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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 20-F

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                        COMMISSION FILE NUMBER: 333-8880

                       SATELITES MEXICANOS, S.A. de C.V.
                         BLVD. M. AVILA CAMACHO NO. 40
                           COL. LOMAS DE CHAPULTEPEC
                               11000 MEXICO, D.F.
                                     MEXICO
                                 (525) 201-0800

                     JURISDICTION OF INCORPORATION: MEXICO

 SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
                                  OF THE ACT:
                     10 1/8% SERIES B SENIOR NOTES DUE 2004

 THE NUMBER OF OUTSTANDING SHARES OF CAPITAL STOCK AS OF DECEMBER 31, 2000 WAS:

<TABLE>
<C>        <S>
    2,550  CLASS I SERIES A SHARES
2,598,450  CLASS II SERIES A SHARES
    2,450  CLASS I SERIES B SHARES
2,496,550  CLASS II SERIES B SHARES
4,900,000  CLASS II SERIES N SHARES
  606,730  CLASS I SERIES C SHARES
</TABLE>

     The registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.

     The registrant has elected to follow Financial Statement Item 18.

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                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
                                   PART I
Item 3.   KEY INFORMATION.............................................    1
Item 4.   INFORMATION ON THE COMPANY..................................    6
Item 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS................    9
Item 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..................   14
Item 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS...........   16
Item 8.   FINANCIAL INFORMATION.......................................   18
Item 9.   MARKETS.....................................................   18
Item 10.  ADDITIONAL INFORMATION......................................   18
Item 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK........................................................   29
                                  PART II
Item 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.............   30
Item 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS....   30
                                  PART IV
Item 18.  FINANCIAL STATEMENTS........................................   30
Item 19.  EXHIBITS....................................................   30
</TABLE>

---------------

All other items have been omitted because they are not applicable or are not
required.

                                        i
<PAGE>   3

                                     PART I

ITEM 3.  KEY INFORMATION

                            SELECTED FINANCIAL DATA

     The following table presents selected financial information for Satelites
Mexicanos, S.A. de C.V. (the "Company" or "Satmex") for the years ended December
31, 2000, 1999, and 1998 and for the period November 17, 1997 to December 31,
1997 and for the fixed satellite service business of the government of Mexico
(the "Predecessor Company") for the period January 1, 1997 to November 16, 1997
and for the year ended December 31, 1996. The information was derived from the
audited financial statements of the Company and the Predecessor Company. The
audited financial statements were prepared in accordance with accounting
principles generally accepted in the United States. The financial information
presented below should be read in conjunction with the financial statements of
the Company and the Predecessor Company.

<TABLE>
<CAPTION>
                                                   COMPANY                                   PREDECESSOR COMPANY
                              --------------------------------------------------   ---------------------------------------
                                       YEARS ENDED              FOR THE PERIOD
                                       DECEMBER 31,            NOVEMBER 17, 1997     FOR THE PERIOD         YEAR ENDED
                              ------------------------------    TO DECEMBER 31,    JANUARY 1, 1997 TO      DECEMBER 31,
                                2000       1999       1998           1997           NOVEMBER 16, 1997          1996
                              --------   --------   --------   -----------------   -------------------   -----------------
                                                         (AMOUNTS IN MILLIONS OF U.S. DOLLARS)
<S>                           <C>        <C>        <C>        <C>                 <C>                   <C>
STATEMENT OF OPERATIONS
  DATA:
  Revenue...................  $  136.4   $  135.5   $  104.8       $   12.9             $   93.4              $ 78.2
  Operating income(1).......      34.3       25.0       32.8            4.0                 39.9                17.6
  Income (loss) before
    income taxes, minority
    interest and
    extraordinary loss(3)...      72.2      (41.0)     (17.2)          (2.0)                39.6                17.8
  Deferred income tax
    provision(1)(3).........     (17.0)      (5.7)      (0.9)          (1.7)                (1.6)
  Income (loss) before
    minority interest and
    extraordinary loss(3)...      55.2      (46.7)     (18.1)          (3.7)                38.0                17.8
  Net income (loss)(3)......      55.2      (46.7)     (23.7)          (4.4)                38.0                17.8
  Net income (loss)
    applicable to common
    stockholders(3).........      53.7      (47.8)     (23.7)          (4.4)                38.0                17.8
OTHER DATA:
  Depreciation and
    amortization............  $   56.7   $   61.3   $   48.7       $    5.8             $   30.9              $ 35.0
  Capital expenditures......       6.7        6.3      152.3            3.0                 65.9                10.6
  Excess (deficiency) of
    earnings to fixed
    charges(2)..............      72.2      (42.5)     (37.7)          (4.9)                 N/A                 N/A
BALANCE SHEET DATA (AT END
  OF PERIOD):
  Total assets..............  $1,123.6   $1,041.7   $1,138.0       $1,035.1                                   $376.8
  Long-term debt............     571.0      587.0      608.0          569.0                                       --
  Telecomm's investment.....        --         --         --             --                                    369.5
  Stockholders' equity(3)...     391.7      336.5      351.3          367.4                                       --
</TABLE>

------------------------------
(1) As a government agency, the Predecessor Company was subject to an assessment
    by the Mexican government equal to 5.8% of monthly revenue in lieu of income
    or asset taxes. The government assessment of $4.5 million and $4.8 million
    for the year ended December 31, 1996 and for the period January 1, 1997 to
    November 16, 1997, respectively, was recorded as an operating expense for
    such periods. The Company is not subject to such an assessment. However, the
    Company is subject to income and asset taxes at statutory rates.

(2) The ratio of earnings to fixed charges is not applicable for the year ended
    December 31, 1996 and the period January 1, 1997 to November 16, 1997
    because there were no fixed charges during those periods.

(3) On August 29, 2000, Satmex's Solidaridad 1 satellite ceased operating and
    was considered irretrievably lost. The loss was caused by the failure of the
    back-up control processor on board the satellite. Solidaridad 1 was insured
    for $250 million. At the date of the loss, Solidaridad 1 had a net book
    value of approximately $109.6 million. After deducting prepaid insurance of
    $1.6 million, the unpaid insurance premiums of $12.5 million and on-going
    monitoring costs and the excess of the estimated cost over revenue for the
    currently committed transponder capacity to be provided to customers of
    $23.2 million, the net gain on the in-orbit failure of Solidaridad 1 is
    approximately $103.1 million.

                                        1
<PAGE>   4

                                 EXCHANGE RATES

     The following table presents the period-end, average, low and high Noon
Buying Rate for the purchase and sale of dollars, each expressed in pesos per
dollar. The exchange rate translations presented should not be construed as
representations that the peso amounts actually represent such dollar amounts or
could be converted into dollars at the rate indicated.

<TABLE>
<CAPTION>
                                                                   EXCHANGE RATE(1)
                                                      -------------------------------------------
              YEAR ENDED DECEMBER 31,                 PERIOD END    AVERAGE(2)     LOW
              -----------------------                 ----------    ----------    -----     HIGH
<S>                                                   <C>           <C>           <C>      <C>
1996................................................      7.88         7.64        7.33      8.05
1997................................................      8.08         7.97        7.72      8.41
1998................................................      9.90         9.24        8.04     10.63
1999................................................      9.48         9.56        9.24     10.60
2000................................................      9.62         9.47        9.18     10.09
</TABLE>

------------------------------
(1) Source: Federal Reserve Bank.

(2) Average of month-end rates.

                 CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

     This annual report on Form 20-F contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. In addition,
from time to time, we or our representatives have made or may make
forward-looking statements, orally or in writing. They can be identified by the
use of forward-looking words such as "believes", "expects", "plans", "may",
"will", "should", or "anticipate" or their negatives or other variations of
these words or other comparable words, or by discussion of strategy that
involves risks and uncertainties. These forward-looking statements may be
included in, but are not limited to, various filings made by us with the
Securities and Exchange Commission, press releases or oral statements made by or
with the approval of one of our authorized executive officers. Forward-looking
statements are only predictions. Actual events or results could differ
materially from those projected or suggested in any forward-looking statement as
a result of a wide variety of factors and conditions, including, but not limited
to, the factors summarized below. We undertake no obligation to update any
forward-looking statement.

WE ARE HIGHLY LEVERAGED.

     As of December 31, 2000, we had outstanding debt of $572 million. A
significant portion of our cash flow is used to service this debt, which in turn
affects our ability to pay our other expenses and to fund our expenditures. In
1999, Loral and Principia invested $31.9 million of capital into our company
through the purchase of preferred stock. We used the proceeds from this capital
contribution to pay down debt in order to ensure compliance with covenants
contained in our debt documents. We cannot guarantee that the shareholders will
make additional equity contributions in the future.

     In February 2000, we amended certain financial covenants in our debt
agreements. In connection with these amendments, we agreed to pay a consent fee
to approving lenders and debtholders and to increase the applicable interest
rates on the debt by up to 0.75%. We believe that our future operating cash flow
and the availability of our revolving credit facility will be sufficient to
service our interest and debt repayment requirements and to maintain the
financial ratios required by our debt agreements, as adjusted by these
amendments. However, if any additional amendments to our debt agreements are
required in the future, there can be no assurance as to the terms on which such
amendments can be obtained, or whether they can be obtained at all.

     Covenants contained in the debt documents also limit our management's
options for dealing with business issues, including incurring additional debt,
making capital expenditures and paying dividends. We cannot be certain that the
restrictions contained in those documents will not impair our ability to finance
our future operations or capital needs or to engage in other business
activities.

                                        2
<PAGE>   5

WE MAY NOT HAVE SUFFICIENT RESOURCES TO REPAY OUR DEBT OBLIGATIONS.

     Our ability to service our debt obligations will depend on our future
performance. At December 31, 2000, we had $237 million of senior secured notes
outstanding, which bear interest at a floating rate. These notes require
repayment in $250,000 quarterly installments, with the balance due on June 29,
2004. In addition, we have $320 million of 10 1/8% fixed rate notes outstanding,
which must be repaid in full on November 1, 2004. At December 31, 2000, we had
$15 million outstanding under our $50 million revolving credit facility. Any
borrowings under our revolving credit facility must be repaid by December 29,
2002.

     If we are unable to repay any portion of the senior secured notes, the
fixed rate notes or the revolving credit facility when due, we will have to
refinance this indebtedness. We cannot guarantee that this refinancing will be
available, or if available, that it will be on terms acceptable to us.

OUR IN-ORBIT SATELLITES REMAIN VULNERABLE TO FAILURE.

     Random failure of satellite components may result in damage to or loss of a
satellite before the end of its expected useful life. Satellites are carefully
built and tested and have certain redundant systems in case of failure. However,
in-orbit failure may result from various causes including:

     - component failure;

     - loss of power or fuel;

     - inability to control positioning of the satellite;

     - solar and other astronomical events; and

     - space debris.

     Repair of satellites in space is not feasible. Many factors affect the
useful lives of satellites. These factors include:

     - fuel consumption;

     - the quality of construction;

     - gradual degradation of solar panels; and

     - the durability of components.

     On August 29, 2000, our Solidaridad 1 satellite ceased operating and was
considered irretrievably lost. The loss was caused by the failure of the back-up
control processor on board the satellite. Solidaridad 1, which was built by
Hughes Space and Communications and commenced service in January 1994,
experienced a failure of its primary control processor in April 1999, and the
satellite had been operating on its back-up processor since that time.

     At December 31, 2000, our Solidaridad 2 and Satmex 5 satellites have
remaining estimated useful lives of eight and one half and 13 years,
respectively. Moreover, Solidaridad 2 was manufactured by Hughes and is similar
in design to Solidaridad 1 and to other Hughes satellites which have experienced
in-orbit component failures.

     While we have obtained in-orbit insurance for Solidaridad 2 and Satmex 5, a
satellite failure may result in a drop in our profits, which loss would not be
insured. The in-orbit insurance for Solidaridad 2 expires in November 2002 and
the in-orbit insurance for Satmex 5 expires in December 2003. We cannot
guarantee that we will be able to renew the insurance at the end of these
periods, or that if renewal is available, that it would be on terms acceptable
to us. For example, the renewal policy for Solidaridad 2 may not insure against
an in-orbit failure due to the loss of the satellite's control processor, the
same component that caused the loss of Solidaridad 1 and other Hughes
satellites. An uninsured loss would have a material adverse effect on our
results of operations and financial condition.

                                        3
<PAGE>   6

OUR CONTRACTS WITH TELEVISA REPRESENT A SIGNIFICANT PORTION OF OUR REVENUES AND
THEY ARE SCHEDULED TO EXPIRE IN DECEMBER 2001.

     Our largest customer is Televisa, which represented approximately 18% of
our service revenue in 2000. On April 1, 1999, we signed a new contract with
Televisa to renew its lease for 12 Ku-band transponders on Solidaridad 2 through
December 2001. During the final three months of the contract, Televisa has an
option to extend its contract on Solidaridad 2 for up to an additional 24
months. There can be no assurance that Televisa will exercise this option.

WE HAVE SHORT-TERM CUSTOMER CONTRACTS.

     As of December 31, 2000, approximately 24% of our customer contracts have
terms that range from one to three years. Moreover, approximately 56% of our
backlog of non-cancelable lease contracts is expected to be realized within the
next three years. Our revenue would be hurt if we are unable to find new
customers to replace customers whose contracts have expired.

WE COMPETE WITH OTHER COMPANIES FOR CUSTOMERS AND CHANGES IN MEXICAN REGULATIONS
MAY RESULT IN NEW COMPETITORS.

     We face competition from other companies, including PanAmSat Corporation
and Intelsat. PanAmSat has a fleet of 21 satellites, including eight that serve
the Latin American market. Intelsat, an international consortium owned by 140
member countries, has 24 satellites, including ten that cover Latin America. In
March 1998, Intelsat spun off six of its satellites to a newly formed company
known as New Skies Satellites N.V., which also competes with us. Further, in
November 2000, Telesat Canada successfully launched the Anik F1 satellite, which
serves all of the Americas. We cannot assure you that we will be able to compete
successfully with our competitors. Moreover, as our competitors launch new
satellites with coverage over the regions that we serve, price reductions may
result. This in turn could hurt our revenue and impact our ability to service
our debt obligations.

     The Mexican government has liberalized its regulatory environment to allow
non-Mexican satellite companies to provide satellite services in Mexico. While
we have historically been the leading provider of domestic fixed satellite
services in Mexico, our Mexican market share may be reduced in the future by
these new competitors. This would in turn have a corresponding effect on our
revenue.

     As land-based telecommunications services expand, demand for our services
may be reduced. For example, in the past we have experienced a number of
contract cancellations or nonrenewals by customers who switched to fiber optic
service providers. These fiber optic service providers can generally provide
services at a lower cost and further build-out of this infrastructure could hurt
our revenue.

OUR GOVERNMENT CONCESSIONS MAY BE REVOKED UNDER CERTAIN CIRCUMSTANCES.

     The Mexican government has granted to us four concessions, three relating
to our use of the orbital slots occupied by our satellites and the fourth
relating to our use of the satellite control centers and the related land and
buildings on which they are located. The orbital concessions have an initial
twenty-year term, expiring in October 2017, and are renewable after that time,
subject to certain conditions, for an additional twenty-year term. The property
concession has a forty-year term. However, these concessions are subject to
termination prior to the expiration of their terms upon the occurrence of
certain events, including our bankruptcy or liquidation.

     Also, the Mexican government has the right to revoke the orbital
concessions pursuant to an expropriation. The Mexican government may also
temporarily seize the orbital concessions in the event of natural disaster, war
or threat to national security, public order or the Mexican economy. In the
past, the Mexican government has used this power to ensure continued service
during labor disputes. If the concessions are terminated, revoked or temporarily
seized, our results of operations and financial condition will be materially and
adversely impacted.

                                        4
<PAGE>   7

WE OPERATE PRIMARILY IN MEXICO, WHICH MAY SUBJECT US TO ADDITIONAL RISKS.

     For the year ended December 31, 2000, approximately 53% of our service
revenue was from billings to Mexican customers. As a result, our performance and
prospects will be affected by the political, social and economic developments in
Mexico, including currency fluctuations and inflation. Mexico has in the past
experienced economic crises characterized by exchange rate instability, high
inflation, high domestic interest rates, negative economic growth and reduced
consumer buying power. Should Mexico experience any such economic crisis in the
future, we cannot assure you that our results of operations and financial
condition would not be affected.

     While the Mexican government does not generally restrict the ability of a
person, Mexican or otherwise, to convert pesos to foreign currencies, it has
done so in the past when it has experienced shortages in its foreign exchange
reserves. We cannot guarantee that this will not happen again in the future. If
we were to experience restrictions on our ability to convert pesos into dollars,
we would have difficulty servicing our debt obligations, which are denominated
in dollars.

     Exchange rate fluctuations could also hurt us. In the past, we generally
hedged against the risk of exchange rate fluctuations. We cannot guarantee that
we will be able to hedge our exchange rate risk in the future or that our hedges
will be successful. Moreover, exchange rate fluctuations could impact our
customers' ability to pay for our services.

OUR BUSINESS IS REGULATED, CAUSING UNCERTAINTY AND ADDITIONAL COSTS.

     Our business is regulated by the Mexican authorities. As we expand our
service outside of Mexico into other countries in Latin America and the United
States, we become subject to regulations in those countries. For example, we
need to obtain landing rights in the countries where we seek to operate.
Regulatory authorities in the various jurisdictions in which we operate can
modify, withdraw or impose charges or conditions upon the licenses which we
need, and so increase our cost of doing business. For example, the concessions
granted to us by the Mexican government require that we reserve approximately 7%
of our satellite capacity for use by the Mexican government free of charge.
Moreover, the concessions are subject to government regulations, which may make
modifications or impose limitations on our operations. If the Mexican government
determines that we are a dominant carrier in our segment, it could impose
informational and pricing requirements on us, which would hurt our results of
operations and financial condition.

     The regulatory process also requires that we negotiate with third parties
operating or intending to operate satellites at or near orbital locations where
we place our satellites so that the frequencies of the satellites do not
interfere with each other. Because we cannot guarantee the results of
negotiations with third parties, "frequency coordination" is an additional
source of uncertainty. For example, we had to coordinate our Satmex 5 satellite
through the Mexican government with the government of Canada.

THERE ARE POTENTIAL CONFLICTING INTERESTS BETWEEN US AND OUR SHAREHOLDERS.

     Loral and Principia own and have interests in other companies that are in
businesses similar to ours, which could give rise to a conflict of interest. In
particular, Loral Skynet, Loral CyberStar and Loral Skynet do Brasil own or are
building satellites, the footprints of which overlap or are planned to overlap
with those of our satellites. We have, together with Loral Skynet, Loral
CyberStar, Loral Skynet do Brasil and Europe*Star, a joint venture between Loral
and Alcatel, adopted a marketing policy that provides for collaboration and
cross-selling among the Loral Global Alliance members. If, however, the members
of the Loral Global Alliance do not collaborate but rather compete in areas of
overlapping capacity, conflicting commercial interests between us and the Loral
entities may arise. If Loral Skynet, Loral CyberStar and Loral Skynet do Brasil
do not collaborate with us or vice versa under the Loral Global Alliance, Loral
Skynet, Loral CyberStar and Loral Skynet do Brasil might compete directly with
us for customers.

