AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 2006
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 20-F

|_|      REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                                       OR

|X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

                                       OR

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from _________ to ___________

|_|      SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         Date of event requiring this shell company report ____________________

                         COMMISSION FILE NUMBER 1-14396

                                 ASIA SATELLITE
                       TELECOMMUNICATIONS HOLDINGS LIMITED
             (Exact Name of Registrant as Specified in Its Charter)

           N/A                                            Bermuda
(Translation of Registrant's                   (Jurisdiction of Incorporation
     Name Into English)                                  or Organization)

                           17th Floor, The Lee Gardens
                                 33 Hysan Avenue
                                  Causeway Bay
                                    Hong Kong
                                  852-2500-0888
          (Address and Telephone Number of Principal Executive Offices)

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

--------------------------------------------------------------------------------
                                                  NAME OF EACH EXCHANGE
          TITLE OF EACH CLASS                      ON WHICH REGISTERED
--------------------------------------------------------------------------------
        American Depositary Shares             The New York Stock Exchange
        Common Stock, par value                The New York Stock Exchange*
        HK $0.10 per share

*  Not for trading, but only in connection with the registration of American
   Depositary Shares. The Common Stock is also listed and traded on The Stock
   Exchange of Hong Kong Limited.

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

                                      None
                                (Title of Class)

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

                                      None
                                (Title of Class)

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

     -- As of December 31, 2005, 390,265,500 shares of Common Stock were issued
and outstanding Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
                                                          Yes  [_]      No  [X]

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such filing requirements for the
past 90 days.
                                                          Yes  [X]      No  [_]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [_]   Accelerated filer [X]   Non-accelerated filer [_]

     Indicate by check mark which financial statement item the registrant has
elected to follow.
                                                       Item 17 [_]  Item 18 [X]

     If this is an annual report, indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
                                                          Yes  [_]      No  [X]

================================================================================

<PAGE>

                                TABLE OF CONTENTS

               ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED

                                                                           PAGE

PART I........................................................................1

   Item 1.    Identity of Directors, Senior Management and Advisors...........1
   Item 2.    Offer Statistics and Expected Timetable.........................2
   Item 3.    Key Information.................................................2
   Item 4.    Information on the Company.....................................13
   Item 5.    Operating and Financial Review and Prospects...................34
   Item 6.    Directors, Senior Management and Employees.....................48
   Item 7.    Major Shareholders and Related Party Transactions..............57
   Item 8.    Financial Information..........................................59
   Item 9.    Stock Price History............................................60
   Item 10.   Additional Information.........................................61
   Item 11.   Quantitative and Qualitative Disclosures About Market Risk.....63
   Item 12.   Description of Securities Other than Equity Securities.........64

PART II......................................................................64

   Item 13.   Defaults, Dividend Arrearages and Delinquencies................64
   Item 14.   Material Modifications to the Rights of Security Holders
                and Use of Proceeds..........................................64

PART III.....................................................................64

   Item 15.   Controls and Procedures........................................64
   Item 16.   Other Information..............................................64

PART IV......................................................................66

   Item 17.   Financial Statements...........................................66
   Item 18.   Financial Statements...........................................66
   Item 19.   Financial Statements and Exhibits..............................66

<PAGE>

                  SUPPLEMENTAL INFORMATION AND EXCHANGE RATES

     All  references to the "Company"  herein are  references to Asia Satellite
Telecommunications  Holdings Limited, a Bermuda company incorporated on May 10,
1996,  and,  unless the  context  otherwise  requires,  its  subsidiaries.  All
references to "AsiaSat" herein are to Asia Satellite Telecommunications Company
Limited,  a Hong Kong company and a  wholly-owned  indirect  subsidiary  of the
Company and,  unless the context  otherwise  requires,  its  subsidiaries.  Any
discrepancies  in any table between  totals and sums of the amounts  listed are
due to rounding.

     The Company and AsiaSat  prepare their  financial  statements in Hong Kong
Dollars.  In this Annual Report references to "US Dollars," "US$" or "$" are to
United States  Dollars and  references to "Hong Kong  Dollars," "HK Dollars" or
"HK$" are to Hong Kong Dollars.  Solely for the convenience of the reader, this
Annual Report contains translations of certain Hong Kong Dollar amounts into US
Dollars at  specified  rates.  These  translations  should not be  construed as
representations  that the Hong Kong Dollar amounts  actually  represent such US
Dollar amounts or could be converted into US Dollars at the rates  indicated or
at all. Unless otherwise stated,  the translations of Hong Kong Dollars into US
Dollars have been made at the rate of HK$7.80 to US$1.00,  the approximate rate
of  exchange on December  31,  2005.  The noon buying rate in New York City for
cable  transfers in Hong Kong Dollars as certified for customs  purposes by the
Federal  Reserve  Bank of New York (the "Noon  Buying  Rate") was  HK$7.7723 to
US$1.00  on  December  31,  2005.  The Noon  Buying  Rate on June 12,  2006 was
HK$7.7607 to US$1.00.

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This  Annual  Report  on  Form  20-F  contains   certain   forward-looking
statements.  The Private  Securities  Litigation  Reform Act of 1995 provides a
"safe harbor" for certain forward-looking  statements. When used in this Annual
Report on Form 20-F, the words "estimate," "project,"  "anticipate,"  "expect,"
"intend,"   "believe"  and  similar   expressions   are  intended  to  identify
forward-looking   statements  and  information.   The  Company  identifies  the
following  important  factors  which could  cause its actual  results to differ
materially  from any results which might be projected,  forecast,  estimated or
budgeted by the Company in forward-looking information. All of such factors are
difficult  to  predict  and  many  are  beyond  the  control  of  the  Company.
Accordingly,  while the Company  believes that the  assumptions  underlying the
forward-looking information are reasonable, there can be no assurance that such
assumptions  will  approximate  actual  experience,  and in such event,  actual
results could differ  materially from the predictions  contained in this Annual
Report on Form 20-F. These important  factors include,  but are not limited to:
(i) the continued  operation of the existing in-orbit satellites and success in
constructing and launching new satellites as planned,  (ii) future economic and
competitive  conditions in the Asian regional satellite market in which AsiaSat
competes,  (iii)  the  Company's  success  in  obtaining  necessary  regulatory
approvals and licenses,  and (iv) the continued  ability of the Company to meet
its debt obligations and fund its capital expenditure programs.

                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS.

     Not applicable.

                                       1
<PAGE>

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.

     Not applicable.


ITEM 3.  KEY INFORMATION

                         SELECTED FINANCIAL INFORMATION

     The  summary  income  statement  data of the  Company  for the years ended
December  31,  2003,  2004 and 2005 and the summary  balance  sheet data of the
Company as of December 31, 2004 and 2005 set forth below are derived from,  and
are  qualified  in their  entirety by  reference  to, the audited  consolidated
financial  statements  of the Company,  including the notes  thereto,  included
elsewhere  herein and in "Operating and Financial  Review and  Prospects."  The
summary  income  statement  data for the years ended December 31, 2001 and 2002
and the summary  balance sheet data as of December 31, 2001,  2002 and 2003 set
forth below are derived from audited  consolidated  financial statements of the
Company not included  herein.  The  consolidated  financial  statements  of the
Company are prepared and presented in  accordance  with  accounting  principles
generally  accepted in Hong Kong,  or Hong Kong GAAP,  which  differ in certain
material respects from accounting  principles  generally accepted in the United
States,  or  U.S.  GAAP.  Note  32  to  the  Company's  consolidated  financial
statements  contains  descriptions of the significant  differences between Hong
Kong GAAP and U.S. GAAP, a reconciliation  of net income from Hong Kong GAAP to
U.S.  GAAP  for the  years  ended  December  31,  2003,  2004 and  2005,  and a
reconciliation  of shareholders'  equity from Hong Kong GAAP to U.S. GAAP as of
December 31, 2004 and 2005. In addition,  Note 32 to the Company's consolidated
financial statements contains additional  disclosures required under U.S. GAAP,
which are not disclosed  elsewhere in the notes to the  Company's  consolidated
financial statements.

<TABLE>
<CAPTION>
                                       -----------------------------------------------------------------------------
                                          2001           2002         2003         2004         2005         2005
                                           HK$            HK$          HK$          HK$          HK$          US$
                                       -----------------------------------------------------------------------------
                                                  (in millions, except for percentages and per share amounts)
<S>                                     <C>            <C>          <C>           <C>          <C>          <C>
INCOME STATEMENT DATA:
Hong Kong GAAP:
   Revenues...................            969.5          950.8        896.2       1,005.0        879.7        112.8
   Cost of services                      (240.0)        (243.1)      (313.3)       (420.5)      (419.0)       (53.7)
   Administrative expenses                (58.6)         (76.7)       (56.1)       (102.5)       (83.9)       (10.8)
   Operating profit                       687.2          637.4        532.6         504.0        420.5         53.9
   Share of results of associates
        (including goodwill
        amortization)                     (47.5)         (13.7)       (15.6)        (12.4)        (3.9)        (0.5)

   Impairment loss recognized in
        respect of goodwill of
        associates                         (0.6)            --         (1.9)           --           --           --
   Profit before taxation                 633.6          623.8        512.1         491.6        416.6         53.4
   Minority Interests.........               --             --           --          (0.1)        (0.8)        (0.1)
   Taxation                               (70.6)         (69.1)       (87.6)        (60.5)       (51.3)        (6.6)
   Profit for the year..........          563.0          554.7        424.5         431.1        365.4         46.8
   Earnings per share.........
      Basic..................              1.44           1.42         1.09          1.10         0.94         0.12
</TABLE>


                                       2
<PAGE>

<TABLE>
<CAPTION>
                                       -----------------------------------------------------------------------------
                                          2001           2002         2003         2004         2005         2005
                                           HK$            HK$          HK$          HK$          HK$          US$
                                       -----------------------------------------------------------------------------
                                                  (in millions, except for percentages and per share amounts)
<S>                                     <C>            <C>          <C>           <C>          <C>          <C>
      Diluted.................             1.44           1.42         1.09          1.10         0.94         0.12
   Earnings per ADS...........
      Basic..................             14.40          14.21        10.88         11.05         9.38          1.2
      Diluted.................            14.40          14.21        10.88         11.05         9.38          1.2
Dividend declared per share:
   Ordinary...................             0.20           0.25         0.32          0.35         0.35         0.04
Number of shares outstanding (in
     thousands)...............          390,266        390,266      390,266       390,266      390,266      390,266
U.S. GAAP:
   Profit for the year                    562.5          538.1        408.3         424.1        358.8         46.0
   Earnings per share.........
      Basic...................             1.44           1.38         1.05          1.09         0.92         0.12
      Diluted.................             1.44           1.38         1.05          1.09         0.92         0.12
   Earnings per ADS...........
      Basic..................             14.41          13.79        10.46         10.86         9.19         1.18
      Diluted.................            14.41          13.79        10.46         10.86         9.19         1.18

<CAPTION>
                                       -----------------------------------------------------------------------------
                                                     RESTATED
                                       -------------------------------------
                                          2001           2002         2003         2004         2005         2005
                                           HK$            HK$          HK$          HK$          HK$          US$
                                       -----------------------------------------------------------------------------
<S>                                     <C>            <C>          <C>           <C>          <C>          <C>
BALANCE SHEET DATA:
Hong Kong GAAP:
   Working capital............             86.8          239.0        529.9       1,023.1      1,461.1        187.3
   Property, plant and
        equipment (1).........          2,915.8        3,206.4      3,140.0       2,894.5      2,620.9        336.0
Total assets..................          3,384.7        3,936.4      4,157.2       4,549.2      4,683.5        600.4
   Long-term liabilities (2)              288.8          326.0        336.5         317.1        280.3         35.9
   Total liabilities (excluding
        minority interests) ..            514.2          589.1        588.5         668.3        573.8         73.6
   Capital stock .............             39.0           39.0         39.0          39.0         39.0          5.0

   Total shareholders' equity           2,870.1        3,346.7      3,568.3       3,874.6      4,104.2        526.2
U.S. GAAP:
   Property, plant and equipment
                                        3,009.2        3,276.6      3,198.5       2,944.9      2,663.3        341.4
   Total assets...............          3,478.1        4,011.2      4,215.7       4,599.9      4,726.1        605.9
   Long-term liabilities (2)              300.1          335.4        345.8         325.6        288.1         36.9
   Total liabilities (excluding
        minority interests)...            525.4          598.5        597.7         676.8        581.6         74.6

   Total shareholders' equity           2,952.2        3,412.2      3,617.5       3,916.7      4,138.9        530.6
</TABLE>

-----------------
(1)     Excludes  leasehold land and land use rights which are  reclassified as
        prepaid operating lease payments with the adoption of revised Hong Kong
        Accounting Standard 17.
(2)     Excludes current portion of long-term liabilities.

    HISTORICAL EXCHANGE RATE INFORMATION

     The  Hong  Kong  Dollar  is  freely  convertible  into  other  currencies,
including the US Dollar.  Since October 17, 1983, the Hong Kong Dollar has been
linked to the US Dollar at the rate


                                       3
<PAGE>

of HK$7.80 to  US$1.00.  The  central  element in the  arrangements  that gives
effect to the link is an  agreement  between the Hong Kong  Government  and the
three Hong Kong  banknote-issuing  banks,  The Hongkong  and  Shanghai  Banking
Corporation  Limited,  Standard  Chartered Bank and, since May 1, 1994, Bank of
China.  Under this  agreement,  the Hong Kong  Government  Exchange Fund issues
certificates of its indebtedness to the banknote-issuing  banks against payment
in  US  Dollars  at  the  fixed  exchange  rate  of  HK$7.80  to  US$1.00.  The
banknote-issuing  banks  hold the  certificates  of  indebtedness  to cover the
issuances of banknotes. When the banknotes are withdrawn from circulation,  the
banknote-issuing  banks surrender the  certificates of indebtedness to the Hong
Kong  Government  Exchange  Fund and are paid the  equivalent US Dollars at the
fixed exchange rate. Exchange  transactions in the Hong Kong Dollar against the
US Dollar continue in the foreign exchange market.

     The following table sets forth the average,  high, low and period end Noon
Buying Rate  between Hong Kong Dollars and US Dollars (in Hong Kong Dollars per
US Dollar) for the periods  indicated.  No representation is made that the Hong
Kong Dollar or US Dollar  amounts  referred to in this annual report have been,
could have been or could be converted into US Dollars or Hong Kong Dollars,  as
the case may be, at the rates indicated below or at any other rate.

<TABLE>
<CAPTION>
                                                HONG KONG DOLLAR/US DOLLAR
                                                     NOON BUYING RATE
                            ------------------------------------------------------------
                              AVERAGE (1)      HIGH            LOW         PERIOD END
                                  HK$           HK$            HK$             HK$
                            -------------    ---------     -----------   ---------------
<S>                              <C>           <C>            <C>            <C>
2001 .................           7.7997        7.8004         7.7970         7.7980
2002 .................           7.7997        7.8095         7.7970         7.7988
2003 .................           7.7875        7.8001         7.7085         7.7640
2004 .................           7.7891        7.8010         7.7632         7.7723
2005 .................
December 2005 ........           7.7536        7.7552         7.7522         7.7545
January 2006 .........           7.7541        7.7573         7.7509         7.7573
February 2006.........           7.7596        7.7617         7.7565         7.7579
March 2006 ...........           7.7593        7.7621         7.7572         7.7597
April 2006 ...........           7.7563        7.7600         7.7534         7.7534
May 2006 .............           7.7541        7.7584         7.7513         7.7584
</TABLE>

(1)     The  average  of the Noon  Buying  Rates on the last day of each  month
        during the period.


                                  RISK FACTORS

     RISK OF  LAUNCH  AND  IN-ORBIT  FAILURE,  LOSS,  REDUCED  PERFORMANCE  AND
SATELLITE DEFECTS

     Satellites are subject to significant risks, including launch and in-orbit
failure, satellite defects,  destruction and damage that may result in total or
partial loss or incorrect  orbital  placement or may prevent proper  commercial
operation.  The failure rate varies by launch vehicle, launch services provider
and satellite  manufacturer.  A total or constructive  total loss of any of our
satellites  would  adversely  affect the Company.  In addition,  any defects in


                                       4
<PAGE>

AsiaSat 2, AsiaSat 3S or AsiaSat 4 may also adversely  affect the Company.  See
"Information on the Company -- Satellites -- AsiaSat 2."

     RISKS IN RELATION TO THE CONSTRUCTION AND LAUNCH OF ASIASAT 5

     AsiaSat has entered into a construction contract and a launch contract for
the  commissioning of AsiaSat 5. The Company plans to launch AsiaSat 5 in 2008.
AsiaSat 5 will replace  AsiaSat 2, which is tentatively  scheduled to retire in
2010.  The  Company  has  planned  for the launch of AsiaSat 5 in 2008 so as to
allow sufficient time for the  construction and launch of another  satellite in
the event of an unsuccessful launch of AsiaSat 5. The total consideration under
the construction contract and launch contract, together with insurance cost, is
estimated  at  approximately   HK$1,404.0  million  (US$180.0   million).   The
construction  contractor,  Space Systems/Loral,  Inc., is a subsidiary of Loral
Space &  Communications  Inc.,  which  emerged  from  chapter 11 of the federal
bankruptcy laws of the United States in November 2005. The predecessor of Loral
Space & Communications  Inc. filed voluntary  petitions for  reorganization  in
July 2003 together with some of its subsidiaries, including Space Systems/Loral
Inc.  Space  Systems/Loral,  Inc.  emerged from the  reorganization  debt-free.
However,  any future financial  difficulties of Space  Systems/Loral,  Inc. may
adversely  affect  its  performance  under the  construction  contract  and may
adversely  affect the  quality  or delay the launch of AsiaSat 5. In  addition,
there  can be no  assurance  that  the  launch  of  AsiaSat  5,  including  the
subsequent  in-orbit testing,  will be successful.  In the event AsiaSat 5 does
not meet  specifications,  there are limited  opportunities  for the Company to
replace  AsiaSat 5 and the  failure to timely  replace  AsiaSat 5 may result in
interruption  of services to our customers  and adversely  affect the operation
and financial results of the Company. Furthermore, a significant portion of the
total  cost of the  construction  and  launch  of a  satellite  is the  cost of
insurance, which generally will not be obtained until several months prior to a
scheduled  launch.  There can be no assurance that sufficient  insurance can be
obtained at a reasonable price prior to the launch of AsiaSat 5.

     RISK OF NOT SUCCESSFULLY RENEWING EXISTING TRANSPONDER CAPACITY AGREEMENTS
OR NOT RENEWING THEM ON TERMS SIMILAR TO THEIR CURRENT TERMS

     The Company's  existing  transponder  capacity  agreements,  also known as
transponder  utilization  agreements,  have scheduled termination dates. If the
Company is unsuccessful in obtaining their renewal on similar commercial terms,
including price levels, and for similar duration,  or in identifying  alternate
users for returned capacity, the Company's revenues will be adversely affected.

     LIMITED LIFE OF SATELLITES

     A number of  factors  affect the  estimated  useful  life of a  satellite,
including the quality of their construction,  the durability of their component
parts, the amount of fuel on-board,  the launch vehicle used and the skill with
which the satellite is monitored and operated.  There can be no assurance as to
the specific  longevity  of AsiaSat 2,  AsiaSat 3S or AsiaSat 4. The  Company's
results of operations would be adversely  affected in the event the useful life
of AsiaSat  2,  AsiaSat 3S or  AsiaSat 4 were  significantly  shorter  than the
estimates   stated  in  "Information   on  the  Company  --  Satellites."   See
"Information on the Company -- Insurance."


                                       5
<PAGE>

     RISK OF LOSING  SATELLITE  SERVICE REVENUES IF OTHER SATELLITES OR SIGNALS
INTERFERE WITH THE COMPANY'S TRANSMISSIONS

     Satellites  operating  from orbital  slots that are adjacent to, and using
the same band of frequencies as, the Company's  satellites could interfere with
the transmissions  made by its satellites.  Such interference could lead to the
loss of satellite  service  revenues if customers  migrate to  competitors  who
operate  satellites  without  such  interference.  The Company has entered into
frequency  coordination  agreements  with certain other  operators to avoid any
material  interference  and pursuant to which the Company has agreed to certain
operating constraints.  The Company's ability to use its orbital slots could be
further  constrained  in  order  to  avoid  material  interference  with  other
satellites and the Company could enter into disputes over  interference  in the
future. In addition,  unintentional or intentional signals could interfere with
the  transmissions  of the Company's  customers and could  severely  damage the
reputation of the Company.  If not remedied,  such signals could lead to a loss
of  satellite  service  revenues  if  customers  migrate  to  competitors.  See
"Information on the Company -- Additional Orbital Slots and Use of Frequencies"
and "Information on the Company - Satellites - AsiaSat 3S."

     RISK OF LOSS OR DAMAGE  TO  SATELLITES,  GROUND  BASED  SATELLITE  CONTROL
EQUIPMENT  OR SATELLITE  STATIONS  FROM ACTS OF WAR,  TERRORISM,  ELECTROSTATIC
STORM, SPACE DEBRIS AND OTHER NATURAL DISASTERS

     The loss,  damage or destruction of AsiaSat 2, AsiaSat 3S or AsiaSat 4, or
damage or destruction to AsiaSat's ground based satellite control equipment and
satellite stations,  as a result of military actions or acts of war, terrorism,
anti-satellite devices, electrostatic storm, collision with space debris, other
natural  disasters or other causes would have an adverse effect on the Company.
AsiaSat's  insurance policies include standard  commercial  satellite insurance
provisions and customary  exclusions from losses resulting from (i) military or
similar  actions,  (ii)  terrorism,  (iii)  laser,  directed  energy or nuclear
anti-satellite  devices,  (iv)  insurrection  and similar acts or  governmental
action to prevent  such  acts,  (v)  governmental  confiscation,  (vi)  nuclear
reaction or radiation  contamination  or (vii) willful or  intentional  acts of
AsiaSat or its contractors. See "Information on the Company -- Insurance."

     RELIANCE UPON SIGNIFICANT CUSTOMER

     The Company's largest customer is STAR Group Limited ("STAR"),  which is a
Hong Kong-based  international  satellite television  broadcasting company that
broadcasts   over  the  greater  Asian  region  and  is  wholly-owned  by  News
Corporation,   a  leading   international   media  group.  STAR  accounted  for
approximately  24.9%,  22.4% and 25.7% of AsiaSat's revenues in the years ended
December 31, 2003, 2004 and 2005, respectively. See "Information on the Company
- Services and Customers."

     The Company could be adversely  affected by the loss of STAR as a customer
or if STAR failed to perform its  obligations  in accordance  with the terms of
its  transponder  utilization  agreements.  There can be no assurance that STAR
will enter into additional transponder  utilization agreements with the Company
upon the expiration of existing transponder utilization agreements.


                                       6
<PAGE>

     RISK OF TECHNOLOGICAL CHANGES

     Technology in the satellite broadcasting and  telecommunications  industry
is in a rapid and continuing  state of change.  Technological  developments may
have an adverse impact on the Company.  First, because the Company's satellites
have an estimated useful life of approximately 15 years, the technology used in
the Company's satellites may not be the most advanced at some future date. As a
consequence,  customers  could  migrate to  satellite  operators  offering  new
generations  of competing  satellite  systems that  incorporate  more  advanced
technologies, or more suitable satellite capabilities or configurations,  after
the expiration of the Company's  initial contract term, which would result in a
loss of  revenues.  In  addition,  the  Company  might be  required  to replace
satellites  earlier  than  expected  to  address  these  developments.  Second,
increased  transponder   efficiency  resulting  from  advances  in  compression
technology, if not offset by increased applications for satellite capacity, may
cause an overall decrease in demand for such capacity.

     RISK OF LIMITED MARKET DEMAND AND INCREASING COMPETITION

     The  business in which the Company  operates  is highly  competitive.  The
satellite  services provided by the Company are used by its customers for point
to  multipoint  communication  (principally  television  broadcasting,  private
communication  networks,  Internet  and  multimedia  services).  The  Company's
principal  competitors are regional and domestic satellite  companies operating
in the Asian region.  Many of these  competitors  have  long-standing  customer
relationships and are substantially  larger, and have financial  resources that
are substantially  greater,  than those of the Company. See "Information on the
Company - Competition."

     TRANSPONDER  OVERSUPPLY.  It is  expected  that  in  2006  the  supply  of
transponders  continues  to exceed  the demand for  transponders.  The  Company
believes that this imbalance  cannot be corrected  until global economic growth
and new  applications and services  increase demand for the existing  capacity.
See "Information on the Company - Competition - Transponder Oversupply."

     COMPETING  SYSTEMS  AND  SATELLITES.  AsiaSat  competes  with a number  of
regional  and  domestic  satellites  and  satellite  systems  such  as  APSTAR,
Chinasat,   Indosat,  INSAT,  Intelsat,  JSAT,  Koreasat,   MEASAT,  New  Skies
Satellites,  PanAmSat, Singtel Optus, SINOSAT,  Superbird,  Thaicom and others.
The Company  believes that most of the domestic  systems are planning to add at
least some regional  transponders to their next  generation of satellites.  The
increased  competition could adversely affect the Company's business prospects.
See  "Information on the Company - Competition - Competition  Restriction  from
Domestic Systems."



                                       7
<PAGE>

     FIBER OPTIC SYSTEMS. Fiber optic systems have been widely installed within
the region for point to point trans-oceanic communications.  In addition, point
to point fiber optic  connections  between major cities in Asia are common.  As
fiber optic coverage increases,  the competitiveness of satellites for point to
point communication will diminish. In addition,  the transmission of television
programming  via  Asymmetric  Digital  Subscriber  Line  ("ADSL")  and  Digital
Subscriber  Line  ("DSL")  technologies,  commonly  known as Internet  Protocol
Television,  is also an alternative for transmission of television  programming
via direct broadcasting satellite and cable.

     RISKS RELATING TO FUTURE SATELLITES

     The  construction,  launch  and  operation  of  AsiaSat  5 and any  future
satellites by the Company would be subject to  substantially  the same risks as
those set forth  herein  relating  to AsiaSat 2,  AsiaSat 3S and  AsiaSat 4. In
addition, AsiaSat's ability to make capital expenditures in connection with the
construction and launch of future  satellites could be subject to conditions of
future  financing  arrangements.   See  "Operating  and  Financial  Review  and
Prospects -- Liquidity and Capital Resources -- Planned Capital Expenditures."

     THE COMPANY IS SUBJECT TO REGULATION BY A NUMBER OF DIFFERENT BODIES

     The business in which the Company operates is highly regulated. Satellite,
broadcasting and  telecommunications  services are subject to international and
national law.

     HONG KONG.  As an  operator  of  privately  owned  satellites,  AsiaSat is
subject to the  regulatory  authority  of the Office of the  Telecommunications
Authority  of Hong Kong  ("OFTA"),  which in turn is subject to the control and
supervision of the People's Republic of China ("China"). The business prospects
of the  Company  could be  adversely  affected  by the  adoption  of new  laws,
policies or regulations,  or changes in the  administration,  interpretation or
application of existing laws,  policies and regulations that modify the present
regulatory environment in Hong Kong.

     Licenses granted to AsiaSat are subject to conditions  specified  therein.
The conditions may include basic orbital parameters (and requirements to obtain
advance  approval for any intended  deviations and to notify any  unintentional
deviation),  requirements  to avoid  interference  with the activities of other
users of outer space and  requirements not to cause actions which may give rise
to liabilities on the part of China or Hong Kong. Breach of any such conditions
can give rise to a right of revocation of the relevant license.

     The   Company's   operation   of  earth   stations   is   subject  to  the
Telecommunications  Ordinance  (Chapter  106 of the  Laws  of Hong  Kong)  (the
"Telecommunications  Ordinance").  The  Telecommunications  Ordinance  contains
provisions  for the  taking  of  possession  by the  Hong  Kong  Government  of
telecommunications stations if the Chief Executive in Council is of the opinion
that an emergency  has arisen in which it is expedient  for the public  service
that the Hong Kong  Government  should  have  control  over  telecommunications
stations. See "Information on the Company - Regulation - Hong Kong Regulation."

     The Company has been  advised by OFTA that it is  considering  reassigning
part of the  satellite  C-band  (specifically  3400 to 3600 MHz) for  Broadband
Wireless Access (BWA) applications. Although the Company does not use this part
of the band the Company believes,  based on analysis and limited testing,  that
broad  deployment  of BWA  transmitters  in Hong Kong will disrupt or interfere
with all conventional (3700 to 4200 MHz) and extended C band


                                       8
<PAGE>

(3400  to 3700  MHz)  satellite  services  in Hong  Kong.  The  Company,  other
satellite  operators  and users have raised  objections  to this  allocation by
OFTA, but there can be no assurance that this objection will be successful. The
Company  cannot be  certain  that in the  event  that  such  frequency  band is
reassigned,  techniques  that may  potentially  be applied to mitigate any such
disruption or interference will be successful. This proposal by OFTA is part of
a  worldwide  trend to assign  more  frequency  spectrum  to mobile and nomadic
communications  services  users.  Should this trend  continue C band  satellite
services  will  be  disadvantaged,  particularly  in  urban  areas  within  the
Company's regional coverage.

     OTHER  NATIONAL  REGULATORY  SCHEMES.  The  customers  of the  Company are
subject to the  regulatory  authority in the  countries in which they  operate.
Many of the Company's  customers must have  authorization from the countries in
which such customers are located in order to uplink to and communicate by means
of the  Company's  satellites.  Although  the Company  does not  believe  these
regulatory  schemes will prevent the Company from pursuing its business,  there
can be no  assurance  that  such  licenses  and  approvals  are or will  remain
sufficient  in the view of  national  regulatory  authorities  and  that  these
authorities will not discourage or prevent  potential  customers from utilizing
transponders on the Company's satellites.

     The  laws  of  certain  countries  require  television   broadcasters  and
satellite   telecommunication   users  providing  services  in  such  countries
generally to use state-owned or locally-owned satellites.  Punitive withholding
taxes are often  applicable  to  payments  made  under  non-domestic  satellite
contracts.  These legal  requirements  prevent the Company and other  satellite
companies from  competing to provide  transponder  capacity to these  potential
customers.  There can be no assurance that other countries in the Asian region,
including countries in which the Company already has customers, will not impose
similar  requirements  to use  state-owned or  locally-owned  satellites in the
future.  The  imposition  of  such  requirements  could  adversely  affect  the
Company's   results  of  operations.   See   "Information   on  the  Company  -
Competition."  The Company  could be adversely  affected by changes in laws and
regulations,  or in the  interpretation  and  application  of existing laws and
regulations,  relating to  taxation or  licensing  fees in  countries  that may
assert  jurisdiction over the Company's  activities,  including countries where
customers  of the  Company  are  located or where  signals  transmitted  by the
Company's  satellites are received.  See  "Operating  and Financial  Review and
Prospects - Taxation."

     INTERNATIONAL  TELECOMMUNICATION UNION. AsiaSat's use of orbital slots and
radio   frequency  is  subject  to  the   regulations   of  the   International
Telecommunication  Union  ("ITU").  Nations  are  required  by treaty to make a
filing of their  proposed  use of  satellite  orbital  slots for  geostationary
satellites  with the  Radiocommunication  Bureau of the ITU. When a conflict or
potential conflict is noted, nations are obligated to negotiate in an effort to
coordinate  the  proposed  uses and  resolve  any  interference  concerns.  The
Radiocommunication Bureau, however, has no formal dispute resolution mechanism,
and if nations  cannot agree on a  resolution,  a satellite  system will not be
entitled to the full interference  protection afforded under international law.
See "Information on the Company - Regulation - International  Telecommunication
Union."


                                       9
<PAGE>

     FAILURE TO ACHIEVE AND MAINTAIN  EFFECTIVE INTERNAL CONTROL OVER FINANCIAL
REPORTING  IN  ACCORDANCE  WITH SECTION 404 OF THE  SARBANES-OXLEY  ACT OF 2002
COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY

     The United  States  Securities  and  Exchange  Commission,  or the SEC, as
required  by  Section  404 of the  Sarbanes-Oxley  Act of 2002,  adopted  rules
requiring every public company to include a management report on such company's
internal controls over financial reporting in its annual report, which contains
management's assessment of the effectiveness of the company's internal controls
over  financial  reporting.  In  addition,  an  independent  registered  public
accounting  firm must attest to and report on  management's  assessment  of the
effectiveness  of the company's  internal  controls over  financial  reporting.
These  requirements  will first apply to our annual report on Form 20-F for the
fiscal year ending  December 31, 2006.  Our  management  may conclude  that our
internal  controls over our financial  reporting are not  effective.  Moreover,
even if our  management  concludes  that our internal  controls over  financial
reporting are effective, our independent auditor may still decline to attest to
our  management's  assessment  or may issue a report that is qualified if it is
not  satisfied  with  our  controls  or the  level at which  our  controls  are
documented,  designed,  operated or reviewed,  or if it interprets the relevant
requirements  differently  from  us.  Furthermore,  during  the  course  of the
evaluation, documentation and attestation, we may identify deficiencies that we
may  not be able  to  remedy  in time  to  meet  the  deadline  imposed  by the
Sarbanes-Oxley  Act for compliance with the  requirements of Section 404. If we
fail to achieve and maintain the adequacy of our internal controls,  we may not
be able to conclude that we have  effective  internal  controls,  on an ongoing
basis,  over financial  reporting in accordance  with the  Sarbanes-Oxley  Act.
Moreover,  effective internal controls are necessary for us to produce reliable
financial  reports and are important to help prevent  fraud.  As a result,  our
failure to achieve and maintain  effective  internal  controls  over  financial
reporting could result in the loss of investor confidence in the reliability of
our financial statements,  which in turn could harm our business and negatively
impact the trading  price of our shares and ADSs.  Furthermore,  we  anticipate
that we will incur considerable  costs and use significant  management time and
other resources in an effort to comply with Section 404 and other  requirements
of the Sarbanes-Oxley Act.

     POLITICAL, ECONOMIC AND OTHER REGIONAL RISKS

     AsiaSat is a Hong Kong company.  Substantially  all of AsiaSat's  revenues
are derived from its operations  conducted in the Asian region.  In 2003,  2004
and 2005,  approximately  59.8%,  51.8% and 61.9%,  respectively,  of AsiaSat's
revenues,  were  derived from  customers  from Greater  China,  which  includes
mainland China, Hong Kong, Macau and Taiwan. Furthermore, during 2003, 2004 and
2005,  approximately,  24.9%,  22.4%  and  25.7%,  respectively,  of  AsiaSat's
revenues were attributable to transponder  utilization  agreements with STAR, a
Hong Kong company.  As a result, the Company's  financial condition and results
of operations may be influenced by the political  situation in the Asian region
and by the general state of the economies in such region.

     CHINA.  General  economic  conditions  in China  could have a  significant
impact on the financial prospects of the Company. The economy of China has been
changing  dramatically  with a gradual  reduction in the role of state economic
plans in the  allocation of resources,  pricing and management of assets and an
increased  reliance on market forces. Any slowdown in economic growth or return
to non-market policies could adversely affect business in China.


                                      10
<PAGE>

     The Company may also be adversely affected by changes in the political and
social   conditions  in  China,  and  by  changes  in  laws,   regulations  and
governmental  policies,  with  respect to broadcast  media,  telecommunications
services,  inflationary measures,  currency conversion or the rates and methods
of taxation,  among other things.  While the Chinese  government is expected to
continue  its  economic  reform  policies,  many  of  the  reforms  are  new or
experimental and may be refined or changed.

     Almost all payments under AsiaSat's transponder utilization agreements are
made in US Dollars.  Since China has extensive foreign exchange  controls,  the
ability of Chinese  companies to convert  Renminbi (the currency of China) into
foreign currency and to purchase foreign currency is subject to various Chinese
laws and regulations. China's current or future foreign exchange controls could
adversely  affect  the  ability  of the  Company's  customers  in China to make
payments to the Company in US Dollars.

     HONG KONG. From July 1, 1997, Hong Kong ceased to be a Crown Colony of the
United Kingdom, and became a Special  Administrative  Region of China. Although
the Basic Law, which governs China's relationship with Hong Kong, provides that
Hong  Kong  will  have a high  degree of  legislative,  judicial  and  economic
autonomy,  there can be no assurance that the Company's financial condition and
results of operations  will not be adversely  affected as a consequence  of the
exercise of China's  sovereignty  over Hong Kong.  In addition,  political  and
social developments in China have from time to time adversely affected the Hong
Kong economy.

     SARS,  AVIAN FLU OR SIMILAR  OCCURRENCE.  The Company's  business could be
adversely affected by the re-emergence of Severe Acute Respiratory Syndrome (or
SARS) or the development of a possible  pandemic such as the avian influenza or
a similar type of regional  occurrence.  Restrictions on travel  resulting from
these possible  events could adversely  affect the Company's  ability to market
and  service  new and  existing  customers  throughout  the  Asian  region.  In
addition,  sick employees or other employees who fear  contracting such illness
could decide to not report for duty. The Company's  results of operations could
be  adversely  affected to the extent that SARS,  avian  influenza or a similar
type of  regional  occurrence  harms the economy  in, or  otherwise  negatively
affects, China or the Asian region generally.

     LIMITATIONS ON WARRANTIES AND INSURANCE

     Pursuant  to  AsiaSat's  satellite   construction  contracts  with  Boeing
Satellite  Systems,  International,  Inc.  (formerly  known as Hughes Space and
Communications  International,  Inc.)  ("Boeing"),  Lockheed  Martin  and Space
Systems/Loral Inc. with respect to AsiaSat 2, AsiaSat 3S, AsiaSat 4 and AsiaSat
5, AsiaSat is the beneficiary of certain limited performance-based, operational
warranties on its satellites.  However,  the limited contractual  warranties do
not cover a substantial  portion of the risk inherent in satellite  launches or
satellite operations. Furthermore, there has been a general rise in the cost of
insurance following a series of satellite failures. In addition, while the cost
of insurance has increased, insurance coverage has decreased as a result of the
increase in satellite  in-orbit  failures and the terrorist events on and after
September 11, 2001.

     AsiaSat has in-orbit  insurance  coverage for AsiaSat 3S and AsiaSat 4 and
plans to obtain such coverage for AsiaSat 5. AsiaSat's  in-orbit insurance must
be renewed annually.  AsiaSat 2 is no longer insured for in-orbit failures. See
"Key Information - Satellites - AsiaSat 2".


                                      11
<PAGE>

     There  are  circumstances  in which  AsiaSat's  insurance  will not  fully
reimburse  AsiaSat for its expenditures with respect to launching a replacement
satellite (for example,  if the cost of  replacement  exceeds the sum insured),
and the insurance will not  compensate  AsiaSat for business  interruption  and
similar losses  (including,  among other things,  loss of market share, loss of
revenue and  incidental and  consequential  damages) which might arise from the
failure  of a  satellite  launch  and launch of a  replacement  satellite  or a
failure of a satellite to perform to  specifications.  For a description of the
amounts and coverage of AsiaSat's launch, in-orbit and liability insurance, see
"Information on the Company -- Insurance."

     RISKS RELATED TO U.S. EXPORT CONTROLS

     The  United   States   tightly   restricts   the   export  of   commercial
communications satellites and satellite-related components and technology. U.S.
export control policy toward Hong Kong and the Company is affected by U.S.-Sino
relations,  which can vary substantially from time to time. AsiaSat has sourced
all its  satellites in the United  States.  There can be no assurance that U.S.
policy  will not change in ways that will have a negative  effect on the export
of future satellites, including the timing of such export, nor can there be any
assurance  that future U.S.  sourcing by the Company  will be unimpeded by U.S.
export restrictions.

     RISK OF LOSS OF RIGHTS TO ORBITAL SLOTS

     In addition to the  frequency  bands  currently  used in the three primary
positions of 100.5 degrees East, 105.5 degrees East, and 122.2 degrees East, in
which the Company's satellites currently operate, China has filed requests with
the ITU on behalf of AsiaSat for a number of other  frequency bands in the same
orbit locations and for enhanced operating  parameters in the current frequency
bands. These filings are at different stages in the application process.  There
is no assurance  that AsiaSat will maintain its right to operate  satellites in
its primary  positions.  There is also no  assurance  that  AsiaSat will obtain
rights to launch and operate satellites with enhanced  parameters or additional
frequency bands or that if it does obtain such rights,  that it will be able to
fully use the  allocated  frequencies  because  of the  limitations  imposed by
coordination  agreements with other satellite systems.  See "Information on the
Company - Satellites - Orbital Slots and Use of Frequencies"  and  "Information
on the Company - Satellites - AsiaSat 4."

     POTENTIAL FUTURE LEVERAGE

     AsiaSat may incur borrowings  under a loan facility in the future.  Such a
loan facility may contain covenants, including financial covenants, which could
prevent the Company from  undertaking  certain  acquisitions and purchases that
may be  necessary  for its growth.  See  "Operating  and  Financial  Review and
Prospects - Liquidity and Capital Resources."

     RISK OF NOT BEING ABLE TO HIRE AND RETAIN HIGH TECHNOLOGY EMPLOYEES IN THE
SATELLITE INDUSTRY

     The Company's  continued  success depends  substantially on its ability to
hire, retain and motivate highly skilled  technology  specialists.  Because the
number of people  with such  skills is  limited,  satellite  operators  compete
vigorously for their services. The potential consequences of the Company's loss
of, or its inability to attract,  key workers could include delays or inability
to launch, monitor or control satellites,  with a consequent reduction in sales
and  profits.  Alternatively,  the  Company  may have to offer more  attractive
remuneration


                                      12
<PAGE>

packages than its  competitors,  which would  increase the Company's  personnel
expenses and could reduce its margins.


ITEM 4.  INFORMATION ON THE COMPANY.

     HISTORY AND DEVELOPMENT OF THE COMPANY

     The Company is an exempted company  organized under the Companies Act 1981
of Bermuda (as amended) (the "Companies  Act"). The Company was incorporated on
May 10, 1996. The Company's  registered  office is located at Canon's Court, 22
Victoria  Street,  Hamilton,  HM12,  Bermuda  (phone:   441-295-2244)  and  its
principal place of business is located at 17th Floor, The Lee Gardens, 33 Hysan
Avenue, Causeway Bay, Hong Kong.

     ORGANIZATIONAL STRUCTURE

     The  Company  is the  parent  company of  AsiaSat.  AsiaSat  holds a 47.3%
interest in SpeedCast  Holdings  Limited,  a 49.0% interest in Beijing Asia Sky
Telecommunications  Technology Company Limited and an 80.0% interest in Skywave
TV  Company  Limited.  See  Note  10 to the  Company's  consolidated  financial
statements.

