<PAGE>

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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549-1004

                                   FORM 10-K

   FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

   For the fiscal year ended December 31, 2000

                                      OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

   For the transition period from  to

                        Commission file number 0-26035

                        HUGHES ELECTRONICS CORPORATION
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
              STATE OF DELAWARE                                  52-1106564
       (State or other jurisdiction of                        (I.R.S. Employer
       incorporation or organization)                       Identification No.)
</TABLE>

                         200 North Sepulveda Boulevard
                         El Segundo, California 90245
                                (310) 662-9688
              (Address, including zip code, and telephone number,
       including area code, of registrants' principal executive office)

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

                                     None

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

                    Common stock, par value $0.01 per share

   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 shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

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

   As of December 31, 2000, there were outstanding 200 shares of the issuer's
$0.01 par value common stock.

   The registrant has met the conditions set forth in General Instructions
I(1)(a) and (b) of Form 10-K and is therefore filing this Annual Report on
Form 10-K with the reduced disclosure format.

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<PAGE>

                        HUGHES ELECTRONICS CORPORATION

                                    PART I

ITEM 1. Business

General

   Hughes Electronics Corporation ("Hughes") is a wholly-owned subsidiary of
General Motors Corporation ("GM"). GM primarily engages in the automotive and
satellite and wireless communications industries. GM also has financing and
insurance operations and, to a lesser extent, engages in other industries.

   Hughes has been a pioneer in many aspects of the satellite and wireless
communications industry, and its technologies have driven the creation of new
services and markets and have established Hughes as a leader in each of the
markets it serves. Hughes believes that its ability to identify, define and
develop new markets early has provided it with a significant competitive
advantage in building sustainable market leadership positions.

   In January 2000, Hughes announced a strategy designed to accelerate the
growth of its services businesses. In connection with this new focus on its
services businesses, on October 6, 2000, Hughes completed the sale of its
satellite systems manufacturing businesses ("Satellite Businesses") to The
Boeing Company ("Boeing"). In addition, Hughes realigned its marketing efforts
to focus on its two major customer groups: consumers and business enterprises.
Hughes believes this marketing realignment will enable it to obtain the full
benefit of the synergies between its various business units and more
effectively reach its customers.

   Hughes provides advanced communications services on a global basis. Hughes
has developed a range of entertainment, information and communications
services for the home and business markets, including video, data, voice,
multimedia and Internet services. Hughes believes that these services provide
the potential for higher value through higher margins and higher growth than
Hughes' traditional manufacturing businesses. Direct broadcasting, leasing and
other service revenues represented about $6.3 billion (or about 86%) and about
$4.6 billion (or about 82%) of Hughes' total revenues for the years ended
December 31, 2000 and 1999, respectively. This represents about 38% year-over-
year growth in service revenues. These figures exclude revenues attributable
to the Satellite Businesses.

   Hughes' businesses include:

  .  DIRECTV, the world's leading digital multi-channel entertainment
     service, based on the number of subscribers. DIRECTV includes businesses
     in the United States and Latin America, and constitutes Hughes' Direct-
     To-Home Broadcast segment. In 2000, DIRECTV U.S. gained a record 1.8
     million net new subscribers, representing a 14% growth rate over 1999.
     As of December 31, 2000, DIRECTV U.S. had about 9.5 million subscribers
     and average monthly revenue per subscriber of $59, the highest in the
     U.S. multi-channel entertainment industry. In 2000, DIRECTV Latin
     America gained a record 501,000 net subscribers, representing a 57%
     growth rate over 1999.

  .  PanAmSat, the owner and operator of the largest commercial satellite
     fleet in the world. PanAmSat Corporation, a publicly-held company of
     which Hughes owns 81%, constitutes Hughes' Satellite Services segment.
     PanAmSat owns and operates 20 satellites that are capable of
     transmitting signals to geographic areas covering a substantial portion
     of the world's population. PanAmSat provides satellite capacity
     primarily for the transmission of cable and broadcast television
     programming from the content source to the consumer distribution point
     (the consumer's home or cable operator). PanAmSat satellites have the
     capability to reach over 125 million cable households around the world
     and serve as transmission platforms for 6 direct-to-home services
     worldwide. In addition, PanAmSat provides satellite services to
     telecommunications carriers, corporations and Internet service providers
     for the provision of satellite-based communications networks, including
     private corporate networks employing very small aperture terminals
     ("VSAT") and international access to the U.S. Internet backbone. In
     2000, PanAmSat introduced NET-36(TM) to provide satellite-based Internet
     broadcast services. These

                                       2
<PAGE>

                         HUGHES ELECTRONICS CORPORATION


     services leverage PanAmSat's fleet of satellites to ensure that high-
     speed Internet subscribers receive digital and streaming media using
     PanAmSat satellites and servers while avoiding Internet congestion that
     would otherwise diminish video fidelity.

  .  Broadband Services and Products, which includes Hughes Network Systems,
     a leading provider of satellite and wireless communications ground
     equipment and business communications services. Hughes Network Systems
     has more than a 50% share of the global market for VSAT private business
     networks. Hughes Network Systems is one of the two largest manufacturers
     of DIRECTV(TM) subscriber equipment having shipped over 3.0 million
     units in 2000. Hughes Network Systems is also leading the development of
     Spaceway(TM), a satellite-based broadband communications platform that
     is expected to provide customers with high-speed, two-way data
     communications on a more cost-efficient basis than systems that are
     currently available. Spaceway is expected to launch service in North
     America in 2003 and currently is not a separately reported business
     segment.

  .  Discontinued Operations. The discontinued operations of Hughes consists
     of the Satellite Businesses, which Hughes sold to Boeing on October 6,
     2000. See Note 17 of the Notes to the Consolidated Financial Statements
     in Part II for further discussion.

   Due to rapid consolidation in the media and telecommunications industries,
GM has announced that it is now considering alternative strategic transactions
involving Hughes and other participants in those industries. Any such
transaction might involve the separation of Hughes from GM. GM's objective in
this effort is to maximize the enterprise value of Hughes for the long-term
benefit of the holders of GM's Class H common stock and GM $1-2/3 par value
common stock through a structure that maintains the financial strength of GM.
No assurance can be given that any transaction will be agreed upon with any
party or that other conditions, including any stockholder or regulatory
approvals will be satisfied.

Segment Reporting Data

   Operating segment and principal geographic area data for 2000, 1999 and 1998
are summarized in Note 19 of the Notes to the Consolidated Financial Statements
in Part II.

Regulatory and Environmental

   Hughes is subject to the requirements of federal, state, local and foreign
environmental and occupational safety and health laws and regulations. These
include laws regulating air emissions, water discharge and waste management.
Hughes has an environmental management structure designed to facilitate and
support its compliance with these requirements, and attempts to maintain
complete compliance with all such requirements. Hughes has made and will
continue to make capital and other expenditures to comply with environmental
requirements. Hughes does not, however, expect capital or other expenditures
for environmental compliance to be material in 2001 and 2002. Environmental
requirements are complex, change frequently and have become more stringent over
time. Accordingly, Hughes cannot provide assurance that these requirements will
not change or become more stringent in the future in a manner that could have a
material adverse effect on Hughes' business.

   Hughes is also subject to environmental laws requiring the investigation and
cleanup of environmental contamination at facilities it formerly owned or
operated or currently owns or operates or to which it sent hazardous wastes for
treatment or disposal. Hughes is aware of contamination at one of its former
sites. Although Hughes believes its reserve reflected in its consolidated
financial statements is adequate to cover environmental investigation and
cleanup, Hughes cannot provide assurance that Hughes' environmental cleanup
costs and liabilities will not exceed the current amount of its reserve.

                                 * * * * * * *

                                       3
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   Hughes makes no attempt herein to predict the future trend of its business
and earnings or the effect thereon of the results of changes in general
economic, industrial, regulatory, and international conditions.

ITEM 2. Properties

   As of December 31, 2000, Hughes had approximately 53 locations operating in
28 states and 48 cities in the United States and approximately 32 additional
locations in 25 cities in approximately 15 countries outside the United
States. At such date, Hughes owned approximately 1.6 million square feet of
space and leased an additional 1.7 million square feet of space.

ITEM 3. Legal Proceedings

   (a) Material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which Hughes became, or was, a party
during the year ended December 31, 2000 or subsequent thereto, but before the
filing of this report are summarized below:

   In connection with the 1997 spin-off of the defense electronics business of
Hughes' predecessor as part of the Hughes restructuring transactions and the
subsequent merger of that business with Raytheon Company ("Raytheon"), the
terms of the merger agreement provided processes for resolving disputes that
might arise in connection with post-closing financial adjustments that were
also called for by the terms of the merger agreement. These financial
adjustments might require a cash payment from Raytheon to Hughes or vice
versa.

   A dispute currently exists regarding the post-closing adjustments which
Hughes and Raytheon have proposed to one another and related issues regarding
the adequacy of disclosures made by Hughes to Raytheon in the period prior to
consummation of the merger. Hughes and Raytheon are proceeding with the
dispute resolution process. It is possible that the ultimate resolution of the
post-closing financial adjustment and of related disclosure issues may result
in Hughes making a payment to Raytheon that would be material to Hughes.
However, the amount of any payment that either party might be required to make
to the other cannot be determined at this time. Hughes intends to vigorously
pursue resolution of the disputes through the arbitration processes, opposing
the adjustments proposed by Raytheon, and seeking the payment from Raytheon
that Hughes has proposed.

                                     * * *

   On June 3, 1999, the National Rural Telecommunications Cooperative ("NRTC")
filed a lawsuit against DIRECTV, Inc. and Hughes Communications Galaxy, Inc.,
which Hughes refers to together in this description as "DIRECTV," in the U.S.
District Court for the Central District of California, alleging that DIRECTV
breached its DBS Distribution Agreement with the NRTC. The DBS Distribution
Agreement provides the NRTC with certain distribution rights, in certain
specified portions of the United States, for a specified period of time, with
respect to DIRECTV(R) programming delivered over 27 of the 32 frequencies at
the 101(degrees) west longitude orbital location. The NRTC claims that DIRECTV
has wrongfully deprived it of the exclusive right to distribute programming
formerly provided by United States Satellite Broadcasting Company, Inc.
("USSB") over the other five frequencies at 101(degrees), and seeks recovery
of related revenues from the date USSB was acquired by Hughes. DIRECTV denies
that the NRTC is entitled to exclusive distribution rights to the former
USSB(R) programming because, among other things, the NRTC's exclusive
distribution rights are limited to programming distributed over 27 of the 32
frequencies at 101(degrees). The NRTC also plead, in the alternative, the
right to distribute former USSB programming on a non-exclusive basis, but
stipulated to dismiss this claim without prejudice on August 25, 2000. DIRECTV
maintains that the NRTC's right under the DBS Distribution Agreement is to
market and sell the former USSB programming as its non-exclusive sales agent
and that NRTC is not entitled to the additional claimed revenues. DIRECTV
intends to vigorously defend against the NRTC claims. DIRECTV also filed a
counterclaim against the NRTC seeking a declaration of the parties' rights
under the DBS Distribution Agreement.

                                       4
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   On August 26, 1999, the NRTC filed a second lawsuit in the U.S. District
Court for the Central District of California against DIRECTV alleging that
DIRECTV has breached the DBS Distribution Agreement. In this lawsuit, the NRTC
is asking the Court to require DIRECTV to pay the NRTC a proportionate share
of unspecified financial benefits that DIRECTV derives from programming
providers and other third parties. DIRECTV denies that it owes any sums to the
NRTC on account of the allegations in these matters and plans to vigorously
defend itself against these claims or this claim.

   Pegasus Satellite Television, Inc. ("Pegasus Satellite") and Golden Sky
Systems, Inc. ("Golden Sky"), the two largest NRTC affiliates, filed an action
on January 11, 2000 against DIRECTV in the U.S. District Court for the Central
District of California. The plaintiffs alleged, among other things, that
DIRECTV has interfered with their contractual relationship with the NRTC. The
plaintiffs alleged that their rights and damages are derivative of the rights
and damages asserted by the NRTC in its two cases against DIRECTV. The
plaintiffs also alleged that DIRECTV interfered with their contractual
relationships with manufacturers and distributors by preventing those parties
from selling receiving equipment to the plaintiffs' dealers. On October 19,
2000, Golden Sky agreed to dismiss its equipment-related claims with
prejudice. DIRECTV denies that it has wrongfully interfered with any of the
plaintiffs' business relationships and will vigorously defend the lawsuit.

   A class action suit was filed in the U.S District Court for the Central
District of California against DIRECTV on behalf of the NRTC's participating
members on February 29, 2000. The Court certified a class on December 29,
2000. The class asserted claims identical to the claims that were asserted by
Pegasus Satellite and Golden Sky in their lawsuit against DIRECTV, described
in the preceding paragraph. Similar to Golden Sky, however, the class has
dismissed its equipment-related claims without prejudice.

   The U.S. District Court for the Central District of California has
consolidated for purposes of discovery the NRTC, Pegasus Satellite and Golden
Sky and class action lawsuits, but has not determined if the cases will be
consolidated for trial. A trial date in February 2002 has been set in the
first NRTC case. Although an amount of loss, if any, cannot be estimated at
this time, an unfavorable outcome could be reached in the NRTC, Pegasus and
class action litigation that could be material to Hughes' results of
operations or financial position.

                                     * * *

   General Electric Capital Corporation ("GECC") and DIRECTV entered into a
contract on July 31, 1995, in which GECC agreed to establish and manage a
private label consumer credit program for consumer purchases of hardware and
related DIRECTV programming. Under the contract, GECC also agreed to provide
certain related services to DIRECTV, including credit risk scoring, billing
and collections services. DIRECTV agreed to act as a surety for loans
complying with the terms of the contract. Hughes guaranteed DIRECTV's
performance under the contract. A complaint and counterclaim were filed by the
parties in the U.S. District Court for the District of Connecticut concerning
GECC's performance and DIRECTV's obligation to act as a surety. A trial
commenced on June 12, 2000 with GECC presenting evidence to the jury for
damages of $157 million. DIRECTV sought damages from GECC of $45 million. On
July 21, 2000, the jury returned a verdict in favor of GECC and awarded
contract damages in the amount of $133.0 million. The trial judge issued an
order granting GECC $48.5 million in interest under Connecticut's offer-of-
judgment statute. With this order, the total judgment entered in GECC's favor
was $181.5 million. Hughes and DIRECTV filed a notice of appeal on December
29, 2000. Hughes and DIRECTV believe that it is reasonably possible that the
jury verdict will be overturned and a new trial granted. Although it is not
possible to predict the result of any eventual appeal in this case, Hughes
does not believe that the litigation will ultimately have a material adverse
impact on Hughes.

                                     * * *

   There is a pending grand jury investigation into whether Hughes should be
accused of criminal violations of United States export control laws arising
out of the participation of two of its employees on a committee formed to
review the findings of Chinese engineers regarding the failure of a Long March
rocket in China in

                                       5
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


1996. Hughes is also subject to the authority of the State Department to
impose sanctions for non-criminal violations of the Arms Export Control Act.
The possible criminal and/or civil sanctions could include fines as well as
debarment from various export privileges and participating in government
contracts. On October 6, 2000, Hughes completed the sale of its Satellite
Businesses to Boeing. In that transaction, Hughes retained limited liability
for certain possible fines and penalties and the financial consequences of
debarment related to the business now owned by Boeing should such sanctions be
imposed by either the Department of Justice or State Department against the
Satellite Businesses. Hughes does not expect sanctions imposed by the
Department of Justice or State Department, if any, to have a material adverse
effect on Hughes.

                                     * * *

   EchoStar Communications Corporation ("EchoStar") and others commenced an
action in the U.S. District Court in Colorado on February 1, 2000 against
DIRECTV, Hughes Network Systems and Thomson Consumer Electronics, Inc.
seeking, among other things, injunctive relief and unspecified damages,
including treble damages, in connection with allegations that the defendants
have entered into agreements with retailers and program providers and engaged
in other conduct that violates the antitrust laws and constitutes unfair
competition. On March 13, 2000, DIRECTV filed a motion seeking a determination
of the relevant market, which, if granted, would result in the dismissal of
EchoStar's antitrust claims. Hughes and DIRECTV filed counterclaims against
EchoStar on March 13, 2000, alleging that EchoStar tortiously interfered with
DIRECTV's relationship with Kelly Broadcasting System, a provider of foreign-
language programming, engaged in unfair business practices in connection with
improper sales of network programming, misleading advertisements for National
Football League games and EchoStar's "PRIMESTAR bounty program," and infringed
on PRIMESTAR(R) trademarks. Although an amount of loss, if any, cannot be
estimated at this time, an unfavorable outcome could be reached that could be
material to Hughes' results of operations or financial position. DIRECTV
believes that EchoStar's complaint is without merit and intends to vigorously
defend against the allegations raised.

                                     * * *

   On September 7, 2000, a putative class action was commenced against
DIRECTV, Inc., Thomson Consumer Electronics, Inc., Best Buy Co., Inc., Circuit
City Stores, Inc. and Tandy Corporation, Inc. in the U.S. District Court in
Los Angeles. The named plaintiffs purport to represent a class of all
consumers who purchased DIRECTV equipment and services at any time from March
1996 to September 1, 2000. The plaintiffs allege that the defendants have
violated federal and California antitrust statutes by entering into agreements
to exclude competition and force retailers to boycott competitors' products
and services. The plaintiffs seek declaratory and injunctive relief, as well
as unspecified damages, including treble damages. DIRECTV believes that the
complaint is without merit and intends to vigorously defend against the
allegations raised therein. DIRECTV has moved to compel arbitration pursuant
to the DIRECTV customer agreement or, in the alternative, to stay the case
pending the resolution of relevant issues in the antitrust suit brought by
EchoStar as described in the preceeding paragraph. Although an amount of loss,
if any, cannot be estimated at this time, an unfavorable outcome could be
reached that could be material to Hughes' results of operations or financial
position.

                                     * * *

   On December 5, 2000, Personalized Media Communications, LLC ("PMC") and
Pegasus Development Corporation ("Pegasus") filed suit in U.S. District Court
for the District of Delaware against DIRECTV, Hughes, Thomson Consumer
Electronics, Inc. and Philips Electronics North American Corporation, alleging
infringement of seven U.S. patents. Based in part on the successful defense by
Hughes against an earlier action brought by PMC on one of the subject patents,
Hughes expects that strong defenses of invalidity and non-infringement exist,
in addition to numerous other defenses including license, laches and estoppel,
Lanham Act violations, patent misuse and abuse of process. Hughes answered the
complaint on January 21, 2001 raising these defenses and

                                       6
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


related conterclaims and intends to vigorously defend the lawsuit and pursue
counterclaims against Pegasus and PMC.

                                     * * *

   Hughes Communications Galaxy, Inc. ("HCGI") filed a lawsuit on March 22,
1991 against the U.S. Government based upon the National Aeronautics and Space
Administration's breach of contract to launch ten satellites on the Space
Shuttle. The U.S. Court of Federal Claims granted HCGI's motion for summary
judgment on the issue of liability on November 30, 1995. A trial was held on
May 1, 1998 on the issue of damages. On June 30, 2000, a final judgment was
entered in favor of HCGI in the amount of $103 million. On July 13, 2000, HCGI
filed a notice to appeal the judgment with the U.S. Court of Appeals for the
Federal Circuit and is requesting a greater amount than was previously awarded
to HCGI. On August 4, 2000, the Government filed its cross appeal. As a result
of the uncertainty regarding the outcome of this matter, no amount has been
recorded in the consolidated financial statements to reflect the award. Final
resolution of this issue could result in a gain that would be material to
Hughes.

                                     * * *

ITEM 4. Submission of Matters to a Vote of Security Holders

   None.

                                       7
<PAGE>

                        HUGHES ELECTRONICS CORPORATION

                                    PART II

ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

   All of Hughes' common stock and preferred stock are owned by GM.
Accordingly, there is no public trading market for Hughes' common or preferred
equity. Dividends on the common stock will be paid when and if declared by
Hughes' Board of Directors. At present, Hughes has no plans to pay a dividend
on the common stock. Dividends on the preferred stock are payable to GM at an
annual rate of 6.25%.

   None of Hughes' common and preferred stock is subject to outstanding
options or warrants to purchase common or preferred stock. There are no
securities convertible into Hughes' common or preferred stock. None of Hughes'
common and preferred stock currently can be sold under Rule 144. Hughes is not
currently publicly offering any of its common and preferred stock. See Notes
15 and 16 of the Notes to the Consolidated Financial Statements in Part II for
further discussion.

                                       8
<PAGE>

                         HUGHES ELECTRONICS CORPORATION



ITEM 6. Selected Financial Data

<TABLE>
<CAPTION>
                                       Years Ended December 31,
                           ----------------------------------------------------
                             2000       1999       1998       1997       1996
                           ---------  ---------  ---------  ---------  --------
                                        (Dollars in Millions)
<S>                        <C>        <C>        <C>        <C>        <C>
Consolidated Statements
 of Operations Data:
Total revenues...........  $ 7,287.6  $ 5,560.3  $ 3,480.6  $ 2,838.3  $2,058.3
Total operating costs and
 expenses................    7,641.7    5,974.8    3,521.7    2,823.7   2,118.0
                           ---------  ---------  ---------  ---------  --------
Operating profit (loss)..  $  (354.1) $  (414.5) $   (41.1) $    14.6  $  (59.7)
                           =========  =========  =========  =========  ========
Income (loss) from
 continuing operations
 before extraordinary
 item and cumulative
 effect of accounting
 change..................  $  (355.4) $  (391.1) $    63.5  $   236.9  $   13.1
Income from discontinued
 operations, net of
 taxes...................       36.1       99.8      196.4      170.6     149.4
Gain on sale of
 discontinued operations,
 net of taxes............    1,132.3        --         --        62.8       --
Extraordinary item, net
 of taxes................        --         --         --       (20.6)      --
Cumulative effect of
 accounting change, net
 of taxes................        --         --        (9.2)       --        --
                           ---------  ---------  ---------  ---------  --------
Net income (loss)........      813.0     (291.3)     250.7      449.7     162.5
Adjustment to exclude the
 effect of GM purchase
 accounting..............       16.9       21.0       21.0       21.0      21.0
Preferred stock
 dividends...............      (97.0)     (50.9)       --         --        --
                           ---------  ---------  ---------  ---------  --------
Earnings (Loss) Used for
 Computation of Available
 Separate Consolidated
 Net Income (Loss).......  $   732.9  $  (321.2) $   271.7  $   470.7  $  183.5
                           =========  =========  =========  =========  ========

Consolidated Balance
 Sheet Data:
Cash and cash
 equivalents.............  $ 1,508.1  $   238.2  $ 1,342.0  $ 2,783.7  $    6.2
Total current assets.....    4,153.7    3,858.0    4,075.2    5,179.1   1,658.4
Total assets.............   19,279.3   18,597.0   12,617.4   12,141.5   3,861.3
Total current
 liabilities.............    2,690.9    2,642.1    1,346.0    1,007.4     691.9
Long-term debt...........    1,292.0    1,586.0      778.7      637.6       --
Minority interests.......      553.7      544.3      481.7      607.8      12.3
Total Stockholder's
 equity..................   12,326.1   11,681.3    8,412.2    8,340.2   2,491.6

Other Data:
EBITDA (1)...............  $   594.0  $   264.4  $   372.0  $   297.0  $  118.1
Depreciation and
 amortization............      948.1      678.9      413.1      282.4     177.8
Capital expenditures.....    1,716.1    1,665.3    1,328.8      712.7     361.6
</TABLE>
--------
Certain prior year amounts have been reclassified to conform to the 2000
presentation.

(1) EBITDA is defined as operating profit (loss), plus depreciation and
    amortization. EBITDA is not presented as an alternative measure of
    operating results or cash flow from operations, as determined in accordance
    with generally accepted accounting principles. Hughes management believes
    it is a meaningful measure of performance and is commonly used by other
    communications, entertainment and media service providers. EBITDA does not
    give effect to cash used for debt service requirements and thus does not
    reflect funds available for investment in the business of Hughes, dividends
    or other discretionary uses. EBITDA as presented herein may not be
    comparable to similarly titled measures reported by other companies.

                                       9
<PAGE>

                         HUGHES ELECTRONICS CORPORATION



ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                  Years Ended December 31,
                                                 ----------------------------
                                                   2000      1999      1998
                                                 --------  --------  --------
                                                   (Dollars in Millions)
<S>                                              <C>       <C>       <C>
Consolidated Statements of Operations Data:
Total revenues.................................. $7,287.6  $5,560.3  $3,480.6
Total operating costs and expenses..............  7,641.7   5,974.8   3,521.7
                                                 --------  --------  --------
Operating loss..................................   (354.1)   (414.5)    (41.1)
Other expenses, net.............................   (461.5)   (245.5)    (62.1)
Income tax benefit..............................   (406.1)   (236.9)   (142.3)
Minority interests in net losses of
 subsidiaries...................................     54.1      32.0      24.4
                                                 --------  --------  --------
Income (loss) from continuing operations before
 cumulative effect of accounting change.........   (355.4)   (391.1)     63.5
Income from discontinued operations, net of
 taxes..........................................     36.1      99.8     196.4
Gain on sale of discontinued operations, net of
 taxes..........................................  1,132.3       --        --
Cumulative effect of accounting change, net of
 taxes..........................................      --        --       (9.2)
                                                 --------  --------  --------
Net income (loss)...............................    813.0    (291.3)    250.7
Adjustment to exclude the effect of GM purchase
 accounting.....................................     16.9      21.0      21.0
Preferred stock dividends.......................    (97.0)    (50.9)      --
                                                 --------  --------  --------
Earnings (Loss) Used for Computation of
 Available Separate Consolidated Net Income
 (Loss)......................................... $  732.9  $ (321.2) $  271.7
                                                 ========  ========  ========
</TABLE>
--------
Certain prior year amounts have been reclassified to conform to the 2000
presentation.

