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

FORM 10-K

|ý  | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|-- | ----------------------------------------------------------------------------------------
|   | For the fiscal year ended December 31, 2005                                             
|OR
|o  | 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 1-31945

THE DIRECTV GROUP, INC.(Exact name of registrant as specified in its charter)

|DELAWARE                                                       |  | 52-1106564                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

2230 East Imperial Highway
El Segundo, California 90245
(310) 964-5000(Address, including zip code, and telephone number, including area code, of registrant's principal executive office)

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

|Title of Each Class     |  | Name of Exchange on Which Registered
|----------------------- |  | ------------------------------------
|Common, $0.01 par value |  | New York Stock Exchange, Inc.       

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

None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ý No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No ý

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 ý No o

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. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large
accelerated filer ý    Accelerated filer o    
Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No ý

As of June 30, 2005, the aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates was
$14,228,528,986. This amount excludes Fox Entertainment Group, Inc.'s approximately 34% ownership interest in our outstanding common stock as of such date.

As
of March 7, 2006, the registrant had outstanding 1,281,527,492 shares of common stock.

Documents
incorporated by reference are as follows:

|Document                                                                                                                                           |  | Part and Item Number of Form 10-K
into which Incorporated
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------
|The DIRECTV Group, Inc. Notice of Annual Meeting of Stockholders and Proxy Statement for Annual Meeting of Stockholders to be held on June 6, 2006 |  | Part III, Items 10 through 14                            



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THE DIRECTV GROUP, INC.

CAUTIONARY STATEMENT FOR PURPOSE OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report on Form 10-K may contain certain statements that we believe 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," "estimate," "anticipate," "intend," "plan," "foresee," "project" 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 including, without limitation, risk factors
discussed in more detail in Item 1A of this Annual Report, which could cause actual results to differ materially from historical results or from those expressed or implied by the relevant
forward-looking statement. The forward-looking statements included in this Annual Report are made only as of the date of this Annual Report and we undertake no obligation to publicly update these
forward-looking statements to reflect subsequent events or circumstances.

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THE DIRECTV GROUP, INC.

PART I

ITEM 1.    BUSINESS

The DIRECTV Group, Inc., which we refer to as the company, we or us, was incorporated in Delaware in 1977 and was subsequently acquired by General Motors
Corporation, or GM, in 1985. From 1985 to 2003, we were a subsidiary of GM.

On
December 22, 2003, we, GM and News Corporation completed a series of transactions that resulted in our split-off from GM and the simultaneous sale of GM's then
remaining 19.8% economic interest in us to News Corporation. Immediately after the split-off, News Corporation acquired an additional 14.2% of outstanding common stock from our common
stockholders, which provided News Corporation with a total of approximately 34% of our outstanding common stock, which was subsequently contributed to its subsidiary, Fox Entertainment
Group, Inc. In addition, we paid to GM a special cash dividend of $275 million in connection with the transactions. As a result of these transactions, we became a publicly-traded
company.

Following
our February 2004 announcement of our intent to restructure our company to focus on the direct-to-home, or DTH, satellite businesses, during 2004
and 2005 we sold substantially all of our non-strategic businesses, investments and assets, including our approximately 80.4% interest in PanAmSat Corporation, or PanAmSat, and the
businesses and assets of Hughes Network Systems, Inc., or HNS. We also announced a series of transactions designed to reorganize our DTH businesses in Latin America. See below for further
discussion of these strategic transactions. On March 16, 2004, we changed our corporate name from Hughes Electronics Corporation to The DIRECTV Group, Inc. Effective on March 17,
2004, we changed our ticker symbol on the New York Stock Exchange, or NYSE, from "HS" to "DTV." This name change had no impact on our
common stock or the rights of our stockholders. The name of our company was changed to better reflect our commitment to building our business around our DTH businesses.

On
February 7, 2006, our Board of Directors authorized a share repurchase program. Under the repurchase program, we are authorized to spend up to $3.0 billion to repurchase
outstanding shares of our common stock. The source of funds for the proposed purchases is from our existing cash on hand and cash from operations. We implemented the repurchase program on
February 10, 2006. There is no fixed termination date for the repurchase program and purchases may be made in the open market, through block trades and other negotiated transactions. The
program may be suspended, discontinued or accelerated at any time.

We
are a leading provider of digital television entertainment in the United States and Latin America. Our two continuing business segments, DIRECTV U.S. and DIRECTV Latin America, which
are differentiated by their geographic location, are engaged in acquiring, promoting, selling and/or distributing digital entertainment programming via satellite to residential and commercial
subscribers. Through April 22, 2005 we also operated the Network Systems segment, which was a provider of satellite-based private business networks, or VSATs, and consumer broadband Internet
access. On April 22, 2005, we completed the contribution of the HNS net assets to HNS LLC and the sale of a 50% interest in HNS LLC to SkyTerra Communications, Inc., or SkyTerra.
Subsequent to the sale we accounted for our investment in HNS under the equity method of accounting. In January 2006, we completed the sale of our remaining 50% interest in HNS LLC to SkyTerra. Please
refer to Part II Item 7 of this Annual Report for more information related to the HNS transactions.



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DIRECTV U.S.

DIRECTV U.S. provides over 15.1 million subscribers with access to hundreds of channels of digital-quality video pictures and CD-quality audio
programming that are transmitted directly to its subscribers' homes or businesses via high-powered geosynchronous satellites.

DIRECTV
U.S. believes it provides one of the most extensive collections of programming available in the MVPD industry. DIRECTV U.S. currently distributes to its subscribers more than
1,500 digital video and audio channels, including about 130 basic entertainment channels, 31 premium movie channels, over 33 regional and specialty sports networks, an aggregate of over 1,100 local
channels, approximately 70 Spanish and other foreign language special interest channels, and approximately 50 pay-per-view movie and event choices. Although DIRECTV U.S.
distributes over 1,100 local channels, a subscriber generally receives only the local channels in the subscriber's home market. As of December 31, 2005, DIRECTV U.S. provided local channel
coverage to approximately 141 markets, or about 94% of U.S. television households.

In
addition, DIRECTV U.S. provides ten national high-definition, or HD, television channels as well as network HD programming in certain local markets. Beginning in the
fourth quarter of 2005, DIRECTV launched local HD channels in 12 of the largest markets and expects to introduce local HD channels to at least 36 markets covering approximately 57% of U.S. television
households in the first half of 2006. By 2007, with the expected launch of two additional satellites, DIRECTV U.S. expects to have the capacity to offer local HD channels to nearly all U.S. television
households.

DIRECTV
U.S. also provides premium professional and collegiate sports programming such as the NFL SUNDAY TICKET package, which allows subscribers to view the biggest
selection of NFL games available each Sunday during the regular season. Under its contract with the NFL, DIRECTV U.S. has exclusive rights to provide this service through 2010, including rights to
provide related HD interactive and mobile services.

To
subscribe to the DIRECTV® service, subscribers acquire receiving equipment from DIRECTV U.S. or through one of DIRECTV U.S.' national retailers as well as independent
satellite television retailers, dealers and regional Bell operating companies, or RBOCs. On March 1, 2006, DIRECTV U.S. introduced a set-top receiver lease program for new and
existing subscribers.

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The
receiving equipment consists of a small receiving satellite dish antenna, a digital set-top receiver and a remote control, which we refer to as a DIRECTV®
System. After acquiring and installing a DIRECTV System, subscribers activate the DIRECTV service by calling DIRECTV U.S. and subscribing to one of DIRECTV U.S.' programming packages.

Key Strengths

DIRECTV U.S. is our principal business and is characterized by the following key strengths:



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Business Strategy

DIRECTV U.S.' overall goal is to provide subscribers with the best television experience in the United States. Its strategy focuses on offering its subscribers
differentiated and exclusive content, attaining leadership in technology, and enhancing its sales, marketing, distribution and customer service.



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Infrastructure

Satellites.DIRECTV U.S. currently uses a fleet of seven satellites to broadcast its service from its
101 WL, 103 WL, 110 WL and 119 WL orbital locations. DIRECTV U.S. also broadcasts from 72.5 WL under its arrangement with Telesat Canada, or Telesat, Industry Canada and the FCC as well as from 95 WL
using transponders on a satellite it leases. Our eighth satellite, SPACEWAY 2, which was launched in November 2005, is expected to begin broadcasting HD services in the second quarter of 2006
from its 99 WL orbital location.

The
FCC licensed DIRECTV U.S. to operate 46 DBS Ku-band frequencies at various orbital positions including 32 frequencies at the 101 WL orbital location, 11 frequencies at
the 119 WL orbital location, and three frequencies at the 110 WL orbital location. In addition, the FCC has granted DIRECTV U.S. Ka-band licenses for DBS operations at the 99 WL, 101 WL
and 103 WL orbital locations. In the third quarter of 2004, DIRECTV U.S. obtained final approval from Industry Canada and the FCC to use the 72.5 WL orbital location. As a part of its arrangement with
Telesat, DIRECTV U.S. transferred two satellites, both of which were previously used as in-orbit spares, to orbital locations controlled by Telesat for use by Telesat for its own services
broadcast into Canada. DIRECTV U.S. also relocated a third satellite to the 72.5 WL orbital location, where it broadcasts local channel services to 29 markets in the United States.

Satellites Under Construction.DIRECTV U.S. currently has four satellites under construction. DIRECTV
9S, which is expected to launch mid-2006, will provide backup capacity at the 101 WL and 119 WL orbital locations. DIRECTV U.S. also plans to launch DIRECTV 10 and DIRECTV 11 in 2007.
These two satellites will provide DIRECTV U.S. with increased capability for local and national HD channels, as well as capacity for new interactive and enhanced services and standard-definition
programming. Once launched, these satellites will operate from our Ka-Band orbital locations. In addition, DIRECTV 12 is being constucted and will serve as a ground spare.

Satellite Risk Management.DIRECTV U.S. uses launch and in-orbit insurance to mitigate
the potential financial impact of satellite fleet launch and in-orbit failures unless the premium costs are considered to be uneconomical relative to the risk of satellite failure. The
insurance generally does not compensate for business interruption or loss of future revenues or subscribers. We rely on in-orbit spare satellites and excess transponder capacity at key
orbital slots to mitigate the impact of satellite failure on our ability to provide services. However, programming continuity cannot be assured in all instances or in the event of multiple satellite
losses.

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Launch
insurance typically covers the time frame from ignition of the launch vehicle through separation of the satellite from the launch vehicle. In the past, DIRECTV U.S. has launched
satellites without insurance. DIRECTV U.S. has been evaluating whether to purchase launch insurance for the three satellites it expects to launch in 2006 and 2007 and will make a final determination
on the satellites based on information relating to premiums for such insurance and other considerations. We do not currently expect to purchase in-orbit insurance for these satellites. As
of December 31, 2005, DIRECTV U.S. had in-orbit insurance coverage for an aggregate amount of approximately $447 million for two of its in-orbit satellites.

Digital Broadcast Centers.To gather programming content, ensure its digital quality, and transmit
content to its satellites, DIRECTV U.S. built two digital broadcast centers, located in Castle Rock, Colorado and Los Angeles, California. These facilities provide the majority of our national and
local standard-definition and HD programming. We have also built uplink facilities in Oakdale, Minnesota and Winchester, Virginia, which are primarily used to provide new HD channels. Three additional
uplink centers are being built so that we may continue to expand DIRECTV U.S. local HD programming. Programming is received by DIRECTV U.S.' broadcast centers from content providers via satellite,
fiber optic cable and/or special tape. Most satellite-delivered programming is then digitized, encoded and transmitted to DIRECTV U.S.' satellites. Each broadcast center was designed with redundant
systems to minimize service interruptions.

Installation Network.DIRECTV HOME SERVICES® installation and service network performs
installation, upgrades and other service call work for DIRECTV U.S. As of December 31, 2005, home service providers performed approximately 85% of all service calls through 11 outsourced
companies with over 14,000 technicians around the United States. In addition, DIRECTV U.S. and its retailers also utilize employer-based or contract installation providers, which perform the remainder
of all new professional subscriber installations. DIRECTV U.S. sets the quality of installation and service standards, performs quality control, manages inventory and monitors the overall service
network performance for nearly all of the third party installation network.

Customer Service Centers.As of December 31, 2005, DIRECTV U.S. used 22 customer service
centers employing nearly 15,000 customer service representatives. Most of these customer service centers, which employ approximately 10,500 customer service representatives, are operated by Convergys
Customer
Management Group, Inc., Precision Response Corporation, ClientLogic Operating Corporation and N.E.W Customer Service Companies, Inc. DIRECTV U.S. currently owns three customer service
centers located in Boise, Idaho, Tulsa, Oklahoma and Huntsville, Alabama that employ approximately 4,200 customer service representatives. A fourth DIRECTV owned and operated customer service center
is scheduled to open in Missoula, Montana in 2006. Potential and existing subscribers can call a single telephone number 24 hours a day, seven days a week, to request assistance for hardware,
programming, installation and technical support. DIRECTV U.S. continues to increase the functionality of telephone-based and web-based self-care features in order to better
manage customer service costs and improve service levels.

NRTC and Pegasus Transactions

Pursuant to an agreement entered into in 1992 with the National Rural Telecommunications Cooperative, or NRTC, the NRTC had the exclusive right to distribute
DIRECTV services transmitted from 27 of the 32 frequencies located at 101 WL to subscribers located primarily in rural areas of the United States. The NRTC separately contracted with its members and
affiliates, including Pegasus Satellite Television, Inc., or Pegasus, to provide them with rights to market and sell these services. The NRTC paid DIRECTV U.S. a fee on the revenues from these
services. DIRECTV U.S. had also separately contracted with the NRTC and Pegasus, the NRTC's largest affiliate, and permitted each of

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them
to market and sell services, including premium services, transmitted from five other frequencies located at the 101 WL orbital slot, as well as frequencies located at the 110 WL and 119 WL
orbital slots. For these separately contracted services, the NRTC and Pegasus paid DIRECTV U.S. a percentage of the subscriber revenues they generated.

Effective
June 1, 2004, DIRECTV U.S. and the NRTC agreed to end the NRTC's exclusive DIRECTV service distribution agreement and all related agreements. As a result of this
agreement, DIRECTV U.S. has the right to sell its services in all territories across the United States. In connection with this transaction, all NRTC members and affiliates, representing approximately
357,000 subscribers, excluding Pegasus, elected to sell their subscribers to DIRECTV U.S. In addition, on July 30, 2004, we entered into certain arrangements with Pegasus and certain other
related entities, whereby DIRECTV U.S. agreed to purchase the primary DBS assets of Pegasus, including rights to all DIRECTV subscribers activated through Pegasus. In these transactions, DIRECTV U.S.
acquired approximately 1.1 million subscribers activated through Pegasus.

For
additional information on these transactions see Note 3 and Note 21 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual
Report.

Competition

DIRECTV U.S.' industry is highly concentrated and DIRECTV U.S. faces substantial competition. Its competition includes companies that offer video, audio,
interactive programming, telephony, data and other entertainment services, including cable television, other DTH companies, RBOCs, wireless companies and companies that are developing new
technologies. Many of DIRECTV U.S.' competitors have access to substantially greater financial and marketing resources. DIRECTV U.S. believes that the quality and variety of video, audio and
interactive programming, quality of picture, access to service, availability of a broadband Internet service, customer service and price are the key elements for gaining and maintaining market share.



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DIRECTV LATIN AMERICA

DTVLA is a leading provider of digital DTH digital television services throughout Latin America, which includes South America, Central America, and the Caribbean.
DTVLA provides a wide selection of high-quality local and international programming under the DIRECTV brand to approximately 1.6 million subscribers in 27 countries throughout the
region of which approximately 85% are located in Brazil, Argentina, Venezuela and Puerto Rico. The pay television and other emerging broadband video and data markets in Latin America are highly
competitive. In each of DTVLA's markets, it competes primarily with other providers of pay television, who distribute their programming by cable, terrestrial microwave systems, traditional over the
air broadcasting or DTH satellite pay television. DTVLA competes primarily on the basis of programming selection, price, technology and quality. In most of the markets in which DTVLA operates, cable
services have been in commercial operation longer than other pay television platforms, and have established large subscriber bases and widespread brand recognition. Cable operators are also generally
able to offer their subscribers lower upfront installation

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and
connection fees than DTH satellite pay television providers. Subscribers to satellite pay television services, such as DTVLA's, also generally pay higher monthly programming fees due to a greater
number of channels, higher quality video and audio output and greater variety of programming and premium programming packages.

On
March 18, 2003, DLA LLC filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. On
February 13, 2004, the Bankruptcy Court confirmed DLA LLC's Plan of Reorganization, which became effective on February 24, 2004. Also effective February 24, 2004, we made a
contribution of certain claims, loans, equity and other interests in LOCs, and converted certain debt into equity, which increased our equity interest in the restructured DLA LLC from 74.7% to
approximately 86%. Darlene Investments LLC, or Darlene, one of DLA LLC's founders, which also contributed its equity and other interests in various LOCs, holds the remaining approximately 14% equity
interest in the restructured DLA LLC. The restructuring in bankruptcy and the contributions by us and Darlene provided DLA LLC with direct control of the most significant LOCs and assets.

On
October 8, 2004, we entered into a series of transactions with News Corporation, Televisa, Globo and Liberty, which we refer to as the Sky Transactions. The Sky Transactions
are designed to strengthen the operating and financial performance of DTVLA by consolidating the DTH platforms of DTVLA and Sky Latin America into a single platform in each of the major territories
served in the region. These transactions are discussed in more detail as follows.

DTVLA's
local operating company in Brazil, DIRECTV Brasil, and Sky Brasil have agreed to merge, with our DIRECTV Brasil subscribers migrating to the Sky Brasil platform. In addition, we
have
agreed to acquire the interests of News Corporation and Liberty in Sky Brasil. Upon completion of these transactions, we expect to acquire in excess of 70% of the equity of the merged platform. The
transactions in Brazil are subject to local regulatory approval, which we expect to receive mid-year 2006.