     ACQUISITIONS, INVESTMENTS AND JOINT VENTURES

     o   In March 2002,  the Company  entered  into an  agreement to acquire an
         additional 8.8% interest in SpeedCast  Holdings Limited,  which wholly
         owns   SpeedCast   Limited   ("SpeedCast")   by  making  an  aggregate
         contribution  of HK$31.2 million  (US$4.0  million),  of which HK$19.5
         million  (US$2.5  million)  was in cash and  HK$11.7  million  (US$1.5
         million) was by means of extending the usage of one C-band transponder
         by SpeedCast  Holdings  Limited for a further  period of 219 days from
         February 4, 2003.  In 2003,  the  Company  extended  payment  terms to
         SpeedCast  allowing a deferment  with interest of up to HK$8.6 million
         (US$1.1 million) in transponder  payments until the end of April 2004.
         In May 2004, the Company  entered into a further  agreement to acquire
         an  additional 2% interest in SpeedCast  Holdings  Limited by making a
         contribution  of HK$11.7  million  (US$1.5  million)  in cash.  See "-
         Services and Customers - Expanded Services and Other Businesses."

     o   In March 2001,  AsiaSat  entered into an agreement with respect to the
         lease of the Tai Po Site. For details with respect to the lease of the
         Tai Po Site, see  "Additional  Information - Material  Contracts",  "-
         Business  Overview"  and "-  Property,  Plants  and  Equipment  - Land
         Facilities."  In  March  2002,  AsiaSat  entered  into a  construction
         agreement with Leighton  Contractors  Asia Limited with respect to the
         construction  of a  satellite  control  center on the Tai Po Site.  In
         December  2002,  AsiaSat  entered  into an  agreement  with  Globecomm
         Systems Europe Limited for the procurement of the telemetry,  tracking
         and control  ("TT&C")  radio  frequency  system to be installed at the
         satellite control center at the Tai Po Site. In January 2004,  AsiaSat
         entered into an agreement with Integral Systems for satellite  control
         software.  As at December 31, 2005, HK$215.2 million (US$27.6 million)
         had been  spent  on the Tai Po Site.  See  "Additional  Information  -
         Material Contracts."

     o   In March 2004,  the Company  entered into a joint venture  arrangement
         and formed  Beijing  Asia Sky  Telecommunications  Technology  Company
         Limited  ("Beijing  Asia") to  provide  corporate  data  networks  and
         services in China using very small


                                      13
<PAGE>

         aperture terminal ("VSAT") technology.  In exchange for a 49% interest
         in Beijing  Asia,  the Company  contributed  HK$12.5  million  (US$1.6
         million) in cash to Beijing Asia and has committed to provide  Beijing
         Asia with  transponder  capacity in an amount of up to HK$13.0 million
         (US$1.7  million)  payable on a deferred  basis over the next three to
         five years.  See "--  Services and  Customers - Expanded  Services and
         Other Businesses" and "Additional Information - Material Contracts."

     o   In November  2004,  the Company  entered  into an  agreement  with two
         strategic  partners pursuant to which the Company agreed to contribute
         HK$24.0  million  (US$3.1  million)  in return for an 80%  interest in
         Skywave  TV  Company  Limited  ("Skywave")  and each of the  strategic
         partners  agreed  to make an  in-kind  contribution  equal  to  HK$3.0
         million (US$0.4 million) in return for a 10% interest each in Skywave.
         See  "--  Services  and  Customers  -  Expanded   Services  and  Other
         Businesses" and "Additional Information - Material Contracts."

     o   In April 2006, AsiaSat entered into a construction contract with Space
         Systems/Loral,  Inc.  ("Loral")  for the  design and  construction  of
         AsiaSat 5. In May 2006,  AsiaSat  entered into a launch  contract with
         Sea Launch  Limited  Partnership  ("Sea  Launch")  which will  provide
         launch  services  related to the launch of AsiaSat 5 from the Baikonur
         Space Center in Kazakhstan.  The total consideration payable under the
         two  contracts,   together  with  insurance  cost,  is   approximately
         HK$1,404.0  million  (US$180.0  million).  See "-- Business Overview -
         Satellites - AsiaSat 5."

     BUSINESS OVERVIEW

     The Company,  through its wholly-owned  subsidiary,  AsiaSat, is a leading
provider of high quality satellite  transponder capacity in Asia. The Company's
satellites  are  positioned  over the Asian  landmass  and offer its  customers
comprehensive  coverage of approximately  two-thirds of the world's population.
The Company operates three satellites -- AsiaSat 2, AsiaSat 3S and AsiaSat 4.

     AsiaSat 2 was  launched  in 1995 and began  commercial  service in January
1996.  AsiaSat 3S was launched from the Baikonur  Cosmodrome in the Republic of
Kazakhstan  and began  commercial  service  in 1999.  AsiaSat  3S has a similar
C-band footprint coverage to AsiaSat 2. Together,  these two satellites provide
coverage to more than 50 countries, with approximately 3.3 billion people, from
Siberia to Australia and from Japan to the Middle East.

     AsiaSat 4, launched from Cape  Canaveral,  United States in April 2003, is
located at the 122.2 degrees East orbital slot and began commercial  service on
July 1, 2003.  AsiaSat 4 is a high power  satellite  having C-band coverage and
power substantially  similar to AsiaSat 2 and AsiaSat 3S. Because AsiaSat 4 has
a more easterly location, its C-band coverage favors the Pacific-Rim, Australia
and New  Zealand to a greater  degree than  previous  AsiaSat  satellites.  The
Ku-band  coverage  of AsiaSat 4 is designed  to meet the  requirements  of both
broadcast  satellite services ("BSS")  frequencies and fixed satellite services
("FSS") frequencies for maximum flexibility. In June 2000, the Company received
a  Telecommunication  License from OFTA allowing AsiaSat to operate four of the
twelve BSS frequencies and the FSS frequencies on AsiaSat 4. In April 2005, the
Company   obtained  the  right  to  make  available  the  remaining  eight  BSS
frequencies  on AsiaSat 4. See "-- Services and  Customers - Expanded  Services
and  Other  Businesses."  Because  AsiaSat 4 is a newly  established  satellite


                                      14
<PAGE>

without an existing  customer base and viewership,  AsiaSat can currently offer
its  customers  the  option to utilize  AsiaSat  4's high  powered  transponder
capacity at a lower cost than the rate  demanded  for capacity on AsiaSat 2 and
AsiaSat  3S.  AsiaSat 3S  demands a higher  rate for its  transponder  capacity
because it has the largest  viewership base of any commercial  satellite in the
Asian region.

     The  Company  has  leased  a  site  in  Tai  Po  Industrial  Estates,  New
Territories,  Hong Kong (the  "Tai Po  Site"),  to  support  the  growth of the
Company's business.  The Tai Po Site houses a new satellite control center (the
"Tai Po Satellite  Earth  Station")  that allows AsiaSat to offer its customers
additional and improved  services.  These services  include  uplink,  technical
support and other  value  added  services.  For a general  discussion  on earth
stations, see "--Regulation - Hong Kong Regulation." Construction of the Tai Po
Satellite  Earth Station was  completed,  and the final  occupation  permit was
received in January 2004 from the Hong Kong Building Authority. See "Additional
Information - Material Contracts."

     As of  December  31,  2005,  the  utilization  rate for each of AsiaSat 2,
AsiaSat  3S  and  AsiaSat  4  was   approximately   40.1%,   72.7%  and  46.5%,
respectively, with an average of 54.0% under transponder utilization agreements
and transponder purchase agreements.

     The Company provides  transponder  capacity primarily to the broadcasting,
telecommunications  (including private  communication  networks),  Internet and
multimedia markets.  AsiaSat has entered into separate transponder  utilization
agreements  with  over  100  customers  from  various  countries  and  regions,
including Australia,  British West Indies,  China, France,  Germany, Hong Kong,
India, Korea,  Kuwait,  Pakistan,  Singapore,  Taiwan, the United Kingdom,  the
United States and Vietnam.

     In  2003,   2004  and  2005,   approximately   59.8%,   51.8%  and  61.9%,
respectively,  of the  Company's  revenues  were  derived from  customers  from
Greater China, which includes mainland China, Hong Kong, Macau and Taiwan.

     The Company  believes  that both  AsiaSat 2 and AsiaSat 3S are the leading
satellites for regional  television  programming  distribution in Asia based on
the number of viewers watching programming distributed on these satellites. The
Company's largest customer,  STAR, is a Hong Kong-based international satellite
television  broadcasting  company that broadcasts to the Asian region via these
two satellites.

     SERVICES AND CUSTOMERS

     During the last three years, the Company's  revenues were derived from the
following markets:

<TABLE>
<CAPTION>
                                               ------------------------------------------------
                                                    2003            2004              2005
                                               ------------------------------------------------
<S>                                                <C>             <C>               <C>
Broadcasting (video).......                         70.4%           70.6%             65.7%
Telecommunications, Internet                        29.6%           29.4%             34.3%
and Multimedia...........
</TABLE>

     Total  revenue from the  Company's  five largest  customers in each of the
years ended  December 31, 2003,  2004 and 2005 was HK$376.6  million,  HK$462.5
million and HK$345.8 million, respectively, which represented 42.0%, 46.0%, and
39.3%  respectively,  of total


                                      15
<PAGE>

revenue.  Revenues from the Company's largest customer represented 24.9%, 22.4%
and 25.7% of total  revenue for the years ended  December  31,  2003,  2004 and
2005, respectively.

     BROADCASTING

     Local,  national and international  broadcasters use satellite transponder
capacity  for  television  programming  distribution,  contribution  operations
(i.e., the transmission of video feeds from one location to another) and ad hoc
services such as the  transmission of special events and live news reports from
the scene of the event.  The largest  market for  broadcasting  services is the
full-time  leasing  of  transponder   capacity  by  programmers  to  distribute
programming  to television  stations,  local cable  operators,  master  antenna
systems and directly to homes.

     STAR offers a bouquet of digital services, including both subscription and
free-to-air  television that,  according to STAR, reaches more than 300 million
viewers across the Asian region.

     STAR entered into capacity  agreements for  transponders on AsiaSat 3S. In
February  2004,  the Company  entered  into an  agreement  with STAR to provide
facilities  at the Tai Po Site to house STAR's back up play out,  broadcast and
radio  frequency  equipment  for  downlinking  and uplinking to AsiaSat 3S, and
other related services. STAR also utilises AsiaSat 2 C-band capacity to provide
programming primarily as backup capacity.

     The  Company's  results of operations  could be adversely  affected by the
loss of STAR as a customer  or if STAR  failed to perform  its  obligations  in
accordance with the terms of its transponder utilization agreements.  There can
be no assurance that STAR will enter into  additional  transponder  utilization
agreements with the Company,  either for AsiaSat 3S or other  satellites,  upon
the  expiration  of  existing  transponder  utilization  agreements.  See  "Key
Information - Risk Factors - Reliance Upon Significant Customer."

     AsiaSat  currently is not subject to any exclusivity  arrangement with any
of  its  customers.  Other  broadcasters  on  its  satellite  fleet  using  its
transponders  include  Pakistan  TV,  Associated  Press  Television  News,  the
Ministry of Information of Kuwait, , BBC World Service Radio, Voice of America,
Deutsche Welle of Germany,  TV5, RAI of Italy, RTVE of Spain, RTPi of Portugal,
RTR Planeta of Russia, Fashion TV, TVB Satellite Broadcasting of Hong Kong, the
European  Broadcasting Union,  Sahara TV, Turner  Broadcasting  System, Sun TV,
Bloomberg  TV, NOW TV,  Indus  Vision,  Muslim TV, MATV,  Channel  NewsAsia and
Reuters TV.

     In addition,  governmental  bodies seek to use  satellites to expand their
coverage to remote and  underdeveloped  regions of their  countries  that would
otherwise be  unserved.  The signals are  received at  rebroadcast  centers and
retransmitted  to  viewers.   The  State  Administration  of  Radio,  Film  and
Television of China (formerly, the Ministry of Radio, Film and Television) uses
capacity on AsiaSat 3S to  distribute  domestic  and  international  television
programming. A number of television channels from various provinces and regions
in China are broadcasting on AsiaSat's C-band transponders.

     TELECOMMUNICATIONS, INTERNET AND MULTIMEDIA

     The  Company's   telecommunications  services  include  the  provision  of
transponder  capacity  for private  communications  networks for data and voice
communications  and for  communications  service providers in Asia. The Company
believes that there will continue to


                                      16
<PAGE>

be  opportunities in Asia to market  transponder  capacity to certain end users
that,  due to poor  telecommunications  infrastructure  or high  costs of local
public networks, desire to operate their own private network for data and voice
transmission. These are often large multinational companies or agencies such as
financial news providers,  newspapers,  banks, paging companies,  airlines, oil
companies and stock exchanges.

     China  represents  one  of  the  world's  largest  potential  markets  for
satellite communications. Private communications networks in China are numerous
and growing.  Organizations in China in such businesses as banking, securities,
publishing  and oil  have  established  private  networks  utilizing  AsiaSat's
satellites to link remote sites with their headquarters.

     AsiaSat's Chinese  telecommunications  customers include the People's Bank
of China,  the  Shanghai  Stock  Exchange,  the  People's  Daily,  CITIC  Guoan
Information  Industry Company Limited and China Petrochemical  Corporation.  In
addition,  Chinese  ministries  and  agencies  have  entered  into  transponder
purchase agreements to use transponders on AsiaSat's satellites.

     AsiaSat's   telecommunications  customers  also  include  Vietnam  Telecom
International,   Reach,  Corporate  Access,   Associated  Press,  Reuters,  the
International  Air  Transport  Association,   Korea  Telecom,  Teleport  Access
Services and Pakistan Telecom.

     Customers  including  Telstra  Corporation,  Pacific  Century  Matrix  and
SpeedCast use  AsiaSat's  satellites  to offer  broadband  (which refers to the
provision of multiple channels of data over a single  communications  channel),
Internet and multimedia services. In addition, Connexion by Boeing entered into
an agreement for the use of Ku-band capacity on AsiaSat 3S to provide in-flight
broadband  communication services on the Asia-to-Europe flight corridor,  which
commenced in the first quarter of 2004.

     EXPANDED SERVICES AND OTHER BUSINESSES

     AsiaSat has launched digital broadcast  platforms on AsiaSat 2 that offers
one  stop  shop  services  including  satellite  capacity,   signal  turnaround
facilities and analog/digital conversion to broadcast customers from Europe and
the  Middle  East for their  services  to Asia and  Australia.  The  turnaround
facilities are supplied by teleport partners in Cyprus and Israel that are able
to receive  signals  from  European and Middle East  satellites  and uplink the
signals to AsiaSat 2 .

     OFTA granted AsiaSat a Fixed Carrier  Services ("FC") license in May 2004.
A FC license  allows  license  holders to uplink  broadcasting  programs and to
provide public telecommunication services linking Hong Kong and other countries
either  on  their  own  business  initiatives,  or for and on  behalf  of their
customers via satellites. AsiaSat's FC license has enabled AsiaSat to provide a
one-stop service to its customers, including high-quality satellite transponder
capacity, uplinking or downlinking broadcasting programs, and telecommunication
services to audiences or operators outside Hong Kong.

     SpeedCast has installed a multimedia platform that enables distribution of
Internet services and other multimedia  content.  Customers may use this format
when distributing content on the AsiaSat satellite system.  AsiaSat now holds a
47.3%  interest  in  SpeedCast  Holdings  Limited,  which was formed in 1999 to
principally  provide high speed  Internet,  multimedia  content  delivery,  and
corporate  broadcast  services  such as data  packages  delivery  and  Internet
streaming.  SpeedCast,  in addition to providing the principal  services,  also
launched on-line


                                      17
<PAGE>

music  distribution,  on-line  multimedia  services  and  streaming  encryption
system. In 2003,  SpeedCast also launched a new service for two-way  operation,
which provides more efficient connection for content delivery.

     On June 27, 2000, the Company was granted a telecommunication license (the
"Telecommunication  License") from OFTA allowing  certain BSS frequencies to be
incorporated  into the payload of AsiaSat 4 at the 122.2  degrees  East orbital
position.  It was  subsequently  granted the right to make  available  four BSS
frequencies on AsiaSat 4 by OFTA.  These BSS frequencies  were assigned to Hong
Kong by the 1997 World  Radiocommunication  Conference  ("WRC '97") of the ITU.
The 2000 World  Radiocommunication  Conference ("WRC-2000") later revised these
assignments  and further  assigned eight more  frequencies  to Hong Kong.  OFTA
granted AsiaSat the right in April 2005 to make available the additional  eight
frequencies  on AsiaSat 4.  These  frequencies  are  designated  for  satellite
broadcasting  uses and are receivable in Hong Kong and  surrounding  areas with
very  small  antennas.  They  can be used  to  provide  Direct-to-Home  ("DTH")
satellite  broadcasting  services,  which  refers to a satellite  service  that
delivers  television  programming  directly  to  consumer  homes  using a small
antenna  and  related  equipment.  Adding the BSS  frequencies  onto  AsiaSat 4
enables AsiaSat to offer high power and wide coverage for broadcasting services
in Hong Kong and the surrounding areas. The main difference between the BSS and
the FSS in AsiaSat's  case is that BSS gives access to additional  spectrum for
the Company.  Moreover,  while the FSS frequency bands are used for a multitude
of services,  the BSS  frequency  bands are normally  used only for  television
applications and with much more standardized parameters.

     In April 2004, the Company's subsidiary Skywave applied for a non-domestic
television  program  service  license,  which was  granted  for 12 years by the
Broadcasting  Authority  of Hong  Kong in May  2004,  in  order  to use the BSS
frequencies on AsiaSat 4 to provide DTH satellite broadcasting services.

     In November 2004, the Company entered into an agreement with two strategic
partners  pursuant to which each of these  strategic  partners  made an in-kind
contribution  equal to HK$3.0  million in return for a 10% interest in Skywave.
See  "--   Acquisitions,   Investments  and  Joint  Ventures"  and  "Additional
Information - Material  Contracts."  Skywave has set up a low cost regional DTH
service,  providing  selected  programming to the markets of Macau,  Hong Kong,
Taiwan and to  subscribers  in  Southern  China  licensed  to  receive  foreign
television services. This DTH service commenced trial services in December 2004
and uses the four BSS  transponders  on AsiaSat 4. By  installing  a very small
dish, viewers can enjoy a whole new range of programming.

     In March 2004,  the Company  formed joint venture  Beijing Asia to provide
corporate  data networks and services in China using VSAT  technology.  Beijing
Asia commenced  operation in October 2004 and is providing  technical  services
and  equipment  installation  for the  construction  and  operation  of a trial
network to connect  remotes  sites in rural  China using VSAT  technology.  See
"--Acquisitions,  Investments and Joint Ventures" and "Additional Information -
Material Contracts."

     On March 18, 2005, Auspicious Colour Limited, a wholly owned subsidiary of
the Company, was established and was granted a non-domestic  television program
service  licence on September 17, 2005 from the  Television  and  Entertainment
Licensing Authority of


                                      18
<PAGE>

Hong Kong.  Auspicious  Colour Limited was set up to provide a one-stop service
that  combines  the  provision  of  satellite  capacity  and uplink  service to
broadcasters.

     SATELLITES

     The global  communications market has historically been shared among three
major  transmission  technologies  - fiber optic and coaxial  cable,  microwave
systems and  satellites.  Satellites  have been,  and  continue to be, used for
global communications applications. Each of these transmission technologies has
advantages over the other two in specific market segments.

     Although  satellites  initially were used for point to point long distance
telephone  and  television  transmissions  and  continue  to be used for  these
applications,  fiber  optic  cables  have  proven to be a more  cost  effective
transmission  method for high volume point to point  applications.  Today, most
trans-oceanic transmissions are delivered via submarine fiber optic and coaxial
cables,  which are ideally suited to carry large amounts of traffic between two
points.  In developing  countries,  satellites  carry a significant  portion of
point to point traffic due to the lack of  terrestrial  fiber optic and coaxial
network.  However,  as more fiber optic and coaxial  networks are  established,
less of this  traffic  will be  delivered  via  satellite.  In many  countries,
satellites are also used to supplement  terrestrial  transmission  networks for
the distribution of television and radio programming.

     Geostationary  satellites are located in-orbit  approximately 22,300 miles
above the Equator.  When positioned in geostationary or geosynchronous orbit, a
satellite appears to hover over the same spot on the earth because it is moving
at a rate that  matches  the speed of the earth's  rotation on its axis.  These
high powered  satellites have the ability to cover up to  approximately  42% of
the  earth's  surface at one time.  With  broad  coverage  capabilities,  these
satellites are well suited for point-to-multi-point  applications  (principally
television broadcasting, private communication network, Internet and multimedia
services).  Satellites  are commonly used for  distribution  of video and audio
signals  to cable  operators  and  local  television  and  radio  stations  for
redistribution.  In DTH applications,  a high powered  geostationary  satellite
allows video  transmissions to be received directly from the satellite to homes
using very small dishes.

     A  satellite  can be  accessed  by an  uplink  for the  transmission  of a
satellite  circuit  extending  from the earth to the satellite  from  virtually
anywhere within its coverage area. This flexibility  makes satellites ideal for
private   communications   networks.   Due   to  the   high   cost   of   local
telecommunications services or the lack of an adequate local telecommunications
infrastructure,  an  organization  may wish to operate its own network.  A VSAT
network, connecting a large number of widely dispersed locations via satellite,
is an efficient and cost effective  method for many  organizations  to maintain
communications  with a network of offices  that spread over a large  geographic
area.

     Satellite  transponders receive signals from the uplink earth stations and
then change the frequency of,  amplify and transmit the signals to the downlink
earth stations.  Transponder subsystems include low-noise receivers,  frequency
converters,   channel   amplifiers,   high   power   amplifiers,   input/output
multipliers,  various  switches  and  other  electronic  components.  Frequency
represents   the   measure  of  how   frequently   a   periodic   (repetitious)
electromagnetic wave form or signal regenerates itself at a given amplitude.


                                      19
<PAGE>

     Communications  satellites are of varying quality and usefulness depending
on (i) footprint,  or coverage area, (ii) orbital  location,  (iii) transponder
power (EIRP),  (iv)  interference  from adjacent  satellites,  (v)  transponder
bandwidth, (vi) frequency band and (vii) other features, such as beam switching
and linearizers.

     A beam represents one of the coverage  patterns offered by a satellite.  A
steerable  beam  allows  the area of  coverage  to be  changed  based on market
demand. The footprint of a satellite refers to the geographic area covered by a
satellite,  the outer edge of which  defines  area beyond  where the quality of
communication  degrades  below  an  acceptable  commercial  level  due  to  the
spacecraft antenna pattern, power of the signal and curvature of the earth. The
primary  transponder  characteristic  is downlink power,  which is expressed in
terms of EIRP. EIRP means equivalent  isotropic radiated power and is a measure
of radio frequency power of each transponder.  Transponder bandwidth, expressed
in terms of megahertz or MHz, a unit of frequency  equal to one million  cycles
per second,  is a range of frequencies that can pass over a given  transmission
channel.  The  greater the  bandwidth,  the more  information  that can be sent
through the circuit in a given amount of time.

     C-band and Ku-band in the context of satellite communications are portions
of the radio frequency  spectrum assigned for satellite  transmission,  and are
approximately  in the three to seven and 11 to 15  gigahertz  (or GHz)  ranges,
respectively.  Gigahertz is a measure of frequency  equal to one billion cycles
per second.  While Ku-band  frequencies suffer from fading caused by rain, they
are more  suitable  for small  antenna  applications  than C-band  frequencies.
Ku-band is generally  used for the same purposes as C-band.  To compensate  for
fading caused by rain, Ku-band transmitters generally have higher power margins
than  C-band  transmitters.  Higher  power,  which  permits  the  use of  small
antennas, makes Ku-band transmission more suitable for DTH television.

     The  following  table  sets  forth  certain  satellite  specifications  in
relation to AsiaSat 2, AsiaSat 3S, AsiaSat 4 and AsiaSat 5, which is planned to
be launched in 2008.  For a discussion on certain risks related to  satellites,
see "Key  Information  -- Risk Factors -- Risk of Launch and In-orbit  Failure,
Loss,  Reduced  Performance and Satellite  Defects",  "Key  Information -- Risk
Factors -- Limited Life of Satellites" and "Key  Information -- Risk Factors --
Risk of Loss or Damage to Satellites,  Ground Based Satellite Control Equipment
or Satellite Stations from Acts of War, Terrorism,  Electrostatic  Storm, Space
Debris and Other Natural Disasters."

<TABLE>
<CAPTION>
                                                  SUMMARY SATELLITE DATA
                   --------------------------------------------------------------------------------------
                       ASIASAT 2           ASIASAT 3S            ASIASAT 4               ASIASAT 5
                   --------------------------------------------------------------------------------------
<S>                <C>                  <C>                   <C>                     <C>
Region
  covered:
   C-band          Asia, Middle East,   Asia, Middle East,    Asia, Middle East,      Asia, Middle East,
                   CIS and Australia    CIS, Australia and    CIS, Australia and      CIS, Australia,
                                        New Zealand           New Zealand             North East Africa
   Ku-band         China, Japan, Hong   East Asia Beam        China Beam, Australia   China Beam, South
                   Kong, Taiwan and     (from Japan to        Beam (Australia and     Asia Beam (inter
                   Korea                Kazakhstan), South    New Zealand             alia, India,
                                        Asia Beam (from       (steerable)), Hong      Pakistan and
                                        Bangladesh to the     Kong BSS Beam           Bangladesh) and
                                        Middle East),         (steerable)             Steerable Beam
                                        Steerable Beam(1)

Launch date        November 28, 1995    March 21, 1999        April 11, 2003          3rd quarter, 2008
                                                                                      (estimated)
Manufacturer       Lockheed Martin      Boeing                Boeing                  Space Systems/Loral

Model              Series 7000          BSS601HP              BSS601HP                SS L 1300
</TABLE>


                                      20
<PAGE>

<TABLE>
<CAPTION>
                                                  SUMMARY SATELLITE DATA
                   --------------------------------------------------------------------------------------
                       ASIASAT 2           ASIASAT 3S            ASIASAT 4               ASIASAT 5
                   --------------------------------------------------------------------------------------
<S>                <C>                  <C>                   <C>                     <C>
Stabilization      Three Axis           Three Axis            Three Axis Stabilized   Three Axis Stabilized
                   Stabilized           Stabilized

Number of
  Transponders     33                   44                    48                      40

  C-band           20 @ 36 MHz          28 @ 36 MHZ           28 @ 36 MHZ             24 @ 36 MHZ
                   4 @ 72 MHz                                                         2 @ 72MHz

  Ku-band          9 @ 54 MHZ           16 @ 54 MHZ           10 @ 54 MHz (FSS)       14 @ 54 MHz
                                                              6 @ 33 MHz (FSS)
                                                              4 @ 33 MHz (BSS)

Maximum            40 dBW (C-band)      41 dBW (C-band)       41 dBW (C-band)         42 dBW (C-band)
  EIRP             53 dBW (Ku-band)     53 dBW (Ku-band)      53 dBW (Ku-band)        54 dBW (Ku-band)
                   ((2)) 56 dBW (BSS Ku-band)

Payload            FSS                  FSS                   BSS / FSS               FSS

Power output       55 W_TWTAs (C-band)  55 W_TWTAs (C-band)   55 W_TWTAs (C-band)     65 W_TWTAs (C-band)

                   115 W_ TWTAs         140 W_TWTAs           140 W_TWTAs (Ku-band)   150 W_TWTAs (Ku-band)
                   (Ku-band)            (Ku-band)

Estimated
  Useful
  Life             13 years             16 years              15 years                15 years

Estimated end
  of useful life   2010                 2015                  2018                    2023
</TABLE>

-----------------
(1)     AsiaSat 3S has 16 Ku-band transponders divided into two fixed beams and
        a steerable beam.
(2)     AsiaSat 2 has experienced power reductions in its Ku-band  transponders
        in relation to their design specifications. See "-- AsiaSat 2."

     ASIASAT 2

     AsiaSat 2 is located in the geostationary  orbit at 100.5 degrees East. It
was  designed  and  produced  by  Lockheed  Martin  and is a series  7000 model
satellite.  It was  launched  on  November  28,  1995 by a Long March 2E launch
vehicle under a contract with China Great Wall Industry Corporation.  AsiaSat 2
commenced commercial service in January 1996.

     AsiaSat 2 is  equipped  with  twenty 36 MHz  C-band and four 72 MHz C-band
transponders  with a maximum  signal power of 40 dBW. It is also  equipped with
nine  54 MHz  Ku-band  transponders  with a  maximum  signal  power  of 53 dBW.
However,  at the time of the  launch,  AsiaSat 2  experienced  a Ku-band  power
reduction  at certain  points of its  coverage  area.  Since 2002,  the back-up
command receiver on AsiaSat 2 (a component used to communicate with and control
the  satellite) has  experienced  intermittent  outages.  AsiaSat 2 can operate
normally on its primary command  receiver.  The satellite uses linear polarized
beams,  with the C-band and Ku-band having  distinct  coverage  areas.  For the
C-band  transponders,  there are four spare amplifiers for each polarization of
12  C-band  transponders  in two  separate  12 for  16  (12  working/16  total)
redundancy ring configurations.  For the Ku-band transponders,  there are three
spare amplifiers connected in a 9 for 12 (9 working/12 total) single redundancy
ring  configuration.  In December 2003, AsiaSat 2 experienced two related short
duration service outages. These outages caused no permanent damage to AsiaSat 2
and AsiaSat's  engineers  took the  appropriate  action to restore  AsiaSat 2's
service.  As a result of these outages,  some customers  moved to other AsiaSat
satellites,  while  three  customers  utilizing  capacity  representing  in the
aggregate less than one C-band  transponder moved to a competitor's  satellite.
These  outages  were the first break in service of an AsiaSat  satellite in the


                                      21
<PAGE>

history of the Company. In February 2005, one of the two bus power transformers
on AsiaSat 2 (which  provides  low voltage to the  satellite)  changed to "off"
status.  While this change of status does not necessarily indicate a failure of
the  transformer,  it is impossible  for the Company to verify the integrity of
this  transformer.  AsiaSat  2 can  operate  normally  with  only one bus power
transformer.  See  "Key  Information  -- Risk  Factors  -- Risk of  Launch  and
In-orbit Failure, Loss, Reduced Performance and Satellite Defects."

     AsiaSat 2 has C-band coverage over virtually the entire Asian region, with
a footprint  stretching  from Russia to Australia  and from Japan to the Middle
East and parts of  Africa.  The  footprint  of  AsiaSat 2 covers  approximately
two-thirds of the world's  population.  AsiaSat 2's C-band  footprint  provides
coverage  over a large area with a single beam.  The nine Ku-band  transponders
provide coverage over China, the Korean peninsula and Japan.

     AsiaSat 2 has an estimated  useful life of 13 years,  indicating  that the
estimated end of its useful life will be in 2008.

     In June 2000,  Lockheed Martin obtained a Technical  Assistance  Agreement
from the U.S.  Department of State to provide  technical  data and services for
in-orbit  anomaly  support  for AsiaSat 2 until  December  31,  2009.  See " --
Regulation -- Export Regulations."

     As a result of a number of reported mechanical failures of Lockheed Martin
series 7000  satellites,  the same model as AsiaSat 2, the  in-orbit  insurance
rate for AsiaSat 2, without  exclusions of coverage,  increased  significantly.
The Company has decided not to procure  in-orbit  insurance for AsiaSat 2 given
the low book value of AsiaSat 2 and the Company's cash  position.  In the event
of a failure  resulting in a total loss of AsiaSat 2, the Company would incur a
loss that is equal to the net book  value of AsiaSat 2 at the time of the total
loss as well as disruption of services carried out on AsiaSat 2.

     ASIASAT 3S

     In 1997,  AsiaSat launched  AsiaSat 3 from the Baikonur  Cosmodrome in the
Republic of  Kazakhstan.  AsiaSat 3 failed as it did not reach its orbital slot
and was replaced, following the successful launch in March 1999, by AsiaSat 3S.

     AsiaSat 3S is located in the  geostationary  orbit at 105.5  degrees East.
AsiaSat  3S was  constructed  by Boeing  and is a  BSS-601HP  model  satellite.
AsiaSat  3S was  launched  from the  Baikonur  Cosmodrome  in the  Republic  of
Kazakhstan and commenced commercial service in 1999.

     AsiaSat 3S has multiple beam coverage and is equipped with twenty-eight 36
MHz  C-band  transponders  with a maximum  signal  power of 41 dBW.  It is also
equipped with sixteen 54 MHz Ku-band  transponders  with a maximum signal power
of 53 dBW.  AsiaSat 3S has transponder  power output of 55 Watts for C-band and
140 Watts for Ku-band. It has an estimated useful life of 16 years,  indicating
that the estimated end of its useful life will be in 2015.

     The footprint for AsiaSat 3S is similar to the footprint of AsiaSat 2 with
two  additional  Ku-band  beams  designed  to meet market  demands.  The C-band
footprint stretches from Japan to the Middle East and from Russia to Australia.
The footprint  provides high powered service to the growing market areas in the
Greater  China  region,  Japan and Korea and  Southeast  Asia.  It covers about
two-thirds of the world's population.


                                      22
<PAGE>

     The 16 Ku-band  transponders  can be  allocated  to two fixed  beams and a
steerable beam. The first beam is an East Asia beam that includes coverage from
Japan to  Kazakhstan.  The second  beam is a South Asia beam that has  coverage
from Bangladesh to the Middle East. In order to compensate for rain fade, which
may occur in  certain  countries  in this  region,  AsiaSat  has  designed  the
coverage to direct higher power in heavy rain areas. The steerable Ku-band beam
allows a smaller,  highly concentrated beam to be moved to any market region in
the coverage area.  This beam could,  for example,  be placed over Australia or
over a specific  region in Asia. Of the 16 Ku-band  transponders on AsiaSat 3S,
eight  transponders  are fixed on East Asia and eight are switchable  among the
three beams so that up to 16  transponders  may be used for the East Asia beam,
up to eight  transponders  may be used for the  South  Asia beam and up to four
transponders may be used for the steerable beam.

     In February 2001,  Boeing obtained a Technical  Assistance  Agreement from
the U.S.  Department  of State  to  provide  technical  data and  services  for
in-orbit   anomaly  support  for  AsiaSat  3S  until  December  31,  2009.  See
"--Regulation - Export Regulation."

     In both  November  2004 and March 2005,  a  transponder  on AsiaSat 3S was
deliberately  interrupted by signals carrying Falun Gong-related  content. As a
result,  the  Company  was  forced  to shut down the  respective  transponder's
transmission  for a short  period of time on  November  26,  2004 and March 14,
2005. These breaks in service affected normal programming of certain customers'
satellite television channels. The Company views these deliberate interruptions
as "harmful  interference"  as such term is defined in the  constitution of the
ITU,  and  accordingly,  the  Company  has  requested  that OFTA  report  these
incidents  to the  Radiocommunications  Sector of the ITU through the  relevant
authority in China. For a general discussion on the ITU, see " -- Regulation --
International  Telecommunication  Union."  Also,  see "Risk  Factors -- Risk of
Losing Satellite Service Revenues if Other Satellites or Signals Interfere with
the Company's Transmissions."

     ASIASAT 4

     AsiaSat 4 was  launched on an Atlas IIIB launch  vehicle on April 11, 2003
in Cape Canaveral,  Florida.  AsiaSat 4 commenced commercial service on July 1,
2003 and is operational at 122.2 degrees East.

     AsiaSat 4 was  constructed by Boeing and is a BSS-601HP  model  satellite.
AsiaSat 4 is the most powerful member of AsiaSat's  satellite fleet carrying 28
C-band  and  20-Ku-band   transponders.   Its  footprint  covers  approximately
two-thirds of the world's  population.  AsiaSat 4's pan-Asian  C-band footprint
covers  more than 40  countries  and regions  spanning  from New Zealand to the
Middle East. Its Ku-band coverage consists of two high-power  focused beams for
East Asia and  Australasia,  as well as a new BSS beam for DTH services in Hong
Kong and the  adjacent  South  China  region.  AsiaSat 4 is designed to provide
advanced  satellite  services  including  DTH  television,   broadband  and  IP
solutions,  and  telecommunications  services  such  as  private  networks  for
business and rural telephony (which refers to the construction and operation of
telephones  and  telephonic  systems).  It has an  estimated  useful life of 15
years, indicating that the estimated end of its useful life will be in 2018.

     Under the AsiaSat 4  construction  contract with Boeing,  Boeing agreed to
provide  off-site  support  services for the life of the satellite.  Boeing has
obtained a Technical  Assistance Agreement from the U.S. Department of State to
provide  technical data and service for


                                      23
<PAGE>

in-orbit  anomaly  support  for  AsiaSat  4.  See "--  Business  Overview"  and
"--Regulation - Export Regulation."

     AsiaSat  previously  had a dispute with Shin Satellite in relation to Shin
Satellite's  right to operate a satellite  from 120 degrees  East. As part of a
comprehensive  agreement to limit potential mutual interference between AsiaSat
4 and  the  IPStar  satellite  operated  by  Shin  Satellite,  the  responsible
administrations  of  China,  OFTA  and the  Administration  of the  Kingdom  of
Thailand (regulator and ITU notifying administration for Shin Satellite) agreed
to increase the orbital separation of IPStar and AsiaSat 4. Both satellites are
required to change orbital locations,  with AsiaSat 4 shifting from 122 degrees
East to 122.2  degrees  East.  For a general  discussion  on  regulations,  see
"--Regulation  -  Hong  Kong  Regulation"  and  "--Regulation  -  International
Telecommunication Union."

     ASIASAT 5

     On April 28, 2006 and May 8, 2006,  AsiaSat  entered  into a  construction
contract and a launch contract,  respectively, for the commissioning of AsiaSat
5.  Under the  terms of the  construction  contract,  Loral,  the  construction
contractor, shall complete the construction of AsiaSat 5 within 25 months after
April 28, 2006.  The launch  contractor,  Sea Launch,  shall  provide  services
associated  with the  launch of  AsiaSat 5 from the  Baikonur  Space  Centre in
Kazakhstan.  Under the terms of the launch contract,  the launch services shall
be  completed  upon the launch of AsiaSat 5, which is  scheduled  to take place
between July 1, 2008 and December 31, 2008.  Though the launch  schedule can be
extended by AsiaSat in accordance with the terms of the launch contract,  it is
expected that AsiaSat 5 will be launched in the second half of 2008.

     AsiaSat 5 is a new satellite based on the well proven Space  Systems/Loral
1300 satellite bus. It will carry 26 C-band and 14 Ku-band  transponders and is
intended to replace AsiaSat 2 at the orbital location of 100.5 degrees East. It
will replace all current functions of AsiaSat 2 in both C and Ku-bands and will
provide additional coverage at Ku-band.  This additional coverage consists of a
dedicated  antenna for South Asia plus a steerable  antenna that can be pointed
to other parts of Asia or Australia. AsiaSat 5 is expected to have an estimated
useful life of 15 years after launch.

     The C-band payload of AsiaSat 5 will be similar to that of AsiaSat 2 other
than  certain  performance  upgrades.  The Ku-band  coverage  for China will be
significantly  improved,  additional  coverage  will also be provided for South
Asia, including India,  Pakistan,  Bangladesh and parts of the Middle East. The
steerable  antenna  will allow  Ku-band  capacity  to be  deployed  in a manner
consistent with the market demand anywhere in Asia.

     ADDITIONAL ORBITAL SLOTS AND USE OF FREQUENCIES

     China  has  filed  on  behalf  of  AsiaSat  applications  with the ITU for
additional  spectrum  capacity  and  enhanced  characteristics  in the  current
frequency  bands for all three orbital  slots where  AsiaSat's  satellites  are
currently  operating.  See "- Regulation." The current capacity has significant
frequency and geographic coverage  constraints  resulting from the coordination
process.  No  assurance  can be given  that  the  additional  capacity  will be
obtained by AsiaSat.

     AsiaSat has the option to co-locate  additional  satellites in the orbital
slots located at 100.5 degrees East,  105.5 degrees East and 122.2 degrees East
in order to provide additional


                                      24
<PAGE>

capacity or enhanced performance in these locations and to support the existing
satellites with redundant capacity.  See "Key Information - Risk Factors - Risk
of Loss of Orbital Slot" and "-- AsiaSat 4."

     TRANSPONDER CAPACITY OR UTILIZATION AGREEMENTS

     A  typical  transponder  capacity  agreement,  also  known as  transponder
utilization  agreement,  for AsiaSat 2,  AsiaSat 3S and AsiaSat 4 has a term of
three  years  or  more,  requires  utilization  fees  to be paid  quarterly  or
semi-annually in advance and provides for renewal options. Generally, AsiaSat's
transponder  utilization  agreements require payment in US Dollars.  Typically,
the customer may terminate the  transponder  utilization  agreement at any time
during the term of the agreement without further obligation if AsiaSat fails to
provide a fully  operational  transponder or by giving not less than 12 months'
notice to AsiaSat.  Upon  termination  (other than for cause),  the customer is
obligated  to pay  AsiaSat  termination  fees based on the  remaining  contract
period  and the  specific  contractual  terms.  In  addition,  the  transponder
utilization  agreements  generally  provide  for a specified  reduction  in the
utilization  fees if transponder  service is interrupted for reasons not caused
by the  customer or by outages  due to the effects of the sun or other  reasons
beyond the control of AsiaSat. If such service  interruptions  continue without
correction and AsiaSat is unable to provide suitable alternative capacity,  the
customer is entitled to terminate the transponder utilization agreement without
further obligation to AsiaSat.  Under the terms of the transponder  utilization
agreements,  AsiaSat  generally  is not  liable  for the lost  profits or other
indirect or consequential damages of any customers.

     AsiaSat entered into  transponder  purchase  agreements with ministries or
agencies  of China under  which the  customer  obtains the right to use Ku-band
capacity  on  AsiaSat  2,  AsiaSat  3S  and  AsiaSat  4 for  the  life  of  the
transponder.   The  terms  of  these   transponder   purchase   agreements  are
substantially  the same as those found in transponder  utilization  agreements,
except  for  certain  differences  such as the term of a  transponder  purchase
agreement  is for the entire  useful  life of a  satellite  and payment for the
entire period of use is typically  completed by the  commencement of the second
year of the term of the agreement.

     CUSTOMER TECHNICAL QUALIFICATIONS AND SUPPORT

     Before uplink  communication  with its  satellite is permitted,  AsiaSat's
customers are required to meet AsiaSat's  strict  engineering  performance  and
operations specifications. The purpose of these requirements is to confirm that
the customer's  equipment operates within AsiaSat's  specifications in order to
minimize  interference  with other  customers on the same satellite or users on
neighboring satellites. AsiaSat's engineers advise the customer with respect to
the  adjustments  required to be made to the  customer's  equipment in order to
minimize interference.

     AsiaSat  provides  technical  support  to  its  customers.  AsiaSat  helps
customers  determine  and  evaluate  their  equipment  configuration,   carrier
modulation,  bandwidth  and  power  requirements,  design  their  networks  and
calculate link budgets.

     AsiaSat's  Carrier  Monitoring System ("CMS") was designed and implemented
by AsiaSat to monitor and measure communications  parameters from AsiaSat's Tai
Po Satellite  Earth  Station.  The CMS is also used to assist in customer earth
station qualification and analysis of


                                      25
<PAGE>

anomalies. The CMS measures power, frequency, bandwidth, carrier-to-noise ratio
and other communications performance characteristics.

     INSURANCE

     AsiaSat has satellite  in-orbit insurance for AsiaSat 3S and AsiaSat 4 and
plans to obtain such coverage for AsiaSat 5. AsiaSat 2 is no longer insured for
in-orbit failures. See "Key Information-Satellites-AsiaSat 2". AsiaSat also has
obtained third-party  liability insurance for AsiaSat 2, AsiaSat 3S and AsiaSat
4. There can be no assurance  that AsiaSat will be able to obtain  insurance in
the future on terms  satisfactory  to  AsiaSat.  See "Key  Information  -- Risk
Factors -- Limitations on Warranties and Insurance."

     There  are  circumstances  in which  AsiaSat's  insurance  will not  fully
reimburse  AsiaSat for its expenditures with respect to launching a replacement
satellite,  such  as  when  the  cost  of  the  construction  and  launch  of a
replacement  satellite  exceeds the  aggregate  amount of coverage  provided by
AsiaSat's  insurance  policy.  The amount of AsiaSat's  insurance also will not
compensate it for business  interruption and similar losses  (including,  among
other  things,  loss of  market  share,  loss of  revenue  and  incidental  and
consequential  damages) which might arise from a full or partial launch failure
or a  failure  of a  satellite  to  perform  to  specifications.  In  addition,
AsiaSat's  insurance policies include standard  commercial  satellite insurance
provisions and customary exclusions including,  among other things,  exclusions
from losses  resulting from (i) military or similar  actions,  (ii)  terrorism,
(iii)  laser,  directed  energy,  or  nuclear   anti-satellite   devices,  (iv)
insurrection and similar acts or governmental  action to prevent such acts, (v)
governmental confiscation,  (vi) nuclear reaction or radiation contamination or
(vii) willful or intentional acts of AsiaSat or its contractors.