                                       10
<PAGE>

                         HUGHES ELECTRONICS CORPORATION



                             SELECTED SEGMENT DATA

<TABLE>
<CAPTION>
                                                 Years Ended December 31,
                                               -------------------------------
                                                 2000       1999       1998
                                               ---------  ---------  ---------
                                                   (Dollars in Millions)
<S>                                            <C>        <C>        <C>
Direct-To-Home Broadcast
Total Revenues................................ $ 5,238.0  $ 3,785.0  $ 1,816.1
Operating Loss................................    (557.9)    (289.6)    (225.8)
EBITDA(1).....................................     (24.5)      22.4     (123.5)
Depreciation and Amortization.................     533.4      312.0      102.3
Segment Assets................................  10,473.4    9,056.6    2,190.4
Capital Expenditures..........................     913.5      516.9      230.8
Satellite Services
Total Revenues................................ $ 1,023.6  $   810.6  $   767.3
Operating Profit..............................     356.6      338.3      318.3
Operating Profit Margin.......................      34.8%      41.7%      41.5%
EBITDA(1)..................................... $   694.0  $   618.8  $   553.3
EBITDA Margin(1)..............................      67.8%      76.3%      72.1%
Depreciation and Amortization................. $   337.4  $   280.5  $   235.0
Segment Assets................................   6,178.4    5,984.7    5,890.5
Capital Expenditures..........................     449.5      956.4      921.7
Network Systems
Total Revenues................................ $ 1,409.8  $ 1,384.7  $ 1,076.7
Operating Profit (Loss).......................     (63.5)    (234.1)       7.1
EBITDA(1).....................................       0.1     (156.7)      74.0
Depreciation and Amortization.................      63.6       77.4       66.9
Segment Assets................................   1,789.9    1,167.3    1,299.0
Capital Expenditures..........................     369.5      175.0       40.0
Eliminations and Other
Total Revenues................................ $  (383.8) $  (420.0) $  (179.5)
Operating Loss................................     (89.3)    (229.1)    (140.7)
EBITDA(1).....................................     (75.6)    (220.1)    (131.8)
Depreciation and Amortization.................      13.7        9.0        8.9
Segment Assets................................     837.6    2,388.4    3,237.5
Capital Expenditures..........................     (16.4)      17.0      136.3
Total
Total Revenues................................ $ 7,287.6  $ 5,560.3  $ 3,480.6
Operating Loss................................    (354.1)    (414.5)     (41.1)
EBITDA(1).....................................     594.0      264.4      372.0
EBITDA Margin(1)..............................       8.2%       4.8%      10.7%
Depreciation and Amortization................. $   948.1  $   678.9  $   413.1
Total Assets..................................  19,279.3   18,597.0   12,617.4
Capital Expenditures..........................   1,716.1    1,665.3    1,328.8
</TABLE>
--------
Certain prior year amounts have been reclassified to conform to the 2000
presentation.

(1)  EBITDA is defined as operating profit (loss), plus depreciation and
     amortization. EBITDA is not presented as an alternative measure of
     operating results or cash flow from operations, as determined in
     accordance with generally accepted accounting principles. Hughes
     management believes it is a meaningful measure of performance and is
     commonly used by other communications, entertainment and media service
     providers. EBITDA does not give effect to cash used for debt service
     requirements and thus does not reflect funds available for investment in
     the business of Hughes, dividends or other discretionary uses. EBITDA
     margin is calculated by dividing EBITDA by total revenues. EBITDA and
     EBITDA margin as presented herein may not be comparable to similarly
     titled measures reported by other companies.

                                       11
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   This Annual Report may contain certain statements that Hughes believes are,
or may be considered to be, "forward-looking statements," within the meaning
of various provisions of the Securities Act of 1933 and of the Securities
Exchange Act of 1934. These forward-looking statements generally can be
identified by use of statements that include phrases such as we "believe,"
"expect," "anticipate," "intend," "plan," "foresee" or other similar words or
phrases. Similarly, statements that describe our objectives, plans or goals
also are forward-looking statements. All of these forward-looking statements
are subject to certain risks and uncertainties that could cause Hughes' actual
results to differ materially from those contemplated by the relevant forward-
looking statement. The principal important risk factors which could cause
actual performance and future actions to differ materially from forward-
looking statements made herein include economic conditions, product demand and
market acceptance, government action, local political or economic developments
in or affecting countries where Hughes has operations, ability to obtain
export licenses, competition, ability to achieve cost reductions, ability to
timely perform material contracts, technological risk, limitations on access
to distribution channels, the success and timeliness of satellite launches,
in-orbit performance of satellites, ability of customers to obtain financing,
Hughes' ability to access capital to maintain its financial flexibility and
the effects of any strategic transactions involving Hughes that GM may enter
into as noted below.

   Additionally, the in-orbit satellites of Hughes and its 81% owned
subsidiary, PanAmSat Corporation, are subject to the risk of failing
prematurely due to, among other things, mechanical failure, collision with
objects in space or an inability to maintain proper orbit. Satellites are
subject to the risk of launch delay and failure, destruction and damage while
on the ground or during launch and failure to become fully operational once
launched. Delays in the production or launch of a satellite or the complete or
partial loss of a satellite, in-orbit or during launch, could have a material
adverse impact on the operation of Hughes' businesses. With respect to both
in-orbit and launch problems, insurance carried by Hughes and PanAmSat
generally does not compensate for business interruption or loss of future
revenues or customers. Hughes has, in the past, experienced technical
anomalies on some of its satellites. Service interruptions caused by these
anomalies, depending on their severity, could result in claims by affected
customers for termination of their transponder agreements, cancellation of
other service contracts or the loss of other customers.

   Readers are urged to consider these factors carefully in evaluating the
forward-looking statements. The forward-looking statements included in this
Annual Report are made only as of the date of this Annual Report and Hughes
undertakes no obligation to publicly update these forward-looking statements
to reflect subsequent events or circumstances.

   Due to rapid consolidation in the media and telecommunications industries,
General Motors Corporation ("GM"), which is the parent company of Hughes, has
announced that it is now considering alternative strategic transactions
involving Hughes and other participants in those industries. Any such
transaction might involve the separation of Hughes from GM. GM's objective in
this effort is to maximize the enterprise value of Hughes for the long-term
benefit of the holders of GM's Class H common stock and GM $1 2/3 par value
common stock through a structure that maintains the financial strength of GM.
No assurance can be given that any transaction will be agreed upon with any
party or that other conditions, including any stockholder or regulatory
approvals will be satisfied.

   On June 6, 2000, the GM Board declared a three-for-one stock split of the
GM Class H common stock. The stock split was in the form of a 200% stock
dividend, paid on June 30, 2000 to GM Class H common stockholders of record on
June 13, 2000. As a result, the numbers of shares of GM Class H common stock
presented for all periods have been adjusted to reflect the stock split,
unless otherwise noted.

                                      12
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



General

 Business Overview

   The continuing operations of Hughes are comprised of the following
segments: Direct-To-Home Broadcast, Satellite Services and Network Systems.
The satellite systems manufacturing businesses ("Satellite Businesses"), which
Hughes sold to The Boeing Company ("Boeing") on October 6, 2000, are reported
as discontinued operations for all years presented. This transaction is
discussed more fully below in "Liquidity and Capital Resources--Acquisitions,
Investments and Divestitures."

   The Direct-To-Home Broadcast segment consists primarily of the United
States and Latin America DIRECTV businesses, which provide digital multi-
channel entertainment services. The DIRECTV U.S. operations were significantly
affected during 1999 with Hughes' acquisition of the direct broadcast
satellite medium-power business of PRIMESTAR in April 1999 and Hughes'
acquisition of United States Satellite Broadcasting Company, Inc. ("USSB"), a
provider of premium subscription programming services, in May 1999. DIRECTV
transitioned a total of about 1.5 million of the 2.3 million PRIMESTAR
subscribers acquired through the shut-down of the business at September 30,
2000. As a result of the USSB acquisition, Hughes acquired the rights to
distribute 25 channels of video programming, including premium networks such
as HBO(R), Showtime(R), Cinemax(R) and The Movie Channel(R), which are now
being offered to DIRECTV's subscribers. The results of operations for
PRIMESTAR and USSB have been included in Hughes' financial information since
their dates of acquisition. See Note 17 to the consolidated financial
statements and "Liquidity and Capital Resources--Acquisitions, Investments and
Divestitures," below, for further discussion of these transactions.

   In the fourth quarter of 1999, DIRECTV U.S. began providing local broadcast
network services to its subscribers and as of December 31, 2000 was offering
those services in 41 U.S. markets representing over 60 million households or
60% of television households.

   The Latin America DIRECTV businesses are comprised of DIRECTV Latin
America, LLC ("DLA"), Hughes' 77.8% owned subsidiary that provides DIRECTV
services in Latin America and the Caribbean Basin; SurFin Ltd. ("SurFin"), a
company 75% owned by Hughes, that provides financing of subscriber receiver
equipment to certain DLA operating companies; Grupo Galaxy Mexicana, S.R.L. de
C.V. ("GGM"), the exclusive distributor of DIRECTV in Mexico, which was
acquired by Hughes in February 1999; and Galaxy Brasil, Ltda. ("GLB"), the
exclusive distributor of DIRECTV in Brazil, which was acquired by DLA in July
1999. The results of operations for SurFin, GGM, and GLB have been included in
Hughes' financial information since their dates of acquisition. See Note 17 to
the consolidated financial statements and "Liquidity and Capital Resources--
Acquisitions, Investments and Divestitures," below, for further discussion of
these transactions.

   Also included as part of the non-operating results of the Direct-To-Home
Broadcast segment is DIRECTV Japan Management, Inc., DIRECTV Japan, Inc., and
certain related companies (collectively "DIRECTV Japan"), Hughes affiliates
that provided DIRECTV services in Japan. On March 1, 2000, Hughes announced
that DIRECTV Japan's operations would be discontinued. DIRECTV Japan ceased
broadcasting on September 30, 2000. See Note 17 to the consolidated financial
statements and "Liquidity and Capital Resources--Acquisitions, Investments and
Divestitures," below, for further discussion.

   The Satellite Services segment consists of PanAmSat, Hughes' 81% owned
subsidiary. PanAmSat provides satellite services to its customers primarily
through long-term operating lease contracts for the full or partial use of
satellite transponder capacity. During the first quarter of 2000, PanAmSat
introduced NET-36(TM) to provide satellite-based Internet broadcast services.
These services leverage PanAmSat's fleet of satellites to ensure that high-
speed Internet subscribers receive digital and streaming media using PanAmSat
satellites and servers while avoiding Internet congestion that would otherwise
diminish video fidelity. PanAmSat expects to begin generating revenues from
the service in 2001.

                                      13
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   The Network Systems segment consists of Hughes Network Systems ("HNS"),
which is a provider of satellite-based private business networks and broadband
Internet access, and a supplier of DIRECTV(TM) receiving equipment (set-top
boxes and dishes). In the fourth quarter of 2000, HNS added two-way
capabilities to its nationwide high-speed satellite Internet service,
DirecPC(R). Offering "always-on" capability, the new two-way high-speed
satellite service allows consumers, who have purchased the necessary hardware
and service, to completely bypass the dial-up telephone network when accessing
the Internet. In January 2000, Hughes announced the discontinuation of its
mobile cellular and narrowband local loop product lines at HNS. As a result of
this decision, HNS recorded a fourth quarter 1999 pre-tax charge to continuing
operations of $272.1 million. The charge represents the write-off of
receivables and inventories, licenses, software and equipment with no
alternative use.

 Satellite Fleet

   Hughes had a fleet of 25 satellites, five owned by DIRECTV and 20 owned and
operated by PanAmSat. Hughes' satellite fleet was expanded in the first
quarter of 2000 with PanAmSat's launch and commencement of service of the
Galaxy XR satellite for Alaska's General Communications, Inc., Disney and
other customers. In the second quarter of 2000, PanAmSat commenced service of
the Galaxy XI satellite, which provides expansion and backup services for
PanAmSat's Galaxy(R) cable neighborhood customers, and successfully launched
Galaxy IV-R, a replacement satellite for Galaxy IV. In the third quarter of
2000, PanAmSat successfully launched PAS-9, which delivers premium broadcast,
Internet and data services throughout North and South America, the Caribbean
and Europe. In the fourth quarter of 2000, PanAmSat successfully launched
PAS-1R, which offers expanded and enhanced video and data broadcasting as well
as broadband Internet services throughout the Americas, the Caribbean, Europe
and Africa. Also during 2000, PanAmSat completed the planned retirement of its
SBS-4 and SBS-5 satellites.

   PanAmSat expects to add additional satellites as part of its comprehensive
satellite expansion and restoration plan. The additional satellites are
intended to meet the expected demand for additional satellite capacity,
replace capacity affected by satellite anomalies, and provide added backup to
existing capacity. In connection with this plan, five satellites have been
successfully launched, with an additional three satellites now under
construction. Two of these satellites will be launched in 2001 and one in
2002.

   DIRECTV U.S.' 4S satellite, a high-power spot-beam satellite, is currently
under construction and is expected to be launched in October 2001. DIRECTV
expects to use DIRECTV 4S to provide additional capacity for new local channel
service or other new services beginning in 2002. Also, the DIRECTV 5
satellite, a high-power satellite acquired from Tempo Satellite, Inc., is
expected to be launched in mid-2001 as a replacement to DIRECTV 6, which will
then serve as a back-up.

Results of Operations

2000 compared to 1999

 Overall

   Revenues. Revenues increased 31.1% to $7,287.6 million in 2000 compared
with $5,560.3 million in 1999. The increased revenues resulted primarily from
the Direct-To-Home Broadcast segment, which reported $1,453.0 million of
higher revenues over 1999, and the Satellite Services segment, which reported
$213.0 million of additional revenues from 1999. The higher revenues from the
Direct-To-Home Broadcast segment resulted from the addition of about 2.3
million net new subscribers in the United States and Latin America since
December 31, 1999 and added revenues from the PRIMESTAR By DIRECTV and premium
channel services. The higher revenues from the Satellite Services segment
resulted primarily from outright sales and sales-type lease transactions
executed during 2000.

                                      14
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   Operating Costs and Expenses. Operating costs and expenses increased to
$7,641.7 million in 2000 from $5,974.8 million in 1999. Broadcast programming
and other costs increased by $773.8 million during 2000 due to higher costs at
the Direct-To-Home Broadcast segment, resulting from the increase in
subscribers and added costs for the premium channel services, and costs
associated with the outright sales and sales-type leases at the Satellite
Services segment. Costs of products sold decreased by $146.5 million in 2000
from 1999 mainly due to higher 1999 costs, which included a write-off of $91.5
million of inventory associated with the discontinuation of certain narrowband
wireless product lines and the completion of several contracts at the Network
Systems segment. Selling, general and administrative expenses increased by
$770.4 million in 2000 from 1999 due primarily to higher marketing costs at
the Direct-To-Home Broadcast segment resulting from increased subscriber
growth in both the United States and Latin America, partially offset by a 1999
charge of $180.6 million at the Network Systems segment resulting from the
write-off of receivables, licenses and equipment associated with the
discontinuation of certain narrowband wireless product lines. Depreciation and
amortization increased by $269.2 million in 2000 over 1999 due primarily to
1999 acquisitions, discussed more fully in "Liquidity and Capital Resources--
Acquisitions, Investments and Divestitures."

   EBITDA. EBITDA is defined as operating profit (loss), plus depreciation and
amortization. EBITDA is not presented as an alternative measure of operating
results or cash flow from operations, as determined in accordance with
generally accepted accounting principles. Hughes management believes it is a
meaningful measure of performance and is commonly used by other
communications, entertainment and media service providers. EBITDA does not
give effect to cash used for debt service requirements and thus does not
reflect funds available for investment in the business of Hughes, dividends or
other discretionary uses. EBITDA margin is calculated by dividing EBITDA by
total revenues. EBITDA and EBITDA margin as presented herein may not be
comparable to similarly titled measures reported by other companies.

   EBITDA for 2000 was $594.0 million and EBITDA margin was 8.2%, compared to
EBITDA of $264.4 million and EBITDA margin of 4.8% for 1999. The large change
resulted from the Network Systems segment, which experienced slightly positive
EBITDA in 2000 compared to a large negative EBITDA in 1999 due to the $272.1
million charge in 1999 associated with the discontinuation of certain
narrowband wireless product lines; higher EBITDA at the Satellite Services
segment due to the increased outright sales and sale-type lease activity;
partially offset by the Direct-To-Home Broadcast segment's EBITDA loss in 2000
compared to positive EBITDA for 1999 that resulted from increased losses at
DIRECTV Latin America. The higher EBITDA margin in 2000 was mainly
attributable to the 1999 EBITDA margin being negatively affected by the charge
for the discontinuation of certain narrowband wireless product lines. The
EBITDA margin for 2000 was negatively affected by increased losses at the
Direct-To-Home Broadcast segment and lower margins associated with the
Satellite Service segment's outright sales and sales-type leases.

   Operating Loss. Hughes' operating loss was $354.1 million in 2000, compared
to $414.5 million in 1999. This decrease resulted from the improvement in
EBITDA, which more than offset increased depreciation and amortization
expense.

   Interest Income and Expense. Interest income increased to $49.3 million in
2000 compared to $27.0 million in 1999 due to an increase in cash and cash
equivalents that resulted from the sale of the Satellite Businesses. Interest
expense increased to $218.2 million in 2000 from $122.7 million in 1999. This
increase primarily resulted from higher average outstanding borrowings and a
full year of interest expense associated with liabilities for above-market
programming contracts assumed in the acquisitions of PRIMESTAR and USSB.
Changes in cash and cash equivalents and debt are discussed in more detail
below under "Liquidity and Capital Resources."

   Other, Net. Other, net increased to a net expense of $292.6 million in 2000
from a net expense of $149.8 million in 1999. The net expense in 2000 included
$164.2 million of equity method losses and $128.4 million of costs related to
the exit of the DIRECTV Japan business, which is discussed below in

                                      15
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


"Liquidity and Capital Resources--Acquisitions, Investments and Divestitures."
The net expense for 1999 included $189.2 million of equity method losses
offset by a gain of $39.4 million from the sale of Hughes Software Systems
Private Limited ("HSS") securities. The change in equity method losses in 2000
compared to 1999 resulted from lower losses at DIRECTV Japan due to the
shutdown of the business at September 30, 2000.

   Income Taxes. Hughes recognized a tax benefit of $406.1 million in 2000
compared to $236.9 million in 1999. The 2000 tax benefit reflects the tax
benefit associated with the write-off of Hughes' historical investment in
DIRECTV Japan and the higher pre-tax losses compared to 1999.

   Loss from Continuing Operations. Hughes reported a loss from continuing
operations of $355.4 million in 2000, compared to $391.1 million in 1999.

   Discontinued Operations. Revenues for the Satellite Businesses decreased to
$1,669.3 million in 2000 from $2,240.7 million in 1999. Revenues, excluding
intercompany transactions, were $1,260.1 million in 2000 compared to $1,780.4
million in 1999. The 1999 results include a full year of revenues, while 2000
only includes revenues through October 6, 2000, the date of sale.

   The Satellite Businesses reported operating profit of $87.6 million in 2000
compared to $152.5 million in 1999. Operating profit, excluding intercompany
transactions, amounted to $59.3 million in 2000 compared to $142.7 million in
1999. The 1999 results included a one-time pre-tax charge of $178.0 million
before intercompany transactions and $125.0 million after intercompany
transactions that resulted from increased development costs and schedule
delays on several new product lines, a one-time pre-tax charge of $81.0
million resulting from the termination of a customer contract and decreased
activity associated with ICO Global Communications (Operations) Ltd. ("ICO"),
partially offset by a $154.6 million pre-tax gain related to the settlement of
a patent infringement case. Additionally, the 1999 results include a full year
of operating results, while 2000 only includes operating results through
October 6, 2000, the date of sale.

   Income from discontinued operations, net of taxes, was $36.1 million in
2000 compared to $99.8 million in 1999.

   Accounting Change. In September 1999, the Financial Accounting Standards
Board ("FASB") issued Emerging Issues Task Force Issue 99-10 ("EITF 99-10"),
Percentage Used to Determine the Amount of Equity Method Losses. EITF 99-10
addresses the percentage of ownership that should be used to compute equity
method losses when the investment has been reduced to zero and the investor
holds other securities of the investee. EITF 99-10 requires that equity method
losses should not be recognized solely on the percentage of common stock
owned; rather, an entity-wide approach should be adopted. Under such an
approach, equity method losses must be recognized based on the ownership level
that includes other equity securities (e.g., preferred stock) and
loans/advances to the investee or based on the change in the investor's claim
on the investee's book value. Hughes adopted EITF 99-10 during the third
quarter of 1999 which resulted in Hughes recording a higher percentage of
DIRECTV Japan's losses subsequent to the effective date of September 23, 1999.
The unfavorable impact of adopting EITF 99-10 was $39.0 million after-tax.

 Direct-To-Home Broadcast Segment

   Direct-To-Home Broadcast segment revenues increased 38.4% to $5,238.0
million in 2000 from $3,785.0 million in 1999. The Direct-To-Home Broadcast
segment had negative EBITDA of $24.5 million in 2000 compared with positive
EBITDA of $22.4 million in 1999. The operating loss for the segment increased
to $557.9 million in 2000 from $289.6 million in 1999.

   United States. The DIRECTV U.S. businesses were the biggest contributors to
the segment's revenue growth with revenues of $4,694 million in 2000, a 38%
increase over 1999 revenues of $3,405 million. The large increase in revenues
resulted primarily from an increased number of DIRECTV subscribers and added
revenues from PRIMESTAR By DIRECTV and premium channel services. As of
December 31, 2000, high-power

                                      16
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


DIRECTV subscribers totaled approximately 9.5 million compared to about 6.7
million at December 31, 1999. In addition to the high-power subscribers, there
were also 1.3 million PRIMESTAR By DIRECTV medium-power subscribers at
December 31, 1999. The large increase in high-power subscribers resulted from
the addition of about 1.8 million net new subscribers to the DIRECTV service
in 2000, a 14% growth rate over the 1.6 million net new subscribers added in
1999, and the conversion of about 1 million PRIMESTAR By DIRECTV medium-power
subscribers to the high-power DIRECTV service in 2000. DIRECTV shut down the
PRIMESTAR By DIRECTV medium-power service on September 30, 2000. Average
monthly programming revenue per subscriber for the high-power business was $59
and $58 at December 31, 2000 and 1999, respectively.

   EBITDA was $151 million in 2000 compared to $150 million in 1999. The
operating loss in 2000 for the DIRECTV U.S. businesses was $244 million
compared to $99 million in 1999. The slight increase in EBITDA was due to the
increased revenues discussed above offset by increased subscriber acquisition
and programming costs associated with the record subscriber growth. The
increased operating loss was principally due to increased amortization of
goodwill and intangibles that resulted from the PRIMESTAR and USSB
acquisitions.

   Latin America. Revenues for the Latin America DIRECTV businesses increased
72% to $541 million in 2000 from $315 million in 1999. The increase in
revenues reflects an increase in subscribers and the consolidation of the GLB
business. Subscribers grew to 1.3 million at December 31, 2000 compared to
0.8 million in 1999. Latin America DIRECTV added 501,000 net new subscribers
in 2000, a 56.6% increase over the 320,000 net new subscribers added in 1999.
Average monthly programming revenue per subscriber was $36 for 2000 and 1999.

   EBITDA was a negative $171 million in 2000 compared to negative EDITDA of
$106 million in 1999. The change in EBITDA resulted primarily from a full year
of GLB losses in 2000 and higher marketing costs associated with the record
subscriber growth, partially offset by the increased revenues discussed above.
The Latin America DIRECTV businesses incurred an operating loss of $309
million in 2000 compared to an operating loss of $169 million in 1999. The
increased operating loss resulted from the decline in EBITDA and higher
depreciation of fixed assets and a full year of goodwill amortization that
resulted from the GLB transaction.

 Satellite Services Segment

   Revenues for the Satellite Services segment in 2000 increased 26.3% to
$1,023.6 million from $810.6 million in 1999. This increase was primarily due
to increased revenues associated with outright sales and sales-type lease
transactions executed during 2000. Revenues associated with outright sales and
sales-type leases of transponders were $243.3 million for 2000 as compared to
$23.1 million for 1999. Revenues from operating leases of transponders,
satellite services and other were 76.2% of total 2000 revenues and decreased
by 0.9% to $780.3 million from $787.5 million in 1999.

   EBITDA in 2000 was $694.0 million, a 12.2% increase over EBITDA of $618.8
million in 1999. The higher EBITDA was due to the increased revenues discussed
above, partially offset by an increase in direct operating and selling,
general and administrative expenses that resulted from the continued satellite
fleet expansion and costs associated with the NET-36 initiative. EBITDA margin
for 2000 was 67.8% compared to 76.3% in 1999. The decline in EBITDA margin was
due to lower margins associated with the increased outright sales and sales-
type lease transactions and the higher direct operating and selling, general
and administrative expenses. Excluding the outright sales and sales-type lease
transactions, EBITDA for 2000 was $536.5 million or 68.8% of corresponding
revenues. Operating profit was $356.6 million for 2000, an increase of $18.3
million over 1999. The higher operating profit resulted from the increase in
EBITDA partially offset by higher depreciation expense related to additional
satellites placed into service since 1999.

   Backlog for the Satellite Services segment, which consists primarily of
operating leases on satellite transponders, was about $6.0 billion in 2000
compared to about $6.1 billion in 1999.

