SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                 FORM 10-K

              Annual Report Pursuant to Section 13 or 15(d) of
                    the Securities Exchange Act of 1934

 For the fiscal year ended December 31, 1996 Commission file number 1-4929

                             COMSAT CORPORATION

           (Exact name of registrant as specified in its charter)

                   District of Columbia              52-0781863
            (State or other jurisdiction of       (I.R.S. Employer
             incorporation or organization)      Identification No.)

                 6560 Rock Spring Drive, Bethesda, MD 20817
                  (Address of principal executive offices)

     Registrant's telephone number, including area code:  (301) 214-3000

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

     Title of each class              Name of each exchange on which registered
     -------------------              -----------------------------------------
     Common Stock, without par value  New York Stock Exchange
                                      Chicago Stock Exchange
                                      Pacific Stock Exchange

     8 1/8% Cumulative Monthly Income  New York Stock Exchange
     Preferred Securities of
     COMSAT Capital I, L.P.

     Securities registered pursuant to Section 12(g) of the Act:  None.

     Indicate  by check  mark  whether  the  Registrant  (1) has  filed all
reports  required to be filed by Section 13 or 15(d) of the  Securities Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports),  and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to
Item  405 of  Regulation  S-K is not  contained  herein,  and  will  not be
contained,  to the best of Registrant's  knowledge,  in definitive proxy or
information  statements  incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]

     Aggregate market value of voting stock held by  non-affiliates  of the
Registrant was $1,223,921,370 based on a closing market price of $26.25 per
share on February 28, 1997, as reported on the composite  tape for New York
Stock Exchange listed issues.

     48,950,328 shares of common stock, without par value, were outstanding
on February 28, 1997.

                    DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference:

                                               
               TITLE                         
               -----                           Part of the Form 10-K into which
COMSAT - Annual Meeting of Shareholders          the document is incorporated
Notice and Proxy Statement - 1997             --------------------------------
                                                          Part III



<PAGE>


                                   PART I

ITEM 1.   BUSINESS

                            GENERAL INFORMATION

BUSINESS SEGMENTS

     COMSAT Corporation  (COMSAT,  the corporation or Registrant)  reported
operating  results and financial data for 1996 in three business  segments:
International Communications, Technology Services and Entertainment.

     The  International  Communications  segment  consists of COMSAT  World
Systems (CWS), COMSAT Mobile  Communications (CMC) and COMSAT International
(CI). CWS provides voice,  data,  video and audio  communications  services
between the U.S.  and other  countries  using the  satellite  system of the
International  Telecommunications  Satellite Organization  (INTELSAT).  CMC
provides  voice,  data,  fax,  telex and  information  services  for ships,
aircraft and land mobile applications  throughout the world primarily using
the satellite system of the  International  Mobile  Satellite  Organization
(Inmarsat). CI develops, acquires and manages telecommunications  companies
in rapidly growing overseas markets. Prior to January 1997, CI was known as
COMSAT  International  Ventures.  These  companies  provide  individualized
network solutions to business clients and carriers in selected  high-growth
markets.  The  Technology  Services  segment  consists of COMSAT RSI,  Inc.
(CRSI),  a  wholly-owned   subsidiary  of  the   corporation,   and  COMSAT
Laboratories,  which are engaged in the design and manufacture of voice and
data communications networks and products, system integration services, and
applied  research and  technology  services for  worldwide  customers.  The
Entertainment  segment  consists  of  the  corporation's  80.67%  ownership
interest in Ascent Entertainment Group, Inc. (Ascent).  Ascent, through its
subsidiaries,  provides  on-demand  in-room  entertainment  programming and
information  services  primarily to the domestic lodging  industry,  owns a
professional  basketball  team and a professional  hockey team, owns a film
and television  production  company,  and provides  satellite  distribution
support services to the National Broadcasting Company (NBC).

     The revenues,  operating  income (loss) and assets of the corporation,
by business segment,  for each of the last three years are shown in Note 18
to the financial statements.

     The  corporation had 3,766 employees on December 31, 1996. None of the
employees is  represented  by a labor union,  except for  approximately  74
employees  working  for  CRSI  on the  construction  of a  100-meter  radio
telescope.

COMMUNICATIONS SATELLITE ACT OF 1962

     COMSAT was  incorporated  in 1963 under  District of Columbia  law, as
authorized by the Communications Satellite Act of 1962 (the Satellite Act).
Effective   June  1,  1993,   COMSAT   changed  its  corporate   name  from
"Communications  Satellite  Corporation" to "COMSAT Corporation." COMSAT is
not an agency or establishment of the U.S. Government.  The U.S. Government
has not invested  funds in COMSAT,  guaranteed  funds invested in COMSAT or
guaranteed the payment of dividends by COMSAT.


                                     2

<PAGE>

     Although  COMSAT is a private  corporation,  the Satellite Act governs
certain aspects of COMSAT's structure, ownership and operations,  including
the  following:  three  of  COMSAT's  15  directors  are  appointed  by the
President  of the United  States  with the advice and consent of the United
States  Senate;  COMSAT's  issuance of capital stock and borrowing of money
must be authorized by the Federal  Communications  Commission (FCC);  there
are  limitations on the classes of persons that may hold shares of COMSAT's
common  stock and on the number of shares a person or class of persons  may
hold;  and, on matters  that may affect the  national  interest and foreign
policy of the United  States,  COMSAT's  representatives  to  INTELSAT  and
Inmarsat  receive  instructions  from the  U.S.  Government.  Congress  has
reserved  the right to amend the  Satellite  Act, and  amendments,  if any,
could materially affect the corporation.

GOVERNMENT REGULATION

     Under  the  Satellite  Act,  the  International   Maritime   Satellite
Telecommunications  Act of 1978 (the Inmarsat  Act) and the  Communications
Act of 1934,  as amended  (the  Communications  Act),  COMSAT is subject to
regulation  by the FCC  with  respect  to its  capital  and  organizational
structure,  as well as CWS's  and CMC's  plant,  operations,  services  and
rates.  FCC  decisions  and policies  have had and will  continue to have a
significant  impact on the corporation.  For a discussion of these matters,
see Notes 10 and 11 to the financial statements.

                        INTERNATIONAL COMMUNICATIONS

COMSAT WORLD SYSTEMS

     SERVICES.  COMSAT World Systems (CWS) provides  satellite capacity for
telephone, data, video and audio communications services between the United
States  and the rest of the world  using the  global  network  of  INTELSAT
satellites.  CWS's  customers  include  U.S.  international  communications
common  carriers,  teleports,  private  network  providers,   multinational
corporations,   U.S.   and   international   broadcasters,   news-gathering
organizations, digital audio companies and the U.S. government.

     The largest  portion of CWS's  revenues  comes from leasing  full-time
voice grade half-circuits  (two-way  communications  links between an earth
station and an INTELSAT  satellite)  to U.S.  international  communications
common carriers. The three largest carrier customers are AT&T Corp. (AT&T),
MCI International  Inc. (MCI) and Sprint  Communications  Company (Sprint).
CWS offers  significant  discounts to  customers  entering  into  long-term
commitments for full-time  voice-grade  half-circuits.  More than 91.7 % of
all eligible voice-grade half-circuits are now under such commitments.

     CWS's voice and data services are primarily  digital,  which  provides
higher quality  transmissions  than analog  services.  CWS's  International
Digital  Route  (IDR)   service,   for  example,   makes  it  possible  for
communications  carriers  to  provide  digital  public-switched   telephone
network  circuits.  The carriers  apply  techniques  to such  circuits that
permit  a  single  digital  circuit  to  handle  multiple  telephone  calls
simultaneously.

     For private-line  customers,  CWS offers an all-digital  International
Business  Service  (IBS),  as well as an  international  VSAT  (Very  Small
Aperture  Terminal)  service.  IBS  offers  customers  high-speed,  digital
communications for voice, data,  facsimile and video conferencing using on-

                                     3

<PAGE>

premise  earth  stations  that  eliminate  the  need for  costly  land-line
connections. At year-end 1996, approximately 89.7% of CWS's IBS traffic was
covered by long-term commitments.  The large increase in the portion of IBS
traffic  committed to long-term  was due to new tariffs  introduced in 1996
which  resulted  in the move of monthly  IBS traffic to one year and longer
commitments.  CWS's customers have established  international VSAT networks
in both Latin America and Europe. Using on-premise antennas as small as 1.8
meters  in  combination  with the  high-power  satellites  in the  INTELSAT
network,   corporations   doing   business   internationally   can  deliver
communications  to multiple sites.  Used primarily for data  transmissions,
VSATs can also accommodate voice and video communications.

     To the growing international broadcasting community, CWS provides both
digital and analog  transmission  services on a  long-term,  short-term  or
occasional  as-needed  basis.  With the launch of the INTELSAT VII and VIIA
satellites  (see "Item 2.  Properties  --  INTELSAT  Satellites"),  CWS has
expanded the availability of high-power, flexible capacity for broadcasters
and satellite news gatherers.

     To  maintain  the  quality  of  the  INTELSAT  network,  CWS  provides
tracking,  telemetry,  control and  monitoring  services  to  INTELSAT  and
engages  in a program  of  research  and  development  to  ensure  that the
satellite  system  accommodates  the  latest  communications  technologies,
including  broadband,  integrated  services digital  networks  (ISDN),  and
asynchronous transfer mode (ATM).

     INTELSAT.  INTELSAT  is a  140-nation  organization  headquartered  in
Washington,   D.C.   It   operates   under   three   agreements:   (1)   an
intergovernmental  agreement;  (2) a  headquarters  agreement with the U.S.
Government;  and  (3)  an  operating  agreement  signed  by  each  nation's
government or designated telecommunications entity (a signatory). COMSAT is
the U.S. signatory. It represents the United States in INTELSAT, subject to
instructions  from the  Department of State (in concert with the Department
of Commerce and the FCC) on matters  that may affect the national  interest
and foreign policy of the United States.

     Each  signatory has rights and  obligations  in INTELSAT  analogous to
those of a partner.  Each owns an  investment  share,  makes  proportionate
contributions  to  INTELSAT's  capital  costs,  and receives  proportionate
distributions  of INTELSAT's  net revenues  after  deductions for operating
expenses.  The investment  shares are readjusted as of March 1 of each year
to approximate the Signatories' respective portions of the total use of the
INTELSAT  space  segment for the previous six months.  COMSAT's  investment
share, the largest in INTELSAT, was 19.1% as of December 31, 1996 and 19.1%
as of December 31, 1995.

     Signatories  also pay INTELSAT for their use of the satellite  system.
INTELSAT has  targeted a pretax rate of return of 20% on signatory  capital
used by another  signatory or from non-owners who use the satellite system.
The actual  rate of return on  signatory's  capital  was 20.2% in 1996.  In
1997,  COMSAT expects to receive an actual pretax rate of return of between
18%  to  22%  on  its  capital  investment  after  appropriate   accounting
adjustments.  CWS realized revenue from its INTELSAT ownership,  net of use
charges paid,  of $35.8  million in 1996.  This net revenue is reflected in
CWS's revenue requirements for FCC ratemaking purposes.

     At December 31, 1996, total INTELSAT Owners' Equity was  approximately
$1.72 billion.


                                     4

<PAGE>

     At year end 1996,  approximately  87% of CWS's IDR, IBS and FM traffic
was  under  long  term  commitments  with  INTELSAT.   CWS  has  short-term
commitments with INTELSAT for the remaining  portion of its FM, IDR and IBS
traffic.  CWS also enters into commitments with INTELSAT for video traffic,
which  vary in length  depending  on the length of  commitments  from CWS's
customers.

     Under the  INTELSAT  agreements,  the member  nations  that  authorize
international  satellite  systems  separate  from  INTELSAT are required to
ensure  that such  systems are  technically  compatible  with the  INTELSAT
system and will not cause significant economic harm to the INTELSAT system.
During  1990,  INTELSAT  initiated  certain  reforms  to  its  process  for
coordinating  with these  separate  satellite  systems,  which reforms were
superseded  in  November  1992  and  again  in  October  1994.   Under  the
streamlined  procedures  approved in 1992,  carriage by separate systems of
any amount of traffic or services not interconnected to the public-switched
network  and  of  up to  1,250  circuits  of  public-switched  traffic  per
satellite  is  presumed  not to  cause  significant  economic  harm  to the
INTELSAT  system.  The 1,250 circuit  threshold was raised in 1994 to 8,000
circuits of  public-switched  traffic per satellite.  In addition,  in 1994
INTELSAT approved further liberalization of coordination  procedures with a
view toward  eliminating  the economic harm test in the 1997-98 time frame.
For a discussion  of separate  satellite  systems  competition  to CWS, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Outlook" and Note 11 to the financial statements.

     The  corporation  continues  to  promote  efforts to  restructure  the
INTELSAT  satellite  system to ensure that they will remain  competitive in
the future  and to enhance  the value of the  corporation's  investment  in
those  systems.  For  a  discussion  of  the  current  status  of  INTELSAT
restructuring,  see  "Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations-Outlook."

     COMPETITION.  CWS competes with operators of high capacity fiber-optic
and other submarine cables in service along major traffic routes worldwide.
CWS's major carrier customers (including its three largest customers, AT&T,
MCI and Sprint) are co-owners of submarine cables.

     Under the Satellite Act and FCC orders, COMSAT is the only U.S. entity
that may provide  international  space segment  services to customers using
INTELSAT  satellites.  In 1985  the FCC  authorized  the  establishment  of
separate U.S.  international  communications  satellite  systems that would
compete  with  INTELSAT,  subject to certain  restrictions  that expired on
December 31, 1996. Three separate U.S. based  international  communications
satellite  systems  (Orion,   PanAmSat  and  Columbia),   INTERSPUTNIK,   a
Russian-based  international  system,  and a number of regional and foreign
satellite  systems around the world currently compete with CWS. For further
discussion  of the  competition  with  CWS by the U.S.  separate  satellite
systems,  see "Management's  Discussion and Analysis of Financial Condition
and Results of Operations-Outlook" and Note 11 to the financial statements.

     TARIFFS AND REVENUES.  Under the Satellite Act and the  Communications
Act,  COMSAT is  subject  to  regulation  by the FCC with  respect to CWS's
communications  services  and the rates  charged  for those  services.  CWS
provides  its  services  on a  non-discriminatory  basis to all  customers,
either under  tariffs  filed with the FCC or on the basis of  inter-carrier
contracts.


                                     5

<PAGE>

     CWS  filed  a   petition   for   rulemaking   with  the  FCC   seeking
incentive-based  regulation of its multi-year,  switched-voice services for
carriers in January 1992. In the absence of FCC action on the petition, CWS
filed a petition for partial relief in July 1994.  This petition  requested
expedited FCC action to approve  streamlined  tariff  procedures for all of
CWS's INTELSAT satellite services.  The petition was also accompanied by an
extensive  economic  study  which  concluded  that  CWS  faces  substantial
effective  competition in all  geographic and service market  segments from
existing and planned fiber optic cables, separate satellite facilities, and
regional and foreign satellite systems, and that its access to the INTELSAT
system  does not  confer  upon CWS any  market  power in the  provision  of
transoceanic  telecommunications facilities. The FCC has not acted on CWS's
1992  petition,  but in August 1996 the FCC issued an order  granting CWS's
1994 request for streamlined  tariffing for its  switched-voice and private
line  services.  The  FCC did  not  grant  CWS's  request  for  streamlined
tariffing  of its video  services,  but invited CWS to file a new  petition
with updated data seeking such relief,  which CWS did in October 1996. That
petition   is  now  pending   before  the  FCC,   as  is  a  petition   for
reconsideration  of the  FCC's  August  1996  order  filed  by one of CWS's
separate system competitors.

     The  corporation  plans  to  formally  petition  the  FCC in  1997  to
re-classify  it as a  non-dominant  carrier and for relief  from  rate-base
rate-of-return regulation.  There can be no assurance that the FCC will act
favorably upon the petition.

     CWS has entered into  inter-carrier  contracts  with each of its three
largest customers,  AT&T, MCI and Sprint. Pursuant to those contracts,  CWS
reduced its rates for 10- and 15-year IDR and TDMA digital "base"  circuits
activated prior to January 1, 1992, and also reduced its rates beginning in
1996 for 7-year and longer IDR and TDMA circuits activated after January 1,
1992.  Additional rate reductions occurred on January 1, 1997. In addition,
the  contracts  provided  AT&T and Sprint with  leases and with  options to
lease capacity from CWS in 36-MHz  increments under specified rates,  terms
and  conditions.  During 1995 and 1996,  the contracts  with AT&T,  MCI and
Sprint were each amended to provide the customers with additional  capacity
in 18- and 36-MHz increments.

     Approximately 27% of the corporation's  consolidated  revenues in 1996
were  derived  from  CWS's   services  (30%  in  1995  and  30%  in  1994).
Approximately 6% of the  corporation's  consolidated  revenues in 1996 were
derived  from CWS's  services to AT&T.  Also in 1996,  CWS's three  largest
customers,  AT&T, MCI and Sprint, were the source of approximately 24%, 18%
and 9%, respectively, of CWS's revenues.

COMSAT INTERNATIONAL

     COMSAT   International   (CI)   operates   an   integrated   group  of
telecommunications  companies  that are engaged  principally  in  providing
individualized  digital network  solutions to business clients and carriers
in selected  markets.  CI also is actively  engaged in the  development  of
prospective   international   telecommunications   opportunities  that  are
consistent  with  its  digital  networking  strategy.   CI's  existing  and
prospective  companies  typically  are and will be located in those rapidly
growing  markets  where a  significant  number of CI's existing or targeted
clients are located (or where they intend to locate).

     As of December 31, 1996,  CI operated 13  companies  worldwide.  These
companies are located in Latin America,  Asia,  Europe and the Commonwealth
of  Independent  States  (CIS).  CI's  companies  generally  are wholly- or
majority-owned,  with the  exception  of COMSAT Max  Limited,  CI's company
operating   in   India,   and   Viatel,   Inc.   (Viatel),   the   European
facilities-based  carrier and call-back  company.  At December 31, 1996, CI

                                     6

<PAGE>

beneficially  owned 50% and 9.5%,  respectively,  of COMSAT Max Limited and
Viatel,  respectively.  CI's clients are typically local,  indigenous (non-
U.S.)   large  and   medium-sized   corporations,   national   branches  of
multinational  corporations  and  major  telecommunications   carriers  and
consortia.

     CI continued to develop new opportunities around the world in 1996. In
particular,  CI  expanded  its  activities  in Latin  America  through  the
formation of a new joint venture in Peru to pursue  terrestrial-based voice
and  data  transmission  services.  Primarily  through  the  conversion  of
existing  debt to equity,  CI also  increased  its  ownership  interest and
operating  control of BelCom,  Inc.  (BelCom)  to 99.6%.  BelCom  currently
provides  telecommunications  services  in  certain  countries  of the CIS,
including the Russian Federation,  Kazakhstan, Uzbekistan and Turkmenistan.
In January 1997, CI's company in China initiated VSAT service. CI also sold
its 20% interest in Philippine Global  Communications,  Inc. (PhilCom) (see
Note 7 to the financial statements) in January 1997.

     In October 1996,  Viatel completed an initial public offering (IPO) of
38.7% of its common stock. As a result of the offering, CI now owns 9.5% in
Viatel.  CI has demand and piggy-back  registration  rights with respect to
its  Viatel  shares  but,  in  connection  with the IPO,  has agreed not to
exercise  such  rights  or sell  its  shares  for a  period  of six  months
following the IPO.

     CI's companies  operate in numerous and diverse markets,  as reflected
in the table set forth below.  Consequently,  the level of  competition  in
these  countries  varies  considerably.  In some  countries  there  is full
competition,  and in others  competition is limited by law. The competitive
conditions  faced by each company are the result of differing  and changing
regulatory policies and economic  conditions.  In those countries that have
not yet undergone a substantial  liberalization of their telecommunications
laws,  CI's principal  competitor is typically the local Postal,  Telegraph
and  Telephone  administration  (PTT),  together  with a limited  number of
companies that provide telecommunications services similar to those offered
by CI. In countries that have liberalized their telecommunications laws, CI
typically faces greater competition than in less liberalized markets.


                                     7

<PAGE>

<TABLE>
<CAPTION>
<S>                                        <C>                                        <C>

CI COMPANY                                  COUNTRY                                    CI OWNERSHIP PERCENTAGE
----------                                  -------                                    -----------------------

BelCom, Inc.                                Russian Federation and CIS                           99.6%

COMSAT Argentina, S.A.                      Argentina                                            100

COMSAT Asia (L)                             China                                                 55
   Incorporated

COMSAT de Colombia, S.A.                    Colombia                                             100

COMSAT de Bolivia S.R.I.                    Bolivia                                              100

COMSAT Brasil                               Brazil                                               100

COMSAT de Guatemala, S.A.                   Guatemala                                            100

COMSAT Max Limited                          India                                                 50

COMSAT Peru, S.A.                           Peru                                                  65

COMSAT Digital Services                     Turkey                                                85

COMSAT Telecommunications                   Turkey                                                51
   Services

COMSAT Venezuela,                           Venezuela                                            100
COMSATVEN, C.A.

Viatel, Inc.                                U.S., Europe, Latin America                           9.5
                                            and Asia

</TABLE>


                                     8

<PAGE>

COMSAT MOBILE COMMUNICATIONS

     COMSAT    Mobile     Communications     (CMC)    provides    satellite
telecommunications  services  for  maritime,  aeronautical  and land mobile
applications,  primarily using Inmarsat  satellites and COMSAT's land earth
stations  in  Connecticut  and  California,  which serve the  Atlantic  and
Pacific  Ocean  Regions,  respectively,  and in Malaysia and Turkey,  which
serve the Indian Ocean Region.  These  stations  enable CMC to offer global
coverage for its  services.  There are  currently  more than 74,000  mobile
terminals  operating  in the  Inmarsat  system.  As  described  below,  CMC
provides a full range of voice, facsimile, data and telex services, as well
as certain value-added services.

     MARITIME SERVICES.  CMC provides satellite services for communications
to and from ships and other vessels.  Customers for these services  include
transport ship operators, cruise ships and their passengers, fishing vessel
operators,  oil and mining  interests,  pleasure boat operators,  U.S. Navy
ships and foreign telecommunications administrations.

     In addition to standard  telephony  services,  CMC's services  include
group call  messaging  to a fleet of ships,  electronic  mail  services,  a
direct-dial  telephone  service for  passengers  and crew on board ships, a
news summary  distribution  service,  access to data bases through personal
computers,   and  other  office   communications   services  for  facsimile
transmissions,   worldwide  teleconferencing  and  current  financial  news
reports.

     In  1992,   CMC  initiated  two  digital   services,   Inmarsat-B  and
Inmarsat-M,  in the Atlantic and Pacific  Ocean Regions and expanded to the
Indian Ocean Region in 1994.  These services  provide more efficient use of
the Inmarsat satellite  capacity,  help to significantly  lower the cost of
using satellite communications,  and expand the potential customer base for
maritime and land mobile  services.  CMC also  introduced  a  multi-channel
version  of   Inmarsat-M   service  that  allows  cruise  ships  and  other
high-volume  users to increase their channel capacity and offer lower rates
to their customers.

     AERONAUTICAL  SERVICES.  CMC  provides  satellite   telecommunications
services for aeronautical  applications,  including airline operational and
administrative    communications,    passenger   telephone   service   and,
prospectively,  air traffic  control.  Customers  of CMC for  international
aeronautical   services  include  airline  service  providers,   commercial
airlines, government aircraft and corporate aircraft.

     By an FCC Report and Order issued in 1989, COMSAT was authorized:  (i)
to be the sole  U.S.  provider  of  Inmarsat  space  segment  capacity  for
aeronautical services; (ii) to provide ground segment aeronautical services
in connection with the Inmarsat space segment on a non-exclusive basis; and
(iii) to provide such  aeronautical  services  only to aircraft  engaged in
international flights,  including international flights over U.S. airspace.
Another  entity,  the American Mobile  Satellite  Corporation  (AMSC),  was
designated to be the sole  provider of certain  domestic  aeronautical  and
land  mobile  satellite  services.  In  1995,  CMC  applied  to the FCC for
authority to offer domestic aeronautical services. CMC's request is pending
before the FCC. In 1996, CMC offered domestic  aeronautical  services on an
interim basis pursuant to temporary authority granted by the FCC.

     CMC began providing  aeronautical services in 1990 with a data service
for cockpit  communications on commercial flights under a 10-year agreement
with Aeronautical Radio, Inc., an airline-owned  service  organization.  In
1991, CMC began providing  aeronautical  voice services in the Atlantic and


                                     9

<PAGE>

Pacific Ocean Regions through its earth stations at Southbury,  Connecticut
and Santa Paula,  California.  There are currently more than 1,300 aircraft
equipped to use the Inmarsat  aeronautical  system,  equally  split between
voice and data services.

     A service  agreement with Kokusai Denshin Denwa Co., Ltd.  (KDD),  the
Japanese  signatory  to  Inmarsat,  provides  that CMC may use KDD's ground
earth station  serving the Indian Ocean Region to serve CMC's  aeronautical
customers,  and CMC may serve KDD's customers  flying in the Atlantic Ocean
Region.  Under the  agreement,  CMC and KDD provide  mutual  back-up in the
Pacific Ocean Region for aeronautical customers of both companies.

     A service  agreement  with GTE  Airfone,  Incorporated,  a provider of
air-to-ground  passenger  telephone service using  terrestrial  facilities,
enables  it to extend  its  current  service  to  transoceanic  flights  by
acquiring satellite and ground earth station services from CMC.

     COMSAT was  selected by United  Airlines in 1997 to provide  satellite
communications  services for passengers (including telephone,  fax and data
transmission) on approximately 74 United Airlines aircraft, in exchange for
making  available  to United  Airlines  a  financing  facility  of up to $7
million to promote the use of satellite phones on United Airlines aircraft.
COMSAT also was selected by Air Canada in 1994 to provide  passenger  voice
service and now provides such service on 20 aircraft.

     In late 1996, the Federal Aviation  Administration  (FAA) selected CMC
to provide  satellite  and uplink  services for the Wide Area  Augmentation
System  (WAAS).  For  a  further  discussion  of  the  WAAS  contract,  see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Outlook."

     LAND MOBILE  SERVICES.  CMC provides  telecommunications  services for
international land mobile applications, using mobile and portable terminals
located outside of the United States.  Customers for these services include
broadcasters,  foreign telecommunications  authorities and U.S. and foreign
corporations and government agencies.

     CMC's land mobile services are currently available using transportable
versions of Inmarsat's  Inmarsat-A  and  Inmarsat-B  mobile earth  stations
(telephone,  facsimile,  data,  and  telex),  a  briefcase-size  Inmarsat-M
terminal and a smaller data-only Inmarsat-C terminal through CMC's C-LinkSM
service. C-LinkSM service is a low-cost text messaging service that permits
smaller vessels and land mobile units to use the global satellite  network.
The  briefcase-size  Inmarsat-M  terminals provide a more portable and less
expensive  telephone service for international  travelers,  the news media,
government  officials  and others  who travel to remote  parts of the world
where reliable communications services are often not available.

     COMSAT is not  generally  authorized  to provide  U.S.  domestic  land
mobile services.  However, it is providing U.S. domestic service to certain
individual end users under special  temporary  authorities from the FCC. In
1995,  COMSAT applied to the FCC for regular authority to offer land mobile
services  domestically.  In 1996,  COMSAT  applied  to the FCC for  blanket
authority to construct and operate up to 5,000 Planet 1TM terminals in the
United States. The FCC has not yet ruled on those applications.


                                     10

<PAGE>

     In 1996, the corporation  established  COMSAT Personal  Communications
(CPC) to  develop  and  manage the  corporation's  personal  communications
services,  including the  introduction of Planet 1SM and future I-CO Global
Communications  (Holdings)  Limited (ICO) service.  CPC's operating results
are reported as part of CMC's results.

     PLANET 1SM. The corporation plans to build on its established position
in mobile satellite  communications as it evolves toward handheld satellite
service.   Planet  1SM,  the  first   generation   of  personal   satellite
communications,  commenced  commercial  service in January 1997. The Planet
1TM terminal is a six pound, laptop computer-sized satellite terminal which
utilizes the Inmarsat-3  satellites.  This product addresses the demand for
global  personal  communications  ahead of the  availability  of  hand-held
satellite  services.  During  1996,  the  first  three of four  operational
Inmarsat- 3 satellites were launched and are now in service.

     INMARSAT.  Inmarsat  is  a  79-nation  organization  headquartered  in
London,   England.   It   operates   under   three   agreements:   (1)   an
intergovernmental  convention;  (2) a headquarters  agreement with the U.K.
Government;  and  (3)  an  operating  agreement  signed  by  each  nation's
government or designated  telecommunications entity (signatory).  COMSAT is
the U.S. signatory. It represents the United States in Inmarsat, subject to
instructions  from the  Department of State (in concert with the Department
of Commerce and the FCC) on matters  that may affect the national  interest
and foreign policy of the United States.

     Each  signatory has rights and  obligations  in Inmarsat  analogous to
those of a partner.  Each owns an  investment  share,  makes  proportionate
contributions  to  Inmarsat's  capital  costs,  and receives  proportionate
distributions  of Inmarsat's  space segment  charges after  deductions  for
operating  expenses.  The investment shares are readjusted as of February 1
of each year to approximate  the  Signatories'  respective  portions of the
total  utilization  of the Inmarsat  space  segment for the previous  year.
COMSAT's  investment  share,  the  largest  in  Inmarsat,  was  23.0% as of
December 31, 1996 and 24% as of December 31, 1995.

     At December 31, 1996, total Inmarsat Owners' Equity was  approximately
$931  million.   Inmarsat's  outstanding  contractual  capital  commitments
totaled  approximately $235 million, and it had operating lease commitments
of $13.5 million.

     The corporation  continues to promote efforts for the privatization of
Inmarsat, based upon management's belief that if Inmarsat is converted into
a  commercial  enterprise  responsible  to  shareholders  and  without  the
governance  and  cost  structure   associated  with  international   treaty
organizations,  it  will be able  to be  more  competitive  in the  dynamic
international telecommunications markets of tomorrow.

     ICO. In December 1996, the corporation  reduced its direct  investment
in ICO from eight  percent to three  percent  (see Note 7 to the  financial
statements).  The  reduction  in ICO  ownership  aligns  the  corporation's
financial  interest with its plans to  concentrate on developing a national
service  wholesaler role in the U.S. The corporation also continues to hold
an indirect  share of ICO through its 23%  ownership  interest in Inmarsat,
which is also an ICO shareholder.

     ICO was formed to provide hand-held satellite  communications services
outside of the Inmarsat  organization to allow a more commercial focus than
the current  Inmarsat  system.  The other current  major  investors in ICO,
besides the Corporation and Inmarsat, include Inmarsat signatories

                                     11

<PAGE>

and Hughes  Communications,  Inc.  (Hughes),  which are expected to compete
with the  corporation  as service  providers in the U.S. and other markets.
For a discussion of the proposed ICO satellite system and the corporation's
investment in ICO, see  "Management's  Discussion and Analysis of Financial
Condition and Results of  Operations-Outlook"  and Note 10 to the financial
statements.

     On May 1, 1995, COMSAT filed an application with the FCC for authority
to  participate  in  Inmarsat's  procurement  of space segment from ICO for
specialized  (non-handheld)  communications  services. In that application,
COMSAT also sought an FCC ruling that ICO had been structured in compliance
with the requirements for COMSAT's  participation in ICO set out in a prior
FCC  ruling.   The   application   is  being  opposed  by  certain  of  the
corporation's competitors. The FCC has not acted on that application.

     COMPETITION.  Under the Inmarsat Act,  COMSAT is the  designated  U.S.
signatory  to the  Inmarsat  Operating  Agreement,  and is  the  sole  U.S.
operating  entity and  investor in the  Inmarsat  system.  CMC competes for
maritime,  land mobile and aeronautical  communications business with other
Inmarsat  Signatories  operating  land earth  stations  and with IDB Mobile
Communications,  Inc. (IDB), another U.S. land earth station operator.  IDB
provides  maritime,  land mobile and aeronautical  services through its own
U.S. land earth stations,  using Inmarsat  satellite capacity obtained from
CMC, as well as through certain foreign earth  stations.  In addition,  CMC
competes with American Mobile Satellite  Corporation (AMSC), which launched
its own satellite in 1995 to offer U.S. domestic and  international  mobile
satellite services. Prior to the launch, AMSC offered service on an interim
basis  pursuant to an agreement  with CMC.  CMC also  competes for maritime
communications  business  with  domestic  and  international  operators  of
cellular radio services,  high frequency radio services,  mobile satellites
and C-band and Ku-band satellites, and in the future is expected to compete
with the  FCC-licensed  low-earth-orbit  ("Big Leo")  satellite  systems of
Iridium and  GlobalStar  and the  medium-earth-orbit  satellite  systems of
Odyssey. Operators of C-band satellites have been successful in capturing a
significant portion of the maritime  communications  business with the U.S.
Navy and cruise ships.  These competitive forces continue to exert downward
pressure  on CMC's  pricing for  services  provided  through  the  Inmarsat
system.

     FCC  decisions  also may  significantly  affect  the  competition  for
products and services  offered by CMC. In November 1993, the FCC authorized
AT&T to provide shore-to-ship Inmarsat service under an agreement with CMC.
In  December  1993,  AT&T  filed  a new  application  to  provide  "branded
end-to-end"  Standard-A  mobile  satellite  service  in  the  ship-to-shore
direction,  which  COMSAT  opposed.  In early  1996,  AT&T was  granted FCC
authorization  to offer such service.  In June 1996, CMC and AT&T concluded
an  Interconnection  and Service  Agreement to address  interconnection  of
facilities and settlement issues.

     In December  1994,  IDB filed two  applications  seeking  authority to
provide two new digital  services,  Inmarsat-M and Inmarsat-B,  to maritime
and land mobile users through  foreign earth stations in the  shore-to-ship
direction in the Atlantic and Pacific Ocean  regions.  In that  proceeding,
IDB  contended  that the Inmarsat Act allows U.S.  carriers to use Inmarsat
earth stations and space segment obtained from foreign Inmarsat Signatories
for  U.S.-originating  traffic, a position COMSAT opposes. IDB withdrew its
applications  in July 1995.  In August  1995,  however,  Cruisephone  filed
applications, which are being opposed by COMSAT, that raise similar issues.
The FCC has not yet ruled on the Cruisephone applications.