     Satellite in-orbit insurance covering a specified period after launch of a
satellite is typically  purchased  together with launch  insurance.  Subsequent
satellite  in-orbit  insurance  is  typically  purchased  on an  annual  basis.
Satellite  in-orbit  insurance,  which has  historically  cost less than  three
percent  of the  insured  value of a  satellite  on an annual  basis,  provides
protection  against  partial  or  total  loss of a  satellite's  communications
capability,  including  loss of  transponders,  power or ability to control the
positioning of the satellite and reduction in the useful life of the satellite.

     AsiaSat obtained  satellite in-orbit insurance for AsiaSat 3S covering the
launch  and the first  five  years  in-orbit  of  AsiaSat  3S in the  amount of
HK$1,521.0 million (US$195.0 million),  which provided coverage for (i) a total
failure of the launch of the satellite and (ii) the failure of the satellite to
obtain  proper orbit or to perform in  accordance  with certain  specifications
once in-orbit.  AsiaSat renewed in-orbit insurance for AsiaSat 3S in the amount
of  HK$780.0  million  (US$100.0  million) at a cost of  approximately  HK$21.1
million (US$2.7  million) for the twelve month period  beginning from March 21,
2006.  AsiaSat obtained launch and the first year in-orbit  insurance  coverage
for AsiaSat 4 prior to its launch.  The insurance amount was HK$1,443.0 million
(US$185.0  million)  covering the total and partial loss of the satellite,  and
HK$286.0 million (US$36.7  million)  covering the cost of insurance  premium in
the event of a total loss. This policy contained standard commercial  satellite
insurance  provisions  and  customary  exclusions,  as well as an  exclusion of
losses in the event of a failure  of XIPS (Xeon Ion  Propulsion  System) on the
satellite.  A failure of XIPS could  result in a reduction  of the  satellite's
life to less  than 15  years.  During  the  time  when  insurance  for  XIPS is
unavailable, AsiaSat has an alternative arrangement in place to cover the event
of  a  XIPS  failure.  Such  arrangement  will  allow  AsiaSat  to  purchase  a


                                      26
<PAGE>

replacement  satellite for AsiaSat 4 if XIPS fails at a pre-agreed price scaled
relative to the time of failure.  The replacement  satellite would be delivered
in-orbit  before  the end of life of AsiaSat  4. "See "Key  Information  - Risk
Factors - Limited Life of Satellites."  AsiaSat renewed in-orbit  insurance for
AsiaSat 4 in the amount  HK$1,404.0  million  (US$180.0  million)  at a cost of
approximately  HK$38.0  million  (US$4.9  million)  for the twelve month period
beginning  from  March  21,  2006.  AsiaSat  has  obtained  satellite  in-orbit
third-party  liability  insurance for AsiaSat 2, AsiaSat 3S and AsiaSat 4 in an
aggregate  amount of HK$390.0  million  (US$50.0  million) for the twelve month
period beginning from June 2, 2006.

     SALES AND MARKETING

     The  Company's  sales and  marketing  department,  which had 35  employees
(including  two general  managers) as of December 31, 2005, is divided into two
groups,  one of which serves  China and the other  serves the  remainder of the
world.  The senior  executive  officers  of the  Company,  including  the Chief
Executive Officer and Deputy Chief Executive Officer,  are directly involved in
marketing  to key  broadcasting  and  telecommunications  customers.  Marketing
activities   include   customer   visits,   selected  trade   advertising   and
presentations at industry conferences.

     EMPLOYEES

     As of December 31, 2005, the Company had 95 permanent employees,  of which
eight  employees  were in  management,  40 employees  were in  engineering  and
operations  and 33  employees  were in sales and  marketing.  The  remaining 14
employees were engaged in  administrative,  accounting,  legal,  regulatory and
clerical  activities.  The Company has 80 employees  in Hong Kong  (including 1
employee for Skywave)  and 15  employees in Beijing.  The Company  believes its
relations with its employees are good. See  "Directors,  Senior  Management and
Employees - Employees."

     COMPETITION

     AsiaSat  was  founded  in the  late  1980s  to serve  the  Asian  regional
satellite  communications market. While global satellite  communications demand
was  satisfied by Intelsat,  Ltd. (the company  formed in  connection  with the
privatization  of  the  former   International   Telecommunications   Satellite
Organization,  an intergovernmental cooperative of more than 140 member nations
that owned and operated a global  communications  satellite system) and several
Asian countries that had developed domestic satellite communications, there was
no supplier of Asian region-wide satellite communications.  Since the launch of
AsiaSat's  first  satellite  in 1990, a number of  international,  regional and
domestic  satellite  operators  have  entered the Asian  regional  market.  The
Company's   primary   market   is   Asian   intra-regional   broadcasting   and
telecommunications.

     INTERNATIONAL, REGIONAL AND DOMESTIC SYSTEMS

     The  business in which the Company  operates  is highly  competitive.  The
satellite services provided by the Company are used by its customers  primarily
for point to multipoint  communication  (principally  television  broadcasting,
private communication network,  Internet and multimedia).  The Company competes
with several international, regional and domestic satellite companies operating
in the Asian region.  Many of these  competitors  have  long-standing  customer
relationships and are substantially  larger, and have financial  resources that


                                      27
<PAGE>

are substantially greater, than those of the Company. The Company believes that
its  ability  to  compete  with these  organizations  depends  on its  existing
customer  relationships and the quality of its customer service, its reputation
as a reliable operator of commercial satellites and the technical advantages of
its satellites.

     COMPETITION RESTRICTION FROM DOMESTIC SYSTEMS

     In many cases customers are required by the laws of their countries to use
a state-owned or locally-owned  satellite  system for domestic  communications.
These legal requirements prevent the Company and other satellite companies from
competing to provide  transponder  capacity to these  potential  customers.  In
addition, AsiaSat currently has entered into transponder utilization agreements
for full  transponders  or partial  transponders  with various purely  domestic
users in several  countries.  These  customers could be lost if monopolies were
granted to state-owned or locally-owned  satellite systems. All, or almost all,
of the domestic systems are planning to add at least some regional transponders
to their next generation of satellites.  See "Key  Information - Risk Factors -
Risk of Limited  Market Demand and Increasing  Competition - Competing  Systems
and Satellites."

     OTHER SATELLITE SYSTEMS

     Other existing and proposed  organizations are competing or might consider
competing  in the  Asian  regional  market.  Some  existing  competitors  offer
low-cost,  high performance  transponders which compete directly with AsiaSat's
satellites,  while other potential competitors offer low-cost,  low-performance
transponders  which do not compete  directly  with  AsiaSat's  high-performance
transponders.  New  organizations  face  significant  entry barriers  including
scarcity of orbital slots and high cost of entry.

     FIBER OPTIC SYSTEMS

     Fiber optic systems have been widely installed within the region for point
to point trans-oceanic communications.  In addition, point to point fiber optic
connections  between major cities in Asia are common.  As fiber optic  coverage
increases,  the competitiveness of satellites for point to point communications
will diminish.

     TRANSPONDER OVERSUPPLY

     It is expected that in 2006, the supply of transponders in the region will
continue to exceed the demand for transponders.  The Company believes that this
imbalance cannot be corrected until global economic growth and new applications
and services increase demand for the existing capacity.  See "Key Information -
Risk Factors - Risk of Limited Market Demand and Increasing Competition."

     REGULATION

     The  international   telecommunications   industry  is  highly  regulated.
Satellite  services are subject to international  space law while  broadcasting
and telecommunications  services are subject to international and national law.
The principal international law relating to the use of outer space is the Outer
Space  Treaty.  Countries  that are party to the Outer Space Treaty or to other
treaties or conventions  regulating  outer space activities are responsible for
fulfilling  their own  obligations  under these treaties or  conventions.  This
often results in the adoption

                                      28
<PAGE>

by member  countries of domestic  laws to regulate the  activities of their own
subjects  in  order  to  enable  the  country  concerned  to  comply  with  its
international obligations.

     HONG KONG REGULATION

     As an operator of privately  owned  satellites,  AsiaSat is subject to the
regulatory authority of Hong Kong through AsiaSat's principal regulator, OFTA.

     AsiaSat's  satellite  operations  are  principally  regulated by the Outer
Space  Ordinance  (Chapter  523 of the Laws of Hong  Kong)  (the  "Outer  Space
Ordinance").  The Outer Space Ordinance  applies to all Hong Kong nationals and
entities  incorporated  under the laws of Hong Kong,  including  AsiaSat.  This
prohibits any such person from, among other things,  launching or procuring the
launch  of  a  satellite,  or  operating  a  satellite,  without  obtaining  an
appropriate license. The Outer Space Ordinance stipulates that any such license
shall describe the activities  authorized by it and also provides that licenses
may be granted  subject to conditions  specified  therein.  The  conditions may
include,   among  other  things,   basic  orbital   parameters  (which  include
requirements  to obtain  advance  approval for any intended  deviations  and to
notify any unintentional  deviation),  requirements to avoid  interference with
the  activities  of other  users of outer space and  requirements  not to cause
actions which may give rise to  liabilities on the part of China and Hong Kong.
Breach of any such  conditions  can give rise to a right of  revocation  of the
relevant license.

     In Hong Kong,  the ultimate  authority to grant  licenses and otherwise to
administer the Outer Space  Ordinance is vested in the Chief  Executive of Hong
Kong,  acting in  coordination  with the  Executive  Council of Hong  Kong.  In
practice,  all  relevant  matters are dealt with on a  day-to-day  basis by and
through OFTA. AsiaSat has the benefit of existing licenses covering current and
future operation of each of AsiaSat 2, AsiaSat 3S and AsiaSat 4, subject to the
conditions  of the  respective  licenses.  Each of these  licenses was formally
granted shortly before or after launch of the satellite  concerned  following a
period of consultation between AsiaSat and OFTA.

     In addition to the  regulatory  regime to which the Company's  outer space
operations  are subject,  the Company's  earth station  operations  involve the
operation and use of telecommunication apparatus at and from its earth stations
at Stanley and Tai Po,  Hong Kong.  An earth  station  includes  the  antennas,
receivers,  transmitters  and other equipment  needed on the ground to transmit
and receive satellite communications signals. Establishment, possession and use
of such  telecommunication  apparatus from the Company's earth stations in Hong
Kong are regulated by the Telecommunications Ordinance. AsiaSat has the benefit
of licenses  granted under the  Telecommunications  Ordinance  covering all its
TT&C  operations  (which  refers to a land based  facility  that  monitors  and
controls the position of the satellite  in-orbit),  as well as  monitoring  and
testing functions,  for each of AsiaSat 2, AsiaSat 3S and AsiaSat 4, subject to
the terms and  conditions  of the  respective  licenses.  The licenses  require
AsiaSat,   among  other  things,   to  avoid  harmful   interference  to  other
telecommunication apparatus operating within or outside Hong Kong and to ensure
compliance   with   all   relevant    requirements    of   the    International
Telecommunication  Convention  (and any other  international  telecommunication
agreements  which may from time to time be  acceded  to by or on behalf  of, or
applied  to,  Hong  Kong).  Such  licenses  for  AsiaSat 2 and  AsiaSat 3S were
formally  granted  contemporaneously  with the grant of the licenses  under the
Outer Space Ordinance. In contrast,  because the Company successfully won a bid
for a  Telecommunication  License  from OFTA  allowing  BSS  frequencies  to be
incorporated into the payload of AsiaSat 4, the


                                      29
<PAGE>

license for AsiaSat 4 under the Telecommunications  Ordinance was granted prior
to the completion of AsiaSat 4. See "--AsiaSat 4." For a further  discussion on
the Telecommunication  License, the FC license and the non-domestic  television
program service license,  see "--Services and Customers - Expanded Services and
Other Businesses."

     The  Telecommunications  Ordinance also contains provisions for the taking
of possession by the Hong Kong Government of telecommunications stations if the
Chief  Executive in Council is of the opinion  that an emergency  has arisen in
which it is  expedient  for the public  service  that the Hong Kong  Government
should  have  control  over  telecommunications   stations.  In  addition,  the
Telecommunications   Ordinance   contains   provisions   for  the   payment  of
compensation should such taking of possession occur.

     OVERSEAS NATIONAL TELECOMMUNICATIONS AUTHORITIES

     The Company's  customers in many of the countries covered by the Company's
satellites  must have  authorization  from the countries in which they or their
uplink  facilities  are located in order to use the Company's  satellites.  The
laws and regulatory  requirements  regulating  access to satellite systems vary
from  country  to  country.  Some  countries  have  substantially   deregulated
satellite communications,  making customer access to the Company's satellites a
relatively  simple  procedure,  while other  countries have  maintained  strict
monopolistic regimes. The application procedure for access to satellite systems
can be  time-consuming  and  costly  and the terms of the  licenses  vary among
different countries. Although AsiaSat believes its customers presently hold the
requisite  licenses  and  approvals  in all  relevant  countries,  there may be
instances of  non-compliance  of which AsiaSat is not aware.  Although  AsiaSat
does not believe  these  regulatory  schemes will prevent it from  pursuing its
business,  there can be no assurance  that such  licenses and  approvals are or
will remain sufficient in the view of foreign  regulatory  authorities and that
these  authorities  will not  discourage or prevent  potential  customers  from
utilizing transponders on AsiaSat's satellites.

     The  laws  of  certain  countries  require  television   broadcasters  and
satellite   telecommunication   users  providing  services  in  such  countries
generally to use  state-owned  or  locally-owned  satellites.  For example,  in
Japan, domestic broadcast using a foreign satellite is not permitted. In India,
if suitable capacity is available from a local satellite  operator,  operations
using a foreign satellite will not be permitted. The use of a foreign satellite
is subject to the authorization of the Department of Justice of India.

     There  are no  specific  restrictions  on  satellite  operators  providing
services  in  Australia.  A radio  communications  license  may be  issued to a
satellite operator specifically to authorize transmissions (a Space License) or
one may be issued specifically to authorize reception of transmissions (a Space
Receive License).  The satellite itself must be either an Australian or foreign
space  object  as  determined  by  the  Australian   Communications  Authority.
AsiaSat's  satellites are determined as foreign space objects by the Australian
Communications  Authority.  When the space  stations are licensed via the space
segment, the operation of ubiquitous earth stations that are communicating with
them may be  authorized  by another  class  license.  AsiaSat has  appointed an
authorized  nominated  carrier  for  its  Ku-band  Australian  transponders  in
Australia.

     In Thailand,  Shin Satellite's 8-year monopoly (which is part of a 30 year
concession from the country's  government) ended in 1999. There are no specific
laws to regulate the activities


                                      30
<PAGE>

and operations of satellites in Thailand.  At present,  satellite activities in
Thailand are authorized and  controlled by the National  Telecom  Commission of
Thailand.

     China requires that all foreign  satellite  television  broadcasters  that
have been  licensed to be  downlinked  in China be  uplinked  to a  state-owned
satellite and  multiplexed  and  downlinked to designated  recipients and cable
headends  from that  state-owned  satellite.  No such  requirement  applies  to
Chinese domestic satellite television broadcasters. Foreign satellite operators
are required to provide  transponder  capacity to domestic  companies that have
been licensed to operate  transponder  capacity  provision  businesses or users
approved by the Ministry of Information  Industry.  Foreign satellite operators
are not allowed to provide  transponder  capacity to  domestic  users  directly
without the approval of the Ministry of Information Industry.

     With respect to telecommunications, Chinese regulations stipulate that all
matters  relating  to the  lease  or the  procurement  of  the  use of  foreign
satellite  transponders  are  under  the  Ministry  of  Information  Industry's
jurisdiction. Domestic users must apply to the Ministry of Information Industry
to lease or procure the use of such transponders.

     These legal  requirements  may  prevent  the  Company and other  satellite
companies from  competing to provide  transponder  capacity to these  potential
customers.  There can be no assurance that other countries in the Asian region,
including countries in which the Company already has customers, will not impose
similar  requirements to use state- or locally-owned  satellites in the future.
The  imposition  of such  requirements  could  adversely  affect the  Company's
results of operations.

     INTERNATIONAL TELECOMMUNICATION UNION

     The ITU was  established  in 1865 and became a  specialized  agency of the
United Nations in 1947. The ITU is an organization  of sovereign  member states
that aims at maintaining and extending international  cooperation among all its
member states for the improvement and rational use of telecommunications of all
kinds.  For this purpose,  the ITU has  developed  and maintains  international
procedures and requirements for use of  telecommunications as well as technical
standards and  recommendations.  As of today,  practically all countries in the
world are members of the ITU.

     The  ITU  is   organized   in   three   sectors:   the   Telecommunication
Standardization Sector, the Radiocommunication Sector and the Telecommunication
Development  Sector. For satellite  communications,  most of the activities and
regulations of relevance take place within the Radiocommunication Sector.

     The objectives of the  Radiocommunication  Sector are to ensure  rational,
equitable,  efficient and economical use of, and access to, the radio-frequency
spectrum  by all  radio  communication  services  and all  countries.  The main
instrument of the  Radiocommunication  Sector is the Radio  Regulations,  which
establishes  procedures for member states.  The Radio  Regulations  are updated
regularly  by World Radio  Conferences.  In between  the  sessions of the World
Radio  Conferences,  the Radio  Regulations  Board, a group of elected members,
develop Rules of Procedure on the application of the Radio Regulations and also
consider other matters that cannot be resolved through a Rule of Procedure. The
Radiocommunication  Sector also  carries  out  technical  studies and  develops
recommendations  on radio  communication  matters to assist  member  states and
users of the radio-frequency spectrum.


                                      31
<PAGE>

The  Radiocommunication  Bureau was  established  to facilitate the work of the
Radiocommunication  Sector, in particular, to facilitate the technical studies,
meetings and conferences and the application of the procedures contained in the
Radio Regulations. The Radiocommunication Bureau has a group of permanent staff
with its headquarters in Geneva, Switzerland.

     The Radio Regulations  allocates certain frequency bands for various kinds
of satellite  communication.  It also contains procedures to be followed by its
member states to ensure that in bringing into use radio communication  systems,
other  users  operating  in  accordance  with  these  procedures  are given the
required protection.

     Details of the ITU, its  instruments  and working  methods can be found in
the Constitution and Convention of the ITU, while radio  communication  matters
are dealt with in the Radio Regulations.

     Nations are  required by treaty to make a filing of their  proposed use of
satellite    orbital   slots   for    geostationary    satellites    with   the
Radiocommunication  Bureau.  After  filing an  orbital  slot  request  with the
Radiocommunication Bureau, other nations are afforded the opportunity to inform
the Radiocommunication  Bureau of any potential conflicts with their present or
planned use of orbital slots.  When a conflict or potential  conflict is noted,
nations are obligated to negotiate in an effort to coordinate the proposed uses
and resolve any interference concerns. The Radiocommunication  Bureau, however,
has  no  formal  enforcement  mechanism,  and  if  nations  cannot  agree  on a
resolution,  a satellite  system may not be  entitled to the full  interference
protection afforded under international law.

     The Hong Kong Special  Administrative  Region is mandated by China to file
and coordinate  applications made by Hong Kong companies for orbital slots with
the  Radiocommunication  Bureau and to resolve interference concerns. The Chief
Executive of Hong Kong has delegated these responsibilities to OFTA. Use of the
orbital  slots  remains  subject to the  continuing  oversight of OFTA and to a
variety  of  regulations  generally  applicable  to  all  satellite  and  radio
licensees.  OFTA has fulfilled its obligation to notify the  Radiocommunication
Bureau of the proposed use of the orbital  slots for all of AsiaSat's  filings,
which include filings for AsiaSat 2, AsiaSat 3S and AsiaSat 4. After AsiaSat 2,
AsiaSat  3S and  AsiaSat  4  reached  their  orbital  positions  and  commenced
operations,  AsiaSat  notified  OFTA,  and OFTA in turn  notified the ITU, that
AsiaSat  2,  AsiaSat  3S and  AsiaSat 4, as  applicable,  were on  station  and
operating as filed with the  Radiocommunication  Bureau,  as coordinated and as
authorized by OFTA. The orbital  locations of all of AsiaSat's  satellites have
been entered into or are waiting to be entered into the Master  Register of the
ITU. This concludes the process for the  coordination  of the orbital slots for
AsiaSat 2, AsiaSat 3S and AsiaSat 4. Moreover,  to add more flexibility for the
utilization  of the payloads of the current and future  AsiaSat  satellites  in
positions at 100.5  degrees  East,  105.5  degrees East and 122.2 degrees East,
additional  filings have been submitted to, and are currently being coordinated
with, the ITU.

     EXPORT REGULATION

     In February  2001,  Boeing  obtained a Technical  Assistance  Agreement to
provide  off-site  support  services for the life of AsiaSat 3S. On October 23,
2001,  Boeing obtained a Technical  Assistance  Agreement to provide  necessary
technical  data and  services  to  AsiaSat  in  connection  with the  AsiaSat 4
program. In addition, Boeing has obtained a Technical


                                      32
<PAGE>

Assistance  Agreement  from the U.S.  Department of State to provide  technical
data and service for in-orbit anomaly support for AsiaSat 4. See "-- Satellites
--AsiaSat 4."

     In June 2000,  Lockheed Martin obtained a Technical  Assistance  Agreement
from the U.S.  Department of State to provide  technical  data and services for
in-orbit anomaly support for AsiaSat 2 until December 31, 2009.

     PROPERTY, PLANTS AND EQUIPMENT

     LAND FACILITIES

     The  Company's  executive  offices are located in Causeway Bay, Hong Kong.
The lease covering the Company's executive office space commenced in March 2005
for a term of three years. The rental amount (excluding rates, air-conditioning
and management  charges) under this lease is  approximately  HK$2.7 million per
year. The Company finances this cost from internal  resources.  See "Additional
Information - Material Contracts."

     In March 2000,  the  Company  opened a  representative  office in Beijing,
China.  The Company's  Beijing  office entered into a new lease for a period of
four years  beginning in June 2004.  The lease amount is  approximately  HK$0.7
million per year.

     The  Company has leased the Tai Po Site in Hong Kong to support the growth
of the Company's  business.  The Tai Po Site houses the Tai Po Satellite  Earth
Station, which is the center for coordination of all technical customer-related
communication on the Company's satellite, including station testing, outage and
trouble  shooting  and real time  scheduling  of ad hoc  broadcasting  services
traffic. These services also include uplink,  technical support and other value
added services.  The Tai Po Satellite Earth Station became fully operational in
December 2003, and the complex  received its final  occupation  permit from the
Hong Kong  Building  Authority  in  January  2004.  The five  full  performance
antennas  required for TT&C operations have been installed and are operational.
See "Additional Information - Material Contracts."

     The Company is not currently the subject of any actions or proceedings for
environmental  liabilities.  As AsiaSat's  satellites reach their "end of life"
and are de-orbited,  it is conceivable that the Company could be subject in the
future to actions for environmental or other liabilities resulting from damages
caused by these satellites.

     SATELLITE CONTROL FACILITIES

     The Tai Po Satellite  Earth  Station has been fully  operational  for more
than two years  and is now the  Company's  primary  TT&C  facility.  The Tai Po
Satellite Earth Station is connected by dual,  diversely routed leased lines to
the TT&C facility at the Reach Network (Hong Kong) Limited's ("Reach") teleport
located at Stanley on the south side of Hong Kong  Island  (the  "Stanley  TT&C
Facility"). The integrity of the delivery of the Company's services is achieved
through  duplicating  at the Tai Po Earth Station,  the Company's  circuits and
facilities  provided at the Stanley TT&C Facility.  A new satellite control and
monitor software program has been installed and is undergoing system testing.

     AsiaSat's  technical personnel staff the Tai Po Satellite Earth Station 24
hours a day. There are no full-time employees of AsiaSat located at the Stanley
TT&C Facility. Reach teleport


                                      33
<PAGE>

technicians  are  responsible  for the routine  maintenance of the antennas and
other equipment located at this facility.

     Once a satellite is placed at its orbital  location,  it is  controlled by
the Tai Po Satellite Earth Station until the end of its in-orbit life. The TT&C
subsystem for each  satellite  makes it possible for ground  control to monitor
the  position of the  satellite  in-orbit.  AsiaSat's  engineers  at the Tai Po
Satellite Earth Station periodically correct a satellite's attitude and conduct
east-west  and  north-south   stationkeeping   maneuvers,  thus  ensuring  that
AsiaSat's satellites maintain their proper orientation and orbital position. In
addition,  commands  from  the  Tai  Po  Satellite  Earth  Station  can  switch
transponders  in and out of  service,  position a steerable  beam,  control the
charging and  discharging  of the  batteries,  activate  back-up  equipment and
engage other control functions.

     ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

     The following  discussion and analysis should be read in conjunction  with
the consolidated  financial statements of the Company and related notes thereto
included elsewhere herein.

     OVERVIEW

     The Company,  through its wholly-owned  subsidiary,  AsiaSat, is a leading
provider of high quality satellite transponder capacity in the Asian region. As
of May 31, 2006, the Company had three satellites in operation:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                  UTILIZATION
                           POSITION                 RATES(1)                               % CHANGE
--------------------------------------------------------------------------------------------------------
                                                      2003         2004        2005
                                                      ----         ----        ----
<S>                     <C>                         <C>          <C>         <C>            <C>
AsiaSat 2               100.5(degree) East            54.3%        36.4%       40.1%          10.2%

AsiaSat 3S              105.5(degree) East            59.0%        73.3%       72.7%         - 0.8%

AsiaSat 4               122.2(degree) East            10.3%        26.8%       46.5%          73.5%

System Utilization                                    39.0%        45.7%       54.0%          18.2%
</TABLE>

-----------------
(1) There were 49 and 57  transponders  respectively  utilized  on all  AsiaSat
satellites  at  each  of  the  year-end  2003  and  2004,  and  there  were  67
transponders  utilized on all AsiaSat  satellites  at year-end  2005.  See "---
Results of Operations - Utilization Rates."

     Our  revenue by  industry  "segments"  consist of video  broadcasting  and
telecommunications.  The  factors  that drive  demand for  AsiaSat's  satellite
services across the Asian region include video distribution,  and the provision
of  telecommunications  networks to users who need last mile  connectivity over
wide geographic coverage at a fixed cost.  Satellites can provide this coverage
where cable cannot,  particularly  across the  widespread  and disparate  Asian
region.

     Due  to  overcapacity,   the  Company  does  not  see  material  signs  of
improvement among regional broadcast and telecommunications operators, nor does
it see new  developments in the market that would enable the Company to deliver
stronger  results in 2006.  The Company does not expect to achieve  significant
improvement in financial results in the near term. See "Key Information -- Risk
Factors - Political, Economic and Other Regional Risks" and "Key Information --
Risk Factors - Risk of Limited  Market Demand and Increasing  Competition."


                                      34
<PAGE>

In addition to this slow growth in new demand, continuing price pressure on new
transponder  utilization  agreements  have limited the  Company's  growth.  See
"Information  on the  Company -  Business  Overview."  However,  the  Company's
business is  long-term in nature,  and the  positive  factors that drive demand
remain  in  place.   These  factors  include   television   distribution   (and
increasingly  in more  developed  markets,  High  Definition  Television),  and
telecommunications   networks  that  need  connectivity  over  wide  geographic
coverage,  at a fixed cost.  In  addition,  the  Company has a strong  existing
customer base with contracts representing  approximately 73.9% of the Company's
2005 revenue remaining under contract for 2006. Furthermore, the Company has an
outstanding  technical  and customer  service team as well as a premium  client
base.  Thus,  operationally,  2006 will be another  challenging  year requiring
intense  customer  focus to  maintain  and  expand  existing  businesses  where
possible and to concentrate on identifying new  opportunities  for growth.  The
Company will continue to investigate strategic opportunities that would support
and enhance the Company's core satellite  business in order to position  itself
to capitalize  upon the recovery of the  commercial  satellite  industry in the
Asian region.

     REVENUE

     SOURCES. Substantially all of the Company's revenues during the years 2001
through  2005  were  derived  from  payments  made in  respect  of  transponder
utilization  agreements  and  transponder  purchase  agreements  for AsiaSat 2,
AsiaSat  3S and  AsiaSat 4 and were  almost  entirely  payable  in US  Dollars.
AsiaSat's   transponder   utilization   agreements  and  transponder   purchase
agreements  in effect as of May 31, 2006 provided for total  committed  revenue
(including a portion of the deposits  received by the Company in prior  periods
and that will be  recognized  as revenue in the  applicable  future  period) of
HK$2,680.0  million (US$343.6  million).  The Company expects that most of such
committed  revenue will be recognized  over the remaining terms of the relevant
agreements up to 2014, assuming that the agreements are not terminated earlier.
See "Information on the Company - Transponder Utilization Agreements." In 2005,
approximately  2.8% of the Company's  revenue from the provision of transponder
capacity was derived from transponder  purchase  agreements,  and the remaining
portion was derived from transponder utilization agreements.

     Payments under transponder utilization agreements are negotiated with each
individual customer and generally are influenced by various factors,  including
market conditions that drive demand, satellite performance capabilities and the
reputation of AsiaSat as a reliable service  provider.  See "Information on the
Company - Business Overview."  Generally,  in the satellite transponder market,
transponders  with greater coverage,  wider bandwidth,  more viewers and higher
power have commanded a premium price.  These factors will impact our ability to
increase charges for transponder capacity in future periods with respect to new
and existing agreements.

     SEGMENTS.  The  Company's  primary  industry  "segments"  consist of video
broadcasting and  telecommunications.  The majority of the Company's revenue is
attributable  to  video  broadcasting.  Due to  the  contracted  nature  of the
Company's  revenue  stream,  year-to-year  fluctuations  are driven by customer
contract  renewals and customer  movements.  See  "Information on the Company -
Business  Overview,"  "Information  on the Company  -Services  and  Customers -
Broadcasting,"   "Information  on  the  Company  -  Services  and  Customers  -
Telecommunications,"  "Information  on the Company - Services  and  Customers -
Multimedia  and  Internet"  and  "Information  on the  Company -  Services  and
Customers -


                                      35
<PAGE>

Expanded Services and Other  Businesses." The following table shows a breakdown
of revenue by segment:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                         YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------
                                     2003                       2004                       2005
                            -----------------------      ---------------------     ----------------------
                                           % OF                       % OF                        % OF
                                           TOTAL                      TOTAL                       TOTAL
                               AMOUNT     REVENUE         AMOUNT     REVENUE         AMOUNT      REVENUE
                            -----------------------      ---------------------     ----------------------
                                 HK$                        HK$                        HK$

                                  (in millions, except for percentages)

<S>                            <C>         <C>           <C>          <C>             <C>        <C>
Broadcasting (video)            631.2       70.4%          709.4        70.6%          578.4       65.7%

Telecommunications,
Internet and Multimedia         265.0       29.6%          295.6        29.4%          301.3       34.3%
                              -------    -------         -------     -------         -------     -------

Total Revenue                   896.2      100.0%        1,005.0(1)    100.0%          879.7       100.0%
</TABLE>

-----------------
(1)  See "-- Results of Operations - Revenues."

     The  following  table shows the place of  incorporation  of the  Company's
customers.  However, due to the nature of the Company's business,  the place of
incorporation of its customers are not reflective of their market activities as
broadcasting  and  telecommunication  consumers  may  be  located  outside  the
coverage area of AsiaSat's satellites.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                         YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------
                                     2003                       2004                       2005
                            -----------------------      ---------------------     ----------------------
                                           % OF                       % OF                        % OF
                                           TOTAL                      TOTAL                       TOTAL
                               AMOUNT     REVENUE         AMOUNT     REVENUE         AMOUNT      REVENUE
                            -----------------------      ---------------------     ----------------------
                                 HK$                        HK$                        HK$

                                  (in millions, except for percentages)

<S>                           <C>         <C>          <C>           <C>             <C>         <C>
Hong Kong                      323.2        36.1%         323.1        32.1%          341.7        38.8%

Greater China, including       212.8        23.7%         197.9        19.7%          202.7        23.0%
Macau and Taiwan

United States of America        71.2         7.9%         183.8(1)     18.3%           78.2         8.9%

British Virgin Islands          40.4         4.5%          40.9         4.1%            9.7         1.1%

United Kingdom                  23.9         2.7%          46.1         4.6%           49.4         5.6%

Others                         224.8        25.1%         213.2        21.2%          198.0        22.6%

Total Revenue                  896.2       100.0%       1,005.0(1)    100.0%          879.7       100.0%
</TABLE>

-----------------
(1)  See "-- Results of Operations - Revenues."

     REVENUE RECOGNITION.  The Company recognizes revenues from all transponder
utilization  agreements  on  a  straight  line  basis  over  the  term  of  the
agreements.  As a result  of the  utilization  fee  escalation  clauses  in the
transponder utilization agreements,  in the early years


                                      36
<PAGE>

of the term of any  such  agreement  revenues  are  recognized  in  respect  of
payments  that are not yet due,  and in the latter  portion of the term of such
agreement revenues recognized will be less than payments due under the contract
terms.  In the aggregate in 2003 and 2004,  there was  recognition  of revenues
under the  transponder  utilization  agreements in excess of payments due under
those  agreements  in the  amounts  of  HK$16.6  million  and  HK$9.3  million,
respectively.  In 2005, the total amount of payments due under the  transponder
utilization  agreements  was in  excess  of  revenues  recognized  under  those
agreements in the amount of HK$0.7 million (US$0.1 million).

     The Company recognizes  revenue on the sale of transponder  capacity under
transponder  purchase  agreements  on a  straight-line  basis  from the date of
delivery of the capacity until the end of the design life of the satellite.

     RELIANCE  UPON A  SIGNIFICANT  CUSTOMER.  In the years ended  December 31,
2003, 2004 and 2005, approximately 24.9%, 22.4% and 25.7%, respectively, of the
Company's revenues were attributable to transponder utilization agreements with
STAR.  See  "Information  on the  Company - Services  and  Customers"  and "Key
Information -- Risk Factors --Reliance upon Significant Customer."

     EXPENSES

     The  components  of  operating  expenses  are cost of  services,  selling,
general and administrative expenses and depreciation. Significant components of
cost of services include in-orbit insurance,  staff costs, satellite operations
and turnaround service charges.  Significant components of selling, general and
administrative expenses include staff costs, office rental expenses,  provision
for doubtful debts, marketing and promotion expenses, business travel expenses,
dual listing  expenses,  professional fees and amortization of goodwill arising
from an acquisition of affiliates.

     Staff costs (and  associated  travel  expenses) and office rental expenses
are allocated by the Company between cost of services and selling,  general and
administrative  expenses depending on the function of such staff and use of the
office space. The cost of services category of operating  expenses includes all
operating  expenses incurred for engineering and the operation of the Company's
satellites, including the proportionate amount of office rental expense for the
office space used by the Company's engineers and the operations department. All
staff,  travel and office  space  expenses not included in cost of services are
allocated to selling, general and administrative expenses.

     INTEREST IN ASSOCIATES

     The Company has  accounted  for its share of profit or loss  arising  from
associates on an equity  accounting  basis.  In the case of a loss, the Company
will reflect its share in its income statement with a corresponding  write down
of its investment in an affiliate. Once the investment has been written down to
zero the Company will not account for any further  loss beyond its  investment.
In 2003, 2004 and 2005, the Company recorded a HK$17.5 million, HK$12.4 million
and HK$3.9 million  (US$0.5  million) loss,  respectively,  with respect to its
investment  in  associates,   which  includes   amortization  of  goodwill  and
impairment loss. In the case of a profit, the Company will reflect its share of
the  profit  in its  income  statement.  In 2003,  2004 and 2005,  the  Company
recorded a positive contribution to the Company's income


                                      37
<PAGE>

statement  in the amount of  HK$HK$3.3  million,  HK$6.4  million  and  HK$28.3
million (US$3.6 million), respectively.

     TAXATION

     The Company is subject to Hong Kong Profits Tax on its  operations  deemed
to be  located  in  Hong  Kong.  It is  also  subject  to  overseas  tax on its
operations in certain of the overseas jurisdictions.  The Hong Kong profits tax
rate was  increased  to 17.5% per annum with effect from April 2003.  Hong Kong
profits tax was previously charged at the rate of 16% per annum.

     Under Indian tax regulations,  the Company may be subject to Indian income
tax on revenues received by the Company in respect of income from the provision
of satellite  transponder  capacity to the Company's  customers for purposes of
those customers carrying on business in India or earning income from any source
in India.

     The Indian tax  authorities  have  assessed  the Company for income tax as
follows:

<TABLE>
<CAPTION>
                                 ASSESSMENTS (HK$ IN MILLIONS) (APPROXIMATELY)
     -----------------------------------------------------------------------------------------------------
     Assessment       1997-98    1998-99    1999-00    2000-01    2001-02    2002-03    2003-04     Total
     Year
<S>                   <C>        <C>        <C>        <C>        <C>        <C>        <C>         <C>
                        20.0       23.0       22.0       14.0       29.0       38.0       43.3      189.3
     -----------------------------------------------------------------------------------------------------
</TABLE>


     The Company has filed appeals for each of the assessment  years 1997-98 to
2003-04.  No assessment has yet been made for the 2004-05 or 2005-06 assessment
years.

     The Income Tax Appellate  Tribunal (the  "Tribunal")  in an earlier appeal
filed against the original assessment for the assessment year 1997-98 held that
the Company is liable for Indian  income tax under certain  circumstances.  The
Company does not believe that it is liable for the Indian income tax as held by
the Tribunal and has filed an appeal against the Tribunal's  decision.  The tax
authorities  have also filed an appeal  against the Tribunal's  decision.  Both
appeals have been admitted by the High Court.

     In order to obtain a stay of  recovery  proceedings,  the Company has made
payments  as  follows  and has  recorded  these  payments  as an  asset  on the
assumption that the amounts are recoverable:

<TABLE>
<CAPTION>
                 PAYMENT TO STAY RECOVERY PROCEEDINGS (HK$ IN MILLIONS) (APPROXIMATELY)
---------------------------------------------------------------------------------------------------------
Assessment        1997-98     1998-99    1999-00    2000-01    2001-02   2002-03    2003-04    Total
Year
<S>               <C>         <C>        <C>        <C>        <C>       <C>        <C>         <C>
                    13.0       15.0        10.0       9.0        20.0      27.0       23.7      117.7
---------------------------------------------------------------------------------------------------------
</TABLE>

     In addition,  based on the general  principles  set forth by the Tribunal,
the amount of income  taxable  in India  depends  on the  payments  made by the
Company's  customers to the Company for the purpose of those customers carrying
on  business  in India or  earning  income  from any  source in India.  As such
information is proprietary in nature and has not been provided by the Company's
customers, the Company cannot reasonably estimate the taxable income and


                                      38
<PAGE>

therefore  also cannot  estimate the amount of Indian  income tax for which the
Company may become liable.  Accordingly,  no provision has been  recognized for
Indian income tax in the Company's financial statements. Furthermore, as stated
above,  the Company has filed an appeal  against the Tribunal's  decision.  The
appeal  has been  admitted  by the High  Court and is  pending  before the High
Court.

     RESULTS OF OPERATIONS

     The  Company's  revenues for 2005 amounted to HK$879.7  million  (US$112.8
million),  a decrease of HK$125.3 million (US$16.1 million) compared to that of
2004.  The revenues for 2004  included a one-time  lump sum receipt of HK$123.0
million (US$15.8  million) for early  termination of a transponder  utilization
agreement.

     Operating  profit  decreased  from  HK$532.6  million in 2003 to  HK$504.0
million  in 2004 as a result  of the  full  year  effect  on  depreciation  and
in-orbit  insurance of AsiaSat 4. Operating  profit in 2005 decreased  16.6% to
HK$420.5 million from HK$504.0 million in 2004. Operating profit as a result of
revenues decreased in 2005 to 47.8% from 50.1% in 2004, which in turn decreased
from 59.4% in 2003.  The decrease in 2005 was the result of the  one-time  lump
sum receipt in 2004 referred to above.

     The following table sets forth, for the periods indicated,  the percentage
of revenues  represented  by certain  income and expense items in the Company's
Consolidated Statement of Operations.

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                ------------------------------------------------
                                                     2003              2004            2005
                                                --------------    -------------    -------------
<S>                                             <C>               <C>              <C>
Revenues                                              100%              100%             100%

Cost of services                                    (35.0)            (41.9)           (47.6)
                                                --------------    -------------    -------------

                                                     65.0              58.1             52.4

Other gains - net                                     0.7               2.2              4.9

Administrative expenses                              (6.3)            (10.2)            (9.5)
                                                --------------    -------------    -------------

Operating profit                                     59.4              50.1             47.8

Finance costs                                        (0.3)               --               --

Share of results of associates (including            (1.7)             (1.2)            (0.5)
   goodwill amortization)

Impairment loss recognized in respect of             (0.2)               --               --
   goodwill of associates
                                                --------------    -------------    -------------

Profit before taxation                               57.2              48.9             47.3

Taxation                                             (9.8)             (6.0)            (5.8)
                                                --------------    -------------    -------------

Profit for the year                                  47.4              42.9             41.5
                                                ==============    =============    =============
</TABLE>

     REVENUES

     Revenues in 2005 decreased 12.5% to HK$879.7  million  (US$112.8  million)
from HK$1,005.0  million in 2004, which in turn increased from HK$896.2 million
in  2003.  During  2005,  the  Company  entered  into  transponder  utilization
agreements totaling


                                      39
<PAGE>

approximately  twenty  transponders  at lower rates for some new  customers and
lost approximately  fifteen  transponders on non-renewal of some contracts upon
expiration or early termination.  The increase in revenue in 2004 was primarily
due to a one-time contribution to revenues resulting from the early termination
of a  transponder  utilization  agreement.  In  2005,  excluding  the  one-time
contribution  of  HK$107.6  million  to the  revenues  of 2004  upon the  early
termination  of a  transponder  utilization  agreement,  revenues  were down by
HK$17.7 million.

     UTILIZATION  RATE. As of December 31, 2005, the overall total  utilization
rate of AsiaSat 2, AsiaSat 3S and AsiaSat 4 increased 18.2% over the prior year
from 45.7% to 54.0%, which in turn increased from the overall total utilization
rate of 39.0% as of December 31, 2003. See "--Overview."  There were 49, 57 and
67 transponders utilized on all AsiaSat's satellites at the year-end 2003, 2004
and 2005,  respectively.  The decrease in the overall  utilization rate in 2003
from the  previous  year was the  result of the  introduction  of  AsiaSat 4 to
AsiaSat's  satellite  fleet and the  contraction  of the business of certain of
AsiaSat's  customers.  The increase in 2004 and 2005 from the previous year was
the  result of the  leasing  of  additional  transponders  to new and  existing
customers. See "Key Information - Risk Factors - Risk of Technological Changes"
and "Key  Information  - Risk  Factors  - Risk of  Limited  Market  Demand  and
Increasing Competition."

     Utilization  rates and the fees derived from its satellites are determined
by  the  terms  of  the  Company's  transponder   agreements  rather  than  the
transponder  capacity  actually  used by the  Company's  customers at any given
time.  The fees derived  from the  Company's  satellites  with respect to video
broadcasting  services varies depending,  in part, on whether the satellite has
an  established  viewer  base.  See  "Information  on the  Company  -  Business
Overview."