                                      17
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



 Network Systems Segment

   Revenues for the Network Systems segment increased 1.8% to $1,409.8 million
in 2000 from $1,384.7 million in 1999. The increase in revenues primarily
resulted from greater shipments of DIRECTV receiver equipment, which totaled
about 3.0 million units in 2000, compared to about 2.1 million units in 1999.
This increase in revenues was partially offset by lower revenues from the
discontinuation of certain narrowband wireless product lines and lower
manufacturing subsidies on DIRECTV receiver equipment.

   The Network Systems segment reported EBITDA of $0.1 million for 2000
compared to negative EBITDA of $156.7 million in 1999. The Network Systems
segment had an operating loss of $63.5 million in 2000 compared to $234.1
million in 1999. The 1999 results included a $272.1 million charge for the
discontinuation of certain narrowband wireless product lines. Excluding this
charge, the Network Systems segment recorded 1999 EBITDA of $115.4 million and
operating profit of $38.0 million. The change in EBITDA and operating results
in 2000 from 1999, excluding the $272.1 million charge, resulted from the
lower manufacturing subsidies and increased costs associated with the upcoming
launch of new DirecPC services, including AOL Plus Powered by DirecPC.

   Backlog for the Network Systems segment, which consists primarily of
private business networks and satellite-based mobile telephony equipment
orders, was about $1.2 billion in 2000 compared to about $1.0 billion in 1999.

 Eliminations and Other

   The elimination of revenues decreased to $383.8 million in 2000 from $420.0
million in 1999 due primarily to the termination of manufacturing subsidies
paid by DIRECTV to HNS during the third quarter of 2000 and decreased
intercompany revenues due to the sale of Hughes' Satellite Businesses.

   Operating losses from "eliminations and other" decreased to $89.3 million
in 2000 from $229.1 million in 1999 due primarily to decreased corporate
expenditures, primarily for employee benefits, and lower margins on
intercompany sales.

1999 compared to 1998

 Overall

   Revenues. Revenues increased 59.8% to $5,560.3 million in 1999 from
$3,480.6 million in 1998. The Direct-To-Home Broadcast segment was the primary
contributor to the increase in revenues resulting from record subscriber
growth in both the U.S. and Latin America DIRECTV businesses and from
additional revenues for the U.S. DIRECTV businesses from the PRIMESTAR and
USSB acquisitions. Also contributing to the increase in revenues were
increased sales of DIRECTV receiver equipment at the Network Systems segment.

   Operating Costs and Expenses. Operating costs and expenses increased to
$5,974.8 million in 1999 from $3,521.7 million in 1998. Broadcast programming
and other costs increased $827.6 million during 1999 due primarily to the
added costs for the PRIMESTAR By DIRECTV and premium channel services. Cost of
products sold increased $343.6 million in 1999 from 1998 due to the increased
sales of DIRECTV receiver equipment discussed above and the write-off of $91.5
million of inventory associated with the discontinued wireless product lines
at the Network Systems segment. Selling, general and administrative expenses
increased by $1,016.1 million in 1999 from 1998 due primarily to increased
costs at the Direct-To-Home Broadcast segment for subscriber acquisition costs
and added costs for the PRIMESTAR By DIRECTV business and a charge of $180.6
million at the Network Systems segment resulting from the write-off of
receivables, licenses and equipment associated with the discontinued wireless
product lines. Depreciation and amortization increased

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                        HUGHES ELECTRONICS CORPORATION


$265.8 million in 1999 over 1998 due primarily to added goodwill, intangibles
and property, plant and equipment resulting from acquisitions and additions to
PanAmSat's satellite fleet.

   EBITDA decreased to $264.4 million in 1999 from $372.0 million in 1998. The
decrease was attributable to charges incurred at the Network Systems segment
which included the $272.1 million charge related to the discontinued wireless
product lines and a provision of $34.5 million for estimated losses associated
with the bankruptcy filings of two Network Systems segment customers. These
declines were offset by an increase in EBITDA of $145.9 million at the Direct-
To-Home Broadcast segment and $65.5 million at the Satellite Services segment.

   Operating Loss. Hughes' operating loss was $414.5 million in 1999 compared
to $41.1 million in 1998. The increased operating loss resulted from the
decrease in EBITDA, discussed above, and higher depreciation and amortization
at the Direct-To-Home Broadcast segment resulting primarily from goodwill from
recent acquisitions.

   Interest Income and Expense. Interest income decreased to $27.0 million in
1999 compared to $112.3 million in 1998. This change resulted from a decline
in cash and cash equivalents. Interest expense increased to $122.7 million in
1999 from $17.5 million in 1998. The increase in interest expense resulted
from an increase in debt and interest associated with liabilities for above-
market programming contracts assumed in the acquisitions of PRIMESTAR and
USSB. The changes in cash and cash equivalents and debt are discussed in more
detail below under "Liquidity and Capital Resources."

   Other, Net. Other, net declined to a net expense of $149.8 million in 1999
from a net expense of $156.9 million in 1998. Other, net for 1999 included
losses from equity method investments of $189.2 million of which $134.9
million related to DIRECTV Japan, offset by the gain of $39.4 million from the
sale of securities in the HSS initial public offering. Other, net for 1998
included losses from equity method investments of $128.3 million, of which
$83.2 million related to DIRECTV Japan, and a write-down of about $35.7
million for investments in two companies that filed for bankruptcy.

   Income Taxes. Hughes recognized an income tax benefit of $236.9 million in
1999 compared to $142.3 million in 1998. The higher tax benefit in 1999
resulted primarily from higher losses from continuing operations. The income
tax benefit in 1998 included a favorable adjustment relating to an agreement
with the Internal Revenue Service regarding the treatment of research and
experimentation credits for the years 1983 through 1995.

   Income (Loss) From Continuing Operations. Hughes reported a loss from
continuing operations in 1999 of $391.1 million compared with 1998 income from
continuing operations of $63.5 million.

   Discontinued Operations. Revenues for the Satellite Businesses decreased to
$2,240.7 million for 1999 from revenues of $2,820.4 million for 1998.
Revenues, excluding intercompany transactions, were $1,780.4 million for 1999
and $2,483.3 million for 1998. The decrease in revenues was principally due to
contract revenue adjustments and delayed revenue recognition that resulted
from increased development costs and schedule delays on several new product
lines and decreased activity associated with the contract with ICO.

   The Satellite Businesses reported an operating profit of $152.5 million for
1999 compared to operating profit of $285.0 million for 1998. The reported
operating profit, excluding intercompany transactions, amounted to $142.7
million for 1999 compared to operating profit of $294.0 million for 1998. The
1999 operating profit included a pre-tax charge of $125.0 million, after
intercompany transactions, that resulted from increased development costs and
schedule delays on several new product lines, a one-time pre-tax charge of
$81.0 million resulting from the termination of a customer contract and
decreased activity associated with a contract with ICO, partially offset by a
$154.6 million pre-tax gain related to the settlement of a patent infringement
case.

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                        HUGHES ELECTRONICS CORPORATION



   Hughes had maintained a lawsuit against the U.S. government since September
1973 regarding the U.S. government's infringement and use of a Hughes patent
covering "Velocity Control and Orientation of a Spin Stabilized Body,"
principally satellites (the "Williams patent"). On April 7, 1998, the U.S.
Court of Appeals for the Federal Circuit reaffirmed earlier decisions in the
Williams patent case, including an award of $114.0 million in damages, plus
interest. In March 1999, Hughes received a payment from the U.S. government as
a final settlement of the suit and as a result, recognized as income from
discontinued operations a pre-tax gain of $154.6 million.

   Accounting Change. In 1998, Hughes adopted American Institute of Certified
Public Accountants Statement of Position ("SOP") 98-5, Reporting on the Costs
of Start-Up Activities. SOP 98-5 required that all start-up costs previously
capitalized be written off and recognized as a cumulative effect of accounting
change, net of taxes, as of the beginning of the year of adoption. On a
prospective basis, these types of costs are required to be expensed as
incurred. The unfavorable cumulative effect of this accounting change at
January 1, 1998 was $9.2 million after-tax.

 Direct-To-Home Broadcast Segment

   Revenues for the Direct-To-Home Broadcast segment more than doubled to
$3,785.0 million in 1999 from $1,816.1 million in 1998. Operating losses
increased to $289.6 million in 1999 from $225.8 million in 1998 while EBITDA
increased to $22.4 million in 1999 from negative $123.5 million in 1998.

   United States. The DIRECTV U.S. businesses reported revenues of $3,405
million in 1999, more than twice the reported revenues of $1,604 million in
1998. The increase in revenues resulted from an increase in subscribers for
the high-power business and added revenues from PRIMESTAR By DIRECTV and
premium channel services. Subscribers for the high-power DIRECTV business
increased by 2.2 million subscribers (1.6 million excluding PRIMESTAR
conversions and incremental subscribers from USSB) during 1999 to 6.7 million
subscribers at the end of 1999. Including PRIMESTAR By DIRECTV subscribers
there were over 8 million subscribers at the end of 1999. Average monthly
revenue per subscriber for the high-power business increased to $58 at
December 31, 1999 from $46 at December 31, 1998. This increase resulted
primarily from the addition of the premium channel services in April 1999.

   EBITDA was $150 million in 1999 compared to negative $18 million in 1998.
The change in EBITDA resulted from the increased revenues that were partially
offset by increased subscriber acquisition costs and added operating costs
from the PRIMESTAR By DIRECTV and premium channel services. The DIRECTV U.S.
businesses reported an operating loss of $99 million in 1999 compared to $100
million in 1998. The decreased operating loss resulted from increased EBITDA
which was generally offset by increased depreciation and amortization that
resulted from the PRIMESTAR and USSB acquisitions.

   Latin America. Revenues for the Latin America DIRECTV businesses increased
82% to $315 million in 1999 from $173 million in 1998. The increase in
revenues reflects an increase in subscribers and the consolidation of the GGM,
GLB and SurFin businesses. Subscribers grew to 0.8 million at the end of 1999
from 0.5 million at the end of 1998. Average monthly revenue per subscriber
decreased to $36 in 1999 from $41 in 1998. The decline in average revenue per
subscriber resulted from currency devaluations in Brazil.

   EBITDA was negative $106 million in 1999 compared to negative $93 million
in 1998. The change in EBITDA resulted primarily from additional losses from
the consolidation of GGM and GLB. The Latin America DIRECTV businesses
incurred an operating loss of $169 million in 1999 compared to $113 million in
1998. The increased operating loss resulted from the decline in EBITDA and
higher depreciation and amortization that resulted from the GGM, GLB and
SurFin transactions.

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                        HUGHES ELECTRONICS CORPORATION



 Satellite Services Segment

   Revenues for the Satellite Services segment increased to $810.6 million in
1999 from $767.3 million in 1998. This increase was primarily due to increased
operating lease revenues, partially offset by a decrease in sales and sales-
type lease revenues. Operating lease revenues, which reflect long-term
satellite service agreements from which PanAmSat derives revenues over the
duration of the contract, were 97.2% of total 1999 revenues and increased by
6.9% to $787.5 million from $736.7 million in 1998. Total sales and sales-type
lease revenues were $23.1 million for 1999 compared to $30.6 million for 1998.

   EBITDA was $618.8 million in 1999 compared to $553.3 million in 1998. The
increase was principally due to higher revenue that resulted from the
commencement of new service agreements on additional satellites placed into
service in 1999 and lower leaseback expense resulting from the exercise of
certain early buy-out opportunities under sale-leaseback agreements during
1999. Operating profit was $338.3 million in 1999, an increase of $20.0
million over 1998. The increase resulted from the higher EBITDA in 1999 offset
by increased depreciation expense resulting from increased capital from
additions to the satellite fleet.

   Backlog for the Satellite Services segment, which consists primarily of
operating leases on satellite transponders, was about $6.1 billion in 1999
compared to about $6.3 billion in 1998.

 Network Systems Segment

   Revenues for the Network Systems segment increased 28.6% to $1,384.7
million in 1999 from $1,076.7 million in 1998. The higher revenues resulted
from greater shipments of DIRECTV receiver equipment. Shipments of DIRECTV
receiver equipment totaled about 2.1 million units in 1999 compared to about
0.7 million units in 1998.

   The Network Systems segment reported negative EBITDA of $156.7 million in
1999 compared to EBITDA of $74.0 million in 1998. The Network Systems segment
incurred an operating loss of $234.1 million in 1999 compared to operating
profit of $7.1 million in 1998. The decline in EBITDA and operating profit
resulted from the $272.1 million charge related to the discontinuation of the
wireless product lines, offset in part by the increased sales of DIRECTV
receiver equipment.

   Backlog for the Network Systems segment, which consists primarily of
private business networks and satellite-based mobile telephony equipment
orders, was about $1.0 billion in 1999 compared to about $1.3 billion in 1998.

 Eliminations and Other

   The elimination of revenues increased to $420.0 million in 1999 from $179.5
million in 1998 due primarily to increased manufacturing subsidies received by
the Network Systems segment from the DIRECTV businesses which resulted from
the increased DIRECTV receiver equipment shipments.

   Operating losses for "eliminations and other" increased to $229.1 million
in 1999 from $140.7 million in 1998. The increase was primarily due to
increases in eliminations of intercompany profit and corporate expenditures.
The increased intercompany profit elimination resulted from the increased
intercompany sales noted above and increased corporate expenditures resulted
primarily from higher pension and other employee costs.

Liquidity and Capital Resources

   Cash and cash equivalents were $1,508.1 million at December 31, 2000
compared to $238.2 million at December 31, 1999. The increase in cash resulted
primarily from cash proceeds received from the sale of the Satellite
Businesses, partially offset by cash used for capital expenditures and the
repayment of debt.

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<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   Cash provided by operating activities was $1,090.7 million in 2000 compared
to $379.5 million in 1999 and $612.1 million in 1998. The change in 2000
compared from 1999 resulted from $552.7 million of lower cash requirements for
the change in operating assets and liabilities and a $158.5 million of higher
income from continuing operations excluding non-cash adjustments, such as
depreciation and amortization, equity losses on unconsolidated subsidiaries
and the loss resulting from the discontinuation of the wireless product lines.
The change in 1999 from 1998 resulted primarily from increased cash
requirements for working capital, offset by increased income from continuing
operations excluding non-cash adjustments.

   Cash provided by (used in) investing activities was $2,210.8 million in
2000 compared to $(3,941.8) million in 1999 and $(2,128.5) million in 1998.
The increase in 2000 from 1999 reflects the proceeds received from the sale of
the Satellite Businesses and a decrease in investment in companies, compared
to 1999. The decrease in 1999 from 1998 reflects the higher investment in
companies primarily related to the acquisitions of PRIMESTAR and the related
Tempo Satellite assets, USSB, SurFin, GGM and GLB. The 1999 decrease is also
due to investments in DIRECTV Japan convertible bonds, the early buy-out of
satellite sale-leasebacks at PanAmSat and increased expenditures for property,
compared to 1998.

   Cash provided by (used in) financing activities was $(849.6) million in
2000 compared to $2,577.5 million in 1999 and $(63.6) million in 1998.
Financing activities in 2000 reflect the repayment of debt and payment of
preferred stock dividends to GM. Financing activities in 1999 reflect
increased borrowings and proceeds from the issuance of preferred stock.
Financing activities in 1998 include the payment to GM for the post-closing
price adjustment stemming from the transfer of Delco Electronics Corporation
to GM in 1997, offset by net long-term borrowings.

   Cash provided by (used in) discontinued operations was $(1,182.0) million
in 2000 compared to $(119.0) million in 1999 and $138.3 million in 1998. The
increase in cash used in 2000 from 1999 was primarily due to $1.1 billion of
taxes associated with the sale of the Satellite Businesses. The decrease in
1999 from 1998 was due to increased working capital requirements, increased
development costs, the termination of a customer contract and decreased
activity associated with the ICO contract.

   Liquidity Measurement. As a measure of liquidity, the current ratio (ratio
of current assets to current liabilities) at December 31, 2000 and 1999 was
1.54 and 1.46, respectively. Working capital increased by $246.9 million to
$1,462.8 million at December 31, 2000 from $1,215.9 million at December 31,
1999. The change in working capital resulted primarily from about $2.8 billion
of after-tax proceeds received from the sale of the Satellite Businesses,
partially offset by the repayment of about $0.8 billion of net borrowings and
$1.7 billion of capital expenditures for property and satellites.

   Property and Satellites. Property, net of accumulated depreciation,
increased $484.8 million to $1,707.8 million in 2000 from $1,223.0 million in
1999. The increase in property resulted primarily from capital expenditures of
about $939.0 million, partially offset by depreciation. The increase in
capital expenditures for property of $432.6 million in 2000 over 1999 was
primarily due to an increase in subscriber leased DIRECTV receiver equipment
used for the conversion of PRIMESTAR subscribers and to support subscriber
growth in Latin America. Satellites, net of accumulated depreciation,
increased $322.7 million to $4,230.0 million in 2000 from $3,907.3 million in
1999. The increase in satellites resulted primarily from capital expenditures
of $777.1 million for the construction of satellites, mostly offset by
depreciation of $299.3 million and a write-off of $128.3 million resulting
from the failure of PanAmSat's Galaxy VII satellite, which was fully insured.
Satellite capital expenditures in 1999 included $789.4 million for the
construction of satellites and $369.5 million for the early buy-out of
satellite sale-leasebacks. Total capital expenditures increased to $1,716.1
million in 2000 from $1,665.3 million in 1999.

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                        HUGHES ELECTRONICS CORPORATION



   Common Stock Dividend Policy and Use of Cash. Dividends may be paid on the
GM Class H common stock only when, as, and if declared by GM's Board of
Directors in its sole discretion. As of December 31, 2000, the amount
available for the payment of dividends by GM to holders of GM Class H common
stock was $19.7 billion.

   The GM Board has not paid, and does not currently intend to pay in the
foreseeable future, cash dividends on its Class H common stock. Similarly,
Hughes has not paid dividends on its common stock to GM and does not currently
intend to do so in the foreseeable future. Future Hughes earnings, if any, are
expected to be retained for the development of the businesses of Hughes.
Hughes expects to have cash requirements in 2001 of about $2.6 billion
primarily due to capital expenditures for satellites and property and planned
increases in subscriber acquisition costs for the Direct-To-Home businesses.
In addition, Hughes expects to increase its investment in affiliated
companies. These cash requirements are expected to be funded from a
combination of existing cash balances, cash provided from operations, amounts
available under credit facilities, and additional borrowings and equity
offerings, as needed.

   Debt and Credit Facilities, General. Hughes utilized a portion of the
proceeds from the sale of its Satellite Businesses to repay about $1.8 billion
of outstanding debt in the fourth quarter of 2000. The outstanding debt
balances that were repaid consisted of $250.0 million under Hughes' 364-day
facility, $339.4 million in commercial paper, $750.0 million under Hughes'
multi-year facility and $500.0 million of floating rate notes.

   Notes Payable. In October 1999, Hughes issued $500.0 million of floating
rate notes to a group of institutional investors in a private placement. The
notes were repaid on October 23, 2000.

   PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling
$750.0 million in January 1998. The outstanding principal balances and
interest rates for these notes as of December 31, 2000 were $200 million at
6.0%, $275 million at 6.125%, $150 million at 6.375% and $125 million at
$6.875%, respectively. Principal on the notes is payable at maturity, while
interest is payable semi-annually.

   In July 1999, in connection with the early buy-out of satellite sale-
leasebacks, PanAmSat assumed $124.1 million of variable rate notes of which
$67.7 million was outstanding at December 31, 2000. The weighted average
interest rate on the notes was 7.06% at December 31, 2000. The notes mature on
various dates through January 2, 2002.

   Revolving Credit Facilities. As of December 31, 2000, Hughes had a $750.0
million multi-year unsecured revolving credit facility. Borrowings under the
facility bear interest based on a spread to the then-prevailing London
Interbank Offer Rate ("LIBOR"). The multi-year credit facility provides for a
commitment of $750.0 million through December 5, 2002. The facility also
provides backup capacity for Hughes' $1.0 billion commercial paper program.
Commercial paper outstanding under the program bears interest at various
rates, based on market rates prevailing at the time each commercial paper
instrument is placed. No amounts were outstanding under the multi-year credit
facility or commercial paper program at December 31, 2000.

   Throughout 2000 Hughes also had outstanding borrowings under a $350.0
million 364-day facility, which expired on November 22, 2000. Borrowings under
the facility bore interest at various rates, based on a spread to then-
prevailing LIBOR. In October 2000, Hughes repaid the outstanding borrowings
under this facility. During 2000, Hughes had available a $500.0 million bridge
facility that provided additional backup capacity for Hughes $1.0 billion
commercial paper program. There were no outstanding borrowings on the bridge
facility during 2000. In October 2000, Hughes elected to terminate the bridge
facility, as provided for under the terms of the agreement.

   PanAmSat maintains a $500.0 million multi-year revolving credit facility
that provides for short-term and long-term borrowings and a $500.0 million
commercial paper program. Borrowings under the credit facility bear interest
at a rate equal to LIBOR plus a spread based on PanAmSat's credit rating. The
multi-year revolving

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                        HUGHES ELECTRONICS CORPORATION


credit facility provides for a commitment through December 24, 2002.
Borrowings under the credit facility and commercial paper program are limited
to $500.0 million in the aggregate. No amounts were outstanding under either
the multi-year revolving credit facility or the commercial paper program at
December 31, 2000.

   At December 31, 2000, SurFin, had a total of $464.9 million outstanding
under unsecured revolving credit facilities of $400.0 million and $150.0
million that expire in June 2002 and September 2003, respectively. Borrowings
under the credit facilities bear interest at various rates based on LIBOR plus
an indicated spread. The weighted average interest rate on these borrowings
was 7.58% at December 31, 2000.

   Other short-term and long-term debt outstanding at December 31, 2000
included $19.4 million of notes bearing fixed rates of interest of 9.61% to
11.11% and $14.6 million of variable rate notes, bearing a weighted average
interest rate of 11.87%. Principal on the fixed rate notes is payable in
varying amounts at maturity from November 2001 to April 2007. Principal on the
variable rate notes is payable in varying amounts at maturity in April and May
2002.

   On January 5, 2001, DLA entered into a $500 million revolving credit
facility. This facility provides for a commitment through the earlier of
eighteen months or the date of receipt of the cash proceeds from the issuance
of any debt or equity security of DLA. Borrowings under the credit facility
bear interest at a rate based on LIBOR plus an indicated spread. As of March
5, 2001, DLA had $333 million outstanding under the revolving credit facility.

   Hughes has filed a shelf registration statement with the Securities and
Exchange Commission with respect to an issuance of up to $2.0 billion of debt
securities from time to time. No amounts have been issued as of December 31,
2000.

   Acquisitions, Investments and Divestitures. Acquisitions and Investments.
On January 1, 2001, DLA acquired from Bavaria S.A. an additional 14.2%
ownership interest in Galaxy Entretenimiento de Colombia ("GEC"), a DLA local
operating company located in Colombia. As a result of the transaction, Hughes'
ownership interest in GEC increased from 44.2% to 55.2%. The purchase price
consisted of prior capital contributions of $4.4 million made by DLA during
2000 on behalf of Bavaria S.A. The increased ownership in GEC will result in
its consolidation from January 1, 2001.

   On December 21, 2000, Hughes entered into an agreement and plan of merger
with Telocity Delaware, Inc. ("Telocity") under which Hughes has agreed to
acquire all outstanding shares of Telocity at a price of $2.15 per share in
cash for a total purchase price of $177 million, and has agreed to provide
Telocity with up to $20 million of interim financing. The transaction is
expected to be completed during the second quarter of 2001.

   In April 2000, DLA acquired a 37.5% ownership interest in GEC from Carvajal
S.A. that increased Hughes' ownership interest from 15% to 44.2%. The purchase
price consisted of $6.7 million in cash and notes payable.

   On July 28, 1999, DLA acquired GLB, the exclusive distributor of DIRECTV
services in Brazil, from Tevecap S.A. for approximately $114.0 million plus
the assumption of debt. In connection with the transaction, Tevecap also sold
its 10% equity interest in DLA to Hughes and Darlene Investments, LLC, which
increased Hughes' ownership interest in DLA to 77.8%. As part of the
transaction, Hughes also increased its ownership interest in SurFin from 59.1%
to 75%. The total consideration paid in the transactions amounted to
approximately $101.1 million.

   On May 20, 1999, Hughes acquired by merger all of the outstanding capital
stock of USSB, a provider of premium subscription television programming via
the digital broadcasting system that it shared with DIRECTV. The total
consideration of approximately $1.6 billion paid in July 1999, consisted of
approximately $0.4 billion in cash and 22.6 million shares of GM Class H
common stock (prior to giving effect to the stock split during 2000).

   On April 28, 1999, Hughes completed the acquisition of PRIMESTAR's 2.3
million subscriber medium-power direct-to-home satellite business. The
purchase price consisted of $1.1 billion in cash and 4.9 million shares of GM
Class H common stock (prior to giving effect to the stock split during 2000),
for a total purchase

                                      24
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


price of $1.3 billion. As part of the acquisition of PRIMESTAR, Hughes also
purchased the high-power satellite assets, which consisted of an in-orbit
satellite and a satellite that had not yet been launched, and related orbital
frequencies of Tempo Satellite Inc., a wholly-owned subsidiary of TCI
Satellite Entertainment Inc., for $500 million in cash.

   Hughes agreed, in connection with its acquisition of PRIMESTAR, to exit the
medium-power business prior to May 1, 2001. Hughes formulated a detailed exit
plan during the second quarter of 1999 and immediately began to migrate the
medium-power customers to DIRECTV's high-power platform. Accordingly, Hughes
accrued exit costs of $150 million in determining the purchase price allocated
to the net assets acquired. The principal components of such exit costs
include penalties to terminate assumed contracts and costs to remove medium-
power equipment from customer premises. Since DIRECTV's acquisition of
PRIMESTAR, DIRECTV converted a total of approximately 1.5 million customers to
its high power service. The PRIMESTAR By DIRECTV service ceased operations, as
planned, on September 30, 2000. The amount of accrued exit costs remaining at
December 31, 2000 and 1999 was $25.9 million and $123.9 million, respectively,
which primarily represents the remaining obligation on certain contracts.