                                        5
<PAGE>   8

DISAGREEMENTS BETWEEN LORAL AND PRINCIPIA COULD RESULT IN DEADLOCK.

     We may undertake certain material actions only with the prior agreement of
both Loral and Principia. If Loral and Principia are unable to reach an
agreement, it could lead to a management deadlock, which would hurt us. To
resolve this deadlock, Loral or Principia may seek to sell its interests or
alternatively, buy the interests of the other. This could in turn result in a
change of control under our debt documents, which would entitle certain of our
debtholders to require us to buy back their debt, including in some cases at a
purchase price equal to 101% of the principal amount. A change of control may
under certain circumstances, also result in a termination of our concessions
from the Mexican government.

IF SERVICIOS DEFAULTS IN THE PAYMENT OF CERTAIN DEBT OWED TO THE MEXICAN
GOVERNMENT, THE MEXICAN GOVERNMENT WOULD GAIN CONTROL OF US.

     Servicios Corporativos Satelitales, S.A. de C.V., which owns 70.71% of our
capital stock has issued to the Mexican government a note in the principal
amount of $125.1 million, which bears interest at 6.03%, matures in December
2004 and is secured by Loral's and Principia's holdings in Firmamento Mexicano,
S. de R.L. de C.V., our parent company. This obligation is subject to early
prepayment under certain circumstances, including upon a failure by Loral and
Principia to maintain sufficient collateral to secure Servicio's obligation to
the Mexican government. Servicios will depend upon dividends from us to repay
this obligation to the Mexican government. We cannot assure you that Servicios
will have the resources to repay this obligation when due. If Servicios were to
default in the payment of this obligation, the Mexican government would have the
right to foreclose upon the Firmamento interests. This would result in the
Mexican government gaining control of us.

JUDGMENTS AGAINST US MAY BE PAID IN PESOS; UPON OUR BANKRUPTCY, OUR DOLLAR
DENOMINATED OBLIGATIONS ARE CONVERTED INTO PESOS.

     If a proceeding were to be brought in Mexico seeking to enforce our
obligations with respect to dollar denominated obligations (including certain of
our outstanding debt), we may elect under Mexican law to make that payment in
pesos, based on the then prevailing exchange rate. Any shortfall based upon
exchange rate fluctuation will be borne by the other party. Moreover, if we were
declared bankrupt, our dollar denominated obligations would be converted into
pesos based on the exchange rate in effect at the time the bankruptcy is
declared. There would be no adjustment to take into account any depreciation on
the value of the peso against the dollar from the time of the bankruptcy
declaration to the date the claim is actually paid.

ITEM 4.  INFORMATION ON THE COMPANY

GENERAL

     In November 1997, Loral Space & Communications Ltd. (together with its
subsidiaries "Loral") and Principia, S.A. de C.V. ("Principia") acquired 75% of
the outstanding capital stock of Satelites Mexicanos, S.A. de C.V. (the
"Company" or "Satmex") from the government of Mexico. Satmex is the leading
provider of fixed satellite services ("FSS") in Mexico and is expanding its
services to become a leading provider of fixed satellite services throughout
Latin America. The Company provides transponder capacity to customers for
distribution of network and cable television programming, DTH (direct-to-home)
television service and on-site transmission of live news reports, sporting
events and other video feeds. Satmex also provides satellite transmission
capacity to telecommunications service providers for public telephone networks
in Mexico and elsewhere and to corporate customers for their private business
networks with data, voice and video applications. The Company is also marketing
the use of satellite transmission capacity for new applications, such as
Internet via satellite. Satmex has landing rights to provide broadcasting and
telecommunications transmission capacity in Mexico, the United States, Canada
and 29 nations and territories in Latin America. The Company's broadcasting
customers include Grupo Televisa, MVS Multivision, Television Azteca and PCTV
and its telecommunications services customers include BellSouth, Telmex, Pemex,
Cemex

                                        6
<PAGE>   9

and the Mexican subsidiaries of Ford and DaimlerChrysler. Satmex's data and
Internet customers include Hughes Network Systems, Verestar and Netsat Express.

     The Company's two satellites (Solidaridad 2 and Satmex 5) are in
geostationary orbit at 113 degrees W.L. and 116.8 degrees W.L., respectively,
and have a total of 96 36-MHz transponder-equivalents operating in the C- and
Ku-band, with an aggregate footprint covering substantially all of the
continental United States, the Caribbean as well as all of Latin America, other
than certain regions in Brazil. The Company has expanded its sales outside of
Mexico through its direct salesforce, its participation in the Loral Global
Alliance and, to a lesser extent, its network of agents, distributors and
value-added resellers in the Latin American region. Satmex also owns another
satellite, Morelos 2, which is in an inclined orbit.

     On August 29, 2000, the Company's Solidaridad 1 satellite, located at 109.2
degrees W. L., ceased operating and was considered irretrievably lost. The loss
was caused by the failure of the back-up control processor on board the
satellite. Solidaridad 1, which was built by Hughes Space and Communications and
commenced service in January 1994, experienced a failure of its primary control
processor in April 1999, and the satellite had been operating on its back-up
processor since that time. Solidaridad 1 was insured for $250 million. At the
date of the loss, Solidaridad 1 had a net book value of approximately $109.6
million. After deducting prepaid insurance of $1.6 million, the unpaid insurance
premiums of $12.5 million and on-going monitoring costs and the excess of the
estimated cost over revenue for the currently committed transponder capacity to
be provided to customers of $23.2 million, the net gain on the in-orbit failure
of Solidaridad 1 is approximately $103.1 million. In January 2001, Satmex
received insurance proceeds of approximately $235.3 million, net of the unpaid
insurance premiums and related value added tax. Satmex intends to apply the net
insurance proceeds towards the construction, launch and insurance of a
replacement satellite as well as for debt service and Satmex has contracted with
Space Systems/Loral, Inc., a wholly owned subsidiary of Loral, to build the
replacement satellite. This satellite known as Satmex 6, is scheduled to be
launched in January 2003 and is designed to provide broader coverage and higher
power levels than any other satellite in the Satmex fleet.

     The Company is a member of the Loral Global Alliance. Through the alliance,
the Company can offer its customers an integrated portfolio of satellite
capacity that provides "one stop shopping" for local, regional and global
geosynchronous satellite services. The other alliance members are Loral Skynet,
Loral CyberStar, Loral Skynet do Brasil and Europe*Star, a joint venture between
Loral and Alcatel. The members of the alliance currently have ten satellites in
orbit with a total of 171 C-band and 273 Ku-band 36-MHz transponder-
equivalents.

     The Loral Global Alliance provides for cross-selling arrangements among the
alliance members' respective sales force and for cooperative marketing and
promotional activities. The Company believes that such arrangements will enable
the members of the alliance to compete more effectively in sales of
communications satellite services worldwide. In addition, the alliance offers
in-orbit backup capabilities for its members in regions where members' fleets
have overlapping coverage. For example, when Solidaridad 1 ceased operating,
Satmex was able to transfer most of its customers to other satellites in the
Loral Global Alliance.

SERVICES

     The Company provides satellite transmission capacity to broadcasting
customers for network and cable television programming, DTH television service
and transmission of live news reports, sporting events and other video feeds
from the scene of the event. In addition, the Company provides satellite
transmission capacity to telecommunications service customers for public
telephone networks in Mexico and elsewhere and corporate customers for their
private business networks with data, voice and corporate video applications.
Satmex also provides satellite connectivity to the Internet backbone for ISPs
(Internet Service Providers). The Company offers its customers part-time
service, varied power and footprint service, grades of service protection and
value-added services.

  BROADCASTING TRANSMISSION SERVICES

     Satellite capacity is utilized for broadcasting transmission services by
various national and international networks for the point to point and point to
multi-point distribution of television programs, video signals, and

                                        7
<PAGE>   10

other services, including distance learning, special events and live reports.
Customers include private and state-owned broadcasting networks, cable
television operators and DTH operators. Broadcasting transmission clients
usually lease one or more transponders.

     Broadcasting customers use satellite capacity to transmit coverage of live
scheduled special events, such as the Olympics, to programmers on an ad hoc
basis. The Company also provides broadcasting transmission services to relay
live news coverage, short duration video feeds and syndicated programming for
broadcasters on a scheduled or ad hoc basis.

     Broadcasting customers also use satellite capacity for "backhaul"
operations, such as transporting programming from a broadcaster's foreign news
bureau to a broadcast center for simultaneous or later transmission. The
Company's services in this area are focused on the transportation of program
material and syndicated programming for broadcasters on a scheduled basis.

  TELECOMMUNICATIONS TRANSMISSION SERVICES

     The Company provides domestic and international telecommunications
transmission services to public and private telecommunications networks
belonging to financial, industrial and commercial, government, transportation
and tourism, educational and press-related companies. Companies may lease
channels, circuits or fractions of a transponder, allowing these transponders to
be shared among several users.

     The Company provides satellite capacity to telephone companies which use
the capacity as part of their communications network on a national or
international basis. The Company's business communications services include the
provision of satellite capacity to communications carriers that provide private
business networks for data, voice and corporate video communications. Network
users utilize satellites rather than ground-based transmission media because
satellite systems provide customers cost savings for large, geographically
dispersed networks, greater independence from telephone companies,
predictability of costs over a long period, flexibility in changing or adding
remote locations to a network, integrated network management and control of all
remote locations and increased network availability and lower transmission error
rates.

     Many businesses and organizations currently use satellite communications
networks for certain of their communications needs. For example, retail chains
use satellite business communications networks for rapid credit card
authorization and inventory control. Banks use satellite networks to connect
automatic teller machines to processing computers. News agencies use satellite
networks to distribute information continuously to numerous locations, and
paging operators use satellite networks to distribute paging information from a
central switch to multiple remote transmitters for retransmission to pagers.

     The Company provides satellite capacity to domestic and regional
communications centers in Latin America. The provision of satellite capacity to
carriers involves relatively low marketing and operating costs, while promoting
the use of satellite networks for business communications in Latin America. The
Mexican government currently represents one of the single largest users of
communications facilities in Mexico.

     The Company offers transponder capacity for end-to-end satellite services
for two types of private business communications networks: IDS (international
digital services) networks and VSAT (very small aperture terminals) networks.
IDS networks consist of rooftop antennas and are used by customers that have
relatively steady flows of information to and/or from all of the points in the
network. Because of their large transmission requirements, IDS networks require
dedicated, permanent communications links to each point. VSAT networks differ
from IDS networks in that VSAT networks consist of very small rooftop antennas
and are utilized by customers that need to send short bursts of data over the
network for relatively short periods of time. Through the use of VSAT technology
and sophisticated software, these networks can be served with a relatively small
amount of satellite capacity.

  INTERNET SERVICE PROVIDERS

     The Company delivers high-speed satellite-based Internet connectivity,
offering a variety of configurations, throughout North America and Latin
America. The Satmex fleet provides an efficient means by which ISPs, service
integrators, infrastructure enablers, universities, governments and other
corporations may develop new Internet-related applications. The benefits of
satellite transmission include avoiding the congestion typically associated with
land-based networks, faster network deployment and configuration, high

                                        8
<PAGE>   11

data throughput, ubiquitous coverage, low cost and highly reliable service. The
Company believes that these benefits, together with Latin America's lack of
infrastructure, geographic dispersion and low population density indicate that
demand for Internet connectivity via satellite, in both the consumer and
corporate markets, will have strong growth in the future.

CUSTOMERS

     The Company has a broad customer base which includes private and
state-owned broadcasting networks, cable television operators, DTH operators,
and public and private telecommunications networks belonging to financial,
industrial and commercial, government, transportation and tourism, educational
and press-related companies. The Company's largest customer is Grupo Televisa
and its subsidiaries ("Televisa"). Revenue from Televisa represented 18%, 31%
and 29%, of service revenue for the years ended December 31, 2000, 1999 and
1998, respectively. Revenue from the Mexican government represented 7%, 10% and
5% of service revenue for the years ended December 31, 2000, 1999 and 1998,
respectively.

     Approximately 53%, 78% and 89% of the Company's service revenue for the
years ended December 31, 2000, 1999 and 1998, respectively, were generated from
customers in Mexico.

PROPERTY, PLANTS AND EQUIPMENT

     Except for the Company's in-orbit satellites, all of the Company's assets
are located in Mexico. The Company's primary satellite control center is located
at Iztapalapa, Mexico and the Company's secondary satellite control center is
located at Hermosillo, Mexico. These centers, aggregating 31,500 square meters,
are designed to ensure that the satellites are correctly positioned and that the
satellites are operating within established parameters. The equipment in the
satellite control centers is owned by the Company, while the buildings and land
that house these centers are property of the Mexican government. The Company
pays rent to the Mexican government for the use of the buildings.

     Satmex leases office space in Mexico City for its headquarters. The Company
believes its facilities are adequate for its present needs.

LEGAL PROCEEDINGS

     Management is not aware of any pending material litigation against the
Company. Liability for all legal actions or other claims against Satmex prior to
October 15, 1997 has been retained by the Mexican government.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     Except for the historical information contained herein, the matters
discussed in the following Operating and Financial Review and Prospects of the
Company are not historical facts, but are "forward-looking statements," as that
term is defined in the Private Securities Litigation Reform Act of 1995. In
addition, the Company or its representatives have made and may continue to make
forward-looking statements, orally or in writing, in other contexts, such as in
reports filed with the SEC, press releases or statements made with the approval
of an authorized executive officer of the Company. These forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "plans," "may," "will," "would," "could," "should,"
"anticipates," "estimates," "project," "intend," or "outlook" or the negative of
these words or other variations of these words or other comparable words, or by
discussion of strategy that involves risks and uncertainties. These
forward-looking statements are only predictions, and actual events or results
may differ materially as a result of a wide variety of factors and conditions,
many of which are beyond the Company's control. Some of these factors and
conditions include: partial or total failure of the Company's in-orbit
satellites; the Company's reliance on certain customers; the Company's
operations are located in Mexico; competition in the Company's industry; and the
Company owes significant amounts of money. In addition, the Company operates in
an industry sector where securities values may be volatile and may be influenced
by economic and other factors beyond the Company's control. The Company
undertakes no obligation to update any forward-looking statement.

                                        9
<PAGE>   12

OVERVIEW

     Satelites Mexicanos, S.A. de C.V. ("Satmex" or the "Company") owns and
operates two geosynchronous communications satellites, Solidaridad 2 and Satmex
5. Satmex also owns another satellite, Morelos 2, which is in an inclined orbit.
Satmex operates in one segment and is the leading provider of fixed satellite
services to broadcasting and telecommunications customers in Mexico. Satmex is
also marketing the use of satellite transmission capacity for new applications,
such as connectivity to the Internet backbone via satellite. Satmex has landing
rights to provide broadcasting and telecommunications transmission capacity in
Mexico, the United States, Canada and 29 nations and territories in the Latin
American region.

     On November 17, 1997, Loral Space & Communications Ltd. together with its
subsidiaries ("Loral") and Principia, S.A. de C.V., ("Principia") acquired 75%
of the issued and outstanding stock of Satmex from the government of Mexico for
$647 million through Firmamento Mexicano S. de R. L. de C.V. ("Firmamento").
Loral owns 65% of Firmamento and Principia owns 35%. Principia holds 51% of
Firmamento's voting interests. The remaining 25% of the capital stock of Satmex
was retained by the Mexican government.

     On March 30, 1999, the Company issued 606,730 shares of preferred stock to
Loral and Principia for a total purchase price of approximately $31.9 million.
The preferred stock has limited voting rights and pays a cumulative dividend in
common stock of the Company. The preferred stock can be exchanged at the
Company's option into common stock of the Company, at a ratio of one share of
preferred stock for 2.0008 shares of common stock if the exchange occurs before
February 2, 2005, and at a ratio of one share of preferred stock for 4.0016
shares of common stock on and after February 2, 2005. As of December 31, 2000,
Servicios Corporativos Satelitales S.A. de C.V., a wholly owned subsidiary of
Firmamento, holds 70.71% of the outstanding capital stock of Satmex, Loral holds
4.46%, Principia holds 1.26% and the Mexican government holds 23.57%.

     In 1999, Loral Skynet entered into an end-of-life lease with Satmex for
three Ku-band transponders on Satmex 5. For the year ended December 31, 1999,
Satmex has accounted for this transaction as a sales-type lease and,
accordingly, recorded revenue of $25.5 million and an operating expense of $14.2
million for the cost of the transponders. Loral Skynet pays Satmex $5,000 per
transponder per quarter for tracking, telemetry and command services for the
life of this agreement. Loral and Principia agreed to exclude these transactions
from the calculation of the management fee and the license fee in 1999.

     On August 29, 2000, the Company's Solidaridad 1 satellite ceased operation
and was considered irretrievably lost. The loss was caused by the failure of the
back-up control processor on board the satellite. Solidaridad 1, which was built
by Hughes Space and Communications and commenced service in January 1994,
experienced a failure of its primary control processor in April 1999, and the
satellite had been operating on its back-up processor since that time.
Solidaridad 1 was insured for $250 million. At the date of the loss, Solidaridad
1 had a net book value of approximately $109.6 million. After deducting prepaid
insurance of $1.6 million, the unpaid insurance premiums of $12.5 million and
on-going monitoring costs and the excess of the estimated cost over revenue for
the currently committed transponder capacity to be provided to customers of
$23.2 million, the net gain on the in-orbit failure of Solidaridad 1 is
approximately $103.1 million. In January 2001, Satmex received insurance
proceeds of approximately $235.3 million, net of the unpaid insurance premiums
and related value aded tax. Satmex intends to apply the net insurance proceeds
towards the construction, launch and insurance of a replacement satellite as
well as for debt service and Satmex has contracted with Space Systems/Loral,
Inc. , a wholly owned subsidiary of Loral, to build the replacement satellite.
This satellite, known as Satmex 6, is scheduled to be launched in January 2003,
and is designed to provide broader coverage and higher power levels than any
other satellite currently in the Satmex fleet.

2000 COMPARED WITH 1999

  Revenue

     Service revenue for the year ended December 31, 2000 increased $26.4
million to $136.4 million, from $110.0 million for the year ended December 31,
1999, primarily due to higher utilization on Satmex 5. The

                                        10
<PAGE>   13

failure of Solidaridad 1 did not have a significant effect on 2000 revenue
because most of its customers were provided with alternative capacity on Satmex
5 or on satellites operated by Loral Skynet. Revenue for 1999 included $25.5
million related to the lease of three transponders with Loral Skynet, which was
accounted for as a sales-type lease.

  Operating expenses

     Operating expenses, as described below, were $102.1 million for the year
ended December 31, 2000, as compared to $96.3 million for 1999, excluding the
cost of the transponders related to the lease with Loral Skynet in 1999.