     COST OF  SERVICES.  Cost of  services in 2005  decreased  0.4% to HK$419.0
million  (US$53.7  million) from HK$420.5 million which in turn increased 34.2%
from HK$313.3 million in 2003.  HK$65.7 million of the increase in 2004 was due
to  depreciation  and HK$26.4  million of the  increase  was due to  insurance.
HK$7.3  million of the  decrease in 2005 was  primarily  due to the decrease in
insurance  costs  resulting  from the  Company's  decision  not to procure  the
in-orbit  insurance for AsiaSat 2. This decrease was largely offset by increase
in depreciation expenses in 2005. See "Key Information - Risk Factors - Risk of
Loss or Damage to  Satellites,  Ground  Based  Satellite  Control  Equipment or
Satellite  Stations from Acts of War,  Terrorism,  Electrostatic  Storm,  Space
Debris  and  Other  Natural   Disasters  and   Limitations  on  Warranties  and
Insurance."  Depreciation  expenses,  which are  included in cost of  services,
increased  in 2005 to  HK$295.1  million  from  HK$287.4  million in 2004.  The
increase in depreciation  expenses in 2005 represented expenses associated with
the  additional  facilities.  HK$55.6  million of the increase in  depreciation
expenses in 2004 was  attributable  to the full year  depreciation of AsiaSat 4
and  HK$55.6  million  of the  increase  was  attributable  to the Tai Po Earth
Station.

     ADMINISTRATIVE  EXPENSES.  Administrative expenses in 2005 decreased 18.1%
to HK$83.9 million  (US$10.8  million) from HK$102.5  million in 2004, which in
turn   increased   82.6%  from  HK$56.1   million  in  2003.  The  increase  in
administrative  expenses in 2004 was largely  attributable to the provision for
impairment of receivables and performance bonus. The decrease in administrative
expenses in 2005 was largely  attributable to the decrease in the provision for
impairment of receivables and the total amount of performance  bonuses compared
to 2004. The decrease in the provision for impairment of receivables was due to


                                      40
<PAGE>

improvement  in  payment  by  trade  customers,   while  the  total  amount  of
performance  bonuses varies from year to year depending on whether  performance
targets are achieved.

     OTHER GAINS - NET.  Other  gains  primarily  consists of interest  income.
Interest income in 2005 increased 100% to HK$43.6 million (US$5.6 million) from
HK$21.8 million in 2004,  which  increased  344.9% from HK$4.9 million in 2003.
The increase in interest  income in 2004 and 2005 was  primarily  due to larger
cash balances and higher interest rates on structured deposits.

     PROFIT BEFORE INCOME TAX

     Profit  before  income tax in 2005  decreased  15.3% to  HK$416.6  million
(US$53.4  million) from HK$491.6  million in 2004, which in turn decreased 4.0%
from HK$512.1 million in 2003. The decrease in profit before income tax in 2004
resulted from higher cost of services and administrative expenses. The decrease
in profit before income tax in 2005 resulted from lower revenues in 2005.

     INCOME TAX EXPENSE

     Income tax  expense in 2005  decreased  15.2% to HK$51.3  million  (US$6.6
million)  from  HK$60.5  million in 2004,  which in turn  decreased  30.9% from
HK$87.6  million in 2003.  The  decrease in income tax expense in 2004 and 2005
resulted  primarily from lower assessable  profit. For the years 2003, 2004 and
2005, the effective tax rates were 17.1%,  12.3% and 12.3%,  respectively.  The
higher  effective rate in 2003 was mainly due to the  additional  provision for
deferred  tax for prior  years and for 2003 due to the  increase of the profits
tax rate in Hong Kong by 1.5% in 2003.

     PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

     Profit for the year in 2005 decreased 15.1% to HK$366.2  million  (US$46.9
million)  from HK$431.2  million in 2004,  which  increased  1.6% from HK$424.5
million in 2003.

     LIQUIDITY AND CAPITAL RESOURCES

     SOURCES OF FINANCING

     The Company's  principal  use of capital in 2003 was capital  expenditures
related to the construction and launch of AsiaSat 4 and the construction of the
Tai Po Satellite Earth Station.  The Company's principal use of capital in 2004
and 2005 was capital  expenditures  associated  with the Tai Po Satellite Earth
Station and tracking facilities.  Cash applied for the acquisition of property,
plant and equipment was HK$162.2  million in 2003,  which in turn  decreased to
HK$47.7  million  in 2004 and  decreased  further to  HK$23.7  million  (US$3.0
million) in 2005.  Cash  applied for the  acquisition  of  property,  plant and
equipment has been financed through cash flows generated from operations.

     As of  December  31,  2005,  the  Company  had  no  outstanding  debt  and
HK$4,104.2 million of shareholders' equity.

     The satellite business is highly capital intensive.  The Company's ability
to meet its future debt  obligations,  if any, will be dependent on a number of
factors, including its cash flow


                                      41
<PAGE>

from operations,  its ability to secure future  financing,  if needed,  and the
useful   lives  of  the   Company's   satellites.   See  "--  Planned   Capital
Expenditures."

     PLANNED CAPITAL EXPENDITURES

     The  Company  anticipates  the  need  for  additional  capital  to  fund a
replacement  satellite  for  AsiaSat  2. The  following  table  sets  forth the
Company's planned major capital expenditures for the periods indicated.  Actual
capital expenditures may differ from the amounts indicated below.

<TABLE>
<CAPTION>
                                       PLANNED CAPITAL EXPENDITURES (IN MILLIONS)
--------------------------------------------------------------------------------------------------------------------------
                       2006           2007            2008          2009           2010           TOTAL           TOTAL
                        HK$            HK$             HK$           HK$            HK$            HK$             US$
--------------------------------------------------------------------------------------------------------------------------
<S>                   <C>            <C>             <C>           <C>            <C>            <C>             <C>
AsiaSat 5              365.0          558.1           480.9           -                          1,404.0          180.0

Others                  22.6            9.3            10.5          9.7           10.6             62.7            8.0

Skywave TV               0.4            1.5             0.5          0.5            0.5              3.4            0.4
                     ---------    ------------     ----------    ----------    -----------     -----------    ------------
       Total           388.0    `     568.9           491.9         10.2           11.1          1,470.1          188.4
                     =========    ============     ==========    ==========    ===========     ===========    ============
</TABLE>

     AsiaSat  5 will  need to be  constructed  for  launch  in 2008 in order to
provide  adequate  opportunity  to  replace  AsiaSat 2 at the end of its useful
life. The total costs for the construction and launch of AsiaSat 5 is estimated
to be approximately  HK$1,404.0 million (US$180.0 million). The planned capital
expenditures  indicated as "Others" in the table above consist of those planned
for furniture and fixture, office equipment,  equipment and building upgrade at
the Tai Po site, motor vehicles, new business and test equipment and tools.

     CONTRACTUAL OBLIGATIONS

     As of December 31, 2005, the Company had various  contractual  obligations
which  are  more  fully  disclosed  in  Note 30 to the  consolidated  financial
statements  of the Company.  The following  table  aggregates  the  contractual
obligations of the Company as of December 31, 2005:


                                      42
<PAGE>

<TABLE>
<CAPTION>
                                                         PAYMENTS (OR OTHER OBLIGATIONS WHICH MAY BECOME DUE)
                                                                       BY PERIOD (HK$ IN MILLIONS)
                                               -------------------------------------------------------------------------
                                                               LESS THAN         1-3            4-5        AFTER 5
                                                  TOTAL         1 YEAR          YEARS          YEARS        YEARS
                                               -------------------------------------------------------------------------
<S>                                              <C>           <C>              <C>           <C>          <C>
Commitment of Expenditure for
Operations and Maintenance
Capital Expenditures....................           15.9           15.9              -             -             -

Operating Lease Obligations.............            9.1            4.3            4.8             -             -
                                                  -------        -------        -------       -------        -------

Total Contractual Obligations                      25.0           20.2            4.8             -             -
                                                  =======        =======        =======       =======        =======
Deferred Revenue Disclosed on the
Company's Balance Sheet(1)..............          239.6          151.9           35.3           17.1         35.3
</TABLE>

     (1) Only reflects deferred revenue associated with the sale of transponder
capacity requiring the provision of on-going  transponder  capacity through the
relevant period of the transponder purchase agreement.

     AsiaSat  leases its premises under  non-cancelable  operating  leases.  At
December 31, 2005, commitments for future minimum lease payments which fall due
in 2006,  2007 and  subsequent  years are HK$4.3  million  and HK$4.8  million,
respectively.

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

     CASH FLOWS

     The  Company  has  generally   financed  its  short-term  working  capital
requirements from cash provided by operations. The Company has not borrowed any
amounts for the last three years.  The Company had cash and cash equivalents of
HK$659.3 million,  HK$1,234.4 million and HK$1,635.5 million (US$209.7 million)
as of December 31, 2003, 2004 and 2005, respectively.


                                      43
<PAGE>

     Net  cash  generated  from  operating  activities  was  HK$627.5  million,
HK$750.8 million and HK$514.4 million (US$65.9 million) in 2003, 2004 and 2005,
respectively.  In 2004,  the increased  level of net cash provided by operating
activities resulted primarily from lower capital expenditures and lower amounts
of  dividends  paid.  In 2005,  the  decreased  level of net cash  provided  by
operating  activities  resulted  from a  lower  level  of cash  generated  from
operations and a larger payment of Hong Kong profits tax.

     Net cash  used in  investing  activities  was  HK$164.5  million,  HK$50.9
million in 2003 and 2004, respectively.  Net cash from investing activities was
HK$23.4 million (US$3.0 million) in 2005.  Expenditures on the construction and
launch of AsiaSat 3S and AsiaSat 4 were HK$58.0  million in 2003.  Expenditures
on other  property and equipment  were HK$104.2  million,  HK$47.7  million and
HK$23.7 million in 2003, 2004 and 2005, respectively.

     Net cash used in  financing  activities  was  HK$209.9  million,  HK$124.9
million  and  HK$136.6  million  (US$17.5  million)  in 2003,  2004  and  2005,
respectively.  In 2003,  2004 and 2005,  net cash used in financing  activities
primarily consisted of dividend payments.

     The Company has sufficient  working  capital to cover its planned  capital
expenditures and other operating needs. See "-- Planned Capital  Expenditures."
The Company had a working  capital of HK$529.9  million at December 31, 2003, a
working  capital of  HK$1,023.1  million  at  December  31,  2004 and a working
capital of HK$1,461.1 million (US$187.3 million) at December 31, 2005.

     OFF-BALANCE SHEET ARRANGEMENTS

     The Company does not have any off-balance sheet  arrangements that have or
are  reasonably  likely to have a current  or  future  effect on the  Company's
financial  condition,  changes in  financial  condition,  revenues or expenses,
results of operations,  liquidity,  capital  expenditures or resources that are
material to investors.

     EXCHANGE RATES

     During the past three years almost all of the Company's revenues, premiums
for satellite insurance coverage and debt service and substantially all capital
expenditures were denominated in US Dollars.  The Company's  remaining expenses
were primarily  denominated in HK Dollars during these periods.  As of December
31,  2005,  almost  all  of  AsiaSat's  transponder   utilization   agreements,
transponder  purchase  agreements  and  obligations  to  construct  and  launch
satellites and to purchase TT&C equipment were denominated in US Dollars.

     INFLATION

     Inflation has not materially affected the Company's  operations during the
past three years.

     U.S. GAAP RECONCILIATION

     The Company's  financial  statements are prepared in accordance  with Hong
Kong GAAP,  which  differs in certain  material  respects from U.S.  GAAP.  The
following  table  sets  forth a  comparison  of the  Company's  net  income and
shareholders' equity in accordance with Hong Kong GAAP and U.S. GAAP.

<TABLE>
<CAPTION>
                                                         ------------------------------------------------
                                                           2003         2004          2005         2005
                                                            HK$          HK$           HK$          US$
                                                         ------------------------------------------------
                                                                          (IN MILLIONS)
<S>                                                       <C>           <C>         <C>            <C>
Net income in accordance with:
  Hong Kong GAAP........................                    424.5         431.2       366.2         46.9
  U.S. GAAP.............................                    408.5         424.1       358.8         46.0

Shareholders' equity in accordance with:
  Hong Kong GAAP........................                  3,568.3       3,874.6     4,104.2        526.2
  U.S. GAAP.............................                  3,617.6       3,916.7     4,138.9        530.6
</TABLE>

     Note 32 to the  Company's  consolidated  financial  statements  provides a
description of the principal  differences  between Hong Kong GAAP and U.S. GAAP
as they  relate to the  Company and a  reconciliation  to U.S.  GAAP of certain

                                      44
<PAGE>

items, including net income and shareholders' equity.  Differences between Hong
Kong GAAP and U.S. GAAP that have a material effect on the Company's net income
and   shareholders'   equity  as  reported  under  Hong  Kong  GAAP  relate  to
capitalization of interest, borrowing costs and deferred taxation.

  RECENT U.S. ACCOUNTING PRONOUNCEMENTS

     SFAS NO.  154.  In May 2005,  the  Financial  Accounting  Standards  Board
("FASB") issued the US Statement of Financial Accounting Standards ("SFAS") No.
154, Accounting Changes and Error Corrections, a replacement of APB Opinion No.
20, Accounting Changes and SFAS No. 3, Reporting  Accounting Changes in Interim
Financial  Statements  (SFAS 154).  SFAS 154 changes the  requirements  for the
accounting   for,  and  reporting  of,  a  change  in  accounting   principles.
Previously,  voluntary changes in accounting principles were generally required
to be recognized  by way of a cumulative  effect  adjustment  within net income
during the period of the change. SFAS 154 requires retrospective application to
financial statements of prior periods,  unless it is impracticable to determine
either the period-specific effects or the cumulative effect of the change. SFAS
154 is effective for accounting changes made in fiscal years beginning after 15
December 2005; but the statement does not change the transitional provisions of
any existing accounting  pronouncements.  The Company does not believe that the
adoption  of SFAS 154 will have a material  effect on its  financial  position,
cash flows or results of operations.

     FASB NO. 109. In July 2005, the FASB issued a proposed  Interpretation  of
FASB Statement No. 109 (the  "Interpretation"),  "Accounting  for Income Taxes"
which   clarified   accounting   for   uncertain  tax   positions.   Under  the
Interpretation,  an  enterprise  is required  to  recognize,  in its  financial
statements,  the best  estimate  of the impact of a tax  position  only if that
position would probably be sustained in an audit, based solely on the technical
merits of the position. In evaluating whether or not the "probable recognition"
threshold has been met, the  Interpretation  requires the presumption  that the
tax position will be evaluated during an audit by taxing authorities.  The term
probable,  as defined in FASB Statement No. 5,  "Accounting for  Contingencies"
means  "the  future  event or events  are  likely  to  occur."  Individual  tax
positions that fail to meet the probable  recognition  threshold will generally
result in either (a) a reduction  in the deferred tax asset or an increase in a
deferred  tax  liability or (b) an increase in the  liability  for income taxes
payable or the  reduction  of an income tax refund  receivable.  The impact may
also include both (a) and (b). The increase in the income tax  liability  would
not be classified as a deferred tax liability unless it resulted from a taxable
temporary  difference  created  by a tax  position  that  has met the  probable
recognition  threshold.  For enterprises that present classified  statements of
financial position,  the income tax liability would be classified as current to
the extent  that a payment  is  anticipated  within  one year or the  operating
cycle, if longer. The Interpretation also would provide guidance on disclosure,
accrual  of  interest  and  penalties,   accounting  in  interim  periods,  and
transition.  The  Interpretation is currently in draft, and thus any effects on
the current accounting  treatment of the Indian income tax liability or the PRC
withholding tax cannot be assessed at this point in time.

     SAB 107 . In March 2005, the SEC issued Staff Accounting  Bulletin ("SAB")
No. 107 Share Based Payment,  which offers guidance on SFAS No. 123(R). SAB No.
107 was issued to assist  preparers by simplifying  some of the  implementation
challenges of SFAS No. 123(R) while  enhancing the  information  that investors
receive.  SAB No. 107 creates a framework  that is premised on two  overarching
themes:   (i)   considerable   judgement  will  be  required  by  preparers  to
successfully  implement SFAS No.  123(R),  specifically  when valuing  employee
stock options; and (ii) reasonable individuals, acting in good faith, may reach


                                      45
<PAGE>

different  conclusions on the fair value of employee stock options.  Key topics
covered  by SAB No. 107  include  valuation  models,  expected  volatility  and
expected  term.  The  Company  will  adopt SAB No.  107  concurrently  with the
adoption of SFAS No.  123(R) with effect from  January 1, 2006.  The Group does
not  expect  the  adoption  of  this  SAB to  have  a  material  impact  on its
consolidated financial position or results of operations.


  CRITICAL ACCOUNTING POLICIES

     The Company's consolidated financial statements are prepared in accordance
with Hong Kong GAAP. The preparation of these consolidated financial statements
requires the Company to make  estimates and judgments  that affect the reported
amounts of assets, liabilities, revenues and expenses as well as the disclosure
of contingent assets and liabilities.  The Company continually  evaluates these
estimates and judgments,  including those related to estimated  useful lives of
satellites,  impairment losses on satellites,  allowance for doubtful accounts,
and  contingent   liabilities  related  to  tax  assessments  from  Indian  tax
authorities.  The Company bases these estimates and judgments on its historical
experience  and other  factors  that it  believes  to be  reasonable  under the
circumstances.  Actual results may differ from these  estimates under different
assumptions  or  conditions.  The Company has  identified  below the accounting
policies that are the most critical to its consolidated financial statements.

     USEFUL  LIVES  OF  IN-ORBIT   SATELLITES.   The  Company  has  significant
investments  in  satellites.  The  carrying  value  of the  Company's  in-orbit
satellites  represented 72%, 59% and 52% of its total assets as of December 31,
2003, 2004 and 2005,  respectively.  The Company  estimates the useful lives of
satellites  in order to  determine  the  amount of  depreciation  expense to be
recorded during the reported period. The useful lives are estimated at the time
satellites are put into orbit and are based on historical experience with other
satellites  as  well  as  the  anticipated  technological  evolution  or  other
environmental changes. If technological changes were to occur more rapidly than
anticipated or in a different form than anticipated,  the useful lives assigned
to these  satellites may need to be shortened,  resulting in the recognition of
increased  depreciation in a future period.  Similarly,  if the actual lives of
satellites  are longer than what the Company has  estimated,  the Company would
have a smaller depreciation expense. As a result, if the Company's estimates of
the useful  lives of its  satellites  are not  accurate  or are  required to be
changed in the future,  the  Company's  net income in future  periods  would be
affected.

     REALIZABILITY OF THE CARRYING AMOUNTS OF LONG-LIVED ASSETS. The Company is
required to evaluate at each balance sheet date whether there is any indication
that the carrying amounts of long-lived  assets  (primarily its satellites) may
be  impaired.  The  recoverable  amount  is the  amount  recoverable  over  the
remaining lives of the assets through  undiscounted future expected cash flows.
If any such  indication  exists,  the Company should  estimate the  recoverable
amount of the long-lived  assets. An impairment loss is recognized based on the
excess of the carrying amount of such long-lived  assets over their recoverable
amounts. The impairment charge is calculated using the discounted present value
of the cash flows  expected  to arise  from the  continuing  use of  long-lived
assets and cash arising  from its  disposal at the end of its useful life.  The
estimates  of the cash  flows are based on the  terms  and  period of  existing
transponder utilization agreements ("Existing Agreements").  Likewise,  changes
in estimated  discount  rates that result in lower  recoverable  amounts  would
result in an impairment loss being recognized.

     Modifications  to the terms of the  Existing  Agreements  that  results in
shorter  utilization  period than previously agreed and/or those that result in
the  reduction in agreed rates will result in a


                                      46
<PAGE>

lower  recoverable  amounts (if the discount rate used is not  changed);  which
may, in turn, result in the carrying amounts exceeding the recoverable amounts,
which in turn would result in an impairment loss being recognized.

     INSURANCE.  For each of its  satellites,  the  Company  obtains  insurance
covering  launch and  first-year  in-orbit loss at a blended  rate.  The launch
insurance  is a one  time  charge  and  the  in-orbit  insurance  is  recurring
in-nature.  The Company  capitalizes a large  portion of the insurance  premium
relating to the launch as a cost of satellite  and  amortizes the cost over the
life of the  satellite  on a  straight-line  basis.  The small  portion  of the
insurance  premium  relating  to  the  first-year  in-orbit  is  determined  by
reference to an indicative rate obtained through an insurance broker in an open
market for  satellites  of similar type and  configuration,  and is recorded as
part of cost of services after  commissioning  of the  satellite.  The in-orbit
insurance cost usually  represents 2.5% to 3.5% of the total amount insured for
such satellite.

     ALLOWANCE  FOR DOUBTFUL  ACCOUNTS.  The Company  maintains  allowance  for
doubtful  accounts for  estimated  losses that result from the inability of its
customers to make the required  payments.  The Company bases its  allowances on
the  likelihood  of  recoverability  of  account   receivables  based  on  past
experience  and current  collection  trends that are expected to continue.  The
Company's  evaluation also includes the length of time the receivables are past
due and the general business environment.

     If changes in these factors occur, or the historical data the Company uses
to calculate the  allowance for doubtful  accounts as of December 31, 2005 does
not reflect the future ability to collect outstanding  receivables,  additional
provisions for doubtful accounts may be needed and the Company's future results
of operations could be adversely affected.

     CONTINGENCY RELATED TO INDIAN TAX ASSESSMENTS. As of December 31, 2005 the
Indian  tax   authorities   have   assessed  the  Company  for  income  tax  of
approximately HK$146.0 million (US$18.7 million). Subsequently, the Company has
received an assessment for the 2003/2004 year in the amount of HK$43.3 million,
which  increases the total amount of such  contingent  liabilities  to HK$189.3
million  (US$24.3  million).  See "--  Taxation." The Company did not recognize
liabilities  in  connection  with  the  foregoing  assessments  as the  Company
believes that the criteria for recognition of a loss  contingency  under the US
SFAS 5,  "Accounting  for  Contingencies"  and Hong Kong  Statement of Standard
Accounting Practice No. 28 "Provisions,  Contingent  Liabilities and Contingent
Assets"  ("SSAP 28") were not met. SFAS 5 requires that "an estimated loss from
a loss  contingency  shall be  accrued  by a charge  to  income  if both of the
following  conditions are met: (a)  information  available prior to issuance of
the financial  statements  indicates that it is probable that an asset had been
impaired  or a  liability  had  been  incurred  at the  date  of the  financial
statements;  and (b) the amount of loss can be  reasonably  estimated.  SSAP 28
states that a contingent  liability is: (a) a possible  obligation  that arises
from past events and whose  existence  will be confirmed only by the occurrence
or  non-occurrence of one or more uncertain future events not wholly within the
control of the  enterprise;  or (b) a present  obligation that arises from past
events but is not recognized because: (i) it is not probable that an outflow of
resources   embodying   economic  benefits  will  be  required  to  settle  the
obligation:  or (ii) the  amount  of the  obligation  cannot be  measured  with
sufficient reliability.

     The Company cannot  reasonably  estimate the loss that will arise from the
assessment  since the  information  needed to  calculate  such loss (if any) is
proprietary  to the  Company's  customers  and was not provided to the Company.
Further, the


                                      47
<PAGE>

Company believes it has a reasonable  likelihood of success with respect to its
appeals against the Tribunal's decision.  Therefore,  the Company believes that
the criteria for recognition of a loss contingency under SSAP 28 or SFAS 5 were
not met.  If the  Company  is finally  held  liable for such  Indian  tax,  the
Company's future results of operations could be adversely affected.

     NEW ACCOUNTING STANDARDS

     In order to achieve convergence with the International Financial Reporting
Standards,  the Hong Kong Institute of Certified  Public  Accountants  issued a
number of new or revised Hong Kong  Financial  Reporting  Standards  ("HKFRS"),
which  became  effective  January 1, 2005.  The Company  adopted  some of those
standards  that are relevant to its  operation.  The Company  believes that the
adoption  of those  standards  did not  result in  substantial  changes  to the
Company existing  accounting policies under Hong Kong GAAP. For a discussion on
the  newly  adopted  accounting   standards,   see  Note  2  to  the  Company's
consolidated financial statements.

     RESEARCH AND DEVELOPMENT

     The  Company  does not  incur any  significant  research  and  development
expenditures.

     TREND INFORMATION AND PROSPECTS

     Due to the nature of the  Company's  business with  long-term  commitments
being made for the purchase of satellites and long-term  contracts entered into
by AsiaSat's  customers,  there are no immediate changes from one period to the
next  which  impact  AsiaSat's  business.  See  "Information  on the  Company -
Business Overview." For a further discussion on trends and prospects,  see " --
Overview."

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

     DIRECTORS AND SENIOR MANAGEMENT

     The  directors  of the  Company  ("Directors")  as of May 31, 2006 are set
forth below.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                     DATE FIRST ELECTED OR
                                                                     APPOINTED DIRECTOR OF
NAME                            AGE       POSITION                   ASIASAT (OR THE COMPANY)       TERM  OF OFFICE
--------------------------------------------------------------------------------------------------------------------------
<S>                             <C>       <C>                        <C>                            <C>
Romain Bausch (2)               52        Chairman and Director      January 15, 1999               May 14, 2007

Zeng Xin Mi (1)                 55        Deputy Chairman and        February 28, 2001              May 14, 2007
                                          Director

Robert Bednarek (2)             48        Director                   March 14, 2002                 May 13, 2008

Professor Edward Chen,          61        Director                   May 10, 1996                   May 16, 2006
G.B.S., C.B.E., J.P. (3)

Yu Cheng Ding (1)               40        Director                   January 15, 1999               May 14, 2007

R. Donald Fullerton (3)         74        Director                   May 10, 1996                   May 13, 2008
</TABLE>

                                      48
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                     DATE FIRST ELECTED OR
                                                                     APPOINTED DIRECTOR OF
NAME                            AGE       POSITION                   ASIASAT (OR THE COMPANY)       TERM  OF OFFICE
--------------------------------------------------------------------------------------------------------------------------
<S>                             <C>       <C>                        <C>                            <C>
Peter Jackson                   57        Director                   May 10, 1996                   May 16, 2006

Wei Min Ju (1)                  43        Director                   October 12, 1998               May 14, 2007

Fai Wong Ko (1)                 57        Director                   March 11, 2004                 May 14, 2007

Mark Rigolle (2)                41        Director                   November 17, 2004              May 13, 2008

Robert Sze (3)                  65        Director                   May 10, 1996                   May 13, 2008

William Wade                    49        Director                   May 10, 1996                   May 16, 2006

Cynthia Dickins (2)             42        Director                   November 17, 2005              May 16, 2006
</TABLE>

--------------------------
(1) Appointed by CITIC.
(2) Appointed by SES.
(3) Independent.

R. Donald Fullerton resigned from the Board on May 30, 2006.


The executive officers of the Company as of May 31, 2006 are set forth below.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                   DATE FIRST ELECTED OR
                                                                   APPOINTED DIRECTOR OF
NAME                          AGE       POSITION                   ASIASAT (OR THE COMPANY)       TERM  OF OFFICE
--------------------------------------------------------------------------------------------------------------------------
<S>                           <C>       <C>                        <C>                            <C>
Peter Jackson                  57       Chief Executive            July 1, 1993                   Indefinite
                                        Officer

William Wade                   49       Deputy Chief               April 15, 1994                 Indefinite
                                        Executive Officer

Catherine Chang                38       Legal Counsel              January 1, 2003                Indefinite

Liqun Chen                     55       General Manager, China     April 14, 1989                 Indefinite

Ya Hui Chiu                    56       General Manager,           February 13, 1989              Indefinite
                                        Operation

Sabrina Cubbon                 44       General Manager,           December 1, 1993               Indefinite
                                        Marketing

Denis Lau                      66       Secretary and General      July 1, 1988                   Indefinite
                                        Manager, Finance and
                                        Administration

Barry Turner                   59       General Manager,           May 1, 1998                    Indefinite
                                        Engineering
</TABLE>

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


                                      49
<PAGE>

     The Board of  Directors of the Company  currently  consists of 12 members.
Action can be taken by a majority of Directors  present at a meeting at which a
quorum  is  present.  Attendance  by six  Directors,  or such  other  number as
determined  by the  Directors  from time to time,  constitutes  a  quorum.  The
Bye-laws of the Company provide that any Director may call a board meeting. The
Directors  all hold office until the next annual  meeting of  shareholders  and
until their successors are elected and have qualified.

     ROMAIN  BAUSCH was  appointed a  Non-executive  Director of the Company on
January 15, 1999. Since then, he acted as Deputy Chairman (1999-2000), Chairman
(2001-2002) and Deputy Chairman  (2003-2004) of the Board on a rotational basis
biennially.  For the current term (2005-2006),  he acts as Chairman.  He is the
President  and CEO of SES GLOBAL S.A ("SES  GLOBAL").  He started his career in
the Luxembourg civil service.  After subsequent  promotions,  he became General
Administrator  of the  Ministry of Finance.  He occupied  key  positions in the
banking and media  sectors and spent a  five-year  term as a Director  and Vice
Chairman of SES GLOBAL.  He graduated with a Master of Arts degree in Economics
(specialization  in  Business  Administration)  from  the  University  of Nancy
(France).

     ZENG XIN MI was  appointed  a  Non-executive  Director  of the  Company on
February 28, 2001.  Since then,  he acted as Deputy  Chairman  (2001-2002)  and
Chairman  (2003-2004) of the Board on a rotational  basis  biennially.  For the
current term (2005-2006),  he acts as Deputy Chairman. He is Executive Director
and Vice President of CITIC Group  ("CITIC").  Prior to his  appointment to the
present  position,   he  held  executive   management  positions  with  various
subsidiaries of CITIC and was the Chief  Executive  Officer of CITISTEEL in the
United  States from 1992 to 1997. He is also Chairman of the Board of CITIC USA
Holdings and CITIC  Australia  Pty  Limited,  and  Executive  Director of CITIC
Resources  Holdings  Limited in Hong Kong.  He joined CITIC in 1985 and holds a
Master of Science degree.

     ROBERT BEDNAREK was appointed a  Non-executive  Director of the Company on
March 14, 2002.  He is Executive  Vice-President  Corporate  Development  and a
member of the Executive  Committee of SES GLOBAL.  Prior to joining SES GLOBAL,
he was the Executive  Vice President and Chief  Technology  Officer of PanAmSat
Corporation.  He  graduated  with a Bachelor  of Science  degree in  Electronic
Engineering from the University of Florida.

     PROFESSOR  EDWARD CHEN,  G.B.S.,  C.B.E.,  J.P.,  has been an  Independent
Non-executive  Director of the Company  since May 1996. He was educated at Hong
Kong  University  (Bachelor  of Arts,  Master of  Social  Science)  and  Oxford
University  (Doctor  of  Philosophy)  and is  currently  President  of  Lingnan
University in Hong Kong. He was a member of the Executive  Council of Hong Kong
from 1992 to 1997 and Chairman of the Consumer Council from 1991 to 1997. He is
now  Chairman of the Press  Council,  a director of the First  Pacific  Company
Limited, a trustee of Eaton Vance Management Funds (Boston),  a director of The
Wharf  (Holdings)  Limited  and  also a  director  of China  Resources  Peoples
Telephone Company.

     YU CHENG DING was  appointed  a  Non-executive  Director of the Company on
January 15, 1999. He was the Assistant  President of CITIC  Securities  Company
Limited and had been with the company from April 1998 to September 2004.  CITIC
Securities  Company Limited is a subsidiary of CITIC engaging in securities and
investment banking business. He has been an independent  non-executive director
of SEEC Media  Group  Limited  since June 2005.  He


                                      50
<PAGE>

holds a  Master  of  Business  Administration  degree  from the  University  of
Pittsburgh  and a Doctor  of  Philosophy  degree  in  Economics  from  Tsinghua
University.

     R. DONALD FULLERTON has been an Independent  Non-executive Director of the
Company  since May 1996.  He was the  Chairman and Chief  Executive  Officer of
Canadian  Imperial  Bank of Commerce  ("CIBC")  until his  retirement  in 1992.
Subsequently, he was Chairman of the Executive Committee of the CIBC's Board of
Directors until 1999. He retired from the CIBC's Board in February 2004. During
his career, he was a director of many national and multi-national  corporations
as well as medical, cultural and educational institutions. He currently sits on
the board of Husky Energy Inc. and 3 Italia  S.p.A.  He resigned from the Board
of the Company on May 30, 2006.

     WEI MIN JU was  appointed  a  Non-executive  Director  of the  Company  on
October 12, 1998. He is a Director and the Chief Financial Officer of CITIC. He
is also a  non-executive  director of CITIC  International  Financial  Holdings
Limited and a director of CITIC Ka Wah Bank. He holds a Bachelor of Arts degree
and a Master degree in Economics.

     ROBERT SZE has been an Independent  Non-executive  Director of the Company
since May 1996.  He is a fellow of the  Institute of Chartered  Accountants  in
England and Wales and the Hong Kong Institute of Certified Public  Accountants,
and was a  partner  in an  international  firm of  accountants  with  which  he
practiced for over 20 years. He is a non-executive director of a number of Hong
Kong listed  companies.  He is also a member of the  Shanghai  Committee of the
Chinese People's Political Consultative Conference.

     FAI WONG KO was appointed a Non-executive Director of the Company on March
11, 2004.  He is the Deputy  General  Manager of CITIC  United Asia  Investment
Limited, a wholly owned subsidiary of CITIC in Hong Kong and has over 20 years'
experience in banking and finance before joining CITIC.  He holds a Bachelor of
Arts and a Master degree in Business Administration.

     MARK  RIGOLLE  was  appointed a  Non-executive  Director of the Company on
November 17, 2004. He is the Chief  Financial  Officer of SES GLOBAL.  Prior to
joining SES GLOBAL,  he held various positions in Belgacom in the financial and
strategic  areas.  He holds  an  Economic  Sciences  degree  from the  Catholic
University of Leuven, Belgium.

     CYNTHIA DICKINS was appointed a  Non-executive  Director of the Company on
November 17, 2005. She is currently  President of SES Asia S.A. ("SES Asia"), a
wholly-owned subsidiary of SES GLOBAL. She has been with SES GLOBAL since 1997,
when she joined GE  Americom  ("GE") as  managing  director  of  Americom  Asia
Pacific.  Prior to GE,  she held  international  management  positions  with TV
Shopping  Network,   PanAmSat  Corporation  and  Pharmacia  (formerly  Monsanto
Company).  She holds a Masters  of  International  Management  degree  from the
American Graduate School of International  Management  (Thunderbird) in Arizona
(USA) and a Bachelor of Arts degree in  International  Relations  from  Gonzaga
University in Washington (USA).

     PETER  JACKSON  has been an  Executive  Director  and the Chief  Executive
Officer of the Company  since May 1996,  having  served in that  position  with
AsiaSat  since July 1993 prior to the  listing of the  Company.  He has over 27
years' experience in the telecommunications  field. Prior to his appointment as
the Chief  Executive  Officer in 1996,  he was employed by Cable & Wireless plc
where  he  held  engineering,   marketing  and  management  positions  and


                                      51
<PAGE>

was responsible for several satellite  telecommunications ventures. He has been
an independent  non-executive director of Daum Communications Group since April
2006.

     WILLIAM WADE has been an Executive Director and the Deputy Chief Executive
Officer of the Company  since May 1996,  having  served in that  position  with
AsiaSat  since April 1994 prior to the listing of the  Company.  He has over 26
years'  experience in the satellite and cable  television  industry.  He speaks
Mandarin Chinese and holds a Bachelor of Arts (Honors) degree in Communications
from the University of Utah, and a Masters of International  Management  degree
from Thunderbird (the Garvin School of International Management).

     CATHERINE  CHANG is Legal  Counsel of the Company.  She joined  AsiaSat in
1994 and  established  the legal  department to manage the legal affairs of the
Company.  Prior to joining  the  Company,  she was a  solicitor  at  Ebsworth &
Ebsworth,  an Australian  law firm.  She graduated  from the  University of New
South Wales, Australia with a Bachelor's degree in Laws and a Bachelor's degree
in Commerce, majoring in Accountancy.

     LIQUN CHEN is General Manager,  China, of AsiaSat, in which capacity he is
responsible for marketing  transponder capacity and managing customer relations
in the China  market.  He had been on  secondment to AsiaSat from his employer,
CITIC,  since 1989 and became a permanent  employee of AsiaSat in January 1997.
He  graduated  with  a  Master  of  Business  Administration  degree  from  the
University of Leuven in Belgium and a Bachelor of Science degree in Electronics
and  Industrial  Automation  from Tsinghua  University,  China.  Prior to being
seconded to the Company, he worked for CITIC.

     DR. YA HUI CHIU is  General  Manager,  Operations,  of  AsiaSat,  in which
capacity  he  is  responsible  for  maintaining  and  operating  the  Company's
satellites.  He has 22 years experience in  telecommunications  engineering and
operations,  with the last 19 years being in the satellite communications area.
He received his Bachelor of Science degree from National Taiwan  University and
his M. Phil and Ph.D. degrees from Yale University, all in Physics.

     SABRINA  CUBBON  is  General  Manager,  Marketing,  of  AsiaSat,  in which
capacity she is  responsible  for sales and  marketing,  business  development,
corporate  affairs  and  market  research.  She has over 21 years of  marketing
experience  in the  telecommunications  industry.  Prior to joining  AsiaSat in
August 1992,  she was  employed by Case  Communications,  a Hong Kong  company,
between  1987 and 1992 as Regional  Manager  Asia-Pacific  responsible  for the
sales and marketing activities to multinational clients. She graduated from the
University of  Manchester,  United  Kingdom with a Masters degree in Electronic
and Electrical Engineering, specializing in cryptography.

     DENIS LAU is General Manager, Finance and Administration and the Secretary
of the  Company.  He joined Hong Kong  Telecom  (now known as PCCW) in 1974 and
held a  number  of  senior  positions,  including  the  Assistant  Group  Chief
Accountant,  before  being  seconded to AsiaSat in 1988.  He became a permanent
employee  of  AsiaSat in  September  1996.  He is a  qualified  accountant  and
secretary  by  profession  and has over 34 years  experience  in the  fields of
accounting and finance. He holds a Diploma in Management Executive  Development
from the Chinese  University of Hong Kong, a Fellowship of The  Association  of
Chartered  Certified  Accountants  in the  United  Kingdom  and the  Hong  Kong
Institute of Certified Public  Accountants and is an Associate of The Institute
of Chartered  Secretaries and  Administrators  in the United Kingdom.  Prior to
joining Hong Kong Telecom, he worked for Esso, Union Carbide and Shaw Brothers.


                                      52
<PAGE>

     BARRY TURNER is General Manager, Engineering of AsiaSat. He joined AsiaSat
in 1997 as Deputy  General  Manager of  Engineering  and was  appointed  to his
present  position in May 1998.  He has 31 years of  experience in the satellite
communications  industry and has held senior and executive management positions
in  Engineering  and in Sales and Marketing at Telesat  Canada and in Strategic
Planning at TMI Communications  Inc. He holds a Bachelor's degree in Electrical
Engineer from the Technical  University of Nova Scotia,  Canada,  and a Masters
degree in Business Administration from the University of Ottawa, Canada.

     Except  for Mr.  Bednarek  and Ms.  Dickins,  who are  brother-in-law  and
sister-in-law,  there  is  no  family  relationship  between  any  director  or
executive officer and any other director or executive officer of the Company.

                                  COMPENSATION

     The aggregate  compensation  paid by AsiaSat to all directors and officers
of the Company for 2004 and 2005 was approximately  HK$35.8 million and HK$27.5
million,  respectively.  This compensation  included payments of HK$0.5 million
(2004:  HK$0.5 million) and HK$0.5 million (2004: HK$0.5 million) to SES GLOBAL
S.A.  and a  subsidiary  of  CITIC,  the  major  shareholders  of the  Company,
respectively,  for certain Non-Executive Directors representing SES GLOBAL S.A.
and CITIC.  The decrease was largely  attributable to a reduction in the amount
of performance bonus of HK$9.2 million.

     CERTAIN SERVICE AGREEMENTS

     PETER JACKSON. Mr. Jackson was seconded to the Company by Cable & Wireless
plc prior to June 1996, when he entered into a service  agreement (the "Jackson
Service  Agreement")  with the  Company  pursuant  to which he became its Chief
Executive Officer.

     The  Jackson  Service  Agreement  was for an  initial  fixed term of three
years.  Following the initial fixed term, the Jackson Service  Agreement may be
terminated by either party giving not less than 12 months' notice.  Mr. Jackson
currently  is entitled to a gross  annual  salary of HK$2.7  million per annum,
together with a housing allowance  including  utilities of up to HK$1.5 million
per annum,  which up to December  31, 2005 was paid  directly by the Company to
the landlord.  Mr. Jackson is also entitled to an additional annual bonus based
upon the Company's  performance.  Mr. Jackson is eligible to participate in the
Share Option Scheme (as defined herein).  He is also entitled to participate in
the Company's  medical scheme and in the Company's  provident fund or any other
AsiaSat pension scheme.

     Under  the  terms  of  the  Jackson  Service  Agreement,  Mr.  Jackson  is
restricted  for a period of 12 months after the  termination  of his employment
with the Company from  competing  with the Company,  attempting to deal with or
solicit any of the  Company's  customers  with whom he had dealings  during the
last 12 months of his  employment or employing or attempting to entice away any
senior  employees of the Company.  Mr. Jackson will not act in any capacity for
Cable & Wireless plc under the terms of the Jackson Service Agreement.

     WILLIAM  WADE.  Mr. Wade was seconded to the Company by Hutchison  Whampoa
prior to June 1996, when he entered into a service agreement (the "Wade Service
Agreement")  with the  Company  pursuant  to which he became its  Deputy  Chief
Executive Officer of the Company.

     The Wade  Service  Agreement  was for an initial  fixed term of two years.
Following the initial fixed term, the Wade Service  Agreement may be terminated
by either party giving not less than six months'  notice.  Mr. Wade is entitled
to a gross annual salary of HK$2.1  million per annum,  together with a housing
allowance  including utilities of up to HK$1.1 million per annum, which is paid
directly  by the  Company to the  landlord.  Mr.  Wade is also  entitled  to an
additional  annual  bonus  based upon the  Company's  performance.  Mr. Wade is
eligible to  participate  in the Share Option  Scheme.  He is also  entitled to
participate in the Company's medical scheme and the Company's provident fund or
any other AsiaSat pension scheme.


                                      53
<PAGE>

     Under the terms of Mr. Wade's  service  agreement,  he is restricted for a
period of six months after the  termination of his employment  with the Company
from competing with the Company,  attempting to deal with or solicit any of the
Company's customers with whom he had dealings during the last six months of his
employment or employing or  attempting  to entice away any senior  employees of
the Company.  Mr. Wade will not act in any capacity for Hutchison Whampoa under
the terms of the Wade Service Agreement.

                                 BOARD PRACTICES

     The Board of  Directors  of the Company  (the  "Board") is vested with the
broadest  powers to perform all acts in the interest of the Company.  The Board
has adopted certain corporate governance guidelines (the "Guidelines") relating
to Board membership, Board conduct and Board committee issues. A summary of the
significant  differences between the Company's corporate  governance  practices
and those  required by the NYSE  Corporate  Governance  Standards  for Domestic
Companies    is     available    at     http://www.asiasat.com/eng/04_investor/
governance/Comparison.pdf.

     The Company has established an audit committee.  The committee's primarily
objective is to assist the Board in  fulfilling  its  oversight  responsibility
with respect to (a) the  accounting  and financial  reporting  processes of the
Company,  including  the  integrity  of  the  financial  statements  and  other
financial  information  provided  by the Company to its  stockholders,  (b) the
Company's   compliance  with  legal  and  regulatory   requirements,   (c)  the
independent  auditors'  qualifications  and independence,  (d) the audit of the
Company's  financial  statements,  and (e)  the  performance  of the  Company's
internal audit function and independent auditors. The audit committee shall (x)
have the sole  authority and  responsibility  to select,  evaluate  and,  where
appropriate,  replace the independent  auditors (or to nominate the independent
auditors for stockholder  approval),  (y) approve all audit engagement fees and
terms and all non-audit  engagements  with the  independent  auditors,  and (z)
perform such other duties and  responsibilities  set forth under the Securities
Exchange  Act of 1934 and any  other  applicable  independence  and  regulatory
requirements.  The audit committee shall also have the sole authority to review
in  advance,  and  grant any  appropriate  pre-approvals,  of (i) all  auditing
services to be  provided by the  independent  auditors  and (ii) all  non-audit
services to be provided by the independent auditors as permitted by Section 10A
of the  Securities  Exchange  Act of 1934,  and, in  connection  therewith,  to
approve all fees and other terms of engagement.  The audit committee shall also
review and  approve  disclosures  required to be  included  in  Securities  and
Exchange   Commission  periodic  reports  filed  under  Section  13(a)  of  the
Securities Exchange Act of 1934 with respect to audit and non-audit services.