                                     12

<PAGE>

     In March 1993, the FCC granted COMSAT a waiver that would allow COMSAT
to provide  equipment,  software  and  value-added  services  to  customers
directly  through CMC, rather than through a separate  subsidiary,  thereby
avoiding  substantial  duplication of personnel and other costs, subject to
COMSAT's  establishing certain  non-structural  safeguards.  To satisfy the
FCC's conditions, COMSAT filed a proposed cost allocation manual and a plan
for implementing  certain  non-accounting  safeguards requested by the FCC.
The FCC approved  COMSAT's cost  allocation  manual in July 1995. In August
1996,  the FCC approved the second  compliance  filing  subject to COMSAT's
submission of a further compliance  filing,  which also must be approved by
the FCC before the waiver becomes  operative.  COMSAT submitted the further
compliance  filing  in  September  1996.  The FCC has not yet acted on that
filing.

     In July 1995,  COMSAT  petitioned the FCC for authorization to provide
the same kinds of value-added  services to its aeronautical and land mobile
customers.  The FCC  granted  this  petition  in May 1996,  subject  to FCC
approval of a compliance filing establishing  non-structural safeguards. In
October 1996,  COMSAT  submitted that compliance  filing,  which is pending
before the FCC. In September 1996,  COMSAT  submitted a request for interim
relief  allowing CMC to market Planet 1TM terminals  under the terms of the
aeronautical  land  mobile  waiver  while  the  FCC is  reviewing  COMSAT's
compliance filing. The FCC has not yet ruled on that request.

     REVENUES. Approximately 15% of the corporation's consolidated revenues
in 1996  were  derived  from CMC  (21% in 1995,  23% in  1994).  No  single
customer of CMC provided  more than 10% of the  corporation's  consolidated
revenues in 1996.

                            TECHNOLOGY SERVICES

COMSAT RSI

     COMSAT RSI, Inc. (CRSI) has three operating groups:  Advanced Systems,
Communication  Systems  and  Wireless  Networks.  These  groups  include 11
business  units,  10 of which are  vertically  integrated  to serve  global
telecommunications markets. The remaining unit, which serves global machine
tool markets,  is preparing to manufacture  wireless  antenna coaxial cable
connectors  that can be used by certain  other CRSI  units.  CRSI  designs,
manufactures,  installs  and supports  systems and products for  satellite,
terrestrial  and wireless  communication,  as well as antennas and products
for  air  traffic  control,  radar,  and  scientific  applications.  CRSI's
customers include the U.S.  Government,  U.S. Government prime contractors,
foreign  governments,   domestic  and  foreign   telecommunication  service
providers and a wide variety of other commercial customers.

     CRSI's manufactured products include parabolic antennas from .6 meters
to 32 meters in diameter,  line-of-sight  microwave antennas,  cellular and
personal communication system (PCS) antennas,  tri-band satellite frequency
converters, microwave components,  Ultra-Small Aperture Terminal (USAT) and
VSAT  equipment,  cellular switch and base station radio  equipment,  servo
control systems,  antenna monitor and control systems,  antenna positioning
systems,  tactical military antennas,  air traffic control antennas,  radar
antennas, radio telescope antennas,  optical measuring devices and tactical
masts. In 1996, CRSI began making towers for use in wireless  communication
programs and became a distributor of coaxial cable for the same projects.

                                     13

<PAGE>

     CRSI's  services  include:  installation  of large-scale  wireless and
wired (including fiber optic cable) communications networks;  gateway earth
station  operations and  maintenance;  satellite  construction  monitoring;
engineering and system design;  satellite  tracking,  telemetry and command
(TT&C)  services;  radio  frequency  engineering  and system  analysis  for
cellular, PCS, and 2-GHz microwave relocation applications; and intelligent
transportation system (ITS) integration.

     The Technology Services segment also includes the activities of COMSAT
General   Corporation   (COMSAT   General),   an   FCC-licensed   satellite
communications  carrier and a wholly-owned  subsidiary of the  corporation.
COMSAT General owns 86.3% of the MARISAT Joint Venture,  which operates two
satellites launched in 1976 -- the capacity of which is leased to Inmarsat,
the  U.S.  Navy  and the U.K.  Navy.  In  September  1996,  COMSAT  General
decommissioned the SBS-2 satellite  (launched in 1981). COMSAT General also
owns the COMSTAR D-4 satellite  (launched in 1981) with capacity  leased to
CMC and the U.S. Navy.

     In contrast to its historical pattern of product  diversification  and
growth  through  acquisition,  in 1996,  CRSI  focused on  integrating  the
acquisitions made in recent years, streamlining and combining operations to
improve  efficiency (such as consolidating  its two wireless antenna plants
in the U.S. and U.K. under a unified  management  and marketing  structure)
and expanding product  offerings  through ongoing internal  development and
external licensing agreements.

     In 1996,  CRSI  incurred  research  and  development  expenses of $8.6
million,  an  increase  of $2.4  million  over 1995.  The  majority  of the
increase was used to develop new VSAT/USAT  equipment,  wireless  antennas,
wideband  multiplexing  equipment,  cellular  switch  and  antenna  control
products.   CRSI  has  also  entered  into  licensing  agreements  for  the
manufacture  of new wireless  communication  towers and the sale of coaxial
cable.

     CRSI won contracts  with a total value of $282 million in 1996.  Major
contracts  ongoing or commenced  during 1996  included:  a contract for ten
gateway earth stations to be deployed worldwide; a contract in the Republic
of  Kazakhstan   for  a  combined   television   broadcast  and  VSAT  data
transmission network; a contract to supply the first INTELSAT earth station
in  the  Kyrgyz  Republic;   transponder  orders  and  a  second  bandwidth
management  center  authorized  under the multi-year  Commercial  Satellite
Communications  Initiative  (CSCI)  contract;  work  on the  Asia  Cellular
Satellite  system  (ACeS);  separate  contracts  for  Inmarsat  land  earth
stations (LESs) in Italy, Poland,  Thailand and India; a contract to supply
communications  trucks in China for  television  and  voice/data  emergency
communications;  an INTELSAT  Standard-B  earth  station to be installed in
Taiwan;  a  contract  to  upgrade  an earth  station  in  Korea;  satellite
construction  monitoring  and/or launch services  contracts for Egypt, Hong
Kong,  Italy,  Korea and  Mexico;  sales of VSATs for  telephony  gateways,
Internet  access,  environmental  and resource  monitoring and ATM banking;
contracts to supply cellular switching equipment in China, Burundi, Guinea,
Zaire,  Russia,  Argentina  and the  Caribbean;  contracts  to  supply  PCN
antennas in France, Spain, the United Kingdom and the U.S.

     CRSI has a large customer base;  however,  in any one 12-month  period
relatively  few  customers  can  represent  a large  portion  of sales.  In
particular,  CRSI sells to the U.S. Government as a prime contractor and as
a subcontractor.  In 1996 and 1995, sales to the U.S. Government  accounted
for 40% and 45% of CRSI's sales,  respectively.  If the U.S.  Department of
Defense is considered separately,  it accounted for 28% and 24% of 1996 and
1995 sales, respectively.  CRSI sales to other COMSAT divisions totaled $11
million in 1996 and $10 million in 1995. Exports represented 27% and 31% of
CRSI's sales in 1996 and 1995, respectively.

                                     14

<PAGE>

     At December 31,  1996,  CRSI's  backlog of orders  believed to be firm
totaled  approximately  $226  million,  as compared to  approximately  $212
million  at  December  31,  1995.   Of  the  December  31,  1996   backlog,
approximately  $160 million is expected to be  recognized  as sales in 1997
and approximately  $36 million is unfunded.  Included in this order backlog
is  approximately  $128  million  of  U.S.  Government  contracts.   As  is
customary,  these  contracts  include  provisions for  cancellation  at the
convenience  of the U.S.  Government  or the  prime  contractor.  If such a
provision   were   exercised,   CRSI  would  likely   assert  a  claim  for
reimbursement  of costs  incurred  and a  reasonable  allowance  for profit
thereon.

     CRSI  purchases   parts  and  materials  from  a  number  of  reliable
commercial  suppliers  and does  not  depend  on any  single  source  for a
significant  portion  of  its  supplies.  It  has  encountered  delays  and
adjustments  from time to time,  but  operations  have not been  materially
affected.

     CRSI competes with major companies  around the world in several of the
telecommunications markets for its products and services. Major competitors
in the  communications  systems markets include Scientific  Atlanta,  Inc.;
California  Microwave,  Inc.; Miteq,  Inc.; LNR  Communications,  Inc.; SSE
Telecom,  Inc.; NEC; Harris  Corporation;  and Mitsubishi.  In the wireless
networks market,  competitors  include GM Hughes  Electronics  Corporation;
Andrew Corporation;  Kathrein; Cellwave; Allgon; Gabriel Electronics, Inc.;
Ericsson Radio Systems AB; Northern  Telecom Limited;  Stanilite;  Celcore;
Alcatel NV; STM  Wireless,  Inc.;  The Allen  Group,  Inc.;  Prodelin;  and
Channel Master.  The Advanced Systems markets  competition  includes Datron
Systems,  Inc.;  TIW Systems,  Inc.;  Electrospace  Systems,  Inc.;  Signal
Processors, Ltd.; Marconi Radar Systems Limited; Cosser Electronics Limited
(Raytheon); Tech-Sym Corporation; and Vertex Communications Corporation. In
the intelligent  transportation  systems market,  the competition  includes
MICA  Corporation;  Hy- Power,  Inc.; and Florida Traffic Control  Devices,
Inc.  Certain  companies  like  Hughes,   Scientific  Atlanta,   California
Microwave, Harris and Andrew Corporation compete in most of CRSI's markets.
Many of these companies are considerably  larger and have greater financial
resources than the corporation.  In all market areas,  CRSI competes on the
basis of price,  performance,  on-time  delivery,  reliability and customer
support.

COMSAT LABORATORIES

     COMSAT Laboratories consists of two main business segments:  technical
consulting and communications  products.  Technical  consulting  activities
include  the design and  development  of  advanced  digital  communications
technologies, systems and networking solutions to commercial and government
customers  worldwide.   COMSAT  Laboratories  also  designs,  develops  and
licenses  communications  products for access,  compression  and networking
applications  as  well  as  software  for  satellite  system  planning  and
management. COMSAT Laboratories also licenses new technology it develops to
other companies for commercialization.

     Customers  include U.S. and foreign  government  agencies,  commercial
entities,  INTELSAT and Inmarsat. In addition, COMSAT Laboratories conducts
research and  development on a broad range of  telecommunications  devices,
subsystems, transmission systems, technologies and techniques in support of
other COMSAT businesses.

     On-going  contracts  being  performed in 1996  include:  a contract to
design,  manufacture  and deliver  S-band mobile  satellite  communications
equipment;   a  contract  with  AT&T  to  deliver  second  generation  TDMA
terminals; contracts with INTELSAT to design STRIP 7 and develop a software
system for generating  INTELSAT TDMA burst time plans; a contract with NASA
to  provide  operation  and  maintenance  support  for the  ACTS  (Advanced

                                    15

<PAGE>

Communications  Technology  Satellite) program;  and a variety of technical
consulting  contracts for  INTELSAT,  Inmarsat and other  governmental  and
private industry customers.

     COMSAT Laboratories won external contracts with a total value of $20.8
million in 1996.  Major new contracts  awarded or begun in 1996 include:  a
contract  with Inmarsat to develop,  install and support  equipment for the
Aeronautical  Network  Channel  Management  System (NCMS);  a contract with
Lockheed Martin for the system  definition and global traffic model for the
Astrolink  program;  a contract with Space  Systems/Loral  for two In-Orbit
Test systems; and a contract to provide frequency  coordination support for
Toshiba Corporation.

     Revenue from  external  customers  was $18.8 million in 1996 and $12.0
million in 1995.  COMSAT  Laboratories  support of other  COMSAT  divisions
totaled  $10.5  million in 1996 and $8.6  million in 1995.  At December 31,
1996,  COMSAT  Laboratories'  backlog of orders totaled $18.2  million,  as
compared to $17.5 million at December 31, 1995.

     COMSAT Laboratories incurred research and development  expenditures of
$6.3  million  in  1996,  a  decrease  of $1.1  million  from  1995.  These
expenditures  were  largely  attributed  to the  development  of its  video
compression, asynchronous transfer mode (ATM) and software products. COMSAT
Laboratories  expects R&D  expenses to increase in the future as it pursues
additional commercial activities.

                               ENTERTAINMENT

     During 1995, the corporation  incorporated  and transferred all of its
entertainment  assets  to  COMSAT  Entertainment  Group,  Inc.,  which  was
subsequently renamed Ascent Entertainment Group, Inc. (Ascent).  An initial
public  offering of Ascent's  common stock was  completed in December  1995
(see Note 5 to the financial  statements).  Ascent's common stock is traded
on the Nasdaq  National  Market under the symbol "GOAL." As a result of the
offering,  the  corporation  now owns 80.67% of Ascent's  common stock.  In
connection  with the  offering,  the  corporation  entered into a Corporate
Agreement,  an Intercompany  Services Agreement and a Tax-Sharing Agreement
with Ascent,  which govern certain  relationships and arrangements  between
the corporation and Ascent, including,  among others, corporate governance,
registration   rights,   indemnification,   various   corporate   services,
allocation of tax liabilities and intercompany payments.

     Ascent is a diversified entertainment and media company which operates
entertainment  production  and  distribution  businesses  characterized  by
well-known  franchises.   Ascent  owns  approximately  57%  of  On  Command
Corporation  (OCC), which in turn owns 100% of On Command Video Corporation
(OCV)  and  Spectravision,  Inc.  (Spectravision).  Ascent  is the  primary
provider of satellite  distribution  support  services to affiliates of the
National   Broadcast   Company  (NBC)   television   network   through  its
wholly-owned  subsidiary,  Ascent Network  Services,  Inc. (ANS),  formerly
COMSAT Video  Enterprises,  Inc. Ascent also owns two  professional  sports
franchises,  the National Basketball  Association (NBA) Denver Nuggets (the
Nuggets)  and the National  Hockey  League (NHL)  Colorado  Avalanche  (the
Avalanche),  and a motion picture and television production company, Beacon
Communications Corp. (Beacon).

     OCC  is  the  leading  provider  of  on-demand  in-room  entertainment
services for the United States lodging  industry.  On October 10, 1996, OCC
consummated  the  acquisition  of the assets  and  properties  and  assumed
certain  liabilities of Spectravision (the Acquisition).  Immediately prior
to the Acquisition,  OCV,  formerly an 84% (78.4% on a fully diluted basis)

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<PAGE>

owned subsidiary of Ascent,  was merged into a subsidiary of OCC and became
a wholly owned subsidiary of OCC.

     In addition to  installing  systems in hotels served by OCC, OCC sells
systems to certain  other  providers  of in-room  entertainment,  including
MagiNet Corporation (formerly Pacific Pay Video Limited), which is licensed
to use OCC's system to provide on-demand in-room  entertainment in the Asia
Pacific region.

     ANS, a wholly-owned  subsidiary of Ascent, is a satellite distribution
support  service  company that  operates a nationwide  installation,  field
service and maintenance support business that principally  services the NBC
affiliate  distribution network.  Pursuant to a service contract which runs
until 1999,  ANS  distributes  national  television  programming of the NBC
television  network  via  satellite  transponders  leased  by  NBC  to  NBC
affiliate stations nationwide.

     In 1984, in connection with its  construction,  service and support of
NBC's master earth station and receiver earth  stations at NBC  affiliates,
Ascent  entered  into a ten year  contract  to design,  build and operate a
Ku-band  satellite  distribution  network,  for which the  network  control
center is located in Florida.  The initial ten year  contract  with NBC was
extended to continue  through  1999.  Ascent owns and  operates the network
(excluding  the  satellite  transponders,  which  are  leased  by NBC)  and
receives yearly payments from NBC in connection with such  operations.  The
network consists of the network control center,  two master earth stations,
eight  transmit/receive   stations,  167  receive  earth  stations  at  NBC
affiliates, of which 51 such earth stations contain portable uplink antenna
and six transportable transmit/receive trucks.

     NBC, with ANS's technical assistance, issued a request for information
to certain of its  hardware  vendors in July 1995 with respect to procuring
equipment  necessary  to upgrade  the NBC  distribution  network to digital
technology.  In  August  1996,  ANS and NBC  executed  a letter  of  intent
pursuant to which ANS has  procured and  installed  certain of such digital
equipment to provide MSNBC,  LLC, a joint venture between NBC and Microsoft
Corporation  (MSNBC) with network  service,  maintenance  and support.  The
partial digital upgrade service is to be provided for a 10 year term and is
currently governed by the underlying NBC service contract, although ANS and
MSNBC  anticipate   finalizing  a  service  agreement   separate  from  the
underlying  NBC  contract in the first half of 1997.  The network  service,
maintenance and support provided to MSNBC are related to and dependent upon
the original NBC  distribution  network.  Ascent  anticipates that ANS will
assist  NBC in  completing  the  upgrade  of the  NBC  network  to  digital
technology,  which will likely involve significant capital  expenditures on
the part of  Ascent  and  would be  accompanied  by an  extension  of ANS's
contract with NBC that expires in 1999.

     Historically,  ANS also included the Satellite Cinema Division,  which
provided  satellite-delivered  pay-per-view  movies on a scheduled basis to
the  lodging  industry.  In the  third  quarter  of 1995,  ANS  contributed
substantially  all of its hotel pay per view  assets,  including  Satellite
Cinema assets,  to OCV in exchange for OCV common stock,  raising  Ascent's
ownership  in OCV by  approximately  5% to 84.7%  (which  was  subsequently
adjusted to 83.7%).  In  connection  with that  transaction,  OCC converted
select Satellite Cinema hotel properties to higher margin OCV services, and
OCV sold  certain  of the  contracts  to  provide  pay-per-view  service to
approximately   100,000  rooms  and  related   equipment  to   TeleVideoCom
Corporation ("TVC") for a payment of approximately $3.3 million.  Satellite
Cinema  operations  at  the  hotel  properties  not  included  in  the  TVC
transaction and not being converted were discontinued.

                                     17

<PAGE>

     In June 1996, the Avalanche won the NHL championship in its first year
in Denver.  Ascent had acquired one of the 26 franchises in the NHL in July
1995 and had moved the  franchise to Denver.  For the 1995-1996 NHL season,
the Avalanche  sold all 12,000 season  tickets that the team made available
for  sale.  For the 1996 - 1997  season  all  12,250  season  tickets  made
available by the team to the public were sold.

     The  Nuggets  are one of 29  franchises  in the  NBA.  Since  Ascent's
initial  investment in the team in 1989 through the 1995 - 1996 season, the
Nuggets  experienced  gains in attendance,  season ticket sales,  corporate
sponsorships,  broadcast fees and proceeds from licensed  merchandise.  For
the 1996 - 1997 season  Nuggets season ticket sales declined from 11,960 to
approximately  8,700.  The Nuggets  corporate sales and other arena related
sales have also seen  declines  of  somewhat  smaller  proportions.  Ascent
assumed operating control of the Nuggets at the end of the 1991-1992 season
and through the  1995-1996  season,  the  Nuggets  have  enjoyed a compound
annual  growth rate in revenues  (excluding  $9.2 million of NBA  expansion
fees recorded in 1995) of approximately  17.5%.  Revenues for the 1996-1997
season will almost  certainly  show a decline  from those of the  1995-1996
season.

     Ascent  markets,  produces  and sells  advertising  for  local  market
over-the-air  television  and radio  broadcasts  of the  Avalanche  and the
Nuggets games. In connection with cable television  broadcasts,  Ascent has
agreements with Fox Sports Rocky Mountain ("Fox Sports") whereby Fox Sports
pays a rights fee to Ascent and Fox  Sports is then  entitled  to all cable
advertising revenue. Ascent believes that the Avalanche and the Nuggets are
among only a few sports franchises to control their own local market cable,
over-the-air television and radio broadcast  distribution.  Ascent produces
many of the Avalanche and the Nuggets games  through  Colorado  Studios,  a
television  production  company  that owns and operates  mobile  television
production facilities and in which Ascent owns a one-third interest. Ascent
believes that its control of  over-the-air  television and radio  broadcast
distribution  increases the  profitability to the Company from these media.
Ascent also  capitalizes  on its ownership of the Avalanche and the Nuggets
through marketing and local market sales of branded Avalanche, Nuggets, NHL
and NBA  merchandise.  Ascent  believes that its ownership of the Avalanche
and the  Nuggets  and its control of its own  over-the-air  television  and
radio  broadcast  distribution  form a base  of  expansion  into  ancillary
entertainment  opportunities in the Rocky Mountain region. To capitalize on
this  competitive  advantage,  Ascent is proposing to build a new arena and
entertainment  complex  as an  integral  part of its  operating  and growth
strategy for the Avalanche and the Nuggets.

     Beacon,  a  wholly-owned  subsidiary  of Ascent,  was  acquired by the
Corporation  in 1994 and was  founded  in 1990 to  produce  feature  length
motion pictures for theater and television distribution. Beacon's principal
focus is the  production  of high  quality  motion  pictures  with  varying
budgets.  It has developed a production formula that it believes will allow
it to maximize its production  capacity  while at the same time  optimizing
the cost  structure  and  quality of its  motion  pictures  and  television
programming.  A  component  of that  formula  includes  Beacon's  strategic
relationships  with significant  domestic and international  motion picture
distributors. Beacon began production of three motion pictures in 1996, all
of which are intended to be released in 1997.  Beacon currently is planning
to begin  production of up to three motion  pictures in 1997,  which may be
released in 1998.

     In  July  1996,  Beacon  entered  into  a  five-year   agreement  (the
"Universal  Agreement") with Universal Pictures  ("Universal")  pursuant to
which  Universal  has agreed to  co-finance  and  distribute  in the United
States and Canada up to 20 pictures produced by Beacon,  although Universal
is not obligated to accept more than 4 films per year from Beacon. To date,
no motion  pictures  have been  produced  and  distributed  pursuant to the

                                    18

<PAGE>

Universal  Agreement.  Pursuant  to the  Universal  Agreement,  Beacon pays
Universal a  distribution  fee out of the  revenues  generated  by domestic
distribution of such motion pictures and Beacon receives net revenues after
Universal's fees and expenses.  Universal  generally controls all rights to
distribute  such  motion  pictures  domestically  for two  full  television
syndication  cycles,  not to exceed 21 years from the theatrical release of
the picture,  although  Beacon retains the  copyrights and retains  certain
other rights related to such films such as music publishing,  merchandising
and hotel television rights.

     In April 1993,  Beacon  entered into a five-year  agreement (the "Sony
Agreement") with Sony Pictures  Entertainment,  Inc.  ("Sony")  pursuant to
which Sony has agreed to co-finance and distribute in the United States and
Canada, through Sony's affiliates, including Columbia Pictures and Tri-Star
Pictures,  up to 15 motion pictures produced by Beacon. Two motion pictures
have been produced and distributed pursuant to the Sony Agreement.  Another
has been  produced  and is  scheduled  to be released  in 1997,  the motion
picture  "Air Force  One"  starring  Harrison  Ford.  Pursuant  to the Sony
Agreement,  Beacon and Sony share in the  revenues  generated  by  domestic
distribution of such motion pictures. Sony generally controls all rights to
distribute the motion  pictures  domestically  for the later of 14 years or
the end of the second television  syndication cycle for such motion picture
(but in no  event  later  than  23  years),  although  Beacon  retains  the
copyrights.  In July 1996,  the Sony  Agreement  was  amended to  terminate
Sony's exclusive acquisition term and to provide that Sony has the right to
jointly  develop,  produce  and  distribute  up to  two  additional  motion
pictures with Beacon for distribution under the Sony Agreement.

     Generally,  Beacon intends to produce motion  pictures with production
budgets in the range of approximately  $5 million to $40 million,  although
Beacon will also consider certain higher budget  projects.  In that regard,
Beacon  produced "Air Force One"  starring  Harrison Ford with a production
budget of approximately $95 million which will be distributed  domestically
pursuant to the Sony Agreement,  and distributed  internationally  by Buena
Vista International,  Inc., a subsidiary of the Walt Disney Company ("Buena
Vista"),  pursuant to an agreement  which provides for a fixed advance of a
significant portion of production costs.

     Beacon  plans to release  most of its motion  pictures on a nationwide
basis, with advertising and distribution  budgets  generally  comparable to
those of the major motion picture  companies.  This type of release pattern
requires  substantial  marketing  expenditures  to  create a  campaign  and
purchase  advertising  on  television,  newspapers,  radio and other media.
Beacon  expects that the  Universal  Agreement and the Sony  Agreement,  as
amended, will help offset such costs and provide more cost effective use of
Beacon's  resources than if Beacon  distributed  its motion pictures alone.
The Universal  Agreement  and the Sony  Agreement,  as amended,  each allow
Beacon to  continue to offset  risks by  pre-selling  foreign  distribution
rights to its motion  pictures and each provides  Beacon a proven  domestic
distribution  network for its productions;  however the Universal Agreement
is more  favorable  to  Beacon  in terms of the  overhead  advance  paid to
Beacon, production funding and domestic print and advertising funding.

     In 1997,  "Playing God" a suspense film starring David Duchovny and "A
Thousand  Acres" starring  Michelle  Pfeiffer and Jessica Lange will not be
released under the Universal  Agreement or the Sony Agreement,  as amended;
however,  both will be released  domestically  by Buena  Vista.  Beacon has
retained the foreign  distribution rights to "Playing God" and a portion of
the  film's  production  costs  are  offset  by the  domestic  distribution
arrangement  with Buena  Vista.  "A  Thousand  Acres" is being  distributed
internationally by Polygram Filmed Entertainment ("Polygram") and the

                                     19

<PAGE>

production  costs are being  split  between  Beacon,  Beacon's  co-producer
Propaganda  Films,  Inc. (a  subsidiary  of  Polygram)  and the Walt Disney
Company.

     The production and release of motion  pictures are subject to numerous
uncertainties  and there can be no assurance that Beacon's strategy will be
successful,  that its  release  schedule  will be met,  that Beacon will be
successful in obtaining the necessary  financing for its operations or that
it will achieve its goals. Beacon intends to maintain  flexibility in order
to adjust its  strategies,  including  the criteria for investing in motion
pictures,  in response  to changes in the motion  picture  industry  and in
respect of Beacon.

     Ascent owns a 26% limited partnership  interest in New Elitch Gardens,
Ltd. (Elitch Gardens),  which it purchased at a cost of approximately  $7.9
million. Elitch Gardens operated an amusement park in Denver,  Colorado. In
October 1996, Elitch Gardens sold the amusement park to Premier Parks, Inc.
In connection  with the sale,  Ascent has recorded a loss on its investment
of $2.3 million in 1996. Ascent has received distributions in 1996 and 1997
in an  aggregate  amount  of $3.6  million  for its  interest  as a limited
partner of Elitch  Gardens,  and expects an additional  distribution in the
first half of 1997.

     Ascent also owns small equity interests in MagiNet Corporation,  which
purchases and uses OCC's on-demand systems in the Asia-Pacific  region, and
Metromedia    International   Group,   a   diversified   company   pursuing
telecommunications   ventures  in  eastern  Europe  and  producing   motion
pictures, among other things.

     Ascent's  entertainment  properties  compete with a broad  spectrum of
other entertainment  alternatives.  In providing  entertainment services to
the lodging  industry,  OCC  operates in a highly  competitive  and rapidly
changing  environment  in which the principal  methods of  competition  are
service, product features and price.

     The Denver Nuggets and Colorado  Avalanche  compete not only with each
other and other major league  sports,  but also with minor  league  sports,
college athletics,  other sports entertainment and non-sports entertainment
such as the Colorado Symphony,  Opera and Ballet, movies, local theater and
recreational  activities  such as skiing.  Beacon  competes with many other
motion picture producers and  distributors,  including major motion picture
studios.

                                INVESTMENTS

     The corporation's investments are discussed at Note 7 to the financial
statements.

ITEM 2.   PROPERTIES

COMSAT PROPERTIES

     At  year  end  1996,  the  headquarters  of the  corporation  and  the
headquarters of the International  Communications segment were located in a
building in Bethesda, Maryland, which the corporation leases from a limited
partnership  in which  it  holds a 50%  interest,  primarily  as a  limited
partner.  The  managing  general  partner  also owns a 50%  interest in the
partnership. An affiliate of the managing general partner owns the building
site and has  leased  this site to the  partnership.  The  corporation  has
entered into a 15-year lease with the partnership for the new building (see
Note 10 to the financial  statements).  In 1995, Ascent's headquarters were

                                    20

<PAGE>

located in Bethesda, Maryland in space leased from the corporation.  Ascent
relocated its headquarters to Denver, Colorado in 1996.

     The corporation  owns buildings and land at Clarksburg,  Maryland that
serve as the  headquarters of COMSAT  Laboratories,  as well as offices for
certain  operations  of  CRSI  and  CMC.  The  corporation  also  owns  two
manufacturing  facilities in Dulles,  Virginia,  one of which serves as the
headquarters  of CRSI,  and land located  nearby that is used as an antenna
test  range by CRSI.  Further,  the  corporation  owns or  leases  14 other
properties in the United States and leases two  properties in England and a
sales  office in the United  Arab  Emirates  for the  operations  of CRSI's
business units.

     COMSAT  General owns 86.3% of the MARISAT Joint  Venture,  which still
operates   two  of  three   satellites   launched  in  1976  (the  F-3  was
decommissioned  in September 1996) -- with capacity leased to the U.K. Navy
and Fugro N.V., a Netherlands company.  COMSAT General owns the COMSTAR D-4
satellite (launched in 1981) with capacity leased to CMC and the U.S. Navy.
In  September  1996,  COMSAT  General  decommissioned  the SBS-2  satellite
(launched in 1981).

     The corporation leases earth stations in Turkey and Malaysia, and owns
earth stations at Santa Paula,  California and Southbury,  Connecticut that
are used by CMC to provide mobile  communications  services. A leased earth
station in Fucino,  Italy along with the California and  Connecticut  earth
stations are used by CRSI to provide TT&C services.  The  corporation  owns
earth stations at Clarksburg, Maryland and Paumalu, Hawaii that are used by
CWS  to  provide  TT&C  services  to  INTELSAT.  The  corporation  owns  an
additional  earth station at Clarksburg,  Maryland which is used by CRSI to
house  its  Satellite  Control  and  Teleport  Facilities  as  well  as the
Bandwidth Management Center for the U.S. Government CSCI Program.

     The  corporation's  properties  are  suitable  and  adequate  for  the
corporation's business operations.

INTELSAT SATELLITES

     The  corporation's  property  accounts include CWS's PRO-RATA share of
INTELSAT  satellites.  The  INTELSAT  satellites  currently  used and under
construction are described below.

     There are nine INTELSAT V and V-A satellites  continuing to operate in
the INTELSAT  system.  These satellites are or soon will be operating in an
inclined orbit.  The capacities  range from 15,000 to 17,000 voice circuits
and 51 to 57  television  channels.  The  satellites  were  built  by Space
Systems/Loral.

     The INTELSAT VI series  consists of five  satellites,  constructed  by
Hughes Aircraft Company, a subsidiary of General Motors Corporation, having
an average  capacity of at least 24,000  bearer  circuits or 87  television
channels.

     The INTELSAT-K  satellite,  constructed by General Electric  Technical
Services Company, Inc., a subsidiary of General Electric Company, having an
average  capacity of 7,000 bearer  circuits or 32  television  channels was
launched in 1992.

                                     21

<PAGE>

     The  INTELSAT VII series  consists of six  satellites  constructed  by
Space Systems/Loral.  These satellites have an average capacity of at least
17,050  bearer  circuits or 62 television  channels.  The last INTELSAT VII
satellite was launched on June 15, 1996.

     The INTELSAT VII-A series,  also  constructed by Space  Systems/Loral,
consists of two  satellites  having an average  capacity of at least 19,250
bearer  circuits or 70 television  channels.  Of the three  INTELSAT  VII-A
satellites constructed, the first INTELSAT VII-A satellite was successfully
launched in May 1995; the launch of the second VII-A, in February 1996, was
a failure (see Note 4 to the financial statements); and the third VII-A was
successfully launched in March 1996.

     The INTELSAT VIII series  consists of four  satellites  that have been
and are being constructed by Lockheed Martin Astro Space, a division of the
Lockheed Martin Corporation. These satellites will have an average capacity
of 21,000 bearer  circuits or 76 television  channels.  The first  INTELSAT
VIII satellite was successfully launched in February 1997.

     COMSAT has applied to the FCC for  authorization to participate in the
procurement of two INTELSAT VIII-A spacecraft.  These satellites, which are
being  constructed  by Lockheed  Martin Astro  Space,  will have an average
capacity of at least 11,600 bearer circuits, or 38 television channels, and
are expected to be launched in 1998.

     COMSAT has applied to the FCC for  authorization to participate in the
procurement of the K-TV satellite.  This spacecraft is being constructed by
Matra  Marconi  Space  and  has a  capacity  of 30  high  power  television
channels.  It is expected that the satellite  will be launched in the first
quarter of 1999.

     COMSAT has applied to the FCC for  authorization to participate in the
procurement of two FOS II  satellites.  These  spacecraft  will be built by
Space  Systems/Loral and are intended to replace two INTELSAT VI satellites
in the year 2001.

     The corporation  has purchased  insurance to cover the launch phase of
the  INTELSAT  VIII  and  VIII-A  satellites.  For the  INTELSAT  801,  the
corporation has purchased post-separation insurance with no deductible on a
partial-loss  basis for 180 days  following  launch.  Total  loss in- orbit
insurance for the remaining  five INTELSAT VIII and VIII-A  satellites  has
been purchased for 365 days with a one satellite loss deductible.

INMARSAT SATELLITES

     The  corporation's  property  accounts include CMC's PRO-RATA share of
Inmarsat  satellites.  The  Inmarsat  satellites  currently  used and under
construction are described below.

     The   second-generation   Inmarsat  satellite  system,  known  as  the
Inmarsat-2   series,   consists  of  four  satellites   constructed  by  an
international consortium led by British Aerospace Dynamics Corporation. One
of  these  serves  as  the  operational  satellite  in  the  AOR-W,  one of
Inmarsat's  four coverage  areas,  while the other three are used primarily
for leases and backup capacity.

     The   third-generation   Inmarsat  satellite  system,   known  as  the
Inmarsat-3  series,  consists of five  satellites  constructed  by Lockheed
Martin Astro Space. These satellites use spot-beam technology, which allows
reuse of the scarce frequency resources allocated for mobile satellite

                                     22

<PAGE>

communications. The Inmarsat-3s have more than 20 times the capacity of the
largest  satellites in the  first-generation  Inmarsat system and are about
eight  times  more  powerful  than the  Inmarsat-2  series.  Three of these
satellites  are already  operational  and the latter two are  scheduled for
launch in mid to late 1997.  Inmarsat has purchased an insurance policy for
launch  failures  and 365 day in- orbit  coverage.  In the event of a first
loss,  Inmarsat will use the insurance proceeds to fully fund the insurance
of the  remaining  launches  and  365 day  coverage.  For a  discussion  of
financing  arrangements  related to the Inmarsat-2  and -3 satellites,  see
Note 8 to the financial statements.