     Satellite operations.  Satellite operations, which consists primarily of
satellite insurance and the personnel costs related to the operation of the
satellites, was $20.0 million for 2000, as compared to $17.8 million for 1999.
The increase is primarily due to the cost of providing replacement capacity to
customers after the failure of Solidaridad 1 of $2.7 million and an increase in
salary expense for engineering and operations personnel, offset by a reduction
in insurance expense due to the failure of Solidaridad 1.

     Selling and administrative expenses.  Selling and administrative expenses
for 2000 were $20.3 million, as compared to $15.9 million for 1999. The increase
is primarily due to higher compensation cost associated with increased headcount
to support increased sales volume.

     License and management fees.  Loral and Principia are responsible for
managing the Company. Loral and Principia receive a management fee, based on a
sliding scale, up to a maximum of 3.75% of the Company's quarterly gross
revenue, as defined. Also, Loral has licensed certain intellectual property to
the Company for an annual fee of 1.5% of the Company's gross revenue, as
defined. Fees for the year ended December 31, 2000 and 1999 were $5.1 million
and $1.3 million, respectively. License and management fees increased due to the
Company's increased revenue and the resumption of the management fee in 2000.
Loral and Principia waived the management fee in 1999.

     Depreciation and amortization.  Depreciation expense for 2000 was $43.8
million as compared to $48.4 million for 1999. The decrease in depreciation
expense is due to the write-off of Solidaridad 1 after it ceased operations on
August 29, 2000. Amortization expense relating to the concessions amounted to
$12.9 million during each period.

  Interest

     Total interest cost was $66.6 million in 2000 as compared to $68.9 million
(before deducting $1.6 million of capitalized interest related to the
construction and launch of Satmex 5) for 1999. Total interest cost decreased due
to lower average outstanding debt during 2000, partially offset by higher
interest rates on the Company's variable rate debt.

  Net foreign exchange gain (loss)

     The peso remained relatively stable against the dollar in each year.

  Deferred income tax provision

     The Company recorded a deferred income tax provision of $17.0 million in
2000, which included a provision of $36.7 million on the net gain from the
in-orbit failure of Solidaridad 1, as compared to a provision of $5.7 million in
1999.

     The Company is subject to the greater of an income tax at 35% of taxable
income or an asset tax at 1.8% on the average of assets less certain
liabilities. During 2000, the Company received a favorable ruling from the
Mexican Supreme Court of Justice allowing the deduction for foreign liabilities,
including but not limited to, financial liabilities, when computing the taxable
base for the asset tax. The Company expects that this ruling will have a
favorable effect to reduce its asset tax in the future.

     Net operating losses may be carried forward for 10 years and any asset tax
paid is available as a credit against the income tax liability for a ten-year
period. At December 31, 2000 the Company had tax loss carryforwards of
approximately $460 million which expire from 2008 to 2010 and tax credits
available against

                                        11
<PAGE>   14

the asset tax of approximately $46 million which expire in 2003. Without these
credits, the Company would have incurred an asset tax liability of approximately
$4.3 million in 2000.

  Preferred stock dividend requirement

     The preferred stock dividend requirement of $1.5 million and $1.1 million
in 2000 and 1999, respectively, relates to the value of the stock dividend
issuable on the 606,730 shares of preferred stock issued in March 1999.

1999 COMPARED WITH 1998

  Revenue

     Revenue for the year ended December 31, 1999 was $135.5 million, as
compared to $104.8 million during 1998. Revenue for 1999 includes $25.5 million
related to the lease with Loral Skynet, which was accounted for as a sales-type
lease. Excluding the revenue recorded in connection with this lease, revenue for
1999 was $110 million as compared to $104.8 million in 1998. Revenue for 1999
reflects revenue from Satmex 5 which began commercial service on January 22,
1999. Satmex 5 replaced Morelos 2 which went into inclined orbit in August 1998.
Revenue for 1999 has been effected by cancellations and nonrenewals from
customers who switched their telecommunications networks to fiber optic service
providers and by the lower utilization on Solidaridad 1 due to a service
interruption in April 1999, which caused some customers on Solidaridad 1 to move
to Satmex 5.

  Operating expenses

     Operating expenses, excluding the cost of the transponders related to the
lease with Loral Skynet, increased to $96.3 million for 1999, from $71.9 million
for 1998, primarily due to increases in satellite operations costs of $2.9
million, selling and administrative expenses of $7.7 million, depreciation
expense and amortization of concessions of $12.6 million and license fee expense
of $1.2 million as described below.

     Satellite operations.  Satellite operations, which consists primarily of
satellite insurance and the personnel costs related to the operation of the
satellites, was $17.8 million for 1999, as compared to $14.9 million for 1998.
The increase is primarily due to the higher in-orbit insurance expense for
Satmex 5.

     Selling and administrative expenses.  Selling and administrative expenses
for 1999 were $15.9 million, as compared to $8.2 million for 1998. The increase
is primarily due to salaries and benefits associated with the hiring of
additional personnel, incentive compensation expense and increased professional
fees. The increase also reflects spending increases for advertising and
promotional expenses.

     License and management fees.  Loral and Principia are responsible for
managing the Company, for which they receive a management fee. During 1998,
management fees were $0.3 million. For the year ended December 31, 1999, Loral
and Principia waived the management fee.

     In 1998, Loral and the Company agreed to retroactively delay the
commencement of license fees until January 1, 1999, because the intellectual
property and related services to which the fees relate did not begin to be
implemented until the beginning of 1999, after Satmex 5 entered commercial
operations. All intellectual property fees accrued as of December 31, 1997 were
reversed in 1998. For the year ended December 31, 1999, Loral reduced the
license fee to 1.2%. In 1999, Satmex recorded a license fee expense of $1.3
million.

     Depreciation and amortization.  Depreciation expense for 1999 was $48.4
million as compared to $36.0 million for 1998. The increase in depreciation
expense reflects the depreciation for Satmex 5, which entered commercial service
in January 1999, of $14.4 million. Satmex 5 replaced Morelos 2, which was fully
depreciated in June 1998. Amortization expense relating to the orbital
concessions amounted to $12.9 million during 1999 as compared to $12.7 million
during 1998.

  Interest

     Total interest cost was $68.9 million in 1999 as compared to $72.6 million
in 1998 (before deducting $1.6 million and $20.5 million of capitalized interest
related to the construction and launch of Satmex 5 for 1999 and 1998,
respectively). The decrease in total interest cost is due to lower average
outstanding debt in 1999.

                                        12
<PAGE>   15

  Net foreign exchange gain (loss)

     The Company recorded a net foreign exchange gain of $3,000 during 1999 and
a net foreign exchange loss of $532,000 in 1998. During 1999, the peso increased
4% against the dollar. However, in 1998, the peso declined 23% against the
dollar.

  Deferred income tax provision

     Satmex recorded a deferred income tax provision of $5.7 million and $0.9
million for the years ended December 31, 1999 and 1998, respectively.

     The Company is subject to the greater of an income tax at 35% of taxable
income or an asset tax at 1.8% on the average of assets less certain
liabilities. Net operating losses may be carried forward for 10 years and any
asset tax paid is available as a credit against the income tax liability for a
ten-year period.

     The provision for income tax for the year ended December 31, 1998 excluded
a deferred tax benefit of $2.8 million related to the extraordinary charge on
the debt refinancing. The net deferred income tax asset at December 31, 1998 was
increased by $200,000 for the change to the Mexican statutory rate from 34% to
35% which was signed into law on December 31, 1998 to be effective January 1,
1999.

     At December 31, 1999 the Company had tax loss carryforwards of
approximately $315 million which expire in 2008 and tax credits available
against the asset tax of approximately $46 million which expire in 2003. Without
these credits, the Company would have incurred an asset tax liability of
approximately $4.5 million in 1999.

  Extraordinary loss

     In 1998, fees of $8.3 million, less applicable income tax benefit of $2.8
million, related to the debt that was refinanced in March 1998 are presented as
an extraordinary loss in the results of operations.

Preferred stock dividend requirement

     The preferred stock dividend requirement in 1999 of $1.1 million, relates
to the value of the stock dividend issuable on the 606,730 shares of preferred
stock issued on March 30, 1999.

INFLATION

     During 1998, 1999 and 2000, the annual rates of inflation in Mexico, as
measured by changes in the National Consumer Price Index as provided by the
Banco de Mexico, were 18.6%, 12.3% and 9.0%, respectively. The Company's major
expenditures, including capital expenses and satellite insurance, will not be
affected by high levels of inflation, because they are denominated in dollars.
Customer contracts are also denominated in dollars. However, high inflation
rates would affect peso denominated expenses such as payroll and rent and could
result in an increase in uncollectible accounts receivable and customer lease
cancellations. To the extent that the peso's devaluation against the U.S. dollar
is less than the inflation rate in Mexico, the Company will be adversely
affected by the effect of inflation in Mexico with respect to its peso
denominated expenses.

CAPITAL EXPENDITURES

     Substantially all capital expenditures are denominated in U.S. dollars.
Capital expenditures were $6.7 million for 2000, as compared to $6.3 million for
1999. Expenditures in 2000 related primarily to equipment at the Company's
satellite control facilities. The Company expects capital expenditures to
increase significantly in the next two years due to the construction of Satmex
6.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2000, the Company had total debt of $572 million. At
December 31, 2000, the Company was in compliance with all covenants governing
its debt agreements.
                                        13
<PAGE>   16

     The Company's primary source of liquidity for working capital purposes is
cash flow from operations. At December 31, 2000, the company had cash and cash
equivalents of $24.6 million. In February 2000, the Company amended certain
financial covenants in its debt agreements. In connection with these amendments,
the Company paid a consent fee to approving lenders and debtholders and agreed
to increase the applicable interest rates on the debt by up to 0.75%. The
Company believes that its cash flow from operations and the availability of its
revolving credit facility will be adequate to service its interest and debt
repayment requirements and ensure compliance with the covenants of its debt
agreements. Further, the Company believes that the net insurance proceeds from
the failure of Solidaridad 1 and cash flow from operations will be sufficient to
fund the on-orbit delivery of Satmex 6.

     Cash used and provided.  Net cash provided by operating activities for the
year ended December 31, 2000 of $40.8 million consisted primarily of $25.7
million of funds generated by earnings before non-cash items, a decrease in
prepaid insurance of $7.6 million, an increase in accounts payable and accrued
expenses of $3.6 million, an increase in interest payable of $1.1 million and an
increase in amounts due to related parties of $8.0 million offset by a decrease
in deferred revenue -- customers of $3.9 million and an increase in accounts
receivable and deferred financing costs and other assets of $1.3 million.

     Cash used in investing activities for 2000 was $6.7 million for capital
expenditures.

     Cash used in financing activities for the year ended December 31, 2000 was
$16 million and reflects the repayment of $1 million of the Company's senior
secured notes and repayment of borrowings under the Company's revolving credit
facility of $15 million.

ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. The Company has completed its review of the
impact that the adoption of SFAS 133 will have and, based on its evaluation the
adoption of SFAS 133, as amended, on January 1, 2001 did not have a significant
effect on its earnings or financial position.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

                        DIRECTORS AND SENIOR MANAGEMENT

<TABLE>
<CAPTION>
             NAME                               POSITION                  AGE      PERIOD OF SERVICE
             ----                               --------                  ---      -----------------
<S>                              <C>                                      <C>   <C>
Sergio Autrey Maza(1)..........  Chairman of the Board and Director       49    Since November 1997
Bernard L. Schwartz(1).........  Director                                 75    Since November 1997
Carlos Autrey Maza.............  Director                                 55    Since October 1999
Eric J. Zahler.................  Director                                 50    Since November 1997
Lauro Gonzalez-Moreno..........  Chief Executive Officer and Director     39    Since November 1997
Cynthia Pelini.................  Executive Vice President and Chief       46    Since April 1998
                                 Financial Officer
Juan Manuel Pinedo.............  Executive Vice President of Sales,       36    Since April 1998
                                 Marketing and Operations
</TABLE>

------------------------------
(1) Member of the Executive Committee.

     The Board of Directors of the Company is chaired by Mr. Sergio Autrey Maza
and pursuant to an agreement between Loral and Principia currently consists of
three Principia directors and two Loral directors. Sergio Autrey Maza and Carlos
Autrey Maza are brothers.

     The Executive Committee is authorized to take action on all matters that
may be authorized by the Board of Directors.

                                        14
<PAGE>   17

     Mr. Gonzalez is the Chief Executive Officer and was named jointly by
Principia and Loral. The Chief Executive Officer reports to the Executive
Committee and the Board of Directors. His duties include day to day management
of the Company, strategic planning and relationship development. The Chief
Executive Officer can be removed at the request of either Principia or Loral.

     Loral has the right to appoint a Chief Operating Officer of the Company who
would be responsible for the day to day management and operations of the
Company, subject to approval from Principia, which approval cannot be
unreasonably withheld.

     All other executive officers have been and will be appointed by the mutual
consent of Loral and Principia.

     Sergio Autrey has been the Chairman of the Board and a director of Satmex
since November 1997 and is the Chairman of the Board of Principia and Globalstar
de Mexico, a satellite telephony service provider. He is also a member of the
board of Parabola, and Grupo Editorial Notmusa, Mexican publishing companies;
and Beta San Miguel, a sugar production company.

     Mr. Schwartz has been a director of Satmex since November 1997. Mr.
Schwartz is Chairman of the Board and Chief Executive Officer of Loral. He is a
member of the General Partners' Committee and Chief Executive Officer of
Globalstar, L.P.

     Carlos Autrey has been a director of Satmex since October 1999 and is a
member of the board of Globalstar de Mexico and Principia. He is also a member
of the board of Grupo Financiero Inverlat, a Mexican financial institution,
SanLuis Corporacion, a Mexican conglomerate, Grupo Herdez, Mexico's largest
canned foods company, and Beta San Miguel.

     Mr. Zahler has been a director of Satmex since November 1997. Mr. Zahler is
the President and Chief Operating Officer of Loral.

     Lauro Gonzalez has been a director and the Chief Executive Officer of
Satmex since November 1997. Mr. Gonzalez is the Chief Executive Officer of
Globalstar de Mexico, and Principia. Mr. Gonzalez was an engagement manager at
McKinsey & Company in Mexico and Brazil.

     Cynthia Pelini has been the Chief Financial Officer of Satmex since April
1998 and Executive Vice President of Finance and Administration since December
2000. Prior to that, she was Vice President of Investor Relations at Grupo
Iusacell, a Mexican cellular communications company from 1996 to 1998. Ms.
Pelini was Director of Banking Relations for Grupo Televisa from 1995 to 1996,
Director of Financial Planning, Capital Markets and Investor Relations for Grupo
Dina, a Mexican transportation manufacturer, from 1992 to 1995, and Corporate
Treasurer of SanLuis Corporacion from 1989 to 1992. From 1976 through 1989, she
worked in international banking assignments for both Chase Bank and Bankers
Trust.

     Juan Manuel Pinedo has been the Executive Vice President of Sales and
Operations of Satmex since December 2000. Mr. Pinedo joined Satmex in April 1998
and was the Executive Director of Business Development until January 1999, when
he was named Executive Director of Sales and Marketing. From 1992 to 1998, Mr.
Pinedo was a senior consultant and engagement manager for McKinsey & Company.
From 1987 to 1992, Mr. Pinedo was an engagement manager for Andersen Consulting.

                                  COMPENSATION

     For the year ended December 31, 2000, the aggregate compensation, including
bonuses, of the executive officers of the Company paid or accrued in that year
for services in all capacities was approximately $2.1 million. During 2000, the
Company did not make payments to members of the Board for attendance at Board or
committee meetings and the Company did not provide any pension, retirement or
similar benefits for directors or executive officers.

     Members of management are eligible for bonuses. For the year ended December
31, 2000, the Company paid $1.5 million for bonuses earned in 1999.

                                        15
<PAGE>   18

                                   EMPLOYEES

     As of December 31, 2000, the Company had 226 full-time employees of which
59 are members of a labor union. The Company believes its relation with its
union employees is satisfactory.

                                SHARE OWNERSHIP

     As of December 31, 2000, the share ownership of Satmex is as follows:

<TABLE>
<CAPTION>
                                                                SHARES     PERCENTAGE
                                                              ----------   ----------
<S>                                                           <C>          <C>
Servicios Corporativos Satelitales, S.A. de C.V.............   7,500,000      70.71
Mexican government..........................................   2,500,000      23.57
Loral.......................................................     473,449       4.46
Principia...................................................     133,281       1.26
                                                              ----------   ----------
                                                              10,606,730     100.00%
                                                              ==========   ==========
</TABLE>

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

                               MAJOR SHAREHOLDERS

     Prior to October 15, 1997, the Company was not operated as a stand-alone
satellite service provider, but was operated by the Mexican government as part
of the operations of Telecomunicaciones de Mexico, an agency of the Mexican
government. In 1997, Loral and Principia formed a joint venture, Firmamento
Mexicano, S. de R.L. de C.V. ("Firmamento") to effect the acquisition of Satmex
from the Mexican government. Firmamento is owned 65% by Loral and 35% by
Principia. Principia, however, holds 51% of Firmamento's voting interests. On
November 17, 1997, Corporativo Satelites Mexicanos, S.A. de C.V. ("Acquisition
Sub"), an indirect subsidiary of Firmamento, entered into a Stock Purchase
Agreement with the Mexican government to acquire 75% of the outstanding capital
stock of Satmex from the Mexican government for a purchase price of $646.8
million. On November 17, 1997, Acquisition Sub paid $194.0 million of the
purchase price and on December 29, 1997 paid the balance, plus interest. On
December 29, 1997, Acquisition Sub was merged into Satmex.

     In consideration of the debt incurred by Satmex in connection with the
acquisition, Servicios Corporativos Satelitales, S.A. de C.V. ("Servicios"), a
wholly owned subsidiary of Firmamento, agreed to pay to the Mexican government
$125.1 million (the "Government Obligation"). The Government Obligation accrues
deferred interest at the rate of 6.03% per annum, compounds annually and matures
in December 2004. Payment of the Government Obligation is currently secured by
Loral's and Principia's interests in Firmamento. If Servicios were to default in
the payment of the Government Obligation, the Mexican government will have the
right to foreclose upon the Firmamento interests. This would result in the
Mexican government gaining control of the Company.

     On March 30, 1999, the Company issued 606,730 shares of preferred stock to
Loral and Principia for a total purchase price of approximately $31.9 million.
The preferred stock has limited voting rights and pays a cumulative dividend in
common stock of the Company. The preferred stock can be exchanged at the
Company's option into common stock of the Company, at an exchange ratio of 1
share of preferred stock for 2.0008 shares of common stock, if the exchange
occurs before February 2, 2005, and at an exchange ratio of 1 share of preferred
stock for 4.0016 shares of common stock on and after February 2, 2005. As of
December 31, 2000, Servicios holds 70.71% of the outstanding capital stock of
the Company, Loral holds 4.46%, Principia holds 1.26% and the Mexican government
holds 23.57%.