DTVLA's
local operating company in Mexico, DIRECTV Mexico, has sold its subscriber list to Sky Mexico and, as a result of completing the transfer of its subscribers to Sky Mexico, ceased
providing services during 2005. In exchange for the subscriber list, we received a note receivable from Sky Mexico that was exchanged for a 12% equity interest in Sky Mexico on February 16,
2006. On that date, we also completed the acquisition of News Corporation and Liberty's equity interests in Sky Mexico, bringing our total equity interest to 47%. Televisa has the option of acquiring
a portion of our ownership interest from us and if that occurs, our equity interest in Sky Mexico would be reduced to 41%.

In
the rest of the region, which we refer to as PanAmericana, we have acquired a 100% interest in Sky Multi-Country Partners and certain related entities from News Corporation, Liberty,
Globo and Televisa. We began consolidating the financial results of the PanAmericana entities on October 8, 2004.

ACQUISITIONS, STRATEGIC ALLIANCES AND DIVESTITURES

We review our competitive position on an ongoing basis and, from time to time, consider various acquisitions, strategic alliances and divestitures in order to
continue to compete effectively, improve our financial results, grow our business and allocate our resources efficiently. We also consider periodically making equity investments in companies with
which we can jointly provide services to our subscribers.

GOVERNMENT REGULATION

We are subject to U.S. government regulation, primarily by the FCC and, to a certain extent, by Congress, other federal agencies, state and local authorities and
the International Telecommunications

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Union,
or ITU, a specialized agency of the United Nations within which governments and the private sector coordinate global telecommunications networks and services. Depending upon the circumstances,
noncompliance with legislation or regulations promulgated by these entities could result in the suspension or revocation of our licenses or registrations, the termination or loss of contracts or the
imposition of contractual damages, civil fines or criminal penalties.

This
section sets forth a summary of regulatory issues pertaining to our operations and is not intended to describe all present and proposed government regulation and legislation
affecting the MVPD industry or our business.

FCC Regulation Under the Communications Act.The Communications Act gives the FCC broad authority to
regulate the operations of our company.

The
ownership and operation of our DBS/DTH system is regulated by the FCC primarily for:



The
FCC grants authorizations to satellite operators that meet its legal, technical and financial qualification requirements. The FCC conditions such authorizations on satisfaction of
ongoing due diligence, construction, reporting and related obligations.

All
of our satellites and earth stations are licensed by the FCC. While the FCC generally issues DTH space station licenses for a fifteen-year term, DBS space station and
earth station
licenses are generally issued for a ten-year term, which is less than the useful life of a healthy direct broadcast satellite. Upon expiration of the initial license term, the FCC has the
option to renew a satellite operator's license or authorize an operator to operate for a period of time on special temporary authority, or decline to renew the license. If the FCC declines to renew
the operator's license, the operator is required to cease operations and the frequencies it was previously authorized to use would revert to the FCC.

Currently
we have several applications pending before the FCC, including applications to launch and operate DIRECTV 9S, a next-generation hybrid satellite with spot beams in
both Ku and Ka-Bands, and DIRECTV 13, a Ku-Band satellite optimized for service to mobile platforms. In general, the FCC's approval of these applications is required for us to
continue to expand our range of service offerings while increasing the robustness of our satellite fleet. We may not obtain these approvals in a timely fashion or at all.

As
a DBS/DTH licensee and operator we are subject to a variety of Communications Act requirements, FCC regulations and copyright laws that could materially affect our business. They
include the following:



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INTELLECTUAL PROPERTY

All DIRECTV Group companies maintain active programs for identifying and protecting our important intellectual property. With the exception of certain U.S.
trademark registrations held by DIRECTV U.S., we own all of our intellectual property for the benefit of our company and our subsidiaries.

We
believe that our growing portfolio of pending and issued patents are important assets. We presently hold over 1,500 issued patents worldwide relating to our past and present
businesses, including over 100 patents developed by, or otherwise relating to, the businesses of DIRECTV U.S. We hold a worldwide portfolio of over 720 registered trademarks, including over 450
foreign registrations related to the DIRECTV name and the Cyclone Design. In addition, DIRECTV U.S. holds over 73 U.S. and Canadian trademark registrations relating to its business, including
registrations of the primary "DIRECTV" and Cyclone Design trademarks. These trademarks are licensed royalty-free to third parties for use in support of DIRECTV U.S.' business. We actively
protect our important patents and trademarks against unauthorized or improper use by third parties.

ENVIRONMENTAL REGULATION

We are subject to the requirements of federal, state, local and foreign environmental laws and regulations. These include laws regulating air emissions, water
discharge and waste management. We have an environmental management structure designed to facilitate and support our compliance with these requirements and attempts to maintain complete compliance
with all such requirements. We have made and will continue to make, as necessary, capital and other expenditures to comply with environmental requirements. We do not, however, expect capital or other
expenditures for

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environmental
compliance to be material in 2006. Environmental requirements are complex, change frequently and have become more stringent over time. Accordingly, we 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 our business.

We
are also subject to environmental laws requiring the investigation and cleanup of environmental contamination at facilities we formerly owned or operated or currently own or operate
or to which we sent hazardous wastes for treatment or disposal. We are aware of contamination at one of our former sites. We believe that we have adequately provided for the expected cost of
environmental investigation and cleanup.

SEGMENT REPORTING DATA

Operating segment and principal geographic area data for 2005, 2004 and 2003 are summarized in Note 20 of the Notes to the Consolidated Financial
Statements in Item 8, Part II of this Annual Report, which we incorporate herein by reference.

EMPLOYEES

As of December 31, 2005, we had approximately 9,200 employees. We believe that our employee relations are good. None of our employees are represented by
labor unions.

ACCESS TO COMPANY REPORTS

Our website address is www.directv.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to those reports filed or furnished, if any, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge
through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission, or SEC. We are not incorporating by reference
in this Annual Report on Form 10-K any information on our website.

In
addition, our subsidiary, DIRECTV Holdings LLC, is a separate registrant with the SEC. You can access DIRECTV Holdings LLC's Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished, if any, pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 free of charge through our website at www.directv.com as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

The
public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information regarding the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer with the SEC. The SEC maintains an Internet site
(www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically.

ITEM 1A.    RISK FACTORS

You should carefully consider the following risk factors, as well as the more detailed descriptions of our business elsewhere in this Annual Report. The risks
described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition or
results of operations.

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Our
business, financial condition or results of operations could be materially and adversely affected by the following:

We may not sustain profitability.

We have sustained significant losses in the past and have significant amounts of debt. If we do not have sufficient income or other sources of cash, it could
affect our ability to service debt and pay other obligations.

Our subsidiaries compete with other MVPDs, some of whom have greater resources than we do and levels of competition are increasing.

We compete in the MVPD industry against cable television, RBOCs and other land-based and satellite-based system operators with service offerings
including video and audio programming, data and entertainment services and telephony service. Some of these competitors have greater financial, marketing and other resources than we do.

Some
cable television operators have large, established customer bases and many cable operators have significant investments in, and access to, programming. According to the National
Cable & Telecommunications Association Mid-Year 2005 Industry Overview, 108 million of the 110 million U.S. television households, or 99%, are passed by cable. Of the
110 million U.S. television households, approximately 73 million, or 67%, were subscribers to cable at year end. Cable television operators have advantages relative to us, including or
as a result of:



In
addition, cable television operators have grown their subscriber base through mergers and acquisitions. Moreover, mergers, joint ventures and alliances among franchise, wireless or
private cable television operators, RBOCs, and others may result in providers capable of offering bundled cable television and telecommunications services in competition with our services.

Various
RBOCs have also begun deployment of fiber optic lines directly to customers' homes or neighborhoods and to deliver video services, which compete with the DIRECTV service. It is
uncertain whether we will be able to increase our satellite capacity, offer a significant level of new services in existing markets in which we compete or expand to additional markets as may be
necessary to compete effectively. Some of these RBOCs also sell the DIRECTV service as a bundle with their voice and data services. The existence of a new broadly-deployed network with the capability
of providing video, voice and data services could present a significant competitive challenge. Should their deployment of fiber optic lines for video grow substantially, we may be unable to develop
other distribution methods to make up for lost sales through the RBOCs.

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AT&T
recently announced an agreement to acquire BellSouth, one of the RBOCs that sells the DIRECTV service. AT&T has a similar arrangement with EchoStar. If the AT&T acquisition of
BellSouth is completed, our arrangements with BellSouth might be adversely affected.

As
a result of these and other factors, we may not be able to continue to expand our subscriber base or compete effectively against cable television or other MVPD operators in the
future.

We depend on the Communications Act for access to cable-affiliated programming and changes impacting that access could materially adversely affect us.

We purchase a substantial percentage of our programming from programmers that are affiliated with cable system operators. Currently, under certain provisions of
the Communications Act governing access to programming, cable-affiliated programmers generally must sell and deliver their programming services to all multi-channel video programming distributors on
non-discriminatory terms and conditions. The Communications Act and the FCC rules also prohibit certain types of exclusive programming contracts involving programming from cable-affiliated
programmers.

Any
change in the Communications Act or the FCC's rules that would permit programmers that are affiliated with cable system operators to refuse to provide such programming or to impose
discriminatory terms or conditions could materially adversely affect our ability to acquire programming on a cost-effective basis, or at all. The Communications Act prohibitions on certain
cable industry exclusive contracting practices with cable-affiliated programmers are scheduled to expire in October 2007 and may not be renewed or extended.

In
addition, certain cable providers have denied us and other MVPDs access to a limited number of channels created by programmers with which the cable providers are affiliated. The cable
providers
have asserted that they are not required to provide such programming due to the manner in which that programming is distributed, which they argue is not covered by the program access provisions of the
Communications Act. Challenges to this interpretation of the Communications Act have not been successful, and we may continue to be precluded from obtaining such programming, which in turn could
materially adversely affect our ability to compete in regions serviced by those cable providers.

Carriage requirements may negatively affect DIRECTV U.S.' ability to deliver local broadcast stations, as well as other aspects of its business.

In implementing SHVIA, the FCC has required satellite carriers to delete certain programming, including sports programming, from the signals of certain distant
stations. The FCC's interpretation, implementation and enforcement of other provisions of SHVIA and SHVERA, as well as judicial decisions interpreting and enforcing these laws, could hamper DIRECTV
U.S.' ability to retransmit distant network and superstation signals, reduce the number of DIRECTV U.S.' existing or future subscribers that can qualify for receipt of these signals, impose costs on
DIRECTV U.S. in connection with the process of complying with the rules, or subject DIRECTV U.S. to fines, monetary damages or injunctions. Also, the FCC's sport blackout requirements, which apply to
all distant network signals, may require costly upgrades to DIRECTV U.S.' system. Further, a recent FCC order interpreting the requirement that satellite carriers retransmit local digital signals with
"equivalent bandwidth" of significantly viewed digital signals may constrain DIRECTV U.S.' ability to deliver such significantly viewed digital signals.

DIRECTV
U.S. has limited capacity, and the projected number of markets in which it can deliver local broadcast programming will continue to be constrained because of the must carry
requirement and may be reduced depending on the FCC's interpretation of its rules in pending and future rulemaking and complaint proceedings, as well as judicial decisions interpreting must carry

20

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requirements.
DIRECTV U.S may not be able to comply with these must carry rules, or compliance may mean that it is not be able to use capacity that could otherwise be used for new or additional local
or national programming services.

Our subsidiaries depend on others to produce programming and programming costs are increasing.

We depend on third parties to provide us with programming services, including third parties who are our affiliates and third parties controlled by competitors.
Our ability to compete successfully will depend on our ability to continue to obtain desirable programming and deliver it to our subscribers at competitive prices. Our programming agreements generally
have remaining terms ranging from less than one to up to ten years and contain various renewal and cancellation provisions. We may not be
able to renew these agreements on favorable terms, or at all, or these agreements may be cancelled prior to expiration of their original terms. If we are unable to renew any of these agreements or the
other parties cancel the agreements, we may not be able to obtain substitute programming, or if we are able to obtain such substitute programming, it may not be comparable in quality or cost to our
existing programming.

In
addition, many of our programming agreements contain annual price increases. When offering new programming, or upon expiration of existing contracts, programming suppliers have
historically increased the rates they charge us for programming, increasing our costs. We expect this practice to continue. Increases in programming costs could cause us to increase the rates that we
charge our subscribers, which could in turn cause subscribers to terminate their subscriptions or potential new subscribers to refrain from subscribing to our service. Furthermore, we may be unable to
pass programming cost increases on to our subscribers, which could have a material adverse effect on our earnings or cash flow.

The
FCC recently adopted rules requiring us to negotiate in good faith with broadcast stations seeking carriage outside of the mandatory carriage regime described above. The rules for
"retransmission consent" negotiations, which are similar to those that have applied to broadcast stations for years, require us to comply with certain indicia of good faith negotiation, as well as to
demonstrate good faith under a "totality of the circumstances" test. Failure to comply with these rules could subject us to administrative sanctions and other penalties.

Our subscriber acquisition costs could materially increase.

We incur costs relating to subscribers acquired by us and subscribers acquired through third-parties. These costs are known as subscriber acquisition costs. For
instance, we provide installation incentives to our retailers to enable them to offer standard professional installation as part of the subscriber's purchase or lease of a DIRECTV System. In addition,
we pay commissions to retailers for their efforts in offering a DIRECTV System to consumers. Our subscriber acquisition costs may materially increase to the extent we continue or expand current sales
promotion activities or introduce other more aggressive promotions, or due to increased competition. Any material increase in subscriber acquisition costs from current levels would negatively impact
our earnings and could materially adversely affect our financial performance.

Increased subscriber churn or subscriber upgrade and retention costs could materially adversely affect our financial performance.

Turnover of subscribers in the form of subscriber service cancellations, or churn, has a significant financial impact on the results of operations of any
subscription television provider, including us, as does the cost of upgrading and retaining subscribers. Any increase in our upgrade and retention costs

21

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for
our existing subscribers may adversely affect our financial performance or cause us to increase our subscription rates, which could increase churn. Churn may also increase due to factors beyond
our control, including involuntary churn by subscribers who are unable to pay their monthly subscription fees, a slowing economy, significant signal theft, a maturing subscriber base and competitive
offers. Any of the risks described in this Annual Report that could potentially have a material adverse impact on our cost or service quality or that could result in higher prices for our subscribers
could also, in turn, cause an increase in churn and consequently have a material adverse effect on our earnings.

Satellite programming signals have been stolen and may be stolen in the future, which could result in lost revenues and would cause us to incur incremental operating costs that
do not result in subscriber acquisition.

The delivery of subscription programming requires the use of conditional access technology to limit access to programming to only those who subscribe and are
authorized to view it. The conditional access system uses, among other things, encryption technology to protect the transmitted signal from unauthorized access. It is illegal to create, sell or
otherwise distribute software or devices to circumvent that conditional access technology. However, theft of cable and satellite programming has been widely reported, and the access or "smart" cards
used in our conditional access system have been compromised in the past and could be further compromised in the future.

We
have undertaken various initiatives with respect to our conditional access system to further enhance the security of the DIRECTV signal. To help combat signal theft, we are currently
providing our subscribers with more advanced access cards that we believe significantly enhance the security of our signal. However, we cannot guarantee that the new card will prevent the theft of our
satellite programming signals. Furthermore, there can be no assurance that we will succeed in developing the technology we need to effectively restrict or eliminate signal theft. If we cannot promptly
correct a compromise of our conditional access technology, our revenue and our ability to contract for video and audio services provided by programmers could be materially adversely affected. In
addition, our operating costs could increase if we attempt to implement additional measures to combat signal theft.

Construction or launch delays on satellites could materially adversely affect our revenues and earnings.

A key component of our business strategy is our ability to expand our offering of new programming and services, including increased local and HD programming. In
order to accomplish this goal, we need to construct and launch new satellites. The construction and launch of satellites are often subject to delays, including satellite and launch vehicle
construction delays, periodic unavailability of reliable launch opportunities, and delays in obtaining regulatory approvals. A significant delay in the future delivery of any satellite would
materially adversely affect the use of the satellite and thus could materially adversely affect our anticipated revenues and earnings. If satellite construction schedules are not met, there can be no
assurance that a launch opportunity will be available at the time a satellite is ready to be launched. Certain delays in satellite construction could also jeopardize a satellite authorization that is
conditioned on timely construction and launch of the satellite.

Our satellites are subject to significant launch and operational risks.

Satellites are subject to significant operational risks relating to launch and while in orbit. Launch risks include launch failure, incorrect orbital placement or
improper commercial operation. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take up to
36 months, and obtain other launch opportunities. The overall historical loss rate in our industry for all launches of commercial satellites in fixed orbits in the

22

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last
five years is estimated to be 5% but may be higher. Any significant delays or failures in successfully launching and deploying our satellites could materially adversely affect our ability to
generate revenues. While we have traditionally purchased insurance covering the launch and, in limited cases, operation of our satellites, such policies typically cover the loss of the satellite
itself and not the business interruption or other associated direct and indirect costs. DIRECTV U.S. does not currently expect to purchase in-orbit insurance for any of its satellites
scheduled for launch in 2006 and 2007.

In-orbit
risks include malfunctions, commonly referred to as anomalies, and collisions with meteoroids, other spacecraft or other space debris. Anomalies occur as a result of
various factors, such as satellite manufacturing errors, problems with the power systems or control systems of the satellites and general failures resulting from operating satellites in the harsh
space environment. We work closely with our satellite manufacturers to determine and eliminate the potential causes of anomalies in new satellites and provide for redundancies of critical components
in the satellites as well as having backup satellite capacity. However, we cannot assure you that we will not experience anomalies in the future, nor can we assure you that our backup satellite
capacity will be sufficient for our business purposes. Any single anomaly or series of anomalies could materially adversely affect our
operations and revenues and our relationships with our subscribers, as well as our ability to attract new subscribers for our services. Anomalies may also reduce the expected useful life of a
satellite, thereby creating additional expenses due to the need to provide replacement or backup satellites and potentially reducing revenues if service is interrupted. Finally, the occurrence of
anomalies may materially adversely affect our ability to insure our satellites at commercially reasonable premiums, if at all. While some anomalies are currently covered by existing insurance
policies, others are not now covered or may not be covered in the future.

Our
ability to earn revenue also depends on the usefulness of our satellites. Each satellite has a limited useful life. A number of factors affect the useful life of a satellite,
including, among other things:



Generally,
the minimum design life of the satellites in our fleet is between 12 and 15 years. The actual useful lives of the satellites may be shorter, in some cases
significantly. Our operating results could be
adversely affected if the useful life of any of our satellites were significantly shorter than 12 years from the date of launch.