ENTERTAINMENT PROPERTIES

     Ascent  currently  leases its  principal  offices in Denver,  Colorado
under a lease which expires in August 1998.  Ascent also leases  facilities
from COMSAT in Maryland, for Beacon in Los Angeles, California, and for ANS
in Palm Bay,  Florida.  Through 1996, OCV leased facilities in Santa Clara,
California  for its  headquarters  and  manufacturing  plant;  however,  in
December  1996  OCC  entered  into a  lease  for  facilities  in San  Jose,
California  and  relocated  its   headquarters   and  OCV's   manufacturing
facilities to that location.  In connection with the OCC Transactions,  OCC
acquired Spectravision's headquarters building in Plano, Texas and directed
Spectravision  to assume  certain  leases for office space  throughout  the
United States, Canada, Mexico, Puerto Rico, Hong Kong and Australia for its
customer support operations.

     The  Nuggets  and the  Avalanche  currently  play  their home games in
Denver's  McNichols  Arena,  an indoor  sports  arena  located in  downtown
Denver.  McNichols  Arena is owned by the City and  County of  Denver  (the
"City") and is made available to the Nuggets under a lease  agreement which
extends until the conclusion of the 2005-2006  season.  McNichols  Arena is
made available to the Avalanche under a lease agreement which extends until
the  conclusion  of the  1996-1997  season,  subject  to  renewals  for two
one-year  terms.  Pursuant to an amendment to the Nuggets lease  agreement,
the term of the  Nuggets'  lease will  decrease by one year for each of the
first two years that the  Avalanche  played in  McNichols  Arena  (from the
2007-2008 season to the 2005-2006 season).

     The  Nuggets'  and the  Avalanche's  leases with the City  require the
teams  to pay  rent to the  City  for use of  McNichols  Arena  equal  to a
percentage of the teams' net income from ticket  sales,  subject to certain
minimum and maximum annual payments.  The City is generally responsible for
maintaining McNichols Arena and providing  administrative personnel such as
ushers, electricians,  janitors, technicians and engineers. The Nuggets and
the  Avalanche  are  responsible  for  providing  police  and  fire  safety
personnel,  announcers, timers, scorers and statisticians.  The Nuggets and
the Avalanche also share in revenue from food and beverage  concessions and
parking rights at McNichols Arena.

     Ascent is currently  developing  and  reviewing  plans for a privately
financed  arena for the  Nuggets,  the  Avalanche  and other  entertainment
events, including,  among other things, concerts,  college sporting events,
ice and dance  performances,  comedy shows and circuses.  See "Management's
Discussion   and   Analysis   of   Financial   Condition   and  Results  of
Operations-Outlook."  Under current  plans,  the proposed  arena would seat
approximately 19,000 for Nuggets games,  approximately 18,000 for Avalanche
games and approximately  20,000 for concerts and other events. The proposed
arena would have  approximately  95 luxury  suites and 1,669 luxury  seats.
Ascent  anticipates  that  financing  for the proposed  arena may be raised
through a partnership with other regional investors, sale of taxable bonds,
bank  financing or other  alternatives  and will likely  include  corporate
sponsorship.  Ascent  estimates  that  the  cost of a new  arena  would  be
approximately $160 million.  Ascent is currently  negotiating with the City
regarding  the proposed  arena and the current  leases of the Avalanche and


                                    23

<PAGE>

Nuggets.   Ascent  management  believes  that  these  negotiations  can  be
successfully  concluded,  but there can be no assurance that Ascent will be
able to reach acceptable terms for the construction of the new arena.

     On March 28, 1996, Ascent entered into a Land Purchase  Agreement with
Southern  Pacific  Transportation  Company ("SPT") pursuant to which Ascent
would purchase  approximately 49 acres in downtown Denver as a site for the
proposed  arena  and  entertainment  complex  for a  purchase  price of $20
million. Pursuant to the agreement, the closing of the land purchase had to
have occurred on or before June 29, 1996. The closing did not take place by
that time and the Land Purchase  Agreement  terminated.  Ascent  management
believes that SPT will reinstate the agreement.  The  transaction  would be
subject to several conditions,  including obtaining  satisfactory financing
and reaching  agreements  with the City regarding the  construction  of the
proposed  arena and the release of the Nuggets and the Avalanche from their
existing  leases at  McNichols  Arena.  The Land  Purchase  Agreement  also
provided for SPT to effect a state-approved  environmental clean-up plan on
the site,  and provide  continuing  indemnification  with regard to certain
environmental  liabilities.  Although  there  can be no  assurance,  Ascent
management  believes that SPT will reinstate the Agreement on substantially
similar terms and the closing date for the agreement will be extended.

ITEM 3.   LEGAL PROCEEDINGS

     Neither COMSAT nor any of its  subsidiaries is a party to, and none of
their property is the subject of, material pending legal  proceedings,  and
no  such   proceedings   are  known  to  be  contemplated  by  governmental
authorities,  except for the  matters  described  in Notes 10 and 11 to the
financial statements and as discussed below.

     In 1995, the corporation  entered into a five-year agreement with News
Corporation to provide satellite services beginning in 1996. In March 1996,
News Corporation rescinded this agreement.  The corporation has commenced a
lawsuit  against  News  Corporation  and other  parties to recover  damages
arising out of News  Corporation's  breach of  obligation  to COMSAT.  News
Corporation  has  asserted  a counter  claim for  return of the  deposit it
originally paid.

     COMSAT  and its  subsidiaries  are a party  to  various  lawsuits  and
arbitration  proceedings  and are subject to various  claims and inquiries,
which generally are incidental to the ordinary course of its business.  The
outcome of legal proceedings  cannot be predicted with certainty.  Based on
currently available information,  however, management does not believe that
the  outcome  of  any  matter  which  is  pending  or  threatened,   either
individually or in the aggregate,  will have a materially adverse effect on
the  consolidated   financial   condition  of  the  corporation  but  could
materially  affect  consolidated  results of  operations in a given year or
quarter.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                     24

<PAGE>


EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
<S>                            <C>                                                             <C>

                                                                                                  Age as of
         Name                                        Officer                                    March 31,1997
         ----                                        -------                                    -------------

Betty C. Alewine                President and Chief Executive Officer                                48
Steven F. Bell                  Vice President, Human Resources and                                  47
                                Organization Development
James M. Carroll                Vice President, Government Relations                                 34
Thomas Collins                  Vice President and General Manager, CMC                              39
Janet L. Dewar                  Vice President, Corporate Affairs                                    47
John V. Evans                   Chief Technical Officer                                              63
Allen E. Flower                 Vice President and Chief Financial Officer                           53
Dwight Jasmann                  President and General Manager,                                       61
                                COMSAT International
Alan G. Korobov                 Controller                                                           48
Christopher Leber               Vice President and General Manager, CPC                              44
Charles Lyons                   President and Chief Executive Officer,                               42
                                Ascent Entertainment Group, Inc.
John H. Mattingly               Vice President and General Manager, CWS                              46
Paul G. Pizzani                 Treasurer                                                            37
Raymond D. Thomas               President, COMSAT RSI, Inc.                                          46
Warren Y. Zeger                 Vice President, General Counsel and Secretary                        49

</TABLE>

     Normally, the officers are elected annually by the Board of Directors,
at its first meeting following the Annual Meeting of Shareholders, to serve
until their successors are elected and qualified.

     There is no  family  relationship  between  an  officer  and any other
officer or director and no arrangement or understanding  between an officer
and any  other  person  pursuant  to  which  he or she was  selected  as an
officer.

     The  following  is  a  brief  account  of  each  executive   officer's
experience for the past five years:

     Mrs. Alewine has been President and Chief Executive Officer since July
1996. She was President,  COMSAT International  Communications from January
1995 to July 1996, and was  President,  CWS, from May 1991 to January 1995.
She was Vice President and General  Manager,  INTELSAT  Satellite  Services
from  January  1989 to May  1991.  She is also a  member  of the  Board  of
Directors of the Corporation.

     Mr. Bell has been Vice  President,  Human  Resources and  Organization
Development  since October 1993. Prior to joining the  corporation,  he was
with American Express Worldwide Technologies,  serving as Vice President of
Human  Resources from September 1992 to September 1993; and with US Sprint,
serving as Regional Director of Human Resources from October 1987 to August
1992.

                                     25

<PAGE>

     Mr.  Carroll  has been  Vice  President,  Government  Relations  since
November  1995. He served as Director of Government  Relations from 1993 to
1995.  He joined COMSAT in 1990 as manager of  government  relations  after
serving as legislative assistant to U.S. Senator Warren B. Rudman.

     Mr. Collins has been Vice President and General Manager, COMSAT Mobile
Communications  since  May  1996.  He was Vice  President  of  Finance  and
Planning,  COMSAT  International  Communications from September 1995 to May
1996 and Vice President of Finance and Planning,  COMSAT World Systems from
April 1993 to  September  1995.  Prior to that,  he was Vice  President  of
Finance, COMSAT Technology Services.

     Ms. Dewar has been Vice  President,  Corporate  Affairs since November
1995. She joined the corporation in 1991 in marketing communications at CWS
and became  Director,  Marketing  Communications  in 1992.  She  previously
worked  at Mobil  Oil  Corporation  in  international  public  affairs  and
strategic planning.

     Dr. Evans has been the Chief Technical Officer for COMSAT  Corporation
since September 1996. He was President,  COMSAT Laboratories from September
1991  to  September  1996.  He was  Vice  President  and  Director,  COMSAT
Laboratories  from October 1983 to September  1991.  He is a consultant  to
Johns Hopkins University's Applied Physics Laboratory.

     Mr. Flower has been Vice President and Chief  Financial  Officer since
November  1995.  From November  1995 to September  1996, he was also Acting
Treasurer.  He was Controller and Acting Chief Financial Officer from April
1995 through November 1995,  Controller from June 1992 to May 1995 and Vice
President,  Finance and Administration,  CVE from May 1990 to June 1992. He
is a director of Ascent Entertainment Group, Inc.

     Mr.   Jasmann  has  been   President  and  General   Manager,   COMSAT
International  since  August,  1996.  He  previously  worked  for  AirTouch
Communications as Vice President of Human Resources and Corporate  Services
and for AT&T,  where in his last  position he was  Managing  President  and
Managing Director of AT&T Asia/Pacific. He is a director of Elcotel, Inc.

     Mr.  Korobov has been  Controller  since  November  1995.  He was Vice
President,  Finance  for CMC from  January  1993 to  September  1995;  Vice
President,  Finance  for CVE  from  June  1992  to  January  1993;  and the
Controller  for CVE from  March  1992 to June  1992.  He was the  Financial
Controller for Inmarsat, based in London, from April 1990 to March 1992.

     Mr. Leber has been Vice President and General Manager, COMSAT Personal
Communication  since 1995.  In May 1994,  he was named Vice  President  and
General Manager of COMSAT's aeronautical services.  From August 1991 to May
1994,  he was  Acting  Vice  President  of  Operations,  CMC and then  Vice
President   and  General   Manager,   CMC   Operations,   Engineering   and
International Relations.

     Mr. Lyons has been President,  Chief Executive  Officer and a director
of  Ascent  since  October  1995,  and  prior to that was  President  and a
director  of  Ascent's  predecessors  since  February  1992.  He  was  Vice
President and General Manager of COMSAT Video Enterprises,  Inc. (CVE) from
October 1990 to February  1992. He is a director of On Command  Corporation
and National Jewish Hospital.

                                     26

<PAGE>

     Mr.  Mattingly  has been Vice  President and General  Manager,  COMSAT
World Systems since 1995. He previously served as Vice President,  European
Ventures,  COMSAT  International  Ventures.  Before joining COMSAT,  he was
Senior  Vice  President  and  General  Manager of  OrionNet,  Inc.  He is a
director for Global Tradeshow Services, Inc.

     Mr. Pizzani has been Treasurer of COMSAT since  September  1996.  From
1993 to 1996 he was Vice President,  Finance and Business Planning,  COMSAT
International  Ventures  and from  1991 to 1992 he was  Director,  Business
Planning, COMSAT World Systems. He is a director of Viatel, Inc.

     Mr. Thomas has been  President of COMSAT RSI, Inc. since January 1997,
having served as acting  President  from  September  1996.  From 1994 until
September 1996, he was Group Vice President of CRSI's Communication Systems
Group. In 1993, he was appointed  President of Fixed Earth Station Systems.
Prior to that,  he was Vice  President  of Finance and  Administration  for
COMSAT  Systems  Division.  He  is  a  director  of  Plexsys  International
Corporation.

     Mr. Zeger has been Vice President, General Counsel and Secretary since
August 1994. He was Vice  President and General  Counsel from March 1992 to
August 1994. He was Acting  General  Counsel from  September  1991 to March
1992 and Associate  General  Counsel of the corporation and Vice President,
Law, World Systems  Division from February 1988 to September  1991. He is a
director of On Command Corporation.

                                  PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
          MATTERS

     As of December 31, 1996, there were 48,820,868 shares of common stock,
without par value,  of the corporation  (COMSAT Common Stock)  outstanding:
48,800,044 were Series I shares,  held by  approximately  37,000 holders of
record other than communications common carriers; and 20,824 were Series II
shares, held by 35 common carriers.

     The  principal  market for COMSAT  Common  Stock is the New York Stock
Exchange,  where it is traded under the symbol "CQ." COMSAT Common Stock is
also listed on the Chicago Stock Exchange and the Pacific Stock Exchange in
the United States and on the Swiss Exchange.

     The corporation's  Transfer Agent,  Registrar and Dividend  Disbursing
Agent is The Bank of New York, 101 Barclay Street, New York, New York.

                                     27

<PAGE>

     The high and low sales prices of, and the dividends  declared on, each
share of COMSAT Common Stock for the last two years are as follows:

<TABLE>
<CAPTION>
<S>                                              <C>                 <C>                  <C>

                                                               COMSAT COMMON STOCK
                                             --------------------------------------------------------


CALENDAR YEAR 1996                                High                 Low                Dividend
------------------                           --------------       --------------       --------------

   First Quarter                                 25 5/8               16 3/4                .195
   Second Quarter                                33 1/8               23 3/8                .195
   Third Quarter                                 26 1/2               18 3/4                .195
   Fourth Quarter                                26 3/4               21 1/2                .195

CALENDAR YEAR 1995                                High                 Low                Dividend
------------------                           --------------       --------------       --------------

   First Quarter                                 21 5/8               17 5/8                .195
   Second Quarter                                21                   18 1/4                .195
   Third Quarter                                 24 5/8               19 1/2                .195
   Fourth Quarter                                22 5/8               18 1/4                .195

</TABLE>

ITEM 6:   SELECTED FINANCIAL DATA FOR THE REGISTRANT FOR EACH OF THE LAST FIVE
          FISCAL YEARS

<TABLE>
<CAPTION>
<S>                                   <C>             <C>             <C>              <C>             <C>

In thousands, except per
share information                              1996            1995            1994            1993            1992
-------------------------------------------------------------------------------------------------------------------
Summary of Operations
Revenues                               $  1,015,261    $    862,912    $    835,665    $    758,015    $    690,245
Operating expenses                          951,180         767,277         685,414         606,435         585,263
Operating income                             64,081          95,635         150,251         151,580         104,982

Income from continuing operations
   before cumulative effect of
   changes in accounting principles           8,622          37,817          77,642          82,469          53,292
Cumulative effect of changes in
   accounting principles                          -               -               -           1,925               -
Net income                                    8,622          37,817          77,642          84,394          53,292

Dividends paid                               37,698          36,874          33,547          30,410          27,837
Primary earnings per share                     0.18            0.79            1.64            1.79            1.16
Dividends paid per share                       0.78            0.78            0.76            0.74            0.70

BALANCE SHEET DATA
Total assets                              2,665,803       2,314,266       1,975,992       1,773,513       1,654,985
Long-term debt                              635,474         664,601         515,542         410,550         496,804
Stockholders' equity                        843,211         839,433         826,916         763,440         702,292

</TABLE>

NOTES
-----
As  discussed  in  Note  6 to the  financial  statements,  the  corporation
consummated its merger with Radiation Systems, Inc. (RSi) in June 1994. The
merger has been treated as a pooling of interests for accounting  purposes.
Accordingly,  information  for all  periods  prior to the  merger  has been
restated  to  include  Rsi.  Information  for  1992  through  1995 has been
reclassified  for certain  costs  historically  reflected as a reduction of
revenues and now classified as cost of services.

                                     28

<PAGE>

ITEM 7:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS.

                           ANALYSIS OF OPERATIONS

CONSOLIDATED OPERATIONS

     Consolidated revenues for 1996 were $1.02 billion, an increase of $152
million as compared to 1995. Revenues improved in all segments in 1996 with
the  largest  increase,  over  40%,  recorded  in the  Technology  Services
segment.  The  International   Communications   segment  revenues  improved
slightly  over last year with  increases in both COMSAT World Systems (CWS)
and COMSAT  International  (CI)  offset,  in part,  by a decrease in COMSAT
Mobile Communications (CMC). The Entertainment segment revenues improved by
28% in 1996 as  compared to 1995.  In October  1996,  Ascent  Entertainment
Group,  Inc.  (Ascent),  through  its newly  formed  subsidiary  On Command
Corporation (OCC),  acquired the assets and assumed certain  liabilities of
SpectraVision,   Inc.   (SpectraVision)   (see  Note  5  to  the  financial
statements).

     Consolidated  revenues for 1995 were $863 million,  an increase of $27
million over 1994.  Revenues increased in the International  Communications
and Entertainment segments but declined in the Technology Services segment.
Within International Communications, CWS's and CI's revenues increased over
the prior  year,  while  CMC's  revenues  declined  over 1994.  The largest
improvement in revenues was in the  Entertainment  segment where On Command
Video (OCV) continued to have substantial growth in its hotel business.

     Operating income in 1996 was $64 million,  which was $32 million below
1995.  During 1995, the  corporation  restructured  elements of each of its
business  segments  and  recorded  a  pre-tax  $20  million  provision  for
restructuring (see Note 16 to the financial statements).  Exclusive of such
provision,  the  decrease in  operating  income over 1995 was $52  million.
Excluding the 1995 restructuring provision, the Technology Services segment
reflected an increase in  operating  income,  while both the  International
Communications and Entertainment segments reported lower operating income.

     Operating  income in 1995 was $96  million,  a decline of $55  million
from 1994. Exclusive of the 1995 restructuring  provision and the Radiation
Systems,  Inc.  (RSi)  merger  and  integration  costs  recorded  in  1994,
operating income was $116 million,  or $42 million below 1994. All business
segments reported lower operating income in 1995 as compared to 1994.

     The initial public offering of common stock of Ascent was completed in
December 1995. The corporation  owns 80.67% of Ascent's  common stock.  The
corporation recognized,  in 1995, a $19 million pre-tax gain as a result of
the public offering (see Note 5 to the financial statements).

     Other  income  (expense),  net,  for  1996  was a net  expense  of $11
million,  which was $4 million  greater  than 1995.  This was due to a full
year of  dividend  payments  on the  Monthly  Income  Preferred  Securities
(MIPS),  which  were  issued  in July  1995  (see  Note 9 to the  financial
statements),  offset  by a $2.7  million  gain on the  sale of I-CO  Global
Communications (Holdings) Limited (ICO) shares (see Note 7 to the financial
statements).  In 1995, other income (expense), net, was a net expense of $8
million compared to a net other income of $3 million for 1994. Dividends on
the MIPS  securities  of $7 million were the primary cause of the increased
expense in 1995.


                                     29

<PAGE>

     Interest costs increased by $2 million in 1996 as compared to 1995 and
by $11  million in 1995 as  compared  to 1994 as a result of  increases  in
borrowings.  Interest  capitalized,  primarily  on  satellite  construction
projects,  declined in 1996 by $5 million as compared to 1995,  and in 1995
by $3  million  as  compared  to 1994,  due to the  completion  of  several
satellite projects.

     Income tax expense was  adjusted to a higher  accrual  rate in 1996 to
reflect  increases in  non-deductible  expenses and state income taxes.  In
October  1996,  Ascent's  ownership  in OCC declined to less than 80%. As a
result,  OCC is no longer a part of the COMSAT  consolidated tax group, and
COMSAT is no longer able to recognize tax benefits from OCC losses.

     Minority interest in net losses of consolidated subsidiaries increased
from $4 million in 1995 to $18 million in 1996 primarily as a result of the
minority interest of Ascent, net of taxes.

         Net income for 1996 was $9 million,  which was $29  million  below
last year. Earnings per share were $0.18, a $0.61 decrease from 1995.

     Net income was $38 million in 1995,  a reduction  of $40 million  from
the prior year.  Earnings  per share for 1995 were  $0.79,  down $0.85 from
1994.

SEGMENT OPERATING RESULTS

     The  corporation   reports   operating   results  in  three  segments:
International  Communications,  Technology  Services and Entertainment (see
Note 18 to the  financial  statements).  The  International  Communications
segment includes COMSAT World Systems (CWS),  COMSAT Mobile  Communications
(CMC) and COMSAT  International  (CI). Prior to 1996, CMC was reported as a
separate segment.  The segment financial  information for 1995 and 1994 has
been adjusted to reflect the change in the corporation's  segments in 1996.
In January 1997, COMSAT  International  Ventures changed its name to COMSAT
International.


                                     30

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                   <C>             <C>             <C>          

In millions                                                                    1996            1995            1994
---------------------------------------------------------------------------------------------------------------------
Revenues
   International Communications:
       World Systems                                                       $   272.9        $  254.7        $   252.0
       Mobile Communications                                                   155.2           180.4           193.5
       International                                                            58.1            37.7            19.2
                                                                           ----------       ---------       ---------
   Total                                                                       486.2           472.8           464.7
   Technology Services                                                         300.6           205.9           219.1
   Entertainment                                                               258.1           202.3           165.6
   Eliminations and other corporate                                            (29.6)          (18.1)          (13.7)
                                                                           ----------       ---------       ---------
       Total revenues                                                      $ 1,015.3        $  862.9        $  835.7
                                                                           ==========       =========       =========

Operating income (loss)
   International Communications:
       World Systems                                                       $   104.0        $  108.6        $  100.9
       Mobile Communications                                                    31.3            53.5            53.5
       International                                                           (17.3)          (20.7)           (4.2)
                                                                           ----------       ---------       ---------
   Total                                                                       118.0           141.4           150.2
   Technology Services                                                          19.0            14.0            21.4
   Entertainment                                                               (45.9)          (15.4)           13.6
                                                                           ----------       ---------       ---------
       Total segment operating income                                           91.1           140.0           185.2
   Merger and integration costs                                                    -               -            (7.4)
   Provision for restructuring                                                     -           (20.1)              -
   Other corporate                                                             (27.0)          (24.3)          (27.5)
                                                                           ----------       ---------       ---------
       Total operating income                                              $    64.1        $   95.6        $  150.3
                                                                           ==========       =========       =========

</TABLE>

INTERNATIONAL COMMUNICATIONS

     International    Communications   includes   the   FCC-regulated   and
non-regulated  businesses  of CWS, CMC and CI. CWS  provides  international
voice, data, video and audio  communications as the  statutorily-designated
U.S.  participant in the global  INTELSAT  satellite  system.  CMC provides
maritime,  aeronautical  and land  mobile  communications  services  as the
statutorily-designated  U.S.  participant in the Inmarsat satellite system.
CI  operates  an  integrated  group  of  telecommunications  businesses  in
countries  with  rapidly  growing  telecommunications  markets and provides
individualized  digital  network  solutions to  customers  located in these
markets.

     Revenues in the International Communications segment in 1996 were $486
million,   which  was  3%  higher   than  1995.   In  1995,   International
Communications  revenues of $473 million  improved 2% over 1994.  Operating
income in 1996 was $118 million,  which was 17% below last year.  Operating
income of $141 million in 1995 was 6% below 1994 results.

COMSAT WORLD SYSTEMS

     CWS's 1996 revenues were $273  million,  which  reflects a 7% increase
over 1995.  The  improvement  in revenues came  primarily from increases in
VSAT  leases,  IBS traffic and CWS's  share of revenues  from the  INTELSAT
system.  These  increases  were partially  offset by reduced  revenues from
scheduled rate reductions in long-term contracts with AT&T, MCI and Sprint,
CWS's three largest international carrier customers.

     CWS's 1995 revenues of $255 million were 1% higher than 1994. Revenues
from expanded  service  offerings  (such as VSAT leases,  digital audio and
wide-band  mobile)  increased by 55%. These increases were partially offset
by reduced  revenues  from voice  circuits,  which  declined 6% due to rate

                                    31

<PAGE>

reductions in the long-term contracts and the conversion of analog circuits
to more  efficient  digital  service.  CWS's  share  of  revenues  from the
INTELSAT  system  also  declined  as a  result  of a 1%  reduction  in  the
corporation's ownership share in 1995.

     Operating  income in 1996 in CWS was $104  million,  a decrease  of 4%
from the prior year.  The decrease in operating  income was the result of a
lower   investment  base  upon  which  the  regulated  rate  of  return  is
calculated.  This was the result of insurance  proceeds  received  from the
February 1996 launch  failure of the INTELSAT 708 satellite  (see Note 4 to
the financial statements).

     CWS's 1995 operating  income of $109 million improved 8% over 1994 due
to decreased  operating  expenses within the division and CWS's lower share
of  INTELSAT's  costs.  These  savings were  partially  offset by increased
depreciation  expense from the launch of three  INTELSAT VII  satellites in
1995.

COMSAT MOBILE COMMUNICATIONS

     CMC's 1996 revenues  were $155 million,  a decrease of 14% as compared
to 1995.  The lower  revenues  were  primarily  the result of  decreases in
analog  telephone and telex  revenues,  expiration  of the American  Mobile
Satellite  Corporation  (AMSC) service  contract in December 1995 and lower
volume in the bulk service  contract with IDB Mobile  Communications,  Inc.
(IDB).  CMC's analog telephone and telex revenues declined by 15% from 1995
as a result of continued competitive pressures. CMC's 1995 revenues of $180
million  were 7% lower than the prior year due to rate  reductions  and the
migration of traffic to less  expensive,  more efficient  digital  services
such as Standard-M.

     Operating  income in CMC for 1996 was $31  million,  or 42% lower than
1995  due  to  lower  revenues,   increased  depreciation  expense  as  two
Inmarsat-3  satellites  were placed in service  during  1996 and  increased
costs related to the start-up of Planet 1SM service.

     CMC's  operating  income  for  1995 was  unchanged  from  1994.  Lower
revenues  were offset by a reduction in operating  expenses and an increase
in CMC's share of Inmarsat's  operating  results.  The decline in operating
expenses was due in part to lower CMC  operating  costs and the reversal of
Inmarsat-related costs which were over-accrued in 1994.

COMSAT INTERNATIONAL

     CI's revenues for 1996 were $58 million,  which reflects growth of 54%
over last year.  The majority of the growth  originated  from  companies in
Brazil  and  Argentina,  where the year over year  growth was 254% and 38%,
respectively.  Partially offsetting the increases was a decline in revenues
in BelCom,  CI's  company  operating in Russia and in the  Commonwealth  of
Independent  States  (CIS),  due  principally  to a reduction  in equipment
sales. CI's revenue commitments under long-term contracts were $220 million
at the end of 1996, which more than doubled over 1995.

     CI's  revenues  in 1995 were $38  million,  which was 97% higher  than
1994.  This was the result of  improvements  in Latin  America and the full
year consolidation of the results of BelCom.

     CI's operating  loss in 1996 was $17 million,  which was 17% less than
the previous year's loss of $21 million. This improvement was primarily the
result  of the  increase  in  revenues  in  Brazil  and a  decrease  in the
operating losses at BelCom.  Partially  offsetting these  improvements were
start-up costs  associated  with CI's newer  companies in China,  Colombia,

                                    32

<PAGE>

India and  Venezuela.  In 1995,  CI  experienced  an operating  loss of $21
million, which was caused in part by losses in BelCom.

TECHNOLOGY SERVICES

     The Technology  Services segment includes COMSAT RSI (CRSI) and COMSAT
Laboratories.  CRSI designs, manufactures and integrates a range of turnkey
systems,  subsystems  and  components  for  advanced  microwave,  cellular,
personal communication services and networks (PCS/PCN), wireless local loop
communication networks, satellite communication,  radar and other services.
In addition,  the segment provides  operations and  maintenance,  satellite
construction monitoring and applied research services.

     Technology  Services'  revenues  in  1996  were  $301  million,  a 46%
improvement  over  last  year due to  increased  revenues  at both CRSI and
COMSAT  Laboratories.  Included in Technology  Services' 1996 revenues were
royalties  of $8 million  related to a licensing  agreement  that  resolved
patent  infringement  disputes  with certain  manufacturers  of  television
encryption  and  decryption   equipment.   Exclusive  of  these  royalties,
Technology  Services' revenues improved 42% over 1995. This improvement was
primarily the result of increases in revenues from the Commercial Satellite
Communications  Initiative  (CSCI) contract,  sales of PCS antennas and the
impact of a full year of  revenues  from JEFA  Wireless  (JEFA) and Plexsys
International  (Plexsys),  which were both  acquired  in the second half of
1995.

     Revenues  for this  segment  declined in 1995 by $13 million  from the
prior year due to the completion in 1994 of several large international and
U.S.  Government  contracts  which were not  replaced in 1995, a $5 million
insurance settlement recorded in 1994 at CRSI, and the downsizing of one of
the Laboratories'  divisions in 1995. Offsetting the decline, in part, were
increases in revenues from  satellite  services for  classified  government
customers,  earth station component sales and the initial  consolidation of
three  companies -  Intelesys,  JEFA and Plexsys - that are involved in the
manufacture,  integration and installation of various  wireless  components
and systems.

     Technology  Services'  operating income was $19 million in 1996, which
was 36% better than 1995.  Exclusive of the $8 million in  royalties  noted
above,  operating income in the Technology Services segment was $11 million
in 1996 as compared to $14 million in 1995. This decrease was the result of
charges  of $9  million  taken in the  fourth  quarter  of 1996  related to
estimated losses on certain long-term,  fixed-price contracts. The decrease
was partially  offset by improvements  from increased sales of PCS antennas
and VSAT products.

     Operating  income in 1995  declined $7 million from 1994.  The decline
was primarily  due to lower  revenues,  as well as new product  development
costs associated with newly acquired VSAT and cellular product  businesses,
and the favorable insurance settlement received in 1994.

ENTERTAINMENT

     The  Entertainment   segment  consists  of  the  corporation's  80.67%
ownership interest in Ascent (see Note 5 to the financial statements).

     Ascent, through OCC and Ascent Network Services,  Inc. (ANS), provides
video  distribution  and  on-demand  video  entertainment  services  to the
lodging  industry  and  video   distribution   services  for  the  National
Broadcasting Company (NBC). This segment also includes the Denver Nuggets

                                     33

<PAGE>

National  Basketball  Association (NBA) franchise,  the Colorado  Avalanche
National  Hockey  League (NHL)  franchise and Beacon  Communications  Corp.
(Beacon), a producer of theatrical films and television programming.

     In October  1996,  Ascent  through its newly formed  subsidiary,  OCC,
acquired the assets and assumed certain liabilities of SpectraVision. Prior
to the  acquisition,  OCV was merged into a subsidiary  of OCC and became a
wholly-owned  subsidiary of OCC.  Ascent now owns 57.2% of the  outstanding
common stock of OCC (see Note 5 to the financial statements).

     The  Entertainment  segment's  1996  revenues  were $258  million,  an
increase of 28% over 1995. The improvement for 1996 includes $21 million of
revenue from the fourth quarter acquisition of SpectraVision by OCC; growth
associated with the continued  installation of new on- demand video systems
at OCC and a full year of revenues  for the Colorado  Avalanche,  which was
acquired in July 1995.  Partially  offsetting  these  increases  were lower
revenues  from the Denver  Nuggets and from  Beacon,  which had no new film
releases in 1996. In addition, revenues in 1996 were lower compared to 1995
due to the discontinuance of the Satellite Cinema business at year-end 1995
and the absence of any  expansion  fees from the NBA which were received in
1995.

     In 1995, the Entertainment segment's revenues were $202 million, which
was 22% higher  than 1994.  This  increase  in  revenues  was the result of
growth in the OCV  installed  room  base,  the  inclusion  of the  Colorado
Avalanche for the last half of 1995,  revenues from a newly released Beacon
film and NBA expansion  revenues.  Offsetting  these  increases  were lower
revenues from the NBC contract.

     In 1996, the Entertainment segment's operating loss was $46 million as
compared  to an  operating  loss of $15  million  in the  prior  year.  The
increase in the  operating  loss is  primarily  attributable  to  increased
losses at the sports  franchises  and at OCC.  OCC  recognized  costs of $9
million  relating  primarily  to asset  write-downs,  reserves  and expense
accruals  associated  with the integration of  SpectraVision  in the fourth
quarter.  The 1995 results  included $9 million of operating income related
to the NBA  expansion  that did not  reoccur in 1996.  The sport  franchise
results reflect the full-year losses of the Colorado  Avalanche,  which was
not included in this segment's results until July 1995.

     In February  1997,  Ascent  restated its financial  statements for the
year ended December 31, 1995 to reduce film  inventory  through a charge to
earnings and to change the Beacon  purchase  price  allocation  between two
intangible assets with different useful lives.  COMSAT's operating loss for
the fourth quarter  included a negative $2.0 million  adjustment to account
for the  restatement  by Ascent.  COMSAT's 1995 financial  statements  were
unaffected by the Ascent restatement.

     The  Entertainment  segment in 1995 reported an operating  loss of $15
million compared to operating income of $14 million in 1994. The decline in
1995 was a result of lower revenues from the NBC contract,  losses from the
Colorado  Avalanche  for the last  half of 1995  and  full-year  costs  for
Beacon. Additionally, the 1995 results include one-time charges recorded in
connection  with the Ascent public  offering.  These losses were  partially
offset by receipt of NBA expansion fees and improvement in OCV operations.