     The Mexican government holds its 23.57% interest in Satmex through Class N
shares. The Class N shares have limited voting rights and may vote only with
respect to the following matters; extension of the Company's term, merger,
conversion or anticipated dissolution of the Company, amendment to the Company's
corporate purpose, change to the Company's nationality or cancellation of the
Company's registration in the Securities Section of the National Registry of
Securities and Intermediaries or in any Mexican or foreign stock exchange.

                                        16
<PAGE>   19

                           RELATED PARTY TRANSACTIONS

     Pursuant to a management services agreement among the Company, Loral and
Principia, the Company has agreed to pay a quarterly management fee based on
quarterly gross revenue, as defined, of the Company and its subsidiaries as
follows: with respect to revenue of less than $25 million, no management fee
will be payable, (ii) with respect to revenue in excess of $25 million but less
than $32 million, 10% of all revenue in excess of $25 million; and with respect
to revenue equal to or in excess of $32 million, 15% of all revenue in excess of
$32 million; provided that the management fee will in no event exceed 3.75% of
the cumulative gross revenue of the Company and its subsidiaries. The management
fee represents compensation paid to Loral and Principia for management services
rendered to the Company. For the year ended December 31, 1999, Principia and
Loral waived the management fee. For the year ended December 31, 2000, the
management fee was $3.2 million.

     Loral has licensed certain intellectual property to the Company for an
annual fee of 1.5% of the Company's gross revenue, as defined. For the year
ended December 31, 1999, Loral and the Company reduced the license fee to 1.2%.
In 2000 and 1999, Satmex recorded a license fee expense of $1.9 million and $1.3
million, respectively.

     The Company is a member of the Loral Global Alliance, whose other members
are Loral Skynet, Loral CyberStar, and Loral Skynet do Brasil, subsidiaries of
Loral, and Europe*Star, a joint venture between Loral and Alcatel. The Loral
Global Alliance provides for cross-selling arrangements among the alliance
members' respective sales force and for cooperative marketing and promotional
activities. The Company believes that such arrangements will enable the members
of the alliance to compete more effectively in sales of communications satellite
services worldwide. In addition, the alliance offers in-orbit backup
capabilities for its members in regions where members' fleets have overlapping
coverage.

     In connection with the privatization, the Company is required to provide
181 MHz C-band and 181 MHz Ku-band capacity for the Mexican government for
national security and certain public purposes at no charge. After the
Solidaridad 1 failure the capacity provided to the government is 130 MHz C-band
and 105 MHz Ku-band. The Company also operates one L-band transponder (on the
Solidaridad 2 satellite) which continues to be owned by the Mexican government.
Under the property concession granted by the Mexican government to the Company,
the Company pays to the government an annual fee of 7.5% of the value of the
property on which the Company's satellite control centers are located.

     On March 30, 1999, the Company issued 606,730 shares of preferred stock to
Loral and Principia for a total purchase price of approximately $31.9 million.
The preferred stock has limited voting rights and pays a cumulative dividend in
common stock of the Company. The preferred stock can be exchanged at the
Company's option into common stock of the Company, at an exchange ratio of 1
share of preferred stock for 2.0008 shares of common stock, if the exchange
occurs before February 2, 2005, and at an exchange ratio of 1 share of preferred
stock for 4.0016 shares of common stock on and after February 2, 2005. As of
December 31, 2000, Servicios holds 70.71% of the outstanding capital stock of
Satmex, Loral holds 4.46%, Principia holds 1.26% and the Mexican government
holds 23.57%.

     In 1999, Loral Skynet entered into an end-of-life lease with Satmex for
three Ku-band transponders on Satmex 5. For the year ended December 31, 1999,
Satmex has accounted for this transaction as a sales-type lease and,
accordingly, recorded revenue of $25.5 million and an operating expense of $14.2
million for the cost of the transponders. Loral Skynet pays Satmex $5,000 per
transponder per quarter for tracking, telemetry and command services for the
life of this agreement. Loral and Principia have agreed to exclude these
transactions from the calculation of the management fee and the license fee.

     In 1999, Firmamento formed three wholly-owned subsidiaries; Satmex
Corporativo, S. de R.L. de C.V., ("Corporate") Satmex Administracion, S. de R.L.
de C.V. ("Administration") and Satmex Servicios Tecnicos, S. de R.L. de C.V.
("Technical") (collectively the "Service Companies"). In June 1999, Satmex
transferred its management personnel to Corporate and its administrative
personnel to Administration. In November 1999, Satmex transferred its union
personnel to Technical. Satmex pays these companies a fee of approximately 8% of
the gross payroll and benefits, excluding payroll taxes. For the years ended
December 31, 2000 and 1999 this fee was $923,000 and $201,000, respectively.

                                        17
<PAGE>   20

     Service revenue from related parties, primarily the Mexican government,
amounted to $13.8 million, $14.3 million and $11.1 million for the years ended
December 31, 2000, 1999 and 1998, respectively.

     Satmex has contracted with Space Systems/Loral, Inc., a wholly owned
subsidiary of Loral to build the replacement satellite for Solidaridad 1.

ITEM 8.  FINANCIAL INFORMATION

     See Item 18 for a list of all financial statements filed as part of this
Form 20-F.

ITEM 9.  MARKETS

     The Company's capital stock is not publicly traded. The Company's 10 1/8%
Series B Senior Notes are not listed on any securities exchange.

ITEM 10.  ADDITIONAL INFORMATION

                           ARTICLES OF INCORPORATION

     We hereby incorporate by reference the description of our Articles of
Incorporation set forth in our Registration Statement on Form S-4 dated November
9, 1998.

                               MATERIAL CONTRACTS

     See "Item 4-Information on the Company", "Item 5-Operating and Financial
Review and Prospects" and "Item 7-Major Shareholders and Related Party
Transactions" for a description of our material contracts.

                               EXCHANGE CONTROLS

     The Mexican economy has in the past experienced balance of payment deficits
and shortages in foreign exchange reserves. While the Mexican government does
not currently restrict the ability of Mexican or foreign persons or entities to
convert pesos to foreign currencies generally, and U.S. dollars in particular,
it has done so in the past and no assurance can be given that the Mexican
government will not institute a restrictive exchange control policy in the
future. In addition, while all of the Company's customer contracts are dollar
denominated, the Company is required to accept payment from its customers in
pesos at the current exchange rate on the date of payment. If the Company were
unable to exchange such pesos into dollars or were unable to obtain sufficient
dollars, it would have difficulty meeting its U.S. dollar payment obligations.
The effect of any such exchange control measures adopted by the Mexican
government on the Mexican economy cannot be accurately predicted.

                                    TAXATION

     The following summary contains a description of the principal Mexican and
U.S. federal income tax consequences of the purchase, ownership and disposition
of the 10 1/8% Series B Senior Notes (the "Senior Notes"). This summary is based
on the tax laws in force as of January 1, 2001 and does not describe any tax
consequences arising under the laws of any state, locality or taxing
jurisdiction other than Mexico and the United States.

     A Convention for the Avoidance of Double Taxation and a Protocol thereto
(the "Tax Treaty") between the United States and Mexico entered into force on
January 1, 1994. Provisions of the Tax Treaty that may affect the taxation of
certain U.S. holders of Senior Notes are summarized below. The United States and
Mexico have also entered into an agreement that covers the exchange of
information with respect to tax matters.

     Mexico has also entered into several treaties for the avoidance of double
taxation with various countries which are in effect. The tax effects of such
treaties, or of any other tax treaty to which Mexico may be a party in the
future, are not discussed below.

                                        18
<PAGE>   21

MEXICAN TAXATION

     This summary of certain Mexican tax considerations deals only with holders
of Senior Notes that are not residents of Mexico for Mexican tax purposes and
that do not conduct a trade or business through a permanent establishment or
fixed base in Mexico (a "Foreign Holder"). For purposes of Mexican taxation, an
individual is a resident of Mexico if he has established his domicile in Mexico,
unless he has resided in another country for more than 183 calendar days,
whether consecutive or not, in any one calendar year and can demonstrate that he
has become a resident of that country for tax purposes. A legal entity is a
resident of Mexico if it is incorporated under Mexican law or if it has
established its main administration or direction center in Mexico. A Mexican
citizen pursuant to Mexican law is presumed to be a resident of Mexico for tax
purposes unless such person can demonstrate otherwise. If a legal entity or an
individual has a permanent establishment or fixed base in Mexico for Mexican
federal tax purposes, such permanent establishment or fixed base shall be
required to pay taxes in Mexico on income attributable thereto in accordance
with applicable tax laws.

  TAXATION OF INTEREST AND PRINCIPAL

     Under the Mexican Income Tax Law, payments of interest made by the Company
in respect of the Senior Notes (including payments of principal in excess of the
issue price of such notes, which, under Mexican law, are deemed to be interest)
to a Foreign Holder will generally be subject to a Mexican withholding tax
assessed at a rate of 10% as long as the Senior Notes are registered in the
Special Section of the National Registry of Securities and Intermediaries
maintained by the Mexican National Banking and Securities Commission (the
"Registry").

     Pursuant to an amendment to the Income Tax Law, payments of interest made
by the Company to Foreign Holders with respect to the Senior Notes will be
subject to withholding taxes imposed at a reduced rate of 4.9%, so long as i)
the Senior Notes are registered with the Special Section of the Registry, ii)
the company files with the Ministry of Finance the information required pursuant
general rules issued by the Secretaria de Hacienda y Credito Publico (the
Ministry of Finance).

     This reduced rate only applies if no party related to the Company (as such
term is defined under the Income Tax Law provision) directly or indirectly, is
the effective beneficiary of 5% or more of the aggregate amount of each such
interest payment.

     Apart from the Reduced Rate, other special rates of Mexican withholding tax
may apply. In particular, under the Tax Treaty, the Mexican withholding tax rate
was reduced from 10% to 4.9%, effective January 1, 1999 (the "Treaty Rate") for
certain holders that are residents of the United States (within the meaning of
the Tax Treaty) under certain circumstances contemplated therein.

     Payments of interest made by the Company with respect to the Senior Notes
to non-Mexican pension or retirement funds will be exempt from Mexican
withholding taxes, provided that (i) any such fund is duly incorporated pursuant
to the laws of its country of origin, is exempt from income tax in such country
and is registered with the Ministry of Finance for that purpose and (ii) the
relevant interest income is exempt from taxes in such country.

     The Company has agreed, subject to specified exceptions and limitations, to
pay additional amounts to the holders of the Senior Notes in respect of the
Mexican withholding taxes mentioned above. If the Company pays additional
amounts in respect of such Mexican withholding taxes, any refunds of, or credits
against, Mexican taxes received with respect to such additional amounts will be
for the account of the Company.

     Holders or beneficial owners of Senior Notes may be requested to provide
certain information or documentation necessary to enable the Company to
establish the appropriate Mexican withholding tax rate applicable to such
holders or beneficial owners. In the event that the specified information or
documentation concerning the holder or beneficial owner, if requested, is not
provided on a timely basis, the obligation of the Company to pay additional
amounts will be limited.

     Under Mexican law and regulations, payments of principal on the Senior
Notes to a Foreign Holder will not be subject to any Mexican taxes.

                                        19
<PAGE>   22

  TAXATION OF DISPOSITIONS

     Capital gains resulting from the sale or other disposition of the Senior
Notes by a Foreign Holder will not be subject to Mexican income or other taxes.

  TRANSFER AND OTHER TAXES

     There are no Mexican stamp, registration, or similar taxes payable by a
Foreign Holder in connection with the purchase, ownership or disposition of the
Senior Notes. A Foreign Holder of Senior Notes will not be liable for Mexican
estate, gift, inheritance or similar tax with respect to the Senior Notes.

U.S. TAXATION

     This summary of certain U.S. federal income tax considerations deals
principally with U.S. Holders (as defined below) that will hold Senior Notes as
capital assets and whose functional currency is the U.S. dollar. This summary
generally does not address the tax treatment of U.S. Holders that may be subject
to special tax rules, such as banks, insurance companies, dealers in securities,
or persons that hold (or will hold) the Senior Notes as a position in a
"straddle" for tax purposes or as part of a "synthetic security" or a
"conversion transaction" or other integrated investment composed of the Senior
Notes and one or more other investments, nor does it address the tax treatment
of U.S. Holders that do not acquire Senior Notes at their issue price as part of
the initial distribution. As used under this section, the term "U.S. Holder"
means a beneficial owner of a Note that is a citizen or resident of the United
States for U.S. federal income tax purposes, a corporation or other entity
taxable as a corporation created or organized under the laws of the United
States, any state thereof or the District of Columbia, a trust whose
administration is subject to the primary supervision of a United States court
and having one or more U.S. persons with the authority to control all of such
trust's substantial decisions, an estate that is subject to U.S. federal income
tax on its income regardless of the source thereof, or a person whose worldwide
income or gain is otherwise subject to U.S. federal income tax on a net income
basis.

  TAXATION OF INTEREST

     A U.S. Holder will treat the gross amount of interest and additional
amounts (i.e., without reduction for Mexican withholding taxes, determined using
the appropriate Mexican withholding tax rate applicable to the U.S. Holder) as
ordinary interest income in respect of the Senior Notes. Mexican withholding
taxes paid at the appropriate rate applicable to the U.S. Holder will be treated
as foreign income taxes eligible for credit against such U.S. Holder's U.S.
federal income tax liability, subject to generally applicable limitations and
conditions, or, at the election of such U.S. Holder, for deduction in computing
such U.S. Holder's taxable income. Interest and additional amounts will
constitute income from sources without the United States for foreign tax credit
purposes. For purposes of applying the U.S. foreign tax credit limitation, such
income generally will constitute "passive income" or, in the case of certain
U.S. Holders, "financial services income" unless the Mexican withholding tax
rate applicable to the U.S. Holder is imposed at a rate of at least 5%, in which
case such income generally will constitute "high withholding tax interest."

     The calculation of foreign tax credits and, in the case of a U.S. Holder
that elects to deduct foreign taxes, the availability of deductions, involves
the application of rules that depend on a U.S. Holder's particular
circumstances. U.S. Holders should consult their own tax advisors regarding the
availability of foreign tax credits and the treatment of additional amounts.

     Subject to the discussion below regarding backup withholding, a holder or
beneficial owner of Senior Notes that is not a U.S. Holder (a "Non-U.S. Holder")
generally will not be subject to U.S. federal income or withholding tax on
interest income or additional amounts earned in respect of Senior Notes, unless
such income is effectively connected with the conduct by the Non-U.S. Holder of
a trade or business in the United States.

                                        20
<PAGE>   23

  TAXATION OF DISPOSITIONS

     Gain or loss realized by a U.S. Holder on the sale, redemption or other
disposition of Senior Notes (less amounts attributable to accrued interest)
generally will be long-term capital gain or loss if, at the time of the
disposition, the Senior Notes have been held for more than one year. Generally,
U.S. Holders that are individuals will be taxed at a preferential rate with
respect to long-term capital gains. There are limits on the deductibility of
capital losses. Gain realized by a U.S. Holder generally will be treated as U.S.
source income for U.S. foreign tax credit purposes. The United States Department
of the Treasury recently published temporary regulations which generally treat
the loss recognized by a U.S. Holder as U.S. source loss.

     Subject to the discussion below regarding backup withholding, a Non-U.S.
Holder of Senior Notes will not be subject to U.S. federal income or withholding
tax on gain realized on the sale or other disposition of Senior Notes unless (i)
such gain is effectively connected with the conduct by the Non-U.S. Holder of a
trade or business in the United States or (ii) in the case of gain realized by
an individual Non-U.S. Holder, the Non-U.S. Holder is present in the United
States for 183 days or more in the taxable year of the sale and certain other
conditions are met.

  BACKUP WITHHOLDING AND INFORMATION REPORTING

     In general, payments of interest and the proceeds of a sale, redemption or
other disposition of the Senior Notes payable to a U.S. Holder by a U.S. paying
agent or other U.S. intermediary will be reported to the Internal Revenue
Service and to the U.S. Holder as may be required under applicable regulations.
Backup withholding at a rate of 31% may apply to these payments if the U.S.
Holder fails to provide an accurate taxpayer identification number or
certification of foreign or other exempt status or fails to report all interest
and dividends required to be shown on its federal income tax returns. Any amount
withheld from a payment to a holder under the backup withholding rules is
allowable as credit against such holder's U.S. federal income tax liability,
provided that the required information is provided to the IRS. Certain U.S.
Holders (including, among others, corporations) are not subject to backup
withholding. U.S. Holders should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.

     The United States Department of the Treasury recently promulgated final
regulations regarding the information reporting and backup reporting rules
discussed above. In general, the final regulations do not significantly alter
the substantive information reporting and backup withholding requirements but
rather unify current certification procedures and forms and clarify reliance
standards. In addition, the final regulations permit the shifting of primary
responsibility for withholding to certain financial intermediaries acting on
behalf of beneficial owners. The final regulations are generally effective for
payments made on or after January 1, 2001, subject to certain transition rules.
Purchasers of the Senior Notes should consult their own tax advisors concerning
the effect of such regulations on their particular situations.

                                   REGULATION

REGULATORY FRAMEWORK

     The Federal Telecommunications Law of Mexico (the "Communications Law"),
which provides the overall legal framework for the regulation of satellite
services in Mexico, became generally effective on June 7, 1995. Under the
Communications Law, a provider of satellite services, such as the Company, must
operate under a concession granted by the Secretaria de Comunicaciones y
Transportes (the Ministry of Communications and Transportation or the "SCT"),
pursuant to an auction process. Such a concession may only be granted to a
Mexican corporation and may not be transferred or assigned without the approval
of the SCT. Foreign investors are permitted by law to hold up to 49% of the
voting stock of such a corporation.

     In addition, the Company's operations are mainly subject to the Ley General
de Bienes Nacionales (the General Law on National Assets), which regulates all
assets that fall within the public domain and the terms for the expropriation
(rescate) of the Company's concessions, the Ley General del Equilibrio Ecologico
y

                                        21
<PAGE>   24

Proteccion al Ambiente (the General Law on Ecology and Protection of the
Environment or the "Environment Law") and other environmental laws, the Ley
Federal de Competencia Economica (the Federal Economic Competition Law), the Ley
de Vias Generales de Comunicacion (the Law of General Means of Communication)
and other international treaties, laws, rules and decrees.

     Under the Telecommunications Law, the SCT is, among other things,
responsible for issuing concessions and permits related to telecommunications
and for formulating policies in the telecommunications area and otherwise taking
all other actions on behalf of the Mexican government in connection with
telecommunications. The Mexican Federal Telecommunications Commission (COFETEL)
is the telecommunications authority responsible for most day-to-day regulation
of satellite communications in Mexico. The Mexican Telecommunications
Commission's duties include, among other things: issuing administrative
regulations relating to telecommunications; recommending amendments to existing
laws and rules; making recommendations to SCT on applications for the grant,
modification, renewal, transfer and revocation of concessions and permits;
administering the radio frequency spectrum; promoting and overseeing
interconnection of equipment and public telecommunications networks; registering
tariffs for telecommunications services and establishing specific obligations
relating to tariffs, quality of service and provision of information by carriers
with substantial market power; and ensuring carriers comply with the obligations
set forth in concessions and permits.