In
the event of a failure or loss of any of our satellites, we may relocate another satellite and use it as a replacement for the failed or lost satellite. In the event of a complete
satellite failure, our services provided via that satellite could be unavailable for several days or longer while backup in-orbit satellites are repositioned and services are moved. We are
not insured for any resultant lost revenues. The use of backup satellite capacity for our programming may require us to discontinue some programming services due to potentially reduced capacity on the
backup satellite. Any relocation of our satellites would require prior FCC approval and, among other things, a demonstration to the FCC that

23

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the
replacement satellite would not cause additional interference compared to the failed or lost satellite. Such FCC approval may not be obtained. We believe we have in-orbit satellite
capacity to expeditiously recover transmission of most programming in the event one of our in-orbit satellites fails. However, programming continuity cannot be assured in the event of
multiple satellite losses.

The cost of commercial insurance coverage on our satellites or the loss of a satellite that is not insured could materially adversely affect our earnings.

We use in-orbit and launch insurance to mitigate the potential financial impact of satellite fleet in-orbit and launch failures unless the
premium costs are considered uneconomic relative to the risk of satellite failure. When insurance is obtained, it generally covers the unamortized book value of covered satellites. Although the
insurance generally does not compensate for business interruption or loss of future revenues or subscribers, we rely on in-orbit spare satellites and excess transponder capacity at key
orbital slots to mitigate the impact of satellite failure on our ability to provide service.

The
price, terms and availability of insurance fluctuate significantly. Launch and in-orbit policies on satellites may not continue to be available on commercially reasonable
terms or at all. In addition to higher premiums, insurance policies may provide for higher deductibles, shorter coverage periods and satellite health-related policy exclusions.

Any
launch vehicle failure, or loss or destruction of any of our satellites for which we do not have commercial insurance coverage could have a material adverse effect on our financial
condition and results of operations, our ability to comply with FCC regulatory obligations and our ability to fund the construction or acquisition of replacement satellites in a timely fashion, or at
all.

Our ability to keep pace with technological developments is uncertain.

In the MVPD industry, changes occur rapidly as new technologies are developed, which could cause our services and products that deliver our services to become
obsolete. We may not be able to keep pace with technological developments. If the new technologies on which we intend to focus our investments fail to achieve acceptance in the marketplace or our
technology does not work and requires significant cost to replace or fix, we could suffer a material adverse effect on our future competitive position, which could cause a reduction in our revenues
and earnings. For example, our competitors could be the first to obtain proprietary technologies that are perceived by the market as being superior. Further, after incurring substantial costs, one or
more of the technologies under development by us or any of our strategic partners could become obsolete prior to its introduction.

In
addition, technological innovation depends, to a significant extent, on the work of technically skilled employees. Competition for the services of these employees is vigorous. We
cannot assure you that we will be able to continue to attract and retain these employees.

To
access technologies and provide products that are necessary for us to remain competitive, particularly in the area of broadband services, we may make future acquisitions and
investments and may enter into strategic partnerships with other companies. Such investments may require a commitment of significant capital and human and other resources. The value of such
acquisitions, investments and partnerships and the technology accessed may be highly speculative. Arrangements with third parties can lead to contractual and other disputes and dependence on the
development and delivery of necessary technology on third parties that we may not be able to control or influence. These relationships may commit us to technologies that are rendered obsolete by other
developments or preclude the pursuit of other technologies which may prove to be superior.

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New
technologies could also create new competitors for DIRECTV. Entities such as RBOCs are implementing and supporting digital video compression over existing telephone lines and
building out fiber optic lines to enhance their capabilities to deliver programming services. While these entities are not currently providing MVPD services on a significant basis, many have the
capabilities for such services and some have announced that they will begin rolling out video services more broadly this year. We may not be able to compete successfully with new entrants in the
market for video services.

Our business relies on intellectual property, some of which is owned by third parties, and we may inadvertently infringe patents and proprietary rights of others.

Many entities, including some of our competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or
services related to those that we currently offer or may offer in the future. In general, if a court determines that one or more of our services or the products used to transmit or receive our
services infringes on intellectual property owned by others, we and the applicable manufacturers or vendors may be required to cease developing or marketing those services and products, to obtain
licenses from the owners of the intellectual property or to redesign those services and products in such a way as to avoid infringing the intellectual property rights. If a third party holds
intellectual property rights, it may not allow us or the applicable manufacturers to use its intellectual property at any price, which could materially adversely affect our competitive position.

We
may not be aware of all intellectual property rights that our services or the products used to transmit or receive our services may potentially infringe. In addition, patent
applications in the United States are confidential until the Patent and Trademark Office issues a patent. Therefore, we cannot evaluate the extent to which our services or the products used to
transmit or receive our services may infringe claims contained in pending patent applications. Further, without lengthy litigation, it is often not possible to determine definitively whether a claim
of infringement is valid.

We
cannot estimate the extent to which we may be required in the future to obtain intellectual property licenses or the availability and cost of any such licenses. Those costs, and their
impact on our earnings, could be material. Damages in patent infringement cases may also include treble damages in certain circumstances. To the extent that we are required to pay royalties to third
parties to whom we are not currently making payments, these increased costs of doing business could materially adversely affect our operating results. We are currently being sued in patent
infringement actions related to use of technologies in our DTH business. There can be no assurance that the courts will conclude that our services or the products used to transmit or receive our
services do not infringe on the rights of third parties, that we or the manufacturers would be able to obtain licenses from these persons on commercially reasonable terms or, if we were unable to
obtain such licenses, that we or the manufacturers would be able to redesign our services or the products used to transmit or receive our services to avoid infringement.

The ability to maintain FCC licenses and other regulatory approvals is critical to our business.

If we do not obtain all requisite U.S. regulatory approvals for the construction, launch and operation of any of our existing or future satellites for the use of
frequencies at the orbital locations planned for these satellites or for the provision of service, or the licenses obtained impose operational restrictions on us, our ability to generate revenue and
profits could be materially adversely affected. In addition, under certain circumstances, existing licenses are subject to revocation or modification and upon expiration, renewal may not be granted.
If existing licenses are not renewed, or are revoked or materially modified, our ability to generate revenue could be materially adversely affected.

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In
certain cases, satellite system operators are obligated by governmental regulation and procedures of the International Telecommunications Union to coordinate the operation of their
systems with other users of the radio spectrum in order to avoid causing interference to those other users. Coordination may require a satellite system operator to reduce power, avoid operating on
certain frequencies, relocate its satellite to another orbital location and/or otherwise modify planned or existing operations. For example, SES has petitioned the FCC for a declaratory ruling to
allow it to provide DBS service using frequencies assigned to it by the Government of Gibraltar and the United Kingdom from an orbital slot located halfway between slots at which we currently operate
and the next nearest existing U.S.-licensed DBS slots. Other operators have filed similar requests. We believe this closer proximity, if permitted, significantly increases the risk of interference
which could adversely affect the quality of service provided to our subscribers. We may not be able to successfully coordinate our satellites to the extent we are required to do so, and any
modifications we make in the course of coordination, or any inability to successfully coordinate, may materially adversely affect our ability to generate revenue.

Other
regulatory risks include, among others:



All
of our FCC satellite authorizations are subject to conditions imposed by the FCC in addition to the FCC's general authority to modify, cancel or revoke those authorizations. Use of
FCC licenses and conditional authorizations are often subject to conditions, including technical requirements and implementation deadlines. Failure to comply with such requirements, or comply in a
timely manner, could lead to the loss of authorizations and could have a material adverse effect on our ability to generate revenue. For example, loss of an authorization could potentially reduce the
amount of programming and other services available to DIRECTV subscribers. The materiality of such a loss of authorization would vary based upon, among other things, the orbital location at which the
frequencies may be used.

In
addition, many of our authorizations and pending applications will be subject to petitions and oppositions filed by several companies, and there can be no assurance that our
authorizations will not be cancelled, revoked or modified or that our applications will not be denied. Moreover, the FCC recently adopted new rules for licensing satellites that may limit our ability
to file applications and secure licenses in the future.

Congress
has continued to shape the scope of the FCC's regulatory authority and enact legislation that impacts our business. In addition, FCC proceedings to implement legislation and
enact additional regulations are ongoing. The outcomes of these legislative or regulatory proceedings or their effect on our business cannot be predicted.

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Our international operation, DTVLA, is subject to various additional risks associated with doing business internationally, which include political instability, economic
instability, and foreign currency exchange rate volatility.

All of DTVLA's operating companies are located outside the United States. DTVLA operates and has subscribers located throughout Latin America and the Caribbean
Basin, which makes it vulnerable to risks of conducting business in foreign markets, including:



In
the past, the countries that constitute some of DTVLA's largest markets, including Brazil, Argentina, Colombia and Venezuela have experienced economic crises, caused by external and
internal factors, and characterized by exchange rate instability, high inflation, high domestic interest rates, economic contraction, a reduction of international capital flows, a reduction of
liquidity in the banking sector and high unemployment. These economic conditions have often been related to political instability, including political violence. If these economic conditions recur,
they could substantially reduce the purchasing power of the population in our markets and materially adversely affect our business.

Because
DTVLA offers premium pay television programming, its business is particularly vulnerable to economic downturns. DTVLA has experienced, and may in the future experience, decreases
or instability in consumer demand for its programming, as well as subscriber credit problems. DTVLA's inability to adjust its business and operations to adequately address these issues could
materially adversely affect its revenues and ability to achieve profitability.

We may not be able to obtain or retain certain foreign regulatory approvals.

There can be no assurance that any current regulatory approvals held by us are, or will remain, sufficient in the view of foreign regulatory authorities, or that
any additional necessary approvals will be granted on a timely basis or at all, in all jurisdictions in which we operate, or that applicable restrictions in those jurisdictions will not be unduly
burdensome. The failure to obtain the authorizations necessary to operate satellites or provide satellite service internationally could have a material adverse effect on our ability to generate
revenue and our overall competitive position.

Our principal stockholder has significant influence over our management and over actions requiring stockholder approval and its interests may differ from ours.

As of December 31, 2005, News Corporation held approximately 34% of the issued and outstanding shares of our common stock. K. Rupert Murdoch, Chairman and
Chief Executive of News

27

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Corporation,
is the Chairman of our Board of Directors, and Chase Carey, who is currently a director of and was formerly employed by News Corporation, is our President and Chief Executive Officer and
a member of our Board of Directors. Additionally, two current News Corporation executives are members of our Board of Directors. As a result, News Corporation has significant influence relating to our
management and actions that require stockholder approval. The interests of News Corporation may differ from the interests of other holders of our common stock. The extent of New Corporation's stock
ownership in us also may have the effect of discouraging offers to acquire control of us and may preclude holders of our common stock from receiving any premium above market price for their shares
that may be offered in connection with any attempt to acquire control of us. The share repurchase program announced February 7, 2006 will result in an increase in News Corporation's ownership
interest in us.

We may face other risks described from time to time in periodic reports filed by us with the SEC.

We urge you to consider the above risk factors carefully in evaluating forward-looking statements contained in this Annual Report. The forward-looking statements
included in this Annual Report are made only as of the date of this Annual Report and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or
circumstances.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

As of December 31, 2005, we had approximately 27 locations operating in 15 states and 21 cities in the United States and approximately 16 additional
locations operating in 16 cities in seven countries outside the United States. At such date, we owned approximately 1.0 million square feet of space and leased an additional 1.3 million
square feet of space. The major locations of the DIRECTV U.S. segment include five administrative offices, two broadcast centers and three call centers. The major locations of the DIRECTV Latin
America segment include six administrative offices, five broadcast centers and three call centers. We consider our properties adequate for our present needs.

ITEM 3.    LEGAL PROCEEDINGS

(a)   Material
pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we became or were a party during the year ended
December 31, 2005 or subsequent thereto, but before the filing of this report, are summarized below:

Intellectual Property Litigation.On June 23, 2004, Acacia Media Technologies Corporation, or
Acacia, filed suit in the U.S. District Court for the Northern District of California against The DIRECTV Group, Inc., Comcast Corporation, Cox Communications, Inc., Hospitality
Network, Inc., Charter Communications, Inc., EchoStar Communications Corporation, Boulder Ridge Cable TV d/b/a Starstream Communications, Seren Innovations, Inc. and Central
Valley Cable TV, LLC, alleging infringement of various patents and seeking unspecified damages and injunctive relief. The defendants, including us, have answered by asserting that the patents are not
infringed, not valid, and not enforceable on numerous grounds and intend to vigorously defend against these claims. Activity is now stayed pending outcome of requests by Acacia to combine the action
with others as a multi-district litigation.

***

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On December 5, 2000, Personalized Media Communications, LLC and Pegasus Development Corporation filed suit in the U.S. District Court for the District of Delaware against
DIRECTV, Inc., The DIRECTV Group, Thomson Consumer Electronics and Philips Electronics North American Corp., alleging patent infringement and seeking unspecified damages and injunctive relief.
On May 14, 2003, the court stayed the case pending outcome of reexaminations of the patents by the U.S. Patent Office.

***

On
June 27, 2000, SuperGuide Corporation filed suit in the U.S. District Court for the Western District of North Carolina against DIRECTV Enterprises, LLC, DIRECTV, Inc.
and DIRECTV Operations, LLC, which we refer to together in this paragraph as the "DIRECTV defendants," DIRECTV Group, Thomson Inc., EchoStar Communications Corporation, EchoStar Satellite
Corporation and EchoStar Technologies Corporation, alleging patent infringement and seeking unspecified damages and injunctive relief. Gemstar Development Corp. was added as a third party defendant
because it asserts to have exclusive control of the patents by reason of a license agreement with SuperGuide Corporation. On July 3, 2002, the court granted summary judgment of
non-infringement to the DIRECTV defendants, DIRECTV Group and DIRECTV system manufacturers under all asserted claims of the patents in the case. Judgment for all defendants dismissing all
claims of infringement and awarding costs to defendants was entered on July 25, 2002. On February 12, 2004, the Court of Appeals for the Federal Circuit affirmed the decision in part and
reversed in part, and remanded the action for further proceedings.

***

Independent Retailer Litigation.On May 18, 2001, plaintiffs Cable Connection, Inc., TV
Options, Inc., Swartzel Electronics, Inc. and Orbital Satellite, Inc. filed a class action complaint against us in Oklahoma State Court, alleging claims similar to those in the
Garcia matter described in (b) below on behalf of all DIRECTV dealers. The plaintiffs seek unspecified damages and injunctive relief. After several procedural hearings and orders, the matter is
now pending before the American Arbitration Association.

***

Darlene Litigation.On October 18, 2004, Darlene Investments, LLC, or Darlene, filed suit in
the circuit court for Miami-Dade County, Florida, against us and certain of our subsidiaries (including DLA LLC), News Corporation, and others, or collectively the Defendants. The suit
alleges fraud and violation of fiduciary, contractual and other duties owed Darlene and to DLA LLC by one or more of the Defendants. Among other things, Darlene alleges that the Sky Transactions were
unfair to DLA LLC and its members, including Darlene. Darlene further alleges that we entered into an oral put agreement that would have required DLA LLC to acquire Darlene's interest in DLA LLC based
on a pricing formula and that Darlene was fraudulently induced to release its rights under that put and other rights. Darlene seeks injunctive relief to preclude DLA LLC from consummating the Sky
Transactions, $1 billion in damages and other relief. We have agreed to indemnify News Corporation against claims by Darlene. We believe Darlene's claims are without merit and we are defending
against these claims.

We
and certain other defendants filed in state court motions to compel arbitration of certain claims and to dismiss others for improper venue, and on November 3, 2005, the judge
entered an order essentially staying the proceedings pending the arbitration between Darlene, DIRECTV and DLA LLC. We and Darlene have filed demands for arbitration under the terms of the dispute
resolution provision of the DLA LLC limited liability company agreement. The parties have agreed upon a potential

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arbitration
panel, and we anticipate that these demands for arbitration will be consolidated for hearing, which is scheduled to occur beginning in late January 2007.

Finally,
in June 2005, we filed suit against Darlene in the United States District Court for the Southern District of New York seeking specific performance and declaratory relief
with respect to the release agreement and covenant not to sue executed by Darlene in February 2004 in connection with the DLA LLC reorganization and related transactions. Darlene has filed an
answer and counterclaim.

***

(b)   Previous
reported legal proceedings which have been terminated during the fourth quarter ended December 31, 2005 are summarized below:

In
April 2001, Robert Garcia, doing business as Direct Satellite TV, an independent retailer of DIRECTV System equipment, instituted arbitration proceedings against us in Los
Angeles, California regarding commissions and certain chargeback disputes. On October 4, 2001, Mr. Garcia filed a class action complaint against us in Los Angeles County Superior Court
asserting the same claims and a Consumer Legal Remedies Act claim. Mr. Garcia alleged $300 million in class-wide damages and sought certification of a class of plaintiffs to
proceed in arbitration with court oversight.
In February 2004, the trial court compelled the matter to arbitration and relinquished all jurisdiction in connection with the case. On November 5, 2005, the parties agreed to settle and
dismiss with prejudice all claims each had asserted against the other in the arbitration, effective as of August 5, 2005. Neither party paid any money to the other in connection with the
settlement, and each party agreed to bear its own costs and attorneys' fees.

***

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

None.

***

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PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is publicly traded on the NYSE under the symbol "DTV." The following table sets forth for the quarters indicated the high and low sales prices
for our common stock, as reported on the NYSE Composite Tape.

For
the period from January 1, 2004 through March 16, 2004, the table reflects the performance of Hughes Electronics Corporation common stock which was listed on the NYSE
under the symbol "HS" during that period. On March 16, 2004, we changed our name to The DIRECTV Group, Inc. Effective on March 17, 2004, our ticker symbol was changed to "DTV."

2005

High

LowFirst Quarter

$
17.01

$
14.21Second Quarter


15.91


13.88Third Quarter


16.79


14.48Fourth Quarter


15.07


13.17


2004

High

LowFirst Quarter

$
18.05

$
14.70Second Quarter


18.81


15.60Third Quarter


17.77


15.72Fourth Quarter


18.25


15.52


As
of the close of business on March 7, 2006, there were approximately 96,008 holders of record of our common stock.