     The  audit  committee  shall  have  three  or more  members  who  shall be
independent non-executive directors unless an applicable exemption is available
under the rules promulgated by the U.S. Securities and Exchange Commission. The
quorum for the committee shall be


                                      54
<PAGE>

two voting  members.  The chairman of the  committee  shall be appointed by the
Board or, if it does not do so, the members of the audit  committee shall elect
a  chairman  by a vote of the  majority  of the  voting  members  of the  audit
committee. The committee comprises Messrs. Robert Sze (Chairman),  Edward Chen,
R. Donald  Fullerton  (resigned  May 30,  2006),  Wei Min Ju and Mark  Rigolle.
Messrs.  Wei Min Ju and Mark  Rigolle  have only  observer  status on the audit
committee and are non-voting members nominated by CITIC and SES GLOBAL under an
exemption to the independence requirement.

     The Company has also established a remuneration  committee.  The committee
is  responsible  for,  among  other  things,   considering  and  reviewing  the
remuneration  packages of the  executive  directors  and the  emoluments of the
non-executive  directors prior to approval of award by the Board. The committee
also reviews the  remuneration  packages of the  employees of the Company.  The
committee  shall have three members and the quorum for the  committee  shall be
two.  The  chairman  of the  committee  shall be an  independent  non-executive
director and appointed by the Board. The committee  comprises Messrs. R. Donald
Fullerton (Chairman, resigned May 30, 2006), Wei Min Ju and Mark Rigolle.

     The Company has also established a nomination committee.  The committee is
responsible  for,  among other  things,  identifying  individuals  qualified to
become Board members,  overseeing  the evaluation of the Board and  management,
and  developing  and  recommending  to the Board a set of corporate  governance
guidelines  applicable  to the Company.  The  committee  also  develops a Chief
Executive  Officer  succession plan. The committee shall have three members and
the quorum shall be two. The chairman of the committee  shall be an independent
non-executive  director and  appointed by the Board.  The  committee  currently
comprises of Messrs. Edward Chen (Chairman), Romain Bausch and Zeng Xin Mi.

     The Company has also  established a business  development  committee.  The
committee is responsible for reviewing all corporate plans, budgets and any new
and  ongoing  projects or ventures  and make  recommendations  to the Board for
consideration and approval.  The committee shall have no executive powers.  The
committee shall have three members who shall be  non-executive  directors.  The
committee currently comprises of Messrs.  Robert Bednarek (Chairman),  Yu Cheng
Ding and Fai Wong Ko.

     The  execution of the  policies  and  decisions of the Board and the daily
management of the Company are vested with the management  that comprises of the
Chief Executive  Officer,  the Deputy Chief  Executive  Officer and the General
Managers  in the  functional  areas  of  Engineering,  Finance,  Marketing  and
Operations,  respectively.  Furthermore, the Board mandates the management with
the preparation and planning of overall  policies and strategies of the Company
as well as decisions  reaching beyond the daily management,  for discussion and
decision  by the  Board.  The  management  meets  on a  regular  basis on daily
business and reports to the Board at every board meeting.

                                    EMPLOYEES

     As of December 31, 2005, the Company had 95 permanent employees,  of which
eight  employees  were in  management,  38 employees  were in  engineering  and
operations  and 31  employees  were in sales and  marketing.  The  remaining 18
employees  were engaged in  administrative,  accounting,  legal and  regulatory
activities.  The  Company has 80  employees  in Hong Kong and 15  employees  in
Beijing.


                                      55
<PAGE>

     The Company does not employ a significant  number of temporary  employees.
The Company is not party to any collective  bargaining  agreement.  The Company
believes its relations with its employees are good.

                                 SHARE OWNERSHIP

     Pursuant to the Company's  new share option scheme  adopted on January 25,
2002 (the "Share  Option  Scheme"),  the Board of  Directors of the Company may
grant  options to any  employees  (including  officers  and  directors)  of the
Company or any of its subsidiaries to subscribe for shares in the Company.  The
subscription price shall be such price as the Board of Directors of the Company
may in its  absolute  discretion  determine  at  the  time  of  grant  but  the
subscription  price  shall  not be less  than  whichever  is  higher of (i) the
closing price of the shares as stated in The Hong Kong Stock Exchange Limited's
(the "Stock  Exchange") daily  quotations sheet on the date of grant;  (ii) the
average  closing  price of the shares as stated in the Stock  Exchange's  daily
quotation sheets for the five business days  immediately  preceding the date of
the grant; and (iii) the nominal value of a share.

     At December 31, 2005,  outstanding  options granted under the Share Option
Scheme  (including  those  previously  granted  under the old  scheme)  were as
follows:

      EXERCISE PERIOD                OPTION PRICE         NUMBER OF SHARES
                                          HK$
------------------------------------------------------------------------------

Nov 26, 1999 to Nov 25, 2006             17.48                1,634,000

Oct 1, 2002 to Sept 30, 2009             17.48                1,655,000

Feb 4, 2004 to Feb 3, 2012               14.35                3,311,500
                                                          --------------------
                                                              6,600,500
                                                          ====================

     As of 31  May  2006,  Romain  Bausch,  the  Chairman  and a  Non-Executive
Director of the Company,  has been granted 100,000  options,  exercisable  from
February 4, 2004 to February 3, 2012.

     As of May 31, 2006,  Zeng Xin Mi, the Deputy  Chairman and a Non-Executive
Director of the Company,  has been granted 100,000  options,  exercisable  from
February 4, 2004 to February 3, 2012.

     As of May 31, 2006, Edward Chen, an Independent  Non-Executive Director of
the Company, has been granted 50,000 options, exercisable from February 4, 2004
to February 3, 2012.

     As of May 31,  2006,  Yu  Cheng  Ding,  a  Non-Executive  Director  of the
Company, has been granted 50,000 options,  exercisable from February 4, 2004 to
February 3, 2012.

     As of May 30, 2006,  R. Donald  Fullerton,  an  Independent  Non-Executive
Director of the Company,  has been granted  75,000  options,  exercisable  from
February  4,  2004  to  February  3,  2012.  Mr.  Fullerton's  options  expired
unexercised upon his resignation from the Company on May 30, 2006.

     As of May 31, 2006, Wei Min Ju, a  Non-Executive  Director of the Company,
has been granted 50,000 options,  exercisable from February 4, 2004 to February
3, 2012.


                                      56
<PAGE>

     As of May 31, 2006, Robert Sze, an Independent  Non-Executive  Director of
the Company, has been granted 75,000 options, exercisable from February 4, 2004
to February 3, 2012.

     As of May 31, 2006,  Peter  Jackson,  an Executive  Director and the Chief
Executive Officer of the Company, has been granted 915,000 options, exercisable
from November 26, 1999 to February 3, 2012.

     As of May 31, 2006,  William  Wade,  an Executive  Director and the Deputy
Chief  Executive  Officer of the  Company,  has been granted  760,000  options,
exercisable from November 26, 1999 to February 3, 2012.

     Under SES company policy,  the options granted to directors of the Company
appointed by SES are held for the benefit of SES.


ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

                               MAJOR SHAREHOLDERS

     The following table sets forth certain information  regarding ownership of
the Company's  voting  securities as of May 31, 2006 by (i) all persons who are
known by the Company to be the beneficial  owner of more than five percent (5%)
of any class of the Company's  voting  securities  and (ii) the total number of
any  class  of the  Company's  voting  securities  owned  by the  officers  and
directors of the Company as a group.

<TABLE>
<CAPTION>
TITLE OF CLASS        IDENTITY OF PERSON OR GROUP        SHARES OWNED       PERCENT OF CLASS
------------------------------------------------------------------------------------------------
<S>                   <C>                                 <C>                   <C>
Common Stock          Bowenvale Limited                   268,905,000             68.90%

Common Stock          Aberdeen Asset Management Asia       21,188,000              5.43%
                      Limited

Common Stock          Directors and Officers                  290,000              0.07%
</TABLE>

     The  Company is  controlled  by  Bowenvale  Limited,  a limited  liability
company incorporated in the British Virgin Islands ("Bowenvale Limited"), which
owns 68.9% of the  outstanding  shares of Common  Stock of the  Company.  Until
January 15, 1999,  Bowenvale  Limited was owned by Cable & Wireless  plc,  Able
Star  Limited,  an  indirect  wholly-owned  subsidiary  of CITIC,  and  Dontech
Limited, an indirect  wholly-owned  subsidiary of Hutchison Whampoa Limited. On
January 15, 1999, Cable & Wireless plc and Hutchison Whampoa Limited sold their
holdings  in  Bowenvale  Limited  to  CITIC  and  SES.  As  a  result  of  this
transaction,  CITIC  increased  its  ownership of the voting  share  capital of
Bowenvale  Limited from 41.67% to 49.5% and SES acquired the  remaining  49.5%.
Voting rights in Bowenvale  Limited are equally  shared  between CITIC and SES.
CITIC also holds 1% of the shares of  Bowenvale  Limited  that are  non-voting.
CITIC is China's leading state-owned investment  corporation,  with diversified
holdings in  banking,  securities,  energy,  telecommunications,  real  estate,
manufacturing,  transportation  and trading and extensive contact in China. The
information  contained  in this  Item 7 does not  include  options  granted  to
current or former Directors  appointed by SES which are  beneficially  owned by
SES pursuant to SES company  policy.  See  "Directors  and Senior  Management -
Share  Ownership."  SES is  based  in  Luxembourg  and is the  largest  private
satellite service provider in the world. CITIC and SES


                                      57
<PAGE>

are each  referred  to herein as a  Shareholder  and Cable &  Wireless  plc and
Hutchison Whampoa Limited are each referred to herein as a former Shareholder.

     The Company is not aware of any arrangement  that may at a subsequent date
result in a change of control of the Company.

                            RELATED PARTY TRANSACTION

     Certain  members of the Board of  Directors  of the Company  also serve as
directors and executive officers of the current Shareholders. These individuals
include Romain Bausch, Robert Bednarek,  Zeng Xin Mi, Wei Min Ju, Mark Rigolle,
Fai  Wong  Ko and  Cynthia  Dickins.  See  "Directors,  Senior  Management  and
Employees."

     The  Company  has  entered  into  transactions  from time to time with its
current and former  Shareholders,  their affiliates and other connected persons
(as defined in the Listing  Rules of the Hong Kong Stock  Exchange).  It is the
Company's policy that such  transactions be effected on terms which the Company
believes to be comparable to those available with unaffiliated  parties. For so
long as the Company is listed on the Hong Kong Stock Exchange, all transactions
between the Company and its directors or any of their respective affiliates (as
defined in the Listing Rules of the Hong Kong Stock  Exchange) will  constitute
connected  transactions  of the  Company  under the  Listing  Rules and  unless
exemptions  are  applicable  or  waivers  are  granted,   will  be  subject  to
independent shareholders' approval in a general meeting.

     AsiaSat has from time to time conducted  transactions  as described  below
with the  Shareholders,  their affiliates and other connected  persons.  Unless
otherwise indicated,  the following  arrangements will continue to be conducted
on the same basis:

     (i)  Since  1996,  CITIC  Guoan   Information   Industry  Company  Limited
     ("Guoan"),  a subsidiary of CITIC, has entered into capacity agreements to
     utilize transponder capacity on the Company's satellites from time to time
     on normal commercial terms. The two current  agreements have a term of one
     year  starting  from  July 1,  2005 and June 1,  2005,  respectively.  The
     transponder  capacity  utilized  under both  agreements is used to provide
     domestic  private  network  services  within  China.  The total  amount of
     revenue  recognized  by the Company  during  2004 and 2005,  respectively,
     under these agreements was  approximately  HK$3.1 million (US$0.4 million)
     and HK$2.5 million (US$0.3 million).

     (ii) In 2004 and 2005,  respectively,  the  Company  paid an agency fee of
     HK$0.7 million and HK$0.7 million to CITIC Technology  Company Limited,  a
     subsidiary of CITIC,  for collecting  money from China customers on behalf
     of the Company.

     (iii) In 2004, a software  license fee  amounting to HK$49,000 was paid to
     SES ASTRA S.A.

     (iv) The Company  has granted or agreed to grant each of the  Shareholders
     demand  and  piggyback  registration  rights,  exercisable  under  certain
     circumstances  and subject to certain  conditions that require the Company
     to  register  under the  Securities  Act Common  Stock  held by  Bowenvale
     Limited,  the  Shareholders and their  affiliates.  Under the registration
     rights  agreement,  the Company will pay all expenses in  connection  with
     registrations made at the request of the Shareholders and the Company will
     pay all expenses in connection with any  registration by the  Shareholders
     incidental  to  a  registration  by  the  Company.  The  exercise  by  the
     Shareholders  of their  registration  rights


                                      58
<PAGE>

     could  adversely  affect the  market  price of the Shares and the ADSs and
     could impair the  Company's  future  ability to raise  capital  through an
     offering of its equity securities.

     (v) In 2004 and 2005,  the Company  recognized  rental income from leasing
     satellite  transponder capacity amounting to approximately HK$18.8 million
     and HK$32.2 million (US$4.1 million), respectively, and no maintenance and
     other services income from SpeedCast Holdings Limited.

     (vi) In 2005,  the Company made payments to SES GLOBAL and a subsidiary of
     CITIC  amounting to HK$0.5 million (2004:  HK$0.5  million;  2003:  HK$0.5
     million) and HK$0.5 million (2004:  HK$0.5 million;  2003: HK$0.5 million)
     respectively,  for certain Non-Executive Directors representing SES GLOBAL
     and CITIC.

     (vii) In  2004,  AsiaSat  entered  into an  agreement  with  Beijing  Asia
     pursuant  to which  AsiaSat  agreed  to  provide  Beijing  Asia with up to
     HK$12.0  million  (US$1.5  million) in transponder  capacity  payable on a
     deferred basis.

     Except for the arrangements referred to in paragraph (v), the transactions
mentioned  above have been entered into in the ordinary  course of business and
on normal  commercial  terms.  Such  transactions,  which  are of a  continuing
nature, are expected to be continued in the future.  Under the Listing Rules of
the Hong Kong Stock Exchange (the "HKSE Listing Rules"),  such transactions are
considered to be  "continuing  connected  transactions"  and depending on their
respective   value,  may  require  full  disclosure  and/or  prior  independent
shareholders'  approval  on each  occasion  they  arise.  The  Company has been
granted a  conditional  waiver  by the Hong  Kong  Stock  Exchange  from  these
requirements in the past. As a result of recent  amendments to the HKSE Listing
Rules  which came into  effect on March 31,  2004,  the  Company is required to
comply with the new  disclosure and  shareholders'  approval  requirements  (if
applicable) on "continuing connected  transactions." The Company has applied to
the Hong Kong Stock Exchange for  clarification and waivers with respect to the
disclosure and shareholders' approval requirements under the HKSE Listing Rules
(as amended).

     In addition to the  requirements  under the HKSE Listing Rules relating to
"continuing  connected  transactions,"  the Companies Act subjects officers and
directors  of the Company to certain  fiduciary  standards  in the  exercise of
their duties on behalf of the Company.  Under the Companies  Act, an officer of
the Company (which term includes directors of the Company) is subject to a duty
of care requiring him to act honestly and in good faith in the discharge of his
duties and to, among other things, give notice to the Board of Directors at the
first  opportunity of any interest he has in any material  contract or proposed
material  contract with the Company or any of its  subsidiaries.  The Companies
Act also  prohibits  the Company  from making  loans to any  Directors  without
obtaining  the consent of  shareholders  holding in the aggregate not less than
nine-tenths of the total voting rights of all the shareholders having the right
to vote at any shareholders meeting.

ITEM 8.  FINANCIAL INFORMATION.

  CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

     Information responsive to this Item is included in response to Item 18.

DIVIDENDS AND DIVIDEND POLICY

     The Company has distributed annual cash dividends to shareholders for each
fiscal year since it commenced operations in 1996 and anticipates continuing to
do so in the future. The


                                      59
<PAGE>

Board has adopted a dividend policy to distribute  approximately  30-40% of net
income as dividends.  However,  any future  dividend  payments are dependent on
future earnings, financial position, cash flow and levels of investments in the
satellite network and ground station equipment.

     The following  table details the total amount of annual  dividends and the
gross dividends paid, together with certain additional  information,  for 2003,
2004 and 2005.

<TABLE>
<CAPTION>
                                                                            -----------------------------
                                                                                  FOR THE YEAR ENDED
                                                                                      DECEMBER 31
                                                                            -----------------------------
                                                                              2003       2004       2005
                                                                            -----------------------------
<S>                                                                           <C>       <C>         <C>
Net income (in HK Dollars in millions)...............................          424       431         366
Ordinary dividend paid (in HK Dollars in millions)...................          105       125         137
Ordinary dividend paid per Share (in HK cents).......................           27        32          35
Ordinary dividend proposed (in HK Dollars in millions)...............           94       105         105
Ordinary dividend proposed per Share (in HK cents) ..................           24        27          27
Special dividend paid (in HK Dollars in millions) ...................           98        -            -
Special dividend paid per share (in HK cents) .......................           25        -            -
</TABLE>

     LEGAL AND REGULATORY PROCEEDINGS

     Other  than  as  described  below,  the  Company  is not  involved  in any
significant legal or regulatory proceedings.

TAX DISPUTES

     The Indian tax  authority  has made  assessments  against  the  Company in
respect of certain capacity  agreement  payments for  transponders  used by the
Company. See "Operating and Financial Review and Prospects - Taxation."

OTHER DISPUTES

     In addition,  the Company is subject to various claims and  proceedings in
the ordinary course of business. None of these claims and proceedings will have
a material  adverse effect on the financial  condition or results of operations
of the Company.

    SIGNIFICANT CHANGES

     There  have  been  no  significant  changes  in  the  Company's  business,
operations or financial condition since December 31, 2005.


ITEM 9.  STOCK PRICE HISTORY.

    SHARE PRICE HISTORY AND MARKETS

     The Company's American  Depositary Shares ("ADS")  representing its shares
(each ADS  representing ten shares of the Company) are listed and traded on the
New York Stock Exchange  (symbol:  SAT) and the Company's shares are listed and
traded on the Hong Kong Stock  Exchange  (symbol:  1135.HK) since June 18, 1996
and June 19,  1996,  respectively.  The table  below  details,  for the periods
indicated,  the high and low closing market prices for its depositary  receipts
on each of the New York Stock  Exchange  and the Hong Kong Stock  Exchange,  as
reported by the New York Stock  Exchange  and the Hong Kong Stock  Exchange for
the last five fiscal years and the most recent six months. See "Key Information
-


                                      60
<PAGE>

Historical Exchange Rate Information" with respect to rates of exchange between
the US Dollar and the HK Dollar applicable during the periods set forth below.

<TABLE>
<CAPTION>
                                                        NEW YORK STOCK EXCHANGE        HONG KONG STOCK EXCHANGE
                                                               (IN US$)                        (IN HK$)
                                                         HIGH             LOW            HIGH            LOW
                                                         ----             ---            ----            ---
<C>                                                     <C>              <C>             <C>             <C>
2001 .........................................          26.25            11.00           20.25           8.35
2002 .........................................          18.90            10.95           15.00           8.90
2003 .........................................          19.43            11.66           14.90           9.25
2004 .........................................          22.11            15.20           17.30          11.70
Quarter Ending March 31, 2004.................          22.11            17.00           17.30          13.40
Quarter Ending June 30, 2004..................          18.35            15.20           14.25          11.70
Quarter Ending September 30, 2004.............          19.50            16.40           15.10          12.75
Quarter Ending December 31, 2004..............          19.78            18.27           15.60          14.50
2005 .........................................          20.55            16.50           18.00          12.40
Quarter Ending March 31, 2005.................          19.09            18.20           15.10          14.15
Quarter Ending June 30, 2005..................          19.38            17.11           15.15          13.50
Quarter Ending September 30, 2005.............          20.55            17.60           16.40          13.60
Quarter Ending December 31, 2005..............          19.02            16.50           18.00          12.40
2006..........................................          19.40            16.15           14.85          12.20
January 2006..................................          18.10            16.28           14.00          12.40
February 2006.................................          17.30            16.15           13.70          12.20
March 2006....................................          19.40            17.05           14.85          13.25
Quarter Ending March 31, 2006.................          19.40            16.15           14.85          12.20
April 2006....................................          18.35            16.85           13.75          13.00
May 2006......................................          17.66            16.71           14.00          13.05
</TABLE>

     There has been no significant trading suspension in the past three years.


ITEM 10. ADDITIONAL INFORMATION.

     CHARTER DOCUMENTS.

     Information  relating to the Company's  charter  documents is incorporated
herein by reference to the Company's Annual Report on Form 20-F for fiscal year
2000, File No.3334856.

     MATERIAL CONTRACTS.

     The following is a summary of the material contracts  concluded outside of
the ordinary  course of business to which the Company and other  members of its
group were a party.  Copies of these  contracts  are filed as  exhibits to this
Form 20-F.  Directions on how to obtain copies of these  contracts are provided
under "Item 10. -- Documents on Display."

     o   Lease  Agreement,  dated March 12, 2001,  between AsiaSat and the Hong
         Kong Industrial  Estates  Corporation (the "Tai Po Lease  Agreement").
         Pursuant  to the Tai Po  Lease  Agreement,  the Hong  Kong  Industrial
         Estates  Corporation  agreed to grant to AsiaSat  rights to the Tai Po
         Site,  for  a  period  of  sixty  (60)  months,  for  the  purpose  of
         constructing  a  satellite  earth  station and other  structures,  and
         thereafter  to lease to


                                      61
<PAGE>

         AsiaSat the Tai Po Site up to 2047. AsiaSat paid a lump sum of HK$25.9
         million  (US$3.3  million) for the lease of the Tai Po Site and agreed
         to pay an annual rent of 3% of the ratable value of the Tai Po Site as
         well as an annual sum of  HK$36,824  for  management  and  maintenance
         charges.

     o   Construction Contract Agreement (the "Construction  Contract"),  dated
         March 4, 2002, between AsiaSat and Leighton Contractors (Asia) Limited
         (the  "Contractor").   Pursuant  to  the  Construction  Contract,  the
         Contractor  agreed to  design  and  construct  a new  satellite  earth
         station on the Tai Po Site.  Costs related to the  construction of the
         Tai Po Site  (including  consultancy  fees but excluding  amounts paid
         under the Lease Agreement) are estimated to be approximately  HK$119.7
         million (US$15.3 million).

     o   Lease Agreement,  dated January 26, 2005,  between AsiaSat and Perfect
         Win Properties Limited (the "Office Lease Agreement"). Pursuant to the
         Office Lease Agreement, Perfect Win Properties Limited agreed to lease
         to AsiaSat the office premises in Causeway Bay, Hong Kong for a period
         of  36  months  commencing  March  1,  2005  for  an  annual  rent  of
         approximately HK$2.7 million (US$0.3 million).

     o   Joint Venture Agreement, dated March 29, 2004, between AsiaSat and Sky
         Networks Communications Group Company Limited (the "Beijing Asia Joint
         Venture  Agreement").  Pursuant  to the  Beijing  Asia  Joint  Venture
         Agreement,  the two parties agreed to participate in the joint venture
         Beijing Asia, and AsiaSat agreed to contribute HK$12.5 million (US$1.6
         million) in cash to Beijing Asia and to provide  transponder  capacity
         payable on a deferred basis.

     o   Subscription Agreement,  dated November 30, 2004, among AsiaSat, Macau
         Cable TV, Limited, Pacific Satellite International Limited and Skywave
         (the  "Skywave  Subscription  Agreement").  Pursuant  to  the  Skywave
         Subscription  Agreement,  AsiaSat  agreed  to make a  HK$24.0  million
         (US$3.1  million)  contribution  in  return  for  an 80%  interest  in
         Skywave.

     o   Shareholders Agreement,  dated November 30, 2004, among AsiaSat, Macau
         Cable TV,  Limited and Pacific  Satellite  International  Limited (the
         "Skywave Shareholders Agreement").  The Skywave Shareholders Agreement
         regulates  the  rights  and  obligations  of  each of the  parties  in
         relation to their  ownership  in Skywave,  including  the  transfer of
         shares in Skywave and the management and operation of Skywave.

     o   AsiaSat  5  Contract  for  One  Spacecraft   Delivered  On-Ground  and
         Associated  Equipment  and Services  (the  "Construction  Agreement"),
         dated April 28, 2006,  between AsiaSat and Space  Systems/Loral,  Inc.
         (the   "Construction   Contractor").   Pursuant  to  the  Construction
         Agreement,  the  Construction  Contractor  will  design,  assemble and
         construct AsiaSat 5. The estimated total consideration for the project
         and the launch is HK$1,404.0 million (US$180.0 million).

     o   Contract for Land Launch Services (the "Launch  Contract"),  dated May
         8, 2006,  between  AsiaSat  and Sea  Launch  Limited  Partnership  the
         ("Launch  Contractor").  Pursuant to the Launch  Contract,  the Launch
         Contractor will provide services associated with the launch of AsiaSat
         5 in the Baikonur Space Centre in Kazakhstan.


                                      62
<PAGE>

     EXCHANGE CONTROLS.

     There are, except in limited embargo circumstances,  no legal restrictions
in  Bermuda  on   international   capital   movements   and  foreign   exchange
transactions.  There can be no assurance  that the  government  of Bermuda will
maintain the current foreign exchange policies.

     TAXATION.

     The Company is not  required to make any tax  withholding  with respect to
its shareholders.

     For an additional  discussion on taxation,  see  "Operating  and Financial
Review and Prospects - Taxation."

     DOCUMENTS ON DISPLAY

     The Company is subject to the informational  reporting requirements of the
Securities  Exchange  Act of 1934 and will file  reports and other  information
with the  Securities  and  Exchange  Commission  ("SEC").  You may  examine the
reports and other  information that the Company files,  without charge,  at the
public  reference  facilities  maintained  by the SEC at Room  1024,  450 Fifth
Street,  N.W.,  Washington,  D.C.,  20549. You may also receive copies of these
materials by mail from the SEC's Public  Reference  Branch at 450 Fifth Street,
N.W.,  Washington,  D.C.,  20549.  For more information on the public reference
rooms, call the SEC at 1-800-SEC-0330.

     SUBSIDIARY INFORMATION.

     Not applicable.


ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     In the normal course of the Company's  business,  the Company's  financial
position is  routinely  exposed to a variety of risks,  including  market risks
associated  with interest rate movements on its  outstanding  debt, if any. The
Company does not have  significant  exposure to commodity  price risks or other
market rate or price risks.

     CURRENCY FLUCTUATIONS

     A substantial  portion of the Company's capital expenditure is denominated
in US Dollars  and HK  Dollars.  Revenues  are  denominated  principally  in US
Dollars.  A  substantial  portion of the cost of  services  and  administrative
expenses  of the Company is  incurred  in Hong Kong  dollars and a  significant
portion is incurred in Renminbi, the legal currency of the People's Republic of
China. There has been wide-spread  speculation about the potential appreciation
of the Renminbi  against the US Dollar in the near future and,  given the close
tie  between  Hong  Kong's  economy and the  People's  Republic  of China,  the
potential impact of such  appreciation on the link between the HK Dollar and US
Dollar that has been in place since 1983.  See "Key  Information  -  Historical
Exchange Rates  Information."  In the event of an  appreciation of the Renminbi
and, in particular,  the HK Dollar,  against the US Dollar,  the profits of the
Company  will  likely be  adversely  affected  as the  Company's  revenues  are
principally denominated in US Dollars.


                                      63
<PAGE>

     INTEREST RATE FLUCTUATIONS

     As of  December  31,  2005,  no  borrowings  consisted  of  floating  rate
borrowings.

     The Company will be exposed to interest rate  fluctuations in the event of
any borrowings  under a future loan arrangement and any change in interest rate
could affect its results of operations and cash flows.  As of December 31, 2005
the Company had no outstanding borrowings.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.


                                    PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

     The Company has not had any material  default in the payment of principal,
interest,  or sinking purchase fund  installments.  The Company has not had any
material  default not cured within 30 days relating to  indebtedness of AsiaSat
or any of its significant  subsidiaries  that exceeds 5% of the Company's total
assets on a consolidated basis.

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS.

     Not Applicable.


                                    PART III

ITEM 15. CONTROLS AND PROCEDURES

     DISCLOSURE CONTROLS AND PROCEDURES

     The Company's  Chief Executive  Officer and Chief  Financial  Officer have
reviewed the Company's  disclosure controls and procedures as of the end of the
period  covered by this  Annual  Report on Form 20-F.  Based upon this  review,
these officers  believe that the Company's  disclosure  controls and procedures
are effective in ensuring that material  information  related to the Company is
made known to them by others within the Company.

     INTERNAL CONTROLS

     There were no significant changes in the Company's internal controls or in
other factors that could significantly  affect these controls during the period
covered by this Annual Report on Form 20-F or from the end of the fiscal period
to the date hereof, including any corrective actions with regard to significant
deficiencies and material weaknesses.


ITEM 16. OTHER INFORMATION.

     AUDIT COMMITTEE FINANCIAL EXPERT

     The Board of Directors has determined that Mr. Robert Sze, a member of the
Company's  audit  committee,  is a "financial  expert" (as such term is used in
Item 16 of Form 20-F) and is an "independent" director (as such term is defined
under the listing rules of the NYSE).


                                      64
<PAGE>

     CODE OF ETHICS

     The  Company  has  adopted  a code  of  ethics  that  requires  all of its
employees,  particularly  senior officers and general  managers,  including the
principal financial officer,  to maintain,  at all times, the highest standards
of integrity and honesty in  conducting  the  Company's  affairs.  This code of
ethics is posted on the Company's website, which is located at www.asiasat.com.
The Company intends to satisfy the disclosure requirement under Item 16 of Form
20-F  regarding  an  amendment  to, or waiver from, a provision of this code of
ethics by posting such  information  on its website,  at the address  specified
above. Information contained in the Company's website, whether currently posted
or  posted  in the  future,  is not  part of  this  document  or the  documents
incorporated herein by reference in this document.

     PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Following  the   resignation   of  Deloitte   Touche   Tohmatsu   ("DTT"),
PricewaterhouseCoopers  ("PwC") was appointed in November 2004 as the Company's
principal  accountant.  As both DTT and PwC served as principal  accountants of
the Company (the  "Principal  Accountants")  during 2004, the fees incurred and
described below for 2004 were for both Principal Accountants.

     AUDIT FEES

     The  aggregate  fees  incurred by the Company in each of 2004 and 2005 was
HK$0.7 million and HK$0.8  million,  respectively,  for  professional  services
rendered by the Principal Accountants, for the audit or review of the Company's
financial statements.

     AUDIT-RELATED FEES

     The  aggregate  fees  incurred by the Company in each of 2004 and 2005 was
HK$9,000 and HK$142,000,  respectively,  for assurance and related  services by
the Principal Accountants that are reasonably related to the performance of the
audit or review of the Company's  financial  statements  and were not otherwise
reported under the paragraph entitled "Audit Fees" above.

     TAX FEES

     The  aggregate  fees  incurred by the Company in each of 2004 and 2005 was
HK$529,000 and HK$89,000,  respectively,  for professional services rendered by
the Principal  Accountant(s)  for tax compliance,  tax advice and tax planning.
The nature of the services includes services rendered in respect of tax in Hong
Kong  and,  for  2004,  services  rendered  by DTT in  respect  of tax in other
jurisdictions amounted to HK$449,000.

     ALL OTHER FEES

     The  aggregate  fees  incurred by the Company in each of 2004 and 2005 was
HK$0.3  million and HK$0.8  million,  respectively,  for  products and services
provided by the Principal  Accountant(s),  other than for services described in
the  paragraphs  above.  The nature of the services  includes the  provision of
professional  advisory  services in relation  to  internal  control  assessment
required by the Sarbanes-Oxley Act of the United States.


                                      65
<PAGE>

     None of the services  described  above were provided  under the de minimus
exception set forth in Rule 2-01(c)(7)(i)(c) under Regulation S-X.

     POLICY ON AUDIT COMMITTEE  PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS

     The audit  committee has adopted terms of reference  which address,  among
other matters,  pre-approval  of audit and non-audit  services  provided by the
independent  auditor.  The terms of reference  requires that all services to be
provided by the independent  auditors must be approved by the audit  committee.
To facilitate smaller projects that may arise between scheduled meetings of the
audit committee, the audit committee may pre-approve the provision of audit and
non-audit   services   by  the   independent   auditors.   For  both  types  of
pre-approvals,   the  audit  committee  considers  whether  such  services  are
consistent  with the rules of the U.S.  Securities  and Exchange  Commission on
auditor independence.

     EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

     The audit committee of the Company currently  comprises of Messrs.  Robert
Sze (Chairman),  Edward Chen, Wei Min Ju and Mark Rigolle.  Messrs.  Wei Min Ju
and Mark  Rigolle  have only  observer  status on the audit  committee  and are
non-voting members nominated by CITIC and SES GLOBAL,  controlling shareholders
of the Company.  Their  appointment to the audit committee is in reliance on an
exemption from the audit committee independence  requirements that is available
to foreign private issuers under Rule 10A-3(b)(1)((iv)(D) promulgated under the
Securities  Exchange  Act of  1934,  as  amended.  Messrs.  Wei Min Ju and Mark
Rigolle  are  not  executive  officers  of the  Company  and  satisfy  the  "no
compensation"  requirement under Rule  10A-3(b)(1(ii)(A).  The Company believes
that their  appointment to the audit  committee  does not materially  adversely
affect the ability of the audit committee to act  independently  and to satisfy
the other requirements of Rule 10A-3.


                                    PART IV

ITEM 17. FINANCIAL STATEMENTS.

     The Company has elected to provide the information  required under Item 18
in lieu of Item 17.


ITEM 18. FINANCIAL STATEMENTS.

     See Index to Financial  Statements for a list of all financial  statements
filed as part of this Annual Report.


ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.

     (a) Index to Financial Statements:

           Independent Auditors' Report (PwC)..............................F-2

           Independent Auditors' Report (DTT)..............................F-3

           Consolidated Statements of Operations...........................F-4

           Consolidated Balance Sheets.....................................F-5


                                      66
<PAGE>

           Consolidated Statement of Changes in Shareholders' Equity.......F-6

           Consolidated Statements of Cash Flows...........................F-7

           Notes to the Consolidated Financial Statements..................F-8



     (b) Exhibits to this Annual Report:

     NUMBER                               EXHIBIT
-------------------------------------------------------------------------------
       1.1.       Memorandum  of  Association  and  Bye-laws  (incorporated  by
                  reference  to  Exhibit  3.1  of  the  Company's  Registration
                  Statement on Form F-1, File No.3334856).
       4.1.       Service  Agreement,  dated June 5, 1996,  between the Company
                  and Peter Jackson (incorporated by reference to Exhibit 10.16
                  of the  Company's  Registration  Statement on Form F-1,  File
                  No.3334856).
       4.2.       Service  Agreement,  dated June 3, 1996,  between the Company
                  and William D. Wade  (incorporated  by  reference  to Exhibit
                  10.17 of the  Company's  Registration  Statement on Form F-1,
                  File No.3334856).
       4.3.       Amendment 9 to Contract No. AsiaSat-3-001/95,  dated March 6,
                  1998, between Hughes Space and Communications  International,
                  Inc.  Asia  Satellite   Telecommunications   Company  Limited
                  (incorporated  by  reference  to  Exhibit  1 on Form 20-F for
                  fiscal year 1997, File No.3334856).
       4.4.       Contract for Launch Services,  dated March 17, 1998,  between
                  Lockheed-Khrunichev-Energia   International,  Inc.  and  Asia
                  Satellite Telecommunications Company Limited (incorporated by
                  reference  to  Exhibit 2 on Form 20-F for  fiscal  year 1997,
                  File No.3334856).
       4.5.       Subscription  Agreement made on March 21, 2000,  between Tech
                  System  Limited,  Asia Satellite  Telecommunications  Company
                  Limited and  PhoenixNet  Holdings  Limited  (incorporated  by
                  reference  to  Exhibit 2 on Form 20-F for  fiscal  year 1999,
                  File No.3334856).
       4.6.       Shareholders' Agreement dated as of April 6, 2000, among Asia
                  Satellite  Telecommunications  Company  Limited,  Tech System
                  Limited,  TVG  Asia  Communications  Fund  II and  PhoenixNet
                  Holdings  Limited  (incorporated by reference to Exhibit 3 on
                  Form 20-F for fiscal year 1999, File No.3334856).
       4.9.       Amendment 5 to Contract No.  AsiaSat-3B/4  dated September 7,
                  2000,  between  Asia  Satellite   Telecommunications  Company
                  Limited and Hughes  Space and  Communications  International,
                  Inc.  (incorporated  by reference to Exhibit 4.9 on Form 20-F
                  for fiscal year 2000, File No.3334856).*
      4.10.       Contract for Launch Services  LKEB-0009-0807  dated September
                  19,  2000,  between  AsiaSat and Lockheed  Martin  Commercial
                  Launch Services,  Inc.  (incorporated by reference to Exhibit
                  4.10 on Form 20-F for fiscal year 2000, File No.3334856).*
      4.11.       Amended  and  Restated  Deposit  Agreement  (incorporated  by
                  reference to Exhibit A to the Registration  Statement on Form
                  F-6, File  No.333-13900,  relating to the Company's  American
                  Depositary Shares).
      4.12.       Share Option  Scheme,  dated January 25, 2002, of the Company
                  (incorporated  by  reference to Exhibit 4.11 on Form 20-F for
                  fiscal year 2001).
      4.13.       Lease  Agreement,  dated March 12, 2001,  between AsiaSat and
                  the Hong Kong Industrial Estates Corporation (incorporated by
                  reference to Exhibit 4.12 on Form 20-F for fiscal year 2002).
      4.14.       Construction Contract Agreement, dated March 4, 2002, between
                  AsiaSat and Leighton Contractors (Asia) Limited (incorporated
                  by  reference  to Exhibit  4.13 on Form 20-F for fiscal  year
                  2002).


                                      67
<PAGE>

      4.15.       Lease  Agreement,   dated  January  26,  2005,  between  Asia
                  Satellite  Telecommunications Company Limited and Perfect Win
                  Properties Limited (incorporated by reference to Exhibit 4.15
                  on Form 20-F for fiscal year 2004).
      4.16.       Equity Joint Venture Contract,  dated March 29, 2004, between
                  Asia  Satellite  Telecommunications  Company  Limited and Sky
                  Networks  Communications Group Company Limited  (incorporated
                  by  reference  to Exhibit  4.16 on Form 20-F for fiscal  year
                  2004).
      4.17.       Subscription  Agreement,  dated November 30, 2004, among Asia
                  Satellite Telecommunications Company Limited, Macau Cable TV,
                  Limited,  Pacific Satellite International Limited and Skywave
                  TV Company Limited (incorporated by reference to Exhibit 4.17
                  on Form 20-F for fiscal year 2004).
      4.18.       Shareholders  Agreement,  dated November 30, 2004, among Asia
                  Satellite Telecommunications Company Limited, Macau Cable TV,
                  Limited   and   Pacific   Satellite   International   Limited
                  (incorporated  by  reference to Exhibit 4.18 on Form 20-F for
                  fiscal year 2004).
      4.19        AsiaSat 5 Contract for One Spacecraft Delivered On-Ground and
                  Associated  Equipment  and  Services,  dated  April 28,  2006
                  between AsiaSat and Space Systems/Loral, Inc.*
      4.20        Contract for Land Launch Services,  dated May 8, 2006 between
                  AsiaSat and Sea Launch Limited Partnership*
       8.1.       Subsidiaries  of the Registrant  (included on page 11 of this
                  Annual Report). 12.1 Certification of Chief Executive Officer
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
      12.2        Certification of Chief Financial  Officer pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.
      13.1        Certification  of  Chief  Executive  Officer  pursuant  to 18
                  U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002.
      13.2        Certification  of  Chief  Financial  Officer  pursuant  to 18
                  U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002.

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

* Confidential  portions of this exhibit have been omitted and filed separately
with the Securities  and Exchange  Commission  with a request for  confidential
treatment pursuant to Rule 24B-2.


                                      68
<PAGE>

                                   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.

                                           ASIA SATELLITE TELECOMMUNICATIONS
                                           HOLDINGS LIMITED



                                           By: /s/ Peter Jackson
                                           -----------------------------------
                                           Peter Jackson
                                           Director and Chief Executive Officer





Date: June 19, 2006


<PAGE>


==============================================================================




ASIA SATELLITE TELECOMMUNICATIONS
HOLDINGS LIMITED


CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005 AND
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





==============================================================================

<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm for the years ended

  December 31, 2004 and 2005...............................................F-2

Report of Independent Registered Public Accounting Firm for the year ended

  December 31, 2003........................................................F-3

Consolidated Balance Sheets at December 31, 2004 and 2005..................F-4

Consolidated Statements of Operations for the years ended

  December 31, 2003, 2004 and 2005.........................................F-5

Consolidated Statements of Changes in Equity for the years ended

  December 31, 2003, 2004 and 2005.........................................F-6

Consolidated Statements of Cash Flows for the years ended

  December 31, 2003, 2004 and 2005.........................................F-7

Notes to the Consolidated Financial Statements.............................F-8






                                      F-1
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of

Asia Satellite Telecommunications Holdings Limited

In our opinion,  the accompanying  consolidated  balance sheets and the related
consolidated  statements  of  operations,  changes  in  equity  and  cash  flow
statements present fairly, in all material respects,  the financial position of
Asia Satellite  Telecommunications  Holdings  Limited and its  subsidiaries  at
December 31, 2005 and 2004, and the results of their  operations and their cash
flows  for each of the two  years in the  period  ended  December  31,  2005 in
conformity with accounting  principles  generally  accepted in Hong Kong. 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 of these financial statements in accordance
with the standards of the Public  Company  Accounting  Oversight  Board (United
States).  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,  assessing
the accounting  principles used and  significant  estimates made by management,
and evaluating the overall financial  statement  presentation.  We believe that
our audits provide a reasonable basis for our opinion.

As  discussed in note 2 to the  consolidated  financial  statements,  the Group
adopted the Revised Hong Kong Financial  Reporting Standards ("HKFRS") in 2005,
which,  with  the  exception  of  HKASs  2,  3  and  16,  require   retroactive
application.

Accounting   principles  generally  accepted  in  Hong  Kong  vary  in  certain
significant  respects  from  accounting  principles  generally  accepted in the
United States of America. Information relating to the nature and effect of such
differences is presented in note 32 to the consolidated financial statements.



/s/ PricewaterhouseCoopers

Hong Kong

June 19, 2006




                                      F-2
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of

Asia Satellite Telecommunications Holdings Limited


We have audited the accompanying consolidated statements of operations, changes
in equity and cash flows of Asia Satellite  Telecommunications Holdings Limited
and  subsidiaries  for the year ended  December 31, 2003, all expressed in Hong
Kong  dollars.  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 the standards of the Public Company
Accounting  Oversight Board (United  States).  Those standards  require that we
plan and perform the audit to obtain  reasonable  assurance  about  whether the
financial  statements  are free of  material  misstatement.  The Company is not
required  to have,  nor were we engaged to  perform,  an audit of its  internal
control over financial reporting.  Our audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the  circumstances  but not for the purpose of expressing an
opinion on the  effectiveness of the Company's  internal control over financial
reporting.   Accordingly,  we  express  no  such  opinion.  An  audit  includes
examining,  on a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also includes  assessing  the  accounting
principles  used  and  significant  estimates  made by  management,  as well as
evaluating the overall financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.