   In February 1999, Hughes acquired an additional ownership interest in GGM,
a Latin America local operating company which is the exclusive distributor of
DIRECTV in Mexico, from Grupo MVS, S.R.L. de C.V. ("Grupo MVS"). As a result,
Hughes' equity ownership represents 49% of the voting equity and all of the
non-voting equity of GGM. In October 1998, Hughes acquired from Grupo MVS an
additional 10% interest in DLA, increasing Hughes' ownership interest to 70%.
Hughes also acquired an additional 19.8% interest in SurFin, a company
providing financing of subscriber receiver equipment for certain local
operating companies located in Latin America and Mexico, increasing Hughes'
ownership percentage from 39.3% to 59.1%. The aggregate purchase price for
these transactions was $197.0 million in cash.

   The financial information included herein reflect the acquisitions
discussed above from their respective dates of acquisition. The acquisitions
were accounted for by the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets acquired and the liabilities
assumed based on the estimated fair values at the date of acquisition. The
excess of the purchase price over the estimated fair values of the net assets
acquired has been recorded as goodwill, resulting in a goodwill addition of
$3,612.4 million for the year ended December 31, 1999.

   Divestitures. On October 6, 2000, Hughes completed the sale of its
Satellite Businesses for $3.75 billion in cash, plus the estimated book value
of the closing net assets of the businesses sold in excess of a target amount.
The transaction resulted in the recognition of a pre-tax gain of $2,036.0
million, or $1,132.3 million after-tax. The purchase price is subject to
adjustment based upon the final closing net assets and is discussed in Note 20
to the consolidated financial statements.

   In a separate, but related transaction, Hughes also sold to Boeing its 50%
interest in HRL Laboratories LLC ("HRL") for $38.5 million, which represented
the net book value of HRL at October 6, 2000.

   During September 2000, Hughes Tele.com (India) Limited sold new common
shares in a public offering in India. As a result of this transaction, Hughes'
equity interest was reduced from 44.7% to 29.2%. Due to the nature of the
transaction, Hughes recorded a $23.3 million increase in capital stock and
additional paid-in capital.

   On March 1, 2000, Hughes announced that the operations of DIRECTV Japan
would be discontinued. Pursuant to an agreement with Japan Digital
Broadcasting Services Inc. (now named Sky Perfect Communications, Inc. or "Sky
Perfect"), qualified subscribers to the DIRECTV Japan service were offered the
opportunity to migrate to the Sky Perfect service, for which DIRECTV Japan was
paid a commission for each subscriber who actually migrated and Hughes
acquired a 6.6% interest in Sky Perfect. As a result, Hughes wrote-off its net
investment in DIRECTV Japan of $164.6 million and accrued exit costs of $403.7
million and

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<PAGE>

                        HUGHES ELECTRONICS CORPORATION


involuntary termination benefits of $14.5 million. Accrued exit costs consist
of claims arising out of contracts with dealers, manufacturers, programmers
and others, satellite transponder and facility and equipment leases,
subscriber migration and termination costs, and professional service fees and
other. The write-off and accrual were partially offset by the difference
between the cost of the Sky Perfect shares acquired and the estimated fair
value of the shares ($428.8 million), as determined by an independent
appraisal, and by $40.2 million for anticipated contributions from other
DIRECTV Japan shareholders. The net effect of the transaction was a charge to
"other, net" of $170.6 million at March 31, 2000.

   During 2000, $193.9 million and $8.3 million were paid related to accrued
exit costs and involuntary termination benefits, respectively. During the
second quarter of 2000, $62.4 million of payments were received from the other
DIRECTV Japan shareholders, resulting in a credit adjustment of $22.2 million
to "other, net". In the fourth quarter of 2000, $106.6 million of accrued exit
costs were reversed and $0.6 million of involuntary termination benefits were
added, resulting in a net credit adjustment to "other, net" of $106.0 million.
The adjustments made to the exit cost accrual were primarily attributable to
earlier than anticipated cessation of the DIRECTV Japan broadcasting service,
greater than anticipated commission payments for subscriber migration and
settlements of various contracts and claims. The amounts remaining for accrued
exit costs and involuntary termination benefits were $103.2 million and $6.8
million, respectively, at December 31, 2000.

   DIRECTV Japan employed approximately 290 personnel as of March 31, 2000, of
which 244 were terminated during the year. The remaining employees at December
31, 2000 will be terminated during the first half of 2001.

   In the fourth quarter of 2000, Sky Perfect completed an initial public
offering, at which date the fair value of Hughes' interest (diluted by the
public offering to approximately 5.3%) in Sky Perfect was approximately $343
million. At December 31, 2000, the market value of Hughes' investment further
declined to $159 million. Based on analysis of recent investment research
regarding Sky Perfect, Hughes determined that a portion of the decline was
"other than temporary," resulting in a charge to "other, net" and a write down
of the investment of $86.0 million. The portion of the decline not considered
"other than temporary," which amounted to $183.4 million, pre-tax, was
recorded as a mark-to-market adjustment to other comprehensive income for the
year ended December 31, 2000.

   On January 13, 2000, Hughes announced the discontinuation of its mobile
cellular and narrowband local loop product lines at HNS. As a result of this
decision, Hughes recorded a fourth quarter 1999 pre-tax charge to continuing
operations of $272.1 million. The charge represents the write-off of
receivables and inventories, licenses, software and equipment with no
alternative use.

   New Accounting Standard. Statement of Financial Accounting Standards
("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, is effective for the Company as of
January 1, 2001. SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as a
hedge and the type of transaction. Adoption of these new accounting standards
will result in an unfavorable cumulative effect of accounting change of
approximately $8.7 million after-tax charge on January 1, 2001. This standard
will have no impact on Hughes' consolidated cash flows.

                                      26
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



Commitments and Contingencies

   In connection with the sale by Hughes of the Satellite Businesses to
Boeing, it is possible that Hughes may be required to make a cash payment to
Boeing as an adjustment to the purchase price based upon the terms of the
stock purchase agreement. Although Hughes believes it has adequately provided
for such an adjustment, the total amount of any such adjustment cannot be
determined at this time. Additionally, as part of the sale, Hughes retained
limited liability for certain possible fines and penalties and the financial
consequences of debarment associated with potential criminal violations of
U.S. export control laws, which are currently being investigated, related to
the businesses now owned by Boeing, should such sanctions be imposed by either
the Department of Justice or State Department against the Satellite
Businesses. Hughes does not expect any sanctions imposed to have a material
adverse effect on Hughes' operations or financial position.

   Hughes may be required to make a cash payment to, or may receive a cash
payment from, Raytheon in connection with the merger of the defense
electronics business of Hughes with Raytheon in 1997. The amount of any such
cash payment to or from Raytheon, if any, is not determinable at this time.

   Hughes purchases in-orbit and launch insurance for its satellite fleet to
mitigate the potential financial impact of in-orbit and launch failures. The
insurance generally does not compensate for business interruption or loss of
future revenues or customers. Certain of Hughes' insurance policies contain
exclusions related to known anomalies and Hughes is self-insured for certain
other satellites. The portion of the book value of satellites that were self-
insured or with coverage exclusions amounted to $519.5 million at December 31,
2000.

   At December 31, 2000, minimum future commitments under noncancelable
operating leases having lease terms in excess of one year are primarily for
real property and aggregated $106.6 million, payable as follows: $29.9 million
in 2001, $23.7 million in 2002, $17.8 million in 2003, $13.6 million in 2004,
$16.4 million in 2005 and $5.2 million thereafter. Certain of these leases
contain escalation clauses and renewal or purchase options. Rental expenses
under operating leases, net of sublease rental income, were $55.9 million in
2000, $58.5 million in 1999 and $82.7 million in 1998.

   Hughes is contingently liable under standby letters of credit and bonds in
the amount of $59.1 million at December 31, 2000. In Hughes' past experience,
no material claims have been made against these financial instruments. In
addition, at December 31, 2000, Hughes has guaranteed up to $340.7 million of
bank debt, including $85.0 million related to Motient Corporation. Of the bank
debt guaranteed, $85.0 million matures in March 2003 and $55.4 million matures
in September 2007. The remaining $200.3 million is related to DIRECTV Latin
America and SurFin guarantees of non-consolidated local operating company debt
and is due in variable amounts over the next five years.

   In connection with the direct-to-home broadcast businesses, Hughes has
commitments related to certain programming agreements which are variable based
upon the number of underlying subscribers and market penetration rates.
Minimum payments over the terms of applicable contracts are anticipated to be
approximately $1.3 billion.

   As part of a marketing agreement entered into with America Online, Inc.
("AOL") on June 21, 1999, Hughes committed to increase its sales and marketing
expenditures over the next three years by approximately $1.5 billion relating
to DirecPC(R)/AOL-Plus, DIRECTV(R), DIRECTV(TM)/AOL TV and DirecDuo(TM). At
December 31, 2000, Hughes' remaining commitment under this agreement was
approximately $1.1 billion.

   See Note 20 to the consolidated financial statements for further discussion
of the above matters and various legal proceedings and claims that could be
material, individually or in the aggregate, to Hughes' continuing operations
or financial position.

                                      27
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



Security Ratings

   Hughes' current long-term credit ratings are Baa2 and BBB-, with its short-
term credit and commercial paper ratings at P-2 and A-3, as rated by Moody's
Investor Services and Standard and Poor's Rating Services, respectively. On
September 21, 2000, subsequent to the announcement that GM was exploring
strategic alternatives involving Hughes, S&P re-affirmed its BBB- and A-3 debt
ratings for Hughes and revised its outlook from positive to developing.
Previously, in January 2000, subsequent to the announced sale of Hughes'
Satellite Businesses, Moody's and S&P each affirmed their respective debt
ratings for Hughes. At that time, Moody's maintained its negative outlook but
ended its review for possible downgrade while S&P revised its outlook to
positive from negative.

   Debt ratings by the various rating agencies reflect each agency's opinion
of the ability of issuers to repay debt obligations as they come due. With
respect to Moody's, the Baa2 rating for senior debt indicates adequate
likelihood of interest and principal payment and principal security. The P-2
short-term rating, the second highest rating available, indicates that the
issuer has a strong ability for repayment relative to other issuers. For S&P,
the BBB- rating indicates the issuer has adequate capacity to pay interest and
repay principal. In general, lower ratings result in higher borrowing costs. A
security rating is not a recommendation to buy, sell, or hold securities and
may be subject to revision or withdrawal at any time by the assigning rating
organization. Each rating should be evaluated independently of any other
rating.

Market Risk Disclosure

   The following discussion and the estimated amounts generated from the
sensitivity analyses referred to below include forward-looking statements of
market risk which assume for analytical purposes that certain adverse market
conditions may occur. Actual future market conditions may differ materially
from such assumptions because the amounts noted below are the result of
analyses used for the purpose of assessing possible risks and the mitigation
thereof. Accordingly, the forward-looking statements should not be considered
projections by Hughes of future events or losses.

 General

   Hughes' cash flows and earnings are subject to fluctuations resulting from
changes in foreign currency exchange rates, interest rates and changes in the
market value of its equity investments. Hughes manages its exposure to these
market risks through internally established policies and procedures and, when
deemed appropriate, through the use of derivative financial instruments.
Hughes' policy is to not enter into speculative derivative instruments for
profit or execute derivative instrument contracts for which there are no
underlying exposures. Hughes does not use financial instruments for trading
purposes and is not a party to any leveraged derivatives.

 Foreign Currency Risk

   Hughes generally conducts its business in U.S. dollars with some business
conducted in a variety of foreign currencies and therefore is exposed to
fluctuations in foreign currency exchange rates. Hughes' objective in managing
its exposure to foreign currency changes is to reduce earnings and cash flow
volatility associated with foreign exchange rate fluctuations. Accordingly,
Hughes enters into foreign exchange contracts to mitigate risks associated
with future foreign currency firm commitments. Foreign exchange contracts are
legal agreements between two parties to purchase and sell a foreign currency,
for a price specified at the contract date, with delivery and settlement in
the future. The impact of a hypothetical 10% adverse change in exchange rates
on the fair values of foreign exchange contracts and foreign currency
denominated assets and liabilities would be less than $3.5 million, net of
taxes at both December 31, 2000 and December 31, 1999.

                                      28
<PAGE>

 Investments

   Hughes maintains investments in publicly-traded common stock of
unaffiliated companies and is therefore subject to equity price risk. These
investments are classified as available-for-sale and, consequently, are
reflected in Hughes' consolidated balance sheets at fair value with unrealized
gains or losses, net of taxes, recorded as part of accumulated other
comprehensive income (loss), a separate component of stockholder's equity.
Declines in market value that are judged to be "other than temporary" are
charged to "other, net" in the Consolidated Statements of Operations and
Available Separate Consolidated Net Income (Loss). At December 31, 2000, the
fair values of the investments in such common stock were $973.9 million
compared to $976.0 million at December 31, 1999. The investments were valued
at the market closing prices at December 31, 2000. No actions have been taken
by Hughes to hedge this market risk exposure. A 10% decline in the market
price of these investments would cause the fair value of the investments in
common stock to decrease by $97.4 million and $97.6 million at December 31,
2000 and 1999, respectively.

 Interest Rate Risk

   Hughes is subject to interest rate risk related to its outstanding debt of
$1.3 billion at December 31, 2000 and $2.1 billion at December 31, 1999. As of
December 31, 2000, debt consisted of PanAmSat's fixed-rate borrowings of
$750.0 million, SurFin's variable rate borrowings of $464.9 million and
various other floating and fixed rate borrowings. Hughes is subject to
fluctuating interest rates which may adversely impact its results of
operations and cash flows for its variable rate bank borrowings. Fluctuations
in interest rates may also adversely effect the market value of Hughes' fixed-
rate borrowings. At December 31, 2000, outstanding borrowings bore interest at
rates ranging from 6.00% to 11.87%. The potential fair value loss resulting
from a hypothetical 10% decrease in interest rates related to Hughes'
outstanding debt would be approximately $25.4 million and $29.0 million at
December 31, 2000 and 1999, respectively.

 Credit Risk

   Hughes is exposed to credit risk in the event of non-performance by the
counterparties to its foreign exchange contracts. While Hughes believes this
risk is remote, credit risk is managed through the periodic monitoring and
approval of financially sound counterparties.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

   The information required by this section is included in Item 7.

                                      29
<PAGE>

                        HUGHES ELECTRONICS CORPORATION

                   RESPONSIBILITIES FOR FINANCIAL STATEMENTS

   The following consolidated financial statements of Hughes Electronics
Corporation were prepared by management, which is responsible for their
integrity and objectivity. The statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
and, as such, include amounts based on judgments of management.

   Management is further responsible for maintaining internal control designed
to provide reasonable assurance that the books and records reflect the
transactions of the company and that established policies and procedures are
carefully followed. Perhaps the most important feature in internal control is
that it is continually reviewed for effectiveness and is augmented by written
policies and guidelines, the careful selection and training of qualified
personnel and a strong program of internal audit.

   Deloitte & Touche LLP, an independent auditing firm, is engaged to audit
the consolidated financial statements of Hughes Electronics Corporation and
issue reports thereon. The audit is conducted in accordance with auditing
standards generally accepted in the United States of America that comprehend
the consideration of internal control and tests of transactions to the extent
necessary to form an independent opinion on the consolidated financial
statements prepared by management. The Independent Auditors' Report appears on
page 32.

   The Board of Directors, through its Audit Committee, is responsible for
assuring that management fulfills its responsibilities in the preparation of
the consolidated financial statements and engaging the independent auditors.
The Audit Committee reviews the scope of the audits and the accounting
principles being applied in financial reporting. The independent auditors,
representatives of management, and the internal auditors meet regularly
(separately and jointly) with the Audit Committee to review the activities of
each, to ensure that each is properly discharging its responsibilities and to
assess the effectiveness of internal control. It is management's conclusion
that internal control at December 31, 2000 provides reasonable assurance that
the books and records reflect the transactions of the company and that
established policies and procedures are complied with. To ensure complete
independence, Deloitte & Touche LLP has full and free access to meet with the
Audit Committee, without management representatives present, to discuss the
results of the audit, the adequacy of internal control, and the quality of
financial reporting.

<TABLE>
 <S>                                <C>
 /s/ Michael T. Smith               /s/ Roxanne S. Austin
 Michael T. Smith                   Roxanne S. Austin
 Chairman of the Board and Chief    Senior Vice President and Chief
 Executive Officer                  Financial Officer
</TABLE>

                                      30
<PAGE>

                        HUGHES ELECTRONICS CORPORATION

                            AUDIT COMMITTEE REPORT

   The Audit Committee of the Hughes Electronics Corporation Board of
Directors (the Committee) is composed of four independent directors and
operates under a written charter adopted by the Board of Directors. The
members of the Committee are T. E. Everhart (Chair), J. M. Cornelius, P. A.
Lund, and A. C. Sikes. The Committee recommends to the Board of Directors the
selection of Hughes' independent auditors.

   Management is responsible for internal control and the financial reporting
process. The independent auditors are responsible for performing an
independent audit of Hughes' consolidated financial statements in accordance
with auditing standards generally accepted in the United States of America and
to issue a report thereon. The Committee's responsibility is to monitor and
oversee these processes.

   In this context, the Committee has met and held discussions with management
and the independent auditors. Management represented to the Committee that
Hughes' consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, and
the Committee has reviewed and discussed the audited consolidated financial
statements with management and the independent auditors. The Committee
discussed with the independent auditors matters required to be discussed by
Statement on Auditing Standards No.61 (Communication with Audit Committees).

   Hughes' independent auditors also provided to the Committee the written
disclosures required by Independence Standards Board Standard No.1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent auditors that firm's independence.

   Based upon the Committee's discussions with management and the independent
auditors and the Committee's review of the representation of management and
the report of the independent auditors to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in Hughes' Annual Report on Form 10-K for the year ended
December 31, 2000 filed with the Securities and Exchange Commission.

/s/ T. E. Everhart, Chair
/s/ J. M. Cornelius
/s/ P. A. Lund
/s/ A. C. Sikes

                                      31
<PAGE>

                        HUGHES ELECTRONICS CORPORATION

                         INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Hughes Electronics Corporation:

   We have audited the accompanying Consolidated Balance Sheets of Hughes
Electronics Corporation as of December 31, 2000 and 1999, and the related
Consolidated Statements of Operations and Available Separate Consolidated Net
Income (Loss), Consolidated Statements of Changes in Stockholder's Equity and
Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 2000. Our audits also included the financial
statement schedule listed in Item 14. These financial statements and the
financial statement schedule are the responsibility of Hughes Electronics
Corporation's management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.

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

   In our opinion, such financial statements present fairly, in all material
respects, the financial position of Hughes Electronics Corporation at December
31, 2000 and 1999, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2000 in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion, the financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

   As discussed in Note 2 to the accompanying financial statements, effective
January 1, 1998, Hughes Electronics Corporation changed its method of
accounting for costs of start-up activities by adopting American Institute of
Certified Public Accountants Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities.

/s/ Deloitte & Touche LLP
_____________________________________
DELOITTE & TOUCHE LLP

Los Angeles, California
January 16, 2001

                                      32
<PAGE>

                         HUGHES ELECTRONICS CORPORATION

ITEM 8. Consolidated Financial Statements and Supplementary Data

                   CONSOLIDATED STATEMENTS OF OPERATIONS AND
               AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)

<TABLE>
<CAPTION>
                                                   Years Ended December 31,
                                                  ----------------------------
                                                    2000      1999      1998
                                                  --------  --------  --------
                                                    (Dollars in Millions)
<S>                                               <C>       <C>       <C>
Revenues
  Direct broadcast, leasing and other services..  $6,262.2  $4,550.8  $2,640.2
  Product sales.................................   1,025.4   1,009.5     840.4
                                                  --------  --------  --------
    Total Revenues..............................   7,287.6   5,560.3   3,480.6
                                                  --------  --------  --------
Operating Costs and Expenses
  Broadcast programming and other costs.........   2,812.8   2,039.0   1,211.4
  Cost of products sold.........................     815.1     961.6     618.0
  Selling, general and administrative expenses..   3,065.7   2,295.3   1,279.2
  Depreciation and amortization.................     948.1     678.9     413.1
                                                  --------  --------  --------
    Total Operating Costs and Expenses..........   7,641.7   5,974.8   3,521.7
                                                  --------  --------  --------
Operating Loss..................................    (354.1)   (414.5)    (41.1)
Interest income.................................      49.3      27.0     112.3
Interest expense................................    (218.2)   (122.7)    (17.5)
Other, net......................................    (292.6)   (149.8)   (156.9)
                                                  --------  --------  --------
Loss From Continuing Operations Before Income
 Taxes, Minority Interests and Cumulative Effect
 of Accounting Change...........................    (815.6)   (660.0)   (103.2)
Income tax benefit..............................    (406.1)   (236.9)   (142.3)
Minority interests in net losses of
 subsidiaries...................................      54.1      32.0      24.4
                                                  --------  --------  --------
Income (Loss) from continuing operations before
 cumulative effect of accounting change.........    (355.4)   (391.1)     63.5
Income from discontinued operations, net of
 taxes..........................................      36.1      99.8     196.4
Gain on sale of discontinued operations, net of
 taxes..........................................   1,132.3       --        --
                                                  --------  --------  --------
Income (Loss) before cumulative effect of
 accounting change..............................     813.0    (291.3)    259.9
Cumulative effect of accounting change, net of
 taxes..........................................       --        --       (9.2)
                                                  --------  --------  --------
Net Income (Loss)...............................     813.0    (291.3)    250.7
Adjustment to exclude the effect of GM purchase
 accounting ....................................      16.9      21.0      21.0
                                                  --------  --------  --------
Earnings (Loss) excluding the effect of GM
 purchase accounting adjustment.................     829.9    (270.3)    271.7
Preferred stock dividends.......................     (97.0)    (50.9)      --
                                                  --------  --------  --------
Earnings (Loss) Used for Computation of
 Available Separate Consolidated Net Income
 (Loss).........................................  $  732.9  $ (321.2) $  271.7
                                                  ========  ========  ========
Available Separate Consolidated Net Income
 (Loss).........................................
Average number of shares of General Motors Class
 H Common Stock outstanding (in millions)
 (Numerator)....................................     681.2     374.1     315.9
Average Class H dividend base (in millions)
 (Denominator)..................................   1,297.0   1,255.5   1,199.7
Available Separate Consolidated Net Income
 (Loss).........................................  $  384.9  $  (95.7) $   71.5
                                                  ========  ========  ========
</TABLE>
--------
Reference should be made to the Notes to the Consolidated Financial Statements.

                                       33
<PAGE>

                         HUGHES ELECTRONICS CORPORATION

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             December 31,
                                                          --------------------
                                                            2000       1999
                                                          ---------  ---------
                                                              (Dollars in
                                                               Millions)

<S>                                                       <C>        <C>
                         ASSETS
                         ------

Current Assets
  Cash and cash equivalents.............................. $ 1,508.1  $   238.2
  Accounts and notes receivable, net of allowances of
   $88.3 and $92.9.......................................   1,253.0      960.9
  Contracts in process...................................     186.0      155.8
  Inventories............................................     338.0      236.1
  Net assets of discontinued operations..................       --     1,224.6
  Deferred income taxes..................................      89.9      254.3
  Prepaid expenses and other.............................     778.7      788.1
                                                          ---------  ---------
      Total Current Assets...............................   4,153.7    3,858.0
Satellites, net..........................................   4,230.0    3,907.3
Property, net............................................   1,707.8    1,223.0
Net Investment in Sales-type Leases......................     221.1      146.1
Intangible Assets, net...................................   7,151.3    7,406.0
Investments and Other Assets.............................   1,815.4    2,056.6
                                                          ---------  ---------
      Total Assets....................................... $19,279.3  $18,597.0
                                                          =========  =========

          LIABILITIES AND STOCKHOLDER'S EQUITY
          ------------------------------------

Current Liabilities
  Accounts payable....................................... $ 1,224.2  $ 1,062.2
  Deferred revenues......................................     137.6      130.5
  Short-term borrowings and current portion of long-term
   debt..................................................      24.6      555.4
  Accrued liabilities and other..........................   1,304.5      894.0
                                                          ---------  ---------
      Total Current Liabilities..........................   2,690.9    2,642.1
                                                          ---------  ---------
Long-Term Debt...........................................   1,292.0    1,586.0
Other Liabilities and Deferred Credits...................   1,647.3    1,454.2
Deferred Income Taxes....................................     769.3      689.1
Commitments and Contingencies
Minority Interests.......................................     553.7      544.3
Stockholder's Equity
  Capital stock and additional paid-in capital...........   9,973.8    9,809.5
  Preferred stock........................................   1,495.7    1,487.5
  Retained earnings (deficit)............................     631.6      (84.4)
                                                          ---------  ---------
Subtotal Stockholder's Equity............................  12,101.1   11,212.6
                                                          ---------  ---------
  Accumulated Other Comprehensive Income (Loss)
    Minimum pension liability adjustment.................     (16.1)      (7.3)
    Accumulated unrealized gains on securities...........     257.0      466.0
    Accumulated foreign currency translation
     adjustments.........................................     (15.9)      10.0
                                                          ---------  ---------
    Accumulated other comprehensive income...............     225.0      468.7
                                                          ---------  ---------
      Total Stockholder's Equity.........................  12,326.1   11,681.3
                                                          ---------  ---------
      Total Liabilities and Stockholder's Equity......... $19,279.3  $18,597.0
                                                          =========  =========
</TABLE>
--------
Reference should be made to the Notes to the Consolidated Financial Statements.