Subject
to the preferential and other dividend rights of any outstanding series of our preferred stock, holders of our common stock are entitled to such dividends and other distributions
in cash, stock or property as may be declared by our Board of Directors in its sole discretion. There were no shares of our preferred stock outstanding at December 31, 2005.

Except
for the $275 million special cash dividend paid to GM in connection with the split-off, no dividends on our common stock have been declared by our Board of
Directors for more than five years. We have no current plans to pay any dividends on our common stock. We currently expect to retain our future earnings, if any, for the development of our businesses
or other corporate purposes.

On
February 7, 2006, our Board of Directors authorized a share repurchase program. Under the repurchase program, we are authorized to spend up to $3.0 billion to repurchase
outstanding shares of our common stock. The source of funds for the proposed purchases is from our existing cash on hand and cash from operations. We implemented the repurchase program on
February 10, 2006. There is no fixed termination date for the repurchase program and purchases may be made in the open market, through block trades and other negotiated transactions. The
program may be suspended, discontinued
or accelerated at any time. Repurchased shares will be retired but remain authorized for registration and issuance in the future. Through March 7, 2006, we have repurchased approximately
110.3 million shares for $1.7 billion, at an average price of $15.50 per share, which includes 100 million shares of our common stock purchased from General Motors employee
pension and benefit trusts.

DIRECTV
U.S. is subject to restrictive covenants under its credit facility. These covenants limit the ability of DIRECTV U.S. to, among other things, make restricted payments, including
dividends, loans or advances to us.

31

---



Information
regarding compensation plans under which our equity securities may be issued is included in Item 12 through incorporation by reference to our Proxy Statement for the Annual
Meeting of Stockholders scheduled to be held on June 6, 2006.

ITEM 6.    SELECTED FINANCIAL DATA

|                                                                                        |  | Years Ended and As of December 31, |         
|--------------------------------------------------------------------------------------- |  | ---------------------------------- | --------
|
|
|Consolidated Statements of Operations Data:                                             |  |                                    |         
|Revenues                                                                                |  | $                                  | 13,164.5
|Total Operating Costs and Expenses                                                      |  |                                    | 12,531.9
|                                                                                        |  |                                    |         
|Operating Profit (Loss)                                                                 |  | $                                  | 632.6   
|                                                                                        |  |                                    |         
|Income (loss) from continuing operations before cumulative effect of accounting changes |  | $                                  | 304.6   
|Income (loss) from discontinued operations, net of taxes                                |  |                                    | 31.3    
|Cumulative effect of accounting changes, net of taxes                                   |  |                                    |        
|                                                                                        |  |                                    |         
|Net Income (Loss)                                                                       |  |                                    | 335.9   
|Preferred stock dividends                                                               |  |                                    |        
|                                                                                        |  |                                    |         
|Net Income (Loss) Attributable to Common Stockholders                                   |  | $                                  | 335.9   
|                                                                                        |  |                                    |         
|Basic and Diluted Income (Loss) Per Common Share:                                       |  |                                    |         
|Income (loss) from continuing operations before cumulative effect of accounting changes |  | $                                  | 0.22    
|Weighted average number of common shares outstanding (in millions):                     |  |                                    |         
|Basic                                                                                   |  |                                    | 1,388.4 
|Diluted                                                                                 |  |                                    | 1,394.8 
|Consolidated Balance Sheet Data:                                                        |  |                                    |         
|Total Assets                                                                            |  | $                                  | 15,630.2
|Long-Term Debt                                                                          |  |                                    | 3,405.3 
|Preferred Stock                                                                         |  |                                    |        
|Total Stockholders' Equity                                                              |  |                                    | 7,940.0 

---

The
cumulative effect of accounting change of $681.3 million recorded in the year ended December 31, 2002 relates to the adoption of Statement of Financial Accounting Standards No 142,
"Goodwill and Other Intangible Assets" in 2002. See the Notes to the Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding the accounting changes in 2004 and 2003 and other significant transactions
during each of the three years in the period ended December 31, 2005.

32

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

SUMMARY DATA

|                                                                                                                             |                                                          | Years Ended December 31, |                                  
|---------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------ | ---------------------------------
|
|
|Consolidated Statements of Operations:                                                                                       |                                                          |                          |                                  
|Revenues                                                                                                                     |                                                          | $                        | 13,164.5                         
|Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below                      |                                                          |                          |                                  
|                                                                                                                             | Broadcast programming and other costs of sale            |                          |                                  
|                                                                                                                             | Subscriber service expenses                              |                          |                                  
|                                                                                                                             | Subscriber acquisition costs:                            |                          |                                  
|                                                                                                                             |                                                          |                          | Third party customer acquisitions
|                                                                                                                             |                                                          |                          | Direct customer acquisitions     
|                                                                                                                             | Upgrade and retention costs                              |                          |                                  
|                                                                                                                             | Broadcast operations expenses                            |                          |                                  
|                                                                                                                             | General and administrative expenses                      |                          |                                  
|                                                                                                                             | (Gain) loss from asset sales and impairment charges, net |                          |                                  
|Depreciation and amortization                                                                                                |                                                          |                          | 853.2                            
|                                                                                                                             |                                                          |                          |                                  
|                                                                                                                             |                                                          |                          |                                  
|                                                                                                                             |                                                          |                          |                                  
|Operating Profit (Loss)                                                                                                      |                                                          |                          | 632.6                            
|Interest income                                                                                                              |                                                          |                          | 150.3                            
|Interest expense                                                                                                             |                                                          |                          | (237.6                           
|Reorganization income (expense)                                                                                              |                                                          |                          |                                 
|Other, net                                                                                                                   |                                                          |                          | (65.0                            
|                                                                                                                             |                                                          |                          |                                  
|Income (Loss) From Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Changes |                                                          |                          | 480.3                            
|Income tax (expense) benefit                                                                                                 |                                                          |                          | (173.2                           
|Minority interests in net (earnings) losses of subsidiaries                                                                  |                                                          |                          | (2.5                             
|                                                                                                                             |                                                          |                          |                                  
|Income (loss) from continuing operations before cumulative effect of accounting changes                                      |                                                          |                          | 304.6                            
|Income (loss) from discontinued operations, net of taxes                                                                     |                                                          |                          | 31.3                             
|                                                                                                                             |                                                          |                          |                                  
|Income (loss) before cumulative effect of accounting changes                                                                 |                                                          |                          | 335.9                            
|Cumulative effect of accounting changes, net of taxes                                                                        |                                                          |                          |                                 
|                                                                                                                             |                                                          |                          |                                  
|Net Income (Loss)                                                                                                            |                                                          | $                        | 335.9                            
|                                                                                                                             |                                                          |                          |                                  
|Basic and Diluted Income (Loss) Per Common Share:                                                                            |                                                          |                          |                                  
|Income (loss) from continuing operations before cumulative effect of accounting changes                                      |                                                          | $                        | 0.22                             
|Income (loss) from discontinued operations, net of taxes                                                                     |                                                          |                          | 0.02                             
|Cumulative effect of accounting changes, net of taxes                                                                        |                                                          |                          |                                 
|                                                                                                                             |                                                          |                          |                                  
|Net Income (Loss)                                                                                                            |                                                          | $                        | 0.24                             
|                                                                                                                             |                                                          |                          |                                  
|Weighted average number of common shares outstanding (in millions)                                                           |                                                          |                          |                                  
|                                                                                                                             | Basic                                                    |                          |                                  
|                                                                                                                             | Diluted                                                  |                          |                                  

|                                 |  | December 31,
|-------------------------------- |  | ------------
|
|
|Consolidated Balance Sheet Data: |  |             
|Cash and cash equivalents        |  | $           
|Total Current Assets             |  |             
|Total Assets                     |  |             
|Total Current Liabilities        |  |             
|Long-Term Debt                   |  |             
|Total Stockholders' Equity       |  |             

---

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

33

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SUMMARY DATA(continued)

|                                                                 |  | Years Ended December 31, |        
|---------------------------------------------------------------- |  | ------------------------ | -------
|
|
|Other Data:                                                      |  |                          |        
|Operating Profit (Loss)                                          |  | $                        | 632.6  
|Add: Depreciation and amortization expense                       |  |                          | 853.2  
|                                                                 |  |                          |        
|Operating Profit (Loss) Before Depreciation and Amortization (1) |  | $                        | 1,485.8
|                                                                 |  |                          |        
|Operating Profit Before Depreciation and Amortization-Margin (1) |  |                          | 11.3   
|Capital expenditures (2)                                         |  | $                        | 923.7  
|Cash flows from operating activities                             |  |                          | 1,171.9
|Cash flows from investing activities                             |  |                          | (723.3 
|Cash flows from financing activities                             |  |                          | 945.3  
|Cash used in discontinued operations                             |  |                          |       

---

34

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SUMMARY DATA(concluded)

Selected Segment Data

|                                                             |  | Years Ended December 31, |         
|------------------------------------------------------------ |  | ------------------------ | --------
|
|
|DIRECTV U.S.                                                 |  |                          |         
|Revenues                                                     |  | $                        | 12,216.1
|                                                             |  |                          |         
|% of Total Revenues                                          |  |                          | 92.8    
|Operating Profit                                             |  | $                        | 802.0   
|Add: Depreciation and Amortization                           |  |                          | 698.2   
|                                                             |  |                          |         
|Operating Profit Before Depreciation and Amortization        |  | $                        | 1,500.2 
|                                                             |  |                          |         
|Operating Profit Margin                                      |  |                          | 6.6     
|Operating Profit Before Depreciation and Amortization-Margin |  |                          | 12.3    
|Segment Assets                                               |  | $                        | 10,525.0
|Capital Expenditures(1)                                      |  |                          | 782.0   
|DIRECTV Latin America                                        |  |                          |         
|Revenues                                                     |  | $                        | 742.1   
|                                                             |  |                          |         
|% of Total Revenues                                          |  |                          | 5.6     
|Operating Loss                                               |  | $                        | (18.7   
|Add: Depreciation and Amortization                           |  |                          | 160.2   
|                                                             |  |                          |         
|Operating Profit (Loss) Before Depreciation and Amortization |  | $                        | 141.5   
|                                                             |  |                          |         
|Operating Profit Before Depreciation and Amortization-Margin |  |                          | 19.1    
|Segment Assets                                               |  | $                        | 1,147.9 
|Capital Expenditures(1)                                      |  |                          | 90.4    
|Network Systems                                              |  |                          |         
|Revenues                                                     |  | $                        | 211.4   
|                                                             |  |                          |         
|% of Total Revenues                                          |  |                          | 1.6     
|Operating Loss                                               |  | $                        | (60.8   
|Add: Depreciation and Amortization                           |  |                          |        
|                                                             |  |                          |         
|Operating Loss Before Depreciation and Amortization          |  | $                        | (60.8   
|                                                             |  |                          |         
|Segment Assets                                               |  |                          |        
|Capital Expenditures(1)                                      |  | $                        | 18.1    
|Eliminations and Other                                       |  |                          |         
|Revenues                                                     |  | $                        | (5.1    
|                                                             |  |                          |         
|Operating Loss                                               |  | $                        | (89.9   
|Add: Depreciation and Amortization                           |  |                          | (5.2    
|                                                             |  |                          |         
|Operating Loss Before Depreciation and Amortization          |  | $                        | (95.1   
|                                                             |  |                          |         
|Segment Assets                                               |  | $                        | 3,957.3 
|Capital Expenditures(1)                                      |  |                          | 33.2    
|Total                                                        |  |                          |         
|Revenues                                                     |  | $                        | 13,164.5
|                                                             |  |                          |         
|Operating Profit (Loss)                                      |  | $                        | 632.6   
|Add: Depreciation and Amortization                           |  |                          | 853.2   
|                                                             |  |                          |         
|Operating Profit (Loss) Before Depreciation and Amortization |  | $                        | 1,485.8 
|                                                             |  |                          |         
|Operating Profit Margin                                      |  |                          | 4.8     
|Operating Profit Before Depreciation and Amortization-Margin |  |                          | 11.3    
|Total Assets                                                 |  | $                        | 15,630.2
|Capital Expenditures(1)                                      |  |                          | 923.7   

---

35

---





SIGNIFICANT EVENTS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS

Strategic Developments

In February 2004, we announced our intent to restructure our company to focus on the DTH satellite businesses. We have announced or completed the following
actions in support of this strategy during 2004 and 2005:



36

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37

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The
financial results for PanAmSat, which formerly comprised our Satellite Services segment, and HSS, which was formerly a component of our Network Systems segment, are presented in our
Consolidated Statements of Operations as discontinued operations. As a result of the SkyTerra transaction, subsequent to April 22, 2005, we accounted for our investment in HNS under the equity
method of accounting, and accordingly, recorded our interest in HNS' net income in "Other, net" in our Consolidated Statements of Operations.

For
additional information regarding the actions described above, see Note 3 and Note 5 of the Notes to the Consolidated Financial Statements in Part II, Item 8, of
this Annual Report.

Other Developments

In addition to the items described above, the following events had a significant effect on the comparability of our operating results for the years ended
December 31, 2005, 2004 and 2003:



Hurricanes Katrina, Wilma, and Rita.During the second half of 2005, a series of hurricanes devastated certain portions of
the Gulf Coast region of the United States. As a result, we recorded approximately $24 million in charges mostly related to a higher level of service calls resulting from the hurricanes, a
reduction in revenues for subscriber service credits and an increase in bad debt expense. Approximately 10,000 subscribers were disconnected in 2005 resulting from the hurricanes.

Financing Transactions.During the second quarter of 2005, DIRECTV U.S. completed a series of refinancing transactions that
resulted in a pre-tax charge to "Other, net" in our Consolidated Statements of Operations of $64.9 million ($40.0 million after tax), of which $41.0 million was
associated with the premium that we paid for the redemption of a portion of our 8.375% senior notes and $23.9 million with our write-off of a portion of our deferred debt issuance
costs and other transaction costs. As a result of the refinancing transactions, our long-term debt increased by $1,011.7 million during 2005 and cash, net of the premium paid and
transaction costs, increased $966.0 million. See Note 9 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for further discussion of
these refinancing transactions.

During
2003, DIRECTV U.S. raised approximately $2,625.0 million of cash through the issuance of $1,400.0 million of 8.375% senior notes and $1,225.0 million of
borrowings under a credit facility. We used a portion of these proceeds to repay the $506.3 million outstanding principal balance plus accrued interest under a prior credit facility agreement,
which then terminated.

Accounting Change.Effective January 1, 2004, DIRECTV U.S. changed its method of accounting for subscriber
acquisition, upgrade and retention costs. Previously, DIRECTV U.S. deferred a portion of these costs, equal to the amount of profit to be earned from the subscriber, typically over the 12 month
subscriber contract, and amortized the deferred amounts to expense over the contract period. DIRECTV U.S. now expenses subscriber acquisition, upgrade and retention costs as incurred as

38

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subscribers
activate the DIRECTV service. See "Accounting Changes" in Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for additional
information.



Sky Transactions.As part of the Sky Transactions, during the year ended December 31, 2004, DTVLA recorded
$8.5 million of severance and other costs related to the ongoing shut-down of DIRECTV Mexico.

Reorganization.On March 18, 2003, DLA LLC filed a voluntary petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. In February 2004, DLA LLC announced the confirmation of its Plan of Reorganization by the U.S. Bankruptcy Court and its emergence from Chapter 11. As a result of the bankruptcy
proceedings described in more detail in Note 18 of the Notes to the Consolidated Financial Statements in Item 8, Part II, DTVLA experienced reduced programming costs in 2005 and 2004 due
to more favorable programming contracts subsequent to the emergence from bankruptcy.

Accounting Change.On July 1, 2003, as more fully discussed in Note 2 of the Notes to the Consolidated
Financial Statements in Item 8, Part II of this Annual Report, DTVLA began consolidating the Venezuelan and Puerto Rican LOCs with the adoption of Financial Accounting Standards Board, or FASB,
Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entitiesan interpretation of ARB No. 51," or FIN 46. Prior to July 1, 2003,
DTVLA accounted for its investments in the Venezuelan and Puerto Rican LOCs under the equity method of accounting and reflected approximately 75.0% of their net income or loss in "Other, net" in the
Consolidated Statements of Operations. We recorded an after-tax charge of $64.6 million to "Cumulative effect of accounting changes, net of taxes" in the Consolidated Statements of
Operations during 2003 resulting from the adoption of FIN 46.

Other.DTVLA's 2003 operating results were adversely affected by the economic and political instability throughout Latin
America. In particular, revenues and operating profit were significantly affected by a loss in net subscribers and the ongoing devaluation of certain local currencies.



Other.During December 2003, upon completion of the News Corporation transactions, we expensed related costs of about
$132 million that primarily included investment advisory fees of about $49 million, retention benefits of about $65 million and severance benefits of about $15 million to
"General and administrative expenses" in the Consolidated Statements of Operations. See Note 1 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual
Report for additional information regarding the News Corporation transactions.



Beginning in 2005, we report our investments in auction rate securities as "Short-term investments" rather than our previous practice of reporting
these investments as part of "Cash and cash equivalents" in our Consolidated Balance Sheets. As a result, we reclassified $522.6 million from "Cash and cash equivalents" to
"Short-term investments" in our Consolidated Balance Sheets at December 31, 2004. Also, our cash flows from investing activities now include purchases and sales of auction rate
securities. This reclassification has no effect on our previously reported total current assets, total assets, working capital or results of operations and does not affect our previously reported cash
flows from operating or financing activities.

39

---



KEY TERMINOLOGY USED IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revenues.We earn revenues mostly from subscriptions to basic and premium channel programming,
pay-per-view programming and seasonal and live sporting events. We also earn revenues from fees that we charge subscribers with multiple set-top receivers (which we
refer to as mirroring fees), hardware revenues from subscribers who purchase receivers under our direct sales and upgrade and retention programs, our published programming guide, warranty service fees
and advertising services. Prior to the completion of the transactions with the NRTC and Pegasus in the third quarter of 2004, revenues also included fees earned from the NRTC and Pegasus, which were
equal to a percentage of the subscriber revenues earned from the subscribers located in certain areas (mainly rural). See "Strategic Developments" above for further discussion.