In our opinion,  such consolidated  financial statements present fairly, in all
material   respects,   the  results  and  the  cash  flows  of  Asia  Satellite
Telecommunications  Holdings  Limited and its  subsidiaries  for the year ended
December 31, 2003, in conformity with accounting  principles generally accepted
in Hong Kong.


Accounting   principles  generally  accepted  in  Hong  Kong  vary  in  certain
significant  respects  from  accounting  principles  generally  accepted in the
United States of America. The application of the latter would have affected the
determination of net income for the year ended December 31, 2003, to the extent
summarized in Note 32.



/s/ Deloitte Touche Tohmatsu

Hong Kong

March 11, 2004, except for consolidated  statement of changes in equity for the
year ended  December  31,  2003 and notes 15, 19, 20, 23 and 27 which are dated
June 5, 2006



                                     F-3
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
                                                                          AS AT DECEMBER 31
                                                         ----------------------------------------------------
                                                 NOTE                                            RESTATED
                                                                2005               2005              2004
                                                             US$'000            HK$'000           HK$'000
<S>                                             <C>       <C>              <C>               <C>
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment                      7         336,014          2,620,911         2,894,467
Leasehold land and land use rights                 6           3,102             24,199            24,782
Intangible assets                                  8             172              1,339                 -
Unbilled receivable                                           22,380            174,563           175,267
Interests in associates                           10           1,833             14,294            13,397
Amount paid to tax authority                      11          12,008             93,666            67,023
                                                         ---------------    -------------    ----------------
                                                             375,509          2,928,972         3,174,936
                                                         ---------------    -------------    ----------------
CURRENT ASSETS
Inventories                                       13              56                434               416
Trade and other receivables                       12          15,204            118,598           137,478
Other loan receivable                                              -                  -             2,062
Cash and cash equivalents                         14         209,683          1,635,526         1,234,355
                                                         ---------------    -------------    ----------------
                                                             224,943          1,754,558         1,374,311
                                                         ---------------    -------------    ----------------
TOTAL ASSETS                                                 600,452          4,683,530         4,549,247
                                                         ===============    =============    ================

EQUITY
Capital and reserves attributable to the
   Company's equity holders
Share capital                                     15           5,003             39,027            39,027
Share premium                                                    592              4,614             4,614
Retained earnings
-  Proposed final dividend                        26          13,509            105,372           105,372
-  Others                                                    507,074          3,955,175         3,725,584
                                                         ---------------    -------------    ----------------
                                                             526,178          4,104,188         3,874,597
Minority interests                                               710              5,537             6,356
                                                         ---------------    -------------    ----------------

TOTAL EQUITY                                                 526,888          4,109,725         3,880,953
                                                         ---------------    -------------    ----------------

LIABILITIES
NON-CURRENT LIABILITIES
Deferred income tax liabilities                   17          24,699            192,654           205,258
Deferred revenue                                  16          11,238             87,654           111,844
                                                         ---------------    -------------    ----------------
                                                              35,937            280,308           317,102
                                                         ---------------    -------------    ----------------
CURRENT LIABILITIES
Construction payables                                            397              3,096             4,989
Other payables and accrued expenses                            8,220             64,118            65,322
Deferred revenue                                  16          19,485            151,982           175,043
Current income tax liabilities                                 9,510             74,180           105,717
Dividend payable                                                  15                121               121
                                                         ---------------    -------------    ----------------
                                                              37,627            293,497           351,192
                                                         ---------------    -------------    ----------------
TOTAL LIABILITIES                                             73,564            573,805           668,294
                                                         ---------------    -------------    ----------------

TOTAL EQUITY AND LIABILITIES                                 660,452          4,683,530         4,549,247
                                                         ===============    =============    ================

NET CURRENT ASSETS                                           187,316          1,461,061         1,023,119
                                                         ===============    =============    ================

TOTAL ASSETS LESS CURRENT LIABILITIES                        562,825          4,390,033         4,198,055
                                                         ===============    =============    ================

Commitments and contingencies                  28, 30
</TABLE>

The accompanying footnotes are an integral part of these consolidated financial
statements.

                                      F-4
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                        YEAR ENDED DECEMBER 31
                                                  -------------------------------------------------------------------
                                           NOTE         2005              2005              2004             2003
                                                     US$'000           HK$'000           HK$'000          HK$'000

<S>                                        <C>     <C>               <C>             <C>                <C>
Sales                                        5       112,783           879,705         1,004,982          896,233
Cost of services                            19       (53,722)         (419,029)         (420,490)        (313,265)
                                                  ------------     --------------    -------------    ---------------
GROSS PROFIT                                          59,061           460,676           584,492          582,968
Other gains - net                           18         5,604            43,711            21,982            5,793
Administrative expenses                     19       (10,754)          (83,880)         (102,477)         (56,125)
                                                  ------------     --------------    -------------    ---------------
OPERATING PROFIT                                      53,911           420,507           503,997          532,636
Finance costs                               21             -                 -                (1)          (3,029)
Share of loss of associates                             (496)           (3,872)          (12,380)         (17,521)
                                                  ------------     --------------    -------------    ---------------
PROFIT BEFORE INCOME TAX                              53,415           416,635           491,616          512,086
Income tax expense                          22        (6,573)          (51,270)          (60,536)         (87,598)
                                                  ------------     --------------    -------------    ---------------
PROFIT FOR THE YEAR                                   46,842           365,365           431,080          424,488
                                                  ============     ==============    =============    ===============

Attributable to:
Equity holders of the Company               24        46,947           366,184           431,216          424,488
Minority interests                                      (105)             (819)             (136)               -
                                                  ------------     --------------    -------------    ---------------
                                                      46,842           365,365           431,080          424,488
                                                  ============     ==============    =============    ===============

EARNINGS PER SHARE FOR PROFIT
   ATTRIBUTABLE TO THE EQUITY HOLDERS OF
   THE COMPANY DURING THE YEAR
   (expressed in US$/HK$ per share)

- basic                                     25      US$0.12           HK$0.94          HK$1.10           HK$1.09
                                                  ============     ==============    =============    ===============

- diluted                                   25      US$0.12           HK$0.94          HK$1.10           HK$1.09
                                                  ============     ==============    =============    ===============


DIVIDENDS                                   26        17,512           136,593           136,593          124,885
                                                  ============     ==============    =============    ===============
</TABLE>

The accompanying footnotes are an integral part of these consolidated financial
statements.

                                      F-5
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                       ATTRIBUTABLE TO EQUITY HOLDERS     MINORITY
                                                NOTE                           OF THE COMPANY             INTERESTS        TOTAL
                                                                      ---------------------------------
                                                           NUMBER OF     SHARE      SHARE     RETAINED
                                                              SHARES    CAPITAL    PREMIUM    EARNINGS
                                                       (in thousand)    HK$'000    HK$'000     HK$'000      HK$'000      HK$'000
<S>                                         <C>        <C>             <C>         <C>      <C>             <C>        <C>
BALANCE AT JANUARY 1, 2003, as
   previously reported as equity                             390,266     39,027      4,614   3,303,075           -     3,346,716
BALANCE AT JANUARY 1, 2003, as
   previously separately reported as                                       -          -              -         492           492
   minority interests
                                                                      ---------- ---------- -----------   ----------   ----------
BALANCE AT JANUARY 1, 2003, as restated                      390,266     39,027      4,614   3,303,075         492     3,347,208
                                                                      ---------- ---------- -----------   ----------   ----------

Profit for the year                                                        -          -        424,488           -       424,488
Final dividend relating to 2002                                            -          -        (74,151)          -       (74,151)
Special dividend relating to 2002                                          -          -        (97,566)          -       (97,566)
Interim dividend relating to 2003                26                        -          -        (31,221)          -       (31,221)
Minority interests                                                         -          -              -           -             -
                                                                      ---------- ---------- -----------   ----------   ----------
                                                                           -          -        221,550           -       221,550
                                                                      ---------- ---------- -----------   ----------   ----------

BALANCE AT DECEMBER 31, 2003                                 390,266     39,027      4,614   3,524,625         492     3,568,758
                                                                      ========== ========== ===========   ==========   ==========

BALANCE AT JANUARY 1, 2004, as per above                     390,266     39,027      4,614   3,524,625         492     3,568,758

Profit/(Loss) for the year                                                 -          -        431,216        (136)      431,080
Final dividend relating to 2003                  26                        -          -        (93,664)          -       (93,664)
Interim dividend relating to 2004                26                        -          -        (31,221)          -       (31,221)
Minority interests                               29                        -          -              -       6,000         6,000
                                                                      ---------- ---------- -----------   ----------   ----------
                                                                           -          -        306,331       5,864       312,195
                                                                      ---------- ---------- -----------   ----------   ----------

BALANCE AT DECEMBER 31, 2004                                 390,266     39,027      4,614   3,830,956       6,356     3,880,953
                                                                      ========== ========== ===========   ==========   ==========

BALANCE AT JANUARY 1, 2005, as per above                     390,266     39,027      4,614   3,830,956       6,356     3,880,953

Profit/(Loss) for the year                                                 -          -        366,184        (819)      365,365
Final dividend relating to 2004                  26                        -          -       (105,372)          -      (105,372)
Interim dividend relating to 2005                26                        -          -        (31,221)          -       (31,221)
                                                                      ---------- ---------- -----------   ----------   ----------
                                                                           -          -        229,591        (819)      228,772
                                                                      ---------- ---------- -----------   ----------   ----------

BALANCE AT DECEMBER 31, 2005                                 390,266     39,027      4,614   4,060,547       5,537     4,109,725
                                                                      ========== ========== ===========   ==========   ==========
</TABLE>

The accompany footnotes are an integral part of these consolidated financial
statements.

                                      F-6
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CONSOLIDATED CASH FLOW STATEMENT

                                                                                    YEAR ENDED DECEMBER 31
                                                                  ------------------------------------------------------------
                                                          NOTE          2005            2005            2004            2003

                                                                     US$'000         HK$'000         HK$'000         HK$'000

<S>                                                       <C>      <C>            <C>             <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations                             27         78,169         609,717         779,413         690,389
Hong Kong Profits Tax paid                                           (10,152)        (79,186)        (10,934)        (48,977)
Overseas tax paid                                                     (2,075)        (16,181)        (17,667)        (13,878)
                                                                  ------------    ------------    ------------    ------------
Net cash generated from operating activities                          65,942         514,350         750,812         627,534
                                                                  ------------    ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment                             (3,033)        (23,659)        (47,672)       (162,196)
Loan to an associate                                       31              -               -          (1,301)         (7,279)
Loan to an independent third party                                         -               -          (3,778)              -
Repayment of loan from an associate                        31            650           5,070           3,510               -
Repayment of loan from an independent third party                        264           2,062           1,716               -
Interest received                                                      5,107          39,833          20,290           4,858
Interest expense                                                           -               -              (1)              -
Proceeds from disposal of property, plant and equipment                   14             108             257              81
Purchase of interests in associates                                        -               -         (23,930)              -
                                                                  ------------    ------------    ------------    ------------
Net cash from/(used in) investing activities                           3,002          23,414         (50,909)       (164,536)
                                                                  ------------    ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid                                             26        (17,512)       (136,593)       (124,885)       (202,938)
Cost of raising bank borrowing facility                                    -               -               -          (6,951)
                                                                  ------------    ------------    ------------    ------------
Net cash used in financing activities                                (17,512)       (136,593)       (124,885)       (209,889)
                                                                  ------------    ------------    ------------    ------------


NET INCREASE IN CASH AND CASH EQUIVALENTS                             51,432         401,171         575,018         253,109
Cash and cash equivalents at beginning of the year                   158,251       1,234,355         659,337         406,228
                                                                  ------------    ------------    ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR,
   REPRESENTING BANK BALANCES AND CASH                     14        209,683       1,635,526       1,234,355         659,337
                                                                  ============    ============    ============    ============
</TABLE>

The accompany footnotes are an integral part of these consolidated financial
statements.

                                     F-7
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.   GENERAL INFORMATION

     Asia Satellite  Telecommunications  Holdings Limited (the Company) and its
     subsidiaries   (together  the  Group)  is  engaged  in  the  provision  of
     transponder capacity.

     The Company is a limited liability  company  incorporated in Bermuda as an
     exempted company under the Companies Act 1981 of Bermuda (as amended). The
     address of its registered office is 17th Floor, The Lee Gardens,  33 Hysan
     Avenue, Causeway Bay, Hong Kong.

     The  Company's  shares are listed on the New York Stock  Exchange  and The
     Stock Exchange of Hong Kong Limited (hereafter collectively referred to as
     the "Stock Exchange").

     These  consolidated  financial  statements  are  presented in thousands of
     units of HK dollars (HK$'000), unless otherwise stated. These consolidated
     financial  statements  have  been  approved  for  issue  by the  Board  of
     Directors  on March 16,  2006 and  signed on its  behalf by Mr. JU Wei Min
     (Director) and Mr. Peter JACKSON (Director).

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The principal  accounting  policies  applied in the  preparation  of these
     consolidated  financial  statements are set out below. These policies have
     been  consistently  applied to all the years  presented,  unless otherwise
     stated.

     2.1    BASIS OF PREPARATION

     The consolidated  financial  statements of the Group have been prepared in
     accordance with Hong Kong Financial  Reporting Standards (HKFRSs) and have
     been prepared under the historical cost convention.

     The preparation of financial statements in conformity with HKFRSs requires
     the  use of  certain  critical  accounting  estimates.  It  also  requires
     management to exercise its judgment in the process of applying the Group's
     accounting  policies.  The areas  involving a higher degree of judgment or
     complexity,  or areas where  assumptions  and estimates are significant to
     the consolidated financial statements, are disclosed in note 4.

     THE ADOPTION OF NEW / REVISED HKFRSS

     In 2005, the Group adopted the new / revised standards and interpretations
     of  HKFRS  below,   which  are  relevant  to  its  operations.   The  2004
     comparatives  have  been  amended  as  required,  in  accordance  with the
     relevant requirements.

     HKAS 1         Presentation of Financial Statements
     HKAS 2         Inventories
     HKAS 7         Cash Flow Statements
     HKAS 8         Accounting Policies, Changes in Accounting Estimates
                    and Errors
     HKAS 10        Events after the Balance Sheet Date
     HKAS 12        Income Taxes
     HKAS 14        Segment Reporting
     HKAS 16        Property, Plant and Equipment
     HKAS 17        Leases
     HKAS 18        Revenue
     HKAS 19        Employee Benefits
     HKAS 21        The Effects of Changes in Foreign Exchange Rates
     HKAS 23        Borrowing Costs
     HKAS 24        Related Party Disclosures
     HKAS 27        Consolidated and Separate Financial Statements
     HKAS 28        Investments in Associates
     HKAS 31        Investments in Joint Ventures
     HKAS 33        Earnings per Share
     HKAS 36        Impairment of Assets
     HKAS 37        Provisions, Contingent Liabilities and Contingent Assets
     HKAS 38        Intangible Assets
     HKFRS 2        Share-based Payments
     HKFRS 3        Business Combinations


                                      F-8
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     2.1    BASIS OF PREPARATION (continued)

     The adoption of new / revised HKASs did not result in substantial  changes
     to the Group's existing accounting policies under HK GAAP. In summary:

     -   HKAS 1 has affected the presentation of minority  interests,  share of
         net  after-tax  results of  associates  and other  disclosures  in the
         consolidated balance sheet,  consolidated  statement of operations and
         consolidated statement of changes in equity;

     -   HKASs 2, 8,16, 21, 28 and 36 have affected certain  disclosures in the
         financial statements;

     -   HKASs 7, 10,  12,  14,  18, 19, 23, 27, 31, 33 and 37 did not have any
         material  impact as the  Group's  existing  accounting  policies  have
         already complied with the standards in all material respects; and

     -   HKAS 24 has affected  the  identification  of related  parties and the
         disclosure of related-party transactions.

     The adoption of revised HKAS 17 has resulted in a change in the accounting
     policy  relating to the  reclassification  of leasehold  land and land use
     rights  from  property,  plant and  equipment  to  operating  leases.  The
     up-front  prepayments  made for the leasehold land and land use rights are
     expensed in the statement of operations on a straight-line  basis over the
     period of the lease. In prior years,  the leasehold land was accounted for
     at cost less accumulated depreciation.

     The adoption of HKFRS 2 has resulted in a change in the accounting  policy
     for share-based payments.  Until December 31, 2004, the provision of share
     options to  employees  did not result in an expense in the  statements  of
     operations. Effective on January 1, 2005, the Company expenses the cost of
     share  options in the  statement  of  operations.  As no share  option was
     granted  after  November  7,  2002,  no  adjustment  was  required  in the
     statement of operations of the respective years (note 2.15).

     The  adoption  of HKFRS  3,  HKASs 36 and 38  results  in a change  in the
     accounting policy for goodwill. Until December 31, 2004, goodwill was:

     -   Amortized on a straight line basis over a period of 2 years; and

     -   Assessed for an indication of impairment at each balance sheet date.

     In accordance with the provisions of HKFRS 3 (note 2.7):

     -   The Group ceased amortization of goodwill from January 1, 2005;

     -   Accumulated  amortization  as at December 31, 2004 has been eliminated
         with a corresponding decrease in the cost of goodwill;

     -   For the year ended  December 31, 2005 and onwards,  goodwill is tested
         annually  for  impairment,  as well as when  there  is  indication  of
         impairment.

     The Group has  reassessed  the useful  lives of its  intangible  assets in
     accordance  with the  provisions of HKAS 38. No  adjustment  resulted from
     this reassessment.

     All changes in the accounting  policies have been made in accordance  with
     the  transition  provisions  in the  respective  standards.  All standards
     adopted by the Group require retrospective application other than:

     -   HKAS 16 - the initial  measurement  of an item of property,  plant and
         equipment  acquired in an exchange of assets  transaction is accounted
         at fair value prospectively only to future transactions;

     -   HKFRS 2 - only  retrospective  application for all equity  instruments
         granted after November 7, 2002 and not vested at January 1, 2005;

     -   HKFRS 3 - prospectively after the adoption date.

     There was no impact on opening  retained  earnings at January 1, 2004 from
     the adoption of HKASs 31 and 38, HKFRSs 2 and 3.


                                      F-9
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     2.1    BASIS OF PREPARATION (continued)

     THE ADOPTION OF REVISED HKAS 17
                                                            2005          2004
                                                         HK$'000       HK$'000
      Decrease in property, plant and equipment          (24,199)      (24,782)
      Increase in leasehold land and land use rights      24,199        24,782

     No early adoption of the following new Standards or  Interpretations  that
     have been issued but are not yet effective. The adoption of such Standards
     or Interpretations  will not result in substantial  changes to the Group's
     accounting policies.

     HKFRS-Int 4     Determining whether an Arrangement contains a Lease
     HKFRS 7         Financial Instruments: Disclosures

     2.2    CONSOLIDATION

     The consolidated  financial statements include the financial statements of
     the Company and all its subsidiaries made up to December 31.

     (a)  Subsidiaries
     Subsidiaries are all entities  (including  special purpose  entities) over
     which  the  Group has the power to  govern  the  financial  and  operating
     policies  generally  accompanying a shareholding  of more than one half of
     the voting  rights.  The existence  and effect of potential  voting rights
     that  are  currently   exercisable  or  convertible  are  considered  when
     assessing whether the Group controls another entity.

     Subsidiaries  are fully  consolidated  from the date on which  control  is
     transferred  to the  Group.  They are  de-consolidated  from the date that
     control ceases.

     The purchase  method of accounting is used to account for the  acquisition
     of subsidiaries.  The cost of an acquisition is measured as the fair value
     of the assets given, equity instruments issued and liabilities incurred or
     assumed at the date of exchange,  plus costs directly  attributable to the
     acquisition.  Identifiable  assets acquired and liabilities and contingent
     liabilities  assumed in a business  combination are measured  initially at
     their fair values at the acquisition  date,  irrespective of the extent of
     any minority interest. The excess of the cost of acquisition over the fair
     value of the  Group`s  share of the  identifiable  net assets  acquired is
     recorded as  goodwill.  If the cost of  acquisition  is less than the fair
     value of the net assets of the  subsidiary  acquired,  the  difference  is
     recognized directly in the statement of operations.

     Inter-company transactions,  balances and unrealized gains on transactions
     between  group  companies  are  eliminated.  Unrealized  losses  are  also
     eliminated  unless the transaction  provides  evidence of an impairment of
     the asset  transferred.  Accounting  policies  of  subsidiaries  have been
     changed where necessary to ensure consistency with the policies adopted by
     the Group.

     In the Company's  balance sheet the investments in subsidiaries are stated
     at cost less provision for impairment  losses. The results of subsidiaries
     are  accounted  for by the Company on the basis of dividend  received  and
     receivable.

     (b) Associates
     Associates are all entities over which the Group has significant influence
     but not control,  generally accompanying a shareholding of between 20% and
     50% of the voting  rights.  Investments in associates are accounted for by
     the equity method of accounting and are initially  recognized at cost. The
     Group's investment in associates includes goodwill (net of any accumulated
     impairment loss) identified on acquisition.

     The Group's share of its associates' post-acquisition profits or losses is
     recognized   in  the   statement   of   operations,   and  its   share  of
     post-acquisition  movements in reserves is  recognized  in  reserves.  The
     cumulative  post-acquisition  movements are adjusted  against the carrying
     amount of the investment. When the Group's share of losses in an associate
     equals or exceeds  its  interest  in the  associate,  including  any other
     unsecured receivables, the Group does not recognize further losses, unless
     it has incurred obligations or made payments on behalf of the associate.

     Unrealized gains on transactions  between the Group and its associates are
     eliminated  to the  extent  of the  Group's  interest  in the  associates.
     Unrealized  losses are also  eliminated  unless the  transaction  provides
     evidence of an impairment of the asset transferred. Accounting policies of
     associates  have been changed where necessary to ensure  consistency  with
     the policies adopted by the Group.

     In the Company's balance sheet the investments in associated companies are
     stated at cost less  provision  for  impairment  losses.  The  results  of
     associated  companies  are  accounted  for by the  Company on the basis of
     dividend received and receivable.


                                     F-10
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     2.3    SEGMENT REPORTING

     A  business  segment  is a group  of  assets  and  operations  engaged  in
     providing  products or services that are subject to risks and returns that
     are  different  from  those of other  business  segments.  A  geographical
     segment is engaged in providing  products or services  within a particular
     economic  environment  that are  subject  to risks  and  returns  that are
     different from those of segments operating in other economic environments.

     2.4    FOREIGN CURRENCY TRANSLATION

     (a)  Functional and presentation currency
     Items included in the financial statements of each of the Group's entities
     are measured  using the currency of the primary  economic  environment  in
     which the entity operates (`the  functional  currency").  The consolidated
     financial  statements are presented in HK dollars,  which is the Company's
     functional and presentation currency.

     (b)  Transactions and balances
     Foreign currency  transactions are translated into the functional currency
     using the  exchange  rates  prevailing  at the dates of the  transactions.
     Foreign  exchange  gains and losses  resulting from the settlement of such
     transactions  and from  the  translation  at  year-end  exchange  rates of
     monetary  assets and  liabilities  denominated  in foreign  currencies are
     recognized in the statement of operations.

     Translation  differences on non-monetary items, such as equity instruments
     held at fair value  through  profit or loss,  are  reported as part of the
     fair value gain or loss.  Translation  difference on  non-monetary  items,
     such as equities  classified as  available-for-sale  financial assets, are
     included in the fair value reserve in equity.

     (c)  Group companies
     The results and  financial  position  of all the group  entities  (none of
     which  has  the  currency  of a  hyperinflationary  economy)  that  have a
     functional   currency   different  from  the  presentation   currency  are
     translated  into the  presentation  currency  as  follows:

     (i)    assets  and  liabilities  for  each  balance  sheet  presented  are
            translated at the closing rate at the date of that balance sheet;

     (ii)   income and expenses for each statement of operations are translated
            at average  exchange rates (unless this average is not a reasonable
            approximation  of the cumulative  effect of the rates prevailing on
            the  transaction  dates,  in which  case  income and  expenses  are
            translated at the dates of the transactions); and

     (iii)  all resulting  exchange  differences  are  recognized as a separate
            component of equity.

     2.5    PROPERTY, PLANT AND EQUIPMENT

     Property,  plant  and  equipment  are  stated  at  cost  less  accumulated
     depreciation and accumulated impairment losses.

     Buildings  in  the  course  of  development  for  production,   rental  or
     administrative purposes or for purposes not yet determined, are carried at
     cost, less an identified impairment loss. Depreciation of these assets, on
     the same basis as other  property  assets,  commences  when the assets are
     ready for their intended use. Historical cost includes expenditure that is
     directly attributable to the acquisition of the items.

     Subsequent costs are included in the asset's carrying amount or recognized
     as a separate asset, as appropriate,  only when it is probable that future
     economic benefits  associated with the item will flow to the Group and the
     cost  of  the  item  can be  measured  reliably.  All  other  repairs  and
     maintenance  are  expensed  in the  statement  of  operations  during  the
     financial year in which they are incurred.

     Depreciation  of property,  plant and  equipment is  calculated  using the
     straight-line  method  to  allocate  cost or  revalued  amounts  to  their
     residual values over their estimated  useful lives, at the following rates
     per annum:

     Satellites:
     -   AsiaSat 2                           8%
     -   AsiaSat 3S                          6.25%
     -   AsiaSat 4                           6.67%
     Buildings                               4%
     Tracking facilities                     10%-20%
     Furniture, fixtures and fittings        20%-33%
     Other equipment                         25%-33%
     Motor vehicles                          25%
     Plant and machinery                     20%


                                     F-11
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     2.5    PROPERTY, PLANT AND EQUIPMENT (continued)

     The assets' residual values and useful lives are reviewed, and adjusted if
     appropriate, at each balance sheet date.

     An asset's  carrying amount is written down immediately to its recoverable
     amount if the  asset's  carrying  amount  is  greater  than its  estimated
     recoverable amount.

     Gains and losses on the  disposal of  property,  plant and  equipment  are
     included in other gains - net.

     2.6    INTANGIBLE ASSETS - LICENCE

     The licence is shown at historical cost. The licence has a definite useful
     life and is carried at cost less accumulated amortization. Amortization is
     calculated  using the  straight-line  method to  allocate  the cost of the
     licence over its estimated useful life (112 months).

     2.7    IMPAIRMENT OF ASSETS

     Assets   that  have  an   indefinite   useful  life  are  not  subject  to
     amortization,  which are at least tested  annually for  impairment and are
     reviewed  for  impairment  whenever  events or  changes  in  circumstances
     indicate that the carrying amount may not be recoverable.  Assets that are
     subject to  amortization  are reviewed for impairment  whenever  events or
     changes in  circumstances  indicate  that the  carrying  amount may not be
     recoverable.  An impairment loss is recognized for the amount by which the
     asset's  carrying amount exceeds its recoverable  amount.  The recoverable
     amount is the higher of an asset's fair value less costs to sell and value
     in use. For the purposes of  assessing  impairment,  assets are grouped at
     the lowest levels for which there are separately  identifiable  cash flows
     (cash-generating units).

     2.8    GOODWILL

     Goodwill  represents the excess of the cost of an investment over the fair
     value of the Group's share of the net identifiable  assets of the acquired
     associates at the date of investment. Goodwill on investment of associates
     is included in interests in  associates.  Goodwill is tested  annually for
     impairment and carried at cost less accumulated  impairment losses.  Gains
     and losses on the  disposal of an entity  include the  carrying  amount of
     goodwill relating to the entity sold.

     Goodwill  is  allocated  to  cash-generating  units  for  the  purpose  of
     impairment testing.

     2.9    INVENTORIES

     Inventories are stated at the lower of cost and net realizable value. Cost
     is determined using the first-in,  first-out (FIFO) method,  comprises all
     costs of purchase and other costs incurred in bringing the  inventories to
     their  present  locations  and  conditions.  Net  realizable  value is the
     estimated  selling  price  in  the  ordinary  course  of  business,   less
     applicable variable selling expenses.

     2.10   TRADE AND OTHER RECEIVABLES

     Trade and other  receivables  are recognized  initially at fair value less
     provision for  impairment.  A provision for  impairment of trade and other
     receivables is established when there is objective evidence that the Group
     will not be able to collect  all  amounts due  according  to the  original
     terms of  receivables.  The amount of the  provision is  recognized in the
     statement of operations.

     2.11  CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include cash in hand, deposits held at call with
     banks, other short-term highly liquid investments with original maturities
     of three months or less, and bank  overdrafts.  Bank  overdrafts are shown
     within borrowings in current liabilities on the balance sheet.

     2.12   SHARE CAPITAL

     Ordinary shares are classified as equity.

     Incremental  costs  directly  attributable  to the issue of new  shares or
     options are shown in equity as a deduction, net of tax, from the proceeds.


                                     F-12
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     2.13   BORROWINGS

     Borrowings  are  recognized  initially at fair value,  net of  transaction
     costs incurred.  Transaction costs are incremental costs that are directly
     attributable to the acquisition, issue or disposal of a financial asset or
     financial  liability,  including  fees  and  commissions  paid to  agents,
     advisers,   brokers  and  dealers,   levies  by  regulatory  agencies  and
     securities  exchanges,  and  transfer  taxes and  duties.  Borrowings  are
     subsequently stated at amortized cost; any difference between the proceeds
     (net of transaction  costs) and the redemption  value is recognized in the
     statement  of  operations  over the  period  of the  borrowings  using the
     effective interest method.

     2.14   DEFERRED INCOME TAX

     Deferred income tax is provided in full,  using the liability  method,  on
     temporary  differences  arising  between  the  tax  bases  of  assets  and
     liabilities  and their  carrying  amounts  in the  consolidated  financial
     statements.  However,  if the  deferred  income  tax arises  from  initial
     recognition  of an  asset  or  liability  in a  transaction  other  than a
     business  combination that at the time of the transaction  affects neither
     accounting nor taxable  profit or loss, it is not accounted for.  Deferred
     income tax is determined using tax rates (and laws) that have been enacted
     or  substantially  enacted by the balance  sheet date and are  expected to
     apply  when the  related  deferred  income  tax asset is  realized  or the
     deferred income tax liability is settled.

     Deferred  income  tax  assets  are  recognized  to the  extent  that it is
     probable that future  taxable  profit will be available  against which the
     temporary differences can be utilized.

     Deferred  income  tax is  provided  on  temporary  differences  arising on
     investments in subsidiaries,  associates and jointly controlled  entities,
     except where the timing of the  reversal of the  temporary  difference  is
     controlled by the Group and it is probable  that the temporary  difference
     will not reverse in the foreseeable future.

     2.15   EMPLOYEE BENEFITS

     (a)  Pension obligations
     The Group  participates  in  defined  contribution  plans,  the Group pays
     contributions  to publicly or  privately  administered  pension  insurance
     plans on a mandatory,  contractual or voluntary  basis.  The pension plans
     are generally  funded by payments from employees and by the relevant Group
     companies.   The  Group  has  no  further  payment  obligations  once  the
     contributions have been paid. The contributions are recognized as employee
     benefit  expense  when  they  are  due and are  reduced  by  contributions
     forfeited by those  employees  who leave the scheme prior to vesting fully
     in the contributions.  Prepaid contributions are recognized as an asset to
     the extent  that a cash refund or a  reduction  in the future  payments is
     available.

     (b)  Share-based compensation
     The Group operates an equity-settled,  share-based  compensation plan. The
     fair value of the employee  services received in exchange for the grant of
     the options is recognized  as an expense.  The total amount to be expensed
     over the vesting  period is  determined  by reference to the fair value of
     the  options  granted,  excluding  the  impact of any  non-market  vesting
     conditions  (for  example,   profitability   and  sales  growth  targets).
     Non-market vesting conditions are included in assumptions about the number
     of options that are expected to become exercisable.  At each balance sheet
     date,  the entity  revises its estimates of the number of options that are
     expected to become  exercisable.  It recognizes the impact of the revision
     of original  estimates,  if any, in the  statement  of  operations,  and a
     corresponding adjustment to equity over the remaining vesting period.

     (c)  Profit-sharing and bonus plans
     The expected cost of profit sharing and bonus payments are recognized as a
     liability when the Group has a present legal or constructive obligation as
     a result of services  rendered by employees and a reliable estimate of the
     obligation can be made.

     Liabilities  for profit sharing and bonus plans are expected to be settled
     within 12 months and are measured at the amounts  expected to be paid when
     they are settled.


                                     F-13
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     2.16   PROVISIONS

     Provisions for environmental  restoration,  restructuring  costs and legal
     claims are recognized  when: the Group has a present legal or constructive
     obligation as a result of past events;  it is more likely than not that an
     outflow of resources  will be required to settle the  obligation;  and the
     amount has been  reliably  estimated.  Restructuring  provisions  comprise
     lease termination penalties and employee termination payments.  Provisions
     are not recognized for future operating losses.

     Where there are a number of similar  obligations,  the likelihood  that an
     outflow will be required in settlement is  determined by  considering  the
     class of  obligations  as a whole.  A provision is recognized  even if the
     likelihood of an outflow with respect to any one item included in the same
     class of obligations may be small.

     2.17   REVENUE RECOGNITION

     Revenue from  transponder  utilization  is recognized  on a  straight-line
     basis over the period of the agreements.  The excess of revenue recognized
     on a  straight-line  basis over the amount  received and  receivable  from
     customers  in  accordance  with the  contract  terms is shown as  unbilled
     receivable.

     Revenue from the sale of transponder  capacity under transponder  purchase
     agreements  is  recognized  on a  straight-line  basis  from  the  date of
     delivery of the transponder capacity until the end of the estimated useful
     life of the satellite.

     Deposits   received  in  advance  in  connection  with  the  provision  of
     transponder capacity are deferred and included in other payables.

     Services under  transponder  utilization  agreements are generally  billed
     quarterly  in  advance.  Such  amounts  received  in advance  and  amounts
     received from the sale of transponder  capacity under transponder purchase
     agreements  in excess of amounts  recognized  as revenue  are  recorded as
     deferred  revenue.  Deferred  revenue  which  will  be  recognized  in the
     following year is classified  under current  liabilities and amounts which
     will be recognized after one year are classified as non-current.

     Interest  income is accrued on a time basis, by reference to the principal
     amounts outstanding and at the interest rate applicable.

     2.18   OPERATING LEASES (AS THE LESSEE)

     Leases  in  which a  significant  portion  of the  risks  and  rewards  of
     ownership are retained by the lessor are  classified as operating  leases.
     Payments made under operating leases (net of any incentives  received from
     the lessor) are expensed in the statement of operations on a straight-line
     basis over the period of the lease.

     2.19   DIVIDEND DISTRIBUTION

     Dividend  distribution  to the Company's  shareholders  is recognized as a
     liability in the financial statements in the period in which the dividends
     are approved by the Company's shareholders.


                                     F-14
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


3.  FINANCIAL RISK MANAGEMENT

    3.1  FINANCIAL RISK FACTORS

     The Group's activities expose it to a variety of financial risks:  foreign
     exchange risk, credit risk, and cash flow interest-rate  risk. The Group's
     overall  risk  management  programme  focuses on the  unpredictability  of
     financial  markets and seeks to minimize  potential adverse effects on the
     Group's financial performance.

     (a)  Foreign exchange risk
     During  the  year,  almost  all  of the  Group's  revenues,  premiums  for
     satellite  insurance  coverage and substantially  all capital  expenditure
     were  denominated in U.S.  Dollars.  The Group's  remaining  expenses were
     primarily  denominated in Hong Kong Dollars.  At December 31, 2005, almost
     all the Group's transponder utilization  agreements,  transponder purchase
     agreement,  loan agreements,  obligations to purchase telemetry,  tracking
     and control equipment were denominated in U.S.  Dollars.  Hence, the Group
     does not  have  any  significant  currency  exposure  and does not need to
     hedge.

     (b)  Credit risk
     The Group has no  significant  concentrations  of credit  risk.  The Group
     maintains provision for impairment of receivables and for estimated losses
     that result  from the  inability  of its  customers  to make the  required
     payments.   The  Group  bases  its   provision   on  the   likelihood   of
     recoverability of account receivables based on past experience and current
     collection  trends that are expected to continue.  The Group's  evaluation
     also  includes  the  length of time the  receivables  are past due and the
     general business environment.

     (c)  Cash flow interest-rate risk
     As the Group has no significant  interest-bearing  assets or  liabilities,
     the Group's income and operating cash flows are substantially  independent
     of changes in market interest rates.


                                     F-15
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4.   CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

     Estimates  and  judgments  are  continually  evaluated  and are  based  on
     historical experience and other factors,  including expectations of future
     events that are believed to be reasonable under the circumstances.

     4.1   CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

     The Group makes  estimates  and  assumptions  concerning  the future.  The
     resulting  accounting  estimates  will,  by  definition,  seldom equal the
     related  actual  results.  The  estimates  and  assumptions  that  have  a
     significant risk of causing a material  adjustment to the carrying amounts
     of assets and  liabilities  within the next  financial  year are discussed
     below.

     (a)  Estimated impairment of goodwill
     The Group tests annually whether goodwill has suffered any impairment,  in
     accordance with the accounting  policy stated in note 2.7. The recoverable
     amounts  of   cash-generating   units  have  been   determined   based  on
     value-in-use   calculations.   These  calculations   require  the  use  of
     estimates.

     (b)  Income taxes
     The  Group  is  subject  to  income   taxes  in  numerous   jurisdictions.
     Significant  judgment is required in determining  the worldwide  provision
     for income taxes.  There are many  transactions and calculations for which
     the ultimate tax  determination is uncertain during the ordinary course of
     business.  The Group  recognizes  liabilities  for  anticipated  tax audit
     issues based on estimates of whether  additional  taxes will be due. Where
     the final tax outcome of these matters is different  from the amounts that
     were initially  recorded,  such differences will impact the income tax and
     deferred tax provisions in the period in which such determination is made.

     The issue of Indian tax is covered under Contingencies in note 28 below.

     (c)  Useful lives of in-orbit satellites
     The  Group's  operations  are  capital  intensive  and it has  significant
     investments  in  satellites.  The carrying  value of the Group's  in-orbit
     satellites  (AsiaSat 2, AsiaSat 3S and AsiaSat 4)  represented  52% of its
     total assets as of December 31, 2005  (December 31, 2004:  59%). The Group
     estimates  the useful lives of satellites in order to determine the amount
     of  depreciation  expense to be recorded during the reported  period.  The
     useful lives are estimated at the time  satellites  are put into orbit and
     are based on historical  experience  with other  satellites as well as the
     anticipated  technological  evolution or other  environmental  changes. If
     technological  changes were to occur more rapidly than anticipated or in a
     different  form than  anticipated,  the  useful  lives  assigned  to these
     satellites  may need to be  shortened,  resulting  in the  recognition  of
     increased depreciation in a future period.  Similarly, if the actual lives
     of  satellites  are longer than the Group has  estimated,  the Group would
     have  a  smaller  depreciation  expense.  As  a  result,  if  the  Group's
     estimations  of the useful lives of its satellites are not accurate or are
     required  to be changed in the  future,  the  Group's net income in future
     periods would be affected.

     (d)  Realizability of the carrying amounts of long-lived assets
     The Group is required to evaluate at each balance sheet date whether there
     is  any  indication  that  the  carrying  amounts  of  long-lived   assets
     (primarily its satellites) may be impaired. If any such indication exists,
     the Group should estimate the recoverable amount of the long-lived assets.
     An impairment  loss is recognized for the excess of the carrying amount of
     such long-lived assets over their recoverable amounts. The value in use is
     the discounted  present value of the cash flows expected to arise from the
     continuing use of long-lived  assets and cash arising from its disposal at
     the end of its useful life.  The  estimates of the cash flows are based on
     the  terms and  period  of  existing  transponder  utilization  agreements
     ("Existing Agreements").

     Modifications  to the  terms of the  Existing  Agreements  that  result in
     shorter  utilization  periods  than  previously  agreed  and/or those that
     result in the reduction in agreed rates will result in a lower recoverable
     amount (if the  discount  rate used is not  changed);  which may, in turn,
     result in a situation  wherein the  recoverable  amounts are less than the
     carrying  amounts  (therefore,   an  impairment  loss  would  need  to  be
     recognized).

     (e) Provision for  impairment  of  receivables
     The issue is covered under credit risk in note 3.1 (b) above.


                                     F-16
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5.   SALES AND SEGMENT INFORMATION

     SALES:

<TABLE>
<CAPTION>
     The Group's sales is analyzed as follows:

                                                              2005               2004               2003
                                                           HK$'000            HK$'000            HK$'000
<S>                                                        <C>                <C>                <C>
     Income from provision of satellite                    850,436            982,464            880,375
     transponder capacity
     Sales of satellite transponder capacity                24,491             20,518             15,858
     Other revenue                                           4,778              2,000                  -
                                                        --------------     --------------    ----------------
                                                           879,705          1,004,982            896,233
                                                        ==============     ==============    ================
</TABLE>

     The Group has only one business segment, namely the operation, maintenance
     and provision of satellite  telecommunication systems for broadcasting and
     telecommunications.  The  Group's  primary  reporting  format for  segment
     reporting  purposes under HKAS 14 "Segment  Reporting" is the geographical
     basis. For the purpose of  classification,  the country where the customer
     is incorporated is deemed to be the source of sales.  However, the Group's
     operating  assets consist  primarily of its satellites  which are used, or
     are intended for use, for transmission to multiple  geographical areas and
     therefore cannot be allocated between geographical segments.  Accordingly,
     no  geographical  analysis of expenses,  assets and  liabilities  has been
     presented.