                                     34

<PAGE>

OUTLOOK

     MANY OF THE STATEMENTS THAT FOLLOW ARE  FORWARD-LOOKING  AND RELATE TO
ANTICIPATED FUTURE OPERATING RESULTS. STATEMENTS WHICH LOOK FORWARD IN TIME
ARE BASED ON MANAGEMENT'S CURRENT  EXPECTATIONS AND ASSUMPTIONS,  WHICH MAY
BE  AFFECTED  BY  SUBSEQUENT  DEVELOPMENTS  AND  BUSINESS  CONDITIONS,  AND
NECESSARILY  INVOLVE RISKS AND  UNCERTAINTIES.  THEREFORE,  THERE CAN BE NO
ASSURANCE  THAT  ACTUAL  FUTURE  RESULTS  WILL NOT DIFFER  MATERIALLY  FROM
ANTICIPATED  RESULTS.  ALTHOUGH THE  CORPORATION  HAS ATTEMPTED TO IDENTIFY
SOME OF THE  IMPORTANT  FACTORS  THAT MAY CAUSE  ACTUAL  RESULTS  TO DIFFER
MATERIALLY  FROM THOSE  ANTICIPATED,  THOSE FACTORS SHOULD NOT BE VIEWED AS
THE ONLY FACTORS WHICH MAY AFFECT FUTURE OPERATING RESULTS.

     In March 1997,  COMSAT's Board of Directors  approved a  comprehensive
strategic  plan to  refocus  the  corporation  on  international  satellite
services and digital  networking  services and  technology.  The  satellite
services   businesses,   which   include  CWS,  CMC  and  COMSAT   Personal
Communications,  are well  positioned  in the  international  market with a
significant  ownership  interest in the largest fleet of  satellites, which
covers most of the world's  land mass and  oceans.  The digital  networking
services  and   technology   businesses,   which   include  CI  and  COMSAT
Laboratories,  develop and operate digital networks in emerging markets and
provide advanced technology services. By focusing on those businesses,  and
shedding non-core operations,  the corporation plans to improve shareholder
value  by  strengthening   its  balance  sheet,   improving   earnings  and
positioning itself to participate in the growth opportunities that exist in
the international satellite and digital networking markets.

     As  part  of  the  strategic  plan,  the  corporation  reaffirmed  its
commitment to divest its 80.67%  interest in Ascent.  In January 1997,  the
corporation  filed a ruling request with the Internal  Revenue Service as a
predicate to a tax-free spin-off.  Pending the ruling, COMSAT will continue
efforts to identify a purchaser  for its  interest in Ascent.  Although the
timing may vary  depending  on which course is taken and factors not within
the  corporation's  control (e.g., the timing of receipt of a ruling),  the
corporation  anticipates that Ascent will be  deconsolidated  for financial
reporting purposes by the end of the first half of 1997.

     The corporation  also announced that it intends to sell  substantially
all of the  assets  and  operations  of CRSI as  well as  non-core  assets.
Consistent with that strategy, in late 1996 and early 1997, the corporation
divested   its   minority   ownership   interest   in   Philippine   Global
Communications,  Inc.  (Philcom) and reduced its ownership  interest in ICO
(see Note 7 to the financial statements).

     The  company   intends  to  increase  its  financial   flexibility  be
refinancing a portion of its long-term debt with the proceeds of short-term
debt.  Additionally,  the Board of Directors is  reviewing  whether  COMSAT
should maintain its dividend at the currend level.

     The corporation also announced, in connection with the strategic plan,
that it will  formally  petition  the  FCC in 1997 to  re-classify  it as a
non-dominant  carrier  and  for  relief  from  rate-based,   rate-of-return
regulation.  There can be no assurance that the FCC will act favorably upon
the petition.

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<PAGE>

INTERNATIONAL COMMUNICATIONS

     The  corporation  continues  to  promote  efforts to  restructure  the
INTELSAT  and  Inmarsat  satellite  systems to ensure that they will remain
competitive  in the future and to  enhance  the value of the  corporation's
investment in those systems.  The  corporation  believes that  considerable
progress  has been made on the  restructuring  of  INTELSAT.  In 1996,  the
corporation  worked  closely  with the  United  States  Government  to gain
support for the creation of a separate, independent company - carved out of
INTELSAT  - to  pursue  video  distribution  and other  new  services.  The
existing  intergovernmental  organization  would  continue to provide basic
public network and other core services. The corporation believes that there
is widespread  agreement  throughout  INTELSAT for this basic restructuring
concept,  which was not evident a year ago. There are a number of important
issues that must be resolved,  however,  before a restructuring of INTELSAT
may be implemented, including the number of satellites to be transferred to
the new company, the capital structure of INTELSAT after restructuring, and
the level of ownership  in the new company by INTELSAT and its  signatories
(e.g.,  COMSAT)  after a planned  initial  public  offering  in 1999 of the
affiliate's stock.

     The  INTELSAT  Assembly of Parties is scheduled to meet in April 1997.
It will review a report of the Working  Party on  restructuring  during the
meeting.  The Assembly is not expected to make a final  determination about
restructuring but is expected to endorse the overall concept and direction.
Additional  progress needs to be made on several  important issues before a
final consensus  proposal can emerge for subsequent  review and adoption by
the Assembly.

     A consensus  agreement of the Assembly or a vote of  two-thirds of the
140  governments  that are members of the INTELSAT  consortium is necessary
for  approval.   The  United  States   Government,   not  the  corporation,
participates  in the Assembly  and casts a single vote.  The success of the
corporation's restructuring efforts will depend on the ability to achieve a
consensus among other signatories and participating member governments.

     In January  1997,  the FCC staff  advised  COMSAT that it will need to
make application to the FCC to participate in INTELSAT actions to create an
affiliate, including the transfer of satellite assets. At issue will be the
terms and  conditions  under  which  those  assets may be removed  from the
corporation's  regulatory  rate base.  The FCC staff has expressed the view
that,  since  COMSAT's  ownership  share of  INTELSAT is  reflected  in its
regulatory  rate  base,  any gain  generated  as a result of  restructuring
should  be  applied  against  the rate  base and  inure to the  benefit  of
ratepayers,  unless COMSAT  demonstrates  sound public policy reasons why a
different  standard  should  apply.  COMSAT  believes  that any transfer of
satellite  assets should be effected at book value with any resulting  gain
derived from the  restructuring  of INTELSAT  inuring to the benefit of the
corporation's shareholders.

     COMSAT  WORLD  SYSTEMS  continues  to be  well-positioned  with  major
international    carriers   through   long-term   agreements   to   provide
cost-competitive services for bulk usage beyond the year 2000. In addition,
CWS expects growth in several  emerging  markets,  including  international
VSAT service and Asynchronous Transfer Mode (ATM) services.

     In addition  to eight  satellites  currently  on order,  INTELSAT  has
signed  a  lease  for  capacity  aboard  the  INSAT-2E   satellite  in  the
Asia-Pacific  region,  planned  for  launch in the 1997 - 1998  time-frame.
INTELSAT  launched two satellites  successfully in 1996 and plans for three
or four  launches  in 1997,  depending  on  satellite  delivery  and launch
availability.   The  new  INTELSAT  VIII  series   satellites   will  offer

                                    36

<PAGE>

higher-power  C-band  capabilities to address various markets.  INTELSAT is
nearing the end of an investment  cycle in which it has invested heavily in
new  satellites.  As those  satellites  are placed in service  and begin to
generate  revenues,  the corporation  anticipates that CWS's free cash flow
(operating cash flow less capital investment) will grow significantly.

     CWS is expected to face increasing  competition  over the longer term.
Several  recently  announced  or  completed  acquisitions  are  expected to
significantly   increase  the  competition  for   international   satellite
telecommunications  services, including the planned acquisition of PanAmSat
by Hughes  Electronics  Corporation  and British  Telecommunications  PLC's
planned acquisition of MCI Communication Corp.

     In late 1993, the FCC substantially  eliminated prior  restrictions on
access of  separate  system  satellite  operators  to the  public  switched
telephone network.  The remaining  restrictions  expired as of December 31,
1996.  Accordingly,  separate  system  satellite  operators  are no  longer
subject  to any U.S.  policy  limitations  with  respect  to the  number of
satellite  circuits  that they may  interconnect  with the public  switched
telephone  network.  This will  increase  competition  in the  provision of
switched services.

     COMSAT MOBILE  COMMUNICATIONS  plans to continue to expand its service
offerings and value-added products to meet anticipated growth in customers'
needs. The increasing number of digital  terminals with improved  operating
efficiency and reduced  service charges are expected to continue to provide
traffic  growth in land mobile,  small  commercial  and pleasure  boat, and
business  traveler  markets.  CMC expects to  continue  to face  increasing
competition  from  existing  Inmarsat  service  providers,  other  wireless
communications  services  (including  C-band)  and other  potential  market
entrants.  In October 1996, CMC reduced its service  charges in response to
competitive  pressures  and has solved  quality  issues in its new  digital
services.

     The lower  service  prices and a greater  prevalence  of  lower-priced
digital versus analog  telephone  service charges are expected to more than
offset potential  increases in revenues due to traffic growth.  As a result
of  those  factors  and the  increased  depreciation  associated  with  the
Inmarsat-3  satellites,  CMC's operating  income is expected to be lower in
1997 than in 1996.

     In late 1996, the Federal Aviation  Administration  (FAA) selected CMC
to provide  satellite  and uplink  services for the Wide Area  Augmentation
System (WAAS). The initial contract is expected to generate revenues of $34
million and could  generate  revenues of up to $100  million if all options
are exercised over the next five years.

     CMC plans to build on its  established  position  in mobile  satellite
communications as it evolves toward handheld satellite service. Planet 1SM,
the  first  generation  of  personal  satellite  communications,  commenced
commercial  service in January  1997.  The  Planet 1TM  terminal  is a six-
pound,  laptop   computer-sized   satellite  terminal  which  utilizes  the
Inmarsat-3  satellites.  This product is expected to address the demand for
global  personal  communications  ahead  of the  availability  of  handheld
satellite  services.  During  1996,  the  first  three of four  operational
Inmarsat-3  satellites were  successfully  launched and are now in service.
The Planet 1SM service is expected to be  available  globally by the second
half of 1997, with the launch of the fourth satellite.

                                    37

<PAGE>

     In December 1996, the corporation reduced its direct investment in ICO
from  eight  percent  to  three  percent  (see  Note  7  to  the  financial
statements).  The  reduction  in ICO  ownership  aligns  the  corporation's
financial  interest with its plans to  concentrate on developing a national
service  wholesaler role in the U.S. The corporation also continues to hold
an indirect  share of ICO through its 23%  ownership in Inmarsat,  which is
also an ICO shareholder.

     As with any new product, there are a number of factors that may affect
the  corporation's  ability  to  offer  Planet  1SM and ICO  services  on a
profitable basis. Such factors include the level of consumer acceptance and
demand,  the  quality  and  pricing  of  competitive   services,   and  the
performance of ground and space systems and customer terminals. In order to
offer Planet 1SM and ICO  services,  the  corporation  must obtain  certain
regulatory approvals (see Notes 10 and 11 to the financial statements).  In
addition,  ICO must receive the funding  required to complete its satellite
system.

     COMSAT  INTERNATIONAL  will continue to operate an integrated group of
telecommunications  companies  that are engaged  principally  in  providing
individualized  digital network  solutions to business clients and carriers
in selected  markets.  CI also plans to develop  prospective  international
telecommunications  opportunities  that are  consistent  with  its  digital
networking  strategy.  In this  regard,  CI will  continue to target  those
rapidly  growing  markets  where a  significant  number of CI's existing or
targeted clients are located (or in which they intend to locate).

     CI's  general  financial   performance  benchmark  is  for  individual
companies to be  operationally  cash-flow  positive  within three years and
profitable after five years of operation absent unforeseen circumstances or
problems.  As  part of its  integrated  approach  to  management  of  those
companies,  CI evaluates operating  performance,  strategic fit and overall
effectiveness  of  managerial  control to determine  whether to continue to
increase or reduce its investment in individual companies.  CI is currently
reviewing its investment in BelCom.  In January 1997, CI sold its 20% share
in Philcom (see Note 7 to the financial statements).

     CI's more mature companies located in Argentina,  Bolivia,  Brazil and
Guatemala are expected to be  profitable in the aggregate in 1997.  Profits
generated from those operations are expected to be offset by losses in CI's
newer companies operating in China, Colombia, India and Venezuela losses at
BelCom and by management costs in the U.S.

     In early 1997,  the  Communications  Secretariat  of Argentina  issued
resolutions which reserve for Nahuelsat,  the domestic Argentine  satellite
operator,  certain  exclusive  rights  for  the  sale of  domestic  Ku-band
satellite  services in Argentina.  CI expects that the  resolution  will be
challenged by satellite service  providers and users.  COMSAT Argentina has
reserved  sufficient  Ku-band  capacity  to address  its current and future
business  requirements  through  1998.  Following  1998,  however,   COMSAT
Argentina will be required to secure  additional  capacity for new business
from Nahuelsat.

TECHNOLOGY SERVICES

     COMSAT RSI should continue to experience revenue growth in each of its
three core groups as a result of strong  worldwide  demand for wireless and
satellite  communications  infrastructure  and  increased  U.S.  Government
spending on advanced communications  products and services.  CRSI's backlog
rose to $226  million at the end of 1996 as compared to $212 million at the

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<PAGE>

end of 1995. Of the December 31, 1996 backlog,  approximately  $160 million
is expected to be recognized as sales in 1997 and approximately $36 million
is unfunded.  Included in this order backlog is approximately  $128 million
of U.S.  Government  contracts.  As is customary,  these contracts  include
provisions for  cancellation at the  convenience of the U.S.  Government or
the prime contractor. If such a provision were exercised, CRSI would likely
assert  a claim  for  reimbursement  of  costs  incurred  and a  reasonable
allowance for profit thereon.

     CRSI's  operating  income in 1997 is  expected  to  improve  over 1996
operating  income,  exclusive  of the  reserves  taken  in 1996 on  certain
long-term, fixed-price contracts. Although the increase in operating income
may not be at the  same  pace as the  increase  in  revenues  due to  costs
related  to the  introduction  of new  services  and  products,  as well as
increasing investment in product development. Additionally, earnings growth
at CRSI will  continue to depend upon CRSI's  ability to contain  costs and
complete projects with favorable margins.

ENTERTAINMENT

     ASCENT is expected  to  continue to derive a majority of its  revenues
from the lodging industry video  distribution  business.  Revenue growth is
expected from the continued  installation  of OCC systems for new customers
and in SpectraVision hotels, and the full year impact of the acquisition of
SpectraVision.

     Contracted  revenues for video  distribution  services provided to NBC
entered an option  phase in 1995,  which  resulted  in lower  revenues  and
operating  income. In 1996, ANS procured and installed digital equipment to
provide MSNBC, LLC, a joint venture between  Microsoft  Corporation and NBC
("MSNBC") with network services,  maintenance and support.  ANS anticipates
that it will  assist NBC in  completing  the  upgrade of the NBC network to
digital technology.

     The  financial  performance  of the Denver  Nuggets  and the  Colorado
Avalanche are, to a large extent,  dependent on their  performance in their
respective leagues.  In addition,  due to the limitations of the facilities
available  at  McNichols  Arena  where both teams  currently  play,  Ascent
believes that projected increases from  facilities-based  revenues will not
keep pace with  increases  in  players'  salaries,  which  could  result in
operating losses for as long as they play in McNichols Arena.  Ascent plans
to construct a new arena and  entertainment  complex,  which is expected to
result in improved  operating  results for both teams. It is estimated that
the arena will cost approximately $160 million.

     Beacon is  expected to release  three  feature  films  during 1997 and
begin  production  on up to three  additional  films in 1997,  which may be
released in 1998.  There is a significant  degree of  unpredictability  and
risk associated with theatrical films.

     In October  1996,  Ascent  through its newly formed  subsidiary,  OCC,
acquired the assets and assumed certain  liabilities of  SpectraVision.  In
addition, Ascent's ownership of OCC declined at that time to less than 80%.
As a result, OCC is no longer a part of the COMSAT  consolidated tax group,
and COMSAT is no longer able to recognize tax benefits from OCC losses.

     As a result of anticipated continued losses at Ascent,  primarily as a
result  of  the  increased  losses   associated  with  the  acquisition  of
SpectraVision  and the impact of the  deconsolidation  for tax  purposes of
OCC,  COMSAT expects to report net losses in 1997 until Ascent is no longer
a part of COMSAT's consolidated results.


                                     39

<PAGE>

                         ANALYSIS OF BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

ASSETS.  The  corporation  ended 1996 with $2.7  billion of assets,  a $352
million increase over 1995.

     Current assets decreased during 1996 by $16 million primarily due to a
decline in cash and cash  equivalents of $111 million,  which was partially
offset by increases in receivables  and  inventories of $80 million and $13
million,  respectively.  The  decrease  in cash  and cash  equivalents  was
primarily  related  to the  repayment  of  loans  on  corporate-owned  life
insurance  policies  and  additional  investment  in ICO.  The  increase in
accounts  receivable  was  principally  the result of growth in revenues at
CRSI,  higher  unbilled  CRSI  receivables  and the  acquisition  by OCC of
SpectraVision.  All of CRSI's unbilled receivables, except for $11 million,
are expected to be collected within one year. The increase in inventory was
due to growth at CRSI related to PCS and other products.

     Non-current  assets  increased in 1996 by $368 million to end the year
at $2.3  billion.  Of the total  increase,  $129  million  was  related  to
property  and  equipment.   Property  and  equipment,   before  accumulated
depreciation,  increased  during the year by $239 million.  The increase in
property and equipment was primarily  related to the  installation of video
systems and the acquisition of SpectraVision at OCC,  additions  related to
CWS's and CMC's share of  INTELSAT  and  Inmarsat  satellite  programs  and
investment   in  new   communication   property  and  equipment  at  COMSAT
International. Partially offsetting these increases was the receipt in 1996
of  insurance  proceeds  related to the launch  failure of the INTELSAT 708
satellite and retirement of fully-depreciated satellite assets.

     Investments increased $45 million during 1996 of which $36 million was
related  to the  corporation's  direct  and  indirect  investments  in ICO.
Goodwill  increased in 1996 by $88 million and was  principally  related to
the  acquisition of  SpectraVision  by OCC. Other assets  increased by $112
million in 1996 as the corporation  repaid loans related to corporate owned
life  insurance  policies  and  Beacon  made  further  investments  in film
inventories.

     LIABILITIES. The corporation's total liabilities increased during 1996
by $272 million.  This was primarily the result of increased  borrowings of
$123 million at Ascent,  increases in  liabilities  for the  production  of
films at Beacon of $44 million and  liabilities  of $19 million  related to
the acquisition of SpectraVision  by OCC.  COMSAT's  short-term  borrowings
increased during 1996 by $18 million.

          ANALYSIS OF CASH FLOWS, LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

     Cash from operating  activities  for 1996 was $231 million,  which was
12% below 1995. The International Communications and Entertainment segments
generated  the  majority of the  corporation's  cash from  operations.  The
corporation  made interest  payments,  net of amounts  capitalized,  of $41
million and tax payments of $1 million.


                                     40

<PAGE>

     During  1996,   the   corporation   used  $357  million  in  investing
activities,  a 16% decrease over 1995.  The 1996  purchases of property and
equipment came primarily from the International  Communications businesses,
as CWS and CMC continued to make capital investments equal to their related
shares of  INTELSAT's  and  Inmarsat's  satellite  programs.  CI  purchased
communications plant and equipment,  predominantly  related to contracts in
Latin America. OCC also purchased video-on-demand  equipment.  Increases in
investments  in  unconsolidated  businesses  are  primarily  related to the
corporation's investment in ICO.

     The corporation expects to make additional investments in property and
equipment  in 1997,  but at a level below the amount  expended  in 1996.  A
decrease in  spending  is  expected  in CWS as a large  portion of existing
satellite   program  costs  at  INTELSAT  were  expended  in  prior  years.
Investments in unconsolidated  businesses are expected to be lower in 1997,
as a result of a decrease in the  corporation's  obligation  related to ICO
and the sale in January 1997 of Philcom.

     Cash  proceeds  from  financing  activities  in  1996  were a net  $14
million,  a $252 million decrease from the previous year.  During 1996, the
corporation  had a net repayment of long-term  debt of $70 million,  repaid
loans on company  owned life  insurance  policies  of $51  million and paid
dividends of $38 million.  Cash from short-term  borrowings of $158 million
came  principally  from an  increase in  short-term  debt at Ascent of $143
million. The quarterly dividend has remained at $0.195 per share throughout
1995 and 1996.

LIQUIDITY AND CAPITAL RESOURCES

     The  corporation's  working  capital at year-end 1996 was a deficit of
$75 million,  a decrease of $296  million  from a positive  $221 million at
year-end  1995.  The $16  million  decline in current  assets was more than
offset by the $280 million increase in current liabilities. The increase in
current  liabilities,  as compared to the prior year,  was primarily due to
the  short-term  borrowings of $143 million under the Ascent and OCC credit
facilities,  $18 million in borrowings under the  corporation's  commercial
paper program, a $44 million increase in deferred income from Beacon's film
production   activities  and  increases  in  accounts   payable  and  other
liabilities  from an increased  level of  operations.  Cash from  operating
activities and short-term borrowings will be used for the near term to fund
growth and to finance working capital needs.

     The  corporation  has access to short-term and long-term  financing at
favorable  rates.  The  corporation's  current  long-term debt ratings were
downgraded  one level in early 1996 to A- by Standard  and Poor's and to A3
by Moody's. The corporation's $200 million commercial paper program had $18
million in borrowings  outstanding as of December 31, 1996. Ascent had $143
million in short term debt  outstanding  at year-end  1996.  A $200 million
credit agreement,  expiring in 1999, backs up the commercial paper program.
The corporation's current commercial paper ratings also were downgraded one
level in early 1996 to A2 by Standard and Poor's and to P2 by Moody's.

     The  corporation  had $26 million  remaining at year-end  1996 under a
$100 million  medium-term  note program,  which is unchanged  from year-end
1995.  The  medium-term  note  program  is  part  of a  $200  million  debt
securities shelf registration program initiated in 1994.

     As  part of its  strategic  plan  (see  "Management's  Discussion  and
Analysis -- Outlook",  the  corporation  intends to tender for a portion of

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<PAGE>

its long-term debt using the proceeds from short-term debt. The corporation
plans to  reduce  its  short-term  debt.  The  corporation  plans to reduce
short-term  debt with proceeds from the sale of assets of CRSI and non-core
assets.

     In March 1997, OCC amended its credit  facility to increase the amount
that OCC may borrow to $150 million from $125 million. Concurrently, Ascent
amended its credit facility to reduce the amount which ascent can borrow to
$140  million  from $200  million and  committed to raise not less than $50
million in subordinated  debt before October 1997 as a condition to further
renewal of its credit  facility (see Note 8 to the  financial  statements).
Ascent's  management  believes  that  Ascent  will be able to  satisfy  the
commitment  to raise $50 million  within  that time frame.  There can be no
assurance,  however,  that other  contingencies  will not arise which could
impact Ascent's ability to obtain the additional  subordinated financing or
that such  financing  will be abailable on terms  acceptable to Ascent.  If
Ascent wer not able to obtain the additional subordinated financing, Ascent
could be required to refinance  the credit  facility,  which could  require
Ascent to reduce or reschedule planned capital investments,  reduce capital
outlays or sell assets.

     The corporation's capital structure and debt-financing  activities are
regulated by the FCC. The  corporation  is required to submit its financial
plans to the FCC for review  annually.  Under existing FCC guidelines,  the
corporation  is subject to a limit of $200  million in  short-term  debt, a
maximum  long-term  debt to  total  capital  ratio  of 45% and an  interest
coverage  ratio of 2.3 to 1. The  latter two  guidelines  are  measured  at
year-end.  In October  1996,  the FCC approved a temporary  decrease in the
interest  coverage  ratio to a minimum of 1.9 to 1, and an  increase in the
short-term  debt limit to $325 million for the 1996 plan year and until the
FCC acts on the  corporation's  1997 capital plan, which is scheduled to be
filed by the end of April 1997. The  corporation was in compliance with the
guidelines,  as modified,  with a long-term  debt to total capital ratio of
43%, $178 million in short-term debt  outstanding and an interest  coverage
ratio of 1.97 to 1 at December 31, 1996.

     If the  corporation  were to fail  to  satisfy  one or more of the FCC
guidelines as of an applicable  measurement  date, the corporation would be
required to seek advance FCC approval of future  financing  activities on a
case by case basis.  If such  approval  were not granted,  the  corporation
could be  required to reduce or  reschedule  planned  capital  investments,
reduce cash outlays, reduce debt or sell assets.


                                     42

<PAGE>

ITEM 8:   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


REPORT OF INDEPENDENT AUDITORS


To the Shareholders of
COMSAT Corporation:

We have  audited the  accompanying  consolidated  balance  sheets of COMSAT
Corporation and its  subsidiaries as of December 31, 1996 and 1995, and the
related  consolidated  statements of income,  stockholders' equity and cash
flow for each of the three years in the period ended December 31, 1996. Our
audit also included the financial  statement  schedules listed in the index
at Item 14(a)2.  These  financial  statements  and the financial  statement
schedules  are the  responsibility  of the  corporation's  management.  Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those  standards  require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material  misstatement.  An audit includes  examining,  on a test basis,
evidence   supporting   the  amounts  and   disclosures  in  the  financial
statements. An audit also includes assessing the accounting principles used
and  significant  estimates made by  management,  as well as evaluating the
overall  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion such consolidated  financial  statements  present fairly, in
all material  respects,  the financial  position of the corporation and its
subsidiaries  at  December  31,  1996 and 1995,  and the  results  of their
operations  and their cash flows for each of the three  years in the period
ended December 31, 1996, in conformity with generally  accepted  accounting
principles.  Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken
as a whole,  present fairly in all material  respects,  the information set
forth therein.



Deloitte & Touche LLP
Washington, D.C.
February 14, 1997
(March 23, 1997 as to the eighth paragraph of Note 8)

                                     43

<PAGE>

                    COMSAT CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED INCOME STATEMENTS
            For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
<S>                                                              <C>              <C>             <C>


In thousands, except per share amounts                                      1996            1995           1994
---------------------------------------------------------------------------------------------------------------
REVENUES                                                           $   1,015,261   $     862,912   $    835,665
                                                                   -------------   -------------   ------------

OPERATING EXPENSES:
   Cost of services                                                      666,345         506,660        471,043
   Depreciation and amortization                                         236,276         202,024        167,784
   Research and development                                               24,618          18,693         16,369
   General and administrative                                             23,941          19,856         22,851
   Merger and integration costs                                                -               -          7,367
   Provision for restructuring                                                 -          20,044              -
                                                                   -------------   -------------   ------------
   Total operating expenses                                              951,180         767,277        685,414
                                                                   -------------   -------------   ------------

OPERATING INCOME                                                          64,081          95,635        150,251

Gain on sale of minority interest                                              -          19,286              -

Other income (expense), net                                             (11,139)         (7,557)          2,689

Interest cost                                                           (61,559)        (59,487)       (48,940)

Interest capitalized                                                      15,760          20,355         23,662
                                                                   -------------   -------------   ------------

Income before taxes and minority interest                                  7,143          68,232        127,662

Income tax expense                                                      (16,144)        (34,911)       (49,939)

Minority interest in net losses (income)
   of consolidated subsidiaries                                           17,623           4,496           (81)
                                                                   -------------   -------------   ------------

NET INCOME                                                         $       8,622   $      37,817   $     77,642
                                                                   =============   =============   ============

EARNINGS PER SHARE                                                 $        0.18     $      0.79     $     1.64
                                                                   =============   =============   ============

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                     44

<PAGE>


                    COMSAT CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                         December 31, 1996 and 1995

<TABLE>
<CAPTION>
<S>                                                                             <C>             <C>

In thousands                                                                              1996            1995
--------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                     $      12,721   $     124,156
   Receivables                                                                         314,766         234,465
   Inventories                                                                          39,635          26,851
   Deferred income taxes                                                                12,756          12,445
   Other                                                                                29,961          27,908
                                                                                 -------------   -------------
   Total current assets                                                                409,839         425,825
                                                                                 -------------   -------------

Property and equipment                                                               1,656,763       1,528,053
Investments                                                                            133,592          88,378
Goodwill                                                                               155,250          67,569
Franchise rights                                                                       102,189         107,962
Other assets                                                                           208,170          96,479
                                                                                 -------------   -------------
   TOTAL ASSETS                                                                  $   2,665,803   $   2,314,266
                                                                                 =============   =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Short-term borrowings and current maturities of long-term debt                $     159,719   $      11,688
   Commercial paper                                                                     17,993               -
   Accounts payable and accrued liabilities                                            168,039         126,980
   Deferred income                                                                      81,942          38,060
   Due to related parties                                                               34,602          22,825
   Accrued income taxes                                                                 17,411               -
   Accrued interest                                                                      5,377           5,155
                                                                                 -------------   -------------    
   Total current liabilities                                                           485,083         204,708
                                                                                 -------------   -------------

Long-term debt                                                                         635,474         664,601
Deferred income taxes                                                                  123,972         119,018
Deferred investment tax credits                                                         12,350          15,190
Accrued postretirement benefit costs                                                    50,423          49,497
Other long-term liabilities                                                            147,818         129,911
Commitments and contingencies (notes 10, 11 & 17)                                            -               -
Minority interest                                                                      167,472          91,908
Preferred securities issued by subsidiary                                              200,000         200,000

STOCKHOLDERS' EQUITY:
   Common stock, without par value, 100,000 shares authorized,
       49,090 shares issued in 1996 and 48,612 in 1995                                 340,691         324,074
   Preferred stock, 5,000 shares authorized, no shares issued or
       outstanding                                                                           -               -
   Retained earnings                                                                   502,839         533,238
   Treasury stock, at cost, 269 shares in 1996 and 857 in 1995                         (3,006)         (9,020)
   Unearned compensation                                                               (3,869)         (5,484)
   Other                                                                                 6,556         (3,375)
                                                                                 -------------   -------------
   Total stockholders' equity                                                          843,211         839,433
                                                                                 -------------   -------------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                       $2,665,803      $2,314,266
                                                                                 =============   =============

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                     45

<PAGE>

                    COMSAT CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED CASH FLOW STATEMENTS
                For the Years Ended December 31, 1996, 1995
                                  and 1994

<TABLE>
<CAPTION>
<S>                                                              <C>            <C>             <C>

In thousands                                                              1996            1995            1994
----------------------------------------------------------------- --------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                        $      8,622   $      37,817   $      77,642
Adjustments for noncash expenses:
   Depreciation and amortization                                       236,276         202,024         167,784
   Provision for restructuring                                               -          20,044               -
   Gain on sale of minority interest                                         -        (19,286)               -
   Changes in operating assets and liabilities:
   Receivables and other current assets                               (63,155)        (11,959)        (17,169)
   Current liabilities                                                  30,557        (12,431)        (14,847)
   Noncurrent liabilities                                               15,498          24,748          25,808
Other                                                                    3,482          22,161           3,690
                                                                  ------------   -------------   -------------
Net cash provided by operating activities                              231,280         263,118         242,908
                                                                  ------------   -------------   -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                (364,427)       (308,161)       (274,562)
   Expenditures for film production costs                             (21,050)        (12,549)           (181)
   Investments in unconsolidated businesses                           (64,707)        (32,810)        (53,397)
   Purchase of subsidiaries                                            (9,264)        (78,240)        (35,676)
   Purchase of minority shares of subsidiaries                         (1,461)            (92)         (4,016)
   Proceeds from sale of investments                                    29,684               -               -
   Insurance proceeds from satellite launch failure                     54,443               -               -
   Decrease (increase) in INTELSAT ownership                           (1,238)          17,919          13,520
   Decrease (increase) in Inmarsat ownership                             5,746         (6,978)           3,573
   Other                                                                15,579         (2,930)         (3,471)
                                                                  ------------   -------------   -------------
   Net cash used in investing activities                             (356,695)       (423,841)       (354,210)
                                                                  ------------   -------------   -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of long-term debt                            126,645         154,119         112,296
   Net short-term borrowings (repayments)                              158,323       (121,356)          74,123
   Borrowings (repayments) against company-owned
       life insurance policies                                        (51,443)           2,542          32,437
   Common stock issued                                                  16,445          10,834           5,291
   Proceeds from issuance of preferred securities of subsidiary              -         200,000               -
   Proceeds from issuance of subsidiary's common stock                       -          78,985           1,486
   Repayment of long-term debt                                       (196,543)         (9,970)        (77,023)
   Cash dividends paid                                                (37,698)        (36,874)        (33,547)
   Other                                                               (1,749)        (12,059)         (1,333)
                                                                  ------------   -------------   -------------
   Net cash provided by financing activities                            13,980         266,221         113,730
                                                                  ------------   -------------   -------------

Net increase (decrease) in cash and cash equivalents                 (111,435)         105,498           2,428
Cash and cash equivalents, beginning of year                           124,156          18,658          16,230
                                                                  ------------   -------------   -------------
Cash and cash equivalents, end of year                            $     12,721   $     124,156   $      18,658
                                                                  ============   =============   =============

SUPPLEMENTAL CASH FLOW INFORMATION:
   Interest paid, net of amount capitalized                       $     40,623   $      36,710   $      24,880
   Income taxes paid                                              $      1,255   $      20,607   $      30,639
   Noncash financing of Inmarsat satellites                       $      5,602   $       7,551   $       7,197

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                     46

<PAGE>

                    COMSAT CORPORATION AND SUBSIDIARIES
         STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY
            For the Years Ended December 31, 1996, 1995 and 1994


<TABLE>
<CAPTION>
<S>                                        <C>       <C>           <C>        <C>           <C>        <C>            <C>
                                            Shares       Shares      Common     Retained     Treasury    Unearned
In thousands                                Issued    Outstanding     Stock     Earnings     Stock    Compensation    Other
-------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993                48,404       46,373     $311,506  $488,090       $(21,473)   $(10,891)     $(3,792)
Net income                                                                      77,642
Cash dividends                                                                 (33,547)
Common stock issued:
   Stock options and restricted stock
       units, including tax benefits                        105          948                      808
   Employee stock purchase, 401(k)
       and Investors' Plus plans               333          333        6,432
Amortization of unearned compensation
   and incentive plan expense                                          1,420                               2,868
Retirement of treasury stock                  (683)                   (8,163)                   8,163
Translation adjustment                                                                                                   5,343
Other                                                                               44                       774           744
                                            -----------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994                48,054       46,811      312,143   532,229        (12,502)    (7,249)        2,295
Net income                                                                      37,817
Cash dividends                                                                 (36,874)
Common stock issued:
   Stock options and restricted stock
       units, including tax benefits                        334        1,705                    3,373
   Employee stock purchase, 401(k)
       and Investors' Plus plans               558          558       10,276
Restricted stock awarded                                     91          871                      911     (1,782)
Amortization of unearned compensation
     and incentive plan expense
   and incentive plan expense                                            619                               2,131
Forfeiture and cancellation of
   restricted stock awards                                  (39)      (1,540)                    (802)       798
Minimum pension liability adjustment                                                                                    (2,006)
Translation adjustment                                                                                                  (3,664)
Other                                                                               66                       618
                                            -----------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995                48,612       47,755      324,074   533,238         (9,020)    (5,484)       (3,375)
Net income                                                                       8,622
Cash dividends                                                                 (37,698)
Common stock issued:
   Stock options and restricted stock
       units, including tax benefits             4          484        4,768                    5,149
   Employee stock purchase, 401(k)
       and Investors' Plus plans               474          474        8,888
Restricted stock awarded                                    183          597                    1,980     (2,577)
Amortization of unearned compensation
   and incentive plan expense                                            437                               2,685
Forfeiture and cancellation of
   restricted stock awards                                  (75)         (51)                  (1,115)       360
Minimum pension liability adjustment                                                                                       383
Translation adjustment                                                                                                     924
Unrealized gain on available for sale
   securities, net of taxes                                                                                              8,624
Other                                                                  1,978    (1,323)                    1,147
                                            -----------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996                49,090       48,821     $340,691  $502,839        $(3,006)   $(3,869)       $6,556
                                            ===================================================================================
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                     47

<PAGE>

                    COMSAT CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL
                STATEMENTS For the Years Ended December 31,
                            1996, 1995 and 1994


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF  CONSOLIDATION.  Accounts of COMSAT  Corporation and its
     majority-owned  subsidiaries  (COMSAT  or the  corporation)  have been
     consolidated.   Significant   intercompany   transactions   have  been
     eliminated.  Minority interest is primarily  comprised of the interest
     of other shareholders in Ascent Entertainment Group, Inc. (Ascent) and
     On Command  Corporation  (OCC) (see Note 5). As of December  31, 1996,
     the corporation owned 80.67% of Ascent and Ascent owned 57.2% of OCC.