                                       34
<PAGE>

                         HUGHES ELECTRONICS CORPORATION

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
                          Capital Stock
                               and                           Accumulated
                           Additional             Retained      Other         Total
                             Paid-In    Preferred Earnings  Comprehensive Stockholder's Comprehensive
                             Capital      Stock   (Deficit) Income (Loss)    Equity     Income (Loss)
                          ------------- --------- --------- ------------- ------------- -------------
                                                     (Dollars in Millions)
<S>                       <C>           <C>       <C>       <C>           <C>           <C>
Balance at December 31,
 1997...................    $8,322.8               $   7.1     $  10.3      $ 8,340.2
Net Income..............                             250.7                      250.7      $ 250.7
Delco post-closing price
 adjustment.............      (199.7)                                          (199.7)
Tax benefit from
 exercise of GM Class H
 common stock options...        23.0                                             23.0
Minimum pension
 liability adjustment...                                          (0.5)          (0.5)        (0.5)
Foreign currency
 translation
 adjustments............                                           3.8            3.8          3.8
Unrealized gains on
 securities:
 Unrealized holding
  gains.................                                           1.8            1.8          1.8
 Less: reclassification
  adjustment for gains
  included in net
  income................                                          (7.1)          (7.1)        (7.1)
                                                                                           -------
Comprehensive income....                                                                   $ 248.7
                            --------    --------   -------     -------      ---------      =======
Balance at December 31,
 1998...................     8,146.1                 257.8         8.3        8,412.2
Net Loss................                            (291.3)                    (291.3)     $(291.3)
Preferred stock.........                $1,487.5      (2.5)                   1,485.0
Preferred stock
 dividends..............                             (48.4)                     (48.4)
GM Class H common stock
 acquired by Hughes and
 retired by GM..........       (11.1)                                           (11.1)
Stock options
 exercised..............       114.4                                            114.4
Shares issued in
 connection with
 acquisitions...........     1,506.7                                          1,506.7
Tax benefit from
 exercise of GM Class H
 common stock options...        53.4                                             53.4
Minimum pension
 liability adjustment...                                          (0.5)          (0.5)        (0.5)
Foreign currency
 translation
 adjustments............                                          11.0           11.0         11.0
Unrealized gains on
 securities.............                                         449.9          449.9        449.9
                                                                                           -------
Comprehensive income....                                                                   $ 169.1
                            --------    --------   -------     -------      ---------      =======
Balance at December 31,
 1999...................     9,809.5     1,487.5     (84.4)      468.7       11,681.3
Net Income..............                             813.0                      813.0      $ 813.0
Preferred stock.........                     8.2      (3.2)                       5.0
Preferred stock
 dividends..............                             (93.8)                     (93.8)
Stock options
 exercised..............        78.4                                             78.4
Tax benefit from
 exercise of GM Class H
 common stock options...        62.3                                             62.3
Other...................        23.6                                             23.6
Minimum pension
 liability adjustment...                                          (8.8)          (8.8)        (8.8)
Foreign currency
 translation
 adjustments............                                         (25.9)         (25.9)       (25.9)
Unrealized loss on
 securities.............                                        (209.0)        (209.0)      (209.0)
                                                                                           -------
Comprehensive income....                                                                   $ 569.3
                            --------    --------   -------     -------      ---------      =======
Balance at December 31,
 2000...................    $9,973.8    $1,495.7   $ 631.6     $ 225.0      $12,326.1
                            ========    ========   =======     =======      =========
</TABLE>
--------
Reference should be made to the Notes to the Consolidated Financial Statements.

                                       35
<PAGE>

                         HUGHES ELECTRONICS CORPORATION


                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                Years Ended December 31,
                                              -------------------------------
                                                2000       1999       1998
                                              ---------  ---------  ---------
                                                  (Dollars in Millions)
<S>                                           <C>        <C>        <C>
Cash Flows from Operating Activities
Income (Loss) from continuing operations
 before cumulative effect of accounting
 change...................................... $  (355.4) $  (391.1) $    63.5
Adjustments to reconcile income (loss) from
 continuing operations before cumulative
 effect of accounting change to net cash
 provided by operating activities
  Depreciation and amortization..............     948.1      678.9      413.1
  Equity losses from unconsolidated
   affiliates................................     164.2      189.2      128.3
  Amortization of gains on sale-leasebacks...       --       (10.8)     (36.2)
  Net gain on sale of investments and
   businesses sold...........................       --       (30.0)     (13.7)
  Net loss on discontinuation of wireless
   product lines.............................       --       272.1        --
  Net loss on discontinuation of DIRECTV
   Japan business and write down of Sky
   Perfect investment........................     128.4        --         --
  Gross profit on sales and sales-type
   leases....................................    (136.4)       --         --
  Net (gain) loss on disposal of assets......      14.6        2.7        --
  Deferred income taxes and other............     377.1      271.1       99.6
  Change in other operating assets and
   liabilities
    Accounts and notes receivable............    (164.4)      35.0      (49.4)
    Inventories..............................    (101.9)     (38.7)      12.9
    Prepaid expenses and other...............       5.3     (494.0)     (91.6)
    Accounts payable.........................     162.0      101.4      224.0
    Accrued liabilities and other............    (132.1)      59.6      (19.0)
    Other....................................     181.2     (265.9)    (119.4)
                                              ---------  ---------  ---------
      Net Cash Provided by Operating
       Activities............................   1,090.7      379.5      612.1
                                              ---------  ---------  ---------
Cash Flows from Investing Activities
Investment in companies, net of cash
 acquired....................................    (181.2)  (2,443.7)  (1,231.0)
Investment in convertible bonds..............       --      (244.7)       --
Expenditures for property....................    (939.0)    (506.4)    (243.9)
Increase in satellites.......................    (777.1)    (789.4)    (929.4)
Early buy-out of satellites under sale and
 leaseback...................................       --      (245.4)    (155.5)
Proceeds from disposal of property...........      31.6       15.8       20.0
Proceeds from sale of subsidiaries and
 investments.................................   4,040.3        --        12.4
Proceeds from insurance claims...............      36.2      272.0      398.9
                                              ---------  ---------  ---------
      Net Cash Provided by (Used in)
       Investing Activities..................   2,210.8   (3,941.8)  (2,128.5)
                                              ---------  ---------  ---------
Cash Flows from Financing Activities
Net increase (decrease) in notes and loans
 payable.....................................    (496.6)     343.0        --
Long-term debt borrowings....................   5,262.2    8,165.6    1,165.2
Repayment of long-term debt..................  (5,591.5)  (7,494.4)  (1,024.1)
Net proceeds from issuance of preferred
 stock.......................................       --     1,485.0        --
Stock options exercised......................      70.1      114.4        --
Purchase and retirement of GM Class H common
 stock.......................................       --       (11.1)       --
Preferred stock dividends paid to General
 Motors......................................     (93.8)     (25.0)       --
Payment to General Motors for Delco post-
 closing price adjustment....................       --         --      (204.7)
                                              ---------  ---------  ---------
      Net Cash Provided by (Used in)
       Financing Activities..................    (849.6)   2,577.5      (63.6)
                                              ---------  ---------  ---------
Net cash provided by (used in) continuing
 operations..................................   2,451.9     (984.8)  (1,580.0)
Net cash provided by (used in) discontinued
 operations..................................  (1,182.0)    (119.0)     138.3
                                              ---------  ---------  ---------
Net increase (decrease) in cash and cash
 equivalents.................................   1,269.9   (1,103.8)  (1,441.7)
      Cash and cash equivalents at beginning
       of the year...........................     238.2    1,342.0    2,783.7
                                              ---------  ---------  ---------
      Cash and cash equivalents at end of the
       year.................................. $ 1,508.1  $   238.2  $ 1,342.0
                                              =========  =========  =========
</TABLE>
--------
Reference should be made to the Notes to the Consolidated Financial Statements.

                                       36
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



Note 1: Basis of Presentation and Description of Business

   Hughes Electronics Corporation ("Hughes Electronics" or "Hughes") is a
wholly owned subsidiary of General Motors Corporation ("GM"). The GM Class H
common stock tracks the financial performance of Hughes, consisting
principally of its direct-to-home broadcast, satellite services, network
systems and the satellite systems manufacturing businesses ("Satellite
Businesses").

   Hughes is a leading provider of digital entertainment, information and
communication services and satellite-based private business networks. Hughes
is the world's leading digital multi-channel entertainment service provider
with its programming distribution service known as DIRECTV(R), which was
introduced in the U.S. in 1994 and was the first high-powered, all digital,
direct-to-home television distribution service in North America. DIRECTV began
service in Latin America in 1996. Hughes is also the owner and operator of the
largest commercial satellite fleet in the world through its 81% owned
subsidiary, PanAmSat. Hughes is also a leading provider of broadband services
and products, including satellite wireless communications ground equipment and
business communications services. Hughes' equipment and services are applied
in, among other things, data, video and audio transmission, cable and network
television distribution, private business networks, digital cellular
communications and direct-to-home satellite broadcast distribution of
television programming.

   Revenues, operating costs and expenses, and other non-operating results for
the discontinued operations of the Satellite Businesses which were sold to The
Boeing Company ("Boeing") on October 6, 2000 are excluded from Hughes' results
from continuing operations for all periods presented herein. Alternatively,
the financial results are presented in Hughes' Consolidated Statements of
Operations and Available Separate Consolidated Net Income (Loss) in a single
line item entitled "Income from discontinued operations, net of taxes," the
related assets and liabilities are presented in the Consolidated Balance
Sheets at December 31, 1999 in a single line item entitled "Net assets of
discontinued operations" and the net cash flows are presented in the
Consolidated Statements of Cash Flows as "Net cash provided by (used in)
discontinued operations." See further discussion in Note 17.

   The accompanying consolidated financial statements include the applicable
portion of intangible assets, including goodwill, and related amortization
resulting from purchase accounting adjustments associated with GM's purchase
of Hughes in 1985, with certain amounts allocated to the Satellite Businesses.

Note 2: Summary of Significant Accounting Policies

 Principles of Consolidation

   The accompanying financial statements are presented on a consolidated basis
and include the accounts of Hughes and its domestic and foreign subsidiaries
that are more than 50% owned or controlled by Hughes.

 Use of Estimates in the Preparation of the Consolidated Financial Statements

   The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may be based upon amounts which differ from those estimates.

 Revenue Recognition

   Revenues are generated from sales of direct-to-home broadcast
subscriptions, and the sale of transponder capacity and related services
through outright sales, sales-type leases and operating lease contracts, and
sales of communications equipment and services.

                                      37
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   Sales are generally recognized as products are shipped or services are
rendered. Direct-to-home subscription revenues and pay-per-view services are
recognized when programming is viewed by subscribers. Programming payments
received from subscribers in advance of viewing are recorded as deferred
revenues until earned.

   Satellite transponder lease contracts qualifying for capital lease
treatment (typically based on the term of the lease) are accounted for as
sales-type leases, with revenues recognized equal to the net present value of
the future minimum lease payments. Upon entering into a sales-type lease, the
cost basis of the transponder is charged to cost of products sold. The portion
of each periodic lease payment deemed to be attributable to interest income is
recognized in each respective period. Contracts for sales of transponders
typically include telemetry, tracking and control ("TT&C") service agreements.
Revenues related to TT&C service agreements are recognized as the services are
performed.

   Transponder and other lease contracts that do not qualify as sales-type
leases are accounted for as operating leases. Operating lease revenues are
recognized on a straight-line basis over the respective lease term.
Differences between operating lease payments received and revenues recognized
are deferred and included in accounts and notes receivable or investments and
other assets.

   A small percentage of revenues are derived from long-term contracts for the
sale of large wireless communications systems. Sales under long-term contracts
are recognized primarily using the percentage-of-completion (cost-to-cost)
method of accounting. Under this method, sales are recorded equivalent to
costs incurred plus a portion of the profit expected to be realized,
determined based on the ratio of costs incurred to estimated total costs at
completion. Profits expected to be realized on long-term contracts are based
on estimates of total sales value and costs at completion. These estimates are
reviewed and revised periodically throughout the lives of the contracts, and
adjustments to profits resulting from such revisions are recorded in the
accounting period in which the revisions are made. Estimated losses on
contracts are recorded in the period in which they are identified.

   Hughes has from time to time entered into agreements for the sale and
leaseback of certain of its satellite transponders. However, as a result of
early buy-out transactions described in Note 4, no obligations under sale-
leaseback agreements remain at December 31, 2000. Prior to the completion of
the early buy-out transactions, the leasebacks were classified as operating
leases and, therefore, the capitalized cost and associated depreciation
related to satellite transponders sold were not included in the accompanying
consolidated financial statements. Gains resulting from the sale and leaseback
transactions were deferred and amortized over the leaseback period. Leaseback
expense was recorded using the straight-line method over the term of the
lease, net of amortization of the deferred gains. Differences between
operating leaseback payments made and expense recognized were deferred and
included in other liabilities and deferred credits.

 Cash Flows

   Cash equivalents consist of highly liquid investments purchased with
original maturities of three months or less.

   Net cash from operating activities includes cash payments made for interest
of $312.9 million, $174.6 million and $53.2 million in 2000, 1999 and 1998,
respectively. Net cash refunds received by Hughes for prior year income taxes
amounted to $290.5 million, $197.2 million and $59.9 million in 2000, 1999 and
1998, respectively.

 Contracts in Process

   Contracts in process are stated at costs incurred plus estimated profit,
less amounts billed to customers and advances and progress payments applied.
Engineering, tooling, manufacturing, and applicable overhead costs, including
administrative, research and development and selling expenses, are charged to
costs and expenses when

                                      38
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


incurred. Amounts billed under retainage provisions of contracts are not
significant, and substantially all amounts are collectible within one year.
Advances offset against contract related receivables amounted to $93.0 million
and $114.5 million at December 31, 2000 and 1999, respectively.

 Inventories

   Inventories are stated at the lower of cost or market principally using the
average cost method.

<TABLE>
<CAPTION>
   Major Classes of Inventories                              2000       1999
   ----------------------------                           ---------- ----------
                                                          (Dollars in Millions)
   <S>                                                    <C>        <C>
   Productive material and supplies...................... $     89.5 $     59.1
   Work in process.......................................      128.3       67.0
   Finished goods........................................      120.2      110.0
                                                          ---------- ----------
     Total............................................... $    338.0 $    236.1
                                                          ========== ==========
</TABLE>

 Property, Satellites and Depreciation

   Property and satellites are carried at cost. Satellite costs include
construction costs, launch costs, launch insurance and capitalized interest.
Capitalized satellite costs represent the costs of successful satellite
launches. The proportionate cost of a satellite, net of depreciation and
insurance proceeds, is written off in the period a full or partial loss of the
satellite occurs. Depreciation is computed generally using the straight-line
method over the estimated useful lives of the assets. Leasehold improvements
are amortized over the lesser of the life of the asset or term of the lease.

 Intangible Assets

   Goodwill, which represents the excess of the cost over the net tangible and
identifiable intangible assets of acquired businesses, and intangible assets
are amortized using the straight-line method over periods not exceeding 40
years.

 Software Development Costs

   Other assets include certain software development costs capitalized in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed. Capitalized software development costs at December 31, 2000 and
1999, net of accumulated amortization of $125.2 million and $98.7 million,
respectively, totaled $74.5 million and $70.4 million. The software is
amortized using the greater of the units of revenue method or the straight-
line method over its estimated useful life, not in excess of five years.
Software program reviews are conducted to ensure that capitalized software
development costs are properly treated and costs associated with programs that
are not generating revenues are appropriately written off.

 Valuation of Long-Lived Assets

   Hughes periodically evaluates the carrying value of long-lived assets to be
held and used, including goodwill and other intangible assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset
is considered impaired when the anticipated undiscounted cash flow from such
asset is separately identifiable and is less than its carrying value. In that
event, a loss is recognized based on the amount by which the carrying value
exceeds the fair value of the long-lived asset. Fair value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of are
determined in a similar manner, except that fair values are reduced for the
cost of disposal.

                                      39
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



 Foreign Currency

   Some of Hughes' foreign operations have determined the local currency to be
their functional currency. Accordingly, these foreign entities translate
assets and liabilities from their local currencies to U.S. dollars using year-
end exchange rates while income and expense accounts are translated at the
average rates in effect during the year. The resulting translation adjustment
is recorded as part of accumulated other comprehensive income (loss), a
separate component of stockholder's equity. Gains and losses resulting from
remeasurement into the functional currency of transactions denominated in non-
functional currencies are recognized in earnings. Net foreign currency
transaction gains and losses included in operations were not material for all
years presented.

 Financial Instruments and Investments

   Hughes maintains investments in equity securities of unaffiliated
companies. Marketable equity securities are considered available-for-sale and
carried at current fair value with unrealized gains or losses, net of taxes,
reported as part of accumulated other comprehensive income (loss), a separate
component of stockholder's equity. Declines in market value that are judged to
be "other than temporary" are charged to "other, net." Fair value is
determined by market quotes, when available, or by management estimate. Non-
marketable equity securities are carried at cost. Investments in which Hughes
owns at least 20% of the voting securities or has significant influence are
accounted for under the equity method of accounting. Equity method investments
are recorded at cost and adjusted for the appropriate share of the net
earnings or losses of the investee. Investee losses are recorded up to the
amount of the investment plus advances and loans made to the investee, and
financial guarantees made on behalf of the investee.

   Market values of financial instruments, other than debt and derivative
instruments, are based upon management estimates. Market values of debt and
derivative instruments are determined by quotes from financial institutions.

   The carrying value of cash and cash equivalents, accounts and notes
receivable, investments and other assets, accounts payable, amounts included
in accrued liabilities and other meeting the definition of a financial
instrument and debt approximated fair value at December 31, 2000 and 1999.

   Hughes' derivative contracts primarily consist of foreign exchange
contracts. Hughes enters into these contracts to reduce its exposure to
fluctuations in foreign exchange rates. Foreign exchange contracts are
accounted for as hedges to the extent they are designated as, and are
effective as, hedges of firm foreign currency commitments. Gains and losses on
foreign exchange contracts designated as hedges of firm foreign currency
commitments are recognized in income in the same period as gains and losses on
the underlying transactions are recognized.

 Stock Compensation

   Hughes issues stock options to employees with grant prices equal to the
fair value of the underlying security at the date of grant. No compensation
cost has been recognized for options in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees. See Note 12 for information regarding the pro forma
effect on earnings of recognizing compensation cost based on the estimated
fair value of the stock options granted, as required by SFAS No. 123,
Accounting for Stock-Based Compensation.

   Compensation related to stock awards is recognized ratably over the vesting
period and, where required, periodically adjusted to reflect changes in the
stock price of the underlying security.

 Product and Service Related Expenses

   Advertising and research and development costs are expensed as incurred.
Advertising expenses were $108.3 million in 2000, $115.8 million in 1999 and
$130.0 million in 1998. Expenditures for research and development were $129.3
million in 2000, $98.8 million in 1999 and $92.6 million in 1998.


                                      40
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


 Market Concentrations and Credit Risk

   Hughes provides services and extends credit to a number of wireless
communications equipment customers and to a large number of direct-to-home
consumers. Management monitors its exposure to credit losses and maintains
allowances for anticipated losses.

 Accounting Changes

   In September 1999, the Financial Accounting Standards Board ("FASB") issued
Emerging Issues Task Force Issue 99-10 ("EITF 99-10"), Percentage Used to
Determine the Amount of Equity Method Losses. EITF 99-10 addresses the
percentage of ownership that should be used to compute equity method losses
when the investment has been reduced to zero and the investor holds other
securities of the investee. EITF 99-10 requires that equity method losses
should not be recognized solely on the percentage of common stock owned;
rather, an entity-wide approach should be adopted. Under such an approach,
equity method losses must be recognized based on the ownership level that
includes other equity securities (e.g., preferred stock) and loans/advances to
the investee or based on the change in the investor's claim on the investee's
book value. Hughes adopted EITF 99-10 during the third quarter of 1999 which
resulted in Hughes recording a higher percentage of DIRECTV Japan's losses
subsequent to the effective date of September 23, 1999. The unfavorable impact
of adopting EITF 99-10 was $39.0 million after-tax.

   In 1998, Hughes adopted American Institute of Certified Public Accountants
Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up
Activities. SOP 98-5 required that all start-up costs previously capitalized
be written off and recognized as a cumulative effect of accounting change, net
of taxes, as of the beginning of the year of adoption. On a prospective basis,
these types of costs are required to be expensed as incurred. The unfavorable
cumulative effect of this accounting change at January 1, 1998 was $9.2
million after-tax.

 New Accounting Standard

   SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities, is effective for the Company as of January 1,
2001. SFAS No. 133 requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as a hedge and the type of
transaction. Adoption of these new accounting standards will result in an
unfavorable cumulative effect of accounting change of approximately $8.7
million after-tax on January 1, 2001.

 Reclassifications

   Certain prior year amounts have been reclassified to conform to the 2000
presentation.

                                      41
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



Note 3: Property and Satellites, Net

<TABLE>
<CAPTION>
                                                  Estimated
                                                 Useful Lives
                                                   (years)      2000     1999
                                                 ------------ -------- --------
                                                                 (Dollars in
                                                                  Millions)
   <S>                                           <C>          <C>      <C>
   Land and improvements........................     7-25     $   45.5 $   51.4
   Buildings and leasehold improvements.........     2-30        189.1    197.0
   Machinery and equipment......................     3-10      1,105.4    795.2
   Customer leased set-top boxes................     4-7         778.3    333.1
   Furniture, fixtures and office machines......     3-13        109.7     92.3
   Construction in progress.....................      --         386.0    363.4
                                                              -------- --------
   Total........................................               2,614.0  1,832.4
   Less accumulated depreciation................                 906.2    609.4
                                                              -------- --------
   Property, net................................              $1,707.8 $1,223.0
                                                              ======== ========
   Satellites...................................    12-16     $5,263.8 $4,683.1
   Less accumulated depreciation................               1,033.8    775.8
                                                              -------- --------
   Satellites, net..............................              $4,230.0 $3,907.3
                                                              ======== ========
</TABLE>

   Hughes capitalized interest of $82.4 million, $65.1 million and $55.3
million during 2000, 1999 and 1998, respectively, as part of the cost of its
satellites under construction.

Note 4: Leasing Activities

   Future minimum payments due from customers under sales-type leases and
related service agreements, and noncancelable satellite transponder operating
leases as of December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                    Sales-Type Leases
                                                    ------------------
                                                    Minimum   Service
                                                     Lease   Agreement Operating
                                                    Payments Payments   Leases
                                                    -------- --------- ---------
                                                       (Dollars in Millions)
   <S>                                              <C>      <C>       <C>
   2001............................................  $ 48.0    $ 4.6   $  618.4
   2002............................................    48.2      4.6      579.6
   2003............................................    48.2      4.6      544.4
   2004............................................    45.9      4.3      504.7
   2005............................................    37.5      3.4      450.4
   Thereafter......................................   154.8      6.4    2,048.7
                                                     ------    -----   --------
     Total.........................................  $382.6    $27.9   $4,746.2
                                                     ======    =====   ========
</TABLE>

   The components of the net investment in sales-type leases are as follows:
<TABLE>
<CAPTION>
                                                            2000       1999
                                                         ---------- ----------
                                                         (Dollars in Millions)
   <S>                                                   <C>        <C>
   Total minimum lease payments......................... $    382.6 $    249.0
   Less unearned interest income and allowance for
    doubtful accounts...................................      136.5       81.1
                                                         ---------- ----------
   Total net investment in sales-type leases............      246.1      167.9
   Less current portion.................................       25.0       21.8
                                                         ---------- ----------
     Total.............................................. $    221.1 $    146.1
                                                         ========== ==========
</TABLE>


                                      42
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


   In 1996 and 1992, Hughes entered into sale-leaseback agreements for certain
satellite transponders with other companies, including General Motors
Acceptance Corporation ("GMAC"), a subsidiary of GM. Deferred gains from these
sale-leaseback agreements are amortized over the expected term of the
leaseback period. In 1998, PanAmSat exercised certain early buy-out options
and repurchased a portion of the leased transponders for a total payment of
$155.5 million. In 1999, PanAmSat exercised early buy-out options for the
remaining transponders for $245.4 million in cash and $124.1 million of
assumed debt. As a result of the above transactions, no deferred amounts
remain outstanding.

Note 5: Intangible Assets

   At December 31, 2000 and 1999, Hughes had $6,443.9 million and $6,642.3
million, respectively, of goodwill, net of accumulated amortization. Goodwill
is amortized over 10 to 40 years. Hughes also had, net of accumulated
amortization, $707.4 million and $763.7 million of intangible assets at
December 31, 2000 and 1999, respectively, which are amortized over 2 to 40
years. Intangible assets consist mainly of Federal Communications Commission
licenses, customer lists and dealer networks.

Note 6: Investments

   Investments in marketable equity securities stated at current fair value
and classified as available-for-sale totaled $973.9 million and $976.0 million
at December 31, 2000 and 1999, respectively. Accumulated unrealized holding
gains, net of taxes, recorded as part of accumulated other comprehensive
income (loss), a separate component of stockholder's equity, were $257.0
million and $466.0 million as of December 31, 2000 and 1999, respectively.

   Aggregate investments in affiliated companies, including advances and
loans, accounted for under the equity method at December 31, 2000 and 1999,
amounted to $121.1 million and $317.4 million, respectively.

Note 7: Accrued Liabilities and Other

<TABLE>
<CAPTION>
                                                                 2000    1999
                                                               -------- ------
                                                                 (Dollars in
                                                                  Millions)
   <S>                                                         <C>      <C>
   Payroll and other compensation............................. $  231.0 $157.2
   Provision for consumer finance and rebate programs.........    125.6  107.3
   Exit costs and other liabilities related to discontinued
    businesses................................................    386.5  123.9
   Programming contract liabilities...........................     90.7   82.6
   Other......................................................    470.7  423.0
                                                               -------- ------
     Total.................................................... $1,304.5 $894.0
                                                               ======== ======
</TABLE>

   Included in other liabilities and deferred credits are long-term
programming contract liabilities which totaled $536.6 million and $627.1
million at December 31, 2000 and December 31, 1999, respectively.