Broadcast Programming and Other Costs of Sale.These costs primarily include license fees for subscription service
programming, pay-per-view programming, live sports
and other events. Other costs include expenses associated with the publication and distribution of our programming guide, continuing service fees paid to third parties for active DIRECTV subscribers,
warranty service premiums we pay to a third party and production costs for on-air advertisements we sell to third parties.

Subscriber Service Expenses.Subscriber service expenses include the costs of customer call centers, billing, remittance
processing and certain home services expenses, such as in-home repair costs.

Subscriber Acquisition CostsThird Party Customer Acquisitions.The majority of these costs represent commissions
we pay to third parties to acquire new DIRECTV subscribers, which include our national retailers as well as independent satellite television retailers, dealers, RBOCs and others. We also include the
costs we incur for DIRECTV System equipment, installation and advertising.

Subscriber Acquisition CostsDirect Customer Acquisitions.These costs consist primarily of hardware,
installation, advertising, marketing and customer call center expenses associated with new DIRECTV subscribers added through our direct customer acquisition program.

SAC.DIRECTV U.S. calculates SAC, which represents total subscriber acquisition costs stated on a per subscriber basis, by
dividing total subscriber acquisition costs for a period (the sum of subscriber acquisition costs reported for third party customer acquisitions and direct customer acquisitions) by the number of
gross new subscribers that DIRECTV U.S. acquired through third parties and its direct customer acquisition program during the period. DIRECTV U.S. excludes the 1.4 million subscribers purchased
as part of the NRTC and Pegasus transactions during 2004, as well as gross new subscribers added in the former NRTC and Pegasus territories prior to the completion of the transactions, from gross new
subscribers used in the calculation of SAC for 2004 and 2003.

Upgrade and Retention Costs.The majority of upgrade and retention costs are associated with upgrade efforts for existing
subscribers that we believe will result in higher ARPU and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for DVR, HD receivers and local channels, our multiple
set-top receiver offer and similar initiatives. Retention costs also include the costs of installing and/or providing hardware under our movers program for subscribers relocating to a new
residence.

Broadcast Operations Expenses.These expenses include broadcast center operating costs, signal transmission expenses
(including costs of collecting signals for our local channel offerings), and costs of monitoring, maintaining and insuring our satellites. Also included are engineering expenses associated with
deterring theft of the DIRECTV signal.

40

---



General and Administrative Expenses.General and administrative expenses include departmental costs for legal, administrative
services, finance, marketing and information technology. These costs also include expenses for bad debt and other operating expenses, such as legal settlements, and gains or losses from the sale or
disposal of fixed assets.

Average Monthly Revenue Per Subscriber.We calculate ARPU by dividing average monthly revenues for the period (total revenues
during the period divided by the number of months in the period) by average DIRECTV subscribers for the period. We calculate average DIRECTV subscribers for the year by adding the number of DIRECTV
subscribers as of the beginning of the year and for each quarter end in the current year or period and dividing by the sum of the number of quarters in the period plus one. DIRECTV U.S. excluded from
its calculation of ARPU the subscribers of the former NRTC members and affiliates prior to the purchase of those subscribers in the second and third quarters of 2004, which we discuss in more detail
above in "Strategic Developments." For 2004, average DIRECTV U.S. subscribers include the subscribers in the former NRTC and Pegasus territories using a daily weighted average from the dates DIRECTV
U.S. acquired the subscribers through December 31, 2004.

Average Monthly Subscriber Churn.Average monthly subscriber churn represents the number of DIRECTV subscribers whose service
is disconnected, expressed as a percentage of the average total number of DIRECTV subscribers. DIRECTV U.S. calculates average monthly subscriber churn by dividing the average monthly number of
disconnected DIRECTV subscribers for the period (total subscribers disconnected during the period divided by the number of months in the period) by average DIRECTV subscribers for the period. Average
monthly churn includes the results from the former NRTC and Pegasus subscribers subsequent to the purchase of those subscribers in 2004.

Subscriber Count.The total number of DIRECTV subscribers represents the total number of subscribers actively subscribing to
the DIRECTV service, including seasonal subscribers and subscribers who are in the process of relocating. DIRECTV U.S. also includes for all periods presented the subscribers of the NRTC's members and
affiliates, including Pegasus, prior to the purchase of those subscribers in 2004.

RESULTS OF OPERATIONS

Executive Overview and Outlook

The following discussion relates primarily to DIRECTV U.S., which generates over 90% of our revenues and is the source of most of our revenue growth.

Lease Program.On March 1, 2006, DIRECTV U.S. introduced a set-top receiver lease program that will result
in a significant change in reported operating costs and expenses in future periods. Currently, under DIRECTV U.S.' sales model, all subscriber acquisition, upgrade and retention costs (including the
cost of set-top receivers) are expensed immediately upon subscriber activation. Under the lease program, DIRECTV U.S. will retain ownership of most new set-top receivers
provided to new and existing subscribers, and accordingly, will capitalize the cost of new leased set-top receivers as a fixed asset. Other subscriber acquisition costs will continue to be
expensed immediately upon subscriber activation. Beginning in March 2006, we expect most of the set-top receivers provided to subscribers to be leased, which will result in a
significant reduction to subscriber acquisition, upgrade and retention costs, partially offset by increasing depreciation expense as set-top receivers are depreciated over their average
estimated useful lives. By retaining ownership of the set-top-receivers, we will be able to recover and reuse the recovered set-top receivers for acquisition,
upgrade and retention activities, which we expect will reduce our overall costs over time. DIRECTV U.S.' revenues are not expected to

41

---



change
significantly due to the lease model, as the monthly mirroring fees currently charged to subscribers will generally be replaced with monthly lease fees; however, a portion of the upfront fees
charged to subscribers will be deferred and recognized over the estimated subscriber life. The following discussion of expected results in 2006 is presented on a comparable basis to historical
results, and accordingly does not reflect the anticipated changes in reported operating costs and expenses resulting from the lease program.

Revenues.Our revenue increases over the last three years have been driven by the growing subscriber base, including the
1.4 million NRTC and Pegasus subscribers acquired in the second and third quarters of 2004, and increasing ARPU at DIRECTV U.S. After accounting for churn, DIRECTV U.S.' net new subscriber
additions were 1.2 million during 2005 and 1.8 million in 2004 (excluding the NRTC and
Pegasus subscribers). Net new DIRECTV U.S. subscriber additions are expected to exceed 1.0 million in 2006. DIRECTV U.S. expects churn to improve in 2006 as compared to average monthly
subscriber churn of 1.70% for 2005. The improvement in churn is expected to result from our continuing efforts to limit the number of high risk subscribers added to our platform, an increase in the
number of subscribers with advanced products, such as HD and DVR set-top receivers, the development of unique and differentiated content, and initiatives to further improve subscriber
service. DIRECTV U.S.' ARPU increased 4.0% in 2005 and 4.7% in 2004. DIRECTV U.S. expects the percentage increase in ARPU for 2006 to be slightly higher than the 2005 increase due mostly to its
planned programming package price increases in March 2006, an increase in mirroring/lease fees from subscribers with multiple set-top receivers and higher sports programming
revenues.

Operating Costs and Expenses.Operating costs and expenses as a percentage of revenues decreased from approximately 100% in
2004 to 93% in 2005 due to the stabilization of costs in key areas such as subscriber acquisition, upgrade and retention costs. DIRECTV U.S. expects operating costs and expenses as a percentage of
revenue to continue to improve in 2006 due to the expected higher revenues discussed above and stable subscriber acquisition costs, partially offset by higher programming costs, upgrade and retention
costs and depreciation and amortization expense. Upgrade and retention costs are expected to increase due to increased demand for HD set-top receivers driven by our roll-out of
additional local-into-local HD markets as well as upgrading our current HD subscribers to MPEG-4 capable set-top receivers and increased demand for
DVRs. The anticipated increase in depreciation expense will result primarily from our three new satellites launched during 2005.

Cash Flows.We expect consolidated cash flow, defined as net cash provided by operating activities less net cash used in
investing activities, to increase slightly in 2006 compared to 2005 resulting from an expected improvement in operating costs as a percentage of revenues, partially offset by an increase in cash
required for sports programming contract payments, approximately $204 million in net cash requirements for the Sky Transactions and slightly higher capital expenditures for satellites and
broadcast equipment to support our launch of new local and HD channels, and to replace and backup existing satellites.

42

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2005 Compared To 2004

Consolidated Results of Operations

Revenues.The following table presents our revenues by segment:

|                       |                |   |          |          |   | Change  |         
|---------------------- | -------------- | - | -------- | -------- | - | ------- | --------
|
|
|
|DIRECTV U.S.           |                | $ | 12,216.1 |          | $ | 9,763.9 |         
|DIRECTV Latin America  |                |   | 742.1    |          |   | 675.2   |         
|Network Systems        |                |   | 211.4    |          |   | 1,099.1 |         
|Eliminations and Other |                |   | (5.1     | )        |   | (178.2  | )       
|                       |                |   |          |          |   |         |         
|                       | Total Revenues |   | $        | 13,164.5 |   | $       | 11,360.0
|                       |                |   |          |          |   |         |         

The
increase in our total revenues was primarily due to the $2,452.2 million increase in revenues at the DIRECTV U.S. segment, which resulted from higher ARPU on a larger
subscriber base and the subscribers that were added as part of the NRTC and Pegasus transactions in the second half of 2004, partially offset by the decrease in revenues from the Network Systems
segment resulting from the divestures of the HNS businesses in 2005 and 2004.

Total Operating Costs and Expenses.The following table presents our operating costs and expenses by segment:

|                                   |  |   |          |  |   | Change   | 
|---------------------------------- |  | - | -------- |  | - | -------- | 
|
|
|
|DIRECTV U.S.                       |  | $ | 11,414.1 |  | $ | 9,742.0  | 
|DIRECTV Latin America              |  |   | 760.8    |  |   | 817.2    | 
|Network Systems                    |  |   | 272.2    |  |   | 2,877.6  | 
|Eliminations and Other             |  |   | 84.8     |  |   | 42.6     | 
|                                   |  |   |          |  |   |          | 
|Total Operating Costs and Expenses |  | $ | 12,531.9 |  | $ | 13,479.4 | 
|                                   |  |   |          |  |   |          | 

The
decrease in our total operating costs and expenses was primarily due to the $2,605.4 million decrease in operating costs and expenses at the Network Systems segment that
resulted from the 2004 asset impairment charges related to SPACEWAY and the SkyTerra transaction, and the divestitures of the HNS businesses, partially offset by the $1,672.1 million increase
at the DIRECTV U.S. segment primarily related to higher costs associated with the increase in revenues and the larger subscriber base.

Interest Income and Expense.Interest income increased to $150.3 million in 2005 compared to $50.6 million in
2004. Interest expense increased to $237.6 million in 2005 from $131.9 million in 2004. The increase in interest income is due to an increase in average interest rates on higher average
cash balances and short-term investments. The increase in interest expense resulted primarily from the decrease in capitalized interest due to the completion of the construction of the
SPACEWAY satellites, an increase in our outstanding borrowings and a higher interest rate on our credit facility. Interest expense is net of capitalized interest of $30.5 million in 2005 and
$101.2 million in 2004.

Reorganization Income.Reorganization income of $43.0 million in 2004 includes a $62.6 million gain that
resulted from the settlement of certain obligations in connection with the confirmation of the DLA LLC Reorganization Plan, partially offset by costs incurred to file the bankruptcy petition, legal

43

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and
consulting costs and other charges related to the DLA LLC reorganization. See Note 18 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for further
information.

Other, Net.Other, net decreased by $462.6 million during 2005. The significant components of "Other, net" were as
follows:

|                                                           |       | 2005 |       | 2004  |   | Change |      
|---------------------------------------------------------- | ----- | ---- | ----- | ----- | - | ------ | -----
|
|Net gain (loss) from sale of investments                   |       | $    | (0.6  | )     | $ | 396.5  |      
|Equity in earnings (losses) of unconsolidated subsidiaries |       |      | 0.7   |       |   | (0.2   | )    
|Refinancing transaction expenses                           |       |      | (64.9 | )     |   |       |      
|Other                                                      |       |      | (0.2  | )     |   | 1.3    |      
|                                                           |       |      |       |       |   |        |      
|                                                           | Total |      | $     | (65.0 | ) | $      | 397.6
|                                                           |       |      |       |       |   |        |      

During
the second quarter of 2005, we completed a series of refinancing transactions that resulted in a pre-tax charge of $64.9 million ($40.0 million after
tax), of which $41.0 million was associated with the premium that we paid for the redemption of a portion of our 8.375% senior notes and $23.9 million with our write-off of a
portion of our deferred debt issuance costs and other transaction costs.

During
2004, we sold various equity investments for $510.5 million in cash, which resulted in us recording a pre-tax gain of $396.5 million.

Income Tax (Expense) Benefit.We recognized income tax expense of $173.2 million in 2005 compared to an income tax
benefit of $690.6 million in 2004, which resulted from losses recorded in 2004. The increase in income tax expense is primarily attributable to higher income from continuing operations before
income taxes, minority interests and cumulative effect of accounting change. The increase was partially offset by an income tax benefit recognized in 2005 due to the utilization of capital loss
carryforwards and a benefit associated with a reduction in the amount of accrued foreign withholding taxes resulting from a favorable tax ruling in Mexico.

Income (Loss) from Discontinued Operations.Income (loss) from discontinued operations, net of taxes, which includes the
results of operations of discontinued businesses and the loss recorded for the disposition of those operations, is as follows:

|                                                               |  | 2005 |      | 2004 |   | Change |  
|-------------------------------------------------------------- |  | ---- | ---- | ---- | - | ------ | -
|
|Income from discontinued operations, net of taxes              |  | $    |     |      | $ | 50.8   |  
|Income (loss) on sale of discontinued operations, net of taxes |  |      | 31.3 |      |   | (633.1 | )
|                                                               |  |      |      |      |   |        |  
|Income (loss) from discontinued operations, net of taxes       |  | $    | 31.3 |      | $ | (582.3 | )
|                                                               |  |      |      |      |   |        |  

The
$31.3 million gain in income on sale of discontinued operations resulted from a favorable tax settlement during the second quarter of 2005, which we discuss in Note 21
of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report.

The
$50.8 million in income from discontinued operations relates to the PanAmSat and HSS businesses sold in 2004. Loss on sale of discontinued operations of $633.1 million
in 2004 includes the loss recorded for the sale of PanAmSat, net of taxes, of $723.7 million, partially offset by the $90.7 million gain on HNS' sale of its approximate 55% interest in
HSS. The discontinued operations of PanAmSat and HSS are more fully discussed in "Strategic Developments" above.

44

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Cumulative Effect of Accounting Change.The $310.5 million cumulative effect of accounting change, net of taxes, in
2004 was due to our change in our method of accounting for subscriber acquisition, upgrade and retention costs.

DIRECTV U.S. Segment

The following table provides operating results and a summary of key subscriber data for the DIRECTV U.S. segment:

|                                                                                                         |                                               |   |                                   |         |                                    | Change  |        
|-------------------------------------------------------------------------------------------------------- | --------------------------------------------- | - | --------------------------------- | ------- | ---------------------------------- | ------- | -------
|
|
|Revenues                                                                                                 |                                               | $ | 12,216.1                          |         | $                                  | 9,763.9 |        
|Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below: |                                               |   |                                   |         |                                    |         |        
|                                                                                                         | Broadcast programming and other costs of sale |   |                                   | 5,050.1 |                                    |         | 4,010.5
|                                                                                                         | Subscriber service expenses                   |   |                                   | 935.4   |                                    |         | 740.2  
|                                                                                                         | Subscriber acquisition costs:                 |   |                                   |         |                                    |         |        
|                                                                                                         |                                               |   | Third party customer acquisitions |         |                                    | 1,999.4 |        
|                                                                                                         |                                               |   | Direct customer acquisitions      |         |                                    | 676.4   |        
|                                                                                                         | Upgrade and retention costs                   |   |                                   | 1,106.5 |                                    |         | 993.2  
|                                                                                                         | Broadcast operations expenses                 |   |                                   | 145.8   |                                    |         | 129.7  
|                                                                                                         | General and administrative expenses           |   |                                   | 802.3   |                                    |         | 662.3  
|Depreciation and amortization expense                                                                    |                                               |   | 698.2                             |         |                                    | 561.2   |        
|                                                                                                         |                                               |   |                                   |         |                                    |         |        
|                                                                                                         |                                               |   |                                   |         | Total Operating Costs and Expenses |         |        
|                                                                                                         |                                               |   |                                   |         |                                    |         |        
|Operating Profit                                                                                         |                                               | $ | 802.0                             |         | $                                  | 21.9    |        
|                                                                                                         |                                               |   |                                   |         |                                    |         |        
|Other Data:                                                                                              |                                               |   |                                   |         |                                    |         |        
|Operating Profit Before Depreciation & Amortization                                                      |                                               | $ | 1,500.2                           |         | $                                  | 583.1   |        
|                                                                                                         |                                               |   |                                   |         |                                    |         |        
|Total number of subscribers (000's)                                                                      |                                               |   | 15,133                            |         |                                    | 13,940  |        
|ARPU                                                                                                     |                                               | $ | 69.61                             |         | $                                  | 66.95   |        
|Average monthly subscriber churn%                                                                        |                                               |   | 1.70                              | %       |                                    | 1.59    | %      
|Gross subscriber additions (000's)(1)                                                                    |                                               |   | 4,170                             |         |                                    | 4,218   |        
|Net subscriber additions (000's)                                                                         |                                               |   | 1,193                             |         |                                    | 1,728   |        
|Average subscriber acquisition costs  per subscriber (SAC)(2)                                           |                                               | $ | 642                               |         | $                                  | 643     |        

---

Subscribers.DIRECTV U.S.' gross subscriber additions in 2005 of 4,170,000 were slightly lower than the 4,218,000 of gross
subscriber additions in 2004 primarily due to more stringent credit policies implemented during the second quarter of 2005. Average monthly churn during 2005 increased to 1.70% due to higher
involuntary churn from higher risk subscribers acquired in 2004 and early 2005

45

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and
a more competitive marketplace. After accounting for this churn, DIRECTV U.S. added 1,193,000 net new subscribers in 2005 compared to 1,728,000 in 2004.