     The  corporation  has  consolidated  its shares of the accounts of the
     International Telecommunications Satellite Organization (INTELSAT) and
     the  International  Mobile  Satellite  Organization  (Inmarsat).   The
     corporation's  ownership  interests in INTELSAT and Inmarsat are based
     primarily on the corporation's  usage of these systems. As of December
     31,  1996,  the  corporation  owned  19.1% of  INTELSAT  and  23.0% of
     Inmarsat.

     USE  OF  ESTIMATES.   The  preparation  of  financial   statements  in
     conformity  with generally  accepted  accounting  principles  requires
     estimates and  assumptions  that directly affect the amounts of assets
     and liabilities and disclosure of contingent assets and liabilities at
     the date of the  financial  statements  and the  reported  amounts  of
     revenues and expenses during the reporting period.  Actual results may
     differ from those  estimates.  Estimates  are used in  accounting  for
     long-term  contracts,   allowance  for  doubtful  accounts,  inventory
     obsolescence,  depreciation and amortization,  employee benefit plans,
     taxes and contingencies.

     REVENUE  RECOGNITION.  Revenue from  satellite  services is recognized
     over the period  during which the  satellite  services  are  provided.
     Revenue  from  long-term  product,   system  integration  and  related
     services contracts is accounted for using the percentage-of-completion
     (cost-to-cost)  method.  Revenue  from other  services  is recorded as
     services are provided.

     INCOME TAXES AND  INVESTMENT  TAX CREDITS.  The  provision  for income
     taxes includes taxes currently  payable and those deferred  because of
     differences  between the  financial  statement and tax bases of assets
     and liabilities.  The corporation has earned investment tax credits on
     certain INTELSAT and Inmarsat  satellite costs. These tax credits have
     been  deferred  and are  being  recognized  as  reductions  to the tax
     provision over the estimated service lives of the related assets.

     EARNINGS PER SHARE.  Earnings per share are computed using the average
     number  of  shares  outstanding  during  each  period,   adjusted  for
     outstanding  stock  options,   restricted  stock  units  and  unissued
     restricted stock awards. The weighted average number of shares used in
     the computation of earnings per share for each year was 49,090,000 for
     1996, 47,998,000 for 1995 and 47,356,000 for 1994.


                                     48

<PAGE>

     EVALUATION  OF  LONG-LIVED  ASSETS.  The  corporation   evaluates  the
     potential impairment of long-lived assets,  including goodwill,  based
     upon projections of undiscounted cash flows whenever events or changes
     in circumstances indicate that the carrying amount of an asset may not
     be fully recoverable.  Management  believes no material  impairment of
     these assets exists at December 31, 1996.

     GOODWILL.   The  balance  sheet  includes   goodwill  related  to  the
     acquisitions of SpectraVision, Inc., On Command Video Corporation, the
     Denver Nuggets Limited Partnership (the Nuggets),  Beacon (see Note 5)
     and  other  businesses.  Goodwill  is  amortized  over 10 to 25 years.
     Accumulated  goodwill  amortization was $20,476,000 and $12,671,000 at
     December 31, 1996 and 1995, respectively.

     FRANCHISE  RIGHTS AND OTHER ASSETS.  Franchise rights were recorded in
     connection with the  acquisition of the Nuggets  beginning in 1989 and
     the  Avalanche in 1995 (see Note 5). These rights are being  amortized
     over 25 years.  The  amounts  shown on the  balance  sheets are net of
     accumulated amortization of $13,091,000 and $8,317,000 at December 31,
     1996 and 1995, respectively.

     The cash surrender  values of life  insurance  policies (net of loans)
     totaling  $71,724,000  and  $12,879,000 at December 31, 1996 and 1995,
     respectively,  are included in "Other  assets." In January  1996,  the
     corporation repaid loans totaling $51,175,000. Other income (expense),
     net on  the  income  statement  includes  the  increases  in the  cash
     surrender values of these policies.

     Film costs totaling  $76,234,000  and $11,470,000 at December 31, 1996
     and 1995,  respectively,  are included in "Other  assets." Film costs,
     net of amortization, are stated at the lower of cost or net realizable
     value.

     STOCK-BASED COMPENSATION.  Statement of Financial Accounting Standards
     (SFAS) No. 123,  "Accounting for Stock-Based  Compensation,"  requires
     expanded  disclosures of stock- based  compensation  arrangements with
     employees and encourages (but does not require)  compensation  cost to
     be measured based on fair value of the equity instrument  awarded (see
     Note 13).  The  corporation  has chosen to  continue  to  account  for
     employee  stock-based  compensation  using the intrinsic  value method
     prescribed in Accounting  Principles Board Opinion No. 25, "Accounting
     for  Stock  Issued  to   Employees,"   and  related   Interpretations.
     Accordingly,  compensation  costs for stock options is measured as the
     excess , if any, of the quoted market price of the corporation's stock
     at the date of the  grant  over the  amount  an  employee  must pay to
     acquire the stock.

     CASH  FLOW  INFORMATION.   The  corporation  considers  highly  liquid
     investments  with a  maturity  of three  months or less at the time of
     purchase to be cash equivalents.

     STATEMENT  PRESENTATION.   Certain  prior  period  amounts  have  been
     reclassified  to conform with the current  year's  presentation.  Most
     notably,  minority  interest in net losses  (income)  of  consolidated
     subsidiaries  is  presented  separately  on the income  statement.  In
     addition,  Ascent  has  historically  reflected  certain  costs  as  a
     reduction  of revenues  and will now  classify  such costs as costs of
     services.


                                     49

<PAGE>

2.   RECEIVABLES

     Receivables at each year end are composed of:

<TABLE>
<CAPTION>
<S>                                                                               <C>             <C>

     In thousands                                                                          1996            1995
     -----------------------------------------------------------------------------------------------------------
     Commercial receivables                                                        $    211,561    $    160,990
     Receivables under long-term contracts:
         U.S. Government:
         Amounts billed                                                                   9,889           6,188
         Unbilled costs and accrued profits                                              35,607          28,937
     Commercial customers:
         Amounts billed                                                                  14,153           9,891
         Unbilled costs and accrued profits                                              34,525          31,617
     Related party receivables                                                            8,305           5,726
     Other                                                                               15,418           4,194
                                                                                   -------------   -------------
     Total                                                                              329,458         247,543
     Less allowance for doubtful accounts                                               (14,692)        (13,078)
                                                                                   -------------   -------------
     Net                                                                           $    314,766    $    234,465
                                                                                   =============   =============
</TABLE>

     Unbilled amounts represent  accumulated costs and accrued profits that
     will be billed at future dates in accordance  with contract  terms and
     delivery  schedules.  All but  approximately  $10,535,000  of the 1996
     amounts are expected to be collected within one year. Unbilled amounts
     are net of progress payments of $69,801,000 in 1996 and $74,677,000 in
     1995.

     In the fourth  quarter,  the  corporation  recorded  additional  costs
     totaling   $9,000,000  for  estimated  losses  on  certain  long-term,
     fixed-price  contracts.  Revenues  related to claims for  constructive
     change  orders on long-term  contracts  are recorded at the  estimated
     amount of recoverable costs incurred. The corporation has filed claims
     for recovery on long-term, fixed-price contracts totaling $34,223,000.
     At December 31, 1996, U.S.  Government unbilled  receivables  includes
     $9,918,000 from such claims.  These estimates could change in the near
     term as additional costs are incurred to complete the contracts and as
     the claims are settled with the U. S. Government and other customers.

3.   INVENTORIES

     Inventories,  stated at the  lower of cost  (first-in,  first-out)  or
     market, consist of the following at each year end:

<TABLE>
<CAPTION>
<S>                                                                               <C>             <C>

     In thousands                                                                          1996            1995
     ----------------------------------------------------------------------------------------------------------
     Finished goods                                                                $     18,015    $      8,137
     Work in progress                                                                    11,811          10,260
     Raw materials                                                                        9,809           8,454
                                                                                   ------------    ------------
     Total                                                                         $     39,635    $     26,851
                                                                                   ============    ============

</TABLE>

                                     50

<PAGE>

4.   PROPERTY AND EQUIPMENT

     Property and equipment  include the  corporation's  shares of INTELSAT
     and Inmarsat property and equipment.

<TABLE>
<CAPTION>
<S>                                                                         <C>              <C>

     In thousands                                                                  1996            1995
     ---------------------------------------------------------------------------------------------------
     Property and equipment at cost:
         Satellites                                                          $1,546,891      $1,396,311
         Furniture, fixtures and equipment                                      974,466         794,393
         Buildings and improvements                                             122,083         122,986
         Land                                                                    10,043           8,567
                                                                             -----------     -----------
         Total                                                                2,653,483       2,322,257
         Less accumulated depreciation                                       (1,266,560)     (1,156,518)
                                                                             -----------     -----------
         Net property and equipment in service                                1,386,923       1,165,739

     Property and equipment under construction:
         INTELSAT satellites                                                    111,222         172,043
         Immarsat third-generation satellites                                    53,323         126,056
         Other                                                                  105,295          64,215
                                                                             -----------      ----------
         Total                                                               $1,656,763       $1,528,053
                                                                             ===========      ==========
</TABLE>

     Depreciation  is calculated  using the  straight-line  method over the
     estimated  service life of each asset.  The service lives for property
     and equipment are: satellites, 10 to 13 years; furniture, fixtures and
     equipment, 3 to 15 years; buildings and improvements, 3 to 40 years.

     Costs of satellites  that are lost at launch or that fail in orbit are
     carried, net of any insurance proceeds, in the property accounts.  The
     remaining net amounts are depreciated over the estimated  service life
     of a satellite of the same series.

     On February 14, 1996, the launch of the INTELSAT 708 satellite failed.
     The corporation's  share of the construction and capitalized  interest
     costs was fully insured.  Insurance proceeds totaling $54,443,000 were
     received in the second quarter of 1996.

5.   ASCENT ENTERTAINMENT GROUP, INC.

     INITIAL PUBLIC OFFERING. In December 1995, Ascent Entertainment Group,
     Inc.  (Ascent)  completed a public offering of 5,750,000 shares of its
     common stock at an offering  price of $15.00 per share.  At that time,
     Ascent  consisted of Ascent Network  Services,  Inc.  (ANS),  formerly
     COMSAT  Video  Enterprises,  Inc.,  and ANS's  ownership of On Command
     Video  Corporation  (OCV),  the Denver  Nuggets  Limited  Partnership,
     Beacon  Communications  Corp.  and  the  Colorado  Avalanche.   COMSAT
     retained  24,000,000 shares, or 80.67% of Ascent.  Concurrent with the
     public  offering,  Ascent  repaid  a  $140,000,000  intercompany  note
     payable to COMSAT.  COMSAT recognized a $19,286,000  pre-tax gain as a
     result of the public offering.

     SPECTRAVISION,  INC. In October 1996,  Ascent through its newly formed
     subsidiary,  On Command  Corporation  (OCC),  acquired  the assets and
     assumed certain  liabilities of SpectraVision,  Inc.  (SpectraVision).
     OCC acquired all of the outstanding capital stock of SpectraDyne, Inc.
     (SpectraDyne),  the primary  operating  subsidiary  of  SpectraVision,
     together   with  certain  other  assets  of   SpectraVision   and  its
     affiliates.  OCV, an approximately 79% owned subsidiary of Ascent, was
     merged into a subsidiary of OCC and became a  wholly-owned  subsidiary

                                    51
<PAGE>

     of OCC. In  connection  with the merger,  Ascent  received  17,149,766
     shares of OCC common stock (57.2% of the initial  30,000,000 shares of
     outstanding  OCC common  stock).  OCV minority  shareholders  received
     4,600,234  shares of the OCC stock in the merger.  In consideration of
     the acquisition of the assets and properties of  SpectraVision by OCC,
     8,041,618 shares of OCC common stock were issued to the  SpectraVision
     bankruptcy  estate  for  distribution  to  SpectraVision's  creditors.
     Additionally,  208,382 shares of OCC common stock were held in reserve
     pending  finalization  of the closing  balance  sheet  pursuant to the
     acquisition agreement.  Of these, 12,000 shares of reserved stock will
     be distributed to Ascent and the former OCV minority  stockholders and
     the remainder  will be  distributed  to the  SpectraVision  bankruptcy
     estate.

     In connection with the SpectraVision  acquisition and the merger,  OCC
     also issued seven year warrants  representing  the right to purchase a
     total  of up to  7,500,000  shares  of OCC  common  stock  (20% of the
     outstanding  common stock of OCC,  after  exercise of the warrants) at
     $15.27 per share.  Warrants to purchase on a cashless basis a total of
     up to  1,425,000  shares  were issued to former OCV  shareholders,  of
     which  Ascent  received  warrants to  purchase  1,124,325  shares.  In
     addition, warrants to purchase for cash 3,450,000 shares of OCC common
     stock were issued to OCC's investment  advisors in connection with the
     transactions and the remainder was issued to the SpectraVision estate.

     The fair value of the  acquisition was determined as of April 19, 1996
     based on an  independent  appraisal  of the net assets  acquired.  The
     aggregate purchase  consideration,  has been allocated to the acquired
     assets  and  assumed  liabilities  of  SpectraVision,  based  on their
     respective fair market values.  The financial  statements  reflect the
     preliminary  allocation  of the purchase  price as the purchase  price
     allocation has not been finalized.

     The assets acquired and liabilities assumed are as follows:

<TABLE>
<CAPTION>
<S>                                                                                                   <C>

     In thousands
     ----------------------------------------------------------------------------------------------------------
     Estimated fair value of assets acquired                                                        $  158,916
     Liabilities assumed                                                                               (67,282)
                                                                                                    -----------
     Net assets acquired at estimated fair value                                                        91,634
     Acquisition costs paid (net of cash received of $257)                                              (9,572)
                                                                                                    -----------
     Common stock and warrants issued                                                               $   82,062
                                                                                                    ===========
</TABLE>

     The following  unaudited pro forma consolidated  results of operations
     for the years ended December 31, 1996 and 1995 are presented as if the
     SpectraVision  acquisition  had  been  made at the  beginning  of each
     period   presented.   The  unaudited  pro  forma  information  is  not
     necessarily  indicative of either the results of operations that would
     have occurred had the purchase been made during the periods  presented
     or the future results of the combined operations.

<TABLE>
<CAPTION>
<S>                                                                                <C>                <C>    

     In thousands, except per share                                                        1996            1995
     ----------------------------------------------------------------------------------------------------------
     Revenues                                                                      $  1,100,561        $986,898
     Net income                                                                           3,017          25,234
     Earnings per share                                                                    0.06            0.53

</TABLE>

                                     52

<PAGE>

     DENVER ARENA  DEVELOPMENT  COSTS. In March 1996,  Ascent purchased the
     interests of The Anschutz  Corporation  ("TAC") in the proposed  arena
     development  project in Denver,  which Ascent and TAC had been jointly
     developing. In consideration for TAC's interest in the proposed arena,
     Ascent paid TAC $6,600,000 in cash and agreed to pay TAC an additional
     $5,000,000 and grant a paid-up suite license, both contingent upon the
     construction and occupancy of the proposed arena. Costs of $11,540,000
     and $2,445,000  representing  the total  expenditures  on the proposed
     arena at December 31, 1996 and 1995, respectively,  have been recorded
     in property.

     Ascent is currently  negotiating  to acquire an option to purchase the
     land for the arena site.  Ascent is also negotiating with the City and
     County of Denver  regarding the construction of the proposed arena and
     the release of the Nuggets and Avalanche from their existing leases at
     the current arena.

     COLORADO  AVALANCHE.  In July 1995,  Ascent acquired a National Hockey
     League franchise and related player  contracts,  management  contracts
     and  certain  other  assets  from Le Club de Hockey Les  Nordiques  in
     Quebec,  Canada  for  $75,840,000.  The cost of this  acquisition  was
     allocated primarily to "franchise rights" (see Note 1). As part of the
     purchase,   Ascent   assumed   contractual   commitments   to  players
     aggregating  $24,625,000  over the next three  years.  The  franchise,
     which was known as the Quebec Nordiques, has been relocated to Denver,
     Colorado and is known as the Colorado Avalanche (the Avalanche).

     BEACON  COMMUNICATIONS  CORP. In December  1994,  Ascent  acquired the
     assets of Beacon  Communications Corp. (Beacon), a film and television
     production company based in Los Angeles.  The cost of this acquisition
     was $29,133,000 which consisted of $16,180,000 in cash and liabilities
     assumed of $12,953,000.  The purchase  agreement calls for future cash
     consideration  of  up  to  $16,900,000  which  is  contingent  on  the
     production  and  performance  of motion  pictures.  If Beacon had been
     acquired  as  of  January  1,  1994,  the   corporation's   pro  forma
     consolidated  revenues would have been  $862,160,000 and the pro forma
     consolidated   net  income  would  have  been   $61,969,000  for  1994
     (unaudited).

6.   MERGER WITH RADIATION SYSTEMS, INC.

     On June 3, 1994, the corporation consummated its merger with Radiation
     Systems,  Inc. (RSi) by issuing  6,147,000  shares of its common stock
     for RSi's common  stock.  The merger was accounted for as a pooling of
     interests. The corporation recorded nonrecurring charges to operations
     in 1994  totaling  $7,367,000  ($6,269,000  net of taxes or $0.13  per
     share) for merger and integration  costs.  These charges  consisted of
     $4,446,000 for investment banking,  legal and other professional fees,
     $2,226,000  for  the  costs  associated  with  closing  a  former  RSi
     division, and $695,000 for severance and related costs.

7.   INVESTMENTS

     ICO.  In 1995  and  1996,  the  corporation  made  direct  investments
     totaling  $11,350,000 and  $46,663,000,  respectively,  in I-CO Global
     Communications   (Holdings)  Limited  (ICO).  In  December  1996,  the
     corporation reduced its direct investment in ICO by selling 777,701 of
     its shares to other ICO shareholders for $29,941,000.  The corporation
     recognized  a gain of  $2,722,000  that is included  in "Other  income
     (expense),  net" on the income  statement.  At  December  31, 1996 and

                                    53

<PAGE>

     1995,  the   corporation's   direct  investment  in  ICO  amounted  to
     $30,794,000 and $11,350,000,  respectively.  The accompanying  balance
     sheet also  includes the  corporation's  $30,713,000  and  $14,226,000
     share of  Inmarsat's  investment  in ICO as of  December  31, 1996 and
     1995, respectively (see Note 10).

     PHILCOM.  In June  1994,  the  corporation  acquired  an  interest  of
     approximately 17% in Philippine Global Communications, Inc. (PhilCom),
     a  provider   of   international   communications   services   in  the
     Philippines,  for $42,141,000.  The  corporation's  share of PhilCom's
     income or losses was recorded using the "equity  method" of accounting
     through the third  quarter of 1996 and is  included  in "Other  income
     (expense),  net" on the income  statement.  In the  fourth  quarter of
     1996,  the  corporation  sold a portion of its  interest in PhilCom at
     book  value for  $3,517,000  and in  January  1997 sold its  remaining
     interest  in  PhilCom  at  book  value  in  exchange  for  cash  and a
     collateralized note receivable totaling $34,292,000.

     MARKETABLE  SECURITIES.  During  1996,  certain  of the  corporation's
     equity  investments   became  marketable   securities  as  defined  in
     Statement  of Financial  Accounting  (SFAS) No. 115,  "Accounting  for
     Certain Investments in Debt and Equity Securities." The securities are
     classified  as available for sale and are reported in  investments  on
     the  December  31, 1996  balance  sheet at fair value of  $24,860,000,
     based on quoted market  prices.  At December 31, 1996,  the unrealized
     gain on such  securities was  $13,268,000 and is reported net of taxes
     in  stockholders'  equity.  During 1996, the corporation  recognized a
     pre-tax loss of  $1,105,000 in "Other  income  (expense),  net" on the
     income  statement  for a  decline  in  market  value  of a  marketable
     security that was deemed to be other than temporary.

     ELITCH  GARDENS.   In  March  1996,  Ascent  purchased  TAC's  limited
     partnership  interest in New Elitch Gardens,  Ltd.  (Elitch  Gardens),
     which owned an amusement park in Denver,  Colorado for $4,125,000 (see
     Note 5). This purchase increased Ascent's ownership interest in Elitch
     Gardens  from  13% to  26%.  In  September  1996,  Ascent  recorded  a
     $1,800,000  reserve on its limited  partnership  investment  in Elitch
     Gardens,  based on the announced sale of the amusement park to Premier
     Parks, Inc. Ascent's share of the proceeds from the sale, which closed
     on October 30,  1996,  is subject to certain  future  adjustments.  In
     December 1996,  Ascent  recorded an additional loss of $510,000 on its
     investment   due  to  its  concerns  over  the   liquidation   of  the
     partnership.  At December  31,  1996,  Ascent's  investment  in Elitch
     Gardens was $2,379,000.  Ascent received a partnership distribution of
     $1,900,000 in January 1997 with the balance expected in the first half
     of 1997.

8.   DEBT

     The corporation's capital and debt-financing  activities are regulated
     by the Federal  Communications  Commission  (FCC).  The corporation is
     required  to submit a financial  plan to the FCC for review  annually.
     Under existing FCC  guidelines,  the corporation is subject to a limit
     of $200,000,000 in short-term borrowings,  a maximum long-term debt to
     total capital ratio of 45% and an interest coverage ratio, as defined,
     of 2.3 to 1. In October 1996, the FCC approved a temporary decrease in
     the interest  coverage ratio to a minimum of 1.9 to 1, and an increase
     in the short-term  debt limit to  $325,000,000  for the 1996 plan year
     and until the FCC acts on the corporation's 1997 capital plan which is

                                    54

<PAGE>

     to be  filed by the end of April  1997.  At  December  31,  1996,  the
     corporation was in compliance with those guidelines, as modified.

     COMMERCIAL PAPER. The corporation  issues short-term  commercial paper
     as needed with repayment terms of 90 days or less under a $200,000,000
     program.  The corporation  had outstanding  borrowings of $17,993,000,
     with a weighted  average  interest rate of 7.25% at December 31, 1996.
     No borrowings were  outstanding at December 31, 1995.  During 1996 and
     1995, the weighted average commercial paper borrowing rates were 5.48%
     and 5.96%, respectively.

     CREDIT FACILITIES. The corporation has a $200,000,000 revolving credit
     agreement,  which  expires  in  December  1999,  as a  backup  to  the
     commercial  paper  program.  There have been no borrowings  under this
     agreement.

     Ascent has a credit  agreement  that  provides  for  borrowings  up to
     $200,000,000 under a one-year secured revolving credit facility, which
     is renewable for up to two  additional  one-year  periods  (subject to
     certain  conditions).   Revolving  loans  extended  under  the  Ascent
     facility generally will bear interest at the London Interbank Offering
     Rate  (LIBOR)  plus a  spread  that  may  range  from  1.75%  to 2.50%
     depending on certain  operating  ratios of Ascent.  The Ascent  Credit
     Facility  provides that at no time will amounts  outstanding under the
     facility  exceed:  (a)  $125,000,000  until Ascent shall have received
     consent  from  the NBA and NHL to  pledge  Ascent's  interests  in the
     Nuggets and Avalanche,  respectively,  and thereafter, (b) the sum of;
     (i) up to $100,000,000 secured by first priority pledges of, and liens
     on, the equity  interests in all of Ascent's  subsidiaries  (excluding
     OCC),  plus (ii) 50% of the  value of the OCC  common  stock  owned by
     Ascent,  secured  by a  pledge  of such  stock.  The  Ascent  facility
     requires Ascent and OCC to maintain  compliance with certain financial
     covenants,  limits Ascent's  ability to incur other  indebtedness  and
     precludes  Ascent from paying cash  dividends on its common stock.  At
     December 31, 1996, Ascent was in compliance with these covenants.  The
     corporation's  share of Ascent's  net assets as of December  31, 1996,
     was approximately $217,474,000.

     At December 31, 1996,  $95,000,000  was  outstanding  under the Ascent
     facility and was classified as short-term borrowings.  At December 31,
     1995,  $70,000,000 was outstanding under a previous five-year facility
     and was classified as long-term  debt. The weighted  average  interest
     rate on these borrowings was 8.05 % and 6.20% at December 31, 1996 and
     1995, respectively.

     OCC has a $125,000,000  bank credit facility  consisting of a one year
     revolving facility,  which is renewable up to four additional one-year
     periods  subject  to certain  conditions,  and a  five-year  revolving
     facility.  Revolving  loans extended under the OCC facility  generally
     will bear interest at LIBOR plus a spread that may range from 0.50% to
     0.75% depending on certain  operating  ratios of OCC. The OCC facility
     requires OCC to comply with certain financial covenants,  which, among
     other  matters,  limit  OCC's  ability  to incur  indebtedness  or pay
     dividends (other than on its common stock).  At December 31, 1996, OCC
     was in compliance with these covenants.

                                    55

<PAGE>

     At  December  31,  1996,  $50,000,000  was  outstanding  under the OCC
     facility as a long-term  revolving loan and is repayable in 2001 while
     $48,000,000 is considered a short-term borrowing. The weighted average
     interest rate on these borrowings was 6.17%.

     In March 1997, OCC amended its credit  facility to increase the amount
     that OCC may borrow to $150 from $125  million.  Concurrently,  Ascent
     amended  its credit  facility  to reduce the amount  which  Ascent can
     borrow to $140 million  from $200  million and  committed to raise not
     less than $50 million in  subordinated  debt before  October 1997 as a
     condition to further renewal of its credit facility.  Ascent's amended
     agreement also removed the borrowing-base  limit related to consent of
     the NBA and NHL as discussed above.  Ascent's management believes they
     will successfully raise the subordinated debt.

     LONG-TERM DEBT.  Long-term debt,  including the corporation's share of
     INTELSAT  and  Inmarsat  debt,  and amounts  outstanding  under credit
     facilities at each year end consists of:

<TABLE>
<CAPTION>
<S>                                                                                  <C>             <C>

     In thousands                                                                          1996            1995
     ----------------------------------------------------------------------------------------------------------
     8.125% notes due 2004                                                            $ 160,000       $ 160,000
     8.95% notes due 2001                                                                75,000          75,000
     6.75% INTELSAT Eurobonds due 2000                                                   28,693          28,659
     7.375% INTELSAT Eurobonds due 2002                                                  38,258          38,212
     8.375% INTELSAT Eurobonds due 2004                                                  38,258          38,212
     6.625% INTELSAT Asian bonds due 2004                                                38,258          38,212
     8.125% INTELSAT Eurobonds due 2005                                                  38,258          38,212
     Inmarsat lease financing obligations                                               103,186         112,203
     Medium-term notes, 7.7% - 8.66%, due 2006 - 2007                                    74,000          74,000
     Ascent credit facility                                                              95,000          70,000
     OCC credit facility                                                                 98,000               -
     Other, net of discounts on notes payable                                             8,282           3,579
                                                                                      ---------       ---------
     Total                                                                              795,193         676,289
                                                                                      ---------       ---------
     Less: Short-term borrowings                                                        143,000             207
           Current maturities                                                            16,719          11,481
                                                                                      ---------       ---------
           Total                                                                        159,719          11,688
                                                                                      ---------       ---------
     Total long-term debt                                                             $ 635,474       $ 664,601
                                                                                      =========       =========
</TABLE>

     In July 1994, the  corporation  filed a shelf  registration  statement
     with  the  Securities  and  Exchange  Commission  (SEC) to issue up to
     $200,000,000  of  debt  securities.   The  corporation  also  filed  a
     prospectus supplement with the SEC to issue up to $100,000,000 of such
     securities  under  a  "medium-term   note  program."  The  $26,000,000
     remaining under the  medium-term  note program may be issued from time
     to time,  at fixed or floating  interest  rates,  as determined at the
     time of issuance.

     The principal  amount of debt  (excluding the Inmarsat lease financing
     obligations)  maturing  over the next five  years is  $145,917,000  in
     1997,  $5,555,000 in 1998,  $305,000 in 1999,  $28,998,000 in 2000 and
     $125,284,000 in 2001.

     INMARSAT    LEASE    FINANCING    OBLIGATIONS.    Inmarsat    borrowed
     (pound)140,400,000 sterling under a capital lease agreement to finance
     the construction of second-generation  Inmarsat  satellites.  Inmarsat
     also entered into another  capital  lease  arrangement  to finance the
     construction costs of its third-generation  satellites. As of December
     31,  1996,   (pound)123,300,000  sterling  of  the  (pound)197,000,000
     sterling   available   for  this  purpose  has  been   borrowed.   The
     corporation's   share  of  these  lease  obligations  is  included  in

                                    56

<PAGE>

     long-term debt.  Inmarsat has hedged its  obligations  through various
     foreign  exchange  transactions  to minimize the effect of fluctuating
     interest and exchange rates (see Note 17).

     The corporation's  share of the payments under these lease obligations
     for each of the next five years is $19,869,000 in 1997, $18,584,000 in
     1998,  $20,040,000 in 1999,  $21,217,000 in 2000,  $21,932,000 in 2001
     and $43,857,000  thereafter.  These payments include interest totaling
     $42,313,000 and a current maturity of $13,802,000.

9.   MONTHLY INCOME PREFERRED SECURITIES

     In  July  1995,   COMSAT  Capital  I,  L.P.  (COMSAT  Capital)  issued
     $200,000,000 of Monthly Income  Preferred  Securities  (MIPS).  COMSAT
     Capital  is a  limited  partnership  formed  for the sole  purpose  of
     issuing  the MIPS and loaning the  proceeds  to COMSAT,  the  managing
     general partner. The MIPS were issued at a par value of $25 per share,
     and  dividends  are payable  monthly at an annual rate of 8.125%.  The
     MIPS are callable by the issuer after July 2000 at par value.

     The  proceeds of the MIPS were  loaned to COMSAT  under the terms of a
     8.125%,  30-year  subordinated  debenture  agreement.  This  agreement
     allows  COMSAT to extend the  maturity of the  debentures  until 2044,
     provided  that  COMSAT  satisfies  certain  financial  covenants.  The
     proceeds  were  used  to  repay  commercial  paper  borrowings  and  a
     $75,000,000 bank loan incurred in the acquisition of the NHL franchise
     and  related  assets  discussed  in Note 5.  COMSAT  Capital  has been
     consolidated in the financial  statements of the corporation since the
     third quarter of 1995. The loan between the partnership and COMSAT has
     been eliminated in consolidation. The $200,000,000 of MIPS is shown on
     the corporation's  consolidated balance sheet as "preferred securities
     issued by subsidiary."  The dividends on these securities are recorded
     as minority interest expense of $16,250,000 and $7,358,000 in 1996 and
     1995, respectively,  and are included in "Other income (expense), net"
     on the income statement.

10.  COMMITMENTS AND CONTINGENCIES

     PROPERTY AND EQUIPMENT.  As of December 31, 1996, the  corporation had
     commitments to acquire property and equipment  totaling  $179,614,000.
     Of this  total,  $164,008,000  is payable  over the next three  years.
     These commitments are related  principally to the corporation's  share
     of INTELSAT and Inmarsat satellite acquisition programs.

     EMPLOYMENT AND CONSULTING  AGREEMENTS.  The corporation has employment
     and  consulting  agreements  with certain  officers and  entertainment
     talent.  Virtually  all of these  agreements  provide  for  guaranteed
     payments.  Other  contracts  provide for payments  contingent upon the
     fulfillment of certain terms and conditions,  which  generally  relate
     only to normal performance of employment  duties.  Amounts required to
     be paid under such agreements  (including  approximately  $118,821,000
     relating to player  agreements)  total  approximately  $59,975,000  in
     1997,  $43,192,000 in 1998,  $27,245,000 in 1999, $17,015,000 in 2000,
     $8,670,000 in 2001 and $9,284,000 thereafter.

                                    57

<PAGE>

     LEASES.  The  corporation  leases  its  headquarters  building  from a
     partnership in which the corporation owns a 50% interest.  The initial
     term of the lease expires in 2008. In addition to lease payments,  the
     corporation is responsible for taxes, insurance and maintenance of the
     building.  The  corporation  also has  leases  of other  property  and
     equipment.  Rental expense under  operating  leases was $24,498,000 in
     1996,  $12,773,000 in 1995 and  $11,798,000 in 1994. The future rental
     payments under operating  leases are $33,424,000 in 1997,  $26,179,000
     in 1998,  $19,657,000 in 1999, $12,512,000 in 2000, $7,325,000 in 2001
     and $44,111,000 thereafter.

     FILM RIGHTS.  As of December 31, 1996, the  corporation had a purchase
     commitment for undelivered film product of approximately $9,629,000.