     Satellite control centers must be established within Mexico for satellites
authorized to use Mexican orbital slots. The Communications Law allows
satellites licensed to Mexican orbital positions to serve other countries
subject to the terms and conditions of treaties with Mexico and subject to the
laws of the foreign country. The SCT may grant concessions at any time to
foreign satellite systems to serve Mexico subject to applicable treaties and
Mexican law.

     The rules promulgated pursuant to the Communications Law requires licensees
of satellites intending to provide telecommunications services through one or
more transmitting earth stations of their own to obtain a separate license to
construct and operate a public telecommunications network. Where the satellite
operator intends to provide services other than public telecommunications
services through its own earth stations, it must obtain a permit from the SCT.
Where a satellite operator intends to provide services other than the lease of
capacity by obtaining a separate license or permit, it may provide such services
only through an affiliate or subsidiary.

THE CONCESSIONS

     The Mexican government has awarded the Company the following concessions:
(i) the right to occupy each of three orbital positions and exploit their
respective C- and Ku-band frequencies (the "Orbital Concessions") and (ii) the
right to use the buildings and areas in which the control centers are located
(the "Property Concession"). The Orbital Concessions may be granted as
collateral to any party other than a foreign government or state.

     The Orbital Concessions include the right to exploit the 113.0 degrees
W.L., 116.8 degrees W.L. and 109.2 degrees W.L. orbital slots. As part of the
Orbital Concessions, the Company may establish rates and terms for transponder
leasing, which must be registered in order to become effective. However, if the
SCT determines that the Company has substantial power in the Mexican market, the
Mexican Telecommunications Commission may determine tariffs and specify
conditions relating to service quality and information requirements.
Additionally, the Company is prohibited from establishing cross subsidies and
using discriminatory practices.

     As part of the Orbital Concessions, the Company is required to allocate 181
MHz C-band and 181MHz Ku-band to the Mexican government, free of charge, for
national security and certain public purposes. In addition, the Company is
required to operate two L-band transponders (one on each of the Solidaridad
satellites), which will continue to be owned by the Mexican government. After
the Solidaridad 1 failure, the capacity to be provided to the Government is 130
MHz C-band and 105 MHz Ku-band and one L-band transponder.

     Under the Orbital Concessions, the Company is required to: (i) carry out
research and development in Mexico, (ii) preferentially staff the control
centers with Mexican nationals, and (iii) maintain satellite service
                                        22
<PAGE>   25

continuously and efficiently. As security for the performance by the Company of
its obligations under each Orbital Concession, the Company was required to post
and must maintain during the term thereof, a surety bond in the amount of 10
million pesos payable to the Federal Treasury of Mexico with respect to each
Orbital Concession. This amount is adjusted each year to reflect the inflation
rate in Mexico. At December 31, 2000, the adjusted amount was approximately 14.6
million pesos per Orbital Concession. Under the terms of the surety bond, the
Company has paid to Fianzas Monterrey Aetna, a surety, a premium of 87,000 pesos
per Orbital Concession, and the surety has agreed to pay to the Federal Treasury
of Mexico, in the event the Company breaches the terms of the Orbital
Concessions, a sum of 14.6 million pesos per Orbital Concession. The Orbital
Concessions were finalized and published in the Official Gazette on December 30,
1997.

     The Orbital Concessions have twenty-year terms expiring on October 22, 2017
and may, subject to certain conditions, be extended for an additional
twenty-year term, without the payment of any additional consideration to the
Mexican government.

     Except in limited circumstances, the Company must notify the SCT prior to
issuing and selling any shares in the Company that represent 10% or more of the
outstanding capital stock of the Company, and must identify the potential
purchaser. Within 30 days of receipt of such notification the SCT may object to
the sale. The Company may only proceed with the proposed sale if no objection is
raised by the SCT. For a term of three years commencing on November 17, 1997,
shareholders of 51% of the paid-in capital stock of the Company, may not
transfer any shares without prior approval from the SCT (except for transfers
between the shareholders not exceeding 5% of the paid-in capital).

     The Property Concession includes two plots of land, and buildings and
fixtures built thereon. The Property Concession includes the right to use only
the property for the purposes of exploiting the orbital slots and frequency
assignments. Additionally, the Company may not rent or otherwise sublease the
property without the prior permission of the SCT. Under the Property Concession,
the Company is required to: (i) pay an annual fee in an amount equal to 7.5% of
the assessed property value and (ii) maintain the premises in good condition.

     The duration of the Property Concession is forty years or for the length of
the Orbital Concessions. The Property Concession duration may be extended at the
discretion of the SCT.

CONCESSION TERMINATION

     The Orbital Concessions will terminate if (i) the term of any such Orbital
Concession expires, (ii) the Company resigns its rights under any such Orbital
Concession, (iii) the Mexican government through the SCT, expropriates any of
the Orbital Concessions, (iv) the Company is liquidated or becomes bankrupt or
(v) the SCT revokes any of the Orbital Concessions. The Company's assets and
rights under the Orbital Concessions may also be temporarily seized by the SCT,
as described below.

     The Communications Law provides that the SCT may revoke any of the Orbital
Concessions upon the occurrence of certain events, including: (i) failure by the
Company to exercise its rights under any of the Orbital Concessions for a period
greater than 180 days from the date the Orbital Concessions were granted; (ii)
unjustified interruption of the services that may be provided under the Orbital
Concessions; (iii) the Company's undertaking any action or refraining from
taking any action that affects the rights of other licensees or concessionaires;
(iv) failure by the Company to satisfy the terms or conditions set forth in the
Orbital Concessions; (v) unjustified failure by the Company to interconnect
other concessionaires or licensees that have the right to provide
telecommunications services; (vi) change of nationality of the Company and (vii)
assignment or transfer of rights granted under the Orbital Concessions in
contravention of the terms of the Communications Law. In the cases of items (i),
(v), (vi) and (vii) above, the SCT may immediately revoke any of the Orbital
Concessions. In the cases of items (ii), (iii) and (iv) above, the SCT may only
revoke any of the Orbital Concessions if it has imposed sanctions on the Company
for the relevant breach on at least three separate occasions. In the event any
of the Orbital Concessions is revoked by the SCT, no compensation shall be paid
to the Company.

                                        23
<PAGE>   26

     The SCT also has the right to terminate any of the Orbital Concessions
pursuant to an expropriation (rescate). From and after any such expropriation,
assets used in connection with the exploitation of the Orbital Concessions would
be subject to the ownership and management of the Mexican government.

     The SCT may also temporarily seize the Orbital Concessions in the event of
natural disaster, war, substantial breach of the public peace and order, or
imminent danger to national security, internal peace or the Mexican economy. In
the past, the Mexican government has used this power to ensure continued service
during labor disputes. Mexican law requires that the Mexican government pay
compensation to the Company if it effects an expropriation or a temporary
seizure, except in the case of a temporary seizure due to war. In respect of an
expropriation (rescate), the basis for any compensation to a concessionaire is
specified by decree of the Mexican government and is subject to judicial review
in the event of dispute. With respect to a temporary seizure, the Communications
Law provides that the Mexican government will indemnify the affected
concessionaire in an amount equal to damages and losses reflecting their real
value; in the event of a dispute regarding such matters, losses shall be
determined by appraisers mutually appointed by the parties and damages shall be
determined on the basis of the average net income generated by the
concessionaire in the year prior to the temporary seizure.

     If the Orbital Concessions are expropriated and in connection with such
expropriation compensation is paid to the Company, the lenders under the
Company's secured credit facility and the holders of the secured floating rate
notes would have priority over the holders of the 10 1/8% fixed rate notes with
respect to such compensation until all amounts due under the secured credit
facility and all amounts due on the secured floating rate notes are paid in
full, and thereafter the holders of the fixed rate notes would have a claim with
respect to any such remaining compensation which would rank pari passu with the
claims of other unsecured creditors of the Company.

     The Property Concession will terminate if: (i) the Property Concession term
expires; (ii) the Company resigns its rights to the Property Concession; (iii)
the Orbital Concessions are terminated; (iv) the purpose for which the Property
Concession is granted no longer exists; (v) the Mexican government expropriates
the Property Concession for reasons of public interest or (vi) the Property
Concession is revoked. The Mexican government may revoke the Property Concession
for various reasons, including without limitation, the following: (i) failure to
use the Property Concession for the purpose for which it was granted; (ii)
failure to comply with the terms of the Property Concession; (iii) activities,
without prior permission of the SCT, which interfere with satellite operations;
and (iv) under terms and conditions generally applicable to property concessions
of this type under applicable Mexican law.

     At the end of the concession term, the orbital positions and control center
land and buildings will revert to the state. The Mexican government will then
have preference to acquire the satellites, control centers and other associated
and necessary equipment for the continuation of satellite service.

TREATIES AND INTERNATIONAL ACCORDS

  RECIPROCITY AGREEMENT BETWEEN THE UNITED STATES AND MEXICO

     In April 1996, Mexico and the United States (the "Parties") signed an
agreement (the "Reciprocity Agreement") concerning the transmission and
reception of signals from satellites for the provision of satellite services to
users in Mexico and the United States. The main aspects of this agreement are
(i) Mexican satellites are permitted to provide satellite service to, from and
within the United States (in conformance with applicable U.S. law), (ii) U.S.
satellites are permitted to provide satellite service to, from and within Mexico
(in conformance with applicable Mexican law), (iii) the conditions for the
transmission and reception of satellite signals will be as agreed to in
protocols to the agreement, (iv) the entities operating commercial satellites
and earth stations may be structured with either public or private participation
(in conformity with both Mexican and U.S. law), (v) neither Mexico nor the
United States shall require a satellite licensed by the other government to
obtain an additional license for the operation of the satellite in order to
provide the satellite services described in the protocols to the Reciprocity
Agreement, (vi) licenses for earth stations and satellite services must comply
with national laws and regulations, (vii) applicable foreign ownership
restrictions on satellite service providers and earth station licenses continue
to apply and (viii) both Mexico

                                        24
<PAGE>   27

and the United States retain the right to take actions that either government
considers necessary for the protection of its essential security interests.

     The Reciprocity Agreement may be amended by agreement of the Parties.
Additional protocols or protocol amendments may be concluded by written
agreement of the Parties. The Reciprocity Agreement may be terminated by mutual
agreement of the Parties, or by either Party by written notice of termination to
the other Party through diplomatic channels. Such notice of termination will
enter into effect six months after receipt of the notice.

  DTH PROTOCOL

     In November 1996, Mexico and the United States signed a protocol (the "DTH
Protocol") to the Reciprocity Agreement concerning the transmission and
reception of signals from satellites for the provision of DTH satellite
services. DTH satellite services are defined to include DTH fixed satellite
service ("DTH-FSS") and broadcasting satellite service ("BSS"), which include
one-way, encrypted video or video/audio radiocommunication signals transmitted
by satellite for direct reception by subscribers who pay a periodic fee,
distribution of video/audio to cable television head-ends and multipoint
distribution service ("MDS") or wireless cable facilities. The DTH Protocol
addressed only a limited number of radiocommunication frequencies. The United
States and Mexico have each agreed to permit satellites licensed by the other
government to provide DTH-FSS and BSS to, from, and within the other country's
territory. Entities seeking to transmit or receive DTH-FSS or BSS signals via a
satellite licensed by the other administration (e.g., through an earth station
in the non-licensing jurisdiction) must still comply with the non-licensing
jurisdiction's other applicable laws (e.g., the earth station licensing
process). Both Mexico and the United States reserve the right to refuse to
accept signals originating from third countries. In addition, both countries
agree to permit DTH-FSS and BSS signals to be delivered directly to subscribers
without requiring that they be retransmitted over an intermediary satellite
system. Mexico and the United States agree not to impose significant
restrictions on the amount or origin of advertising and program content. The DTH
Protocol does not apply to the transmission of any audio-only DTH-FSS or BSS
signals that do not contain solely music. Service to cable television head-ends
is permitted under the DTH Protocol as of November 8, 1997.

     The DTH Protocol may be amended by written agreement of the Parties. The
DTH Protocol may be terminated by agreement of the Parties, or by either Party
by written notice of termination to the other Party. Such notice of termination
shall enter into effect six months after receipt of the notice. The DTH Protocol
will remain in force until it is terminated in such manner or replaced by a new
protocol. Upon termination of the DTH Protocol, a Party may, at its discretion,
terminate any license that has been issued pursuant to the DTH Protocol. In
addition to the general provisions for termination, the DTH Protocol may be
terminated upon sixty days written notice if a Party determines that the other
Party has failed to conform to the principles of the DTH Protocol.

  FSS PROTOCOL

     In October 1997, Mexico and the United States signed another protocol (the
"FSS Protocol") to the Reciprocity Agreement, with respect to the transmission
and reception of signals from satellites for the provision of international and
domestic FSS. The definition of FSS includes, but is not limited to, signals
carrying video or video/audio distributed to cable television head-end and
multipoint distribution service (restricted microwave television service)
facilities and excludes the DTH-FSS and BSS services governed by the DTH
Protocol. Like the DTH Protocol, the FSS Protocol addresses only a limited
number of radiocommunication frequencies. Subject to the terms of the FSS
Protocol, the United States and Mexico have agreed to permit satellites licensed
by the other to provide domestic and international FSS to, from, and within the
other country's territory. Satellites licensed by either Mexico or the United
States may be authorized to provide international service beginning October 16,
1997. Satellites licensed by the United States were authorized to provide
domestic FSS in Mexico beginning in January 1999. Satellites licensed by Mexico
were authorized to provide domestic FSS services in the United States beginning
on January 1, 1998. The FSS Protocol also states that a satellite licensed by
either Mexico or the United States to provide DTH-FSS or BSS shall be permitted
to provide video or video-audio distribution to cable television head-end and
                                        25
<PAGE>   28

multipoint distribution service (restricted microwave television services)
facilities beginning November 8, 1997. Entities seeking to transmit or receive
FSS signals via a satellite licensed by the other Party (e.g., through an earth
station in the non-licensing jurisdiction) must still comply with the
non-licensing jurisdiction's other applicable laws (e.g., the earth station
licensing process). Unlike the DTH Protocol, the FSS Protocol permits
communications to or from third countries. However, similar to the DTH Protocol,
under the FSS Protocol, both countries agree to permit FSS signals to be
delivered directly to fixed-earth stations without requiring that they be
retransmitted over an intermediary satellite system.

     The FSS Protocol may be amended by written agreement of the Parties. The
FSS Protocol may be terminated by agreement of the Parties, or by either Party
by written notice of termination to the other Party. Such notice of termination
shall enter into effect six months after receipt of the notice. Upon termination
of the FSS Protocol, a Party may, at its discretion, terminate any license that
has been issued pursuant to the FSS Protocol. The FSS Protocol will remain in
force until it is terminated in such manner or replaced by a new protocol.

  RECIPROCITY AGREEMENT BETWEEN CANADA AND MEXICO

     In April 1999, Mexico and Canada signed an agreement similar to the
agreement between Mexico and the United States. As of December 31, 2000, the
protocols between Canada and Mexico had not been signed.

  ARGENTINE AGREEMENT

     In November of 1997, the governments of Mexico and the Argentine Republic
entered into a bilateral agreement to afford reciprocal treatment for satellite
service providers licensed under the laws of each party. The agreement provides
that satellite service providers licensed in Mexico may transmit certain
DTH-FSS, BSS and other FSS signals to satellite customers in Argentina, and vice
versa. The agreement, using the radiocommunication rules of the International
Telecommunications Union (the "ITU") as a base, sets forth the terms and
conditions for the technical coordination of each party's satellite systems. The
parties further agreed to cooperate in assuring compliance with each party's
applicable laws and regulations. Mexican satellite providers operating in
Argentina would remain subject to applicable Argentine law, and vice versa. The
parties agreed to apply their respective laws in a transparent and
non-discriminatory fashion. An agreement was entered into in June 2000, but will
not be implemented until the mutual exchange of diplomatic notes and the
execution of a more detailed protocol.

  ANDESAT AGREEMENT

     On October 24, 1997, Mexico and Member Countries of the Andean Community of
Nations (the "Andean Community") entered into a five year agreement regarding
coordination between the Mexican satellite system and the Simon Bolivar Andean
satellite system, which was amended on March 1, 1999 (the "ANDESAT Agreement").

     Under the ANDESAT Agreement, Satmex has agreed to provide the Andean
Community satellite capacity until January 2003 at certain preferred rates. As
of December 31, 2000, the Andean Community has the right to use, at no charge,
one and one quarter transponders. Subject to certain conditions, ANDESAT has the
first purchase option of up to eight transponders for DTH service on Satmex 5 at
a price to be agreed upon by the parties and/or the parties reaching a shared
utility agreement. If requested, Satmex will provide up to 600 hours of
technical assistance at no charge for the design, construction and launch of the
Simon Bolivar satellite system. As of December 31, 2000, Satmex has not provided
any technical assistance for the Simon Bolivar satellite system. In addition, if
requested, Satmex will provide, subject to availability, backup satellite
capacity for the first Simon Bolivar satellite.

  THE GENERAL AGREEMENT ON TRADE IN SERVICES ("GATS")

     Under the auspices of the World Trade Organization (the "WTO"), the
Negotiating Group for Basic Telecommunications concluded negotiations that
resulted in receipt of commitments from 69 governments. The commitments cover
basic telecommunications services including telephony, packet and circuit data
                                        26
<PAGE>   29

transmission, fax, private leased, circuit, cellular telephony, individual
localization telex and telegraph services. These services can be offered through
a variety of available medium, such as cable, wireless, radio or satellite. The
GATS itself imposes an obligation to afford most-favored-nation treatment to all
other members unless an exemption is filed. Mexico did not file an exemption.

     Mexico has adopted the regulatory reference paper which established
parameters relating to competition, interconnection, universal service, public
availability, criteria for awarding licenses, autonomy of the regulatory entity
and assignment and exploitation of available resources. Mexico has established
the following service parameters: (i) telex and telegraph services are not
included; (ii) cross-border traffic must be routed through a company licensed by
the SCT; (iii) license fees are imposed; (iv) licenses will only be awarded to
Mexican companies, in which foreign participation is limited to 49%, except in
cellular, where foreign participation may be higher; (v) services other than
international long-distance that require the use of satellites must employ
Mexican satellites until 2002; and (vi) there is no limit to foreign investment
in companies that offer services to third parties.

GOVERNMENT AND SUPRA-GOVERNMENTAL REGULATION

  FCC REGULATION OF SATELLITE SERVICES AND FOREIGN OWNERSHIP OF FCC LICENSES

     The U.S. satellite and telecommunications industries are highly regulated.
In addition to the international accords and protocols discussed above, the
Federal Communications Commission (the "FCC") regulates satellite providers
operating in the U.S. as well as the provision of satellite services, generally.
The FCC currently regulates access to the U.S. market by non-U.S. licensed
satellite systems.