Revenues.DIRECTV U.S.' revenues increased $2,452.2 million to $12,216.1 million resulting from higher ARPU on
the larger subscriber base and the full year effect of the Pegasus and NRTC subscribers that DIRECTV U.S. purchased in the second half of 2004. The 4.0% increase in ARPU to $69.61 resulted primarily
from price increases on certain programming packages and higher mirroring fees from an increase in the average number of set-top receivers per subscriber. Excluding the dilutive effect
from the consolidation of the former NRTC and Pegasus subscribers, primarily due to the lower ARPU received from these subscribers, ARPU would have increased approximately 6%.

Total Operating Costs and Expenses.DIRECTV U.S.' total operating costs and expenses increased $1,672.1 million to
$11,414.1 million resulting primarily from higher costs for programming, subscriber service expenses, general and administrative expenses, depreciation and amortization expense, and subscriber
upgrade and retention initiatives. Operating costs and expenses as a percentage of revenues decreased from approximately 100% in 2004 to 93% in 2005 mostly due to the stabilization of costs in key
areas such as subscriber acquisition, upgrade and retention.

DIRECTV
U.S.' broadcast programming and other costs of sale increased $1,039.6 million primarily as a result of the increased number of subscribers and annual program supplier
rate increases. Subscriber service expenses increased as a result of the larger subscriber base.

Subscriber
acquisition costs were stable in 2005 compared to 2004. However, SAC per subscriber was slightly lower due to a decrease in the cost of set-top receivers, mostly
offset by an increase in the number of set-top receivers provided to new subscribers, including a greater number of higher cost HD and DVR products.

Increased
volume under DIRECTV U.S.' movers and HD upgrade programs drove most of the $113.3 million increase in upgrade and retention costs. Under these programs, DIRECTV U.S.
provides additional equipment, plus installation, to existing subscribers at significantly reduced prices.

The
$140.0 million increase in general and administrative expenses resulted primarily from higher bad debt expense resulting from the increase in the subscriber base and
involuntary churn discussed above, and an increase in other expenses, such as labor, benefits and consulting, to support the larger business.

The
improvement of operating profit before depreciation and amortization of $917.1 million was primarily due to higher margins from the increase in revenues combined with the
stabilizing of costs in key areas such as subscriber acquisition, upgrade and retention. The improvement in operating profit of $780.1 million was primarily due to higher operating profit
before depreciation and amortization and lower depreciation expense resulting from assets becoming fully depreciated in 2005, more than offset by higher amortization of about $181 million
resulting from intangible assets recorded as part of the NRTC and Pegasus transactions.

46

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DIRECTV Latin America Segment

The following table provides operating results and a summary of key subscriber data for the DIRECTV Latin America segment:

|                                                    |  |   |       |   |   | Change |  
|--------------------------------------------------- |  | - | ----- | - | - | ------ | -
|
|
|Revenues                                            |  | $ | 742.1 |   | $ | 675.2  |  
|Operating Profit Before Depreciation & Amortization |  |   | 141.5 |   |   | 45.9   |  
|Operating Loss                                      |  |   | (18.7 | ) |   | (142.0 | )
|Total number of subscribers (000's)                 |  |   | 1,593 |   |   | 1,646  |  
|Net subscriber additions (losses) (000's)           |  |   | (53   | ) |   | 57     |  
|Net subscriber additions, excluding Mexico (000's)  |  |   | 149   |   |   | 124    |  
|ARPU                                                |  | $ | 39.20 |   | $ | 35.80  |  

The
increase in revenues in 2005 resulted primarily from the increase in ARPU on a larger subscriber base across the region as well as the effects of the consolidation of Sky Chile and
Sky Colombia in October 2004, partially offset by the shut-down of DIRECTV Mexico. The increase in ARPU is primarily due to the effects of the consolidation of Sky Chile and Sky
Colombia in October 2004, selected price increases in the region, and the appreciation of the Brazilian real.

The
110,000 decrease in net subscriber additions resulted primarily from the shut-down of DIRECTV Mexico and migration of subscribers to the Sky Mexico platform. Excluding
Mexico, net subscriber additions for DIRECTV Latin America improved by 25,000.

The
improvement in operating profit before depreciation and amortization was primarily due to the increase in revenues discussed above, the $70.4 million gain from the sale of the
DIRECTV Mexico subscribers, as well as $45.0 million in 2004 charges primarily for asset write-downs, severance and other costs related to the shut-down of DIRECTV Mexico. These
increases were partially offset by approximately $25 million of increased costs in 2005 related to the merger in Colombia and certain subscriber acquisition, upgrade and retention costs now
being expensed under Puerto Rico's new sales model. Previously, Puerto Rico only leased equipment to subscribers and capitalized the related costs. The improvement in operating loss was due to the
increase in operating profit before
depreciation and amortization and reduced depreciation principally reflecting the effect of a fourth quarter 2004 write-down of assets in Mexico.

Network Systems Segment

The following table provides operating results for the Network Systems segment:

|                                                  |  |   |       |   |   | Change   |  
|------------------------------------------------- |  | - | ----- | - | - | -------- | -
|
|
|Revenues                                          |  | $ | 211.4 |   | $ | 1,099.1  |  
|Operating Loss Before Depreciation & Amortization |  |   | (60.8 | ) |   | (1,682.9 | )
|Operating Loss                                    |  |   | (60.8 | ) |   | (1,778.5 | )

47

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The decrease in revenues, operating loss before depreciation and amortization and operating loss resulted primarily from the divestitures of the HNS businesses. Operating loss before
depreciation and amortization and operating loss in 2004 include asset impairment charges of $1,466.1 million related to SPACEWAY and $190.6 million for the SkyTerra transactions, as
well as $25.6 million in severance charges associated with the HNS related transactions discussed above in "Strategic Developments."

Eliminations and Other

The elimination of revenues decreased to $5.1 million in 2005 from $178.2 million in 2004. The revenue elimination resulted mostly from the
elimination of sales from HNS to DIRECTV prior to the sale of HNS' set-top receiver manufacturing business in June 2004.

Operating
loss from Eliminations and Other decreased to $89.9 million in 2005 from $220.8 million in 2004. Operating loss in 2004 included $16.5 million in higher
stock compensation costs and non-recurring charges in the amount of $113.0 million for retention benefits, severance and related costs under our pension benefit plans resulting from
headcount reductions and the strategic transactions discussed above.

2004 Compared To 2003

Consolidated Results of Operations

Revenues.The following table presents our revenues by segment:

|                       |  |   |          |   |   | Change  |  
|---------------------- |  | - | -------- | - | - | ------- | -
|
|
|
|DIRECTV U.S.           |  | $ | 9,763.9  |   | $ | 7,695.6 |  
|DIRECTV Latin America  |  |   | 675.2    |   |   | 597.7   |  
|Network Systems        |  |   | 1,099.1  |   |   | 1,271.0 |  
|Eliminations and Other |  |   | (178.2   | ) |   | (192.1  | )
|                       |  |   |          |   |   |         |  
|Total Revenues         |  | $ | 11,360.0 |   | $ | 9,372.2 |  
|                       |  |   |          |   |   |         |  

The
increase in our total revenues was primarily due to the $2,068.3 million increase in revenues at the DIRECTV U.S. segment, which resulted from higher ARPU on the larger
subscriber base, including those subscribers added as part of the NRTC and Pegasus transactions, partially offset by the $171.9 million decrease in revenues at the Network Systems segment,
resulting primarily from the sale of the set-top receiver manufacturing operations in June 2004.

Total Operating Costs and Expenses.The following table presents our operating costs and expenses by segment:

|                                   |  |   |          |  |   | Change  | 
|---------------------------------- |  | - | -------- |  | - | ------- | 
|
|
|
|DIRECTV U.S.                       |  | $ | 9,742.0  |  | $ | 7,236.8 | 
|DIRECTV Latin America              |  |   | 817.2    |  |   | 882.3   | 
|Network Systems                    |  |   | 2,877.6  |  |   | 1,374.4 | 
|Eliminations and Other             |  |   | 42.6     |  |   | 16.2    | 
|                                   |  |   |          |  |   |         | 
|Total Operating Costs and Expenses |  | $ | 13,479.4 |  | $ | 9,509.7 | 
|                                   |  |   |          |  |   |         | 

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The
increase in our total operating costs and expenses in 2004 was primarily due to the $2,505.2 million increase at the DIRECTV U.S. segment primarily related to higher costs
associated with the larger subscriber base and the $1,656.7 million in asset impairment charges related to SPACEWAY and the SkyTerra transactions at the Network Systems segment.

Interest Income and Expense.Interest income increased to $50.6 million in 2004 compared to $28.4 million in
2003. Interest expense decreased to $131.9 million in 2004 from $156.3 million in 2003. The increase in interest income is due to an increase in average cash balances and the
$11.2 million in interest income received as part of the judgment against Pegasus. The decrease in interest expense resulted primarily from lower interest on DIRECTV U.S.' credit facilities
resulting from a reduced interest rate and lower outstanding borrowings. Interest expense is net of capitalized interest of $101.2 million in 2004 and $120.0 million in 2003.

Reorganization Expense.Reorganization income was $43.0 million in 2004 compared to reorganization expense of
$212.3 million in 2003. The reorganization income in 2004 includes a $62.6 million gain as a result of the settlement of certain obligations in connection with the confirmation of the
DLA LLC Reorganization Plan, partially offset by costs incurred to file the bankruptcy petition, legal and consulting costs and other charges related to such reorganization. Reorganization expense of
$212.3 million in 2003 includes the costs incurred to file the bankruptcy petition, ongoing related legal and consulting costs, costs related to settlement agreements reached with creditors,
the write-off of intangible assets and other charges related to the reorganization. Also included in reorganization expense are accruals for any claims allowed in the Chapter 11
proceeding. See Note 18 of the Notes to the Consolidated Financial Statements in Part II, Item 8 for further information.

Other, Net.Other, net increased by $397.6 million during 2004. The significant components of "Other, net" were as
follows:

|                                             |  | 2004 |       | 2003 |   | Change |  
|-------------------------------------------- |  | ---- | ----- | ---- | - | ------ | -
|
|Net gain from sale of investments            |  | $    | 396.5 |      | $ | 7.5    |  
|Equity losses from unconsolidated affiliates |  |      | (0.2  | )    |   | (81.5  | )
|Net unrealized gain on investments           |  |      |      |      |   | 79.4   |  
|Other                                        |  |      | 1.3   |      |   | (5.4   | )
|                                             |  |      |       |      |   |        |  
|Total                                        |  | $    | 397.6 |      | $ |       |  
|                                             |  |      |       |      |   |        |  

During
2004, we sold various equity investments for $510.5 million in cash, which resulted in us recording a pre-tax gain of $396.5 million.

For
2003, equity losses from unconsolidated affiliates is primarily comprised of losses at the DTVLA LOCs.

Net
unrealized gain on investments for 2003 includes a $79.6 million gain resulting from an increase in the fair value of an investment in a convertible note.

Income Tax Benefit.We recognized an income tax benefit of $690.6 million in 2004 compared to an income tax benefit of
$104.3 million in 2003. The higher income tax benefit for 2004 was primarily due to higher pre-tax losses in the current year, utilization of prior year foreign tax losses for which
no tax benefit had previously been recognized and a decrease in foreign withholding taxes.

49

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Income (Loss) from Discontinued Operations.Income (loss) from discontinued operations, net of taxes, which includes the
results of operations of discontinued businesses and the loss recorded for the disposition of those operations, is as follows:

|                                                         |  | 2004 |        | 2003 |   | Change |  
|-------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|
|Income from discontinued operations, net of taxes        |  | $    | 50.8   |      | $ | 82.8   |  
|Loss on sale of discontinued operations, net of taxes    |  |      | (633.1 | )    |   | (4.7   | )
|                                                         |  |      |        |      |   |        |  
|Income (loss) from discontinued operations, net of taxes |  | $    | (582.3 | )    | $ | 78.1   |  
|                                                         |  |      |        |      |   |        |  

The
$32.0 million decrease in income from discontinued operations, net of taxes, is primarily related to the completion of the sale of our approximately 80.4% interest in PanAmSat
in August 2004. In addition, PanAmSat recorded a one-time expense related to employee benefits in 2004 resulting from the PanAmSat transaction.

The
$633.1 million loss on sale of discontinued operations, net of taxes, in 2004 relates to the $723.7 million loss on the sale of our approximately 80.4% interest in
PanAmSat, partially offset by the $90.7 million gain on HNS' sale of its approximately 55% interest in HSS. The $4.7 million loss for 2003 relates primarily to the settlement reached
with Boeing of a purchase price adjustment arising out of the 2000 sale of our satellite systems manufacturing businesses. We discuss discontinued operations more fully above in "Strategic
Developments."

Cumulative Effect of Accounting Changes.The $310.5 million cumulative effect of accounting change, net of taxes, in
2004 was due to our change in our method of accounting for subscriber acquisition, upgrade and retention costs. The $64.6 million cumulative effect of accounting change, net of taxes, in 2003
was due to our adoption of FIN 46 on July 1, 2003, resulting in the consolidation of the Venezuelan and Puerto Rican LOCs.

50

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DIRECTV U.S. Segment

The following table provides operating results and a summary of key subscriber data for the DIRECTV U.S. segment:

|                                                                                                         |                                               |   |                                    |         |   | Change  |        
|-------------------------------------------------------------------------------------------------------- | --------------------------------------------- | - | ---------------------------------- | ------- | - | ------- | -------
|
|
|Revenues                                                                                                 |                                               | $ | 9,763.9                            |         | $ | 7,695.6 |        
|Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below: |                                               |   |                                    |         |   |         |        
|                                                                                                         | Broadcast programming and other costs of sale |   |                                    | 4,010.5 |   |         | 3,229.8
|                                                                                                         | Subscriber service expenses                   |   |                                    | 740.2   |   |         | 623.5  
|                                                                                                         | Subscriber acquisition costs:                 |   |                                    |         |   |         |        
|                                                                                                         |                                               |   | Third party customer acquisitions  |         |   | 1,960.8 |        
|                                                                                                         |                                               |   | Direct customer acquisitions       |         |   | 684.1   |        
|                                                                                                         | Upgrade and retention costs                   |   |                                    | 993.2   |   |         | 404.4  
|                                                                                                         | Broadcast operations expenses                 |   |                                    | 129.7   |   |         | 133.4  
|                                                                                                         | General and administrative expenses           |   |                                    | 662.3   |   |         | 565.2  
|Depreciation and amortization expense                                                                    |                                               |   | 561.2                              |         |   | 497.0   |        
|                                                                                                         |                                               |   |                                    |         |   |         |        
|                                                                                                         |                                               |   | Total Operating Costs and Expenses |         |   | 9,742.0 |        
|                                                                                                         |                                               |   |                                    |         |   |         |        
|Operating Profit                                                                                         |                                               | $ | 21.9                               |         | $ | 458.8   |        
|                                                                                                         |                                               |   |                                    |         |   |         |        
|Other Data:                                                                                              |                                               |   |                                    |         |   |         |        
|Operating Profit Before Depreciation & Amortization                                                      |                                               | $ | 583.1                              |         | $ | 955.8   |        
|Total number of subscribers (000's)                                                                      |                                               |   | 13,940                             |         |   | 12,212  |        
|ARPU                                                                                                     |                                               | $ | 66.95                              |         | $ | 63.92   |        
|Average monthly subscriber churn%                                                                        |                                               |   | 1.59                               | %       |   | 1.55    | %      
|Average subscriber acquisition costs  per subscriber (SAC)                                              |                                               | $ | 643                                |         | $ | 593     |        

Subscribers.DIRECTV U.S. had approximately 13.9 million subscribers at December 31, 2004, which included
approximately 1.4 million subscribers in the former NRTC and Pegasus territories that DIRECTV U.S. purchased in the second half of 2004. At December 31, 2003, DIRECTV U.S. had
approximately 12.2 million subscribers, which included 10.7 million owned and operated subscribers and 1.5 million subscribers in the former NRTC and Pegasus territories. In 2004,
excluding the subscribers from the former NRTC and Pegasus territories, DIRECTV U.S. added 4.0 million gross new owned and operated subscribers, an increase of 34% over the prior year, due to a
higher number of subscribers acquired in local channel markets, more attractive consumer promotions, and an improved and more diverse distribution network. After accounting for churn, DIRECTV U.S.
added 1.8 million net new owned and operated subscribers, or 1.7 million total subscribers including the former NRTC members and affiliates and Pegasus during 2004.

DIRECTV
U.S.' average monthly subscriber churn increased to 1.59% for the year ended December 31, 2004 compared to average monthly subscriber churn of 1.55% for the year ended
December 31, 2003 primarily due to a more competitive marketplace and higher involuntary churn mostly related to the substantial increase in gross subscriber acquisitions over the past year.

Revenues.The $2,068.3 million increase in revenues to $9,763.9 million resulted from DIRECTV U.S.' new
subscribers added in 2004, including those subscribers added as part of the NRTC and Pegasus transactions, and higher ARPU on the larger subscriber base. The 4.7% increase in ARPU to

51

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$66.95
resulted primarily from price increases on certain programming packages, higher mirroring fees from an increase in the average number of set-top receivers per subscriber and a
higher percentage of subscribers purchasing local channels. Excluding the dilutive effect from the consolidation of the former NRTC and Pegasus subscribers primarily due to the lower ARPU received
from these subscribers, ARPU would have increased approximately 6%.

Total Operating Costs and Expenses.The $2,505.2 million increase in total operating costs and expenses to
$9,742.0 million resulted primarily from higher costs for programming, subscriber acquisitions and subscriber upgrade and retention initiatives.

DIRECTV
U.S.' higher broadcast programming and other costs of sale resulted mostly from the increased number of subscribers and annual program supplier rate increases.

Higher
gross subscriber additions during the year ended December 31, 2004 and the increase in SAC per subscriber primarily drove the $861.4 million increase in subscriber
acquisition costs. The higher SAC per subscriber was mostly due to an increase in the number of set-top receivers provided to new subscribers, which rose from an average of about 2.1
set-top receivers per new subscriber during 2003 to about 2.5 during 2004, an increase in the number of subscribers purchasing DVRs and the change in DIRECTV U.S.' method of accounting for
subscriber acquisition, upgrade and retention costs. These increases were partially offset by a decrease in the costs of set-top receivers and lower marketing costs per subscriber due to
the effect of the higher gross subscriber additions.