                                      43
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



Note 8: Short-Term Borrowings and Long-Term Debt

 Short-Term Borrowings and Current Portion of Long-Term Debt

<TABLE>
<CAPTION>
                                              Interest
                                              Rates at
                                            December 31,
                                                2000        2000       1999
                                            ------------ ---------- -----------
                                                         (Dollars in Millions)
   <S>                                      <C>          <C>        <C>
   Floating rate notes, net of unamortized
    discount...............................                         $     498.9
   Other short-term borrowings.............    10.00%    $      3.4         --
   Current portion of long-term debt.......     7.06%          21.2        56.5
                                                         ---------- -----------
     Total short-term borrowings and
      current portion of long-term debt....              $     24.6 $     555.4
                                                         ========== ===========
</TABLE>

 Long-Term Debt

<TABLE>
<CAPTION>
                                            Interest Rates at
                                            December 31, 2000   2000     1999
                                            ----------------- -------- --------
                                                                 (Dollars in
                                                                  Millions)
   <S>                                      <C>               <C>      <C>
   Notes payable...........................   6.00%-  7.06%   $  817.7 $  874.1
   Revolving credit facilities.............   7.45%-  9.50%      464.9    727.9
   Other debt..............................    9.61%-11.87%       30.6     40.5
                                                              -------- --------
   Total debt..............................                    1,313.2  1,642.5
   Less current portion....................                       21.2     56.5
                                                              -------- --------
     Total long-term debt..................                   $1,292.0 $1,586.0
                                                              ======== ========
</TABLE>

   Notes Payable. In October 1999, Hughes issued $500.0 million of floating
rate notes to a group of institutional investors in a private placement. The
notes were repaid on October 23, 2000.

   PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling
$750.0 million in January 1998. The outstanding principal balances for these
notes as of December 31, 2000 were $200 million, $275 million, $150 million
and $125 million, respectively. Principal on the notes is payable at maturity,
while interest is payable semi-annually.

   In July 1999, in connection with the early buy-out of satellite sale-
leasebacks, PanAmSat assumed $124.1 million of variable rate notes of which
$67.7 million was outstanding at December 31, 2000. The notes mature on
various dates through January 2, 2002.

   Revolving Credit Facilities. As of December 31, 2000, Hughes had a $750.0
million multi-year unsecured revolving credit facility. Borrowings under the
facility bear interest based on a spread to the then-prevailing London
Interbank Offer Rate ("LIBOR"). The multi-year credit facility provides for a
commitment of $750.0 million through December 5, 2002. The facility also
provides backup capacity for Hughes' $1.0 billion commercial paper program.
Commercial paper outstanding under the program bears interest at various
rates, based on market rates prevailing at the time each commercial paper
instrument is placed. No amounts were outstanding under the multi-year credit
facility or commercial paper program at December 31, 2000.

   Throughout 2000 Hughes also had outstanding borrowings under a $350.0
million 364-day facility, which expired on November 22, 2000. Borrowings under
the facility bore interest at various rates, based on a spread to then-
prevailing LIBOR. In October 2000, Hughes repaid the outstanding borrowings
under this facility. During 2000, Hughes had available a $500.0 million bridge
facility that provided additional backup capacity for Hughes $1.0 billion
commercial paper program. There were no outstanding borrowings on the bridge
facility during 2000. In October 2000, Hughes elected to terminate the bridge
facility, as provided for under the terms of the agreement.

                                      44
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   Hughes' $750.0 million multi-year unsecured revolving credit facility
contains covenants that Hughes must comply with. The covenants require Hughes
to maintain a minimum level of consolidated net worth and not exceed certain
specified ratios. At December 31, 2000, Hughes was in compliance with all such
covenants.

   PanAmSat maintains a $500.0 million multi-year revolving credit facility
that provides for short-term and long-term borrowings and a $500.0 million
commercial paper program. Borrowings under the credit facility bear interest
at a rate equal to LIBOR plus a spread based on PanAmSat's credit rating. The
multi-year revolving credit facility provides for a commitment through
December 24, 2002. Borrowings under the credit facility and commercial paper
program are limited to $500.0 million in the aggregate. No amounts were
outstanding under either the multi-year revolving credit facility or the
commercial paper program at December 31, 2000.

   At December 31, 2000, Hughes' 75% owned subsidiary, SurFin Ltd. ("SurFin"),
a company that provides financing of subscriber receiver equipment to certain
DIRECTV Latin America operating companies, had a total of $464.9 million
outstanding under unsecured revolving credit facilities of $400.0 million and
$150.0 million that expire in June 2002 and September 2003, respectively.
Borrowings under the credit facilities bear interest at various rates of
interest based on the LIBOR plus an indicated spread.

   Other. Other short-term and long-term debt outstanding at December 31, 2000
included $19.4 million of notes bearing fixed rates of interest and $14.6
million of variable rate notes. Principal on the fixed rate notes is payable
in varying amounts at maturity from November 2001 to April 2007. Principal on
the variable rate notes is payable in varying amounts at maturity in April and
May 2002.

   The aggregate maturities of long-term debt for the five years subsequent to
December 31, 2000 are $21.2 million in 2001, $399.8 million in 2002, $326.2
million in 2003, none in 2004, $275.0 million in 2005 and $291.0 in 2006 and
thereafter.

Note 9: Income Taxes

   The income tax benefit is based on reported loss from continuing operations
before income taxes, minority interests and cumulative effect of accounting
change. Deferred income tax assets and liabilities reflect the impact of
temporary differences between the amounts of assets and liabilities recognized
for financial reporting purposes and such amounts recognized for tax purposes,
as measured by applying currently enacted tax laws.

   Hughes and its domestic subsidiaries join with GM in filing a consolidated
U.S. federal income tax return. The portion of the consolidated income tax
liability or receivable recorded by Hughes is generally equivalent to the
amount that would have been recorded on a separate return basis.

                                      45
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   The income tax benefit consisted of the following:

<TABLE>
<CAPTION>
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                      (Dollars in Millions)
   <S>                                               <C>      <C>      <C>
   Taxes currently payable (refundable):
     U.S. federal................................... $(757.9) $(406.5) $(201.9)
     Foreign........................................    31.6     30.1     15.9
     State and local................................   (52.0)   (24.2)   (36.5)
                                                     -------  -------  -------
       Total........................................  (778.3)  (400.6)  (222.5)
                                                     -------  -------  -------
   Deferred tax liabilities (assets):
     U.S. federal...................................   361.0    185.0     50.8
     State and local................................    11.2    (21.3)    29.4
                                                     -------  -------  -------
       Total........................................   372.2    163.7     80.2
                                                     -------  -------  -------
       Total income tax benefit..................... $(406.1) $(236.9) $(142.3)
                                                     =======  =======  =======
</TABLE>

   Loss from continuing operations before income taxes, minority interests and
cumulative effect of accounting change included the following components:

<TABLE>
<CAPTION>
                                                       2000     1999     1998
                                                      -------  -------  -------
                                                       (Dollars in Millions)
   <S>                                                <C>      <C>      <C>
   U.S. loss......................................... $(752.2) $(519.0) $ (10.2)
   Foreign loss......................................   (63.4)  (141.0)   (93.0)
                                                      -------  -------  -------
       Total......................................... $(815.6) $(660.0) $(103.2)
                                                      =======  =======  =======
</TABLE>

   The combined income tax benefit was different than the amount computed
using the U.S. federal statutory income tax rate for the reasons set forth in
the following table:

<TABLE>
<CAPTION>
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                      (Dollars in Millions)
   <S>                                               <C>      <C>      <C>
   Expected refund at U.S. federal statutory income
    tax rate.......................................  $(285.4) $(231.0) $ (36.1)
   Research and experimentation tax benefits and
    resolution of tax contingencies................    (80.9)   (78.9)  (172.9)
   Foreign sales corporation tax benefit...........    (32.8)   (13.6)   (15.6)
   U.S. state and local income taxes...............    (26.6)   (29.5)    (4.6)
   DIRECTV Japan and other equity method
    investees......................................    (81.2)    60.3     36.7
   Minority interests in losses of partnership.....     27.8     19.0     19.3
   Non-deductible goodwill amortization............     40.3     31.0     20.0
   Foreign taxes, net of credits...................     31.6      2.8      2.0
   Other...........................................      1.1      3.0      8.9
                                                     -------  -------  -------
     Total income tax benefit......................  $(406.1) $(236.9) $(142.3)
                                                     =======  =======  =======
</TABLE>

                                      46
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities at December 31 were as follows:

<TABLE>
<CAPTION>
                                            2000                  1999
                                    --------------------- ---------------------
                                    Deferred   Deferred   Deferred   Deferred
                                      Tax         Tax       Tax         Tax
                                     Assets   Liabilities  Assets   Liabilities
                                    --------  ----------- --------  -----------
                                              (Dollars in Millions)
<S>                                 <C>       <C>         <C>       <C>
Accruals and advances.............  $  233.3              $  106.1
Customer deposits, rebates and
 commissions......................     137.9   $  185.1       44.1   $  114.1
State taxes.......................      29.4        --        27.9        --
Gain on PanAmSat merger...........       --       181.2        --       186.3
Satellite launch insurance costs..       --       148.3        --       121.3
Depreciation and amortization.....       --       834.3        --       560.5
Net operating loss and tax credit
 carryforwards....................     244.7        --       287.3        --
Programming contract liabilities..     251.0        --       285.0        --
Unrealized gains on securities....       --       176.6        --       318.6
Write-off related to wireless
 product lines....................       --         --        95.9        --
Other.............................     145.7       97.0      204.4      100.7
                                    --------   --------   --------   --------
Subtotal..........................   1,042.0    1,622.5    1,050.7    1,401.5
Valuation allowance...............     (98.9)       --       (84.0)       --
                                    --------   --------   --------   --------
  Total deferred taxes............  $  943.1   $1,622.5   $  966.7   $1,401.5
                                    ========   ========   ========   ========
</TABLE>

   No income tax provision has been made for the portion of undistributed
earnings of foreign subsidiaries deemed permanently reinvested that amounted
to approximately $56.8 million and $29.7 million at December 31, 2000 and
1999, respectively. Repatriation of all accumulated earnings would have
resulted in tax liabilities of $19.9 million in 2000 and $10.4 million in
1999.

   At December 31, 2000, Hughes has $98.9 million of deferred tax assets
relating to foreign operating loss carryforwards expiring in varying amounts
between 2001 and 2005. A valuation allowance was provided for all foreign
operating loss carryforwards. At December 31, 2000, Hughes has $24.2 million
of foreign tax credits which will expire in 2006. At December 31, 2000, a
Hughes subsidiary has $46.0 million of alternative minimum tax credits
generated in separate filing years, which can be carried forward indefinitely.
At December 31, 2000, Hughes' subsidiaries have $75.6 million of deferred tax
assets relating to federal net operating loss carryforwards which will expire
in varying amounts between 2009 and 2018.

   Hughes has an agreement with Raytheon Company ("Raytheon") which governs
Hughes' rights and obligations with respect to U.S. federal and state income
taxes for all periods prior to the spin-off and merger of Hughes' defense
electronics business with Raytheon in 1997. Hughes is responsible for any
income taxes pertaining to those periods prior to the merger, including any
additional income taxes resulting from U.S. federal and state tax audits, and
is entitled to any U.S. federal and state income tax refunds relating to those
years.

   Hughes also has an agreement with Boeing which governs Hughes' rights and
obligations with respect to U.S. federal and state income taxes for all
periods prior to the sale of Hughes' Satellite Businesses. Hughes is
responsible for any income taxes pertaining to those periods prior to the
sale, including any additional income taxes resulting from U.S. federal and
state tax audits, and is entitled to any U.S. federal and state income tax
refunds relating to those years.

   The U.S. federal income tax returns of Hughes have been examined through
1994. All years prior to 1986 are closed. Issues relating to the years 1986
through 1994 are being contested through various stages of administrative
appeal. The Internal Revenue Service ("IRS") is currently examining Hughes'
U.S. federal tax

                                      47
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


returns for years 1995 through 1997. Management believes that adequate
provision has been made for any adjustment which might be assessed for open
years.

   Hughes reached an agreement with the IRS regarding a claim for refund of
U.S. federal income taxes related to the treatment of research and
experimentation costs for the years 1983 through 1995. Hughes recorded a total
of $172.9 million of research and experimentation tax benefits during 1998, a
substantial portion of which related to the above noted agreement with the IRS
and covered prior years.

   Taxes receivable from GM at December 31, 2000 and 1999 , respectively, were
approximately $175.0 million and $610.6 million of which $100.0 million and
$290.8 million, respectively, are included in prepaid expenses and other in
the consolidated balance sheets.

Note 10: Retirement Programs and Other Postretirement Benefits

   Substantially all of Hughes' employees participate in Hughes' contributory
and non-contributory defined benefit retirement plans. Benefits are based on
years of service and compensation earned during a specified period of time
before retirement. Additionally, an unfunded, nonqualified pension plan covers
certain employees. Hughes also maintains a program for eligible retirees to
participate in health care and life insurance benefits generally until they
reach age 65. Qualified employees who elected to participate in the Hughes
contributory defined benefit pension plans may become eligible for these
health care and life insurance benefits if they retire from Hughes between the
ages of 55 and 65.

                                      48
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   The components of the pension benefit obligation and the other
postretirement benefit obligation, as well as the net benefit obligation
recognized in the consolidated balance sheets, are shown below:

<TABLE>
<CAPTION>
                                                                    Other
                                                  Pension      Postretirement
                                                 Benefits         Benefits
                                               --------------  ----------------
                                                2000    1999    2000     1999
                                               ------  ------  -------  -------
                                                   (Dollars in Millions)
<S>                                            <C>     <C>     <C>      <C>
Change in Benefit Obligation
Net benefit obligation at beginning of year..  $317.7  $341.8  $  22.8  $  24.7
Service cost.................................    14.7    14.5      0.6      0.6
Interest cost................................    30.4    23.9      2.7      1.5
Plan participants' contributions.............     2.3     3.0      --       --
Actuarial (gain) loss........................    61.2   (31.3)     8.1     (2.7)
Benefits paid................................   (22.8)  (34.2)    (4.0)    (1.3)
                                               ------  ------  -------  -------
Net benefit obligation at end of year........   403.5   317.7     30.2     22.8
                                               ------  ------  -------  -------
Change in Plan Assets
Fair value of plan assets at beginning of
 year........................................   390.1   346.6      --       --
Actual return on plan assets.................    99.8    69.6      --       --
Employer contributions.......................     8.0     3.0      4.0      1.3
Plan participants' contributions.............     2.3     3.0      --       --
Benefits paid................................   (22.8)  (34.2)    (4.0)    (1.3)
Transfers....................................     0.1     2.1      --       --
                                               ------  ------  -------  -------
Fair value of plan assets at end of year.....   477.5   390.1      --       --
                                               ------  ------  -------  -------
Funded status at end of year.................    74.0    72.4    (30.2)   (22.8)
  Unamortized amount resulting from changes
   in plan provisions........................     0.9    (0.4)     --       --
  Unamortized net amount resulting from
   changes in plan experience and actuarial
   assumptions...............................   (62.1)  (38.7)    (4.5)    (1.4)
                                               ------  ------  -------  -------
    Net amount recognized at end of year.....  $ 12.8  $ 33.3  $ (34.7) $ (24.2)
                                               ======  ======  =======  =======
Amounts recognized in the consolidated
 balance sheets consist of:
  Prepaid benefit cost.......................  $ 29.4  $ 43.0
  Accrued benefit cost.......................   (46.7)  (24.6) $ (34.7) $ (24.2)
  Intangible asset...........................     3.0     2.6      --       --
  Deferred tax assets........................    11.0     5.0      --       --
  Accumulated other comprehensive loss.......    16.1     7.3      --       --
                                               ------  ------  -------  -------
    Net amount recognized at end of year.....  $ 12.8  $ 33.3  $ (34.7) $ (24.2)
                                               ======  ======  =======  =======
</TABLE>

   Included in the pension plan assets at December 31, 2000 and 1999 is GM
Class H common stock of $0.5 million and $0.6 million, respectively. Included
at December 31, 1999 are GM $1 2/3 common stock of $0.3 million and GMAC bonds
of $0.5 million.

<TABLE>
<CAPTION>
                                                                   Other
                                                   Pension    Postretirement
                                                  Benefits       Benefits
                                                  ----------  ----------------
                                                  2000  1999   2000     1999
                                                  ----  ----  -------  -------
<S>                                               <C>   <C>   <C>      <C>
Weighted-average assumptions as of December 31
Discount rate.................................... 7.75% 7.75%    7.50%    7.50%
Expected return on plan assets................... 9.50% 9.50%     N/A      N/A
Rate of compensation increase.................... 5.00% 5.00%     N/A      N/A
</TABLE>

   For measurement purposes, an 8.5% annual rate of increase per capita cost
of covered health care benefits was assumed for 2001. The rate was assumed to
decrease gradually 0.5% per year to 6.0% in 2006.

                                      49
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



<TABLE>
<CAPTION>
                                                                     Other
                                                                Postretirement
                                          Pension Benefits         Benefits
                                        ----------------------  ---------------
                                         2000    1999    1998   2000 1999 1998
                                        ------  ------  ------  ---- ---- -----
                                               (Dollars in Millions)
<S>                                     <C>     <C>     <C>     <C>  <C>  <C>
Components of net periodic benefit
 cost
Benefits earned during the year.......  $ 14.7  $ 14.5  $ 13.6  $0.6 $0.6 $ 0.5
Interest accrued on benefits earned in
 prior years..........................    30.4    23.9    22.5   2.7  1.5   1.2
Expected return on assets.............   (37.9)  (28.5)  (26.3)  --   --    --
Amortization components
  Asset at date of adoption...........     --      --     (2.7)  --   --    --
  Amount resulting from changes in
   plan provisions....................     0.1     0.4     0.4   --   --    --
  Net amount resulting from changes in
   plan experience and actuarial
   assumptions........................     3.6     4.7     2.7   0.8  --   (0.1)
                                        ------  ------  ------  ---- ---- -----
    Net periodic benefit cost.........  $ 10.9  $ 15.0  $ 10.2  $4.1 $2.1 $ 1.6
                                        ======  ======  ======  ==== ==== =====
</TABLE>

   The projected benefit obligation and accumulated benefit obligation for the
pension plans with accumulated benefit obligations in excess of plan assets
were $57.2 million and $46.7 million, respectively, as of December 31, 2000
and $52.9 million and $42.4 million, respectively, as of December 31, 1999.
The pension plans with accumulated benefit obligations in excess of plan
assets do not have any underlying assets.

   A one-percentage point change in assumed health care cost trend rates would
have the following effects:

<TABLE>
<CAPTION>
                                                  1-Percentage  1- Percentage
                                                 Point Increase Point Decrease
                                                 -------------- --------------
                                                     (Dollars in Millions)
   <S>                                           <C>            <C>
   Effect on total of service and interest cost
    components.................................       $1.1          $(1.0)
   Effect on postretirement benefit
    obligation.................................        2.3           (2.1)
</TABLE>

   Hughes maintains 401(k) plans for qualified employees. A portion of
employee contributions are matched by Hughes and amounted to $15.1 million,
$12.5 million and $10.6 million in 2000, 1999 and 1998, respectively.

   Hughes has disclosed certain amounts associated with estimated future
postretirement benefits other than pensions and characterized such amounts as
"other postretirement benefit obligation." Notwithstanding the recording of
such amounts and the use of these terms, Hughes does not admit or otherwise
acknowledge that such amounts or existing postretirement benefit plans of
Hughes (other than pensions) represent legally enforceable liabilities of
Hughes.

Note 11: Stockholder's Equity

   GM holds all of the outstanding common stock of Hughes, which consists of
200 shares of $0.01 par value common stock.

                                      50
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   The following represents changes in the components of accumulated other
comprehensive income (loss), net of taxes, as of December 31:

<TABLE>
<CAPTION>
                                    2000                       1999                     1998
                          --------------------------  -----------------------  -----------------------
                                     Tax               Pre-     Tax             Pre-     Tax
                          Pre-tax  (Credit)    Net     tax    (Credit)  Net     tax    (Credit) Amount
                          Amount   Expense   Amount   Amount  Expense  Amount  Amount  Expense   Net
                          -------  --------  -------  ------  -------- ------  ------  -------- ------
                                                  (Dollars in Millions)
<S>                       <C>      <C>       <C>      <C>     <C>      <C>     <C>     <C>      <C>
Minimum pension
 liability adjustments..  $ (14.8) $  (6.0)  $  (8.8) $ (0.8)  $ (0.3) $ (0.5) $ (0.8)  $(0.3)  $(0.5)
Foreign currency
 translation
 adjustments............  $ (25.9)     --    $ (25.9) $ 11.0      --   $ 11.0  $  3.8     --    $ 3.8
Unrealized gains
 (losses) on
 securities.............  $(351.0) $(142.0)  $(209.0) $767.3   $317.4  $449.9  $  3.0   $ 1.2   $ 1.8
Reclassification
 adjustment for gains
 included in net
 income.................      --       --        --      --       --      --   $(11.8)  $(4.7)  $(7.1)
</TABLE>

Note 12: Incentive Plans

   Under the Hughes Electronics Corporation Incentive Plan ("the Plan"), as
approved by the GM Board of Directors in 1999, shares, rights or options to
acquire up to 233 million shares of GM Class H common stock on a cumulative
basis were authorized for grant, of which 107 million shares were available at
December 31, 2000 subject to GM Executive Compensation Committee approval.

   The GM Executive Compensation Committee may grant options and other rights
to acquire shares of GM Class H common stock under the provisions of the Plan.
The option price is equal to 100% of the fair market value of GM Class H
common stock on the date the options are granted. These nonqualified options
generally vest over two to five years, expire ten years from date of grant and
are subject to earlier termination under certain conditions.

   Changes in the status of outstanding options were as follows:

<TABLE>
<CAPTION>
                                                     Shares
                                                      Under     Weighted-Average
                                                     Option      Exercise Price
                                                   -----------  ----------------
   <S>                                             <C>          <C>
   GM Class H Common Stock
   Outstanding at December 31, 1997...............  41,884,845       $ 9.69
   Granted........................................  12,541,575        17.01
   Exercised......................................  (4,518,723)        7.74
   Terminated.....................................  (2,811,537)       10.60
                                                   -----------       ------
   Outstanding at December 31, 1998...............  47,096,160       $11.77
   Granted........................................  15,012,825        16.08
   Exercised...................................... (10,308,171)        9.95
   Terminated.....................................  (4,294,746)       13.49
                                                   -----------       ------
   Outstanding at December 31, 1999...............  47,506,068       $13.28
   Granted........................................  35,538,026        37.06
   Exercised......................................  (5,718,726)       11.88
   Terminated..................................... (10,976,113)       31.47
                                                   -----------       ------
   Outstanding at December 31, 2000...............  66,349,255       $23.04
                                                   ===========       ======
</TABLE>

                                      51
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   The following table summarizes information about the Plan stock options
outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                     Options Outstanding         Options Exercisable
                              --------------------------------- ---------------------
                                           Weighted-
                                            Average
                                           Remaining  Weighted-             Weighted-
                                          Contractual  Average               Average
                                Number       Life     Exercise    Number    Exercise
   Range of Exercise Prices   Outstanding   (years)     Price   Exercisable   Price
   ------------------------   ----------- ----------- --------- ----------- ---------
   <S>                        <C>         <C>         <C>       <C>         <C>
   $ 3.00 to $ 8.99........    1,993,734      3.6      $ 6.95    1,993,734   $ 6.95
     9.00 to  16.99........   29,315,599      6.9       12.53   20,064,718    12.06
    17.00 to  24.99........    6,686,826      7.5       18.41    6,050,526    18.27
    25.00 to  32.99........    2,600,900      9.7       31.12        9,500    28.57
    33.00 to  41.99........   25,752,196      9.3       36.98       93,000    41.06
                              ----------                        ----------
   $ 3.00 to $41.99........   66,349,255      7.9      $23.04   28,211,478   $13.07
                              ==========                        ==========
</TABLE>

   On May 5, 1997, PanAmSat adopted a stock option incentive plan with terms
similar to the Plan. As of December 31, 2000, PanAmSat had 4,123,070 options
outstanding to purchase its common stock with exercise prices ranging from
$29.00 per share to $63.25 per share. The options vest ratably over three to
four years and have a remaining life ranging from six years to ten years. At
December 31, 2000, 1,086,915 options were exercisable at a weighted average
exercise price of $35.08. The PanAmSat options have been considered in the
following pro forma analysis.

   The following table presents pro forma information as if Hughes recorded
compensation cost using the fair value of issued options on their grant date,
as required by SFAS No. 123, Accounting for Stock Based Compensation:

<TABLE>
<CAPTION>
                                                        2000   1999     1998
                                                       ------ -------  ------
                                                       (Dollars in Millions)
   <S>                                                 <C>    <C>      <C>
   Earnings (loss) used for computation of available
    separate consolidated net income (loss)
     as reported...................................... $732.9 $(321.2) $271.7
     pro forma........................................  585.3  (384.9)  186.7
</TABLE>

   The pro forma amounts for compensation cost are not indicative of the
effects on operating results for future periods.