     In the Second Domestic International Satellite Consolidation rulemaking
("DISCO II"), the FCC adopted a framework under which it will consider requests
for the use of non-U.S. licensed satellites to provide services in the U.S. The
FCC will examine all requests to determine whether grant of authority is
consistent with the public interest, convenience and necessity. In doing so, the
FCC will consider factors such as the effect on competition in the U.S. market,
spectrum availability, eligibility requirements (such as foreign ownership,
legal, technical and financial qualifications), operating requirements and
national security, law enforcement, foreign policy and trade concerns, as
appropriate. Depending on the nature of the services offered in the United
States, these foreign-licensed satellites may be subject to a variety of
regulatory requirements. Petitions to reconsider certain aspects of the DISCO II
order have been filed with the FCC.

     In determining the effect on competition, the order in DISCO II establishes
a presumption that competition will be promoted, and, therefore, that no
effective competitive opportunities ("ECO") test is required, in evaluating
whether to permit satellites licensed by WTO member countries (including
affiliates of INTELSAT and Inmarsat licensed by WTO members and providing
covered services) to provide services covered by the U.S. schedule of
commitments under the World Trade Organization Agreement on Basic
Telecommunications (the "WTO Basic Telecom Agreement"). Except that if Comsat
Corporation seeks to provide domestic services, it will be required to make an
appropriate waiver of immunity from suit and demonstrate that the service will
enhance competition in the U.S. market. For requests to serve the U.S. market by
satellite operators from non-WTO member countries, the FCC will examine the
effective competitive opportunities in the foreign markets for U.S. satellite
operators to determine if the non-U.S. satellite satisfies the competition
component of the public interest analysis.

     The FCC will also apply the ECO tests to requests to serve the U.S. market
with services not covered by the WTO Agreement such as DTH-FSS, direct broadcast
satellite services, and digital audio radio services. The U.S. schedule of
commitments under the WTO Basic Telecom Agreement excludes DTH-FSS, direct
broadcast satellite service and digital audio radio service, and the U.S. has
taken a most-favored-nation and national treatment exception for these services.
Thus, for those services the FCC will continue to apply the ECO test to entities
including WTO member countries seeking to provide these services. The FCC,
however, has created an exception to this general rule where the U.S. has
entered into bilateral agreements with the other country regarding specific
services, as the U.S. has done with Mexico. The FCC will review earth station
applications to access a satellite licensed in a country with which the U.S. has
a bilateral agreement based on

                                        27
<PAGE>   30

a presumption that entry will promote competition. The application will be
subject to other public interest requirements and must comply with FCC technical
and service rules.

     Once operational, a non-U.S. licensed satellite system serving the U.S.
will be subject to the same ongoing requirements that apply to U.S.-licensed
satellites. For instance, the FCC rules prohibit an international satellite
provider from entering into exclusionary arrangements with other countries for
satellite capacity for a particular service. The DISCO II process provides that
in order for non-U.S. satellite operators to bring before the FCC their requests
to serve the U.S. they may (i) participate in a U.S. space station processing
round, or (ii) have a U.S. earth station operator apply for authority to
communicate with the non-U.S. satellite or (iii) apply to be listed on the
"Premitted Space Station List" of non-U.S. licensed satellites that any
U.S.-authorized earth station with an "ALSAT" designation may communicate with,
subject to any condition the FCC may impose. The FCC does not require space
stations licensed by another country or administration to obtain separate and
duplicative U.S. space station licenses, but the FCC does require compliance
with the same technical requirements it imposes on U.S. satellites.

     The FCC also places certain restrictions on the ownership by non-U.S.
citizens and corporations of FCC licenses. The Communications Act of 1934, as
amended (the "Communications Act"), provides that certain radio licenses,
including earth station licenses, cannot be granted to or held by any foreign
government or the representative thereof. In addition, under Section 310(b) of
the Communications Act, a non-U.S. citizen or a corporation organized under the
laws of any foreign government may not hold or vote more than 20% of the equity
of a common carrier, broadcast or aeronautical licensee directly. However, under
Section 310(b)(4), the FCC does permit non-U.S. citizens or foreign corporations
to own or vote 25% of the equity of a U.S. corporation which, in turn, owns all
or part of the equity of a common carrier, broadcast or aeronautical licensee
(i.e., a holding company) unless such ownership would be contrary to the public
interest. The FCC has the discretion to permit such persons and corporations to
exceed the 25% benchmark applicable to such indirect ownership interests.

     The FCC had applied an ECO test as part of its public interest analysis for
allowing non-U.S. citizens or foreign corporations to exceed the 25% benchmark
under Section 310(b)(4) for indirect interest in common carrier, broadcast and
aeronautical radio licensees. Recently the FCC eliminated the ECO test for
common carrier, broadcast and aeronautical licensees or applications with
indirect foreign ownership from WTO member countries. Instead, the FCC adopted a
rebuttable presumption that applications by investors from WTO member countries
to exceed the 25% foreign ownership benchmark under Section 310(b)(4) will
promote competition. The FCC will, however, consider other public interest
factors such as national security, law enforcement, foreign policy and trade
concerns, if raised by the Executive Branch of the U.S. government. Licensees
must seek FCC approval before they accept indirect foreign ownership that would
put them over the 25% benchmark. The FCC may deny applications that pose a very
high risk to competition that cannot be addressed by conditions that it may
impose on the license. Petitions to reconsider certain aspects of the FCC order
adopting the regime described above have been filed with the FCC.

     On December 14, 1999, Satmex requested that the FCC include Satmex's
satellites in the United States Permitted Space Station List. This request was
approved by the FCC on October 30, 2000, and Satmex's satellites communicate
with earth stations and customers in the United States.

  ROLE OF THE INTERNATIONAL TELECOMMUNICATION UNION

     Registration of orbital slots and international frequency coordination is
accomplished under the aegis of the ITU, an international body in which most of
the nations of the world are represented as member states. Representation at the
ITU for coordination purposes is limited to national representatives; private
companies are not entitled to participate in their own right in coordination
activities.

     All ITU filings are made through ITU member states. Therefore, companies
must work within the constraints set by the administration representing their
interests and factors such as national interests and foreign relations concerns
often affect positions that an administration is willing to take on behalf of
commercial entities.

                                        28
<PAGE>   31

     Nations are required by treaty to give notice of their proposed use of
satellite orbital slots and frequencies with Radiocommunication Bureau
("Bureau") of the ITU. After notification by the Bureau of the orbital slot
request, other nations are afforded the opportunity to apprise the Bureau of any
conflicts with their present or planned satellite systems. When a conflict or
potential conflict is noted, nations are obligated to negotiate in a effort to
coordinate the proposed uses and resolve any interference concerns. The ITU,
however, has no power to resolve disputes formally.

     The process is ultimately subject to enforcement by national regulatory
authorities acting pursuant to international treaty obligations. The ITU has
limited power to enforce or police its rules; it relies on the goodwill and
cooperation of the individual members.

     ITU rules grant coordination priority with respect to most frequency
assignments at most orbital locations on a "first to file, first in right"
basis, even though a filing entails no enforceable commitment to construct or
launch a satellite within any particular period of time. When coordination
consultations have been successfully completed, the Bureau is notified of that
fact by the sponsoring administration. Subsequently, the satellite registrations
are listed in the Bureau's Master International Frequency Register ("MIFR"),
which contains, for instance, the assigned frequency, the date of its
registration, and technical details. Once this information is registered, the
assignment is entitled to international recognition and protection against
harmful interference for the life of the satellite while it is in operation.

     The SCT and other Mexican governmental agencies are responsible for filing
and coordinating requests by Mexican companies to coordinate orbital slots and
frequency assignments with the Bureau and for resolving interference concerns.
Use of the orbital slots remains subject to the continuing oversight of SCT and
to a variety of regulations generally applicable to all satellite and radio
licensees, including the international radio regulations.

  STATUS OF THE COMPANY SATELLITES

     The Mexican government notified the ITU on October 4, 1994 that
coordination for Solidaridad 1 had been completed and notified the ITU on April
25, 1995 that coordination for Solidaridad 2 had been completed.

     The Satmex 5 request for coordination was published by the ITU on June 24,
1997. The Company has favorably concluded coordination discussions with the
government of Canada regarding Satmex 5 and is able to provide service in
Canada.

     The Company has held preliminary discussions with Canada regarding
coordination of the replacement satellite for Solidaridad 1, which will be
located at 109.2(o)WL.

  INTELSAT CONSULTATION

     INTELSAT is an international organization that owns and operates satellite
systems. Article XIV of the international agreement creating INTELSAT requires
signatories to the agreement, such as Mexico, to consult with INTELSAT prior to
establishing, acquiring or utilizing space segment facilities or satellites
other than INTELSAT to meet their domestic or international public
telecommunications services requirements. The Mexican government as a signatory
must complete the consultation process with INTELSAT for each new satellite or
modifications to existing satellites to ensure that any such satellite or
modification will not cause INTELSAT technical harm arising from signal
interference. The Mexican government has completed the consultation process for
Solidaridad 2 and Satmex 5.

     The Company will request that the Mexican Government initiate the
consultation process during 2001 for the replacement satellite for Solidaridad
1.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to market risk from changes in currency exchange
rates and change in interest rates. The Company from time to time assesses its
exposure and monitors opportunities to manage these risks.

                                        29
<PAGE>   32

  EXCHANGE RATE RISK

     During 1999 and 2000, the annual rates of inflation in Mexico, as measured
by changes in the National Consumer Price Index as provided by the Banco de
Mexico, were 12.3% and 9.0%, respectively. The Company's major expenditures,
including capital expenses and satellite insurance will not be affected by high
levels of inflation, because they are denominated in dollars. Customer contracts
are also denominated in dollars. However, high inflation rates would affect peso
denominated expenses such as payroll and rent and could result in an increase in
uncollectible accounts receivable and customer lease cancellations. To the
extent that the peso's devaluation against the U.S. dollar is less than the
inflation rate in Mexico, the Company will be adversely affected by the effect
of inflation in Mexico with respect to its peso denominated expenses.

  INTEREST RATE RISK

     At December 31, 2000, the fair value, based on quoted market prices, of the
Company's fixed rate notes was approximately $203 million. The carrying value of
the Company's revolving credit facility and senior secured notes approximates
their fair value because their interest rates are based on floating rates. The
carrying value of the Company's debt exceeded fair value by $117 million. Market
risk on debt is estimated as the potential increase in annual interest expense
resulting from a hypothetical one percent increase in interest rates and amounts
to $2.5 million.

                                    PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Not applicable.

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

     Not applicable.

                                    PART IV

ITEM 18.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Index To Financial Statements...............................  F-1
Independent Auditors' Report................................  F-2
Report of Independent Accountants...........................  F-3
Balance Sheets as of December 31, 2000 and 1999.............  F-4
Statements of Operations for the years ended December 31,
  2000, 1999 and 1998.......................................  F-5
Statements of Changes in Stockholders' Equity for the years
  ended December 31, 2000, 1999 and 1998....................  F-6
Statements of Cash Flows for the years ended December 31,
  2000, 1999 and 1998.......................................  F-7
Notes to the Financial Statements...........................  F-8
</TABLE>

ITEM 19.  EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------                           -----------
<C>           <S>
    2.1       Contract for the Purchase and Sale of Personal Property
              (Contrato de Compraventa de Bienes Muebles), dated as of
              October 15, 1997, by and between the Federal Government of
              the United Mexican States and Satelites Mexicanos, S.A. de
              C.V.+
    2.2       Contract for the Purchase and Sale of Personal Property
              (Contrato de Compraventa de Bienes Muebles), dated as of
              October 15, 1997, by and between the Federal Government of
              the United Mexican States and Satelites Mexicanos, S.A. de
              C.V. (English translation).+
</TABLE>

                                        30
<PAGE>   33

<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------                           -----------
<C>           <S>
    2.3       Stock Purchase and Sale Agreement (Contrato de Compraventa
              de Acciones), dated as of November 17, 1997, by and between
              the Federal Government of the United Mexican States and
              Corporativo Satelites Mexicanos, S.A. de C.V.+
    2.4       Stock Purchase and Sale Agreement (Contrato de Compraventa
              de Acciones), dated as of November 17, 1997, by and between
              the Federal Government of the United Mexican States and
              Corporativo Satelites Mexicanos, S.A. de C.V. (English
              translation).+
    3.1       Estatutos Sociales (bylaws) of Satelites Mexicanos, S.A. de
              C.V.+
    3.2       Estatutos Sociales (bylaws) of Satelites Mexicanos, S.A. de
              C.V. (English translation)+
    4.1       Indenture, dated as of February 2, 1998, between Satelites
              Mexicanos, S.A. de C.V. and The Bank of New York, as
              trustee.+
    4.2       Amended and Restated Credit Agreement among Firmamento
              Mexicano S. de R.L. de C.V., Servicios Corporativos
              Satelitales, S.A. de C.V., Satelites Mexicanos, S.A. de
              C.V., the several Lenders from time to time parties thereto,
              Donaldson, Lufkin & Jenrette Securities Corporation and
              Lehman Brothers Inc., as arrangers, DLJ Capital Funding,
              Inc. and Lehman Commercial Paper Inc., as Syndication
              Agents, and Citibank, N.A., as Administrative Agent, dated
              as of February 23, 1998.+
    4.3       Intercreditor and Collateral Trust Agreement among
              Firmamento Mexicano S. de R.L. de C.V., Servicios
              Corporativos Satelitales, S.A. de C.V., Satelites Mexicanos,
              S.A. de C.V., Citibank, N.A., as Administrative Agent,
              Citibank, N.A., as Indenture Trustee, and Citibank, N.A., as
              Collateral Trustee, dated as of February 23, 1998.+
    4.4       Indenture, dated as of March 4, 1998, among, Satelites
              Mexicanos, S.A. de C.V., as the Issuer, Firmamento Mexicano
              S. de R.L. de C.V. and Servicios Corporativos Satelitales,
              S.A. de C.V., as Guarantors, and Citibank, N.A., as
              trustee.+
    4.5       First Amendment, dated as of June 23, 1998, to the Amended
              and Restated Credit Agreement among Firmamento Mexicano S.
              de R.L. de C.V., Servicios Corporativos Satelitales, S.A. de
              C.V., Satelites Mexicanos, S.A. de C.V., the several Lenders
              from time to time parties thereto, Donaldson, Lufkin &
              Jenrette Securities Corporation and Lehman Brothers Inc., as
              arrangers, DLJ Capital Funding, Inc. and Lehman Commercial
              Paper Inc., as Syndication Agents, and Citibank, N.A., as
              Administrative Agent, dated as of February 23, 1998.+
    4.6       First Supplemental Indenture, dated as of June 30, 1998,
              Supplemental to Indenture, dated as of March 4, 1998, among,
              Satelites Mexicanos, S.A. de C.V., as the Issuer, Firmamento
              Mexicano S. de R.L. de C.V. and Servicios Corporativos
              Satelitales, S.A. de C.V., as Guarantors, and Citibank,
              N.A., as trustee.+
    4.7       Second Amendment, dated as of February 16, 2000, to the
              Amended and Restated Credit Agreement among Firmamento
              Mexicano S. de R.L. de C.V., Servicios Corporativos
              Satelitales, S.A. de C.V., Satelites Mexicanos, S.A. de
              C.V., the several Lenders from time to time parties thereto,
              Donaldson, Lufkin & Jenrette Securities Corporation and
              Lehman Brothers Inc., as arrangers, DLJ Capital Funding,
              Inc. and Lehman Commercial Paper Inc., as Syndication
              Agents, and Citibank, N.A., as Administrative Agent, dated
              as of February 23, 1998.++
    4.8       Second Supplemental Indenture, dated as of February 16,
              2000, to Indenture, dated as of March 4, 1998, among,
              Satelites Mexicanos, S.A. de C.V., as the Issuer, Firmamento
              Mexicano S. de R.L. de C.V. and Servicios Corporativos
              Satelitales, S.A. de C.V., as Guarantors, and Citibank,
              N.A., as trustee.++
   10.1       Intentionally omitted.
   10.2       Intentionally omitted.
   10.3       Intentionally omitted.
   10.4       Intentionally omitted.
   10.5       Registration Rights Agreement, dated as of February 2, 1998,
              by and between Satelites Mexicanos, S.A. de C.V. and
              Donaldson, Lufkin & Jenrette Securities Corporation and
              Lehman Brothers Inc., as Initial Purchasers.+
   10.6       Contract Number TVDP-1191/97 for the Provision of Ongoing
              Service for the Transmission of Restricted Television
              Signals by Satellite, dated September 9, 1997, by and
              between the Decentralized Telecommunications Agency of
              Mexico and Corporacion de Radio y Television del Norte de
              Mexico, S.A. de C.V.+#
</TABLE>

                                        31
<PAGE>   34

<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------                           -----------
<C>           <S>
   10.7       Contract Number TVDP-1191/97 for the Provision of Ongoing
              Service for the Transmission of Restricted Television
              Signals by Satellite, dated September 9, 1997, by and
              between the Decentralized Telecommunications Agency of
              Mexico and Corporacion de Radio y Television del Norte de
              Mexico, S.A. de C.V. (English translation).+#
   10.8       Modifying Agreement to Contract Number TVDP-007/96 for the
              Provision of Ongoing Service for the Transmission of
              Restricted Television Signals by Satellite, dated September
              9, 1997, by and between the Decentralized Telecommunications
              Agency of Mexico and Corporation de Radio y Television del
              Norte de Mexico, S.A. de C.V.+#
   10.9       Modifying Agreement to Contract Number TVDP-007/96 for the
              Provision of Ongoing Service for the Transmission of
              Restricted Television Signals by Satellite, dated September
              9, 1997, by and between the Decentralized Telecommunications
              Agency of Mexico and Corporation de Radio y Television del
              Norte de Mexico, S.A. de C.V. (English translation).+#
  10.10       Satellite Concession 116.8 degrees W.L.+
  10.11       Satellite Concession 116.8 degrees W.L. (English
              Translation)+
  10.12       Satellite Concession 113.0 degrees W.L.+
  10.13       Satellite Concession 113.0 degrees W.L. (English
              Translation)+
  10.14       Satellite Concession 109.2 degrees W.L.+
  10.15       Satellite Concession 109.2 degrees W.L. (English
              Translation)+
  10.16       Property Concession+
  10.17       Property Concession (English Translation)+
  10.18       Amended and Restated Membership Agreement, dated as of
              August 21, 1998 among Loral SatMex Ltd., Ediciones Enigma,
              S.A. de C.V. and Firmamento Mexicano, S. de R.L. de C.V.+
     12       Computation of Excess (Deficiency) of Earnings to Cover
              Fixed Charges*.
</TABLE>

------------------------------
 # Portions of Exhibit omitted pursuant to an application for confidential
   treatment.
 + Incorporated by reference from registrant's Registration Statement on Form
   S-4 filed on November 9, 1998 (File No. 333-8880).
++ Incorporated by reference from the registrant's Annual Report on Form 20-F
   for the year ended December 31, 1999.
 * Filed herewith.