     GOVERNMENT CONTRACTS. The corporation and its subsidiaries are subject
     to, and are currently a party to, audits and investigations by various
     agencies which oversee  contract  performance  in connection  with the
     corporation's  contracts with the U.S. Government.  If the corporation
     is  found  liable  for  wrongdoing  as a  result  of such an  audit or
     investigation,  the  corporation  could be fined or subjected to other
     punitive actions.

     ENVIRONMENTAL  ISSUES. The corporation  reviews, on a quarterly basis,
     its estimates of costs of compliance with  environmental  laws and the
     cleanup of various sites,  including sites which governmental agencies
     have  designated the corporation as a potentially  responsible  party.
     When it is probable  that  obligations  have been incurred and where a
     minimum cost or a  reasonable  estimate of the cost of  compliance  or
     remediation  can be  determined,  the  applicable  amount is  accrued.
     Because of the uncertainties  associated with environmental assessment
     and  remediation  activities,  future  expense to remediate  currently
     identified sites could be higher than the liability currently accrued.
     Based on currently available information, however, management does not
     believe that any costs incurred in excess of those  currently  accrued
     will have a materially  adverse  effect on the financial  condition of
     the corporation.

     INVESTMENT IN ICO. In 1994, the corporation and Inmarsat  committed to
     invest in ICO (see Note 7). ICO plans to build and operate  spacecraft
     and related  terrestrial  facilities  for the  provision  of worldwide
     mobile  communications via handheld devices.  As of December 31, 1996,
     the   corporation's   investment   totaled   $30,794,000,    and   the
     corporation's share of Inmarsat's investment totaled $30,713,000.  The
     other ICO shareholders who purchased the  corporation's  ICO shares in
     the  December  1996  transactions,   also  assumed  future  investment
     commitments of  $50,551,000 on those shares.  As of December 31, 1996,
     the corporation's future commitments to ICO totaled $5,239,000 and the
     corporation's  share of Inmarsat's  future  commitments to ICO totaled
     $5,123,000, all payable in December 1997.

     The corporation has applied to the FCC for authority to participate as
     an investor and service provider in ICO. In acting on the application,
     which is being opposed by ICO's  competitors,  the FCC will  determine
     whether  the  corporation  satisfies  the  requisite  legal and policy
     criteria to  participate  in ICO. The  corporation  believes  that all
     necessary  operating  authorizations  with  respect  to  ICO  will  be
     obtained,  although the FCC may condition the use of ICO telephones in
     the U.S. on  reciprocal  access by ICO's U.S.  competitors  to foreign
     markets. In addition,  the provision of ICO service in the U.S. may be
     subject to the availability of adequate spectrum on an economic basis.

                                    58

<PAGE>

     In May  1996,  TRW,  Inc.  filed a  lawsuit  against  ICO in the  U.S.
     District  Court  for  the  Central  District  of  California   seeking
     injunctive relief and unspecified  monetary damages.  The lawsuit,  as
     amended, alleges that the proposed ICO satellite system would infringe
     two patents held by TRW. If TRW prevails,  ICO could be precluded from
     offering  services in the U.S.  or could be  required to make  royalty
     payments  to TRW.  The  corporation  has been  advised  by ICO that it
     intends to vigorously defend the lawsuit.

11.  REGULATORY ENVIRONMENT AND LITIGATION

     REGULATORY  ENVIRONMENT.  Under the Communications Act of 1934 and the
     Satellite Act, as amended, the corporation is subject to regulation by
     the  FCC  with  respect  to  communications  facilities  and  services
     provided  through the INTELSAT  and Inmarsat  systems and to the rates
     charged for those services.

     Until 1985, the corporation was, with minor exceptions,  the sole U.S.
     provider of  international  fixed satellite  communications  services.
     Since then, the FCC has  authorized  several  international  satellite
     systems separate from INTELSAT.  These separate U.S. systems currently
     compete against the corporation for voice, video and data traffic.  In
     1993,  the FCC  substantially  eliminated  prior  restrictions  on the
     ability  of  separate  systems  to  offer  public  switched  telephony
     services,  thereby  increasing  competition to the  corporation in the
     voice market.  The remaining FCC  restrictions on competitive  systems
     expired on December 31, 1996.

     The corporation has received FCC  authorization  to participate in the
     procurement of five third-generation Inmarsat satellites (see Note 4).
     The first Inmarsat-3  satellites were successfully  launched in April,
     September  and December  1996.  The remaining two launches are planned
     for 1997. In May 1996, the corporation  received  authority to provide
     communication  services,  including  Planet 1SM and other land  mobile
     services outside of North America, over the Inmarsat-3 satellites. The
     corporation has applied to the FCC for  authorization  to offer Planet
     1SM and other mobile  services in the U.S. Those  applications,  which
     have been  opposed by certain of the  corporation's  competitors,  are
     pending before the FCC.

     LITIGATION.  The  corporation  and its  subsidiaries  are a  party  to
     various  lawsuits  and  arbitration  proceedings  and are  subject  to
     various  claims and inquiries,  which  generally are incidental to the
     ordinary  course of its  business.  The  outcome of legal  proceedings
     cannot be  predicted  with  certainty.  Based on  currently  available
     information,  however, management does not believe that the outcome of
     any matter which is pending or threatened,  either  individually or in
     the  aggregate,   will  have  a  materially   adverse  effect  on  the
     consolidated   financial   condition  of  the  corporation  but  could
     materially affect  consolidated  results of operations in a given year
     or quarter.

     The  corporation  also is  defending  an  antitrust  suit  brought  by
     PanAmSat   Corporation   against  the   corporation,   which   alleges
     interference  with PanAmSat's  efforts to compete in the international
     satellite  communications  market and seeks estimated  alleged damages
     (before   trebling)   at  a  1994  present   value  of   approximately
     $228,000,000.  In December  1994, the  corporation  filed a motion for
     summary judgment directed to dismissal of all claims in the complaint.
     In September 1996, the U.S.  District Court for the Southern  District

                                    59

<PAGE>

     of New York granted the corporation's motion for summary judgement and
     dismissed  the complaint in its  entirety.  In October 1996,  PanAmSat
     filed an appeal with the U.S. Court of Appeals for the Second Circuit,
     which is pending before the court.

12.  STOCKHOLDERS' EQUITY

     TREASURY STOCK. The corporation  acquired 404,500 shares of RSi common
     stock in 1993 for $5,098,000. Additionally, RSi acquired 80,000 shares
     of its own  common  stock  for  $870,000.  These  shares,  which  were
     equivalent to 378,000  shares of COMSAT common stock,  were  accounted
     for as treasury  stock  transactions  as of December 31,  1993.  These
     shares, in addition to RSi's other treasury shares,  were retired upon
     consummation of the merger discussed in Note 6.  Accordingly,  683,000
     shares  of the  corporation's  common  stock,  with a  total  cost  of
     $8,163,000, were retired in 1994.

     INVESTORS'  PLUS PLAN. The  corporation's  Investors' Plus Plan allows
     investors  to  purchase  shares  of  common  stock  directly  from the
     corporation. In 1996, 1995 and 1994, 80,000, 145,000 and 76,000 shares
     were  issued  with  total  proceeds  of  $1,781,000,   $3,027,000  and
     $977,000, respectively.

13.  STOCK INCENTIVE PLANS

     The  corporation  has  stock  incentive  plans  that  provide  for the
     issuance of stock options, restricted stock awards, stock appreciation
     rights and  restricted  stock units.  A total of  7,307,000  shares of
     common stock may be granted  under the current  plans.  As of December
     31,  1996,  261,000  shares of the  corporation's  treasury  stock and
     7,046,000  unissued common shares were reserved for these plans. As of
     December 31, 1996, no stock appreciation rights were outstanding.

     STOCK OPTIONS.  Under the current plans,  the exercise price for stock
     options may not be less than the fair  market  value of the stock when
     granted.  Options  vest over  three  years and  expire  after 10 to 15
     years.  The exercise price of certain  options  granted prior to 1993,
     pursuant to an expired  plan,  is equal to 50% of the market  price on
     the grant date. The cost of these awards, which is the 50% discount to
     market  when  granted,  was  recorded  as  unearned   compensation  in
     stockholders' equity. This unearned compensation has been amortized to
     expense over the three-year vesting period.  Stock option activity was
     as follows:

<TABLE>
<CAPTION>
<S>                                                                       <C>              <C>            <C>

         In thousands                                                          1996            1995            1994
         -----------------------------------------------------------------------------------------------------------
         Outstanding at January 1                                             4,415           3,742           2,519
                     Granted                                                    899           1,204           1,398
                     Exercised                                                 (481)           (327)           (126)
                     Canceled                                                  (355)           (204)            (49)
                                                                           ---------       ---------       ---------
         Outstanding at December 31                                           4,478           4,415           3,742
                                                                           =========       =========       =========


         Exercisable at December 31                                           2,270           1,792           1,377
                                                                           =========       =========       =========

</TABLE>

     The weighted  average fair value at date of grant for options  granted
     during 1996 and 1995 was $5.59 and $6.04, respectively. The fair value
     of  options  at date of grant was  estimated  using the  Black-Scholes
     model  assuming  an  expected  option  life  of  seven  years  and the

                                    60

<PAGE>

     following  weighted average  assumptions,  respectively,  for 1996 and
     1995:  dividend  yield-  3.37% and  3.29%,  interest  rate - 5.70% and
     7.30%, and volatility- 29.47% and 28.82%.

     Weighted average option exercise price information for the years 1996,
     1995 and 1994 follows:

<TABLE>
<CAPTION>
<S>                                                                     <C>             <C>             <C>

     Per share                                                             1996            1995            1994
     ----------------------------------------------------------------------------------------------------------
     Outstanding at January 1                                            $22.08          $22.31          $19.46
         Granted                                                          19.44           19.31           25.02
         Exercised                                                        17.24           12.80           10.86
         Canceled                                                         20.37           24.00           25.73
     Outstanding at December 31                                           22.20           22.08           22.31
     Exercisable at December 31                                           23.00           20.19           16.86
</TABLE>

     Stock options outstanding and exercisable at December 31, 1996 follow:
<TABLE>
<CAPTION>
<S>                           <C>             <C>               <C>                      <C>             <C>

     In thousands, except per share amounts and years
     ----------------------------------------------------------------------------------------------------------------

                                        Options Outstanding                                   Options Exercisable
                            --------------------------------------------                  ---------------------------
                                                  Weighted Average
                                            ----------------------------
                                                Remaining                                                Weighted
           Exercise Price         Number       Contractual      Exercise                  Number          Average
               Range           Outstanding     Life in Years      Price                 Exercisable    Exercise Price
         ------------------    ------------    -------------   -------------            -------------   -------------
         $ 5.97 - $ 6.64               67             4.10         $  6.16                       67        $   6.16
           8.89 -  10.66              156             4.58            9.64                      156            9.64
          13.57 -  19.57            1,835             8.01           18.47                      423           17.66
          22.44 -  30.31            2,420             6.97           26.28                    1,624           26.36
                               ------------    -------------   -------------           -------------    -------------
         $ 5.97 - $30.31            4,478             7.27           22.20                    2,270           23.00
                               ============    =============   =============           =============    =============
</TABLE>

     RESTRICTED  STOCK AWARDS.  Restricted stock awards are shares of stock
     that are subject to  restrictions  on their sale or transfer.  In 1996
     and 1995,  66,000  and  91,000  "performance-based"  restricted  stock
     awards were granted,  respectively,  and in 1994,  265,000 awards were
     granted.  With  respect  to the 1996 and 1995  awards,  grantees  have
     record  ownership  of the  underlying  securities.  However,  all such
     securities  are  subject  to  forfeiture  at  the  end  of a  two-year
     performance period. With respect to the 1994 awards,  grantees did not
     have record ownership of the underlying  shares of stock until the end
     of a two-year  performance period. The actual shares awarded are based
     upon the achievement of the applicable  financial  performance targets
     during the relevant  performance  period.  The  weighted  average fair
     value at date of grant for  restricted  stock  awards  granted  during
     1996,  1995,  and 1994 was $18.00,  $19.69 and  $27.37,  respectively,
     which in each case was equal to the market  value of the common  stock
     at the date of grant.

     At the end of the performance period with respect to the 1995 and 1994
     awards,  76,000 shares and 116,000 shares,  net of amounts  forfeited,
     were eligible to be issued in connection with these awards. The shares
     to be issued are subject to restrictions on their sale or transfer for
     three  additional  years.  The expected  cost of these grants is being
     amortized  over  five  years.   The   amortization   was  recorded  as
     compensation  expense of  $1,360,000  in 1996,  $1,009,000 in 1995 and
     $1,420,000  in 1994,  and a  corresponding  increase to  stockholders'
     equity.

     RESTRICTED  STOCK UNITS.  Restricted stock units entitle the holder to
     receive a  combination  of stock and cash equal to the market price of
     common stock for each unit,  when vested.  These units vest over three
     years. During 1996, 1995 and 1994,  respectively,  34,000,  71,000 and

                                    61

<PAGE>

     115,000  restricted  stock units were granted . The  weighted  average
     fair  value  for the  units  granted  during  1996,  1995 and 1994 was
     $18.99,  $19.67 and  $27.25 per unit,  which in each case was equal to
     the market value of the common  stock at the date of grant.  Partially
     vested restricted stock units outstanding  totaled 197,000 at December
     31, 1996 and 202,000 at December 31, 1995.  The cost of these  awards,
     which is the market  value of the units when  vested,  is amortized to
     expense over the three-year  vesting period.  The amounts amortized to
     expense  in  1996,  1995  and  1994  was  $1,830,000,  $1,286,000  and
     $335,000, respectively.

     EMPLOYEE  STOCK  PURCHASE  PLAN.  Employees  may  purchase  stock at a
     discount through the  corporation's  Employee Stock Purchase Plan. The
     purchase  price of the  shares is the lower of 85% of the fair  market
     value of the stock on the  offering  date,  or 85% of the fair  market
     value of the stock on the last  business day of each month  throughout
     the one-year  offering  period.  The purchase  price on the respective
     offering dates for 1996, 1995 and 1994 purchases,  was $16.04,  $16.74
     and $25.87, respectively.

     There were 254,000  shares,  236,000  shares and 178,000 shares issued
     under  this plan at  weighted  average  prices of  $16.03,  $16.37 and
     $19.79  for  the  years  ended  December  31,  1996,  1995  and  1994,
     respectively.  As of December 31, 1996, a total of 1,758,000 shares of
     the  corporation's  unissued  common stock has been  reserved for this
     plan.

     The  weighted  average  fair  value  of the  purchase  rights  granted
     pursuant  to  this  plan  in  1996  and  1995  was  $4.07  and  $4.56,
     respectively.  The fair  value of each  purchase  right was  estimated
     using the  Black-Scholes  model as of January 1 of each year  assuming
     each  plan year  consisted  of  twelve,  one  month  options,  and the
     following  weighted  average  assumptions  respectively,  for 1996 and
     1995: dividend yield- 3.89% and 3.15%, interest rate - 5.11% and 6.40%
     and volatility- 27.33% and 32.15%.

     PRO  FORMA  DISCLOSURES.  Had  stock-based  compensation  cost for the
     corporation's  stock incentive plans been determined based on the fair
     value  at  the  grant  dates  for  awards  under  those   plans,   the
     corporation's  net income  would  have been  decreased  by  $2,352,000
     ($0.05 per share) and  $1,732,000  ($0.04 per share) in 1996 and 1995,
     respectively.  The pro forma effect on net income for 1996 and 1995 is
     not  representative  of the pro forma  effect on net  income in future
     years  because  it  does  not  take  into   consideration   pro  forma
     compensation expense related to grants made prior to 1995.

     ASCENT  AND OCC  STOCK  INCENTIVE  PLANS.  Ascent  and OCC  have  each
     established  stock incentive plans expiring in 2006, under which stock
     options,  restricted stock awards, stock appreciation rights and other
     stock based awards may be granted.  For each of the plans, options are
     generally  granted at prices not less than the fair value of  Ascent's
     or OCC's stock at the date of grant.  At December 31, 1996, the Ascent
     and OCC plans have,  respectively,  a total of 1,610,000 and 3,000,000
     common  stock  shares  reserved  for  issuance and options to purchase
     1,344,250 and 2,181,565 shares  outstanding.  Ascent and OCC have also
     adopted  the  disclosure   only   provisions  of  SFAS  No.  123.  The
     corporation's  share of Ascent's and OCC's pro forma compensation cost
     for 1996 would be approximately $1,701,000,  net of tax, or a decrease
     of $0.03 per share.

                                    62

<PAGE>

     EMPLOYEE STOCK  OWNERSHIP PLAN. A subsidiary of the corporation has an
     Employee  Stock  Ownership Plan (ESOP) which was  established  for the
     benefit of eligible  employees.  The ESOP acquired  714,000  shares of
     common stock in 1988 with bank loan proceeds.  The  corporation  makes
     periodic  contributions  to the  ESOP  at  least  sufficient  to  make
     principal and interest  payments when they are due.  Contributions  to
     the ESOP charged to expense totaled $538,000 in 1996, $800,000 in 1995
     and $864,000 in 1994. The  corporation  has guaranteed the ESOP's bank
     notes  payable and has reported  the unpaid  balance of these loans as
     long-term  debt of the  corporation.  An  unearned  ESOP  compensation
     amount,  which is equal to the unpaid bank loans, has been recorded as
     a reduction to stockholders' equity.

14.  PENSION AND OTHER BENEFIT PLANS

     The corporation has a  non-contributory,  defined benefit pension plan
     for  qualifying  employees.  Pension  benefits  are  based on years of
     service and compensation prior to retirement.

     The components of net pension expense for each year are:
<TABLE>
<CAPTION>
<S>                                                              <C>              <C>              <C>


     In thousands                                                          1996            1995            1994
     -----------------------------------------------------------------------------------------------------------
     Service cost for benefits earned during the year                 $   2,590       $   2,606       $   3,719
     Interest cost on projected benefit obligation                        7,213           6,995           6,817
     Credit for actual return on pension plan assets                    (15,323)        (23,924)           (624)
     Net amortization and deferral                                        5,981          15,197          (7,572)
                                                                      ----------       ---------      ----------
     Net pension expense                                              $     461       $     874       $   2,340
                                                                      ==========      ==========      ==========
</TABLE>

     The corporation recognized a $1,380,000 curtailment gain in the second
     quarter of 1995 which arose from the reduction of pension benefits for
     a group of employees.  Additionally,  the provision for  restructuring
     recorded in 1995 (see Note 16) is net of a $925,000  curtailment  gain
     resulting from workforce reductions.

     The following table shows the pension plan's obligations and assets as
     well as the liability  recorded in the corporation's  balance sheet at
     each year end.

<TABLE>
<CAPTION>
<S>                                                                                 <C>             <C>

     In thousands                                                                          1996            1995
     ----------------------------------------------------------------------------------------------------------
     Actuarial present value of benefit obligations:
         Vested benefit obligation                                                   $  89,773       $  90,997
                                                                                     ==========      ==========
         Accumulated benefit obligation                                              $  92,095       $  93,848
                                                                                     ==========      ==========

     Actuarial present value of projected benefit obligation for
         service rendered to date                                                    $ 103,608       $ 105,593
     Pension plan assets at fair value                                                 126,936         114,690
                                                                                     ----------      ----------
     Plan assets greater than projected benefit obligation                              23,328           9,097
     Unrecognized net gain                                                             (25,512)        (10,677)
     Unrecognized transition asset at January 1, 1986 being
         amortized over 13 years                                                        (2,402)         (3,610)
                                                                                     ----------      ----------
     Net pension liability                                                           $  (4,586)      $  (5,190)
                                                                                     ==========      ==========

     Assumed discount rate                                                                7.50%           7.00%
     Assumed rate of compensation increase                                                5.00%           4.75%
     Expected rate of return on pension plan assets                                       9.00%           9.00%

</TABLE>

                                    63

<PAGE>

     The plan's assets  consist  primarily of common  stock,  corporate and
     government bonds and short-term investments.  The corporation's policy
     is to fund the minimum actuarially computed  contributions required by
     law. The corporation  made a $1,065,000 cash  contribution to the plan
     in 1996. No contribution was required for 1995.

     SUPPLEMENTAL   EXECUTIVE  RETIREMENT  PLAN.  The  corporation  has  an
     unfunded  supplemental  pension plan for  executives.  The expense for
     this plan was $2,817,000, $2,505,000 and $2,976,000 for 1996, 1995 and
     1994, respectively.

     The  corporation  recorded a minimum plan  liability for the excess of
     the  accumulated  benefit  obligation over the accrued plan liability.
     This was reported as a reduction to stockholders' equity of $3,180,000
     as of December 31, 1996 and $3,563,000 as of December 31, 1995.  These
     amounts  are net of  deferred  income  taxes and net of an  intangible
     asset recorded for the unrecognized transition obligation.

     The  following  table  shows  the  plan's  obligations  as well as the
     liability  recorded in the  corporation's  balance  sheet at each year
     end.

<TABLE>
<CAPTION>
<S>                                                                                  <C>             <C>

     In thousands                                                                          1996            1995
     ----------------------------------------------------------------------------------------------------------
     Actuarial present value of benefit obligations:
         Accumulated benefit obligation                                               $  20,913       $  20,220
                                                                                      ==========      ==========
         Projected benefit obligation                                                 $  22,136       $  21,443
                                                                                      ==========      ==========
     Accrued liability                                                                $  20,913       $  20,220
                                                                                      ==========      ==========

     Assumed discount rate                                                                 7.50%           7.00%
     Assumed rate of compensation increase                                                 5.00%           4.75%

</TABLE>

     401(K)  PLAN.  The  corporation  has  a  401(k)  plan  for  qualifying
     employees.  A portion  of  employee  contributions  is  matched by the
     corporation  with  shares of its  common  stock.  The number of shares
     contributed  to the plan and the  respective  market  values each year
     were as follows:  1996 - 140,000  shares  ($3,035,000),  1995- 177,000
     shares ($3,386,000) and 1994 - 79,000 shares ($1,934,000).

     POSTRETIREMENT  BENEFITS.  The  corporation  provides  health and life
     insurance benefits to qualifying retirees.  The expected cost of these
     benefits  is  recognized  during the years in which  employees  render
     service.

     The components of the net postretirement benefit expense for each year
     were:

<TABLE>
<CAPTION>
<S>                                                                  <C>             <C>           <C>

     In thousands                                                          1996            1995            1994
     -----------------------------------------------------------------------------------------------------------
     Service cost for benefits earned during the year                 $   1,019       $   1,128    $      1,756
     Interest cost on accumulated postretirement
         benefit obligation                                               2,496           2,778           2,867
     Net amortization and deferral                                       (1,219)         (1,241)         (1,221)
                                                                      ----------      ----------      ----------
     Net postretirement benefit expense                               $   2,296       $   2,665       $   3,402
                                                                      ==========      ==========      ==========
</TABLE>

     The corporation recognized a $1,300,000 curtailment gain in the second
     quarter of 1995 which  arose from the  elimination  of  postretirement
     health  care  benefits  for a group of  employees.  Additionally,  the
     provision for restructuring recorded in 1995 (see Note 16) is net of a
     $993,000 curtailment gain resulting from workforce reductions.


                                     64

<PAGE>

     The  following  table  shows  the  plan's  obligations  as well as the
     liability  recorded in the  corporation's  balance  sheet at each year
     end.

<TABLE>
<CAPTION>
<S>                                                                                  <C>             <C>

     In thousands                                                                          1996            1995
     -----------------------------------------------------------------------------------------------------------
     Accumulated postretirement benefit obligation:
           Retirees                                                                   $  16,792       $  23,020
           Fully eligible active participants                                             4,038           5,158
           Other active participants                                                      8,630          10,614
                                                                                      ----------      ----------
           Total                                                                         29,460          38,792
     Unrecognized gain from plan changes                                                 15,368          10,454
     Unrecognized net gain                                                                5,595             251
                                                                                      ----------      ----------
     Net postretirement benefit liability                                             $  50,423       $  49,497
                                                                                      ==========      ==========

     Assumed discount rate                                                                 7.50%           7.00%
     Assumed rate of compensation increase                                                 5.00%           4.75%

</TABLE>

     A 9.5%  increase  in health  care costs was  assumed for 1996 with the
     rate decreasing 0.5% each year to an ultimate rate of 5.5%. Increasing
     the  assumed  trend rate by 1.0% each year would  have  increased  the
     accumulated  postretirement benefit obligation as of December 31, 1996
     by $3,471,000 and the benefit expense for 1996 by $481,000.

 15. INCOME TAXES

     The components of income tax expense for each year are:

<TABLE>
<CAPTION>
<S>                                                                  <C>             <C>             <C>
     In thousands                                                          1996            1995            1994
     -----------------------------------------------------------------------------------------------------------
     Federal:
         Current                                                      $   9,468       $  20,852       $  28,646
         Deferred                                                        (1,948)         11,615          16,821
         Investment tax credits (net)                                    (1,844)         (2,150)         (2,307)
     State and local                                                      7,002           4,600           6,510
     Foreign                                                              3,466              (6)            269
                                                                      ----------      ----------      ----------
     Total                                                            $  16,144       $  34,911       $  49,939
                                                                      ==========      ==========      ==========
</TABLE>

     The difference  between tax expense computed at the statutory  Federal
     tax rate and the corporation's effective tax rate is:

<TABLE>
<CAPTION>
<S>                                                                  <C>             <C>              <C>

     In thousands                                                          1996            1995            1994
     -----------------------------------------------------------------------------------------------------------
     Federal income taxes computed at the statutory rate              $   2,500       $  23,881       $  44,681
     Foreign losses                                                       5,679           5,518             656
     Investment tax credits (net)                                        (1,844)         (2,150)         (2,307)
     Losses (income) with no tax benefit                                   (507)          3,833           1,156
     State income taxes, net of Federal income tax benefit                4,541           2,656           4,097
     Goodwill amortization                                                1,027           1,349             920
     Losses on non-tax consolidated U.S. investments                      5,287             161             139
     Merger costs                                                             -               -           1,556
     Life insurance (net)                                                (1,123)           (814)           (548)
     Other                                                                  584             477           (411)
                                                                      ----------      ----------      ----------
     Income tax expense                                               $  16,144       $  34,911       $  49,939
                                                                      ==========      ==========      ==========
</TABLE>


                                     65

<PAGE>

     The current and net non-current components of deferred tax accounts as
     shown on the balance sheet at December 31, 1996 and 1995 are:

<TABLE>
<CAPTION>
<S>                                                                                 <C>              <C>

     In thousands                                                                          1996            1995
     -----------------------------------------------------------------------------------------------------------
     Current deferred tax asset                                                       $  12,756       $  12,445
     Non-current deferred tax liability                                                (123,972)       (119,018)
                                                                                      ----------      ----------
     Net liability                                                                    $(111,216)      $(106,573)
                                                                                      ==========      ==========
</TABLE>

     The deferred tax assets and  liabilities at December 31, 1996 and 1995
     are:

<TABLE>
<CAPTION>
<S>                                                                                  <C>             <C>

     In thousands                                                                          1996            1995
     -----------------------------------------------------------------------------------------------------------
     Assets:
         Postretirement benefits                                                      $  22,872       $  21,760
         Accrued expenses                                                                59,880          43,781
         Alternative minimum tax credit                                                  36,562          35,330
         Long-term contract revenues                                                      9,583           7,009
         Other                                                                            7,762           4,381
                                                                                      ----------      ----------
         Total deferred tax assets                                                      136,659         112,261
                                                                                      ----------      ----------
         Liabilities:
         Property and equipment                                                        (235,964)       (211,292)
         Investments - unrealized gains                                                 (11,476)         (7,074)
         Other                                                                             (435)           (468)
                                                                                      ----------      ----------
         Total deferred tax liabilities                                                (247,875)       (218,834)
                                                                                      ----------      ----------
         Net liability                                                               $ (111,216)      $(106,573)
                                                                                     ===========      ==========
</TABLE>

     The Internal  Revenue Service (IRS) has completed  examinations of the
     Federal  income tax  returns of the  corporation  through  1989 and is
     currently  examining Federal income tax returns for 1990 through 1994.
     The  corporation  has also  amended its  returns and filed  claims for
     refunds for 1979 through 1987.  The IRS has denied these  claims.  The
     corporation  is  contesting  this denial by the IRS. In the opinion of
     the corporation, adequate provision has been made for income taxes for
     all periods through 1996.

16.  PROVISION FOR RESTRUCTURING

     In the third  quarter  of 1995,  the  corporation  recorded  a pre-tax
     charge of $20,044,000 to strategically restructure elements of all its
     business  units.  About 170  employees  were  severed as part of these
     activities.  The provision included  $1,858,000 for employee severance
     costs in COMSAT World Systems  (CWS) and COMSAT Mobile  Communications
     (CMC),  $10,866,000 to restructure COMSAT's entertainment  businesses,
     and $7,320,000 to  restructure  several  businesses  within COMSAT RSI
     (CRSI) and for actions taken in COMSAT Laboratories. The actions taken
     in  CWS  and  CMC  were  associated  with  the  consolidation  of  the
     management  and  administration  of  these  two  businesses  into  one
     business  unit.  As a result,  various  administrative,  marketing and
     other positions were eliminated.

     In the third quarter of 1995,  management  decided to discontinue  the
     Satellite Cinema scheduled movie operations.  The restructuring charge
     included  a  provision  of  $5,140,000  to  write  down  property  and
     inventory to estimated  realizable value, an accrual of $1,010,000 for
     employee  severance costs and a charge of $4,716,000 for costs related
     principally to settling  contractual  commitments  incurred to support
     the Satellite Cinema business that will not be fulfilled. Revenues for
     the Satellite  Cinema  operations were $25,036,000 and $34,753,000 for

                                    66

<PAGE>

     the years ended  December 31, 1995 and 1994,  respectively.  Operating
     income (loss) before allocation of general and administrative expenses
     was ($16,591,000) and $3,897,000 for the years ended December 31, 1995
     and 1994, respectively.

     Within   CRSI,   the   corporation   combined   the   management   and
     administration  of four of its business  units into two businesses and
     decided to discontinue certain product lines in another business unit.
     The   corporation   also   downsized  one  of  the  divisions  of  its
     Laboratories business. The restructuring provision included $1,920,000
     for  employee  severance  costs  associated  with  these  actions  and
     $5,400,000   primarily  to  write  down  inventory  to  its  estimated
     realizable value.

     At  December  31,  1995,  $4,100,000  of the  restructuring  provision
     remained,  principally  for the  payment  of  employee  severance  and
     contractual  commitments.   All  of  the  restructuring  actions  were
     substantially  completed at the end of 1995,  except for the shut down
     of Satellite Cinema, which was completed in the first quarter of 1996.
     No additions to the provision  were necessary  during 1996,  leaving a
     minor  balance yet to be paid at December 31, 1996 for  severance  and
     contractual commitments.

17.  FINANCIAL INSTRUMENTS AND OFF-BALANCE-SHEET RISKS

     The  corporation  owns a 50% interest in a partnership  which owns the
     headquarters  building  leased by the  corporation  (see Note 10). The
     corporation has guaranteed repayment of a portion of the partnership's
     mortgage on the building.  The balance of the guarantee was $2,086,000
     as of December 31, 1996.  The guarantee  will be reduced as the loan's
     principal  balance is repaid.  The corporation  was also  contingently
     liable to banks for $8,925,000 as of December 31, 1996 for outstanding
     letters  of credit  securing  performance  of certain  contracts.  The
     estimated fair value of these instruments is not significant.

     Inmarsat  has entered  into  foreign  currency  contracts  designed to
     minimize  exposure to exchange rate  fluctuations  on fixed  operating
     expenses denominated primarily in British pounds sterling. At December
     31, 1996, Inmarsat had several contracts maturing primarily in 1997 to
     purchase   foreign   currency   for  a  total  of   $97,829,000.   The
     corporation's share of the estimated fair value of these contracts, as
     determined by a bank, is an unrealized gain of approximately  $787,000
     at December 31, 1996.

     Inmarsat  has entered into  interest  rate and foreign  currency  swap
     arrangements  to minimize  the  exposure to interest  rate and foreign
     currency  exchange  fluctuations  related to its  satellite  financing
     obligations.  Inmarsat  borrowed  and is  obligated  to  repay  pounds
     sterling.  The pounds sterling  borrowed were swapped for U.S. dollars
     with an agreement to exchange the dollars for pounds sterling in order
     to meet the future  lease  payments.  Inmarsat  pays  interest  on the
     dollars at an average  fixed rate of 8.8%,  and it  receives  variable
     interest on the sterling  amounts based on short-term LIBOR rates. The
     differential  to be paid or  received  is  accrued as  interest  rates
     change and is recognized over the life of the agreements. The currency
     swap  arrangements  have been  designated as hedges,  and any gains or
     losses are  included  in the  measurement  of the debt.  The effect of
     these  swaps  is  to  change  the  sterling  lease   obligation   into
     fixed-interest-rate dollar debt. As of December 31, 1996, Inmarsat had
     $394,754,000 of swaps to be exchanged for (pound)246,274,000  sterling
     at various dates  through 2007.  Inmarsat is exposed to loss if one or
     more of the  counter  parties  defaults.  However,  Inmarsat  does not
     anticipate  non-performance  by the  counter  parties as all are major
     financial institutions.  The corporation's share of the estimated fair

                                    67

<PAGE>

     value of these swaps is an  unrealized  loss of $5,295,000 at December
     31, 1996.  The fair value was estimated by computing the present value
     of the dollar  obligations  using current rates available for issuance
     of debt with similar  terms,  and the current value of the sterling at
     year-end exchange rates.

     The fair value of long-term debt  (excluding  capitalized  leases) was
     estimated by obtaining a yield-adjusted  price as of December 31, 1996
     for each obligation from an investment banker.

<TABLE>
<CAPTION>
<S>                                                                                 <C>              <C>
                                                                                          Book
     In thousands                                                                        Amount      Fair Value
     ----------------------------------------------------------------------------------------------------------
     8.125% notes due 2004                                                            $ 160,000       $ 171,088
     8.95% notes due 2001                                                                75,000          81,473
     INTELSAT bonds                                                                     181,725         190,523
     Medium-term notes                                                                   74,000          79,538

</TABLE>

     The fair values of the remaining long-term debt not itemized above and
     the corporation's other financial  instruments are approximately equal
     to their carrying values.