Increased
volume under DIRECTV U.S.' DVR, HD, local channel upgrade and movers programs as well as an increased number of subscribers provided with multiple set-top receivers
under other upgrade and retention programs drove most of the $588.8 million increase in upgrade and retention costs. Under these programs, DIRECTV U.S. provides DVRs or additional equipment,
plus installation, to existing subscribers at significantly reduced prices or for free. Also contributing to the change was approximately $59.8 million of higher costs in 2004 compared to 2003
due to the change in the method of accounting for subscriber acquisition, upgrade and retention costs effective January 1, 2004.

DIRECTV
U.S.' higher subscriber service expenses of $116.7 million resulted primarily from increased costs due to DIRECTV U.S.' larger subscriber base and higher costs associated
with the opening of two new customer call centers in 2004. General and administrative expenses increased $97.1 million compared to the year ended December 31, 2003 due mostly to higher
bad debt expense resulting from increased activity associated with a larger subscriber base, higher professional service fees and higher employee compensation costs related to stock options and
restricted stock units.

The
decrease in operating profit before depreciation and amortization of $372.7 million was primarily due to higher subscriber acquisition costs and upgrade and retention costs,
partially offset by an increase in gross margin on the higher revenues discussed above. The decrease in operating profit of $436.9 million was due to lower operating profit before depreciation
and amortization, and the $64.2 million increase in depreciation and amortization expense due to additional amortization expense in 2004 due to the intangible assets DIRECTV U.S. recorded as
part of the NRTC and Pegasus transactions, partially offset by a decrease of $56.4 million due to certain fixed assets being fully depreciated since 2003.

52

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DIRECTV Latin America Segment

The following table provides operating results and a summary of key subscriber data for the DIRECTV Latin America segment:

|                                                           |  |   |        |   |   | Change |  
|---------------------------------------------------------- |  | - | ------ | - | - | ------ | -
|
|
|Revenues                                                   |  | $ | 675.2  |   | $ | 597.7  |  
|Operating Profit (Loss) Before Depreciation & Amortization |  |   | 45.9   |   |   | (85.3  | )
|Operating Loss                                             |  |   | (142.0 | ) |   | (284.6 | )
|Total number of subscribers (000's)                        |  |   | 1,646  |   |   | 1,499  |  
|Net subscriber additions (losses) (000's)                  |  |   | 57     |   |   | (83    | )
|ARPU                                                       |  | $ | 35.80  |   | $ | 33.00  |  

The
increase in revenues is primarily a result of the larger subscriber base in 2004 as well as the full year impact of consolidating the Venezuelan and Puerto Rican LOCs.

The
140,000 change in net subscriber additions resulted primarily from lower churn across a majority of the LOCs and the relatively stable economic conditions in the region, partially
offset by the ongoing shut-down of DIRECTV Mexico and the migration of subscribers to the Sky Mexico platform. This increase in net subscriber additions excludes approximately 89,500
subscribers acquired from the PanAmericana entities as part of the Sky Transactions. The increase in ARPU is primarily due to the consolidation of the Venezuelan and Puerto Rican LOCs in
July 2003 as a result of our adoption of FIN 46 and the consolidation of Sky Chile and Sky Colombia.

The
improvement in operating profit (loss) before depreciation and amortization and operating loss was primarily due to lower programming costs as a result of the renegotiation of
certain contracts in connection with the bankruptcy, partially offset by the $45.0 million charge related to asset write-downs, severance and other costs related to the ongoing
shut-down of DTVLA's Mexico operations as part of the Sky Transactions.

Network Systems Segment

The following table provides operating results for the Network Systems segment:

|                                                  |  |   |          |   |   | Change  |  
|------------------------------------------------- |  | - | -------- | - | - | ------- | -
|
|
|Revenues                                          |  | $ | 1,099.1  |   | $ | 1,271.0 |  
|Operating Loss Before Depreciation & Amortization |  |   | (1,682.9 | ) |   | (32.6   | )
|Operating Loss                                    |  |   | (1,778.5 | ) |   | (103.4  | )

The
decrease in revenues resulted primarily from lower sales of DIRECTV set-top receivers as a result of the sale of the set-top receiver manufacturing operations
to Thomson in June 2004. As we expect to have significant continuing cash flows with the set-top receiver manufacturing operations resulting from the five year supply agreement, the
financial results of the set-top receiver manufacturing operations prior to June 2004 are reported in continuing operations, and not as discontinued operations. See Note 3 of
the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for more information related to the set-top receiver manufacturing operations.

53

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The
increase in operating loss before depreciation and amortization and operating loss in 2004 compared with 2003 is primarily due to the $1,466.1 million and the
$190.6 million in asset impairment charges related to SPACEWAY and the SkyTerra transaction, respectively, as well as the $25.6 million in severance charges associated with the sale of
the set-top box receiver manufacturing operations and substantially all of the remaining assets of HNS, discussed above in "Strategic Developments."

Eliminations and Other

The elimination of revenues decreased to $178.2 million in 2004 from $192.1 million in 2003. The decrease was primarily due to the sale of the
set-top receiver manufacturing operations in June 2004.

Operating
loss from Eliminations and Other increased to $220.8 million in 2004 from $208.3 million in 2003. The increase resulted from a $27.3 million increase in
stock-based compensation in 2004 and
$113.0 million of retention, severance and related costs under our pension benefit plans in 2004, partially offset by the one-time charge of approximately $132 million in
2003 related to the completion of the News Corporation transactions.

LIQUIDITY AND CAPITAL RESOURCES

In 2005, our cash and cash equivalents balance increased $1,393.9 million to $3,701.3 million and our short-term investments balance
increased $160.6 million to $683.2 million. These increases resulted primarily from $997.8 million of net proceeds from the refinancing transactions during the second quarter of
2005, $1,171.9 million of cash flows from operating activities, $246.0 million in cash proceeds from the SkyTerra transaction, and $113.1 million of proceeds from the sale of
investments, partially offset by cash paid for satellites, property and equipment of $888.7 million.

As
a measure of liquidity, the current ratio (ratio of current assets to current liabilities) was 2.16 at December 31, 2005 and 1.77 at December 31, 2004. Working capital
increased by $1,191.7 million to $3,268.3 million at December 31, 2005 from working capital of $2,076.6 million at December 31, 2004. The change was principally due
to the increase in cash and short-term investments discussed above and increases in accounts receivable and inventories, partially offset by an increase in accounts payable and accrued
liabilities.

As
of December 31, 2005, DIRECTV U.S. has the ability to borrow up to $500 million under its existing credit facility. The DIRECTV U.S. credit facility is available until
2011. DIRECTV U.S. is subject to restrictive covenants under its credit facility. These covenants limit the ability of DIRECTV U.S. and its respective subsidiaries to, among other things, make
restricted payments, including dividends, loans or advances to us.

In
2005, we generated $448.6 million of positive cash flow (defined as net cash provided by operating activities less net cash used in investing activities). During 2006,
including an expected net cash requirement of $204.0 million related to the Sky Transactions, we expect an increase in cash flow from 2005 due to an increase in operating profit, partially
offset by higher sports programming contract payments and slightly higher capital expenditures at DIRECTV U.S. for satellites and broadcast equipment to support the launch of new local and HD
channels, and to replace and backup existing satellites.

On
February 7, 2006, our Board of Directors authorized a share repurchase program. Under the repurchase program, we are authorized to spend up to $3.0 billion to repurchase
outstanding shares of our common stock. We implemented the repurchase program on February 10, 2006. There is no fixed termination date for the repurchase program and purchases may be made in
the open market, through block trades and other negotiated transactions. This program may be suspended, discontinued or

54

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accelerated
at any time. Through March 7, 2006, we have repurchased approximately 110.3 million shares for $1.7 billion, at an average price of $15.50 per share, which includes
100 million shares of our common stock purchased from General Motors employee pension and benefit trusts.

We
expect to fund our operations and the balance of the share repurchase program from a combination of existing cash balances, cash provided from operations and amounts available under
DIRECTV U.S.' existing credit facility. We believe the financing transactions completed in 2005, as described in Note 9 of the Notes to the Consolidated Financial Statements in Item 8,
Part II, provide liquidity to fund our operations and commitments for the foreseeable future. However, several factors may affect our ability to fund our operations and commitments that we
discuss in "Contractual Obligations, Off-Balance Sheet Arrangements and Contingencies" below.

In
addition, our future cash flows may be reduced if we experience, among other things, significantly higher subscriber additions than planned, increased subscriber churn or upgrade and
retention costs, higher than planned capital expenditures for satellites and broadcast equipment, satellite anomalies or signal theft or if we are required to make a prepayment on our Term Loans.

Notes Payable and Credit Facilities

At December 31, 2005, we had $3,415.0 million in total outstanding borrowings, bearing a weighted average interest rate of approximately 6.7%. Our
outstanding borrowings primarily consist of notes payable and amounts borrowed under a credit facility as more fully described in Note 9 of the Notes to the Consolidated Financial Statements in
Item 8, Part II of this Annual Report, which we incorporate herein by reference.

Our
short-term borrowings, notes payable, credit facility and other borrowings mature as follows: $9.4 million in 2006; $10.1 million in 2007;
$47.6 million in 2008; $97.6 million in 2009; $297.5 million in 2010; and $2,949.7 million thereafter. However, these amounts do not reflect potential prepayments that may
be required under our senior secured credit facility. We were not required to make a prepayment for the years ended December 31, 2005 and 2004. However, we made a prepayment of
$201.0 million on April 15, 2004 for the year ended December 31, 2003.

Dividend Policy and Stockholders' Equity

Dividends may be paid on our common stock only when, as, and if declared by our Board of Directors in its sole discretion. Except for the $275 million
special cash dividend paid to GM in connection with the split-off in 2003, our Board of Directors has not declared dividends on our common stock for more than five years. We have no
current plans to pay any dividends on our common stock. We currently expect to retain our future earnings, if any, for the development of our business or other corporate purposes.

We
are a publicly-traded company with our common stock listed as "DTV" on the NYSE. As part of the News Corporation transactions completed on December 22, 2003, our certificate of
incorporation was amended to provide for the following capital stock: common stock, par value $0.01 per share, 3,000,000,000 shares authorized; Class B common stock, par value $0.01 per share,
275,000,000 shares authorized; excess stock, par value $0.01 per share, 800,000,000 shares authorized; and preferred stock, par value $0.01 per share, 9,000,000 shares authorized. As of
December 31, 2005, there were no outstanding shares of the Class B common stock, excess stock or preferred stock. Repurchased shares will cease to be issued and outstanding but remain
authorized for registration and issuance in the future.

55

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CONTRACTUAL OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS AND CONTINGENCIES

Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2005, including the future periods in which payments are expected. Additional
details regarding these obligations are provided in the Notes to the Consolidated Financial Statements in Item 8 referenced in the table.

|                                                                                                |  | Payments Due By Period
|----------------------------------------------------------------------------------------------- |  | ----------------------
|
|
|Long-Term Debt Obligations (Note 9)(a)                                                          |  | $                     
|Purchase Obligations (Note 21)(b)                                                               |  |                       
|Operating Lease Obligations (Note 21)(c)                                                        |  |                       
|Capital Lease Obligations                                                                       |  |                       
|Other Long-Term Liabilities Reflected on the Consolidated Balance Sheets under GAAP (Note 3)(d) |  |                       
|                                                                                                |  |                       
|Total                                                                                           |  | $                     
|                                                                                                |  |                       

---

Off-Balance Sheet Arrangements

We are contingently liable under standby letters of credit and bonds in the aggregate amount of $16.2 million, which were undrawn at December 31,
2005.

56

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Contingencies

For a discussion of contingencies, see Note 21 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, which
we incorporate herein by reference.

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

For a discussion of "Certain Relationships and Related-Party Transactions," see Note 17 of the Notes to the Consolidated Financial Statements in
Part II, Item 8 of this Annual Report, which we incorporate herein by reference.

USE OF ESTIMATES IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to
make estimates, judgments and assumptions that affect amounts reported. Management bases its estimates, judgments and assumptions on historical experience and on various other factors that are
believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported for future periods may be affected by changes in those
estimates. The following represents what we believe are the critical accounting policies that may involve a higher degree of estimation, judgment and complexity. For a summary of our significant
accounting policies, including those discussed below, see Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, which we incorporate
herein by reference.

Multi-Year Programming Contracts for Live Sporting Events.We charge the cost of multi-year
programming contracts for live sporting events with minimum guarantee payments, such as DIRECTV U.S.' agreement with the NFL, to expense based on the ratio of each period's contract revenues to the
estimated total contract revenues to be earned over the contract period. Management evaluates estimated total contract revenues at least annually.

Reserves for Doubtful Accounts.Management estimates the amount of required reserves for the potential
non-collectibility of accounts and notes receivable based upon past experience of collection and consideration of other relevant factors. However, past experience may not be indicative of
future collections and therefore we could incur additional charges in the future to reflect differences between estimated and actual collections.

Income Taxes.We must make certain estimates and judgments in determining provisions for income taxes. These estimates and
judgments occur in the calculation of tax credits, tax benefits and deductions, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition
of revenue and expense for tax and financial statement purposes. Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.

We
assess the recoverability of deferred tax assets at each reporting date and where applicable, record a valuation allowance to reduce the total deferred tax asset to an amount that
will, more likely than not, be realized in the future. Our assessment includes an analysis of whether deferred tax assets will be realized in the ordinary course of operations based on the available
positive and negative evidence, including the scheduling of deferred tax liabilities and forecasted income from operating activities. The underlying assumptions we use in forecasting future taxable
income require significant judgment. In the event that actual income from operating activities differs from forecasted amounts, or if we change our estimates of forecasted income from operating
activities, we could record additional

57

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charges
in order to adjust the carrying value of deferred tax assets to their realizable amount. Such charges could be material to our consolidated results of operations and financial position.

In
addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit
issues in the United States and other tax jurisdictions based on our determination of whether, and the extent to which, additional tax payments are probable and estimable. If we ultimately determine
that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We record an
additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be. For a discussion of current tax
matters, see Note 10 and Note 21 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, which we incorporate herein by reference.

Contingent Matters.Determining when, or if, an accrual should be recorded for a contingent matter, including but not limited
to legal and tax issues, and the amount of such accrual, if any, requires a significant amount of management judgment and estimation. We develop our judgment and estimates in consultation with outside
counsel based on an analysis of potential outcomes. Due to the uncertainty of determining the likelihood of a future event occurring and the potential financial statement impact of such an event, it
is possible that upon further development or resolution of a contingent matter, we could record a charge in a future period that would be material to our consolidated results of operations and
financial position.

Valuation of Long-Lived Assets.We evaluate the carrying value of long-lived assets to be held and
used, other than goodwill and intangible assets with indefinite lives, when events and circumstances warrant such a review. We consider the carrying value of a long-lived asset impaired
when the anticipated undiscounted future cash flow from such asset is separately identifiable and is less than its carrying value. In that event, we recognize a loss based on the amount by which the
carrying value exceeds the fair value of the long-lived asset. We determine fair value primarily using the estimated future cash flows associated with the asset under review, discounted at
a rate commensurate with the risk involved, and other valuation techniques. We determine losses on long-lived assets to be disposed of in a similar manner, except that we reduce the fair
value for the cost of disposal. Changes in estimates of future cash flows could result in a write-down of the asset in a future period.

Recognition of Rebate Related to Long-Term Purchase Agreement.As part of our sale of HNS' set-top
receiver manufacturing operations to Thomson in June 2004, DIRECTV U.S. entered into a long-term purchase agreement with Thomson for the supply of set-top receivers. As
part of this agreement, as amended, DIRECTV U.S. can earn a $57.0 million rebate from Thomson if Thomson's aggregate sales of DIRECTV U.S.' set-top receivers equal at least
$4 billion over the initial five year contract term plus an additional one year optional extension period, or the Contract Term. DIRECTV U.S. has determined that, based upon projected
set-top receiver requirements, it is probable and reasonably estimable that the minimum purchase requirement will be met for the $57.0 million rebate during the initial contract
period. DIRECTV U.S. bases its probability assessment for meeting the minimum purchase requirement on its current and future business projections, including its belief that existing and new
subscribers will likely acquire new set-top receivers due to certain technological advances. Any negative trends in the purchase of set-top receivers for existing and new
subscribers may materially impact its ability to earn the rebate. On a quarterly basis, DIRECTV U.S. will continue to assess whether the rebate is probable over the Contract Term. If DIRECTV U.S.
subsequently determines that it is no longer probable that it will earn the rebate, DIRECTV U.S. would be required to reverse the amount of the credit recognized to date as a charge to the
Consolidated Statements of

58

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Operations
at the time such determination is made. See Note 3 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for further discussion.

ACCOUNTING CHANGE

Subscriber Acquisition, Upgrade and Retention Costs.Effective January 1, 2004, we changed our method of accounting
for subscriber acquisition, upgrade and retention costs. Previously, we deferred a portion of these costs, equal to the amount of profit to be earned from the subscriber, typically over the
12 month subscriber contract, and amortized to expense over the contract period. We now expense subscriber
acquisition, upgrade and retention costs as incurred as subscribers activate the DIRECTV service. We determined that expensing such costs was preferable to the prior accounting method after
considering the accounting practices of competitors and companies within similar industries and the added clarity and ease of understanding our reported results for investors. We continue to
capitalize costs under our subscriber lease programs. As a result of the change, on January 1, 2004, we expensed our deferred subscriber acquisition cost balance of $503.9 million as a
cumulative effect of accounting change. The amount of the cumulative effect was $310.5 million, net of taxes. The following table presents our results on a pro forma basis as if we had
retroactively applied this new method:

|                                                             |  | 2005 |          | 2004 |   | 2003     |  
|------------------------------------------------------------ |  | ---- | -------- | ---- | - | -------- | -
|
|Pro Forma:                                                   |  |      |          |      |   |          |  
|Total operating costs and expenses                           |  | $    | 12,531.9 |      | $ | 13,479.4 |  
|Operating Profit (Loss)                                      |  |      | 632.6    |      |   | (2,119.4 | )
|Net income (loss)                                            |  |      | 335.9    |      |   | (1,638.7 | )
|Basic and diluted net income (loss) per common share         |  |      | 0.24     |      |   | (1.18    | )
|Other Data:                                                  |  |      |          |      |   |          |  
|Operating Profit (Loss)                                      |  | $    | 632.6    |      | $ | (2,119.4 | )
|Add: Depreciation and amortization expense                   |  |      | 853.2    |      |   | 838.0    |  
|                                                             |  |      |          |      |   |          |  
|Operating Profit (Loss) before depreciation and amortization |  | $    | 1,485.8  |      | $ | (1,281.4 | )
|                                                             |  |      |          |      |   |          |  
|Average subscriber acquisition costsper subscriber (SAC)    |  | $    | 642      |      | $ | 643      |  

For
addition information regarding "Accounting Changes" and "New Accounting Standards," see Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8
of this Annual Report, which we incorporate herein by reference.