                                   SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                          SATELITES MEXICANOS, S.A. de C.V.

                                          By: CYNTHIA PELINI
                                            ------------------------------------
                                            Cynthia Pelini
                                            Chief Financial Officer

Date: April 19, 2001

                                        32
<PAGE>   35

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Independent Auditors' Report................................  F-2
Report of Independent Accountants...........................  F-3
Balance Sheets as of December 31, 2000 and 1999.............  F-4
Statements of Operations for the years ended December 31,
  2000, 1999 and 1998.......................................  F-5
Statements of Changes in Stockholders' Equity for the years
  ended December 31, 2000, 1999 and 1998....................  F-6
Statements of Cash Flows for the years ended December 31,
  2000, 1999 and 1998.......................................  F-7
Notes to the Financial Statements...........................  F-8
</TABLE>

                                       F-1
<PAGE>   36

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
Satelites Mexicanos, S.A. de C.V.

     We have audited the accompanying balance sheets of Satelites Mexicanos,
S.A. de C.V. (a subsidiary of Servicios Corporativos Satelitales, S.A. de C.V.)
as of December 31, 2000 and 1999, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 financial statements present fairly, in all material
respects, the financial position of Satelites Mexicanos, S.A. de C.V. as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

Deloitte & Touche
Mexico City, Mexico
January 15, 2001
(January 26, 2001 as to Note 1)

                                       F-2
<PAGE>   37

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors
of Satelites Mexicanos, S.A. de C.V.

     In our opinion, the accompanying statements of operations, changes in
stockholders' equity and cash flows presents fairly, in all material respects,
the results of operations and cash flows of Satelites Mexicanos, S.A. de C.V. (a
subsidiary of Servicios Corporativos Satelitales, S.A. de C.V.) for the year
ended December 31, 1998, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion. We have not audited the
financial statements of Satelites Mexicanos, S.A. de C.V. for any period
subsequent to December 31, 1998.

PricewaterhouseCoopers
Mexico City
March 29, 1999

                                       F-3
<PAGE>   38

                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 2000 AND 1999
                     (Amounts in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                                 2000          1999
                                                              ----------    ----------
<S>                                                           <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $   24,625    $    6,450
  Insurance proceeds receivable (Note 1)....................     235,338
  Accounts receivable, net..................................       7,902         7,341
  Due from related parties..................................       2,525         2,889
  Prepaid insurance.........................................       7,312        13,069
                                                              ----------    ----------
          Total current assets..............................     277,702        29,749
Satellites and equipment, net...............................     354,422       501,174
Concessions, net............................................     476,426       489,331
Prepaid insurance, non current..............................       6,597        10,031
Deferred financing costs, net...............................       8,195         9,368
Other assets................................................         235           460
Deferred income taxes.......................................                     1,621
                                                              ----------    ----------
          Total assets......................................  $1,123,577    $1,041,734
                                                              ==========    ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
  Current maturities of long-term debt......................  $    1,000    $    1,000
  Accounts payable..........................................       4,919         3,341
  Accrued expenses (Note 1).................................      11,332         3,480
  Interest payable..........................................      14,610        13,500
  Deferred income taxes.....................................       8,590         3,387
  Due to related parties....................................       9,928         2,277
                                                              ----------    ----------
          Total current liabilities.........................      50,379        26,985
Accrued expenses, non current (Note 1)......................      15,181
Deferred revenue -- customers...............................       3,957         7,878
Deferred revenue -- Mexican government......................      81,135        83,335
Deferred income taxes.......................................      10,205
Long-term debt..............................................     571,000       587,000
                                                              ----------    ----------
          Total liabilities.................................     731,857       705,198
                                                              ----------    ----------
Commitments and contingencies (Note 9)

Stockholders' equity:
  Common stock..............................................     382,040       380,533
  Preferred stock...........................................      31,886        31,886
  Accumulated deficit.......................................     (22,206)      (75,883)
                                                              ----------    ----------
          Total stockholders' equity........................     391,720       336,536
                                                              ----------    ----------
          Total liabilities and stockholders' equity........  $1,123,577    $1,041,734
                                                              ==========    ==========
</TABLE>

                       See notes to financial statements.

                                       F-4
<PAGE>   39

                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                     (Amounts in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                               2000        1999        1998
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Revenue:
  Service revenue..........................................  $136,441    $110,020    $104,779
  Sales-type lease.........................................                25,500
                                                             --------    --------    --------
                                                              136,441     135,520     104,779
                                                             --------    --------    --------
Operating expenses:
  Satellite operations.....................................    20,039      17,835      14,946
  Selling and administrative expenses......................    20,263      15,887       8,178
  Cost of transponders under sales-type lease..............                14,234
  License and management fees..............................     5,149       1,266          86
  Depreciation expense and amortization of concessions.....    56,675      61,310      48,728
                                                             --------    --------    --------
                                                              102,126     110,532      71,938
                                                             --------    --------    --------
Operating income...........................................    34,315      24,988      32,841
Gain on in-orbit failure of Solidaridad 1 (Note 1).........   103,114
Interest income............................................     1,517       1,347       2,604
Interest expense and amortization of deferred financing
  costs....................................................   (66,635)    (67,325)    (52,119)
Net foreign exchange gain (loss)...........................       (98)          3        (532)
                                                             --------    --------    --------
Income (loss) before income taxes and extraordinary loss...    72,213     (40,987)    (17,206)
Deferred income tax provision..............................   (17,029)     (5,676)       (931)
                                                             --------    --------    --------
Income (loss) before extraordinary loss....................    55,184     (46,663)    (18,137)
Extraordinary loss from extinguishment of debt, net of
  income tax benefit of $2,840.............................                            (5,513)
                                                             --------    --------    --------
Net income (loss)..........................................    55,184     (46,663)    (23,650)
Preferred stock dividend requirement.......................    (1,507)     (1,130)
                                                             --------    --------    --------
Net income (loss) applicable to common stockholders........  $ 53,677    $(47,793)   $(23,650)
                                                             ========    ========    ========
</TABLE>

                       See notes to financial statements.

                                       F-5
<PAGE>   40

                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                (Monetary amounts in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                             COMMON STOCK         PREFERRED STOCK
                                         ---------------------   -----------------   ACCUMULATED
                                           SHARES      AMOUNT    SHARES    AMOUNT      DEFICIT      TOTAL
                                         ----------   --------   -------   -------   -----------   --------
<S>                                      <C>          <C>        <C>       <C>       <C>           <C>
Balance January 1, 1998................  10,000,000   $371,848                        $ (4,440)    $367,408
Finalization of fair value of assets
  contributed by the Government upon
  the merger...........................                  7,555                                        7,555
Net loss...............................                                                (23,650)     (23,650)
                                         ----------   --------                        --------     --------
Balance December 31, 1998..............  10,000,000    379,403                         (28,090)     351,313
Issuance of preferred stock............                          606,730   $31,886                   31,886
Net loss...............................                                                (46,663)     (46,663)
Preferred stock dividend requirement...                  1,130                          (1,130)
                                         ----------   --------   -------   -------    --------     --------
Balance December 31, 1999..............  10,000,000    380,533   606,730    31,886     (75,883)     336,536
Net income.............................                                                 55,184       55,184
Preferred stock dividend requirement...                  1,507                          (1,507)
                                         ----------   --------   -------   -------    --------     --------
Balance December 31, 2000..............  10,000,000   $382,040   606,730   $31,886    $(22,206)    $391,720
                                         ==========   ========   =======   =======    ========     ========
</TABLE>

                       See notes to financial statements.

                                       F-6
<PAGE>   41

                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                     (Amounts in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                             2000        1999         1998
                                                           --------    ---------    ---------
<S>                                                        <C>         <C>          <C>
OPERATING ACTIVITIES
Net income (loss)........................................  $ 55,184    $ (46,663)   $ (23,650)
Non-cash items:
  Depreciation expense and amortization of concessions...    56,675       61,310       48,728
  Amortization of deferred financing costs...............     2,180        4,715        5,423
  Gain on in-orbit failure of Solidaridad 1 (Note 1).....  (103,114)
  Cost of transponders under sales-type lease............                 14,234
  Deferred revenue -- Mexican government.................    (2,200)      (2,200)      (2,200)
  Extraordinary loss.....................................                               5,513
  Deferred income taxes..................................    17,029        5,676          931
Changes in assets and liabilities:
  Accounts receivable....................................      (562)        (279)      (2,611)
  Prepaid insurance......................................     7,571        3,573      (18,123)
  Accounts payable and accrued expenses..................     3,642      (31,872)      32,769
  Interest payable.......................................     1,110         (270)      13,441
  Due from/to related parties............................     8,015          520        1,960
  Deferred revenue -- customers..........................    (3,921)       7,878
  Deferred financing costs and other assets..............      (782)      (1,400)     (11,402)
                                                           --------    ---------    ---------
Cash flow provided by operating activities...............    40,827       15,222       50,779
                                                           --------    ---------    ---------
INVESTING ACTIVITIES
Acquisition of satellites and equipment..................    (6,652)      (6,306)    (152,275)
                                                           --------    ---------    ---------
FINANCING ACTIVITIES
Borrowings (repayments) under revolving credit facility,
  net....................................................   (15,000)      30,000
Proceeds from issuance of senior secured notes...........                             325,000
Proceeds from issuance of fixed rate notes...............                             320,000
Repayment of senior secured notes........................    (1,000)     (86,000)      (1,000)
Decrease in interest reserve account.....................                  9,765       15,235
Repayment of bank loans..................................                            (570,000)
Capital contributions....................................                 31,886
                                                           --------    ---------    ---------
Cash flow (used in) provided by financing activities.....   (16,000)     (14,349)      89,235
                                                           --------    ---------    ---------
Increase (decrease) in cash and cash equivalents.........    18,175       (5,433)     (12,261)
Cash and cash equivalents at beginning of period.........     6,450       11,883       24,144
                                                           --------    ---------    ---------
Cash and cash equivalents at end of period...............  $ 24,625    $   6,450    $  11,883
                                                           ========    =========    =========
SUPPLEMENTAL DISCLOSURE
Interest paid............................................  $ 63,123    $  61,923    $  49,851
                                                           ========    =========    =========
</TABLE>

                       See notes to financial statements.

                                       F-7
<PAGE>   42

                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                       NOTES TO THE FINANCIAL STATEMENTS
                  (Monetary amounts expressed in U.S. dollars)

 1.  THE COMPANY

     On November 17, 1997, Loral Space & Communications, Ltd. (together with its
subsidiaries "Loral") and Principia, S.A. de C.V. ("Principia"), through
Corporativo Satelites Mexicanos, S.A. de C.V. ("Corporativo"), a wholly owned
subsidiary of Firmamento Mexicano, S. de R.L. de C.V. ("Firmamento") acquired
75% of the issued and outstanding capital stock of Satelites Mexicanos, S.A. de
C.V. (the "Company" or "Satmex") for $646.8 million. On November 17, 1997,
Corporativo paid $194.0 million of the purchase price and on December 29, 1997,
paid the balance, plus interest.

     In consideration of the debt incurred by Satmex in connection with the
acquisition, Servicios Corporativos Satelitales, S.A. de C.V. ("Servicios"), a
wholly owned subsidiary of Firmamento, agreed to pay to the Mexican government
$125.1 million (the "Government Obligation"). The Government Obligation accrues
deferred interest at the rate of 6.03% per annum, compounds annually and matures
in December 2004. Payment of the Government Obligation is currently secured by
Loral's and Principia's interests in Firmamento.

     Satmex owns and operates two geosynchronous communications satellites,
Solidaridad 2 and Satmex 5. Satmex also owns another satellite, Morelos 2, which
is in an inclined orbit. Satmex operates in one business segment and is the
leading provider of fixed satellite services ("FSS") to broadcasting and
telecommunications customers in Mexico. Satmex has landing rights to provide
broadcasting and telecommunications transmission capacity in Mexico, the United
States, Canada and 29 nations and territories in the Latin American region.

     On August 29, 2000, Satmex's Solidaridad 1 satellite ceased operating and
was considered irretrievably lost. The loss was caused by the failure of the
back-up control processor on board the satellite. Solidaridad 1, which was built
by Hughes Space and Communications and commenced service in January 1994,
experienced a failure of its primary control processor in April 1999, and the
satellite had been operating on its back-up processor since that time.
Solidaridad 1 was insured for $250 million. At the date of the loss, Solidaridad
1 had a net book value of approximately $109.6 million. After deducting prepaid
insurance of $1.6 million, the unpaid insurance premiums of $12.5 million and
on-going monitoring costs and the excess of the estimated cost over revenue for
the currently committed transponder capacity to be provided to customers of
$23.2 million, the net gain on the in-orbit failure of Solidaridad 1 is
approximately $103.1 million. In January, 2001, Satmex received insurance
proceeds of approximately $235.3 million, net of the unpaid insurance premiums
and related value added tax. Satmex intends to apply the net insurance proceeds
towards the construction, launch and insurance of a replacement satellite as
well as for debt service and Satmex has contracted with Space Systems/Loral,
Inc. ("SS/L"), a wholly owned subsidiary of Loral, to build the replacement
satellite. This satellite, known as Satmex 6, is scheduled to be launched in
January 2003, and is designed to provide broader coverage and higher power
levels than any other satellite currently in the Satmex fleet.

 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Basis of presentation

     The Company's financial statements are presented in U.S. dollars and have
been prepared using accounting principles generally accepted in the United
States of America.

  Functional currency and translation

     The Company maintains its legal books and records in Mexican pesos. The
functional currency of the Company is the U.S. dollar. Monetary assets and
liabilities denominated in pesos are translated into U.S. dollars using current
exchange rates. Non-monetary assets and liabilities originally denominated in
pesos

                                       F-8
<PAGE>   43
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

are translated into U.S. dollars using the historical exchange rate at the date
of the transaction. Capital stock is translated at historical exchange rates.

     The financial statements should not be construed as representations that
Mexican pesos have been, could have been or may in the future be converted into
U.S. dollars at such rates or any other rates.

     Relevant exchange rates used in the preparation of the financial statements
were as follows (Mexican pesos per one U.S. dollar):

<TABLE>
<CAPTION>
                                                                2000       1999       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Current exchange rate at December 31,.......................  Ps. 9.60   Ps. 9.52   Ps. 9.89
Weighted average exchange rate..............................      9.46       9.56       9.09
</TABLE>

  Use of estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from these estimates. Significant estimates include the
estimated useful lives of the Company's satellites and deferred income taxes.

  Cash and cash equivalents

     Cash and cash equivalents represent investments in short-term deposits and
commercial paper with banks which have original maturities of ninety days or
less.

  Satellites and equipment

     Satellites and equipment are stated at historical cost. Depreciation
expense is calculated using the straight-line method over the estimated useful
lives of the related assets. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful life of the improvements.

     The estimated useful lives of the Company's fixed assets are:

<TABLE>
<S>                                                <C>
Solidaridad 2....................................  14.5 years
Satmex 5.........................................    15 years
Equipment........................................     9 years
Furniture and fixtures...........................    10 years
</TABLE>

     Solidaridad 2 and Satmex 5 are being depreciated over their estimated
useful lives commencing on their in-orbit service dates of November 11, 1994 and
January 22, 1999, respectively. The estimated useful lives of the satellites
were determined by engineering analyses performed at the in-orbit service dates.
Morelos 2 was fully depreciated at June 30, 1998.

     Costs incurred in connection with the construction and successful
deployment of the Company's satellites and related equipment are capitalized.
Such costs include direct contract costs, allocated indirect costs, launch
costs, launch insurance, and construction period interest. Capitalized interest
related to the construction of Satmex 5 was $1.6 million and $20.5 million for
the years ended December 31, 1999 and 1998, respectively.

     Gains or losses from in-orbit satellite failures, after consideration of
insurance proceeds, are recorded in the period the failure occurs.

     Except for the Company's in-orbit satellites, all the Company's long-lived
assets are located in Mexico.

                                       F-9
<PAGE>   44
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

  Concessions

     The Mexican government granted Satmex the rights to three 20-year
concession titles (the "Concessions"), to operate in three orbital slots; 109.2
degrees W.L., 113.0 degrees W.L. and 116.8 degrees W.L. The Concessions are
renewable on certain conditions for an additional 20 years at no additional
cost. The Concessions require Satmex to reserve certain capacity on each
satellite for use by the Mexican government. The Concessions are being amortized
over 40 years. Amortization expense was $12.9 million, $12.9 million and $12.7
million for the years ended December 31, 2000, 1999 and 1998, respectively.

  Deferred financing costs

     Deferred financing costs are being amortized over the period of the related
debt (see Note 6). Amortization expense for the years ended December 31, 2000,
1999 and 1998 was $2.1 million, $4.7 million and $5.4 million, respectively.

  Valuation of long-lived assets

     The carrying value of the Company's long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that an asset
may not be recoverable. Assets are determined to be impaired when the estimated
undiscounted cash flows expected to result from the use of the asset are less
than the carrying value of the asset. The Company measures impairment as the
difference between the carrying value and the fair value of the asset.

  Labor benefits, indemnification payments and other benefits plans

     At December 31, 2000 and 1999 the Company has no obligation for statutory
seniority premiums and severance costs because the Company uses external
services from affiliated companies to perform its activities. The Company has no
obligation for post-retirement health care insurance or other benefits.

  Deferred income tax

     The Company recognizes deferred income tax assets and liabilities for the
future consequences of temporary differences between the financial statement
carrying amounts of assets and liabilities and their respective income tax
bases, measured using enacted rates. The effects of changes in the statutory
rates are accounted for in the period that includes the enactment date. Deferred
income tax assets are also recognized for the estimated future effects of tax
loss carryforwards and asset tax credit carryforwards. Deferred income tax
assets are reduced by any benefits that are not expected to be realized.

  Revenue recognition

     Satmex provides satellite capacity under service lease agreements for
periods ranging from one year to ten years. Some service lease agreements
provide for cash advances from customers with reduced rents. Such cash advances
are recognized as revenue on a straight-line method over the total lease term.

     In the case of end-of-life leases, in which Satmex collects the total rent
in advance and provides no insurance or warranty on the related transponders,
Satmex recognizes the total revenue and related cost as sales-type leases.
During the year ended December 31, 1999, Satmex recognized revenue of $25.5
million and related undepreciated cost of $14.2 million for the lease of three
Ku-band transponders to Loral Skynet which was accounted for as a sale-type
lease.

                                       F-10
<PAGE>   45
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

  Deferred revenue -- Mexican government

     The Company is required to provide the Mexican government, at no charge,
approximately 7% of its available transponder capacity for the duration of the
Concessions. In 1997, the Company recorded $88 million as deferred revenue, as
the value of this obligation, and an increase in the value of the Concessions by
the same amount. This obligation is being amortized over 40 years as an increase
in revenue and a corresponding increase in amortization expense. Amortization of
deferred revenue totals $2.2 million annually.

  Financial instruments

     The estimated fair value of the Company's financial instruments has been
determined using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market
data to develop estimates of fair value.