18.  BUSINESS SEGMENT INFORMATION

     The corporation  reports operating results and financial data in three
     business segments:  International Communications,  Technology Services
     and Entertainment.  The International  Communications segment consists
     of  activities  undertaken  by the  corporation  in its  COMSAT  World
     Systems  (CWS),   COMSAT  Mobile   Communications   (CMC)  and  COMSAT
     International  (CI)  businesses.  CWS provides voice,  data, video and
     audio  communications  services  between the U.S. and other  countries
     using the INTELSAT satellite  network.  CMC provides voice, data, fax,
     telex and  information  services  for ships,  aircraft and land mobile
     applications throughout the world using the Inmarsat satellite system.
     CI  develops,  acquires  and manages  telecommunications  companies in
     high-growth  emerging  markets  overseas.   In  January  1997,  COMSAT
     International Ventures changed its name to COMSAT International. These
     companies  provide a wide  array of private  line and public  switched
     communications  services and equipment  installations.  The Technology
     Services segment  consists of the financial  results of COMSAT RSI and
     COMSAT Laboratories, which include the design and manufacture of voice
     and data  communications  networks and products,  systems  integration
     services,  and applied research and technology  services for worldwide
     users. The Entertainment  segment consists of the financial results of
     Ascent  (see  Note 5).  Ascent  owns a 57.2%  interest  in OCC  (which
     provides on-demand entertainment  programming and information services
     primarily to the domestic lodging industry), a professional basketball
     team  and a  professional  hockey  team,  and a  film  and  television
     production company.


                                     68

<PAGE>

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

     SEGMENT INFORMATION

     In thousands                                                          1996            1995            1994
     -----------------------------------------------------------------------------------------------------------
     Revenues:
         International Communications:
              World Systems                                  $  272,969      $  254,683      $  251,988
              Mobile Communications                             155,187         180,384         193,530
              International                                      58,084          37,708          19,148
                                                              -----------     -----------     -----------
         Total                                                  486,240         472,775         464,666
         Technology Services (1)                                300,629         205,912         219,119
         Entertainment                                          258,120         202,332         165,612
         Eliminations and other corporate                       (29,728)        (18,107)        (13,732)
                                                             -----------     -----------     -----------
         Total                                               $1,015,261      $  862,912      $  835,665
                                                             ===========     ===========     ===========
     Operating income (loss) (2) 
         International Communications:
              World Systems                                  $  104,009      $  108,655      $  100,856
              Mobile Communications                              31,255          53,504          53,518
              International                                     (17,282)        (20,708)         (4,247)
                                                             -----------     -----------     -----------
         Total                                                  117,982         141,451         150,127
         Technology Services (1)                                 19,014          13,990          21,423
         Entertainment                                          (45,963)        (15,445)         13,603
         Merger and integration costs                                 -               -          (7,367)
         Provision for restructuring (3)                              -         (20,044)              -
         Other corporate                                        (26,952)        (24,317)        (27,535)
                                                             -----------    ------------     -----------
         Total                                               $   64,081     $    95,635      $  150,251
                                                             ===========    ============     ===========
     Identifiable assets as of December 31:
         International Communications:
              World Systems                                   $ 791,497      $  832,823      $  817,623
              Mobile Communications                             440,856         418,878         420,570
              International                                     199,510         116,861          67,014
                                                             -----------     -----------     ------------
         Total                                                1,431,863       1,368,562       1,305,207
         Technology Services                                    244,478         176,529         147,015
         Entertainment                                          727,452         494,519         368,904
         Corporate and other assets (4)                         262,010         274,656         154,866
                                                             -----------     -----------     ------------
         Total                                               $2,665,803      $2,314,266       $1,975,992
                                                             ===========     ===========     ============
    Property and equipment additions:
         International Communications:
              World Systems                                  $  110,231      $  137,762      $  115,555
              Mobile Communications                              70,616          39,795          55,103
              International                                      89,857          41,025          20,970
                                                             -----------     -----------     -----------
         Total                                                  270,704         218,582         191,628
         Technology Services                                      9,274           6,910           4,067
         Entertainment                                           88,286          85,111          90,053
         Corporate and other assets                               1,193             717             835
                                                             -----------    ------------    ------------
         Total                                               $  369,457     $   311,320     $   286,583
                                                             ===========    ============    ============
     Depreciation and amortization:
         International Communications:
              World Systems                                  $   91,729     $    87,980     $    81,521
              Mobile Communications                              45,207          40,096          35,299
              International                                      14,814           8,244           3,404
                                                             -----------    ------------    ------------
         Total                                                  151,750         136,320         120,224
         Technology Services                                      7,580           7,206           6,880
         Entertainment                                           74,812          56,213          38,010
         Corporate and other assets                               2,134           2,285           2,670
                                                            ------------    ------------    ------------
         Total                                              $   236,276     $   202,024     $   167,784
                                                            ============    ============    ============


</TABLE>

                                     69

<PAGE>

     (1)  International  Communications'  World  Systems  revenues  include
          intersegment  sales totaling  $15,931,000 in 1996,  $7,124,000 in
          1995 and $3,726,000 in 1994. Technology Services segment revenues
          include   intersegment   sales  totaling   $11,624,000  in  1996,
          $9,960,000 in 1995,  and $8,625,000 in 1994.  Intersegment  sales
          for other  segments are not  significant.  Revenues and operating
          income  reported  for the  Technology  Services  segment  include
          business interruption insurance proceeds of $4,835,000 in 1994.

     (2)  The method of allocating  indirect corporate costs was changed in
          1995, and 1994's segment operating results have been restated for
          this change.

     (3)  If the 1995  provision for  restructuring  (see Note 16) had been
          charged to segment  operating  income,  the amounts  allocated to
          each  segment  would  have  been:  International  Communications;
          $315,000,  $1,343,000 and $200,000 to the World  Systems,  Mobile
          Communications,   and  International  businesses,   respectively;
          Entertainment, $10,866,000; and Technology Services, $7,320,000.

     (4)  The corporation's  investments in  unconsolidated  businesses are
          included in Corporate and other assets.

     RELATED PARTY TRANSACTIONS.  The corporation provides support services
     to INTELSAT and support  services and satellite  capacity to Inmarsat.
     The revenues from these services were $19,656,000 in 1996, $25,190,000
     in  1995  and  $26,162,000  in  1994.  These  revenues  were  recorded
     primarily in the International  Communications and Technology Services
     segments.

     SIGNIFICANT CUSTOMERS.  Revenues in 1996, 1995 and 1994, respectively,
     included sales to the U.S.  Government of  $144,435,000,  $121,152,000
     and  $121,715,000,  and  to  AT&T  of  $70,588,000,   $81,866,000  and
     $100,096,000.  Substantially  all of the  U.S.  Government  sales  are
     reported  in  International   Communications'   Mobile  Communications
     business and the Technology Services segment. Substantially all of the
     sales to AT&T are  reported  in  International  Communications'  World
     Systems business.


                                     70

<PAGE>

19.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
<S>                                   <C>             <C>            <C>              <C>            <C>

     In thousands, except per              First          Second          Third          Fourth           Total
     share amount                        Quarter         Quarter        Quarter         Quarter            Year
     -------------------------------------------------------------------------- --------------------------------
     1996:
         Revenues                      $ 248,555       $ 239,161      $ 234,005 (1)   $ 293,540      $1,015,261
         Operating income (loss)          25,764          22,675         26,248         (10,606)(2)      64,081
         Net income (loss)                 9,327           5,782          5,037         (11,524)(3)       8,622
         Earnings (loss) per share          0.19            0.12           0.10           (0.24)           0.18
         Dividends per share                0.19 1/2        0.19 1/2       0.19 1/2        0.19 1/2        0.78
         Stock price:
            High                              25 5/8          33 1/8         26 1/2          26 3/4          33 1/8
            Low                               16 3/4          23 3/8         18 3/4          21 1/2          16 3/4
            Close                             23 3/8          26             22 5/8          24 5/8          24 5/8
     1995:
         Revenues                      $ 210,063       $ 214,050 (4)  $ 206,298       $ 232,501 (4)   $ 862,912
         Operating income                 29,757          44,939            628 (5)      20,311          95,635
         Net income (loss)                14,573          22,012        (15,623)         16,855 (6)      37,817
         Earnings (loss) per share          0.31            0.46          (0.33)           0.35            0.79
         Dividends per share                0.19 1/2        0.19 1/2       0.19 1/2        0.19 1/2        0.78
         Stock price:
            High                              21 5/8          21             24 5/8          22 5/8          24 5/8
            Low                               17 5/8          18 1/4         19 1/2          18 1/4          17 5/8
            Close                             18 5/8          19 5/8         22 5/8          18 5/8          18 5/8

</TABLE>

     (1)  Revenues  in the third  quarter  of 1996  include  $7,800,000  in
          royalties  related to a licensing  agreement that resolved patent
          infringement disputes.

     (2)  The  fourth  quarter of 1996  includes  costs of  $9,000,000  for
          estimated losses on certain long-term fixed price contracts.  OCC
          recorded  charges  of  $8,700,000  relating  primarily  to  asset
          write-downs,  reserves and expense  accruals  associated with the
          integration of SpectraVision.

     (3)  The fourth  quarter of 1996 includes a pre-tax gain of $2,722,000
          from the  corporation's  sale of ICO shares and a pre-tax loss of
          $1,105,000 for a decline in value of a marketable  security.  The
          fourth  quarter tax provision  reflects a net charge,  due to the
          losses from non-tax  consolidated U.S.  investments and increased
          state income taxes.

     (4)  Revenues  include the  corporation's  share of NBA expansion fees
          totaling $8,802,000 in the second quarter of 1995 and $367,000 in
          the fourth quarter of 1995.

     (5)  The third quarter of 1995  includes a  $20,044,000  provision for
          restructuring (see Note 16 to the financial statements).

     (6)  The fourth quarter of 1995 includes a $19,286,000 pre-tax gain as
          a result of the public  offering  of the  common  stock of Ascent
          (see  Note  5 to the  financial  statements).  Additionally,  the
          corporation  recorded  accounting  charges  to  operating  income
          totaling  $2,265,000  net of tax,  to conform  the  corporation's
          consolidation of Ascent to Ascent's externally reported financial
          results.


                                     71

<PAGE>



ITEM 9:  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.  None.

                                 PART III

     Except for the portion of Item 10 relating to Executive Officers which
is included in Part I of this Report,  the information  called for by Items
10-13 is incorporated by reference from the COMSAT - 1997 Annual Meeting of
Shareholders  - Notice  and  Proxy  Statement  - (to be filed  pursuant  to
Regulation  14A not later than 120 days after the close of the fiscal year)
which  meeting  involves  the election of  directors,  in  accordance  with
General Instruction G to the Annual Report on Form 10-K.

Item 10. Directors and Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions

                                  PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         (a)   Documents filed as part of this Report

          1.   Consolidated  Financial Statements and Supplementary Data of
               Registrant

               a.  Independent Auditors' Report
               b.   Consolidated Financial Statements of COMSAT Corporation
                    and Subsidiaries

                    (i)  Consolidated  Income  Statements for the Years Ended
                         December 31, 1996, 1995 and 1994

                    (ii) Consolidated Balance Sheets as of December 31, 1996
                         and 1995

                    (iii)Consolidated  Cash Flow  Statements  for the Years
                         Ended December 31, 1996, 1995 and 1994

                    (iv) Statements of Changes in Consolidated Stockholders'
                         Equity for the Years Ended December 31, 1996, 1995
                         and 1994

                    (v)  Notes to Consolidated Financial Statements for Each
                         of the Three  Years in the Period  Ended  December
                         31, 1996

          2.   Financial Statement Schedules Relating  to the  Consolidated
               Financial  Statements of COMSAT  Corporation for Each of the
               Three Years in the Period Ended December 31, 1996

               a.   Schedule  I  --  Condensed  Financial   Information  of
                    Registrant
               b.   Schedule II -- Valuation and Qualifying Accounts
  
                                  72

<PAGE>

               All Schedules (except those listed above) have been omitted,
               because they are not  applicable  or not required or because
               the  required  information  is  included  elsewhere  in  the
               financial statements in this filing.

         (b)   Reports on Form 8-K

               The corporation filed a Report on Form 8-K dated October 18,
               1996 related to the announcement of its intent to divest its
               interest  in  Ascent  Entertainment  Group,  Inc.  and third
               quarter 1996 operating results.

          (c)  Exhibits  (listed  according  to the number  assigned in the
               table in Item 601 of Regulation S-K)

Exhibit No. 3 - Articles of Incorporation and By-laws

     3.1       Articles of Incorporation of Registrant,  composite copy, as
               amended through June 1, 1993 (Incorporated by reference from
               Exhibit No. 4(a) to Registrant's  Registration  Statement on
               Form S-3 (No. 33-51661) filed on December 22, 1993)

     3.2       By-laws of Registrant,  as amended through February 16, 1996
               (Incorporated   by   reference   from  Exhibit  No.  3.2  to
               Registrant's  Report on Form 10-K for the fiscal  year ended
               1995)

     3.3       Regulations  adopted  by  Registrant's  Board  of  Directors
               pursuant  to Section  5.02(c) of  Registrant's  Articles  of
               Incorporation  (Incorporated  by reference  from Exhibit No.
               3(c) to Registrant's Report on Form 10-K for the fiscal year
               ended 1992)

Exhibit No. 4 - Instruments defining the rights of security holders, including
indentures

     4.1       Specimen of a  certificate  representing  Series I shares of
               COMSAT  Common Stock,  without par value,  which are held by
               citizens of the United  States  (Incorporated  by  reference
               from  Exhibit No. 4(a) to  Registrant's  Report on Form 10-K
               for the fiscal year ended December 31, 1993)

     4.2       Specimen of a  certificate  representing  Series I shares of
               COMSAT  Common Stock,  without par value,  which are held by
               aliens  (Incorporated  by reference from Exhibit No. 4(b) to
               Registrant's  Report on Form 10-K for the fiscal  year ended
               December 31, 1982)

     4.3       Specimen of a certificate  representing  Series II shares of
               COMSAT  Common  Stock,  without par value  (Incorporated  by
               reference  from Exhibit No. 4(c) to  Registrant's  Report on
               Form 10-K for the fiscal year ended December 31, 1982)

     4.4       Standard  Multiple-Series  Indenture  Provisions dated March
               15, 1991 (Incorporated by reference from Exhibit No. 4(a) to
               Registrant's   Registration   Statement  on  Form  S-3  (No.
               33-39472) filed on March 15, 1991)

                                    73

<PAGE>

     4.5       Indenture dated as of March 15, 1991 between  Registrant and
               The Chase Manhattan Bank,  N.A.  (Incorporated  by reference
               from Exhibit No. 4(b) to Registrant's Registration Statement
               on Form S-3 (No. 33-39472) filed on March 15, 1991)

     4.6       Supplemental Indenture,  dated as of June 29, 1994, from the
               Registrant to The Chase Manhattan Bank, N. A.  (Incorporated
               by  reference   from   Exhibit  No.  4(c)  to   Registrant's
               Registration  Statement on Form S-3 (No.  33-54369) filed on
               June 30, 1994)

     4.7       Officers'  Certificate  pursuant  to  Section  3.01  of  the
               Indenture,  dated as of March 15, 1991,  from the Registrant
               to The Chase Manhattan Bank,  N.A., as Trustee,  relating to
               the authorization of $75,000,000  aggregate principal amount
               of  Registrant's  8.95%  Notes Due 2001  (with  form of Note
               attached)  (Incorporated  by reference from Exhibit No. 4 to
               Registrant's  Current  Report  on Form 8-K  filed on May 15,
               1991)

     4.8       Officers'  Certificate  pursuant  to  Section  3.01  of  the
               Indenture,  dated as of March 15, 1991,  from the Registrant
               to The Chase Manhattan Bank,  N.A., as Trustee,  relating to
               the authorization of $160,000,000 aggregate principal amount
               of  Registrant's  8.125%  Debentures  Due 2004 (with form of
               Debenture attached)  (Incorporated by reference from Exhibit
               No. 4 to  Registrant's  Current  Report on Form 8-K filed on
               April 9, 1992)

     4.9       Officers'  Certificate  pursuant  to  Section  3.01  of  the
               Indenture,  dated as of March 15, 1991, as  supplemented  by
               the Supplemental Indenture,  dated as of June 29, 1994, from
               the  Registrant  to  The  Chase  Manhattan  Bank,  N.A.,  as
               Trustee,  relating  to  the  authorization  of  $100,000,000
               aggregate  principal  amount  of  Registrant's  Medium  Term
               Notes, Series A (with forms of Notes attached) (Incorporated
               by reference from Exhibit No. 4(i) to Registrant's Report on
               Form 10-K for the fiscal year ended December 31, 1994)

     4.10      Limited  Partnership  Agreement  of COMSAT  Capital I, L.P.,
               dated as of July 18,  1995,  relating to issuance of monthly
               income preferred securities  (Incorporated by reference from
               Exhibit No. 4(a) to Registrant's Report on Form 10-Q for the
               quarter ended June 30, 1995)

     4.11      Guarantee  Agreement  for  Preferred  Securities  of  COMSAT
               Capital I, L.P., dated as of July 18, 1995  (Incorporated by
               reference  from Exhibit No. 4(b) to  Registrant's  Report on
               Form 10-Q for the quarter ended June 30, 1995)

     4.12      Indenture between  Registrant and the First National Bank of
               Chicago, as Trustee, dated as of July 18, 1995 (Incorporated
               by reference from Exhibit No. 4(c) to Registrant's Report on
               Form 10-Q for the quarter ended June 30, 1995)
  
                                  74

<PAGE>

Exhibit No. 10 - Material Contracts

     10.1      Agreement  Relating to the International  Telecommunications
               Satellite  Organization  (INTELSAT)  by  Governments,  which
               entered  into force on February  12, 1973  (Incorporated  by
               reference from Exhibit No. 10(a) to  Registrant's  Report on
               Form 10-K for the fiscal year ended December 31, 1980)

     10.2      Operating  Agreement  Relating to  INTELSAT  by  Governments
               which entered into force on February 12, 1973  (Incorporated
               by reference from Exhibit No. 10(b) to  Registrant's  Report
               on Form 10-K for the fiscal year ended December 31, 1980)

     10.3      Agreement  dated  August  15,  1975,  among  COMSAT  General
               Corporation, RCA Global Communications,  Inc., Western Union
               International,  Inc.  and  ITT  World  Communications,  Inc.
               relating  to the  establishment  of a joint  venture for the
               purpose of participating in the ownership and operation of a
               maritime communications  satellite system and Amendment Nos.
               1-4 and Amendment  No. 5 dated March 24, 1980  (Incorporated
               by reference from Exhibit No. 10(p) to  Registrant's  Report
               on Form 10-K for the fiscal year ended December 31, 1980)

     10.4      Amendment  No. 6 to  Exhibit  10.3 dated  September  1, 1981
               (Incorporated  by reference  from  Exhibit No.  10(p)(ii) to
               Registrant's  Report on Form 10-K for the fiscal  year ended
               December 31, 1981)

     10.5      Convention   on   the   International   Maritime   Satellite
               Organization    (INMARSAT)    dated    September   3,   1976
               (Incorporated   by   reference   from   Exhibit  No.  11  to
               Registrant's  Report on Form 10-K for the fiscal  year ended
               December 31, 1978)

     10.6      Operating  Agreement  on INMARSAT  dated  September  3, 1976
               (Incorporated   by   reference   from   Exhibit  No.  12  to
               Registrant's  Report on Form 10-K for the fiscal  year ended
               December 31, 1978)

     10.7*     Registrant's   1982  Stock  Option  Plan   (Incorporated  by
               reference from Exhibit No. 10(x) to  Registrant's  Report on
               Form 10-K for the fiscal year ended December 31, 1981)

     10.8      Agreement  dated  October 6, 1983,  between  COMSAT  General
               Corporation  and  National   Broadcasting  Company  for  the
               provision  of  satellite  distribution  network  programming
               (Incorporated   by  reference  from  Exhibit  No.  10(r)  to
               Registrant's  Report on Form 10-K for the fiscal  year ended
               December 31, 1983)

     10.9      Amendment   to  Exhibit   10.8  dated   September   1,  1992
               (Incorporated  by  reference  from  Exhibit No.  10(j)(i) to
               Registrant's  Report on Form 10-K for the fiscal  year ended
               December 31, 1992)

     10.10*    Registrant's Insurance and Retirement Plan for Executives, as
               amended and restated effective January 1, 1997

     10.11*    Registrant's Non-Employee Directors Stock Plan

                                    75

<PAGE>

     10.12     Memorandum of Understanding between Registrant and National
               Aeronautics and Space Administration (NASA), dated July 21,
               1988 and amended through February 22, 1990 (Incorporated by
               reference from Exhibit No. 10(aa) to Registrant's Report on
               Form 10-K for the fiscal year ended December 31, 1989)

     10.13     Agreement to Acquire and Lease (and Supplemental Agreements
               thereto)   dated   September   28  and  October  10,  1988,
               respectively,  among the International  Maritime  Satellite
               Organization  (Inmarsat),  the  North  Sea  Marine  Leasing
               Company,  British  Aerospace  Public Limited  Company,  the
               European Investment Bank,  Kreditanstalt Fuer Wiederaufbau,
               European   Investment  Bank  (as  Agent  and  as  Trustee),
               Instituto  Mobiliare  Italiano,  Credit National,  Hellenic
               Industrial  Development  Bank,  and  Society  Nationale  de
               Credit a  L'Industrie  relating to the  financing  of three
               Inmarsat spacecraft (Incorporated by Reference from Exhibit
               No. 3(a) to Registrant's Report on Form 10-K for the fiscal
               year ended December 31, 1988)

     10.14     Service  Agreement,   dated  September  14,  1989,  between
               Registrant  and  Aeronautical   Radio,   Inc.  relating  to
               satellite-based  communications  services  (Incorporated by
               reference from Exhibit No. 10(y) to Registrant's  Report on
               Form 10-K for the fiscal year ended December 31, 1989)

     10.15     Agreement,  dated January 22, 1990,  between Registrant and
               Kokusai   Denshin   Denwa  Co.,   Ltd.  for   provision  of
               aeronautical  services   (Incorporated  by  reference  from
               Exhibit No. 10(z) to  Registrant's  Report on Form 10-K for
               the fiscal year ended December 31, 1990)

     10.16     Amendment  No.  1 to  Exhibit  10.15  dated  May  20,  1993
               (Incorporated  by reference  from  Exhibit No.  10(q)(i) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1993)

     10.17*    Registrant's 1990 Key Employee Stock Plan (Incorporated  by
               reference from Exhibit No. 10 (p) to Registrant's Report on
               Form 10-K for the fiscal year ended December 31, 1989)

     10.18*    Amendment No. 1 to Exhibit 10.17  dated  January  15,  1993
               (Incorporated  by reference  from  Exhibit No.  10(r)(i) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1993)

     10.19*    Amendment No. 2 to Exhibit 10.17  dated  January  16,  1994
               (Incorporated  by reference  from Exhibit No.  10(o)(ii) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1994)

     10.20     Amended and Restated Agreement, dated November 14, 1990, of
               Limited  Partnership of Rock Spring II Limited  Partnership
               (Incorporated  by  reference  from  Exhibit  No.  10(a)  to
               Registrant's  Current  Report on Form 8-K filed on February
               24, 1992)
                                    76

<PAGE>

     10.21     Amended and Restated  Lease  Agreement,  dated November 14,
               1990,  of  Limited  Partnership  of Rock  Spring II Limited
               Partnership  (Incorporated  by  reference  from Exhibit No.
               10(b) to  Registrant's  Current Report on Form 8-K filed on
               February 24, 1992)
      
     10.22     Amended and Restated Ground Lease Indenture, dated November
               14, 1990,  between  Anne D.  Camalier  (Landlord)  and Rock
               Spring II Limited  Partnership  (Tenant)  (Incorporated  by
               reference  from Exhibit No. 10(c) to  Registrant's  Current
               Report on Form 8-K filed on February 24, 1992)

     10.23     Finance  Facility  Contract  (and  Supplemental  Agreements
               thereto),  dated December 20, 1991, among the International
               Maritime Satellite Organization (Inmarsat),  Abbey National
               plc, General Electric  Technical  Services  Company,  Inc.,
               European Investment Bank,  Kreditanstalt Fuer Wiederaufbau,
               Instituto  Mobiliare  Italiano  S.p.A.,   Credit  National,
               Societe     Nationale    de    Credit    a     L'Industrie,
               Finansieringsinstituttet for Industri OG Haandvaerk A/S, De
               Nationale    Investeringsbank   NV,   and   Osterreichische
               Investitionkredit   Aktiengesellschaft   relating   to  the
               financing of three  Inmarsat  spacecraft  (Incorporated  by
               reference from Exhibit No. 10 (dd) to  Registrant's  Report
               on Form 10-K for the fiscal year ended December 31, 1991)

     10.24*    Registrant's  Directors and Executives Deferred Compensation
               Plan, as amended and restated as of January 1997

     10.25     Service  Agreement,   dated  September  12,  1990,  between
               Registrant and GTE Airfone, Incorporated, for the provision
               of  aeronautical   satellite   services   (Incorporated  by
               reference from Exhibit No. 10(r) to Registrant's  Report on
               Form 10-K for the fiscal year ended December 31, 1990)

     10.26     Fiscal  Agency  Agreement,  dated  as of  August  6,  1992,
               between    International    Telecommunications    Satellite
               Organization  and Morgan Guaranty Trust Company of New York
               (Incorporated  by  reference  from  Exhibit  No. 10 (dd) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1992)

     10.27     Fiscal  Agency  Agreement,  dated as of January  19,  1993,
               between    International    Telecommunications    Satellite
               Organization  and Morgan Guaranty Trust Company of New York
               (Incorporated  by  reference  from  Exhibit  No. 10 (ee) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1992)

     10.28     Lease Agreement,  dated June 8, 1993,  between GTE Airfone,
               Incorporated,  United Airlines, Inc. and Registrant for the
               provision and financing of aeronautical satellite equipment
               (Incorporated  by  reference  from  Exhibit  No.  10(aa) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1993)
  
                                  77
     <PAGE>

     10.29     Agreement dated July 1, 1993,  between  Registrant and AT&T
               Easylink  Services  relating to  exchange of telex  traffic
               (Incorporated  by  reference  from  Exhibit  No.  10(bb) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1993)

     10.30     Agreement  dated July 27, 1993,  between the Registrant and
               American   Telephone  &  Telegraph   Company   relating  to
               utilization  of space  segment  (Incorporated  by reference
               from Exhibit No. 10(cc) to Registrant's Report on Form 10-K
               for the fiscal year ended December 31, 1993)

     10.31     Amendment  to Exhibit  10.30  dated as of  December 1, 1995
               (Incorporated  by  reference  from  Exhibit  No.  10.34  to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1995)

     10.32     Amendment to Exhibit 10.30 dated as of January 8, 1997

     10.33     Agreement dated September 1, 1993,  between  Registrant and
               MCI  International,  Inc.  relating  to exchange of traffic
               (Incorporated  by  reference  from  Exhibit  No.  10(dd) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1993)

     10.34     Agreement  dated November 30, 1993,  between the Registrant
               and  Sprint   Communications   Company  L.P.   relating  to
               utilization  of space  segment  (Incorporated  by reference
               from Exhibit No. 10(ee) to Registrant's Report on Form 10-K
               for the fiscal year ended December 31, 1993)

     10.35     Amendment   to   Exhibit   10.34   dated   April  7,   1995
               (Incorporated  by reference  from  Exhibit No.  10(a)(i) to
               Registrant's  Report on Form 10-Q/A  Amendment  No. 2 dated
               June 29, 1995 for the quarter ended March 31, 1995)

     10.36     Agreement dated December 10, 1993,  between  Registrant and
               Sprint  International  relating to the  exchange of traffic
               (Incorporated  by  reference  from  Exhibit  No.  10(ff) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1993)

     10.37     Credit  Agreement  dated  as of  December  17,  1993  among
               Registrant,  NationsBank of North  Carolina,  N.A., Bank of
               America National Trust and Savings  Association,  The First
               National Bank of Chicago,  The Chase Manhattan Bank,  N.A.,
               The Sumitomo  Bank,  Limited,  New York Branch,  Swiss Bank
               Corporation,  New York Branch, as lenders,  and NationsBank
               of  North  Carolina,   N.A.,  as  agent   (Incorporated  by
               reference from Exhibit No. 10(gg) to Registrant's Report on
               Form 10-K for the fiscal year ended December 31, 1993)

     10.38     Amendment  No. 1 to Exhibit  10.37 dated as of December 17,
               1994  (Incorporated by reference from Exhibit No. 10(cc)(i)
               to  Registrant's  Report on Form 10-K for the  fiscal  year
               ended December 31, 1994)

                                    78
     <PAGE>

     10.39     Agreement    dated   January   24,   1994,    between   MCI
               International,  Inc. and Registrant relating to utilization
               of space segment  (Incorporated  by reference  from Exhibit
               No.  10(ii)  to  Registrant's  Report  on Form 10-K for the
               fiscal year ended December 31, 1993)

     10.40     Amendment  to  Exhibit  10.39  dated  as of  July  1,  1995
               (Incorporated  by  reference  from  Exhibit  No.  10.42  to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1995)

     10.41     Amendment to Exhibit 10.39 dated as of September 17, 1996

     10.42     Agreement dated February 18, 1994,  between  Registrant and
               AT&T  relating  to  exchange  of traffic  (Incorporated  by
               reference from Exhibit No. 10(jj) to Registrant's Report on
               Form 10-K for the fiscal year ended December 31, 1993)

     10.43     Fiscal    Agency    Agreement     between     International
               Telecommunications  Satellite  Organization,   Issuer,  and
               Bankers Trust  Company,  Fiscal Agent and Principal  Paying
               Agent,   dated  as  of  March  22,  1994  (Incorporated  by
               reference from Exhibit No. 10(kk) to Registrant's Report on
               Form 10-K for the fiscal year ended December 31, 1993)

     10.44     Distribution   Agreement   dated  July  11,  1994   between
               Registrant  and  CS  First  Boston   Corporation,   Salomon
               Brothers Inc and  Nationsbanc  Capital  Markets,  Inc.,  as
               Distributors,  of Registrant's  Medium-Term Notes, Series A
               (Incorporated  by  reference  from  Exhibit  No.  10(ff) to
               Registrant's  Report on Form 10-K for the fiscal year ended
               December 31, 1994)

     10.45     Fiscal    Agency    Agreement     between     International
               Telecommunications  Satellite  Organization,   Issuer,  and
               Morgan  Guaranty Trust Company,  Fiscal Agent and Principal
               Paying Agent, dated as of October 14, 1994 (Incorporated by
               reference from Exhibit No. 10(gg) to Registrant's Report on
               Form 10-K for the fiscal year ended December 31, 1994)

     10.46*    Registrant's   Annual   Incentive  Plan   (Incorporated   by
               reference from Exhibit No. 10(hh) to Registrant's  Report on
               Form 10-K for the fiscal year ended December 31, 1994)

     10.47     Fiscal    Agency    Agreement     between     International
               Telecommunications  Satellite  Organization,   Issuer,  and
               Morgan  Guaranty Trust Company,  Fiscal Agent and Principal
               Paying Agent,  dated as of February 28, 1995  (Incorporated
               by reference from Exhibit No. 10(ii) to Registrant's Report
               on Form 10-K for the fiscal year ended  December  31, 1994)
  
                                  79
     <PAGE>

     10.48     Consent  Agreement,  dated as of July 1, 1995, by and among
               the  National   Hockey  League,   Le  Club  de  Hockey  Les
               Nordiques,  Les  Nordiques  de Quebec 1988,  Marcel  Aubut,
               COMSAT Hockey  Enterprises,  LLC, COMSAT Video Enterprises,
               Inc., Ascent  Entertainment Group, Inc., and the Registrant
               (Incorporated  by reference from Exhibit No. 10.7 to Ascent
               Entertainment  Group,  Inc.'s  Report  on Form 10-K for the
               fiscal year ended December 31, 1996)

     10.49*    Amended  and  Restated  Employment  Agreement,  dated as of
               December 18, 1995, between Ascent and Charles Lyons

     10.50*    Agreement,  dated  as of  November  4,  1996,  between  the
               Registrant and Richard E. Thomas

     10.51*    Registrant's 1995 Key Employee Stock Plan  (Incorporated by
               reference   from   Exhibit  No.  99  to  the   Registrant's
               definitive  Proxy  Statement on Schedule 14A filed on April
               7, 1995)

     10.52     Corporate Agreement,  dated as of December 18, 1995, between
               the  Registrant  and  Ascent  relating  to  certain  matters
               arising in connection with Ascent's  initial public offering
               (Incorporated  by  reference  from  Exhibit No. 10.54 to the
               Registrant's  Report on Form 10-K for the fiscal  year ended
               December 31, 1995)

     10.53     Intercompany  Services Agreement,  dated as of December 18,
               1995,  between the  Registrant  and Ascent  relating to the
               provision  of  certain  services   subsequent  to  Ascent's
               initial  public  offering  (Incorporated  by reference from
               Exhibit No. 10.55 to the  Registrant's  Report on Form 10-K
               for the fiscal year ended December 31, 1995)

     10.54     Tax  Sharing  Agreement,  dated as of  December  18,  1995,
               between the Registrant  and Ascent  relating to certain tax
               matters  arising  subsequent  to  Ascent's  initial  public
               offering  (Incorporated by reference from Exhibit No. 10.56
               to the Registrant's Report on Form 10-K for the fiscal year
               ended December 31, 1995)

     10.55     $200,000,000  Credit  Agreement dated as of October 8, 1996
               among Ascent  Entertainment  Group, Inc., the lenders named
               therein and  NationsBank of Texas,  N.A.  (Incorporated  by
               reference  from the  Current  Report  on Form 8-K  filed by
               Ascent Entertainment Group, Inc. on October 17, 1996)

     10.56     $125,000,000  Credit  Agreement  dated as of October 8, 1996
               among On Command Corporation,  the lenders named therein and
               NationsBank of Texas,  N.A.  (Incorporated by reference from
               the Current Report on Form 8-K filed by Ascent Entertainment
               Group, Inc. on October 17, 1996)

     10.57     Agreement between Beacon Communications Corp. and Universal
               Pictures, a division of Universal City Studios, Inc., dated
               as of July 10, 1996 (Incorporated by reference from Exhibit
               No.  10.5 to the  Quarterly  Report on Form  10-Q  filed by
               Ascent  Entertainment  Group,  Inc. on November 13, 1996 as
               amended on January 6, 1997)

     10.58     Employment Agreement, dated as of July 19, 1996, between the
               Registrant and Betty C. Alewine

                                    80

<PAGE>

     10.59     Agreement, dated as of July 19, 1996, between the Registrant
               and Bruce L. Crockett (Incorporated by reference from Exhibit
               No. 10 to the  Registrant's  Report  on Form 10-Q  filed on
               November 14, 1996)

Exhibit No. 11  -  Statement re computation of per share earnings

Exhibit No. 21  -  Subsidiaries of the Registrant as of March 1, 1997

Exhibit No. 23  -  Consents of experts and counsel

                   Consent of Independent Auditors dated March 23, 1997.