     The  following  table  provides  an  analysis  of  the  Group's  sales  by
     geographical markets:

<TABLE>
<CAPTION>
                                                               2005              2004               2003
                                                           HK$'000            HK$'000            HK$'000
<S>                                                         <C>               <C>                <C>
     Hong Kong                                              341,698           323,133            323,187
     Greater China, including Taiwan                        202,730           197,936            212,847
     United States of America                                78,205           183,750             71,164
     United Kingdom                                          49,401            46,073             23,930
     British Virgin Islands                                   9,706            40,897             40,351
     Others                                                 197,965           213,193            224,754
                                                         -------------     --------------    ----------------
                                                            879,705         1,004,982            896,233
                                                         =============     ==============    ================
</TABLE>

6.   LEASEHOLD LAND AND LAND USE RIGHTS - GROUP

     The Group's  interests  in  leasehold  land and land use rights  represent
     prepaid  operating lease payments and their net book value are analyzed as
     follows:

<TABLE>
<CAPTION>
                                                                                  2005            2004
                                                                               HK$'000          HK$'000
<S>                                                                            <C>              <C>
     In Hong Kong held on:
     Leases of over 50 years                                                         -                -
     Leases of between 10 to 50 years                                           24,199           24,782
                                                                           --------------    ----------------
                                                                                24,199           24,782
                                                                           ==============    ================


                                                                                  2005             2004
                                                                               HK$'000          HK$'000

     Opening                                                                    24,782           25,365
     Amortization of prepaid operating lease payment                              (583)            (583)
                                                                           --------------     ---------------
     Closing                                                                    24,199           24,782
                                                                           ==============     ===============
</TABLE>


                                     F-17
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


7.  PROPERTY, PLANT AND EQUIPMENT - GROUP

<TABLE>
<CAPTION>
                                       SATELLITES AND TRACKING FACILITIES

                                                                    FURNITURE,
                                                                       FIXTURE                           PLANT
                                   IN        UNDER                         AND     OFFICE     MOTOR        AND
                                  OPERATION  CONSTRUCTION  BUILDINGS  FITTINGS  EQUIPMENT  VEHICLES  EQUIPMENT  TOTAL
                                  ---------  ------------  ---------  --------  ---------  --------  ---------  -----
                                    HK$'000    HK$'000   HK$'000  HK$'000    HK$'000   HK$'000    HK$'000    HK$'000
<S>                               <C>           <C>      <C>       <C>         <C>        <C>         <C>  <C>
      AT JANUARY 1, 2004
      Cost                        4,167,029     41,837   117,866  10,558       6,925      3,427     2,524  4,350,166
      Accumulated depreciation   (1,191,719)         -      (393) (8,962)    (5,335)     (2,125)   (1,598) (1,210,132)
                                 ----------- ---------- --------- -------- ---------- --------- ---------- ----------
      Net book amount             2,975,310     41,837   117,473   1,596       1,590      1,302       926  3,140,034
                                 =========== ========== ========= ======== ========== ========= ========== ==========

      YEAR ENDED DECEMBER 31, 2004
      Opening net book amount     2,975,310     41,837   117,473   1,596       1,590      1,302       926  3,140,034
      Additions                      14,953     22,826        34   1,291       1,055      1,722        22     41,903
      Transfer                       55,028    (55,028)        -       -           -          -         -          -
      Disposals (note 27)                 -          -         -     (16)        (1)        (71)        -        (88)
      Depreciation                 (280,171)         -    (4,716)   (716)      (762)       (797)     (220)  (287,382)
                                 ----------- ---------- --------- -------- ---------- --------- ---------- ----------
      Closing net book amount     2,765,120      9,635   112,791   2,155       1,882      2,156       728  2,894,467
                                 =========== ========== ========= ======== ========== ========= ========== ==========

      AT DECEMBER 31, 2004
      Cost                        4,232,629      9,635   117,900  10,854       7,646      3,871     2,370  4,384,905
      Accumulated depreciation   (1,467,509)         -    (5,109) (8,699)    (5,764)     (1,715)   (1,642) (1,490,438)
                                 ----------- ---------- --------- -------- ---------- --------- ---------- ----------
      Net book amount             2,765,120      9,635   112,791   2,155       1,882      2,156       728  2,894,467
                                 =========== ========== ========= ======== ========== ========= ========== ==========

      YEAR ENDED DECEMBER 31,
      2005
      Opening net book amount     2,765,120      9,635   112,791   2,155       1,882      2,156       728  2,894,467
      Additions                       1,337     10,309        98   7,377       1,584        865         -     21,570
      Transfer                       19,539    (19,539)        -       -           -          -         -          -
      Disposals (note 27)                 -          -         -      (7)        (2)          -         -         (9)
      Depreciation                 (286,032)         -    (4,716) (2,178)    (1,068)       (907)     (216)  (295,117)
                                 ----------- ---------- --------- -------- ---------- --------- ---------- ----------
      Closing net book amount     2,499,964        405   108,173   7,347       2,396      2,114       512  2,620,911
                                 =========== ========== ========= ======== ========== ========= ========== ==========

      AT DECEMBER 31, 2005
      Cost                        4,253,504        405   117,998  11,142       8,928      4,137     2,371  4,398,485
      Accumulated depreciation   (1,753,540)         -    (9,825) (3,795)    (6,532)     (2,023)   (1,859) (1,777,574)
                                 ----------- ---------- --------- -------- ---------- --------- ---------- ----------
      Net book amount             2,499,964        405   108,173   7,347       2,396      2,114       512  2,620,911
                                 =========== ========== ========= ======== ========== ========= ========== ==========
</TABLE>

     Depreciation  expense of HK$295,117,000  (2004:  HK$287,382,000)  has been
     expensed in cost of services.


                                     F-18
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


8.   INTANGIBLE ASSETS - GROUP


                                                                 LICENCE
                                                                 HK$'000
     AT JANUARY 1, 2004 AND DECEMBER 31, 2004
     Cost                                                              -
     Accumulated amortization and impairment                           -
                                                                -------------
     Net book amount                                                   -
                                                                =============

     YEAR ENDED DECEMBER 31, 2005
     Additions                                                     1,500
     Amortization expense (a) (note 19)                             (161)
                                                                -------------
     Closing net book amount                                       1,339
                                                                =============

     AT DECEMBER 31, 2005
     Cost                                                          1,500
     Accumulated amortization and impairment (b)                    (161)
                                                                -------------
     Net book amount                                               1,339
                                                                =============

     Note:
     (a) Amortization expense of HK$161,000 is included in the administrative
     expenses in the statement of operations.

     (b) The aggregate amortization expense for each of the next 5 fiscal years
     is approximately HK$161,000.


9.   INVESTMENTS IN SUBSIDIARIES

     (a) Investments in subsidiaries
                                                                COMPANY
                                                      -------------------------
                                                          2005           2004
                                                       HK$'000        HK$'000

     Unlisted shares in subsidiaries, at cost          429,054        429,054
                                                      ============  ===========


     The  cost of the  unlisted  shares  is  based  on the  book  value  of the
     underlying net assets of the subsidiaries  attributable to the Group as at
     the date on which the Company became the ultimate  holding  company of the
     Group under the Group reorganization in 1996.


                                     F-19
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


9. INVESTMENTS IN SUBSIDIARIES (continued)

      The following is a list of the principal subsidiaries and a controlled
      partnership at December 31, 2005:

<TABLE>
<CAPTION>
                                     PLACE OF                                PARTICULARS OF
                                     INCORPORATION     PRINCIPAL             ISSUED SHARE
      NAME                           AND KIND OF       ACTIVITIES AND        CAPITAL AND DEBT      INTEREST
                                     LEGAL ENTITY      PLACE OF OPERATION    SECURITIES            HELD
      ---------------------------    ---------------   -------------------   ------------------    ---------
<S>   <C>                            <C>               <C>                   <C>                   <C>
      AsiaSat BVI Limited            British Virgin    Investment holding    3,000 ordinary        *100%
                                     Islands,          in Hong Kong          shares of US$1 each
                                     limited
                                     liability
                                     company

      Asia Satellite                 Hong Kong,        Provision of          30,000 ordinary        100%
      Telecommunications             limited           satellite             shares and 20,000
      Company Limited                liability         transponder           non-voting
                                     company           capacity worldwide    deferred shares of
                                                                             HK$10 each

      Hanbury International          British Virgin    Inactive in Hong      1 ordinary share       100%
      Limited                        Islands,          Kong                  of HK$1 each
                                     limited
                                     liability
                                     company

      SAT Limited                    Republic of       Inactive in           100 ordinary          *100%
                                     Mauritius,        Republic of           shares of US$1 each
                                     limited           Mauritius
                                     liability
                                     company

      Skywave TV Company             Hong Kong,        Provision of DTH      3,000,002 ordinary     80%
      Limited (formerly known        limited           broadcasting          shares of HK$10
      as Auspicious City             liability         services in Hong      each
      Limited)                       company           Kong and Mainland
                                                       China

      Sornico Limited                Hong Kong,        Inactive in Hong      2 ordinary shares      100%
                                     limited           Kong                  of HK$10 each
                                     liability
                                     company
      The First Asian Satellite      Hong Kong,        Inactive in Hong      N/A                    1%
      Leasing  Limited               limited           Kong
      Partnership (the               liability
      "Partnership")                 partnership

      Auspicious Colour Limited      Hong Kong,        Inactive in Hong      1 ordinary share       100%
                                     limited           Kong                  of HK$1 each
                                     liability
                                     company
</TABLE>

     The  Company  continues  to  control  the  Partnership  as it is a general
     partner and accordingly continues to consolidate it.

     *Shares held directly by the Company.


                                     F-20
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10.  INTERESTS IN ASSOCIATES - GROUP

<TABLE>
<CAPTION>
                                                                                        2005            2004
                                                                                     HK$'000         HK$'000
<S>                                                                                   <C>             <C>
         Share of net assets
         Beginning of the year                                                        11,551          24,151
         Share of associates' losses                                                  (3,872)        (12,380)
         Amortization of goodwill                                                          -            (220)
                                                                                 -------------    ------------
         End of the year                                                               7,679          11,551
                                                                                 -------------    ------------

         Amount due from an associate
         Beginning of the year                                                         1,846               -
         Additions                                                                     4,769           1,846
                                                                                 -------------    ------------
         End of the year                                                               6,615           1,846
                                                                                 -------------    ------------

         Total                                                                        14,294          13,397
                                                                                 =============    ============
</TABLE>

     Interests  in  associates  at  December  31,  2005  include   goodwill  of
     HK$442,000 (2004: HK$442,000).

     The  Group's  interest  in its  principal  associates,  all of  which  are
     unlisted, were as follows:

<TABLE>
<CAPTION>
                               PARTICULARS
                               OF ISSUED                                                                     %
                               SHARES          COUNTRY OF                                                    INTEREST
         NAME                  HELD            INCORPORATION  ASSETS   LIABILITIES  REVENUES  PROFIT/(LOSS)  HELD
         ------------------    ------------    -------------  ------   -----------  -------   -------------  --------
         <S>                   <C>             <C>            <C>      <C>          <C>       <C>            <C>
                                                              HK$'000    HK$'000    HK$'000     HK$'000        %
         2004

         Beijing Asia          N/A             China          48,785     25,183         888      (2,289)      49
         Sky
         Telecommunications
         Technology
         Company Limited

         SpeedCast             Ordinary        Cayman         35,418     21,740      49,825     (11,339)      47
         Holdings Limited      shares of       Islands
                               US$0.0001
                               each

         SpeedCast             Ordinary        Hong Kong         N/A        N/A         N/A         N/A       47
         Limited (note 1)      shares of
                               HK$0.01
                               each
                                                              ------     ------     -------     --------
                                                              84,203     46,923      50,713     (13,628)
                                                              ======     ======     =======     ========
         2005

         Beijing Asia Sky      N/A             China          42,011     25,945       2,721      (7,909)      49
         Telecommunications
         Technology
         Company Limited

         SpeedCast             Ordinary        Cayman         39,392     25,345      82,673         368       47
         Holdings Limited       shares of      Islands
                                US$0.0001
                                each

         SpeedCast             Ordinary        Hong Kong         N/A        N/A         N/A         N/A       47
         Limited (note 1)       shares of
                                HK$0.01
                                each
                                                              ------     ------     -------     --------
                                                              81,403     51,290      85,394      (7,541)
                                                              ======     ======     =======     ========
</TABLE>

     The Group has not recognized  profit amounting to HK$174,000  (2004:  loss
     HK$5,363,000) for SpeedCast  Holdings Limited as the Group's share of loss
     exceeds its interest in SpeedCast.  The accumulated  losses not recognized
     were HK$12,034,000 (2004: HK$12,208,000).

     Note:
     (1) SpeedCast Limited is the wholly-owned subsidiary of SpeedCast
         Holdings Limited. Accordingly, assets, liabilities, revenues and
         profit/(loss) are not disclosed again.

11.  AMOUNT PAID TO TAX AUTHORITY - GROUP

     At the balance sheet date, an amount of approximately HK$93,666,000 (2004:
     HK$67,023,000)  had been paid to the  Government  of India.  For  details,
     please refer to note 28.


                                     F-21
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12.  TRADE AND OTHER RECEIVABLES - GROUP

<TABLE>
<CAPTION>
                                                                                 2005             2004
                                                                              HK$'000          HK$'000
<S>                                                                            <C>              <C>
     Trade receivables                                                         90,653           91,364
     Trade receivables from related parties (note 31)                           7,678            4,574
     Less: provision for impairment of receivables                            (30,930)         (23,230)
                                                                          -------------    --------------
     Trade receivables - net                                                   67,401           72,708
     Receivables from related parties (note 31)                                15,503           14,628
     Other receivables                                                         10,831            7,846
     Deposits and prepayments                                                  24,863           37,226
     Loan receivable from an associate (note 31)                                    -            5,070
                                                                          -------------    --------------
                                                                              118,598          137,478
     Less non-current portion: loans to related parties                             -                -
                                                                          -------------    --------------
     Current portion                                                          118,598          137,478
                                                                          =============    ==============


     (a) The  Group  does  not  normally  provide  credit  terms  to its  trade
         customers.  The Company usually bills its trade customers quarterly in
         advance in accordance with its agreements.  The aged analysis of trade
         receivables is stated as follows:

                                                                                 2005             2004
                                                                              HK$'000          HK$'000

     0 to 30 days                                                              27,768           34,047
     31 to 60 days                                                              8,652           18,318
     61 to 90 days                                                             14,315           11,424
     91 to 180 days                                                            10,074            3,796
     181 days or above                                                          6,592            5,123
                                                                          -------------    --------------
                                                                               67,401           72,708
                                                                          =============    ==============
</TABLE>

     There  is  no   concentration   of  credit  risk  with  respect  to  trade
     receivables, as the Group has a large number of customers, internationally
     dispersed.


                                     F-22
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13.  INVENTORIES - GROUP

<TABLE>
<CAPTION>
                                                                                    2005           2004
                                                                                 HK$'000        HK$'000
<S>                                                                                  <C>            <C>
     Merchandise                                                                     434            416
                                                                              ============    ===========
</TABLE>

     The cost of  inventories  recognized  as expense  and  included in cost of
     services amounted to HK$500,000 (2004: Nil).


14.  CASH AND CASH EQUIVALENTS - GROUP

<TABLE>
<CAPTION>
                                                                                     2005           2004
                                                                                  HK$'000        HK$'000
<S>                                                                                <C>             <C>
     Cash at bank and in hand                                                      13,173          4,036
     Short-term bank deposits                                                   1,622,353      1,230,319
                                                                               ------------    -----------
                                                                                1,635,526      1,234,355
                                                                               ============    ===========
</TABLE>

     The effective  interest  rate on short-term  bank deposits was 3.1% (2004:
     2.3%); these deposits have an average maturity of 17 days.

     Cash includes the following for the purposes of the cash flow statement:

<TABLE>
<CAPTION>
                                                                                     2005           2004
                                                                                  HK$'000        HK$'000
<S>                                                                             <C>            <C>
     Cash and cash equivalents                                                  1,635,526      1,234,355
                                                                               ============    ===========
</TABLE>


15.  SHARE CAPITAL

<TABLE>
<CAPTION>
                                                   NUMBER OF     ORDINARY          SHARE
                                                      SHARES       SHARES        PREMIUM          TOTAL
                                                  (thousands)     HK$'000        HK$'000        HK$'000
<S>                                                  <C>           <C>             <C>           <C>
     AT DECEMBER 31, 2005 AND DECEMBER 31, 2004      390,266       39,027          4,614         43,641
                                                  ==========    ===========    ===========    ===========
</TABLE>

     The total  authorized  number of  ordinary  shares is  550,000,000  shares
     (2004:  550,000,000  shares)  with a par value of HK$0.10 per share (2004:
     HK$0.10 per share). All issued shares are fully paid.


                                     F-23
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15.  SHARE CAPITAL (continued)

     SHARE OPTION SCHEME
     A share option  scheme is adopted to provide  incentives  to employees and
     directors and to promote the long term  financial  success of the Company.
     The details of the scheme are as follows:

     SCHEME ADOPTED ON JUNE 3, 1996

     In accordance  with the Company's  share option scheme (the "1996 Scheme")
     adopted  pursuant  to a  resolution  passed on June 3, 1996,  the Board of
     Directors  of the Company  may at their  discretion  grant  options to all
     permanent,  full-time  employees of the Company and its  subsidiaries,  to
     subscribe  for  shares in the  Company.  The  primary  purpose of the 1996
     Scheme was to provide incentives to eligible employees.

     The total  number of shares in  respect  of which  options  may be granted
     under  the 1996  Scheme  (including  options  already  exercised)  was not
     permitted to exceed 10% of the issued share  capital of the Company at any
     point in time. The maximum number of share options issued to any employee,
     based on the  subscription  price of the  options,  shall not exceed  four
     times the annual basic salary  (excluding  bonuses and allowances) of that
     employee.


     Options  granted  must be taken up  within  28 days from the date of grant
     upon  payment  of HK$1 per each grant of share  options.  An option may be
     exercisable  up to 50% on or after  the third  anniversary  of the date of
     grant, up to 75% on or after the fourth  anniversary and fully on or after
     the fifth  anniversary  but  before the tenth  anniversary  of the date of
     offer unless the Board of Directors specifies other periods.  The exercise
     price  was  determined  by the  Board of  Directors  and was  based on the
     average closing price of the shares for the five trading days  immediately
     preceding the date of grant.


     The  1996  Scheme  was  terminated  on  January  25,  2002  pursuant  to a
     resolution passed on that date.

     SCHEME ADOPTED ON JANUARY 25, 2002

     A new share option  scheme (the "2002  Scheme") was adopted  pursuant to a
     resolution  passed  on  January  25,  2002  for  the  primary  purpose  of
     attracting  and retaining the best  personnel for the  development  of the
     Company's  businesses,  and providing incentives to employees,  Directors,
     consultants,  agents, representatives and advisors, and promoting the long
     term  financial  success of the  Company.  The 2002  Scheme will expire on
     January 24, 2012.

     Under the 2002 Scheme,  the Board of Directors of the Company may at their
     discretion  grant options to the employees,  including  Directors,  of the
     Company or any company that  directly,  or indirectly  through one or more
     intermediaries,  controls or is controlled  by, or is under common control
     with, the Company, to subscribe for shares in the Company. Options granted
     to a Director,  chief executive or substantial  shareholder of the Company
     or any of their respective  associates must be approved by the Independent
     Non-executive   Directors  of  the  Company   (excluding  any  Independent
     Non-executive Director who is also the grantee).

     No options have been granted during 2003. At December 31, 2002, the number
     of shares in  respect of which  options  had been  granted  under the 2002
     Scheme was  7,149,500  representing  1.83% of the shares of the Company in
     issue at that date.

     The total  number of shares in  respect  of which  options  may be granted
     under the 2002 Scheme and any other schemes is not permitted to exceed 30%
     of the issued share capital of the Company from time to time. In addition,
     the total  number of shares in  respect  of which  options  may be granted
     under the 2002 Scheme and any other schemes must not, in aggregate, exceed
     10% of the issued share capital of the Company at the adoption date of the
     2002 Scheme,  being  39,026,550  shares,  without prior  approval from the
     Company's shareholders.

     The  number of shares in respect  of which  options  may be granted to any
     individual  in any one year is not permitted to exceed 1% of the shares of
     the  Company  in  issue,   without  prior   approval  from  the  Company's
     shareholders.   Options  granted  to  a  substantial  shareholder,  or  an
     Independent  Non-executive  Director  of the  Company,  or  any  of  their
     respective  associates  under the 2002 Scheme and any other schemes in any
     one year in excess of 0.1% of the Company's issued share capital or with a
     value in  excess  of HK$5  million  must be  approved  in  advance  by the
     Company's shareholders.

     Options  granted  must be taken up  within  28 days from the date of grant
     upon payment of HK$1 per each grant of share options.  The exercise period
     of the share options  granted under the 2002 Scheme shall be determined by
     the Board of Directors  when such options are granted,  provided that such
     period  shall not end  later  than 10 years  from the date of  grant.  The
     exercise  price is  determined  by the Board of Directors  and will not be
     less than the higher of the closing price of the  Company's  shares on the
     date of grant,  or the  average  closing  price of the shares for the five
     trading days immediately preceding the date of grant, or the nominal value
     of a share of the Company.

     No options were granted during 2003. Total consideration  received in 2002
     from employees for taking up the options granted amounted to HK$105.

     The  financial  impact of share  options  granted is not  recorded  in the
     Company's or the Group's  balance sheet until such time as the options are
     exercised,  and no charge is  recognized in the statement of operations in
     respect of the value of options  granted in the year. Upon the exercise of
     the share options, the resulting shares issued are recorded by the Company
     as  additional  share  capital at the nominal  value of the shares and the
     excess  of the  exercise  price per share  over the  nominal  value of the
     shares is recorded by the Company in the share  premium  account.  Options
     which  are  lapsed  or are  cancelled  prior to their  exercise  dates are
     deleted from the register of outstanding options.


                                     F-24
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15.  SHARE CAPITAL (continued)

     Movements in the number of share  options  outstanding  and their  related
     weighted average exercise prices are as follows:

<TABLE>
<CAPTION>
     OPTION A:
                                       2005                      2004                       2003
                             -----------------------    ----------------------     ----------------------
                                 AVERAGE                 AVERAGE                    AVERAGE
                                EXERCISE                EXERCISE                   EXERCISE
                                PRICE IN                PRICE IN                   PRICE IN
                                 HK$ PER   OPTIONS       HK$ PER     OPTIONS        HK$ PER     OPTIONS
                                   SHARE                   SHARE                      SHARE
<S>                             <C>      <C>            <C>        <C>             <C>        <C>
     AT JANUARY 1                  17.48 1,691,500          17.48  1,691,500           17.48  1,718,500
     Granted                           -         -              -          -               -          -
     Forfeited                         -         -              -          -               -          -
     Exercised                         -         -              -          -               -          -
     Lapsed                        17.48   (57,500)             -          -               -    (27,000)
                                         -----------               -----------                -----------
     AT DECEMBER 31                17.48 1,634,000          17.48  1,691,500           17.48  1,691,500
                                         ===========               ===========                ===========

     OPTION B:
                                       2005                      2004                       2003
                             -----------------------    ----------------------    -----------------------
                                 AVERAGE                 AVERAGE                    AVERAGE
                                EXERCISE                EXERCISE                   EXERCISE
                                PRICE IN                PRICE IN                   PRICE IN
                                 HK$ PER   OPTIONS       HK$ PER     OPTIONS        HK$ PER     OPTIONS
                                   SHARE                   SHARE                      SHARE

     AT JANUARY 1                  17.48 1,753,000          17.48  1,768,000           17.48  1,838,000
     Granted                           -         -    -         -          -               -          -
     Forfeited                         -         -    -         -          -               -          -
     Exercised                         -         -    -         -          -               -          -
     Lapsed                        17.48   (98,000)         17.48    (15,000)          17.48    (70,000)
                                         -----------               -----------                -----------
     AT DECEMBER 31                17.48 1,655,000          17.48  1,753,000           17.48  1,768,000
                                         ===========               ===========                ===========

     OPTION C:
                                       2005                      2004                       2003
                             -----------------------    ----------------------    -----------------------
                                 AVERAGE                 AVERAGE                    AVERAGE
                                EXERCISE                EXERCISE                   EXERCISE
                                PRICE IN                PRICE IN                   PRICE IN
                                 HK$ PER   OPTIONS       HK$ PER     OPTIONS        HK$ PER     OPTIONS
                                   SHARE                   SHARE                      SHARE

     AT JANUARY 1                  14.35 3,481,500          14.35  3,481,500           14.35  3,593,000
     Granted                           -         -    -         -          -               -          -
     Forfeited                         -         -    -         -          -               -          -
     Exercised                         -         -    -         -          -               -          -
     Lapsed                        14.35  (170,000)   -         -          -               -   (111,500)
                                         -----------               -----------                -----------
     AT DECEMBER 31                14.35 3,311,500          14.35  3,481,500           14.35  3,481,500
                                         ===========               ===========                ===========

     Out of the 6,600,500 outstanding options (2004:  6,926,000 options;  2003:
     6,941,000), no. of exercisable options are as follows:

                                       2005                      2004                       2003
                             -----------------------    ----------------------    -----------------------
                                 AVERAGE                 AVERAGE                    AVERAGE
                                EXERCISE                EXERCISE                   EXERCISE
                                PRICE IN                PRICE IN                   PRICE IN
                                 HK$ PER   OPTIONS       HK$ PER     OPTIONS        HK$ PER     OPTIONS
                                   SHARE                   SHARE                      SHARE

     Option A                      17.48 1,634,000          17.48  1,691,500           17.48  1,691,500
     Option B                      17.48 1,655,000          17.48  1,753,000           17.48  1,326,000
     Option C                      14.35 1,655,750          14.35    870,375           14.35          -
                                         -----------               -----------                -----------
     Total                               4,944,750                 4,314,875                  3,017,500
                                         ===========               ===========                ===========
</TABLE>


                                     F-25
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15.  SHARE CAPITAL (continued)

     Share options outstanding at the end of the year have the following expiry
     date and exercise prices:

<TABLE>
<CAPTION>
                              EXERCISE PRICE
     EXPIRY DATE              IN HK$ PER SHARE                        SHARE OPTIONS
                                                ----------------------------------------------------------
                                                           2005                 2004                 2003
<S>                                <C>                <C>                  <C>                  <C>
     November 25, 2006             17.48              1,634,000            1,691,500            1,691,500
     September 30, 2009            17.48              1,655,000            1,753,000            1,768,000
     February 3, 2012              14.35              3,311,500            3,481,500            3,481,500
                                                -----------------    -----------------    ----------------
                                                      6,600,500            6,926,000            6,941,000
                                                =================    =================    ================
</TABLE>

<TABLE>
<CAPTION>
     Details of specific categories of options are as follows:

     Option     Date of grant    Vesting period                    Exercise period                  Exercise
     type                                                                                           price
     ---------- ---------------- --------------------------------- -------------------------------- -------
<S>             <C>              <C>                               <C>                              <C>
     2002 Scheme                                                                                    HK$
     A (note a) February 4, 2002 -                                 February 4, 2002 - November      17.48
                                                                   25, 2006
     B (note b) February 4, 2002 February 4, 2002 - September      October 1, 2002 - September      17.48
                                 30, 2002                          30, 2009
     C (note c) February 4, 2002 February 4, 2002 - February 3,    February 4, 2004 - February 3,   14.35
                                 2004                              2012

     1996 Scheme                                                                                    HK$
     D (note a) November 26,     November 26, 1996 - November      November 26, 1999 - November     17.48
                1996             25, 1999                          25, 2006
     E (note b) September 20,    September 20, 1999 - September    October 1, 2002 - September      17.48
                1999             30, 2002                          30, 2009
</TABLE>

     Notes:

     a.  Pursuant to a resolution  passed in the special general meeting of the
         Company held on January 25, 2002,  the 1996 Scheme was  terminated and
         all existing  options  under that scheme were  cancelled.  New options
         were  issued on  February  4, 2002 under the 2002 Scheme with the same
         exercise  price and  exercise  periods to replace the options  granted
         under the 1996 Scheme.

         Option type A

         100% between February 4, 2002 and November 25, 2006

         The exercise  periods of the following option types are divided into 3
         tranches, as detailed below:

         Option type D

         1. Up to 50% between  November  26,1999 and November 25, 2006 2. Up to
         75%  between  November  26, 2000 and  November  25, 2006 3. Up to 100%
         between November 26, 2001 and November 25, 2006

         Option types B and E

         1. Up to 50% between  October 1, 2002 and  September 30, 2009 2. Up to
         75%  between  October  1, 2003 and  September  30,  2009 3. Up to 100%
         between October 1, 2004 and September 30, 2009

     b.  Additional  share  options  were  issued on February 4, 2002 under the
         2002 Scheme.

         The exercise period is divided into 3 tranches, as detailed below:

         Option type C

         1. Up to 25% between  February  4, 2004 and  February 3, 2012 2. Up to
         50%  between  February  4,  2005 and  February  3,  2012 3. Up to 100%
         between February 4, 2006 and February 3, 2012


                                     F-26
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16.  DEFERRED REVENUE - GROUP

<TABLE>
<CAPTION>
                                                                                  2005              2004
                                                                               HK$'000           HK$'000
<S>                                                                             <C>              <C>
     The maturity of deferred revenue is as follows:
     Within one year                                                           151,982           175,043
     More than one year but not exceeding five years                            87,654           111,844
                                                                           --------------    --------------
                                                                               239,636           286,887
     Less: amount shown as current                                            (151,982)         (175,043)
                                                                           --------------    --------------
                                                                                87,654           111,844
                                                                           ==============    ==============
</TABLE>

17.  DEFERRED INCOME TAX - GROUP

     Deferred  income  tax assets and  liabilities  are offset  when there is a
     legally enforceable right to offset current tax assets against current tax
     liabilities  and when the deferred  income taxes relate to the same fiscal
     authority. The offset amounts are as follows:

<TABLE>
<CAPTION>
                                                                               2005       2004       2003
                                                                            HK$'000    HK$'000    HK$'000
<S>                                                                         <C>        <C>        <C>
     Deferred tax assets:
     -  Deferred tax assets to be recovered after more than 12 months             -          -          -
     -  Deferred tax assets to be recovered within 12 months                      -          -        (76)
                                                                           ---------- ---------- ----------
                                                                                  -          -        (76)
                                                                           ---------- ---------- ----------

     Deferred tax liabilities:
     -  Deferred tax liabilities to be recovered after more than 12         192,654    205,258    213,598
        months
     -  Deferred tax liabilities to be recovered within 12 months                 -          -          -
                                                                           ---------- ---------- ----------
                                                                            192,654    205,258    213,598
                                                                           ---------- ---------- ----------

                                                                            192,654    205,258    213,522
                                                                           ========== ========== ==========

     The gross movement on the deferred income tax account is as follows:

                                                                               2005       2004       2003
                                                                            HK$'000    HK$'000    HK$'000

     Beginning of the year                                                  205,258    213,522    185,949
     Recognized in the statement of operations (note 22)                    (12,604)    (8,264)    10,140
     Effect of change in tax rate recognized in the statement of                  -          -     17,433
        operations
                                                                           ---------- ---------- ----------
     End of the year                                                        192,654    205,258    213,522
                                                                           ========== ========== ==========
</TABLE>


                                     F-27
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17.  DEFERRED INCOME TAX - GROUP (continued)

     The  movement in deferred tax  liabilities/(assets)  during the year is as
     follows:

     DEFERRED TAX LIABILITIES/(ASSETS):

<TABLE>
<CAPTION>
                                                             ACCELERATED
                                                                    TAX
                                                             DEPRECIATION  OTHERS   TAX LOSS      TOTAL
                                                                HK$'000  HK$'000    HK$'000    HK$'000
<S>                                                             <C>      <C>        <C>        <C>
     AT JANUARY 1, 2003                                         185,949         -         -     185,949
     Recognized in the statement of                              10,527      (311)      (76)     10,140
        operations
     Effect of change in tax rate
        recognized in the statement of                           17,433         -         -      17,433
        operations
     Charged to equity                                                -         -         -           -
     Exchange differences                                             -         -         -           -
                                                             ----------- ---------- ---------- ----------
     AT DECEMBER 31, 2003                                       213,909      (311)      (76)    213,522
     Recognized in the statement of                              (6,884)   (1,456)       76      (8,264)
        operations
     Charged to equity                                                -         -         -           -
     Exchange differences                                             -         -         -           -
                                                             ----------- ---------- ---------- ----------
     AT DECEMBER 31, 2004                                       207,025    (1,767)        -     205,258
     Recognized in the statement of                             (13,730)    1,126         -     (12,604)
        operations
     Charged to equity                                                -         -         -           -
     Acquisition of subsidiary                                        -         -         -           -
     Exchange differences                                             -         -         -           -
                                                             ----------- ---------- ---------- ----------
     AT DECEMBER 31, 2005                                       193,295      (641)        -     192,654
                                                             =========== ========== ========== ==========

18.  OTHER GAINS - NET

                                                                   2005             2004             2003
                                                                HK$'000          HK$'000          HK$'000

     Interest income                                             43,606           21,813            4,945
     Gain on disposal of property, plant and equipment               99              169               76
        other than transponders
     Others                                                           6                -              772
                                                               ------------    ------------    -------------
                                                                 43,711           21,982            5,793
                                                               ============    ============    =============

19.  EXPENSES BY NATURE

                                                                   2005           2004             2003
                                                                HK$'000       HK$'000          HK$'000

     Expenses  included in cost of services  and  administrative  expenses  are
     analyzed as follows:

     Auditors' remuneration                                         769            697              679
     Impairment of receivables                                    2,987              -                -
     Provision for impairment of receivables                      7,700         17,690                -
     Depreciation, amortization and impairment expenses         295,278        287,382          221,694
        (notes 7 and 8)
     Employee benefit expense (note 20)                          65,092         75,427           59,225
     Operating leases
          - premises                                              5,872          5,380            5,965
          - leasehold land & land use rights                        583            583              583
     Net exchange loss                                              547            288              672
                                                              ===========    ===========     =============

     Expenses deducted from administrative expenses are analyzed as follows:

     Write-back of provision for impairment of                        -              -            6,279
        receivables
                                                              ===========    ===========     =============

20.  EMPLOYEE BENEFIT EXPENSE

                                                                   2005           2004             2003
                                                                HK$'000        HK$'000           HK$'000

     Salary and other benefits, including directors'             60,748         71,071           55,214
        remuneration
     Pension costs - defined contribution plans                   4,344          4,356            4,011
                                                              -----------    -----------     -------------
     Total staff costs                                           65,092         75,427           59,225
                                                              ===========    ===========     =============
</TABLE>


                                     F-28
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20.  EMPLOYEE BENEFIT EXPENSE (continued)

     (a) PENSIONS - DEFINED CONTRIBUTION PLANS

     Forfeited  contributions  totaling  HK$292,000  (2004:  HK$37,000;   2003:
     HK$178,000) were utilized during the year leaving  HK$43,000  available at
     the year-end to reduce future contributions.

     No contributions  (2004 and 2003:  HK$Nil) were payable to the fund at the
     year-end.

     (b)  DIRECTORS' AND SENIOR MANAGEMENT'S EMOLUMENTS

     The remuneration of every Director for the year ended December 31, 2005 is
     set out below:

<TABLE>
<CAPTION>
                                                                                     EMPLOYER'S  COMPENSATION
                                                                                   CONTRIBUTION      FOR LOSS
                                                                                             TO     OF OFFICE
                                              DISCRETIONARY  INDUCEMENT        OTHER    PENSION            AS
     NAME OF DIRECTOR         FEES    SALARY        BONUSES        FEES  BENEFITS(a)     SCHEME      DIRECTOR     TOTAL
                           HK$'000   HK$'000        HK$'000     HK$'000      HK$'000    HK$'000       HK$'000   HK$'000
<S>                        <C>       <C>            <C>         <C>          <C>        <C>           <C>       <C>
     Romain BAUSCH (g)         200         -              -           -           -           -             -       200
     Robert BEDNAREK (g)       150         -              -           -           -           -             -       150
     Edward CHEN               225         -              -           -           -           -             -       225
     Cynthia DICKINS (b) &      12         -              -           -           -           -             -        12
     (g)
     DING Yu Cheng (h)         100         -              -           -           -           -             -       100
     R. Donald FULLERTON       200         -              -           -           -           -             -       200
     JU Wei Min (h)            100         -              -           -           -           -             -       100
     KO Fai Wong (h)           100         -              -           -           -           -             -       100
     MI Zeng Xin (h)           200         -              -           -           -           -             -       200
     Mark RIGOLLE (g)          100         -              -           -           -           -             -       100
     Robert SZE                250         -              -           -           -           -             -       250
     Peter JACKSON               -     2,672            390           -       1,961         401             -     5,424
     William WADE                -     2,074            302           -       1,485         311             -     4,172
                           -------- ---------    -----------   ---------   --------- -----------   ----------- ---------
     Total                   1,637     4,746            692           -       3,446         712             -    11,233
                           ======== =========    ===========   =========   ========= ===========   =========== =========


     The remuneration of every Director for the year ended December 31, 2004 is
     set out below:

                                                                                     EMPLOYER'S  COMPENSATION
                                                                                   CONTRIBUTION      FOR LOSS
                                                                                             TO     OF OFFICE
                                              DISCRETIONARY  INDUCEMENT        OTHER    PENSION            AS
     NAME OF DIRECTOR         FEES    SALARY        BONUSES        FEES  BENEFITS(a)     SCHEME      DIRECTOR     TOTAL
                           HK$'000   HK$'000        HK$'000     HK$'000      HK$'000    HK$'000       HK$'000   HK$'000

     Romain BAUSCH (g)         200         -              -           -            -          -             -       200
     Robert BEDNAREK (g)       150         -              -           -            -          -             -       150
     Edward CHEN               175         -              -           -            -          -             -       175
     DING Yu Cheng (h)         100         -              -           -            -          -             -       100
     R. Donald FULLERTON       175         -              -           -            -          -             -       175
     JU Wei Min (h)            125         -              -           -            -          -             -       125
     KO Fai Wong (c) & (h)      81         -              -           -            -          -             -        81
     LI Ting Zhou (d) & (h)     19         -              -           -            -          -             -        19
     MI Zeng Xin (h)           200         -              -           -            -          -             -       200
     Mark RIGOLLE (e) & (g)     15         -              -           -            -          -             -        15
     Jurgen SCHULTE (f) &      110         -              -           -            -          -             -       110
     (g)
     Robert SZE                175         -              -           -            -          -             -       175
     Peter JACKSON               -     2,619          2,619           -        1,817        393             -     7,448
     William WADE                -     2,033          2,033           -        1,405        305             -     5,776
                           -------- ---------    -----------   ---------    --------- ----------   ----------- ---------
     Total                   1,525     4,652          4,652           -        3,222        698             -    14,749
                           ======== =========    ===========   =========    ========= ==========   =========== =========

     The remuneration of every Director for the year ended December 31, 2003 is
     set out below:

                                                                                     EMPLOYER'S  COMPENSATION
                                                                                   CONTRIBUTION      FOR LOSS
                                                                                             TO     OF OFFICE
                                              DISCRETIONARY  INDUCEMENT        OTHER    PENSION            AS
     NAME OF DIRECTOR         FEES    SALARY        BONUSES        FEES  BENEFITS(a)     SCHEME      DIRECTOR     TOTAL
                           HK$'000   HK$'000        HK$'000     HK$'000      HK$'000    HK$'000       HK$'000   HK$'000

        Romain BAUSCH (g)         200       -             -           -            -          -             -       200
        Robert BEDNAREK (g)       150       -             -           -            -          -             -       150
        Edward CHEN               125       -             -           -            -          -             -       125
        DING Yu Cheng (h)         100       -             -           -            -          -             -       100
        R. Donald FULLERTON       175       -             -           -            -          -             -       175
        JU Wei Min (h)            125       -             -           -            -          -             -       125
        LI Ting Zhou (h)          100       -             -           -            -          -             -       100
        MI Zeng Xin (h)           200       -             -           -            -          -             -       200
        Jurgen SCHULTE (g)        125       -             -           -            -          -             -       125
        Robert SZE                175       -             -           -            -          -             -       175
        Peter JACKSON               -   2,619             -           -        1,802        393             -     4,814
        William WADE                -   2,033             -           -        1,377        305             -     3,715
                              -------- --------- -----------   ---------    --------- ----------   ----------- ---------
        Total                   1,475   4,652             -           -        3,179        698             -    10,004
                              ======== ========= ===========   =========    ========= ==========   =========== =========
</TABLE>

                                     F-29
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20.  EMPLOYEE BENEFIT EXPENSE (continued)

     (b) DIRECTORS' AND SENIOR MANAGEMENT'S EMOLUMENTS (CONTINUED)

     Notes:
     (a) Other benefits include accommodation, car, leave passage, insurance
         premium and club membership.
     (b) Appointed on November 17, 2005.
     (c) Appointed on March 11, 2004.
     (d) Resigned on March 11, 2004.
     (e) Appointed on November 17, 2004.
     (f) Resigned on November 17, 2004.
     (g) Paid to SES GLOBAL and its subsidiary.
     (h) Paid to a subsidiary of CITIC.

     (c) FIVE HIGHEST PAID INDIVIDUALS

     The five  individuals  whose  emoluments were the highest in the Group for
     the year include two (2004 and 2003: two) directors  whose  emoluments are
     reflected in the analysis  presented above. The emoluments  payable to the
     remaining  three  (2004  and 2003:  three)  individuals  during  the years
     presented are as follows:

<TABLE>
<CAPTION>
                                                               2005             2004              2003
                                                            HK$'000          HK$'000           HK$'000
<S>                                                           <C>              <C>               <C>
     Basic salaries, housing allowances, share                8,450            8,313             8,268
        options, other allowances and benefits in kind
     Contributions to retirement benefits scheme                701              687               687
     Performance related incentive payments                     606            3,666                 -
                                                        --------------   --------------    --------------
                                                              9,757           12,666             8,955
                                                        ==============   ==============    ==============

     The emoluments fell within the following bands:

                                                                     NUMBER OF INDIVIDUALS
                                                        -------------------------------------------------
                                                               2005             2004              2003
     Emolument bands
     HK$2,500,001 - HK$3,000,000                                  1                -                 1
     HK$3,000,001 - HK$3,500,000                                  1                -                 2
     HK$3,500,001 - HK$4,000,000                                  1                1                 -
     HK$4,000,001 - HK$4,500,000                                  -                1                 -
     HK$4,500,001 - HK$5,000,000                                  -                1                 -
                                                        --------------   --------------    --------------
                                                                  3                3                 3
                                                        ==============   ==============    ==============
</TABLE>

21.  FINANCE COSTS

<TABLE>
<CAPTION>
                                                               2005             2004              2003
                                                            HK$'000          HK$'000           HK$'000
<S>                                                         <C>              <C>               <C>
     Cost of raising bank borrowing facility                      -                -             6,951
     Less: Amount capitalized in assets under                     -                -            (3,922)
        construction
                                                        --------------   --------------    --------------
                                                                  -                -             3,029
     Interest expense:
     -  bank borrowings: bank loans and overdrafts                -                1                 -
                                                        --------------   --------------    --------------
                                                                  -                1             3,029
                                                        ==============   ==============    ==============
</TABLE>


                                     F-30
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22.  INCOME TAX EXPENSE

     A significant  portion of the Group's  profit is treated as earned outside
     Hong Kong and is not subject to Hong Kong profits  tax.  Hong Kong profits
     tax has been  provided at the rate of 17.5% (2004 and 2003:  17.5%) on the
     estimated assessable profit for these years.

     Overseas tax, including the Foreign Enterprises Income Tax in the People's
     Republic of China,  is calculated at 5% to 20% of the gross revenue earned
     in certain of the overseas jurisdictions.

     Details of deferred taxation are set out in note 17.

     The  Group  currently  has a tax  case in  dispute  with  the  Indian  tax
     authorities. Details of this area set out in note 28.

<TABLE>
<CAPTION>
                                                               2005              2004             2003
                                                            HK$'000           HK$'000          HK$'000
<S>                                                         <C>               <C>              <C>
     Current income tax
     - Hong Kong profits tax                                 45,056            49,574           38,516
     - Overseas taxation                                     18,818            19,226           21,509
                                                        --------------    -------------    --------------
                                                             63,874            68,800           60,025
                                                        --------------    -------------    --------------
     Deferred income tax (note 17)
     - Current year                                         (12,604)           (8,264)          10,140
     - Attributable to an increase in tax rate in
       Hong Kong                                                  -                 -           17,433
                                                        --------------    -------------    --------------
                                                            (12,604)           (8,264)          27,573
                                                        --------------    -------------    --------------
                                                             51,270            60,536           87,598
                                                        ==============    =============    ==============
</TABLE>

     The tax on the  Group's  profit  before tax differs  from the  theoretical
     amount that would arise using the weighted  average tax rate applicable to
     profits of the consolidated companies as follows:

<TABLE>
<CAPTION>
                                                                2005             2004             2003
                                                             HK$'000          HK$'000          HK$'000
<S>                                                          <C>              <C>              <C>
     Profit before tax                                       416,635          491,616          512,086
                                                         =============    =============    ==============

     Tax calculated at tax rate of 17.5% (2004 and            72,911           86,033           89,615
        2003: 17.5%)
     Tax effect of income not subject to tax                 (84,164)         (91,475)         (78,454)
     Tax effect of expenses not deductible for tax            43,027           44,585           34,429
        purposes
     Tax effect of tax losses of associates not                  678            2,167            2,734
        recognized
     Effect of income tax rate differential between
        Hong Kong and overseas locations                      18,818           19,226           21,509
     Increase in deferred tax liability resulting from
        an increase in Hong Kong Profits Tax rate                  -                -           17,433
     Other                                                         -                -              332
                                                         -------------    -------------    --------------
     Tax expense                                              51,270           60,536           87,598
                                                         =============    =============    ==============
</TABLE>

23.  NET FOREIGN EXCHANGE LOSSES

     The exchange  differences  recognized in the  statement of operations  are
     included as follows:

<TABLE>
<CAPTION>
                                                                2005              2004            2003
                                                             HK$'000           HK$'000         HK$'000
<S>                                                              <C>               <C>             <C>
     Administrative expenses                                     547               288             672
                                                         ==============    ============    ==============
</TABLE>

24.  PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

     The profit  attributable to equity holders of the Company is dealt with in
     the financial  statements  of the Company to the extent of  HK$136,977,000
     (2004: HK$125,358,000; 2003: HK$202,578,000).