   The following table presents the estimated weighted-average fair value of
options granted under the Plan using the Black-Scholes valuation model and the
assumptions used in the calculations (for 1998, stock volatility was estimated
based upon a three-year average derived from a study of a Hughes determined
peer group):

<TABLE>
<CAPTION>
                                                          2000    1999    1998
                                                         ------  ------  ------
   <S>                                                   <C>     <C>     <C>
   Estimated fair value per option granted.............. $20.39  $ 8.01  $ 7.59
   Average exercise price per option granted............  37.06   16.08   17.01
   Expected stock volatility............................   42.1%   38.0%   32.8%
   Risk-free interest rate..............................    6.5%    5.2%    5.6%
   Expected option life (in years)......................    6.9     7.0     6.2
</TABLE>

                                      52
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



Note 13: Other Income and Expenses

<TABLE>
<CAPTION>
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                      (Dollars in Millions)
   <S>                                               <C>      <C>      <C>
   Equity losses from unconsolidated affiliates..... $(164.2) $(189.2) $(128.3)
   Net loss on discontinuation of DIRECTV Japan
    business and write down of Sky Perfect
    investment......................................  (128.4)     --       --
   Gain from sale of common stock of an affiliate...     --      39.4      --
   Other............................................     --       --     (28.6)
                                                     -------  -------  -------
     Total other, net............................... $(292.6) $(149.8) $(156.9)
                                                     =======  =======  =======
</TABLE>

   Equity losses from unconsolidated affiliates at December 31, 2000 are
primarily comprised of losses at DIRECTV Japan, Hughes Ispat Limited, of which
Hughes owns 45%, and Galaxy Entertainment de Venezuela, C.A., of which Hughes
owns 20%.

Note 14: Related-Party Transactions

   In the ordinary course of its operations, Hughes provides
telecommunications services and sells electronic components to, and purchases
sub-components from, related parties.

   The following table summarizes significant related-party transactions:

<TABLE>
<CAPTION>
                                                               2000  1999  1998
                                                               ----- ----- -----
                                                                  (Dollars in
                                                                   Millions)
   <S>                                                         <C>   <C>   <C>
   Revenues................................................... $33.4 $46.5 $40.5
   Costs and expenses.........................................  27.0  35.2  29.0
</TABLE>

Note 15: Available Separate Consolidated Net Income (Loss)

   GM Class H common stock is a "tracking stock" of GM designed to provide
holders with financial returns based on the financial performance of Hughes.
Holders of GM Class H common stock have no direct rights in the equity or
assets of Hughes, but rather have rights in the equity and assets of GM (which
includes 100% of the stock of Hughes).

   Amounts available for the payment of dividends on GM Class H common stock
are based on the Available Separate Consolidated Net Income (Loss) ("ASCNI")
of Hughes. The ASCNI of Hughes is determined quarterly and is equal to the
available separate consolidated net income (loss) of Hughes, excluding the
effects of the GM purchase accounting adjustment arising from GM's acquisition
of Hughes and reduced by the effects of preferred stock dividends paid and/or
payable to GM (earnings (loss) used for computation of ASCNI), multiplied by a
fraction, the numerator of which is equal to the weighted-average number of
shares of GM Class H common stock outstanding during the period (681.2
million, 374.1 million and 315.9 million during 2000, 1999 and 1998,
respectively) and the denominator of which is a number equal to the weighted-
average number of shares of GM Class H common stock which, if issued and
outstanding, would represent 100% of the tracking stock interest in the
earnings of Hughes (Average Class H dividend base). The Average Class H
dividend base was 1,297.0 million during 2000, 1,255.5 million during 1999 and
1,199.7 million during 1998.

   In addition, the denominator used in determining the ASCNI of Hughes may be
adjusted from time-to-time as deemed appropriate by the GM Board to reflect
subdivisions or combinations of the GM Class H common stock, certain transfers
of capital to or from Hughes, the contribution of shares of capital stock of
GM to or for the benefit of Hughes employees and the retirement of GM Class H
common stock purchased by Hughes. The GM Board's discretion to make such
adjustments is limited by criteria set forth in GM's Restated Certificate of
Incorporation.

                                      53
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   During the second quarter of 2000, GM completed an exchange offer in which
GM repurchased 86 million shares of GM $1 2/3 par value common stock and
issued 92 million shares (prior to giving effect to the stock split during
2000) of GM Class H common stock. In addition, on June 12, 2000, GM
contributed approximately 54 million shares (prior to giving effect to the
stock split during 2000) and approximately 7 million shares (prior to the
stock split during 2000) of GM Class H common stock to its U.S. Hourly-Rate
Employees Pension Plan and VEBA trust, respectively.

   On June 6, 2000, the GM Board declared a three-for-one stock split of the
GM Class H common stock. The stock split was in the form of a 200% stock
dividend, paid on June 30, 2000 to GM Class H common stockholders of record on
June 13, 2000. As a result, the numbers of shares of GM Class H common stock
presented for all periods have been adjusted to reflect the stock split,
unless otherwise noted.

   Effective January 1, 1999, shares of Class H common stock delivered by GM
in connection with the award of such shares to and the exercise of stock
options by employees of Hughes increases the numerator and denominator of the
fraction referred to above. Prior to January 1, 1999, the exercise of stock
options did not affect the GM Class H dividend base (denominator). From time
to time, in anticipation of exercises of stock options, Hughes purchases Class
H common stock on the open market. Upon purchase, these shares are retired and
therefore decrease the numerator and denominator of the fraction referred to
above.

Note 16: Hughes Series A Preferred Stock

   On June 24, 1999, as part of a strategic alliance with Hughes, America
Online, Inc. ("AOL") invested $1.5 billion in shares of GM Series H preference
stock. The GM Series H preference stock will automatically convert on June 24,
2002 into GM Class H common stock based upon a variable conversion factor
linked to the GM Class H common stock price at the time of conversion, and
accrues quarterly dividends at a rate of 6.25% per year. It may be converted
earlier in certain limited circumstances. GM immediately invested the $1.5
billion received from AOL in shares of Hughes Series A Preferred Stock
designed to correspond to the financial terms of the GM Series H preference
stock. Dividends on the Hughes Series A Preferred Stock are payable to GM
quarterly at an annual rate of 6.25%. The underwriting discount on the Hughes
Series A Preferred Stock is amortized over three years. Upon conversion of the
GM Series H preference stock into GM Class H common stock, Hughes will redeem
the Hughes Series A Preferred Stock through a cash payment to GM equal to the
fair market value of the GM Class H common stock issuable upon the conversion.
Simultaneous with GM's receipt of the cash redemption proceeds, GM will make a
capital contribution to Hughes of the same amount.

Note 17: Acquisitions, Investments and Divestitures

 Acquisitions and Investments

   On January 1, 2001, DIRECTV Latin America, LLC ("DLA"), which operates the
Latin America DIRECTV business, acquired from Bavaria S.A. an additional 14.2%
ownership interest in Galaxy Entretenimiento de Colombia ("GEC"), a DLA local
operating company located in Colombia. As a result of the transaction, Hughes'
ownership interest in GEC increased from 44.2% to 55.2%. The purchase price
consisted of prior capital contributions of $4.4 million made by DLA during
2000 on behalf of Bavaria S.A. The increased ownership in GEC will result in
its consolidation from January 1, 2001.

   On December 21, 2000, Hughes entered into an agreement and plan of merger
with Telocity Delaware, Inc. ("Telocity") under which Hughes has agreed to
acquire all outstanding shares of Telocity at a price of $2.15 per share in
cash for a total purchase price of $177 million, and has agreed to provide
Telocity with up to $20 million of interim financing. The transaction is
expected to be completed during the second quarter of 2001.

   In April 2000, DLA acquired a 37.5% ownership interest in GEC from Carvajal
S.A. that increased Hughes' ownership interest from 15% to 44.2%. The purchase
price consisted of $6.7 million in cash and notes payable.

                                      54
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   On July 28, 1999, DLA, acquired Galaxy Brasil, Ltda. ("GLB"), the exclusive
distributor of DIRECTV services in Brazil, from Tevecap S.A. for approximately
$114.0 million plus the assumption of debt. In connection with the
transaction, Tevecap also sold its 10% equity interest in DLA to Hughes and
Darlene Investments, LLC, which increased Hughes' ownership interest in DLA to
77.8%. As part of the transaction, Hughes also increased its ownership
interest in SurFin from 59.1% to 75%. The total consideration paid in the
transactions amounted to approximately $101.1 million.

   On May 20, 1999, Hughes acquired by merger all of the outstanding capital
stock of United States Satellite Broadcasting Company, Inc. ("USSB"), a
provider of premium subscription television programming. The total
consideration of approximately $1.6 billion paid in July 1999, consisted of
approximately $0.4 billion in cash and 22.6 million shares of GM Class H
common stock (prior to giving effect to the stock split during 2000).

   On April 28, 1999, Hughes completed the acquisition of PRIMESTAR's 2.3
million subscriber medium-power direct-to-home satellite business. The
purchase price consisted of $1.1 billion in cash and 4.9 million shares of GM
Class H common stock (prior to giving effect to the stock split during 2000),
for a total purchase price of $1.3 billion. As part of the acquisition of
PRIMESTAR, Hughes also purchased the high-power satellite assets, which
consisted of an in-orbit satellite and a satellite that had not yet been
launched, and related orbital frequencies of Tempo Satellite Inc., a wholly
owned subsidiary of TCI Satellite Entertainment Inc, for $500 million in cash.

   Hughes agreed, in connection with its acquisition of PRIMESTAR, to exit the
medium-power business prior to May 1, 2001. Hughes formulated a detailed exit
plan during the second quarter of 1999 and immediately began to migrate the
medium-power customers to DIRECTV's high-power platform. Accordingly, Hughes
accrued exit costs of $150 million in determining the purchase price allocated
to the net assets acquired. The principal components of such exit costs
include penalties to terminate assumed contracts and costs to remove medium-
power equipment from customer premises. Since DIRECTV's acquisition of
PRIMESTAR, DIRECTV converted a total of approximately 1.5 million customers to
its high power service. The PRIMESTAR By DIRECTV service ceased operations, as
planned, on September 30, 2000. The amount of accrued exit costs remaining at
December 31, 2000 and 1999 was $25.9 million and $123.9 million, respectively,
which primarily represents the remaining obligation on certain contracts.

   In February 1999, Hughes acquired an additional ownership interest in GGM,
a Latin America local operating company which is the exclusive distributor of
DIRECTV in Mexico, from Grupo MVS, S.R.L. de C.V. ("Grupo MVS"). As a result,
Hughes' equity ownership represents 49% of the voting equity and all of the
non-voting equity of GGM. In October 1998, Hughes acquired from Grupo MVS an
additional 10% interest in DLA, increasing Hughes' ownership interest to 70%.
Hughes also acquired an additional 19.8% interest in SurFin, increasing
Hughes' ownership percentage from 39.3% to 59.1%. The aggregate purchase price
for these transactions was $197.0 million in cash.

   In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat for
$851.4 million in cash, increasing its ownership interest in PanAmSat to
81.0%.

   The financial information included herein reflect acquisitions from their
respective dates of acquisition. The acquisitions were accounted for by the
purchase method of accounting and, accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed based on the
estimated fair values at the date of acquisition. The excess of the purchase
price over the estimated fair values of the net assets acquired has been
recorded as goodwill, resulting in a goodwill addition of $3,612.4 million for
the year ended December 31, 1999.

   The following selected unaudited pro forma information is being provided to
present a summary of the combined results of Hughes and USSB and PRIMESTAR for
1999 and 1998 as if the acquisitions had occurred as of the beginning of the
respective periods, giving effect to purchase accounting adjustments. The pro
forma

                                      55
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


data presents only significant transactions, is presented for informational
purposes only and may not necessarily reflect the results of operations of
Hughes had these companies operated as part of Hughes for each of the periods
presented, nor are they necessarily indicative of the results of future
operations. The pro forma information excludes the effect of non-recurring
charges.

<TABLE>
<CAPTION>
                                                              1999      1998
                                                            --------  --------
                                                               (Dollars in
                                                                Millions)
   <S>                                                      <C>       <C>
   Total revenues.......................................... $6,350.3  $5,318.6
   Income (loss) before cumulative effect of accounting
    change.................................................   (297.1)    160.0
   Net income (loss).......................................   (297.1)    150.8
   Pro forma available separate consolidated net income
    (loss).................................................   (103.1)     53.4
</TABLE>

 Divestitures

   On October 6, 2000, Hughes completed the sale of its Satellite Businesses
for $3.75 billion in cash, plus the estimated book value of the closing net
assets of the businesses sold in excess of a target amount. The transaction
resulted in the recognition of a pre-tax gain of $2,036.0 million, or $1,132.3
million after-tax. Included in this gain is a net after-tax curtailment loss
of $42 million related to pension and other postretirement benefit plan assets
and liabilities associated with the Satellite Businesses. The purchase price
is subject to adjustment based upon the final closing net assets as discussed
in Note 20.

   Summarized financial information for the discontinued operations follows:

<TABLE>
<CAPTION>
                                                     2000     1999     1998
                                                   -------- -------- --------
                                                     (Dollars in Millions)
   <S>                                             <C>      <C>      <C>
   Revenues (excluding intercompany
    transactions)................................. $1,260.1 $1,780.4 $2,483.3
   Income tax provision...........................     23.2     42.9     97.6
   Net income.....................................     36.1     99.8    196.4
</TABLE>

   In a separate, but related transaction, Hughes also sold to Boeing its 50%
interest in HRL Laboratories LLC ("HRL") for $38.5 million, which represented
the net book value of HRL at October 6, 2000.

   During September 2000, Hughes Tele.com (India) Limited sold new common
shares in a public offering in India. As a result of this transaction, Hughes'
equity interest was reduced from 44.7% to 29.2%. Due to the nature of the
transaction, Hughes recorded a $23.3 million increase in capital stock and
additional paid-in capital.

   On March 1, 2000, Hughes announced that the operations of DIRECTV Japan
Management, Inc., DIRECTV Japan, Inc., and certain related companies
(collectively "DIRECTV Japan") would be discontinued. Pursuant to an agreement
with Japan Digital Broadcasting Services Inc. (now named Sky Perfect
Communications, Inc. or "Sky Perfect"), qualified subscribers to the DIRECTV
Japan service were offered the opportunity to migrate to the Sky Perfect
service, for which DIRECTV Japan was paid a commission for each subscriber who
actually migrated and Hughes acquired a 6.6% interest in Sky Perfect. As a
result, Hughes wrote-off its net investment in DIRECTV Japan of $164.6 million
and accrued exit costs of $403.7 million and involuntary termination benefits
of $14.5 million. Accrued exit costs consist of claims arising out of
contracts with dealers, manufacturers, programmers and others, satellite
transponder and facility and equipment leases, subscriber migration and
termination costs, and professional service fees and other. The write-off and
accrual were partially offset by the difference between the cost of the Sky
Perfect shares acquired and the estimated fair value of the shares ($428.8
million), as determined by an independent appraisal, and by $40.2 million for
anticipated contributions from other DIRECTV Japan shareholders. The net
effect of the transaction was a charge to "other, net" of $170.6 million at
March 31, 2000.

                                      56
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   During 2000, $193.9 million and $8.3 million were paid related to accrued
exit costs and involuntary termination benefits, respectively. During the
second quarter of 2000, $62.4 million of payments were received from the other
DIRECTV Japan shareholders, resulting in a credit adjustment of $22.2 million
to "other, net". In the fourth quarter of 2000, $106.6 million of accrued exit
costs were reversed and $0.6 million of involuntary termination benefits were
added, resulting in a net credit adjustment to "other, net" of $106.0 million.
The adjustments made to the exit cost accrual were primarily attributable to
earlier than anticipated cessation of the DIRECTV Japan broadcasting service,
greater than anticipated commission payments for subscriber migration and
settlements of various contracts and claims. The amounts remaining for accrued
exit costs and involuntary termination benefits were $103.2 million and $6.8
million, respectively, at December 31, 2000.

   DIRECTV Japan employed approximately 290 personnel as of March 31, 2000, of
which 244 were terminated during the year. The remaining employees at December
31, 2000 will be terminated during the first half of 2001.

   In the fourth quarter of 2000, Sky Perfect completed an initial public
offering, at which date the fair value of Hughes' interest (diluted by the
public offering to approximately 5.3%) in Sky Perfect was approximately $343
million. At December 31, 2000, the market value of Hughes' investment further
declined to $159 million. Based on analysis of recent investment research
regarding Sky Perfect, Hughes determined that a portion of the decline was
"other than temporary", resulting in a charge to "other, net" and a write down
of the investment of $86.0 million. The portion of the decline not considered
"other than temporary", which amounted to $183.4 million, pre-tax, was
recorded as a mark-to-market adjustment to other comprehensive income for the
year ended December 31, 2000.

   On January 13, 2000, Hughes announced the discontinuation of its mobile
cellular and narrowband local loop product lines at Hughes Network Systems. As
a result of this decision, Hughes recorded a fourth quarter 1999 pre-tax
charge to continuing operations of $272.1 million. The charge represents the
write-off of receivables and inventories, licenses, software and equipment
with no alternative use.

Note 18: Derivative Financial Instruments and Risk Management

   In the normal course of business, Hughes enters into transactions that
expose it to risks associated with foreign exchange rates. Hughes utilizes
derivative instruments in an effort to mitigate these risks. Hughes' policy is
to not enter into speculative derivative instruments for profit or execute
derivative instrument contracts for which there are no underlying exposures.
Instruments used as hedges must be effective at reducing the risk associated
with the exposure being hedged and designated as a hedge at the inception of
the contract. Accordingly, changes in market values of hedge instruments are
highly correlated with changes in market values of the underlying
transactions, both at the inception of the hedge and over the life of the
hedge contract.

   Hughes primarily uses foreign exchange contracts to hedge firm commitments
denominated in foreign currencies. Foreign exchange contracts are legal
agreements between two parties to purchase and sell a foreign currency, for a
price specified at the contract date, with delivery and settlement in the
future. The total notional amounts of contracts afforded hedge accounting
treatment at December 31, 2000 and 1999 were not significant.

   Hughes is exposed to credit risk in the event of non-performance by the
counterparties to its foreign exchange contracts. While Hughes believes this
risk is remote, credit risk is managed through the periodic monitoring and
approval of financially sound counterparties.

                                      57
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



Note 19: Segment Reporting

   Hughes' segments, which are differentiated by their products and services,
include Direct-To-Home Broadcast, Satellite Services, and Network Systems.
Direct-To-Home Broadcast is engaged in acquiring, promoting, selling and/or
distributing digital entertainment programming via satellite to residential
and commercial customers. Satellite Services is engaged in the selling,
leasing and operating of satellite transponders and providing services for
cable television systems, news companies, Internet service providers and
private business networks. The Network Systems segment is a provider of
satellite-based private business networks and broadband Internet access, and a
supplier of DIRECTV receiving equipment (set-top boxes and dishes). Other
includes the corporate office and other entities.

   Selected information for Hughes' operating segments are reported as
follows:

<TABLE>
<CAPTION>
                          Direct-
                          To-Home   Satellite Network
                         Broadcast  Services  Systems    Other    Eliminations   Total
                         ---------  --------- --------  --------  ------------ ---------
                                            (Dollars in Millions)
<S>                      <C>        <C>       <C>       <C>       <C>          <C>
2000
External Revenues....... $ 5,208.6  $  880.2  $1,176.7  $   22.1         --    $ 7,287.6
Intersegment Revenues...      29.4     143.4     233.1       5.2   $  (411.1)        --
                         ---------  --------  --------  --------   ---------   ---------
Total Revenues.......... $ 5,238.0  $1,023.6  $1,409.8  $   27.3   $  (411.1)  $ 7,287.6
                         ---------  --------  --------  --------   ---------   ---------
Operating Profit
 (Loss)................. $  (557.9) $  356.6  $  (63.5) $  (67.9)  $   (21.4)  $  (354.1)
Depreciation and
 Amortization...........     533.4     337.4      63.6      21.2        (7.5)      948.1
Intangibles, net........   4,139.9   2,303.6      41.6     666.2         --      7,151.3
Segment Assets..........  10,473.4   6,178.4   1,789.9   8,990.5    (8,152.9)   19,279.3
Capital Expenditures....     913.5     449.5     369.5       0.6       (17.0)    1,716.1
                         ---------  --------  --------  --------   ---------   ---------
1999
External Revenues....... $ 3,781.7  $  673.6  $1,091.7  $   13.3         --    $ 5,560.3
Intersegment Revenues...       3.3     137.0     293.0       2.5   $  (435.8)        --
                         ---------  --------  --------  --------   ---------   ---------
Total Revenues.......... $ 3,785.0  $  810.6  $1,384.7  $   15.8   $  (435.8)  $ 5,560.3
                         ---------  --------  --------  --------   ---------   ---------
Operating Profit
 (Loss)................. $  (289.6) $  338.3  $ (234.1) $ (126.0)  $  (103.1)  $  (414.5)
Depreciation and
 Amortization...........     312.0     280.5      77.4      20.8       (11.8)      678.9
Intangibles, net........   4,308.5   2,368.6      46.9     682.0         --      7,406.0
Segment Assets..........   9,056.6   5,984.7   1,167.3   2,765.9      (377.5)   18,597.0
Capital Expenditures....     516.9     956.4     175.0      30.0       (13.0)    1,665.3
                         ---------  --------  --------  --------   ---------   ---------
1998
External Revenues....... $ 1,813.7  $  643.8  $1,000.6  $   22.5         --    $ 3,480.6
Intersegment Revenues...       2.4     123.5      76.1       1.4   $  (203.4)        --
                         ---------  --------  --------  --------   ---------   ---------
Total Revenues.......... $ 1,816.1  $  767.3  $1,076.7  $   23.9   $  (203.4)  $ 3,480.6
                         ---------  --------  --------  --------   ---------   ---------
Operating Profit
 (Loss)................. $  (225.8) $  318.3  $    7.1  $ (107.6)  $   (33.1)  $   (41.1)
Depreciation and
 Amortization...........     102.3     235.0      66.9      13.9        (5.0)      413.1
Intangibles, net........       --    2,433.5      53.6     698.8         --      3,185.9
Segment Assets..........   2,190.4   5,890.5   1,299.0   3,470.6      (233.1)   12,617.4
Capital Expenditures....     230.8     921.7      40.0       3.3       133.0     1,328.8
                         ---------  --------  --------  --------   ---------   ---------
</TABLE>

                                      58
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   The following table presents revenues earned from customers located in
different geographic areas. Property is grouped by its physical location. All
satellites are reported as United States assets.

<TABLE>
<CAPTION>
                                2000                1999                1998
                         ------------------- ------------------- -------------------
                                     Net                 Net                 Net
                          Total   Property &  Total   Property &  Total   Property &
                         Revenues Satellites Revenues Satellites Revenues Satellites
                         -------- ---------- -------- ---------- -------- ----------
                                            (Dollars in Millions)
<S>                      <C>      <C>        <C>      <C>        <C>      <C>
North America
  United States......... $6,008.2  $5,577.3  $4,407.9  $4,891.8  $2,645.6  $3,830.6
  Canada and Mexico.....    198.8      89.3     114.6      51.8      56.9       2.0
                         --------  --------  --------  --------  --------  --------
    Total North
     America............  6,207.0   5,666.6   4,522.5   4,943.6   2,702.5   3,832.6
                         --------  --------  --------  --------  --------  --------
Europe
  United Kingdom........    114.7       5.6     175.2      10.5     111.3      14.1
  Other.................     19.7       0.4      47.6       0.2      61.2       0.3
                         --------  --------  --------  --------  --------  --------
    Total Europe........    134.4       6.0     222.8      10.7     172.5      14.4
                         --------  --------  --------  --------  --------  --------
South America and the
 Caribbean
  Brazil................    285.4     234.3     157.7     151.1     150.9       4.6
  Other.................    282.3      12.1     245.3       9.8     104.2      11.1
                         --------  --------  --------  --------  --------  --------
    Total South America
     and the Caribbean..    567.7     246.4     403.0     160.9     255.1      15.7
                         --------  --------  --------  --------  --------  --------
Asia
  Japan.................     34.5       0.6     103.6       0.7      67.5       0.5
  India.................     81.1      16.4      85.1      12.4      79.9      14.7
  China.................     35.1       0.7      27.7       1.2      63.4       1.7
  Other.................    139.4       0.9     108.5       0.5      65.5       0.6
                         --------  --------  --------  --------  --------  --------
    Total Asia..........    290.1      18.6     324.9      14.8     276.3      17.5
                         --------  --------  --------  --------  --------  --------
Total Middle East.......     14.0       --       11.9       --       20.0       --
Total Africa............     74.4       0.2      75.2       0.3      54.2       0.3
                         --------  --------  --------  --------  --------  --------
    Total............... $7,287.6  $5,937.8  $5,560.3  $5,130.3  $3,480.6  $3,880.5
                         ========  ========  ========  ========  ========  ========
</TABLE>

Note 20: Commitments and Contingencies

   In connection with the sale by Hughes of the Satellite Businesses to
Boeing, the terms of the stock purchase agreement provide for an adjustment to
the purchase price based upon the final closing net assets of the Satellite
Businesses compared to the estimated closing net assets. The stock purchase
agreement also provides a process for resolving any disputes that might arise
in connection with the final determination of the final closing net assets.

   Boeing recently submitted proposed changes to the closing net assets, which
Hughes is currently reviewing. It is possible that the ultimate resolution of
these proposed changes may result in Hughes making a cash payment to Boeing
that would be material to Hughes. Although Hughes believes it has adequately
provided for an adjustment to the purchase price, the total amount of any such
adjustment cannot be determined at this time.

   Additionally, as part of the sale of the Satellite Businesses, Hughes
retained limited liability for certain possible fines and penalties and the
financial consequences of debarment associated with potential criminal
violations of U.S. export control laws, which are currently being
investigated, related to the businesses now owned by Boeing, should such
sanctions be imposed by either the Department of Justice or State Department
against the Satellite Businesses. Hughes does not expect any sanctions imposed
to have a material adverse effect on its consolidated financial statements.