Exhibit No. 27  -  Financial Data Schedule

*Compensatory plan or arrangement.
  
                                  81

<PAGE>

                                SIGNATURES

     Pursuant to the  requirements of Section 13 or 15(d) of the Securities
Exchange  Act of 1934,  the  Registrant  has duly  caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                            COMSAT CORPORATION
                                (Registrant)

Date: March 21, 1997           By  /s/ Alan G. Korobov
                                   ---------------------------------
                                   (Alan G. Korobov, Controller)


     Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this  report  has been  signed  below by each of the  following  persons on
behalf of the Registrant and in the capacity and on the date indicated.


                                   (1) Principal executive officer

Date: March 21, 1997                   By /s/ Betty C. Alewine
                                          -------------------------------
                                         (Betty C. Alewine, President and
                                          Chief Executive Officer)


                                   (2) Principal financial officer

Date: March 21, 1997                   By /s/ Allen E. Flower
                                          -------------------------------
                                          (Allen E. Flower, Vice President
                                           and Chief Financial Officer)


                                   (3) Principal accounting officer

Date: March 21, 1997                   By /s/ Alan G. Korobov
                                          -------------------------------
                                          (Alan G. Korobov, Controller)


                                   (4) Board of Directors


Date: March 21, 1997                   By /s/ C. J. Silas
                                          -------------------------------
                                          (C. J. Silas, Chairman and Director)


                                       By /s/ Lucy Wilson Benson
                                          -------------------------------
                                          (Lucy Wilson Benson, Director)
  
                                  82

<PAGE>
                                       By /s/ Edwin I. Colodny
                                          -------------------------------
                                          (Edwin I. Colodny, Director)


                                       By
                                          -------------------------------
                                          (Lawrence S. Eagleburger, Director)



                                       By /s/ Neal B. Freeman
                                          -------------------------------
                                          (Neal B. Freeman, Director)


                                       By /s/ Arthur Hauspurg
                                          -------------------------------
                                          (Arthur Hauspurg, Director)


                                       By /s/ Caleb B. Hurtt
                                          -------------------------------
                                          (Caleb B. Hurtt, Director)


                                       By /s/ Peter S. Knight
                                          -------------------------------
                                          (Peter S. Knight, Director)


                                       By /s/ Peter W. Likins
                                          -------------------------------
                                          (Peter W. Likins, Director)


                                       By /s/ Howard M. Love
                                          -------------------------------
                                          (Howard M. Love, Director)


                                       By /s/ Charles T. Manatt
                                          -------------------------------
                                          (Charles T. Manatt, Director)


                                       By /s/ Robert G. Schwartz
                                          -------------------------------    
                                          (Robert G. Schwartz, Director)


                                       By /s/ Dolores D. Wharton
                                          -------------------------------
                                          (Dolores D. Wharton, Director)


                                    83
<PAGE>

                               EXHIBIT INDEX
                               -------------


Exhibit No.                     Description
-----------                     -----------

     3.1        Articles of Incorporation of Registrant, composite copy, as
                amended  through  June 1, 1993  (Incorporated  by reference
                from   Exhibit  No.  4(a)  to   Registrant's   Registration
                Statement on Form S-3 (No.  33-51661) filed on December 22,
                1993)

     3.2        By-laws of Registrant, as amended through February 16, 1996
                (Incorporated   by  reference   from  Exhibit  No.  3.2  to
                Registrant's  Report on Form 10-K for the fiscal year ended
                1995)

     3.3        Regulations  adopted  by  Registrant's  Board of  Directors
                pursuant  to Section  5.02(c) of  Registrant's  Articles of
                Incorporation  (Incorporated  by reference from Exhibit No.
                3(c) to  Registrant's  Report on Form  10-K for the  fiscal
                year ended 1992)

Exhibit No. 4 - Instruments defining the rights of security holders, including
indentures

     4.1        Specimen of a certificate  representing  Series I shares of
                COMSAT Common Stock,  without par value,  which are held by
                citizens of the United  States  (Incorporated  by reference
                from Exhibit No. 4(a) to  Registrant's  Report on Form 10-K
                for the fiscal year ended December 31, 1993)

     4.2        Specimen of a certificate  representing  Series I shares of
                COMSAT Common Stock,  without par value,  which are held by
                aliens  (Incorporated by reference from Exhibit No. 4(b) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1982)

     4.3        Specimen of a certificate  representing Series II shares of
                COMSAT Common  Stock,  without par value  (Incorporated  by
                reference from Exhibit No. 4(c) to  Registrant's  Report on
                Form 10-K for the fiscal year ended December 31, 1982)

     4.4        Standard  Multiple-Series  Indenture Provisions dated March
                15, 1991  (Incorporated  by reference from Exhibit No. 4(a)
                to  Registrant's  Registration  Statement  on Form S-3 (No.
                33-39472) filed on March 15, 1991)

     4.5        Indenture dated as of March 15, 1991 between Registrant and
                The Chase Manhattan Bank, N.A.  (Incorporated  by reference
                from   Exhibit  No.  4(b)  to   Registrant's   Registration
                Statement  on Form S-3 (No.  33-39472)  filed on March  15,
                1991)

     4.6        Supplemental Indenture, dated as of June 29, 1994, from the
                Registrant to The Chase Manhattan Bank, N. A. (Incorporated
                by  reference   from  Exhibit  No.  4(c)  to   Registrant's
                Registration  Statement on Form S-3 (No. 33-54369) filed on
                June 30, 1994)

     4.7        Officers'  Certificate  pursuant  to  Section  3.01  of the
                Indenture,  dated as of March 15, 1991, from the Registrant
                to The Chase Manhattan Bank, N.A., as Trustee,  relating to
                the authorization of $75,000,000 aggregate principal amount
                of  Registrant's  8.95%  Notes Due 2001  (with form of Note
                attached)  (Incorporated by reference from Exhibit No. 4 to
                Registrant's  Current  Report  on Form 8-K filed on May 15,
                1991)
  
                                  84

<PAGE>

     4.8        Officers'  Certificate  pursuant  to  Section  3.01  of the
                Indenture,  dated as of March 15, 1991, from the Registrant
                to The Chase Manhattan Bank, N.A., as Trustee,  relating to
                the  authorization  of  $160,000,000   aggregate  principal
                amount of  Registrant's  8.125%  Debentures  Due 2004 (with
                form of Debenture attached) (Incorporated by reference from
                Exhibit No. 4 to  Registrant's  Current  Report on Form 8-K
                filed on April 9, 1992)

     4.9        Officers'  Certificate  pursuant  to  Section  3.01  of the
                Indenture,  dated as of March 15, 1991, as  supplemented by
                the Supplemental Indenture, dated as of June 29, 1994, from
                the  Registrant  to The  Chase  Manhattan  Bank,  N.A.,  as
                Trustee,  relating  to the  authorization  of  $100,000,000
                aggregate  principal  amount of  Registrant's  Medium  Term
                Notes,   Series   A  (with   forms   of   Notes   attached)
                (Incorporated   by  reference  from  Exhibit  No.  4(i)  to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1994)

     4.10       Limited  Partnership  Agreement of COMSAT  Capital I, L.P.,
                dated as of July 18, 1995,  relating to issuance of monthly
                income preferred securities (Incorporated by reference from
                Exhibit  No. 4(a) to  Registrant's  Report on Form 10-Q for
                the quarter ended June 30, 1995)

     4.11       Guarantee  Agreement  for  Preferred  Securities  of COMSAT
                Capital I, L.P., dated as of July 18, 1995 (Incorporated by
                reference from Exhibit No. 4(b) to  Registrant's  Report on
                Form 10-Q for the quarter ended June 30, 1995)

     4.12       Indenture between Registrant and the First National Bank of
                Chicago,   as   Trustee,   dated  as  of  July   18,   1995
                (Incorporated   by  reference  from  Exhibit  No.  4(c)  to
                Registrant's Report on Form 10-Q for the quarter ended June
                30, 1995)

     10.1       Agreement Relating to the International  Telecommunications
                Satellite  Organization  (INTELSAT) by  Governments,  which
                entered  into force on February 12, 1973  (Incorporated  by
                reference from Exhibit No. 10(a) to Registrant's  Report on
                Form 10-K for the fiscal year ended December 31, 1980)

     10.2       Operating  Agreement  Relating to  INTELSAT by  Governments
                which entered into force on February 12, 1973 (Incorporated
                by reference from Exhibit No. 10(b) to Registrant's  Report
                on Form 10-K for the fiscal year ended  December  31, 1980)
                10.3 Agreement dated August 15, 1975,  among COMSAT General
                Corporation, RCA Global Communications, Inc., Western Union
                International,  Inc.  and ITT  World  Communications,  Inc.
                relating to the  establishment  of a joint  venture for the
                purpose of  participating in the ownership and operation of
                a maritime  communications  satellite  system and Amendment
                Nos.  1-4  and   Amendment  No.  5  dated  March  24,  1980
                (Incorporated  by  reference  from  Exhibit  No.  10(p)  to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1980)

     10.4       Amendment  No. 6 to Exhibit  10.3 dated  September  1, 1981
                (Incorporated  by reference  from Exhibit No.  10(p)(ii) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1981)

     10.5       Convention   on  the   International   Maritime   Satellite
                Organization    (INMARSAT)    dated   September   3,   1976
                (Incorporated   by   reference   from  Exhibit  No.  11  to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1978)

     10.6       Operating  Agreement  on INMARSAT  dated  September 3, 1976
                (Incorporated   by   reference   from  Exhibit  No.  12  to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1978)

                                    85

<PAGE>

     10.7*      Registrant's  1982  Stock  Option  Plan   (Incorporated  by
                reference from Exhibit No. 10(x) to Registrant's  Report on
                Form 10-K for the fiscal year ended December 31, 1981)

     10.8       Agreement  dated October 6, 1983,  between  COMSAT  General
                Corporation  and  National  Broadcasting  Company  for  the
                provision of  satellite  distribution  network  programming
                (Incorporated  by  reference  from  Exhibit  No.  10(r)  to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1983)

     10.9       Amendment   to  Exhibit   10.8  dated   September  1,  1992
                (Incorporated  by reference  from  Exhibit No.  10(j)(i) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1992)

     10.10*     Registrant's Insurance and Retirement Plan for Executives,
                as amended and restated effective January 1, 1997

     10.11      *Registrant's Non-Employee Directors Stock Plan

     10.12      Memorandum of Understanding between Registrant and National
                Aeronautics and Space Administration (NASA), dated July 21,
                1988 and amended through February 22, 1990 (Incorporated by
                reference from Exhibit No. 10(aa) to Registrant's Report on
                Form 10-K for the fiscal year ended December 31, 1989)

     10.13      Agreement to Acquire and Lease (and Supplemental Agreements
                thereto)   dated   September   28  and  October  10,  1988,
                respectively,  among the International  Maritime  Satellite
                Organization  (Inmarsat),  the  North  Sea  Marine  Leasing
                Company,  British  Aerospace  Public Limited  Company,  the
                European Investment Bank,  Kreditanstalt Fuer Wiederaufbau,
                European   Investment  Bank  (as  Agent  and  as  Trustee),
                Instituto  Mobiliare  Italiano,  Credit National,  Hellenic
                Industrial  Development  Bank,  and  Society  Nationale  de
                Credit a  L'Industrie  relating to the  financing  of three
                Inmarsat spacecraft (Incorporated by Reference from Exhibit
                No. 3(a) to Registrant's Report on Form 10-K for the fiscal
                year ended December 31, 1988)

     10.14      Service  Agreement,   dated  September  14,  1989,  between
                Registrant  and  Aeronautical   Radio,   Inc.  relating  to
                satellite-based  communications  services  (Incorporated by
                reference from Exhibit No. 10(y) to Registrant's  Report on
                Form 10-K for the fiscal year ended December 31, 1989)

     10.15      Agreement,  dated January 22, 1990,  between Registrant and
                Kokusai   Denshin   Denwa  Co.,   Ltd.  for   provision  of
                aeronautical  services   (Incorporated  by  reference  from
                Exhibit No. 10(z) to  Registrant's  Report on Form 10-K for
                the fiscal year ended December 31, 1990)

     10.16      Amendment  No.  1 to  Exhibit  10.15  dated  May  20,  1993
                (Incorporated  by reference  from  Exhibit No.  10(q)(i) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1993)

     10.17*     Registrant's 1990 Key Employee Stock Plan (Incorporated  by
                reference from Exhibit No. 10 (p) to Registrant's Report on
                Form 10-K for the fiscal year ended December 31, 1989)

     10.18*     Amendment  No. 1 to Exhibit  10.17  dated  January 15, 1993
                (Incorporated  by reference  from  Exhibit No.  10(r)(i) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1993)

                                    86

<PAGE>

     10.19*     Amendment  No. 2 to Exhibit  10.17  dated  January 16, 1994
                (Incorporated  by reference  from Exhibit No.  10(o)(ii) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1994)

     10.20      Amended and Restated Agreement, dated November 14, 1990, of
                Limited  Partnership of Rock Spring II Limited  Partnership
                (Incorporated  by  reference  from  Exhibit  No.  10(a)  to
                Registrant's  Current  Report on Form 8-K filed on February
                24, 1992) 10.21 Amended and Restated Lease Agreement, dated
                November 14, 1990, of Limited Partnership of Rock Spring II
                Limited Partnership (Incorporated by reference from Exhibit
                No. 10(b) to Registrant's  Current Report on Form 8-K filed
                on February 24, 1992)

     10.22      Amended and Restated Ground Lease Indenture, dated November
                14, 1990,  between  Anne D.  Camalier  (Landlord)  and Rock
                Spring II Limited  Partnership  (Tenant)  (Incorporated  by
                reference  from Exhibit No. 10(c) to  Registrant's  Current
                Report on Form 8-K filed on February 24, 1992)

     10.23      Finance  Facility  Contract  (and  Supplemental  Agreements
                thereto),  dated December 20, 1991, among the International
                Maritime Satellite Organization (Inmarsat),  Abbey National
                plc, General Electric  Technical  Services  Company,  Inc.,
                European Investment Bank,  Kreditanstalt Fuer Wiederaufbau,
                Instituto  Mobiliare  Italiano  S.p.A.,   Credit  National,
                Societe     Nationale    de    Credit    a     L'Industrie,
                Finansieringsinstituttet for Industri OG Haandvaerk A/S, De
                Nationale    Investeringsbank   NV,   and   Osterreichische
                Investitionkredit   Aktiengesellschaft   relating   to  the
                financing of three  Inmarsat  spacecraft  (Incorporated  by
                reference from Exhibit No. 10 (dd) to  Registrant's  Report
                on Form 10-K for the fiscal year ended December 31, 1991)

     10.24*     Registrant's Directors and Executives Deferred Compensation
                Plan, as amended and restated as of January 1, 1997

     10.25      Service  Agreement,   dated  September  12,  1990,  between
                Registrant and GTE Airfone, Incorporated, for the provision
                of  aeronautical   satellite   services   (Incorporated  by
                reference from Exhibit No. 10(r) to Registrant's  Report on
                Form 10-K for the fiscal year ended December 31, 1990)

     10.26      Fiscal  Agency  Agreement,  dated  as of  August  6,  1992,
                between    International    Telecommunications    Satellite
                Organization  and Morgan Guaranty Trust Company of New York
                (Incorporated  by  reference  from  Exhibit  No. 10 (dd) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1992)

     10.27      Fiscal  Agency  Agreement,  dated as of January  19,  1993,
                between    International    Telecommunications    Satellite
                Organization  and Morgan Guaranty Trust Company of New York
                (Incorporated  by  reference  from  Exhibit  No. 10 (ee) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1992)

     10.28      Lease Agreement,  dated June 8, 1993,  between GTE Airfone,
                Incorporated,  United Airlines, Inc. and Registrant for the
                provision and financing of aeronautical satellite equipment
                (Incorporated  by  reference  from  Exhibit  No.  10(aa) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1993)
  
                                  87
<PAGE>

     10.29      Agreement dated July 1, 1993,  between  Registrant and AT&T
                Easylink  Services  relating to  exchange of telex  traffic
                (Incorporated  by  reference  from  Exhibit  No.  10(bb) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1993)

     10.30      Agreement  dated July 27, 1993,  between the Registrant and
                American   Telephone  &  Telegraph   Company   relating  to
                utilization  of space  segment  (Incorporated  by reference
                from Exhibit No. 10(cc) to Registrant's Report on Form 10-K
                for the fiscal year ended December 31, 1993)

     10.31      Amendment  to Exhibit  10.30  dated as of  December 1, 1995
                (Incorporated  by  reference  from  Exhibit  No.  10.34  to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1995)

     10.32     Amendment to Exhibit 10.30 dated as of January 8, 1997

     10.33      Agreement dated September 1, 1993,  between  Registrant and
                MCI  International,  Inc.  relating  to exchange of traffic
                (Incorporated  by  reference  from  Exhibit  No.  10(dd) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1993)

     10.34      Agreement  dated November 30, 1993,  between the Registrant
                and  Sprint   Communications   Company  L.P.   relating  to
                utilization  of space  segment  (Incorporated  by reference
                from Exhibit No. 10(ee) to Registrant's Report on Form 10-K
                for the fiscal year ended December 31, 1993)

     10.35      Amendment   to   Exhibit   10.34   dated   April  7,   1995
                (Incorporated  by reference  from  Exhibit No.  10(a)(i) to
                Registrant's  Report on Form 10-Q/A  Amendment  No. 2 dated
                June 29, 1995 for the quarter ended March 31, 1995)

     10.36      Agreement dated December 10, 1993,  between  Registrant and
                Sprint  International  relating to the  exchange of traffic
                (Incorporated  by  reference  from  Exhibit  No.  10(ff) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1993)

     10.37      Credit  Agreement  dated  as of  December  17,  1993  among
                Registrant,  NationsBank of North  Carolina,  N.A., Bank of
                America National Trust and Savings  Association,  The First
                National Bank of Chicago,  The Chase Manhattan Bank,  N.A.,
                The Sumitomo  Bank,  Limited,  New York Branch,  Swiss Bank
                Corporation,  New York Branch, as lenders,  and NationsBank
                of  North  Carolina,   N.A.,  as  agent   (Incorporated  by
                reference from Exhibit No. 10(gg) to Registrant's Report on
                Form 10-K for the fiscal year ended December 31, 1993)

     10.38      Amendment  No. 1 to Exhibit  10.37 dated as of December 17,
                1994  (Incorporated by reference from Exhibit No. 10(cc)(i)
                to  Registrant's  Report on Form 10-K for the  fiscal  year
                ended December 31, 1994)

     10.39      Agreement    dated   January   24,   1994,    between   MCI
                International,  Inc. and Registrant relating to utilization
                of space segment  (Incorporated  by reference  from Exhibit
                No.  10(ii)  to  Registrant's  Report  on Form 10-K for the
                fiscal year ended December 31, 1993)

     10.40      Amendment  to  Exhibit  10.39  dated  as of  July  1,  1995
                (Incorporated  by  reference  from  Exhibit  No.  10.42  to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1995)

     10.41      Amendment to Exhibit 10.39 dated as of September 17, 1996

                                    88
<PAGE>

     10.42      Agreement dated February 18, 1994,  between  Registrant and
                AT&T  relating  to  exchange  of traffic  (Incorporated  by
                reference from Exhibit No. 10(jj) to Registrant's Report on
                Form 10-K for the fiscal year ended December 31, 1993)

     10.43      Fiscal    Agency    Agreement     between     International
                Telecommunications  Satellite  Organization,   Issuer,  and
                Bankers Trust  Company,  Fiscal Agent and Principal  Paying
                Agent,   dated  as  of  March  22,  1994  (Incorporated  by
                reference from Exhibit No. 10(kk) to Registrant's Report on
                Form 10-K for the fiscal year ended December 31, 1993)

     10.44      Distribution   Agreement   dated  July  11,  1994   between
                Registrant  and  CS  First  Boston   Corporation,   Salomon
                Brothers Inc and  Nationsbanc  Capital  Markets,  Inc.,  as
                Distributors,  of Registrant's  Medium-Term Notes, Series A
                (Incorporated  by  reference  from  Exhibit  No.  10(ff) to
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1994)

     10.45      Fiscal    Agency    Agreement     between     International
                Telecommunications  Satellite  Organization,   Issuer,  and
                Morgan  Guaranty Trust Company,  Fiscal Agent and Principal
                Paying Agent, dated as of October 14, 1994 (Incorporated by
                reference from Exhibit No. 10(gg) to Registrant's Report on
                Form 10-K for the fiscal year ended December 31, 1994)

     10.46*     Registrant's   Annual   Incentive  Plan   (Incorporated  by
                reference from Exhibit No. 10(hh) to Registrant's Report on
                Form 10-K for the fiscal year ended December 31, 1994)

     10.47      Fiscal    Agency    Agreement     between     International
                Telecommunications  Satellite  Organization,   Issuer,  and
                Morgan  Guaranty Trust Company,  Fiscal Agent and Principal
                Paying Agent,  dated as of February 28, 1995  (Incorporated
                by reference from Exhibit No. 10(ii) to Registrant's Report
                on Form 10-K for the fiscal year ended December 31, 1994)

     10.48      Consent  Agreement,  dated as of July 1, 1995, by and among
                the  National   Hockey  League,   Le  Club  de  Hockey  Les
                Nordiques,  Les  Nordiques  de Quebec 1988,  Marcel  Aubut,
                COMSAT Hockey  Enterprises,  LLC, COMSAT Video Enterprises,
                Inc., Ascent  Entertainment Group, Inc., and the Registrant
                (Incorporated  by reference from Exhibit No. 10.7 to Ascent
                Entertainment  Group,  Inc.'s Report on 10-K for the fiscal
                year ended December 31, 1996)

     10.49*     Amended  and  Restated  Employment  Agreement,  dated as of
                December 18, 1995, between Ascent and Charles Lyons

     10.50*     Agreement,  dated  as of  November  4,  1996,  between  the
                Registrant and Richard E. Thomas

     10.51*     Registrant's 1995 Key Employee Stock Plan

     10.52      Corporate Agreement, dated as of December 18, 1995, between
                the  Registrant  and Ascent  relating  to  certain  matters
                arising in connection with Ascent's initial public offering
                (Incorporated  by  reference  from Exhibit No. 10.54 to the
                Registrant's  Report on Form 10-K for the fiscal year ended
                December 31, 1995)

                                    89
<PAGE>

     10.53      Intercompany  Services Agreement,  dated as of December 18,
                1995,  between the  Registrant  and Ascent  relating to the
                provision  of  certain  services   subsequent  to  Ascent's
                initial  public  offering  (Incorporated  by reference from
                Exhibit No. 10.55 to the  Registrant's  Report on Form 10-K
                for the fiscal year ended December 31, 1995)
     10.54      Tax  Sharing  Agreement,  dated as of  December  18,  1995,
                between the Registrant  and Ascent  relating to certain tax
                matters  arising  subsequent  to  Ascent's  initial  public
                offering  (Incorporated by reference from Exhibit No. 10.56
                to the Registrant's Report on Form 10-K for the fiscal year
                ended December 31, 1995)

     10.55      $200,000,000  Credit  Agreement dated as of October 8, 1996
                among Ascent  Entertainment  Group, Inc., the lenders named
                therein and  NationsBank of Texas,  N.A.  (Incorporated  by
                reference  from the  Current  Report  on Form 8-K  filed by
                Ascent Entertainment Group, Inc. on October 17, 1996)

     10.56      $125,000,000  Credit  Agreement dated as of October 8, 1996
                among On Command Corporation, the lenders named therein and
                NationsBank of Texas, N.A.  (Incorporated by reference from
                the   Current   Report   on  Form  8-K   filed  by   Ascent
                Entertainment Group, Inc. on October 17, 1996)

     10.57      Agreement between Beacon Communications Corp. and Universal
                Pictures, a division of Universal City Studios, Inc., dated
                as of July 10, 1996 (Incorporated by reference from Exhibit
                No.  10.5 to the  Quarterly  Report on Form  10-Q  filed by
                Ascent  Entertainment  Group,  Inc. on November 13, 1996 as
                amended on January 6, 1997)

     10.58      Employment  Agreement,  dated as of July 19, 1996,  between
                the Registrant and Betty C. Alewine

     10.59      Agreement,   dated  as  of  July  19,  1996,   between  the
                Registrant and Bruce L. Crockett (Incorporated by reference
                from Exhibit No. 10 to the Registrant's Report on Form 10-Q
                filed on November 14, 1996.)


11              Statement re computation of per share earnings

21              Subsidiaries of the Registrant as of March 1, 1997

23              Consents of experts and counsel
                Consent of Independent Auditors dated March 23, 1997

27              Financial Data Schedule

*Compensatory plan or arrangement.

                                    90

<PAGE>


                    COMSAT CORPORATION (PARENT COMPANY)
         SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                             INCOME STATEMENTS
            For the Years Ended December 31, 1996, 1954 and 1994

<TABLE>
<CAPTION>
<S>                                                            <C>              <C>             <C>

In thousands                                                              1996            1995           1994
-------------------------------------------------------------------------------------------------------------
REVENUES                                                         $     425,810   $     428,943   $    446,380
                                                                 -------------   -------------   ------------

OPERATING EXPENSES:
   Cost of services                                                    132,272         130,899        163,745
   Depreciation and amortization                                       140,027         131,596        121,131
   Research and development                                             11,518           9,114         10,009
   General and administrative                                           21,941          19,856         22,851
   Merger and integration costs                                              -               -          2,469
   Provision for restructuring                                               -           3,702              -
                                                                 -------------   -------------   ------------
   Total operating expenses                                            305,758         295,167        320,205
                                                                 -------------   -------------   ------------

OPERATING INCOME                                                       120,052         133,776        126,175

Gain on sale of shares of a subsidiary                                       -          19,286              -

Other income, net                                                        6,755           2,160          1,371

Interest cost                                                          (67,209)        (66,801)       (47,924)

Interest capitalized                                                    15,760          20,355         23,662
                                                                 -------------   -------------   ------------

Income before taxes and equity in net income (loss)
   of subsidiaries                                                      75,358         108,776        103,284

Income tax expense                                                     (27,488)        (42,515)       (39,507)
                                                                 -------------   -------------   ------------

Income before equity in net income (loss) of subsidiaries               47,870          66,261         63,777

Equity in net income (loss) of subsidiaries                            (39,248)        (28,444)         13,865
                                                                 -------------   -------------   ------------

NET INCOME                                                       $       8,622   $      37,817   $     77,642
                                                                 =============   =============   ============


</TABLE>


<PAGE>


                    COMSAT CORPORATION (PARENT COMPANY)
         SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                               BALANCE SHEETS
                      As of December 31, 1996 and 1995

<TABLE>
<CAPTION>
<S>                                                                            <C>              <C>

In thousands                                                                              1996           1995
-------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                     $       1,658   $    102,796
   Receivables                                                                          91,380         80,413
   Other                                                                                22,954         27,137
                                                                                 -------------   ------------
   Total current assets                                                                115,992        210,346
                                                                                 -------------   ------------

Property and equipment (net of accumulated depreciation of
   $923,617 in 1996 and $790,247 in 1995)                                            1,174,890      1,204,675
Investment in and amounts due from subsidiaries                                        625,113        542,525
Other assets                                                                           155,191         58,629
                                                                                 -------------   ------------
   TOTAL ASSETS                                                                  $   2,071,186   $  2,016,175
                                                                                 =============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current maturities of long-term obligations                                   $      13,802   $     10,375
   Commercial paper                                                                     17,993              -
   Accounts payable and accrued liabilities                                             70,849         49,501
   Due to related parties                                                               34,602         22,825
                                                                                 -------------   ------------
   Total current liabilities                                                           137,246         82,701
                                                                                 -------------   ------------

Long-term debt                                                                         578,379        590,378
Note payable to subsidiary                                                             206,200        206,200
Deferred income taxes and investment tax credits                                       132,512        135,572
Other long-term liabilities                                                            183,262        160,820

STOCKHOLDERS' EQUITY:
   Common stock                                                                        340,691        324,074
   Retained earnings                                                                   502,839        533,238
   Treasury stock and other                                                             (9,943)       (16,808)
                                                                                 -------------   ------------
   Total stockholders' equity                                                          833,587        840,504
                                                                                 -------------   ------------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $   2,071,186   $  2,016,175
                                                                                 =============   ============
</TABLE>



<PAGE>


                    COMSAT CORPORATION (PARENT COMPANY)
         SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                            CASH FLOW STATEMENTS
            For the Years Ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
<S>                                                            <C>              <C>             <C>

In thousands                                                              1996            1995           1994
-------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                        $     231,828   $     216,743   $    186,015
                                                                 -------------   -------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                 (177,448)       (171,247)      (165,185)
   Investments in unconsolidated businesses                            (57,350)        (27,200)        (1,895)
   Change in intercompany balances, net                               (118,693)        (48,738)      (158,957)
   Proceeds from sale of investment                                     22,626          17,919         13,520
   Insurance proceeds from satellite launch failure                     54,443               -              -
   Decrease (increase) in INTELSAT ownership                            (1,238)          17,919         13,520
   Other                                                                11,853          (13,155)           430
                                                                 -------------    -------------   ------------
  Net cash used in investing activities                               (265,807)        (242,421)      (312,087)
                                                                 -------------    -------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of long-term debt                                  -          81,986        112,296
   Repayment of long-term debt                                          (9,848)         (2,975)       (71,306)
   Borrowings from subsidiary                                                -         206,200              -
   Net short-term borrowings (repayments)                               17,993        (121,356)        78,123
   Borrowings (repayments) against company-owned life
       insurance policies                                              (51,443)          2,542         32,437
   Common stock issued                                                  13,837          10,834          5,291
   Cash dividends paid                                                 (37,698)        (36,874)       (33,133)
   Other                                                                     -         (11,883)        (1,333)
                                                                 -------------   -------------   ------------
   Net cash provided by (used for) financing activities                (67,159)        128,474        122,375
                                                                 -------------   -------------   ------------

Net increase (decrease) in cash and cash equivalents                  (101,138)        102,796         (3,697)
Cash and cash equivalents, beginning of year                           102,796               -          3,697
                                                                 -------------   -------------   ------------
Cash and cash equivalents, end of year                           $       1,658   $     102,796              -
                                                                 =============   =============   ============
</TABLE>


<PAGE>


                    COMSAT CORPORATION (PARENT COMPANY)
         SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                NOTES TO CONDENSED FINANCIAL INFORMATION OF
                REGISTRANT For the Years Ended December 31,
                            1996, 1995 and 1994

1.   BASIS OF PRESENTATION

     Pursuant to the rules and  regulations  of the Securities and Exchange
     Commission,  the Condensed  Financial  Statements of the Registrant do
     not include all of the  information  and notes normally  included with
     financial  statements  prepared in accordance with generally  accepted
     accounting principles.  These Condensed Financial Statements should be
     read in conjunction with the Consolidated  Financial  Statements,  and
     Notes thereto included in the accompanying Annual Report on Form 10-K,
     Part II, Item 8.

2.   LONG-TERM DEBT

     The components of long-term debt are as follows:

<TABLE>
<CAPTION>
<S>                                                                               <C>            <C>

     In thousands                                                                          1996            1995
     ----------------------------------------------------------------------------------------------------------
     8.125% notes due 2004                                                         $    160,000   $     160,000
     8.95% notes due 2001                                                                75,000          75,000
     6.75% INTELSAT Eurobonds due 2000                                                   28,693          28,659
     7.375% INTELSAT Eurobonds due 2002                                                  38,258          38,212
     8.375% INTELSAT Eurobonds due 2004                                                  38,258          38,212
     6.625% INTELSAT Asian bonds due 2004                                                38,258          38,212
     8.125% INTELSAT Eurobonds due 2005                                                  38,258          38,212
     Inmarsat lease financing obligations                                               103,186          12,203
     Medium-term notes, 7.7% - 8.66%, due 2006 - 2007                                    74,000          74,000
     Discounts on notes payable                                                          (1,730)         (1,957)
                                                                                    ------------   -------------
     Total                                                                              592,181         600,753
     Less current maturities                                                            (13,802)        (10,375)
                                                                                    ------------   -------------
     Total long-term debt                                                          $    578,379   $     590,378
                                                                                    ============   =============
</TABLE>

     The principal  amount of debt  (excluding the Inmarsat lease financing
     obligation)  maturing over the next five years is none in 1997 through
     1999,  $28,693,000 in 2000 and  $74,979,000 in 2001. See Note 8 to the
     Consolidated Financial Statements on Form 10-K, Part II, Item 8, for a
     discussion of the Inmarsat lease financing obligation.

3.   NOTE PAYABLE TO SUBSIDIARY

     In 1995, COMSAT Corporation  borrowed  $206,200,000 from a subsidiary,
     COMSAT  Capital  I,  L.P.  (see Note 9 to the  Consolidated  Financial
     Statements  on Form 10-K,  Part II,  Item 8).  Interest  of 8.125% per
     annum is payable  monthly.  The entire principal amount is due in July
     2025.  The maturity may be extended to a date not later than July 2044
     at the  election of the  borrower,  provided  that  certain  financial
     covenants are satisfied.



<PAGE>


                    COMSAT CORPORATION AND SUBSIDIARIES
                   SCHEDULE II - VALUATION AND QUALIFYING
                 ACCOUNTS For the Years Ended December 31,
                            1996, 1995 and 1994

<TABLE>
<CAPTION>
<S>                                          <C>            <C>              <C>             <C>

                                                Balance at
                                              Beginning of      Charged to                       Balance at
In thousands                                          Year        Expenses    Deductions(a)     End of Year
-----------------------------------------------------------------------------------------------------------
1994:
Allowance for loss on accounts receivable     $     12,838    $      2,428    $       5,891   $       9,375
Allowance for loss on investments             $      1,000               -    $         250   $         750

1995:
Allowance for loss on accounts receivable     $      9,375    $      5,138    $       1,435   $      13,078
Allowance for loss on investments             $        750               -                -   $         750

1996:
Allowance for loss on accounts receivable     $     13,078    $      4,958    $       3,344   $      14,692
Allowance for loss on investments             $        750    $      3,417                -   $       4,167


</TABLE>

(a)  Uncollectible  amounts written off,  recoveries of amounts  previously
     reserved, and other adjustments.


<PAGE>