                                     F-31
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

25.  EARNINGS PER SHARE

     BASIC
     Basic earnings per share is calculated by dividing the profit attributable
     to  equity  holders  of the  Company  by the  weighted  average  number of
     ordinary shares in issue during the year.

<TABLE>
<CAPTION>
                                                                2005              2004            2003
                                                             HK$'000           HK$'000         HK$'000
<S>                                                          <C>               <C>             <C>
     Profit attributable to equity holders of the            366,184           431,216         424,488
        Company
                                                         ==============    ============    ==============

     Weighted average number of ordinary shares in
        issue (thousands)                                    390,266           390,266         390,266
                                                         ==============    ============    ==============

     Basic earnings per share (HK$ per share)                   0.94              1.10            1.09
                                                         ==============    ============    ==============
</TABLE>


     DILUTED
     Diluted  earnings per share is calculated  adjusting the weighted  average
     number of ordinary shares outstanding to assume conversion of all dilutive
     potential  ordinary  shares.  The  Company  has share  options of dilutive
     potential ordinary shares. The calculation is done to determine the number
     of shares that could have been acquired at fair value  (determined  as the
     average  annual market share price of the  Company's  shares) based on the
     monetary value of the  subscription  rights attached to outstanding  share
     options.  The number of shares  calculated  as above is compared  with the
     number of shares that would have been issued  assuming the exercise of the
     share options.

<TABLE>
<CAPTION>
                                                                2005              2004             2003
                                                             HK$'000           HK$'000          HK$'000
<S>                                                          <C>               <C>              <C>
     Profit used to determine diluted earnings per
        share                                                366,184           431,216          424,488
                                                         ==============    =============    =============

     Weighted average number of ordinary shares in
        issue (thousands)                                    390,266           390,266          390,266
     Adjustments for  - share options (thousands)                 26                 -                -
                                                         --------------    -------------    -------------
     Weighted average number of ordinary shares for
        diluted earnings per share (thousands)               390,292           390,266          390,266
                                                         ==============    =============    =============

     Diluted earnings per share (HK$ per share)                 0.94              1.10             1.09
                                                         ==============    =============    =============
</TABLE>

26.  DIVIDENDS

     The  dividends  paid  during  the  years  ended  2005,  2004 and 2003 were
     HK$136,593,000 (HK$0.35 per share), HK$124,885,000 (HK$0.32 per share) and
     HK$202,938,000 (HK$0.52 per share included special dividend of HK$0.25 per
     share)  respectively.  A dividend in respect of 2005 of HK$0.27 per share,
     amounting to a total dividend of  HK$105,372,0000 is to be proposed at the
     Annual General Meeting on May 19, 2006. These financial  statements do not
     reflect this dividend payable.

<TABLE>
<CAPTION>
                                                                2005              2004             2003
                                                             HK$'000           HK$'000          HK$'000
<S>                                                          <C>               <C>              <C>
     Interim dividend paid of HK$0.08 (2004: HK$0.08;         31,221            31,221           31,221
        2003: HK$0.08) per ordinary share
     Proposed final dividend of HK$0.27 (2004: HK$0.27;
        2003: HK$0.24) per ordinary share                    105,372           105,372           93,664
                                                         --------------    -------------    -------------
                                                             136,593           136,593          124,885
                                                         ==============    =============    =============
</TABLE>


                                     F-32
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


27.  CASH GENERATED FROM OPERATIONS

<TABLE>
<CAPTION>
                                                        2005          2005          2004           2003
                                                     US$'000       HK$'000       HK$'000        HK$'000
<S>                                                   <C>          <C>           <C>            <C>
     Profit for the year                              46,842       365,365       431,080        424,488
     Adjustments for:
     -  Tax (note 22)                                  6,573        51,270        60,536         87,598
     -  Bad debt expenses                                383         2,987             -              -
     -  Provision for impairment of receivables          987         7,700        17,690         (6,279)
        (written back) made
     -  Depreciation (note 7)                         37,836       295,117       287,382        221,694
     -  Amortization of prepaid operating lease           75           583           583            583
        payment (note 6)
     -  Amortization of licence (note 8)                  21           161             -              -
     -  Profit on sale of property, plant and            (13)          (99)         (169)           (76)
        equipment (see below)
     -  Impairment loss recognized in respect of           -             -             -          1,896
        goodwill of associates
     -  Interest income (note 18)                     (5,591)      (43,606)      (21,813)        (4,945)
     -  Finance costs (note 21)                            -             -             1          3,029
     -  Share of loss from associates (note 10)          496         3,872        12,380         15,625
     Changes in working capital (excluding the
        effects of acquisition and exchange
        differences on consolidation):
     -  Unbilled receivable                               90           704         6,357        (16,643)
     -  Amount paid to tax authority                  (3,416)      (26,643)      (42,535)        (5,182)
     -  Inventories                                       (2)          (18)         (416)             -
     -  Trade and other receivables                      100           779       (27,136)       (16,416)
     -  Other payables and accrued expenses             (154)       (1,204)       47,964          4,597
     -  Deferred revenue                              (6,058)      (47,251)        7,509        (19,580)
                                                    ----------    ---------    -----------    -----------
     Cash generated from operations                   78,169       609,717       779,413        690,389
                                                    ==========    =========    ===========    ===========
</TABLE>

     In the cash flow  statement,  proceeds  from sale of  property,  plant and
     equipment comprise:

<TABLE>
<CAPTION>
                                                        2005          2005          2004          2003
                                                     US$'000       HK$'000       HK$'000       HK$'000
<S>                                                  <C>           <C>           <C>           <C>
     Net book amount (note 7)                              1             9            88             5
     Profit on sale of property, plant and                13            99           169            76
        equipment
                                                    ----------    ----------    ----------    -----------
     Proceeds from sale of property, plant and
        equipment                                         14           108           257            81
                                                    ==========    ==========    ==========    ===========
</TABLE>

                                     F-33
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

28.  CONTINGENCIES

     Under Indian tax  regulations,  the Group may be subject to Indian  income
     tax on revenues  received by the Group in respect of income from provision
     of satellite transponder capacity to the Group's customers for purposes of
     those  customers  carrying on business in India or earning income from any
     source in India.

     The  Indian  tax  authorities  have  assessed  the Group for income tax as
     follows:

     Assessment year                               Amount HK$       Amount INR
                                                (approximate)     (approximate)
     1997-98                                       20 million      115 million
     1998-99                                       23 million      141 million
     1999-00                                       22 million      127 million
     2000-01                                       14 million       84 million
     2001-02                                       29 million      171 million
     2002-03                                       38 million      210 million
     2003-04                                       43 million      247 million
                                               ---------------    -------------
     Total                                        189 million            1,095
                                                                       million
                                               ===============    =============


     The Group has filed  appeals for each of the  assessment  years 1997-98 to
     2003-04.

     No  assessment  has yet been made for the  2004-05 or  2005-06  assessment
     years.

     The Income Tax Appellate  Tribunal (the  "Tribunal")  in an earlier appeal
     filed against the original assessment for the assessment year 1997-98 held
     that  the  Group  is  liable   for  Indian   income   tax  under   certain
     circumstances. The Group does not believe that it is liable for the Indian
     income tax as held by the  Tribunal  and has filed an appeal  against  the
     Tribunal's decision. The tax authorities have also filed an appeal against
     the Tribunal's  decision.  Both the appeals have been admitted by the High
     Court.

     In order to  obtain a stay of  recovery  proceedings,  the  Group has made
     payments as follows  and has  recorded  these  payments as an asset on the
     assumption that the amounts are recoverable:

     Assessment year                               Amount HK$       Amount INR
                                                (approximate)     (approximate)
     1997-98                                       13 million       78 million
     1998-99                                       15 million       88 million
     1999-00                                       10 million       62 million
     2000-01                                        9 million       50 million
     2001-02                                       20 million      119 million
     2002-03                                       27 million      148 million
     2003-04                                       24 million      135 million
                                               ---------------    -------------
     Total                                        118 million      680 million
                                               ===============    =============

     In addition,  based on the general  principles  set forth by the Tribunal,
     the amount of income  taxable in India depends on the payments made by the
     Group's customers to the Group for the purpose of those customers carrying
     on business in India or earning  income from any source in India.  As such
     information  is  proprietary  in nature and has not been  provided  by the
     Group's customers, the Group cannot reasonably estimate the taxable income
     and therefore  also cannot  estimate the amount of income tax to which the
     Group may be assessed.  Furthermore,  as stated above, the Group has filed
     an appeal against the Tribunal's decision. The appeal has been admitted by
     the High Court and is pending before the Court. Accordingly,  no provision
     has  been  recognized  for  Indian  income  tax in the  Group's  financial
     statements. Any related legal costs are expensed as incurred.

29.  MAJOR NON-CASH TRANSACTIONS

     On November 30, 2004, the Group  decreased its equity  interest in Skywave
     TV Company Limited ("Skywave") from 100% to 80% when two independent third
     parties made a contribution in kind of HK$3 million each in return for 10%
     stake in the Skywave.  There was no major non-cash transaction during 2005
     and 2003.


                                     F-34
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

30.  COMMITMENTS - GROUP

     CAPITAL COMMITMENTS
     Capital  expenditure  at the balance sheet date but not yet incurred is as
     follows:

<TABLE>
<CAPTION>
                                                                                2005               2004
                                                                             HK$'000            HK$'000
<S>                                                                          <C>                <C>
     A satellite earth station
        Contracted but not provided for                                            -             15,561
     Other investment projects
        Authorized but not contracted for                                     10,140              5,486
     Other assets
        Contracted but not provided for                                        5,750                345
                                                                         ---------------    -------------
                                                                              15,890             21,392
                                                                         ===============    =============
</TABLE>

     OPERATING LEASE COMMITMENTS - WHERE THE GROUP IS THE LESSEE
     The Group  leases  certain of its office and  residential  premises  under
     non-cancellable  operating  leases.  Leases are  negotiated for an average
     term  of  two  to  four  years.  The  lease  expenditure  expensed  in the
     statements of operations  during the years presented are disclosed in note
     19.

     The  future  aggregate   minimum  lease  payments  under   non-cancellable
     operating leases are as follows:

<TABLE>
<CAPTION>
                                                                                2005               2004
                                                                             HK$'000            HK$'000
<S>                                                                          <C>                <C>
     Not later than 1 year                                                     4,376              6,504
     Later than 1 year and not later than 5 years                              4,773             10,647
     Later than 5 years                                                            -                  -
                                                                         ---------------    -------------
                                                                               9,149             17,151
                                                                         ===============    =============
</TABLE>

     OPERATING LEASE COMMITMENTS - WHERE THE GROUP IS THE LESSOR
     The Group  leases  its office  premises  under  non-cancellable  operating
     leases.  The  lease  is  negotiable  for  four  years.  The  lease  income
     recognized in the statement of operations  during the year was  HK$552,000
     (2004: HK$368,000; 2003: Nil).

     The  Group had  contracted  with the  customer  for the  following  future
     minimum lease payments:

<TABLE>
<CAPTION>
                                                                                2005               2004
                                                                             HK$'000            HK$'000
<S>                                                                              <C>                <C>
     Within one year                                                             552                552
     One to two years                                                            552                552
     Two to three years                                                          184                552
     Three to four years                                                           -                184
                                                                         ---------------    -------------
                                                                               1,288              1,840
                                                                         ===============    =============
</TABLE>

                                     F-35
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31.  RELATED-PARTY TRANSACTIONS

     The Group is  controlled  by Bowenvale  Limited  (incorporated  in British
     Virgin Islands),  which owns 68.9% of the Company's shares.  The remaining
     31.1% of the shares are widely held. The ultimate parents of the Group are
     CITIC Group  (incorporated in China) and SES GLOBAL S.A.  (incorporated in
     Luxembourg).

     The following transactions were carried out with related parties:

     i) INCOME FROM PROVISION OF SATELLITE TRANSPONDER CAPACITY

     The Group has entered into  agreements  for the  provision of  transponder
     capacity  to a  subsidiary  of CITIC,  CITIC  Guoan  Information  Industry
     Company  Limited.  CITIC  is a  substantial  shareholder  of  the  Company
     throughout the years presented.

     During the years presented,  the Group recognized income from provision of
     satellite transponder capacity from its associate, SpeedCast.

<TABLE>
<CAPTION>
                                                              2005              2004             2003
                                                           HK$'000           HK$'000          HK$'000
<S>                                                        <C>               <C>              <C>
     CITIC Guoan Information Industry Company Limited        2,461             3,101            3,782
     SpeedCast Limited (an associate)                       32,202            18,793           20,829
                                                       ---------------   --------------   ---------------
                                                            34,663            21,894           24,611
                                                       ===============   ==============   ===============
</TABLE>

     ii) AGENCY FEE

     In addition, the Group has entered into an agreement with CITIC
     Technology Company Limited, a subsidiary of CITIC, for collecting money
     from China customers on behalf of the Group.

<TABLE>
<CAPTION>
                                                              2005              2004             2003
                                                           HK$'000           HK$'000          HK$'000
<S>                                                        <C>               <C>              <C>
     CITIC Technology Company Limited                          723               686              719
                                                       ===============   ==============   ===============
</TABLE>

     iii) KEY MANAGEMENT COMPENSATION

     Information for other management personnel is set out in note 20.

     The Group made payments to SES GLOBAL and its subsidiary and a
     subsidiary of CITIC for certain Non-executive Directors representing
     SES GLOBAL and CITIC.

<TABLE>
<CAPTION>
                                                              2005              2004             2003
                                                           HK$'000           HK$'000          HK$'000
<S>                                                        <C>               <C>              <C>
     SES GLOBAL and its subsidiary                             462               475              475
     A subsidiary of CITIC                                     500               525              525
                                                       ---------------   --------------   ---------------
                                                               962             1,000            1,000
                                                       ===============   ==============   ===============

     iv) OTHER FEES
                                                              2005              2004             2003
                                                           HK$'000           HK$'000          HK$'000

     Licence fee:
     SES ASTRA S.A.                                              -                49                -
                                                       ===============   ==============   ===============

     Consultancy fee:
     SES ASTRA S.A.                                              -                 -              390
                                                       ===============   ==============   ===============
</TABLE>

     SES ASTRA S.A. is a wholly-owned  subsidiary of SES GLOBAL. SES GLOBAL was
     a substantial shareholder of the Company throughout the years presented.


                                     F-36
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31.  RELATED-PARTY TRANSACTIONS (continued)

     v) INTEREST INCOME ON LOAN RECEIVABLE FROM AN ASSOCIATE

<TABLE>
<CAPTION>
                                                              2005              2004              2003
                                                           HK$'000           HK$'000           HK$'000
<S>                                                        <C>               <C>                <C>
     SpeedCast Limited (an associate)                          176               419                86
                                                       ===============   ==============    ==============
</TABLE>

     vi) YEAR-END BALANCES ARISING FROM THESE TRANSACTIONS

<TABLE>
<CAPTION>
                                                                                2005              2004
                                                                             HK$'000           HK$'000
<S>                                                                          <C>               <C>
     Trade receivables from related parties (note 12):
     CITIC Guoan Information Industry Company Limited                             39             1,248
     SpeedCast Limited (an associate)                                          7,639             3,326
                                                                         --------------    --------------
                                                                               7,678             4,574
                                                                         ==============    ==============

     Receivables from related parties (note 12):
     CITIC Technology Company Limited                                         15,503            14,628
                                                                         ==============    ==============

     Payables to related parties:
     CITIC Technology Company Limited                                            455               770
                                                                         ==============    ==============

     vii) LOAN RECEIVABLE FROM AN ASSOCIATE
                                                                                2005              2004
                                                                             HK$'000           HK$'000
     Loan receivable from SpeedCast Limited:
     Beginning of the year                                                     5,070             7,279
     Loans advanced during the year                                                -             1,301
     Loan repayments received                                                 (5,070)           (3,510)
                                                                         --------------    --------------
     End of the year (note 12)                                                     -             5,070
                                                                         ==============    ==============
</TABLE>

     The amount was  secured,  bearing  interest  at 6% per annum and was fully
     repaid as at December 31, 2005.

     The above  transactions  were entered into on commercial  terms determined
     and agreed by the Group and the relevant parties.


                                     F-37
<PAGE>
-------------------------------------------------------------------------------
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32.  SUMMARY OF  DIFFERENCES  BETWEEN HONG KONG ("HK") AND UNITED  STATES("US")
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")

     The  accompanying   consolidated  financial  statements  are  prepared  in
     accordance  with HK GAAP,  which differs in certain  significant  respects
     from USGAAP as follows:

     The  following  table  summarizes  the  effect on profit  (net  income) of
     differences between HK GAAP and US GAAP for the years presented:

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31
                                                      --------------------------------------------------
                                                           2005        2005          2004         2003
                                                        US$'000     HK$'000       HK$'000      HK$'000
<S>                                                     <C>         <C>           <C>          <C>
     Profit for the year (net income) as                 46,947     366,184       431,216      424,488
     reported under
       HK GAAP
     US GAAP adjustments:
        Amortization of interest and borrowing           (1,035)     (8,072)       (8,072)     (11,780)
        costs (a)
        Amortization of goodwill (b)                          -           -           221        6,500
        Impairment loss of goodwill (b)                       -           -             -      (11,104)
        Tax effect on reconciling items (c)                  90         706           706          151
                                                      ---------    ----------   ----------    ----------
      Profit for the year (net income) under US          46,002     358,818       424,071      408,525
     GAAP
                                                      =========    ==========   ==========    ==========

     Basic earnings per share under US GAAP             US$0.12     HK$0.92       HK$1.09      HK$1.05
     Diluted earnings per share under US GAAP           US$0.12     HK$0.92       HK$1.09      HK$1.05
     Basic earnings per American Depositary
       Share ("ADS") under US GAAP                      US$1.18     HK$9.19      HK$10.86     HK$10.46
     Diluted earnings per American Depositary
       Share ("ADS") under US GAAP                      US$1.18     HK$9.19      HK$10.86     HK$10.46
     Shares used in computation of basic earnings
       per share (in thousands)                         390,266     390,266       390,266      390,266
     Shares used in computation of diluted
     earnings                                           390,292     390,292       390,266      390,266
       per share (in thousands)
</TABLE>

     The following table summarizes the effect on  shareholders'  equity of the
     differences between HK GAAP and US GAAP:

<TABLE>
<CAPTION>
                                                                            AS AT DECEMBER 31
                                                                 ---------------------------------------

                                                                      2005          2005           2004
                                                                   US$'000       HK$'000        HK$'000
<S>                                                                <C>           <C>            <C>
     Shareholders' equity as reported under                        526,178     4,104,188      3,874,597
       HK GAAP
     US GAAP adjustments:
        Capitalization of interest and borrowing costs (a)          15,767       122,980        122,980
        Amortization of interest and borrowing costs (a)           (10,336)      (80,617)       (72,545)
        Amortization of goodwill (b)                                 1,452        11,325         11,325
        Impairment loss of goodwill (b)                             (1,424)      (11,104)       (11,104)
        Tax effect of reconciling items (c)                         (1,004)       (7,831)        (8,537)
                                                                 ----------    -----------    ----------
      Shareholders' equity under US GAAP                           530,633     4,138,941      3,916,716
                                                                 ==========    ===========    ==========
</TABLE>


                                F-38
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32.  SUMMARY OF  DIFFERENCES  BETWEEN HONG KONG ("HK") AND UNITED  STATES("US")
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") (continued)

     (a) Capitalization of interest and borrowing costs

     Under HK GAAP,  interest on bank loans and related  costs of obtaining the
     loans (including costs incurred in connection with loan facilities)  taken
     out to finance construction of satellites is capitalized during the period
     of  construction.  Under US GAAP,  the interest cost  incurred  during the
     period of construction that could have been avoided if the construction of
     satellites had not been made, is capitalized.  The interest capitalized is
     computed by applying an average  borrowing rate of outstanding debt to the
     total amount of qualifying assets under construction,  not to exceed total
     interest costs incurred.

     In addition,  under US GAAP,  certain  related  borrowing costs payable to
     lenders are excluded from the amounts capitalized.

     (b) Amortization and impairment loss of goodwill

     Under HK GAAP,  HKFRS 3 requires all business  combinations  for which the
     agreement  date is on or after  January 1, 2005 to be accounted  for using
     the purchase method.  Goodwill acquired in a business  combination will no
     longer be  amortized  but will be  subject  to  impairment  tests at least
     annually in accordance with HKAS 36. Upon the adoption of HKFRS 3, the net
     carrying  amount of goodwill  carried on the  balance  sheet is frozen and
     will be tested for  impairment.  Goodwill  previously  taken  directly  to
     reserves will no longer be subject to  impairment  testing and will not be
     recognized in the statement of operations when all or part of the business
     to which the  goodwill  relates  is  disposed  of.  Accordingly,  goodwill
     previously  taken  directly to reserves  will not impact the  statement of
     operations in the future upon the adoption of HKAS 36.

     Under US GAAP,  effective from January 1, 2002, goodwill is: (i) no longer
     amortized,  (ii)  assigned  to a  reporting  unit  and  (iii)  tested  for
     impairment  at least  annually.  Prior to January 1,  2002,  goodwill  was
     amortized over its estimated  useful life, not to exceed 40 years under US
     GAAP.

     (c) The amounts included in the reconciliation show the income tax effects
     of the differences between HK GAAP and US GAAP as described above.

     (d) Interest income

     Under HK GAAP,  interest  income is included  in profit  from  operations.
     Under US GAAP,  interest  income is excluded from operating  income and is
     included in net income as other income.


                                     F-39
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32.  SUMMARY OF  DIFFERENCES  BETWEEN HONG KONG ("HK") AND UNITED  STATES("US")
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") (continued)

     The changes in shareholders' equity based on US GAAP are as follows:

<TABLE>
<CAPTION>
                                                                            AS AT DECEMBER 31
                                                                 ---------------------------------------
                                                                      2005          2005           2004
                                                                   US$'000       HK$'000        HK$'000
<S>                                                                <C>         <C>            <C>
     Balance, beginning of year                                    502,143     3,916,716      3,617,530
     Transactions during the year:
      i)  Net income                                                46,002       358,818        424,071
     ii)  Dividend paid                                            (17,512)     (136,593)      (124,885)
                                                                 ----------    -----------    ----------
     Balance, end of year                                          530,633     4,138,941      3,916,716
                                                                 ==========    ===========    ==========
</TABLE>

     Note: One ADS is equivalent to 10 ordinary shares.


     A reconciliation  of the significant  balance sheet accounts under HK GAAP
     and to the amounts determined under US GAAP is as follows:

<TABLE>
<CAPTION>
                                                                              AS AT DECEMBER 31
                                                                  ----------------------------------------
                                                                       2005          2005           2004
                                                                    US$'000       HK$'000        HK$'000
<S>                                                                 <C>           <C>            <C>
     Property, plant and equipment
       Amount under HK GAAP                                         336,014     2,620,911      2,894,467
       US GAAP adjustments:
          Capitalization of interest and borrowing costs             15,767       122,980        122,980
          Amortization of interest and borrowing costs              (10,336)      (80,617)       (72,545)
                                                                  ----------    -----------    -----------
       Amount under US GAAP                                         341,445     2,663,274      2,944,902
                                                                  ==========    ===========    ===========

     Interests in associates
       Amount under HK GAAP                                           1,833        14,294         13,397
       US GAAP adjustments:
          Amoritsation of goodwill                                    1,452        11,325         11,325
          Impairment loss of goodwill                                (1,424)      (11,104)       (11,104)
                                                                  ----------    -----------    -----------
       Amount under US GAAP                                           1,861        14,515         13,618
                                                                  ==========    ===========    ===========


     Deferred income tax liabilities
       Amount under HK GAAP                                          24,699       192,654        205,258
       US GAAP adjustments:
          Tax effect of reconciling items                             1,004         7,831          8,537
                                                                  ----------    -----------    -----------
       Amount under US GAAP                                          25,703       200,485        213,795
                                                                  ==========    ===========    ===========
</TABLE>

     The amounts of total assets  determined  using US GAAP, as a result of the
     foregoing   adjustments,   are   HK$4,726,114,000   (US$605,912,000)   and
     HK$4,599,903,000  as of  December  31,  2005 and 2004,  respectively.  The
     amounts of total liabilities  (excluding  minority  interests)  determined
     using  US  GAAP,   as  a  result  of  the   foregoing   adjustments,   are
     HK$581,636,000  (US$74,569,000) and HK$676,831,000 as of December 31, 2005
     and 2004, respectively.


                                     F-40
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32.  SUMMARY OF  DIFFERENCES  BETWEEN HONG KONG ("HK") AND UNITED  STATES("US")
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") (continued)

<TABLE>
<CAPTION>
                                                                    AS AT DECEMBER 31
                                                --------------------------------------------------------
                                                     2005           2005          2004           2003
                                                  US$'000        HK$'000       HK$'000        HK$'000
<S>                                               <C>            <C>           <C>            <C>
     Net cash generated from operating
     activities
       Amount under HK GAAP                        65,942        514,350       750,812        627,534
       US GAAP adjustments:
          Interest received                         5,107         39,833        20,290          4,858
          Cost of raising bank borrowing                -              -             -         (6,951)
     facility
                                                -----------    ----------    -----------    ------------
       Amount under US GAAP                        71,049        554,183       771,102        625,441
                                                ===========    ==========    ===========    ============

     Net cash used in investing activities
       Amount under HK GAAP                         3,002         23,414       (50,909)      (164,536)
       US GAAP adjustments:
          Interest received                        (5,107)       (39,833)      (20,290)        (4,858)
                                                -----------    ----------    -----------    ------------
       Amount under US GAAP                        (2,105)       (16,419)      (71,199)      (169,394)
                                                ===========    ==========    ===========    ============

     Net cash used in financing activities
       Amount under HK GAAP                       (17,512)      (136,593)     (124,885)      (209,889)
       US GAAP adjustments:
          Cost of raising bank borrowing                -              -             -          6,951
     facility
                                                -----------    ----------    -----------    ------------
       Amount under US GAAP                       (17,512)      (136,593)     (124,885)      (202,938)
                                                ===========    ==========    ===========    ============
</TABLE>

     The  reclassification  for US GAAP  consolidated  statements of cash flows
     pertains to interest received and costs for bank borrowings facility which
     are  presented  as  investing  and  financing  activities  under  HK GAAP,
     respectively (as opposed to operating  activities and investing activities
     under US GAAP, respectively).

     Additional disclosures as required by US GAAP:

     (a) US GAAP  requires that all items that are required to be recognized as
         components of comprehensive income be reported in a separate financial
         statement.  There are no material differences between total recognized
         gains and losses for the periods shown in the consolidated  statements
         of changes in Equity  presented  under HK GAAP  comprehensive  income,
         except  for  the  differences  between  HK  GAAP  and US  GAAP  profit
         attributable to shareholders shown above.

     (b) The Company applies  Accounting  Principles  Board ("APB") Opinion No.
         25,   "Accounting   for  Stock  Issued  to  Employees",   and  related
         Interpretations  in  accounting  for  options  granted  under the 1996
         Scheme and 2002 Scheme (see note 20).  No  compensation  cost has been
         recognized  on  options  granted  under the 1996  Scheme  and the 2002
         Scheme.

         The Company,  on September 8, 1999,  cancelled 2,161,000 share options
         (granted under the 1996 Scheme)  exercisable from November 26, 1999 to
         November  25, 2006 at an exercise  price of  HK$19.00  per share.  The
         Company  had,  simultaneous  to  the  cancellation,  issued  2,022,000
         replacement  share options to the same employees with similar exercise
         period  but at a lower  exercise  price of  HK$17.48  per  share.  The
         139,000  share  options  cancelled  but not replaced  were those share
         options held by resigned employees.  There was no change in the number
         of shares to be issued to  satisfy  the  exercise  of the  replacement
         share options. The Company, through December 31, 2002, did not account
         for the option  modification  under a variable  plan  accounting  that
         would have been required under  Financial  Accounting  Standards Board
         Interpretation No. 44, "Accounting for Certain Transactions  Involving
         Stock  Compensation".  There would be no impact on the Company's  2003
         consolidated  financial  statements and on 2004 and 2005  consolidated
         financial  statements  when  the  Company  accounted  for  the  option
         modification  under a variable plan required  under FIN 44 as the fair
         value of the underlying shares was less than the exercise price of the
         share options as at December 31, 2003, 2004 and 2005, respectively.


                                     F-41
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32.  SUMMARY OF  DIFFERENCES  BETWEEN HONG KONG ("HK") AND UNITED  STATES("US")
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") (continued)

     Had  compensation  cost  for  the  Company's  share  option  schemes  been
     determined based on the fair value at the grant dates for awards under the
     share option schemes  consistent with the method of Statement of Financial
     Accounting   Standards   ("SFAS")  No.  123  "ACCOUNTING  FOR  STOCK-BASED
     COMPENSATION",  the Company's net income and earnings per share would have
     been as follows:

<TABLE>
<CAPTION>
                                                          2005             2004            2003
                                                       HK$'000          HK$'000         HK$'000
<S>                                                    <C>              <C>             <C>
     Net income as reported under US GAAP              358,818          424,071         408,255
     Add: Stock compensation as reported
     Less: Stock compensation determined                (3,589)          (6,983)        (10,952)
             using the fair value method
                                                   -------------    ------------    ---------------
     Pro forma net income under US GAAP                355,229          417,088         397,303
                                                   =============    ============    ===============

     Shares used in computation of basic
        earnings per share (thousands)                 390,266          390,266         390,266
                                                   =============    ============    ===============

     Shares used in computation of diluted
        earnings per share (thousands)                 390,292          390,266         390,266
                                                   =============    ============    ===============

     Net income per share under US GAAP
     Basic, as reported (HK$ per share)                   0.92             1.09            1.05
     Diluted, as reported (HK$ per share)                 0.92             1.09            1.05

     Basic, pro forma (HK$ per share)                     0.91             1.07            1.02
     Diluted, pro forma (HK$ per share)                   0.91             1.07            1.02
</TABLE>

     The  weighted  average fair value of options  granted  during 2002 (Option
     Types A, B and C) was HK$8, using the Black-Scholes  option-pricing  model
     based on the following assumptions:

     Expected life of options                            10 years
     Expected volatility                                 51.00%
     Risk-free rate                                      5.99%
     Expected annual dividend yield                      1.62%

     The  Black-Scholes  option  pricing  model  requires  the  input of highly
     subjective  assumptions,  including the volatility of share price. Because
     changes in subjective  input  assumptions  can materially  affect the fair
     value  estimate,  in the directors'  opinion,  the existing model does not
     necessarily  provide a  reliable  single  measure of the fair value of the
     share options.

     Share  option  with  Option  Types  A  and  B  issued  in  2002  represent
     replacement  share  options to Option Types D and E,  respectively.  There
     would be no impact on pro forma net income,  assuming SFAS No. 123 is used
     with  respect to issuance  of the  replacement  share  options as the fair
     value of share options prior to and subsequent to the replacement remained
     the same.

     Compensation  expense resulting from the fair value method of SFAS No. 123
     may not be representative of compensation  expense to be incurred on a pro
     forma basis in future years.


                                     F-42
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32.  SUMMARY OF  DIFFERENCES  BETWEEN HONG KONG ("HK") AND UNITED  STATES("US")
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") (continued)

     A summary of the status of the Company's 2002 Scheme and 1996 Scheme as of
     December 31, 2005,  2004 and 2003, and changes during the years then ended
     is presented below:

<TABLE>
<CAPTION>
                                2005                        2004                       2003
                      -----------------------    -------------------------    ----------------------
                                   WEIGHTED-                    WEIGHTED-                  WEIGHTED-
                                     AVERAGE                      AVERAGE                    AVERAGE
                                    EXERCISE                     EXERCISE                   EXERCISE
                        SHARES         PRICE        SHARES          PRICE      SHARES          PRICE
                        ------                      ------                     ------
                                         HK$                          HK$                       HK$
<S>                   <C>              <C>       <C>                <C>       <C>              <C>
     Outstanding,     6,926,000        15.91     6,941,000          15.91     7,149,500        15.91
     beginning of
     year
     Granted                  -            -             -              -           -              -
     Exercised                -            -             -              -           -              -
     Forfeited/cancelled/lapsed
                      (325,500)        15.85      (15,000)          17.48     (208,500)        15.81
                      ---------   -----------    ----------    -----------    --------    ----------
     Outstanding,
     end of year      6,660,500        15.91     6,926,000          15.91     6,941,000        15.91
                      =========   ===========    ==========    ===========    ========    ==========

     Options
     exercisable at
     year-end         4,944,750        17.48     4,314,875          17.48     3,017,500        17.48
                      =========   ===========    ==========    ===========    ========    ==========

     Weighted-average                   N/A                          N/A                        N/A
     fair value of
     options
     granted during
     the year
</TABLE>

     The following  table  summarizes  information  on the 2002 Scheme and 1996
     Scheme outstanding at December 31, 2005:

<TABLE>
<CAPTION>
                      Options outstanding                             Options exercisable
     ----------------------------------------------------    -------------------------------------
                                              WEIGHTED-
                                                AVERAGE
                                              REMAINING
                                            CONTRACTUAL
     EXERCISE PRICE      NUMBER OF OPTIONS         LIFE     EXERCISE PRICE     NUMBER OF OPTIONS
     --------------      -----------------  -----------     --------------     -----------------
<S>                      <C>                <C>             <C>                <C>
     HK$ 14.35                3,311,500       6.09 years     HK$ 14.35                 1,655,750
     HK$ 17.48                3,289,000       2.33 years     HK$ 17.48                 3,289,000
                         ---------------    -------------                      ------------------
                              6,600,500       4.22 years                               4,944,750
                         ===============    =============                      ==================
</TABLE>

     (c) Recent changes in accounting standards

         SFAS NO. 154. In May 2005, the Financial  Accounting  Standards  Board
         ("FASB")  issued the US Statement of  Financial  Accounting  Standards
         ("SFAS")  No.  154,  Accounting  Changes  and  Error  Corrections,   a
         replacement of APB Opinion No. 20, Accounting  Changes and SFAS No. 3,
         Reporting  Accounting  Changes in Interim  Financial  Statements (SFAS
         154).  SFAS 154 changes the  requirements  for the accounting for, and
         reporting of, a change in accounting principles. Previously, voluntary
         changes  in  accounting  principles  were  generally  required  to  be
         recognized by way of a cumulative  effect adjustment within net income
         during  the  period of the  change.  SFAS 154  requires  retrospective
         application  to financial  statements of prior  periods,  unless it is
         impracticable to determine either the  period-specific  effects or the
         cumulative effect of the change.  SFAS 154 is effective for accounting
         changes made in fiscal years beginning after 15 December 2005; but the
         statement does not change the transitional  provisions of any existing
         accounting  pronouncements.  The  Company  does not  believe  that the
         adoption  of SFAS 154 will have a  material  effect  on its  financial
         position, cash flows or results of operations.


                                     F-43
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32.  SUMMARY OF  DIFFERENCES  BETWEEN HONG KONG ("HK") AND UNITED  STATES("US")
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") (continued)

     (c) Recent changes in accounting standards (continued)

         FASB NO. 109. In July 2005, the FASB issued a proposed  Interpretation
         of FASB  Statement  No. 109 (the  "Interpretation"),  "Accounting  for
         Income Taxes" which clarified  accounting for uncertain tax positions.
         Under the Interpretation,  an enterprise is required to recognize,  in
         its  financial  statements,  the best  estimate of the impact of a tax
         position  only if that  position  would  probably be  sustained  in an
         audit,  based  solely  on the  technical  merits of the  position.  In
         evaluating  whether or not the  "probable  recognition"  threshold has
         been met, the  Interpretation  requires the  presumption  that the tax
         position will be evaluated during an audit by taxing authorities.  The
         term  probable,  as defined in FASB Statement No. 5,  "Accounting  for
         Contingencies" means "the future event or events are likely to occur."
         Individual  tax positions  that fail to meet the probable  recognition
         threshold  will  generally  result in either  (a) a  reduction  in the
         deferred tax asset or an increase in a deferred  tax  liability or (b)
         an increase in the liability for income taxes payable or the reduction
         of an income tax refund  receivable.  The impact may also include both
         (a) and (b).  The  increase in the income tax  liability  would not be
         classified  as a deferred  tax  liability  unless it  resulted  from a
         taxable  temporary  difference  created by a tax position that has met
         the  probable  recognition  threshold.  For  enterprises  that present
         classified statements of financial position,  the income tax liability
         would be  classified  as  current  to the  extent  that a  payment  is
         anticipated  within one year or the operating  cycle,  if longer.  The
         Interpretation  also would provide guidance on disclosure,  accrual of
         interest and penalties, accounting in interim periods, and transition.
         The  Interpretation is currently in draft, and thus any effects on the
         current accounting treatment of the Indian income tax liability or the
         PRC withholding tax cannot be assessed at this point in time.

         SAB 107.  In March  2005,  the SEC issued  Staff  Accounting  Bulletin
         ("SAB") No. 107 Share Based Payment, which offers guidance on SFAS No.
         123(R). SAB No. 107 was issued to assist preparers by simplifying some
         of the  implementation  challenges of SFAS No. 123(R) while  enhancing
         the  information  that  investors  receive.  SAB  No.  107  creates  a
         framework that is premised on two overarching themes: (i) considerable
         judgment will be required by preparers to successfully  implement SFAS
         No. 123(R), specifically when valuing employee stock options; and (ii)
         reasonable  individuals,  acting in good  faith,  may reach  different
         conclusions on the fair value of employee  stock  options.  Key topics
         covered by SAB No. 107 include valuation models,  expected  volatility
         and expected  term.  The Company  will adopt SAB No. 107  concurrently
         with the adoption of SFAS No. 123(R) with effect from January 1, 2006.
         The Group does not expect the  adoption of this SAB to have a material
         impact  on  its   consolidated   financial   position  or  results  of
         operations.

     (d) Details  of  the  movements  of  the   provision  for   impairment  of
         receivables  made for the years ended December 31, 2005, 2004 and 2003
         are as follows:

                                                 2005        2004         2003
                                              HK$'000     HK$'000      HK$'000

         At beginning of year                  23,230       5,540       15,012
         Bad debt expense                       7,700      17,690            -
         Bad debt recovered                         -           -       (6,279)
         Amount written off                         -           -       (3,193)
                                            ----------- ------------ -----------
         At end of year                        30,930      23,230        5,540
                                            =========== ============ ===========

     (e) Major customers

         The Company has one customer accounting for 10% or more of its service
         revenue.  Service revenue from such customer  represents 25.7%,  22.4%
         and 24.9% of revenues in 2005, 2004 and 2003, respectively.

     (f) Income tax

         The  Company  is subject to Hong Kong  Profits  Tax on its  operations
         deemed to be located in Hong Kong.  It is also  subject to an overseas
         tax on its operations in certain overseas jurisdictions.

         The Group's operating assets consist primarily of its satellites which
         are used,  or are  intended  for use,  for  transmission  to  multiple
         geographical  areas and  therefore  cannot be  allocated  between  tax
         jurisdictions.  Accordingly, no analysis of income tax and profit from
         operations by jurisdiction has been presented.

     (g) Fair value of financial instruments

         The carrying value of cash and cash  equivalents,  other  receivables,
         other payables and customer  deposits  approximates fair value because
         of the relatively short maturities of these financial instruments.  It
         is not  practical  to  determine  the fair  value of  unbilled  rental
         receivable as it involves high volume of transactions.


                                     F-44
<PAGE>
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ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
-------------------------------------------------------------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32.  SUMMARY OF  DIFFERENCES  BETWEEN HONG KONG ("HK") AND UNITED  STATES("US")
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") (continued)

     (h) Concentration of credit risk

         Financial   instruments  which  potentially  subject  the  Company  to
         concentrations  of credit risks consist  principally  of cash and cash
         equivalents  and  trade  receivables.  The  Company  believes  that no
         significant  credit risk exists relative to cash and cash  equivalents
         as  substantially  all of these financial  instruments are held in the
         form of term deposits at a major bank.

         The Company performs on-going credit evaluations of its customers. The
         Company  believes  that no  significant  credit  risk exists for these
         assets as credit losses,  when realized,  is expected to be within the
         range of management's expectations.

     (i) Concentration - industry and major customers
                                                            2005    2004   2003
                                                            ----    ----   ----

         Broadcasting                                      65.7%   70.6%  70.4%

         Telecommunications, Internet and Multimedia       34.3%   29.4%  29.6%

         The five largest customers accounted for 39.3%, 46.0% and 42.0% of the
         Company's  total revenue for the years ended  December 31, 2005,  2004
         and 2003, respectively.

         The  trade  receivables  from the  five  customers  with  the  largest
         receivables   balances  represent  75.9%  and  71.5%  of  total  trade
         receivables as of December 31, 2005 and 2004, respectively.

     (j) 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  reported  amounts  of assets  and
         liabilities  and certain  disclosures at the date of the  consolidated
         financial   statements  and  the  reported  amounts  of  revenues  and
         expenses. Actual results could differ from those estimates.

     (k) Earnings per share

         As of December 31, 2005,  2004 and 2003 the Company had share  options
         outstanding  of  6,600,500,   6,926,000  and  6,941,000,  which  could
         potentially  dilute basic  earnings per share in the future,  but were
         excluded  in the  computation  of diluted  earnings  per share in such
         periods, as their effect would have been antidilutive.

     (l) Segment information

         SFAS No. 131 "Disclosures  about Segments of an Enterprise and Related
         Information"  establishes  standards for reporting  information  about
         operating  segments and related  disclosures  products  and  services,
         geographic  areas,  and  major  customers.   Operating   segments  are
         components of an enterprise about which separate financial information
         is  available  that is  evaluated  regularly  by the  chief  operating
         decision-maker in deciding how to allocate  resources and in assessing
         performance.   The  chief  operating  decision-maker  of  the  Company
         allocates   resources  and  assess   performance   on  the  basis  its
         consolidated financial statements. No other financial information that
         presents  segment  profit or loss is  generated by the Company that is
         used by its chief operating decision-maker in allocating resources and
         assessing performance. Thus, the Company is a single operating segment
         under SFAS No. 131 and the geographical  segments  disclosed in note 5
         do not represent operating segments under SFAS No. 131.

33.  SUBSEQUENT EVENTS

     On March 16, 2006, the Board approved to procure a new satellite,  AsiaSat
     5, to replace AsiaSat 2 before its  retirement.  On April 28, 2006 and May
     8, 2006,  the Group  entered into a  Construction  Agreement  and a Launch
     Contract   respectively   with  two  independent  third  parties  for  the
     construction  and launching of AsiaSat 5. The  consideration  of the above
     contracts  together with the insurance cost is estimated at  approximately
     US$180 million (approximately HK$1,404 million).

34.  CONVENIENT TRANSLATION TO UNITED STATES DOLLARS

     The translation of Hong Kong dollar amounts into United States dollars are
     for  convenience  and have  been  made at a rate of  HK$7.8  to US$1,  the
     approximate  rate of exchange  at December  31,  2005.  Such  transactions
     should not be  construed  as  representations  that the Hong Kong  dollars
     amounts represent,  or have keen, or could be converted into United States
     dollars at that or any other rate.


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