                                      59
<PAGE>

                        HUGHES ELECTRONICS CORPORATION



   In connection with the 1997 spin-off of Hughes defense electronics business
and the subsequent merger of that business with Raytheon, the terms of the
merger agreement provided processes for resolving disputes that might arise in
connection with post-closing financial adjustments that were also called for
by the terms of the merger agreement. These financial adjustments might
require a cash payment from Raytheon to Hughes or vice versa.

   A dispute currently exists regarding the post-closing adjustments which
Hughes and Raytheon have proposed to one another and related issues regarding
the adequacy of disclosures made by Hughes to Raytheon in the period prior to
consummation of the merger. Hughes and Raytheon are proceeding with the
dispute resolution process. It is possible that the ultimate resolution of the
post-closing financial adjustment and of related disclosure issues may result
in Hughes making a payment to Raytheon that would be material to Hughes.
However, the amount of any payment that either party might be required to make
to the other cannot be determined at this time. Hughes intends to vigorously
pursue resolution of the disputes through the arbitration processes, opposing
the adjustments proposed by Raytheon, and seeking the payment from Raytheon
that Hughes has proposed.

   General Electric Capital Corporation ("GECC") and DIRECTV entered into a
contract on July 31, 1995, in which GECC agreed to establish and manage a
private label consumer credit program for consumer purchases of hardware and
related DIRECTV programming. Under the contract, GECC also agreed to provide
certain related services to DIRECTV, including credit risk scoring, billing
and collections services. DIRECTV agreed to act as a surety for loans
complying with the terms of the contract. Hughes guaranteed DIRECTV's
performance under the contract. A complaint and counterclaim were filed by the
parties in the U.S. District Court for the District of Connecticut concerning
GECC's performance and DIRECTV's obligation to act as a surety. A trial
commenced on June 12, 2000 with GECC presenting evidence to the jury for
damages of $157 million. DIRECTV sought damages from GECC of $45 million. On
July 21, 2000, the jury returned a verdict in favor of GECC and awarded
contract damages in the amount of $133.0 million. The trial judge issued an
order granting GECC $48.5 million in interest under Connecticut's offer-of-
judgment statute. With this order, the total judgment entered in GECC's favor
was $181.5 million. Hughes and DIRECTV filed a notice of appeal on December
29, 2000. Hughes and DIRECTV believe that it is reasonably possible that the
jury verdict will be overturned and a new trial granted. Although it is not
possible to predict the result of any eventual appeal in this case, Hughes
does not believe that the litigation will ultimately have a material adverse
impact on Hughes' consolidated financial statements.

   Hughes Communications Galaxy, Inc. ("HCGI") filed a lawsuit on March 22,
1991 against the U.S. Government based upon the National Aeronautics and Space
Administration's breach of contract to launch ten satellites on the Space
Shuttle. The U.S. Court of Federal Claims granted HCGI's motion for summary
judgment on the issue of liability on November 30, 1995. A trial was held on
May 1, 1998 on the issue of damages. On June 30, 2000, a final judgment was
entered in favor of HCGI in the amount of $103 million. On July 13, 2000, HCGI
filed a notice to appeal the judgment with the U.S. Court of Appeals for the
Federal Circuit and is requesting a greater amount than was previously awarded
to HCGI. On August 4, 2000, the Government filed its cross appeal. As a result
of the uncertainty regarding the outcome of this matter, no amount has been
recorded in the consolidated financial statements to reflect the award. Final
resolution of this issue could result in a gain that would be material to
Hughes.

   Litigation is subject to uncertainties and the outcome of individual
litigated matters is not predictable with assurance. In addition to the above
items, various legal actions, claims, and proceedings are pending against
Hughes, including those arising out of alleged breaches of contractual
relationships; antitrust and patent infringement matters; and other items
arising in the ordinary course of business. Hughes has established reserves
for matters in which losses are probable and can be reasonably estimated. Some
of the matters may involve compensatory, punitive, or other treble damage
claims, or sanctions, that if granted, could require Hughes to pay damages or
make other expenditures in amounts that could not be estimated at December 31,
2000. After discussion with counsel, it is the opinion of management that such
liability is not expected to have a material adverse effect on Hughes'
consolidated financial statements.


                                      60
<PAGE>

                        HUGHES ELECTRONICS CORPORATION


   Hughes purchases in-orbit and launch insurance for its satellite fleet to
mitigate the potential financial impact of in-orbit and launch failures. The
insurance generally does not compensate for business interruption or loss of
future revenues or customers. Certain of Hughes' insurance policies contain
exclusions related to known anomalies and Hughes is self-insured for certain
other satellites. The portion of the book value of satellites that were self-
insured or with coverage exclusions amounted to $519.5 million at December 31,
2000.

   At December 31, 2000, minimum future commitments under noncancelable
operating leases having lease terms in excess of one year are primarily for
real property and aggregated $141.0 million, payable as follows: $31.2 million
in 2001, $26.0 million in 2002, $20.2 million in 2003, $15.9 million in 2004,
$19.1 million in 2005 and $28.6 million thereafter. Certain of these leases
contain escalation clauses and renewal or purchase options. Rental expenses
under operating leases, net of sublease rental income, were $55.9 million in
2000, $58.5 million in 1999 and $82.7 million in 1998.

   Hughes is contingently liable under standby letters of credit and bonds in
the amount of $59.1 million at December 31, 2000. In Hughes' past experience,
no material claims have been made against these financial instruments. In
addition, at December 31, 2000, Hughes has guaranteed up to $340.7 million of
bank debt, including $85.0 million related to Motient Corporation. Of the bank
debt guaranteed, $85.0 million matures in March 2003 and $55.4 million matures
in September 2007. The remaining $200.3 million is related to DIRECTV Latin
America and SurFin guarantees of non-consolidated local operating company debt
and is due in varying amounts over the next five years.

   In connection with the Direct-To-Home Broadcast businesses, Hughes has
commitments related to certain programming agreements which are variable based
upon the number of underlying subscribers and market penetration rates.
Minimum payments over the terms of applicable contracts are anticipated to be
approximately $1.3 billion.

   As part of a marketing agreement entered into with AOL on June 21, 1999,
Hughes committed to increase its sales and marketing expenditures over the
next three years by approximately $1.5 billion relating to DirecPC(R)/AOL-
Plus, DIRECTV(R), DIRECTV(TM)/AOL TV and DirecDuo(TM). At December 31, 2000,
Hughes' remaining commitment under this agreement was approximately $1.1
billion.

                                     * * *

                                      61
<PAGE>

                         HUGHES ELECTRONICS CORPORATION


                            SUPPLEMENTAL INFORMATION

<TABLE>
<CAPTION>
Selected Quarterly Data (Unaudited)        1st       2nd       3rd       4th
-----------------------------------      --------  --------  --------  --------
                                           (Dollars in Millions Except Per
                                                   Share Amounts)
<S>                                      <C>       <C>       <C>       <C>
2000 Quarters
Revenues...............................  $1,703.1  $1,837.0  $1,688.5  $2,059.0
                                         --------  --------  --------  --------
Loss from continuing operations before
 income taxes and minority interests...  $ (337.7) $ (141.8) $ (201.7) $ (134.4)
Income tax benefit.....................    (221.8)    (54.8)    (77.8)    (51.7)
Minority interests in net losses of
 subsidiaries..........................       7.6       4.5      19.6      22.4
Income (loss) from discontinued
 operations............................      26.4      13.4      10.5     (14.2)
Gain on sale of discontinued
 operations, net of taxes..............       --        --        --    1,132.3
                                         --------  --------  --------  --------
Net income (loss)......................     (81.9)    (69.1)    (93.8)  1,057.8
Earnings (loss) used for computation of
 available separate consolidated net
 income (loss).........................  $ (101.3) $  (87.9) $ (112.6) $1,034.7
                                         ========  ========  ========  ========
Average number of shares of General
 Motors Class H common stock
 outstanding (in millions)
 (Numerator)...........................     413.4     562.7     873.9     874.9
Average Class H dividend base (in
 millions) (Denominator)...............   1,294.5   1,297.0   1,297.8   1,298.7
Available separate consolidated net
 income (loss).........................  $  (32.4) $  (38.1) $  (75.8) $  697.1
Stock price range of General Motors
 Class H common stock
  High.................................  $  47.00  $  41.58  $  37.61  $  38.00
  Low..................................  $  30.50  $  27.33  $  24.63  $  21.33
1999 Quarters
Revenues...............................  $  918.4  $1,316.1  $1,627.8  $1,698.0
                                         --------  --------  --------  --------
Loss from continuing operations before
 income taxes and minority interests...  $  (31.0) $  (70.8) $  (87.4) $ (470.8)
Income tax benefit.....................     (13.4)     (9.5)    (36.8)   (177.2)
Minority interests in net losses of
 subsidiaries..........................       6.5       6.8       8.8       9.9
Income (loss) from discontinued
 operations............................      84.1     (43.1)      6.9      51.9
                                         --------  --------  --------  --------
Net income (loss)......................      73.0     (97.6)    (34.9)   (231.8)
Earnings (loss) used for computation of
 available separate consolidated net
 income (loss).........................  $   78.3  $  (93.9) $  (54.3) $ (251.3)
                                         ========  ========  ========  ========
Average number of shares of General
 Motors Class H common stock
 outstanding (in millions)
 (Numerator)...........................     318.9     363.0     405.3     408.9
Average Class H dividend base (in
 millions) (Denominator)...............   1,200.6   1,244.7   1,286.7   1,290.3
Available separate consolidated net
 income (loss).........................  $   20.8  $  (27.4) $  (17.1) $  (79.6)
Stock price range of General Motors
 Class H common stock
  High.................................  $  17.67  $  21.29  $  20.81  $  32.54
  Low..................................  $  12.83  $  16.31  $  16.25  $  18.65
</TABLE>


                                       62
<PAGE>

                         HUGHES ELECTRONICS CORPORATION



ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

   None.

                                    PART III

ITEM 10. Directors and Executive Officers of the Registrant

   Omitted.

ITEM 11. Executive Compensation

   Omitted.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

   Omitted.

ITEM 13. Certain Relationships and Related Transactions

   Omitted.

                                       63
<PAGE>

                                    PART IV

ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Forms 8-K

<TABLE>
<CAPTION>
                                                                    Page Number
                                                                    -----------
 <C>     <S>                                                        <C>
 (a) 1.  All Consolidated Financial Statements...................   See Part II
     2.  Financial Statement Schedule II--Valuation and
         Qualifying Accounts for the Years Ended December 31,
         2000, 1999, and 1998....................................            67
     3.  Exhibits (Including Those Incorporated by Reference)....
<CAPTION>
 Exhibit
 Number
 -------
 <C>     <S>                                                        <C>
 *2.1    Agreement and Plan of Merger among General Motors
         Corporation. Hughes Electronics Corporation and United
         States Satellite Broadcasting Company, Inc. dated
         December 11, 1998 (incorporated by reference to Exhibit
         2(a) to the Current Report on Form 8-K of General Motors
         Corporation filed December 17, 1998 (the "December 8-
         K"))....................................................

 *2.2    Shareholders Agreement dated December 11, 1998 among
         General Motors Corporation, Hughes Electronics
         Corporation, Hubbard Broadcasting, Inc., Stanley S.
         Hubbard, Stanley E. Hubbard and Robert W. Hubbard
         (incorporated by reference to Exhibit 2(b) to the
         December 8-K)...........................................

 *2.3    Asset Purchase Agreement among PRIMESTAR, Inc.,
         PRIMESTAR Partners L.P., PRIMESTAR MDU, Inc., the
         stockholders of PRIMESTAR, Inc. and Hughes Electronics
         Corporation, dated as of January 22, 1999 (incorporated
         by reference to Exhibit 99.1 to the Current Report on
         Form 8-K of General Motors Corporation filed February 2,
         1999 (the "February 8-K"))..............................

 *2.4    Asset Purchase Agreement among PRIMESTAR, Inc.,
         PRIMESTAR Partners L.P., Tempo Satellite, Inc., the
         stockholders of PRIMESTAR, Inc. and Hughes Electronics
         Corporation dated as of January 22, 1999 (incorporated
         by reference to Exhibit 99.2 to the February 8-K).......

 *2.5    Stock Purchase Agreement between The Boeing Company,
         Hughes Electronics Corporation and Hughes
         Telecommunications and Space Company for the purchase
         and sale of the outstanding capital stock of Hughes
         Space and Communications Company and certain additional
         outstanding capital stock, dated as of January 13, 2000
         (incorporated by reference to Exhibit 2.5 to the Annual
         Report on Form 10-K for the year ended December 31, 1999
         of Hughes Electronics Corporation) (the "1999 10-K")....

 *2.6    Agreement and Plan of Merger, dated as of December 21,
         2000, by and among Hughes Electronics Corporation,
         DIRECTV Broadband Inc. and Telocity Delaware Inc.
         (incorporated by reference to Exhibit (d)(1) to the
         Schedule TO of Hughes Electronics Corporation filed on
         February 1, 2001.)......................................

 *3.1    Amended and Restated Certificate of Incorporation of
         Hughes Electronics Corporation (incorporated by
         reference to Exhibit 3.1 to the Form 10 of Hughes
         Electronics Corporation filed August 13, 1999 (the "Form
         10"))...................................................

 *3.2    Bylaws of Hughes Electronics Corporation (incorporated
         by reference to Exhibit 3.2 to the Form 10).............

 *4.1    Specimen form of certificate representing Common Stock
         of Hughes Electronics Corporation (incorporated by
         reference to Exhibit 4.1 to the Form 10)................
</TABLE>

                                       64
<PAGE>

<TABLE>
<CAPTION>
 Exhibit                                                                  Page
 Number                                                                  Number
 -------                                                                 ------
 <C>     <S>                                                             <C>
  *10.1  Revolving Credit Agreement (Multi-Year Facility), dated as of
         December 5, 1997 among Hughes Network Systems, Inc. to be
         renamed Hughes Electronics Corporation, the Banks named
         therein and Bank of America National Trust and Savings
         Association as Administrative Agent, Morgan Guaranty Trust
         Company of New York, as Syndication Agent, Citicorp USA, Inc.
         and The Chase Manhattan Bank as Documentation Agents
         (the "Multi-Year Facility") (incorporated by reference to
         Exhibits 10.3 to the Form 10)................................

  *10.2  First Amendment to the Multi-Year Facility, dated as of
         December 15, 1998 (incorporated by reference to Exhibit 10.4
         to the Form 10)..............................................

  *10.3  Amended and Restated Revolving Credit Agreement (Multi-Year
         Facility), dated as of November 24, 1999 among Hughes
         Electronics Corporation, the Banks named therein and Bank of
         America, N.A. as Administrative Agent, Morgan Guaranty Trust
         Company of New York as Syndication Agent, Citicorp USA, Inc.
         and The Chase Manhattan Bank as Documentation Agents (the
         "Revolving Credit Agreement--Multi-Year Facility")
         (incorporated by reference to Exhibit 10.9 to the 1999 10-
         K)...........................................................

  *10.4  First Amendment to Amended and Restated Revolving Credit
         Agreement--Multi-Year Facility, dated as of December 31, 1999
         (incorporated by reference to Exhibit 10.10 to the 1999 10-
         K)...........................................................

 **10.5  Second Amendment to Amended and Restated Revolving Credit
         Agreement--Multi-Year Facility, dated as of March 16, 2000...

 **10.6  Third Amendment to Amended and Restated Revolving Credit
         Agreement--Multi-Year Facility, dated as of September 19,
         2000.........................................................

  *10.7  Credit Agreement, dated as of June 3, 1999 among SurFin Ltd.,
         certain designated subsidiaries, the Banks named therein and
         Citicorp USA, Inc. as Administrative Agent, Bank of America
         NT & SA as Syndication Agent, Deutsche Bank A.G., New York
         and Cayman Islands Branches, as Documentation Agent, The
         Chase Manhattan Bank, the First National Bank of Chicago,
         Morgan Guaranty Trust Company of New York and Westdeutsche
         Landesbank Girozentrale, New York and Cayman Islands Branches
         as Senior Managing Agents (incorporated by reference to
         Exhibit 10.6 to the 1999 10-K)...............................

 **10.8  Credit Agreement, dated as of September 20, 2000 among SurFin
         Ltd., certain designated subsidiaries, the Banks named
         therein and Citicorp USA, Inc. as Administrative Agent,
         Deutsche Bank A.G., New York Branch and/or Cayman Islands
         Branch, as Syndication Agent.................................

 **10.9  Revolving Credit Agreement (Bridge Facility), dated as of
         January 5, 2001, among DIRECTV Latin America, LLC, the Banks
         named therein and Deutsche Bank A.G., New York Branch, as
         Administrative Agent.........................................

  *10.10 DBS Distribution Agreement between Hughes Communications
         Galaxy, Inc. and National Rural Telecommunications
         Cooperative, dated April 10, 1992 (the "DBS Agreement")
         (incorporated by reference to Exhibit 10.5 to the Form 10)+..

  *10.11 Addendum I to the DBS Agreement (incorporated by reference to
         Exhibit 10.6 to the Form 10).................................

  *10.12 Amendment No. 1 to the DBS Agreement, dated May 11, 1992
         (incorporated by reference to Exhibit 10.7 to the Form 10)...

  *10.13 Amendment No. 2 to the DBS Agreement, dated May 26, 1992
         (incorporated by reference to Exhibit 10.8 to the Form 10)...

  *10.14 Amendment No. 3 to the DBS Agreement, Letter of Agreement,
         dated May 29, 1992 (incorporated by reference to Exhibit 10.9
         to the Form 10)..............................................
</TABLE>

                                       65
<PAGE>


<TABLE>
<CAPTION>
 Exhibit                                                                   Page
 Number                                                                   Number
 -------                                                                  ------
 <C>     <S>                                                              <C>
 *10.15  Amendment No. 4 to the DBS Agreement, dated December 1, 1992
         (incorporated by reference to Exhibit 10.10 to the Form 10)...

 *10.16  Amendment No. 5 to the DBS Agreement, dated December 11, 1992
         (incorporated by reference to Exhibit 10.11 to the Form 10)...

 *10.17  Amendment No. 6 to the DBS Agreement, dated December 23, 1992
         (incorporated by reference to Exhibit 10.12 to the Form 10)...

 *10.18  Amendment No. 7 to the DBS Agreement, Letter of Agreement,
         dated July 9, 1993 (incorporated by reference to Exhibit 10.13
         to the Form 10)...............................................

 *10.19  Amendment No. 8 to the DBS Agreement, Letter of Agreement,
         dated February 14, 1994 (incorporated by reference to Exhibit
         10.14 to the Form 10)+........................................

 *10.20  Amendment No. 9 to the DBS Agreement, Letter of Agreement,
         dated June 22, 1994 (incorporated by reference to Exhibit
         10.15 to the Form 10).........................................

 *10.21  Loan Agreement, dated May 15, 1997, between Hughes Network
         System, Inc. and PanAmSat (incorporated by reference to the
         Annual Report on Form 10-K for the year ended December 31,
         1997 of PanAmSat Corporation (PanAmSat's "Form 10-K"))........

 *10.22  First Amendment to Loan Agreement, dated December 23, 1997
         (incorporated by reference to PanAmSat's Form 10-K)...........

 *10.23  Credit Agreement, dated February 20, 1998, among PanAmSat,
         certain lenders and CitiCorp USA (incorporated by reference to
         PanAmSat's Form 10-K).........................................

 *10.24  Subordination Agreement, dated as of January 16, 1998, between
         Hughes Electronics and PanAmSat (incorporated by reference to
         PanAmSat's Form 10-K).........................................

 *10.25  Subordination and Amendment Agreement, dated as of February
         20, 1998, among Hughes Electronics Corporation, PanAmSat and
         CitiCorp USA Inc. (incorporated by reference to PanAmSat's
         Form 10-K)....................................................

 **23    Independent Auditors' Consent.................................    70
</TABLE>
--------
 * Incorporated by reference.
**  Filed herewith.
 + Confidential treatment received for certain portions of this exhibit
   pursuant to Rule 406 promulgated under the Securities Act.

(b) Reports on Form 8-K

   Five reports on Form 8-K, dated September 28, 2000, October 11, 2000,
November 1, 2000, November 1, 2000 and November 20, 2000 were filed during the
quarter ended December 31, 2000 reporting matters under Item 5, Other Events.

                                      66
<PAGE>

                         HUGHES ELECTRONICS CORPORATION



                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                     Additions  Additions
                          Balance at charged to  charged               Balance
                          beginning  costs and  to other               at end
       Description         of year    expenses  accounts    Deductions of year
       -----------        ---------- ---------- ---------   ---------- -------
                                        (Dollars in Millions)
<S>                       <C>        <C>        <C>         <C>        <C>
For the Year Ended
 December 31, 2000
Allowances Deducted from
 Assets
  Accounts and notes
   receivable (for
   doubtful
   receivables)..........  $ (92.9)   $(207.9)   $(77.9) a    $290.4 b $ (88.3)
  Net investment in
   sales-type leases (for
   doubtful
   receivables)..........    (10.3)       --        --           --      (10.3)
  Inventories
   (principally for
   obsolescence of
   service parts)........   (113.5)     (26.0)      --         104.7 c   (34.8)
                           -------    -------    ------       ------   -------
    Total Allowances
     Deducted from
     Assets..............  $(216.7)   $(233.9)   $(77.9)      $395.1   $(133.4)
                           =======    =======    ======       ======   =======
For the Year Ended
 December 31, 1999
Allowances Deducted from
 Assets
  Accounts and notes
   receivable (for
   doubtful
   receivables)..........  $ (23.9)   $(138.9)   $(79.5) a    $149.4 b $ (92.9)
  Net investment in
   sales-type leases (for
   doubtful
   receivables)..........    (10.6)       --        --           0.3 b   (10.3)
  Inventories
   (principally for
   obsolescence of
   service parts)........     (9.1)    (110.4)      --           6.0 c  (113.5)
                           -------    -------    ------       ------   -------
    Total Allowances
     Deducted from
     Assets..............  $ (43.6)   $(249.3)   $(79.5)      $155.7   $(216.7)
                           =======    =======    ======       ======   =======
For the Year Ended
 December 31, 1998
Allowances Deducted from
 Assets
  Accounts and notes
   receivable (for
   doubtful
   receivables)..........  $ (15.1)   $ (37.5)   $(22.1) a    $ 50.8 b $ (23.9)
  Net investment in
   sales-type leases (for
   doubtful
   receivables)..........    (12.9)       --        --           2.3 b   (10.6)
  Inventories
   (principally for
   obsolescence of
   service parts)........     (4.7)      (6.4)      --           2.0 c    (9.1)
                           -------    -------    ------       ------   -------
    Total Allowances
     Deducted from
     Assets..............  $ (32.7)   $ (43.9)   $(22.1)      $ 55.1   $ (43.6)
                           =======    =======    ======       ======   =======
</TABLE>
--------
a. Primarily reflects the recovery of accounts previously written-off and
   increases resulting from acquisitions.
b. Relates to accounts written-off.
c. Relates to obsolete parts and/or discontinued product lines written-off.

Reference should be made to the Notes to the Consolidated Financial Statements.

                                       67
<PAGE>

                                  SIGNATURES

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

                                          HUGHES ELECTRONICS CORPORATION
                                          (Registrant)

   Date: March 6, 2001                            /s/ Michael T. Smith
                                          By: _________________________________
                                                     (Michael T. Smith
                                                  Chairman of the Board of
                                               Directors and Chief Executive
                                                          Officer)

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on this 6th day of March 2001 by the following
persons on behalf of the Registrant and in the capacities indicated.

<TABLE>
<CAPTION>
             Signature                           Title
             ---------                           -----


<S>                                  <C>                           <C>
     /s/ Michael T. Smith            Chairman of the Board of      Principal Executive
____________________________________  Directors and Chief           Officer
         (Michael T. Smith)           Executive Officer


     /s/ Roxanne S. Austin           Senior Vice President and
____________________________________  Chief Financial Officer
        (Roxanne S. Austin)
                                                                   Principal Financial
                                                                    Officers
     /s/ Michael J. Gaines           Vice President and
____________________________________  Treasurer
        (Michael J. Gaines)

     /s/ Patrick T. Doyle            Vice President and            Principal Accounting
____________________________________  Controller                    Officer
         (Patrick T. Doyle)

    /s/ James M. Cornelius           Director
____________________________________
        (James M. Cornelius)

    /s/ Thomas E. Everhart           Director
____________________________________
        (Thomas E. Everhart)

       /s/ Peter A. Lund             Director
____________________________________
          (Peter A. Lund)

      /s/ Harry J. Pearce            Director
____________________________________
         (Harry J. Pearce)

     /s/ Eckhard Pfeiffer            Director
____________________________________
         (Eckhard Pfeiffer)

</TABLE>


                                      68
<PAGE>

<TABLE>
<CAPTION>
             Signature                           Title
             ---------                           -----
<S>                                  <C>                           <C>
      /s/ Alfred C. Sikes            Director
____________________________________
         (Alfred C. Sikes)

     /s/ John F. Smith, Jr.          Director
____________________________________
        (John F. Smith, Jr.)

     /s/ Bernee D.L. Strom           Director
____________________________________
        (Bernee D.L. Strom)

  /s/ G. Richard Wagoner, Jr.        Director
____________________________________
     (G. Richard Wagoner, Jr.)
</TABLE>

                                   * * * * *

                                       69
<PAGE>

                         HUGHES ELECTRONICS CORPORATION


                                                                      EXHIBIT 23

                         INDEPENDENT AUDITORS' CONSENT

   We consent to the incorporation by reference in Registration Statement No.
333-78259 of Hughes Electronics Corporation on Form S-3 of our report dated
January 16, 2001 appearing in this Annual Report on Form 10-K of Hughes
Electronics Corporation for the year ended December 31, 2000.

/s/ Deloitte & Touche LLP
_____________________________________
DELOITTE & TOUCHE LLP

Los Angeles, California
March 6, 2001

                                       70