     The carrying value of cash and cash equivalents, accounts receivable, and
accounts payable is a reasonable estimate of their fair value.

     The carrying value of the Company's revolving credit facility and senior
secured notes approximate fair value because their interest rates are based on
floating rates. At December 31, 2000, the fair value of the Company's fixed rate
notes based on quoted market prices was $216 million.

  Foreign exchange forward contracts

     The Company has used foreign exchange forward contracts to hedge the
Company's net monetary liabilities in foreign currencies. Gains and losses from
the contracts are included in the component "Net foreign exchange gain (loss)"
in the Statements of Operations. No such contracts were outstanding at December
31, 2000 and 1999.

  Concentration of credit risk and principal customers

     Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Company's cash and cash equivalents are maintained
with high-credit-quality financial institutions. The Company's customers are the
Mexican government and large and mid-sized corporations. The creditworthiness of
such institutions is generally substantial. As the Company expands its
operations, it has added customers in emerging markets or customers that are in
the development stage. Management believes that its credit evaluation, approval
and monitoring processes mitigate potential credit risks.

     Revenue from Grupo Televisa and its subsidiaries ("Televisa") represented
18%, 31% and 29% of service revenue for the years ended December 31, 2000, 1999
and 1998, respectively. Revenue from the Mexican government represented 7%, 10%
and 5% of service revenue for the years ended December 31, 2000, 1999 and 1998,
respectively.

     Approximately 53%, 78% and 89% of the Company's service revenue for the
years ended December 31, 2000, 1999 and 1998, respectively, was generated from
customers in Mexico.

  Value added tax

     The Company collects value added tax based on revenue from its customers.
Value added taxes previously paid for the acquisition of assets or operating
expenses may be offset against value added tax collected from customers.

                                       F-11
<PAGE>   46
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

  New accounting pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. The Company has completed its review of the
impact that the adoption of SFAS 133 will have and, based on its evaluation, the
adoption of SFAS 133, as amended, on January 1, 2001 did not have a significant
effect on its earnings or financial position.

  Reclassifications

     Certain reclassifications have been made to conform prior year amounts to
the current year's presentation.

3.  ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                             ----------------
                                                              2000      1999
                                                             ------    ------
                                                              (IN THOUSANDS)
<S>                                                          <C>       <C>
Customers..................................................  $6,243    $3,870
Value added tax recoverable................................   1,853     3,139
Other......................................................   1,514     1,174
Allowance for uncollectible accounts.......................  (1,708)     (842)
                                                             ------    ------
                                                             $7,902    $7,341
                                                             ======    ======
</TABLE>

4.  SATELLITES AND EQUIPMENT

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         --------------------
                                                           2000        1999
                                                         --------    --------
                                                            (IN THOUSANDS)
<S>                                                      <C>         <C>
Satellites (Note 1)....................................  $409,119    $561,362
Equipment..............................................    24,627      22,059
Furniture and fixtures.................................     5,817       4,394
Leasehold improvements.................................     2,763       2,008
Construction in progress...............................     2,187       3,461
Construction in progress -- Satmex 6...................     3,172
                                                         --------    --------
                                                          447,685     593,284
Accumulated depreciation...............................   (93,263)    (92,110)
                                                         --------    --------
                                                         $354,422    $501,174
                                                         ========    ========
</TABLE>

     Depreciation expense was $43.8 million, $48.4 million and $36.0 million for
the years ended December 31, 2000, 1999 and 1998, respectively.

                                       F-12
<PAGE>   47
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

5.  BALANCES AND TRANSACTIONS WITH RELATED PARTIES

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                           ------------------
                                                            2000        1999
                                                           ------      ------
                                                             (IN THOUSANDS)
<S>                                                        <C>         <C>
AMOUNTS RECEIVABLE:
Principia................................................  $  605      $  470
Loral....................................................     583         335
Service Companies........................................      17
Firmamento...............................................                 112
Servicios................................................                 145
Mexican government agencies..............................   1,320       1,827
                                                           ------      ------
                                                           $2,525      $2,889
                                                           ======      ======
AMOUNTS PAYABLE:
Loral....................................................  $6,275      $1,501
Principia................................................     380          97
Service Companies........................................   3,255         669
Firmamento...............................................      18          10
                                                           ------      ------
                                                           $9,928      $2,277
                                                           ======      ======
</TABLE>

     Transactions with related parties, not otherwise disclosed, are as follows:

  Revenue

     Service revenue from related parties, primarily the Mexican government,
amounted to $13.8 million, $14.3 million and $11.1 million for the years ended
December 31, 2000, 1999 and 1998, respectively.

  Management fee

     Loral and Principia are responsible for managing the Company. Loral and
Principia receive a management fee, based on a sliding scale, up to a maximum of
3.75% of the Company's quarterly gross revenue, as defined. For the year ended
December 31, 1998, the management fee was $276,000. For the year ended December
31, 1999, Loral and Principia waived the management fee. For the year ended
December 31, 2000, the management fee was $3.2 million.

  License fee

     Loral has licensed certain intellectual property to the Company for an
annual fee of 1.5% of the Company's gross revenue, as defined. In 1998 Loral and
the Company agreed to delay the commencement of such fees until January 1, 1999,
because the intellectual property and related services to which the fees relate
were not expected to be implemented until the beginning of 1999, when Satmex 5
was placed in service. Fees of $190,000 accrued for the period November 17, 1997
to December 31, 1997 were reversed in 1998. For the year ended December 31,
1999, Loral agreed to reduce the license fee to 1.2%. In 1999, Satmex recorded a
license fee expense of $1.3 million. For the year ended December 31, 2000, the
license fee was $1.9 million.

                                       F-13
<PAGE>   48
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

  Rent

     The equipment in the satellite control centers is owned by the Company,
while the buildings and land that house these centers are property of the
Mexican government. The Company pays rent to the Mexican government for the use
of the buildings and land equal to 7.5% of appraised value. For the years ended
December 31, 2000, 1999 and 1998 the rent expense under this agreement was
$289,000, $253,000 and $262,000, respectively.

     For the year ended December 31, 1998, the Company paid $252,000 to an
affiliate of Principia for the rental of office space.

  Service companies

     Satmex uses external services from affiliated companies to perform its
activities. Satmex pays these companies a fee of approximately 8% of the gross
payroll and benefits, excluding payroll taxes. For the years ended December 31,
2000 and 1999 this fee was $923,000 and $201,000, respectively.

  Guarantee arrangements

     In connection with the loan agreements (see Note 6), Firmamento and
Servicios have provided and continue to provide guarantees on behalf of the
Company.

 6.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         --------------------
                                                           2000        1999
                                                         --------    --------
                                                            (IN THOUSANDS)
<S>                                                      <C>         <C>
Senior secured notes (11.16% and 9.26% at December 31,
  2000 and 1999).......................................  $237,000    $238,000
Fixed rate notes.......................................   320,000     320,000
Revolving credit facility (11.01% and 9.62% at December
  31, 2000 and 1999)...................................    15,000      30,000
                                                         --------    --------
Total debt.............................................   572,000     588,000
Less, current maturities...............................     1,000       1,000
                                                         --------    --------
                                                         $571,000    $587,000
                                                         ========    ========
</TABLE>

     At December 31, 2000, the Company has a $50 million five year revolving
credit facility (the "Credit Facility") which bears interest, at the Company's
option, at rates based on margins over LIBOR or the base rate specified in the
credit agreement. The Company pays a commitment fee on the unused portion of
this facility. The Credit Facility expires December 29, 2002.

     On February 2, 1998, the Company issued $320 million 10.125% fixed rate
notes due November 1, 2004 (the "Fixed Rate Notes"). The Fixed Rate Notes are
unsecured and rank senior in right of payment to all subordinated debt of the
Company and pari passu in right of payment to all senior debt of the Company,
including the Credit Facility and the Senior Secured Notes.

     On March 2, 1998, the Company issued $325 million of senior secured
floating rate notes due June 30, 2004 (the "Senior Secured Notes"). The Senior
Secured Notes rank senior in right of payment to all

                                       F-14
<PAGE>   49
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

subordinated debt of the Company and pari passu in right of payment to all
senior indebtedness of the Company including the Credit Facility and the Fixed
Rate Notes. The Senior Secured Notes bear interest, at the Company's option, at
rates based on LIBOR or the base rate specified in the credit agreement, are
redeemable at the option of the Company and are secured equally and ratably with
the Credit Facility by substantially all of the assets of the Company. In
addition, the Senior Secured Notes and the Credit Facility are guaranteed by
Holdings and Servicios.

     Both the Credit Facility and the Senior Secured Notes contain covenants
which require maintenance of certain quarterly financial and operating ratio
levels and impose limits on the Company's spending for capital expenditures. In
addition, the Credit Facility, Senior Secured Notes and the Fixed Rate Notes
contain limitations on indebtedness, investments, business combinations and
other customary restrictions. At December 31, 2000, Satmex was in compliance
with all covenants governing its debt agreements.

     The Company is required to make quarterly redemption payments on the Senior
Secured Notes of $250,000 through March 31, 2004 and a final payment of $233.8
million at maturity. In 1999, in addition to the required redemption payments
totaling $1 million, the Company prepaid $85 million of the Senior Secured
Notes.

     On January 10, 2000, Satmex solicited from its holders of the Senior
Secured Notes and the participants in its Credit Facility for an amendment to
permit the modification of certain covenants, in exchange for the payment of a
fee and an increase in the applicable interest margin by up to 0.75%. On
February 16, 2000, this amendment was declared effective.

     In 1998, the Company recorded an extraordinary charge of $8.3 million less
an applicable income tax benefit of $2.8 million. The extraordinary charge
consisted of the write-off of unamortized financing costs on debt issued at the
Acquisition that was refinanced in 1998.

     The aggregate maturities of debt are as follows (in thousands):

<TABLE>
<S>                                                           <C>
2001........................................................  $  1,000
2002........................................................    16,000
2003........................................................     1,000
2004........................................................   554,000
                                                              --------
                                                              $572,000
                                                              ========
</TABLE>

 7.  STOCKHOLDERS' EQUITY

     At December 31, 2000 and 1999 the Company's issued and outstanding capital
stock comprised a fixed and variable portion, with the fixed portion represented
by 611,730 shares and the variable portion by 9,995,000 shares, respectively in
both years.

     On March 12, 1999, at an extraordinary general meeting of Satmex's
stockholders it was agreed to increase the fixed capital stock by $56.1 million
through the issuance of 1,068,000 shares of Series C preferred stock. On March
30, 1999, the Company issued 606,730 shares of preferred stock to Loral and
Principia for a total purchase price of approximately $31.9 million. The
preferred stock has limited voting rights and pays a cumulative dividend in
common stock of the Company equal to 0.138 shares of Series N or Series B common
stock for each share of preferred stock. The preferred stock can be exchanged at
the Company's option into common stock of the Company, at an exchange ratio of 1
share of preferred stock for 2.008 shares of Series N or Series B common stock,
if the exchange occurs before February 2, 2005, and at an exchange ratio of 1
share of preferred stock for 4.016 shares of Series N or Series B common stock
on and after February 2, 2005. As of December 31, 2000, Servicios holds 70.71%
of the outstanding capital stock of Satmex, Loral holds 4.46%, Principia holds
1.26% and the Mexican government holds 23.57%.

                                       F-15
<PAGE>   50
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

     The issued and outstanding capital stock of the Company consisted of the
following:

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       -----------------------
                       SERIES                             2000         1999
                       ------                          ----------   ----------
<S>                                                    <C>          <C>
A Common stock.......................................   2,601,000    2,601,000
B Common stock.......................................   2,499,000    2,499,000
N Common stock.......................................   4,900,000    4,900,000
C Preferred stock....................................     606,730      606,730
                                                       ----------   ----------
                                                       10,606,730   10,606,730
                                                       ==========   ==========
</TABLE>

     At December 31, 2000 and 1999 the capital stock and the notional value is
as follows:

<TABLE>
<CAPTION>
                                    2000                            1999
                        ----------------------------    ----------------------------
     DESCRIPTION          SHARES          AMOUNT          SHARES          AMOUNT
     -----------        ----------    --------------    ----------    --------------
                                      (IN THOUSANDS)                  (IN THOUSANDS)
<S>                     <C>           <C>               <C>           <C>
Common stock:
  Fixed portion.......       5,000       $      6            5,000       $      6
  Variable portion....   9,995,000        382,034        9,995,000        380,527
                        ----------       --------       ----------       --------
                        10,000,000       $382,040       10,000,000       $380,533
                        ==========       ========       ==========       ========
Preferred stock:
  Fixed portion.......     606,730       $ 31,886          606,730       $ 31,886
                        ==========       ========       ==========       ========
</TABLE>

     Stockholder's equity except restated capital paid by stockholders and net
taxable retained earnings adjusted for inflation in accordance with Mexican tax
law, will be subject to a 35% dividend tax in the event of distribution. In
addition, all dividends paid to individuals or entities resident abroad will be
subject to an additional 7.69% dividend tax if profits were generated after
December 31, 1998 and 7.57% if profits were generated before January 1, 1999.
Restatement of capital and net taxable earnings are computed in accordance with
certain tax procedures which is approximately the accumulated effect of
inflation on both items.

     Series A shares have full voting rights and can only be acquired by Mexican
individuals, Mexican corporations or irrevocable trusts. These shares are
divided into Class I (minimum fixed capital) and Class II (variable capital)
shares. Series B shares have full voting rights and may be acquired by Mexican
or foreign investors. These shares are divided into Class I (minimum fixed
capital) and Class II (variable capital) shares. Series N shares contain
restricted voting and limited corporate rights and may represent up to 80% of
the total capital of the Company. These shares may be acquired by Mexican and
foreign investors and currently represent variable capital.

 8.  INCOME TAXES

     The income tax provision for the years ended December 31, 2000, 1999 and
1998 is as follows:

<TABLE>
<CAPTION>
                                                   2000       1999      1998
                                                  -------    ------    ------
                                                        (IN THOUSANDS)
<S>                                               <C>        <C>       <C>
Deferred........................................  $17,029    $5,676    $  931
                                                  -------    ------    ------
Net income tax provision........................  $17,029    $5,676    $  931
                                                  =======    ======    ======
</TABLE>

     The deferred income tax provision for the year ended December 31, 1998
included $200,000 for the change to the Mexican statutory rate from 34% to 35%
which was signed into law on December 31, 1998 to be effective January 1, 1999.

                                       F-16
<PAGE>   51
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

     The components of the net deferred income tax asset and (liability) are as
follows:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                         --------------------
                                                           2000        1999
                                                         --------    --------
                                                            (IN THOUSANDS)
<S>                                                      <C>         <C>
Tax loss carryforwards.................................  $161,069    $110,273
Deferred revenue.......................................    24,936      26,729
Other, net.............................................       918         911
Satellites and equipment...............................   (64,228)    (72,732)
Gain on in-orbit failure of Solidaridad 1..............   (79,570)
Concessions............................................   (42,785)    (39,567)
Prepaid insurance......................................    (4,968)     (8,110)
Deferred financing costs...............................    (2,327)     (2,729)
                                                         --------    --------
Subtotal...............................................    (6,955)     14,775
Less valuation allowance...............................    11,840      16,541
                                                         --------    --------
Net deferred tax liability.............................  $(18,795)   $ (1,766)
                                                         ========    ========
</TABLE>

     The net deferred income tax liability is classified as follows:

<TABLE>
<CAPTION>
                                                             2000       1999
                                                            -------    ------
                                                             (IN THOUSANDS)
<S>                                                         <C>        <C>
Current deferred income tax liabilities...................  $ 8,590    $3,387
                                                            =======    ======
Long-term deferred income tax assets......................             $1,621
                                                                       ======
Long-term deferred income tax liabilities.................  $10,205
                                                            =======
</TABLE>

     At December 31, 2000 the Company had tax loss carryforwards of
approximately $460.2 million which expire from 2008 to 2010 and credits
available against the asset tax of approximately $45.9 million which expire in
2003. Due to the uncertainties regarding the Company's ability to realize the
full benefit from these tax loss carryforwards, Satmex established a valuation
allowance of $11.8 million at December 31, 2000 against the deferred tax assets.

     The provision for income taxes, for the years ended December 31, 2000, 1999
and 1998 differs from the amount computed by applying the Mexican income tax
rate because of the effect of the following items:

<TABLE>
<CAPTION>
                                                  2000       1999       1998
                                                 -------   --------    -------
                                                        (IN THOUSANDS)
<S>                                              <C>       <C>         <C>
Tax benefit at Mexican statutory income
  tax rate (35%)...............................  $25,275   $(14,345)   $(5,850)
Inflation component and effect of
  remeasurement................................   (3,409)    12,362       (377)
Non deductible expenses........................       59         98         53
Change in valuation allowance..................   (4,701)     8,013      6,675
Other..........................................     (195)      (452)       430
                                                 -------   --------    -------
Net income tax provision.......................  $17,029   $  5,676    $   931
                                                 =======   ========    =======
</TABLE>

     The Mexican asset tax law provides for a minimum tax of 1.8% on average
assets, as defined in the law, less certain liabilities, which is payable to the
extent it exceeds amounts due for income taxes. During 2000, the Company
received a favorable ruling from the Mexican Supreme Court of Justice allowing
the deduction for foreign liabilities, including but not limited to, financial
liabilities, when computing the taxable base for the asset tax. The Company
expects that this ruling will have a favorable effect to reduce its asset tax in
the future. Any asset taxes paid may be used to offset future income taxes
payable if certain conditions are met. For the year ended December 31, 2000, the
Company had no asset tax liability.

                                       F-17
<PAGE>   52
                       SATELITES MEXICANOS, S.A. DE C.V.
        (SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)

                 NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)

9.  COMMITMENTS AND CONTINGENCIES

     The Company leases office space under a noncancelable operating lease
expiring in May 2005. The monthly rent, including maintenance, is approximately
$112,000. Rent expense under this lease was $1.3 million, $1.2 million and
$599,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

     Management is not aware of any pending litigation against the Company.
Liability for all legal actions or other claims against Satmex prior to October
15, 1997 has been retained by the Mexican government.

     Future minimum lease receipts due from customers under non-cancelable
operating leases for transponder capacity on satellites in-orbit as of December
31, 2000, are as follows (in thousands):

<TABLE>
<S>                                                           <C>
2001........................................................  $115,111
2002........................................................    75,454
2003........................................................    67,938
2004........................................................    58,259
2005........................................................    26,592
Thereafter..................................................   119,369
                                                              --------
                                                              $462,723
                                                              ========
</TABLE>

10.  REVENUE BY CUSTOMER LOCATION

     The following table presents revenue by country based on customer location
for the years ended December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                2000       1999       1998
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
Mexico......................................................  $ 72,068   $ 85,304   $ 93,290
United States...............................................    58,094     48,322      8,655
Other.......................................................     6,279      1,894      2,834
                                                              --------   --------   --------
          Total.............................................  $136,441   $135,520   $104,779
                                                              ========   ========   ========
</TABLE>

                                       F-18