SECURITY RATINGS

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. Ratings in the Ba
range for Moody's Investor Services, or Moody's, and the BB range for Standard & Poor's Ratings Services, or S&P, generally indicate moderate protection of interest and principal payments,
potentially outweighed by exposure to uncertainties or adverse conditions. Ratings in the B range generally indicate that the obligor currently has financial capacity to meet its financial commitments
but there is limited assurance over any long period of time that interest and principal payments will be made or that other terms will be maintained. 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.

59

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The Company

Effective January 24, 2005, Moody's no longer provides a security rating for us, consistent with its normal practice of providing a rating for only the
primary debt issuer. Accordingly, Moody's provides security ratings only for DIRECTV U.S., as described below.

On
February 2, 2005, Standard and Poor's Rating Services, or S&P, affirmed our long-term corporate rating of BB and revised the outlook to stable, citing potential
share repurchase activity while discretionary cash flow was negative. In connection with the refinancing at DIRECTV U.S., S&P affirmed our corporate rating at BB, with a stable outlook.

DIRECTV U.S.

On April 4, 2005, in connection with our April 2005 refinancing transactions, Moody's assigned a Ba1 rating to DIRECTV U.S.' senior secured credit
facility. In addition, it affirmed DIRECTV U.S.' Ba2 senior implied and Ba2 senior unsecured ratings. On June 8, 2005, Moody's assigned a Ba2 rating to DIRECTV U.S.' 6.375% senior notes
discussed in Note 9 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report. The ratings remain on stable outlook.

On
April 5, 2005, in connection with our April 2005 refinancing transactions, S&P assigned a BB rating to DIRECTV U.S.' senior secured credit facility and affirmed DIRECTV
U.S.' BB corporate and BB- senior unsecured ratings. On June 8, 2005, S&P assigned a BB- rating to DIRECTV U.S.' 6.375% senior notes and affirmed its corporate, senior
secured and unsecured ratings. All ratings remain on stable outlook.

***

60

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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, you should not consider the forward-looking statements as our projections of future
events or losses.

General

Our 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 our equity investments. We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial
instruments. We enter into derivative instruments only to the extent considered necessary to meet our risk management objectives, and do not enter into derivative contracts for speculative purposes.

Foreign Currency Risk

We generally conduct our business in U.S. dollars with some business conducted in a variety of foreign currencies and therefore are exposed to fluctuations in
foreign currency exchange rates. Our objective in managing our exposure to foreign currency changes is to reduce earnings and cash flow volatility associated with foreign exchange rate fluctuations.
Accordingly, we may enter into foreign exchange contracts to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions.
The gains and losses on derivative foreign exchange contracts offset changes in value of the related exposures. As of December 31, 2005, we had no significant foreign currency exchange
contracts outstanding. The impact of a hypothetical 10% adverse change in exchange rates on the fair values of foreign currency denominated assets and liabilities would be a loss of
$15.3 million, net of taxes, at December 31, 2005.

Interest Rate Risk

We are subject to fluctuating interest rates, which may adversely impact our consolidated results of operations and cash flows. We had outstanding debt of
$3,411.9 million at December 31, 2005, excluding unamortized bond premium, which consisted primarily of DIRECTV's fixed rate borrowings of $1,910.0 million and variable rate
borrowings of $1,500.0 million. As of December 31, 2005, a hypothetical one percentage point increase in interest rates related to our outstanding variable rate debt would have increased
our annual interest expense by approximately $15 million.

61

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of The DIRECTV Group, Inc.
El Segundo, California

We
have audited the accompanying consolidated balance sheets of The DIRECTV Group, Inc. (the "Company") as of December 31, 2005 and 2004, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement
schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion
on the financial statements and financial statement schedules based on our audits.

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

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The DIRECTV Group, Inc. at December 31, 2005 and
2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in
all material respects, the information set forth therein.

As
discussed in Note 2 of the Notes to the Consolidated Financial Statements, effective January 1, 2004, The DIRECTV Group, Inc. changed its method of accounting for
subscriber acquisition, upgrade and retention costs, effective for the year ended December 31, 2005, The DIRECTV Group, Inc. changed the presentation of its consolidated statements of cash
flows to present separate disclosure of the cash flows from operating, investing, and financing activities of discontinued operations and retroactively revised the statements of cash flows for the
years ended December 31, 2004 and 2003 for the change.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over
financial reporting as of December 31, 2005, based on the criteria established inInternal ControlIntegrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 6, 2006 expressed an unqualified opinion on management's assessment of the effectiveness of the
Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

|/s/DELOITTE & TOUCHE LLPDELOITTE & TOUCHE LLP |  | 
|--------------------------------------------- |  | 

Los
Angeles, California
March 6, 2006

62

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                                                                             |         | Years Ended December 31,                                 |         
|---------------------------------------------------------------------------------------------------------------------------- | ------- | -------------------------------------------------------- | --------
|
|
|Revenues                                                                                                                     |         | $                                                        | 13,164.5
|Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below                      |         |                                                          |         
|                                                                                                                             |         | Broadcast programming and other costs of sale            |         
|                                                                                                                             |         | Subscriber service expenses                              |         
|                                                                                                                             |         | Subscriber acquisition costs:                            |         
|                                                                                                                             |         |                                                          |         
|                                                                                                                             |         |                                                          |         
|                                                                                                                             |         | Upgrade and retention costs                              |         
|                                                                                                                             |         | Broadcast operations expenses                            |         
|                                                                                                                             |         | General and administrative expenses                      |         
|                                                                                                                             |         | (Gain) loss from asset sales and impairment charges, net |         
|Depreciation and amortization                                                                                                |         |                                                          | 853.2   
|                                                                                                                             |         |                                                          |         
|                                                                                                                             |         |                                                          |         
|                                                                                                                             |         |                                                          |         
|Operating Profit (Loss)                                                                                                      |         |                                                          | 632.6   
|Interest income                                                                                                              |         |                                                          | 150.3   
|Interest expense                                                                                                             |         |                                                          | (237.6  
|Reorganization income (expense)                                                                                              |         |                                                          |        
|Other, net                                                                                                                   |         |                                                          | (65.0   
|                                                                                                                             |         |                                                          |         
|Income (Loss) From Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Changes |         |                                                          | 480.3   
|Income tax (expense) benefit                                                                                                 |         |                                                          | (173.2  
|Minority interests in net (earnings) losses of subsidiaries                                                                  |         |                                                          | (2.5    
|                                                                                                                             |         |                                                          |         
|Income (loss) from continuing operations before cumulative effect of accounting changes                                      |         |                                                          | 304.6   
|Income (loss) from discontinued operations, net of taxes                                                                     |         |                                                          | 31.3    
|                                                                                                                             |         |                                                          |         
|Income (loss) before cumulative effect of accounting changes                                                                 |         |                                                          | 335.9   
|Cumulative effect of accounting changes, net of taxes                                                                        |         |                                                          |        
|                                                                                                                             |         |                                                          |         
|Net Income (Loss)                                                                                                            |         | $                                                        | 335.9   
|                                                                                                                             |         |                                                          |         
|Basic and Diluted Income (Loss) Per Common Share:                                                                            |         |                                                          |         
|Income (loss) from continuing operations before cumulative effect of accounting changes                                      |         | $                                                        | 0.22    
|Income (loss) from discontinued operations, net of taxes                                                                     |         |                                                          | 0.02    
|Cumulative effect of accounting changes, net of taxes                                                                        |         |                                                          |        
|                                                                                                                             |         |                                                          |         
|Net Income (Loss)                                                                                                            |         | $                                                        | 0.24    
|                                                                                                                             |         |                                                          |         
|Weighted average number of common shares outstanding (in millions):                                                          |         |                                                          |         
|                                                                                                                             | Basic   |                                                          |         
|                                                                                                                             | Diluted |                                                          |         

---

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

63

---



CONSOLIDATED BALANCE SHEETS

|                                       |                                                                                                                                                                                                                             | December 31, |                                           
|-------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ------------------------------------------
|
|
|ASSETS                                 |                                                                                                                                                                                                                             |              |                                           
|Current Assets                         |                                                                                                                                                                                                                             |              |                                           
|                                       | Cash and cash equivalents                                                                                                                                                                                                   |              | $                                         
|                                       | Short-term investments                                                                                                                                                                                                      |              |                                           
|                                       | Accounts and notes receivable, net of allowances of $114.9 and $121.7                                                                                                                                                       |              |                                           
|                                       | Inventories                                                                                                                                                                                                                 |              |                                           
|                                       | Deferred income taxes                                                                                                                                                                                                       |              |                                           
|                                       | Prepaid expenses and other                                                                                                                                                                                                  |              |                                           
|                                       | Assets of business held for sale                                                                                                                                                                                            |              |                                           
|                                       |                                                                                                                                                                                                                             |              |                                           
|                                       |                                                                                                                                                                                                                             |              | Total Current Assets                      
|Satellites, net                        |                                                                                                                                                                                                                             |              | 1,875.5                                   
|Property and Equipment, net            |                                                                                                                                                                                                                             |              | 1,199.2                                   
|Goodwill                               |                                                                                                                                                                                                                             |              | 3,045.3                                   
|Intangible Assets, net                 |                                                                                                                                                                                                                             |              | 1,878.0                                   
|Deferred Income Taxes                  |                                                                                                                                                                                                                             |              | 492.4                                     
|Investments and Other Assets           |                                                                                                                                                                                                                             |              | 1,043.4                                   
|                                       |                                                                                                                                                                                                                             |              |                                           
|                                       |                                                                                                                                                                                                                             |              | Total Assets                              
|                                       |                                                                                                                                                                                                                             |              |                                           
|LIABILITIES AND STOCKHOLDERS' EQUITY   |                                                                                                                                                                                                                             |              |                                           
|Current Liabilities                    |                                                                                                                                                                                                                             |              |                                           
|                                       | Accounts payable                                                                                                                                                                                                            |              | $                                         
|                                       | Accrued liabilities and other                                                                                                                                                                                               |              |                                           
|                                       | Unearned subscriber revenues and deferred credits                                                                                                                                                                           |              |                                           
|                                       | Short-term borrowings and current portion of long-term debt                                                                                                                                                                 |              |                                           
|                                       | Liabilities of business held for sale                                                                                                                                                                                       |              |                                           
|                                       |                                                                                                                                                                                                                             |              |                                           
|                                       |                                                                                                                                                                                                                             |              | Total Current Liabilities                 
|Long-Term Debt                         |                                                                                                                                                                                                                             |              | 3,405.3                                   
|Other Liabilities and Deferred Credits |                                                                                                                                                                                                                             |              | 1,407.6                                   
|Commitments and Contingencies          |                                                                                                                                                                                                                             |              |                                           
|Minority Interests                     |                                                                                                                                                                                                                             |              | 49.2                                      
|Stockholders' Equity                   |                                                                                                                                                                                                                             |              |                                           
|                                       | Common stock and additional paid-in capital$0.01 par value, 3,000,000,000 shares authorized, 1,391,031,989 shares and 1,385,814,459 shares issued and outstanding at December 31, 2005 and December 31, 2004,
respectively |              |                                           
|                                       | Retained earnings (deficit)                                                                                                                                                                                                 |              |                                           
|                                       | Accumulated Other Comprehensive Loss                                                                                                                                                                                        |              |                                           
|                                       |                                                                                                                                                                                                                             |              |                                           
|                                       |                                                                                                                                                                                                                             |              | Total Stockholders' Equity                
|                                       |                                                                                                                                                                                                                             |              |                                           
|                                       |                                                                                                                                                                                                                             |              | Total Liabilities and Stockholders' Equity
|                                       |                                                                                                                                                                                                                             |              |                                           

---

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

64

---





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

|                                                                                                    |                                                                             | Common
Shares |   | Common
Stock and
Additional
Paid-In
Capital |          | Preferred
Stock |   | Retained
Earnings
(Deficit) |   | Accumulated
Other
Comprehensive
Income (Loss) |          | Total
Stockholders'
Equity |   | Comprehensive
Income (Loss) |       
|--------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------- | - | ------------------------------------------- | -------- | --------------- | - | --------------------------- | - | --------------------------------------------- | -------- | -------------------------- | - | --------------------------- | ------
|
|Balance at January 1, 2003                                                                          |                                                                             | 200           |   | $                                           | 10,151.8 |                 | $ | 914.1                       |   | $                                             | (1,027.1 | )                          | $ | (61.7                       | )     
|Net Loss                                                                                            |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               | (361.8   | )                          |   |                             |       
|Conversion of Series B Convertible Preferred Stock into Class B common stock and common stock split |                                                                             | 1,481,891,553 |   |                                             | 914.1    |                 |   | (914.1                      | ) |                                               |          |                            |   |                             |       
|Adjustment to GM stock holdings in connection with the News Corporation transactions                |                                                                             | (98,301,304   | ) |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|Special cash dividend paid to General Motors                                                        |                                                                             |               |   |                                             | (275.0   | )               |   |                             |   |                                               |          |                            |   |                             |       
|Tax benefit to General Motors                                                                       |                                                                             |               |   |                                             | (25.1    | )               |   |                             |   |                                               |          |                            |   |                             |       
|Stock options exercised                                                                             |                                                                             | 59,002        |   |                                             | 17.7     |                 |   |                             |   |                                               |          |                            |   |                             |       
|Other                                                                                               |                                                                             |               |   |                                             | 34.0     |                 |   |                             |   |                                               |          |                            |   |                             |       
|Minimum pension liability adjustment                                                                |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   | (16.5                       | )     
|Foreign currency translation adjustments                                                            |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   | 6.0                         |       
|Unrealized gains on securities:                                                                     |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|                                                                                                    | Unrealized holding gains                                                    |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             | 275.3 
|                                                                                                    | Less: reclassification adjustment for net gains recognized during the year  |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             | (0.6  
|                                                                                                    |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|Comprehensive loss                                                                                  |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|                                                                                                    |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|Balance at December 31, 2003                                                                        |                                                                             | 1,383,649,451 |   |                                             | 10,817.5 |                 |   |                            |   |                                               | (1,388.9 | )                          |   | 202.5                       |       
|Net Loss                                                                                            |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               | (1,949.2 | )                          |   |                             |       
|Stock options exercised                                                                             |                                                                             | 2,139,782     |   |                                             | 23.0     |                 |   |                             |   |                                               |          |                            |   |                             |       
|Stock-based compensation expense                                                                    |                                                                             |               |   |                                             | 57.1     |                 |   |                             |   |                                               |          |                            |   |                             |       
|DIRECTV Latin America reorganization                                                                |                                                                             |               |   |                                             | (31.5    | )               |   |                             |   |                                               |          |                            |   |                             |       
|Other                                                                                               |                                                                             | 25,226        |   |                                             | 3.8      |                 |   |                             |   |                                               |          |                            |   |                             |       
|Minimum pension liability adjustment                                                                |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   | 7.4                         |       
|Foreign currency translation adjustments                                                            |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   | 14.8                        |       
|Unrealized gains (losses) on securities:                                                            |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|                                                                                                    | Unrealized holding losses                                                   |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             | (5.6  
|                                                                                                    | Less: reclassification adjustment for net gains recognized during the year  |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             | (243.8
|                                                                                                    |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|Comprehensive loss                                                                                  |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|                                                                                                    |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|Balance at December 31, 2004                                                                        |                                                                             | 1,385,814,459 |   |                                             | 10,869.9 |                 |   |                            |   |                                               | (3,338.1 | )                          |   | (24.7                       | )     
|Net Income                                                                                          |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               | 335.9    |                            |   |                             |       
|Stock options exercised and vesting of restricted stock units issued                                |                                                                             | 5,217,530     |   |                                             | 45.2     |                 |   |                             |   |                                               |          |                            |   |                             |       
|Stock-based compensation expense                                                                    |                                                                             |               |   |                                             | 40.6     |                 |   |                             |   |                                               |          |                            |   |                             |       
|Other                                                                                               |                                                                             |               |   |                                             | 0.5      |                 |   |                             |   |                                               |          |                            |   |                             |       
|Minimum pension liability adjustment                                                                |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   | 7.0                         |       
|Foreign currency translation adjustments                                                            |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   | 2.6                         |       
|Unrealized gains (losses) on securities:                                                            |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|                                                                                                    | Unrealized holding gains                                                    |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             | 0.7   
|                                                                                                    | Less: reclassification adjustment for net losses recognized during the year |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             | 0.4   
|                                                                                                    |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|Comprehensive income                                                                                |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|                                                                                                    |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       
|Balance at December 31, 2005                                                                        |                                                                             | 1,391,031,989 |   | $                                           | 10,956.2 |                 | $ |                            |   | $                                             | (3,002.2 | )                          | $ | (14.0                       | )     
|                                                                                                    |                                                                             |               |   |                                             |          |                 |   |                             |   |                                               |          |                            |   |                             |       

---

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

65

---



CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                   |                                                                                                                                                                | Years Ended December 31,                                    |                                                 
|-------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------------------
|
|
|Cash Flows from Operating Activities               |                                                                                                                                                                |                                                             |                                                 
|                                                   | Net Income (Loss)                                                                                                                                              |                                                             | $                                               
|                                                   | Cumulative effect of accounting changes, net of taxes                                                                                                          |                                                             |                                                 
|                                                   | Income (loss) from discontinued operations, net of taxes                                                                                                       |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   | Income (loss) from continuing operations before cumulative effect of accounting changes                                                                        |                                                             |                                                 
|                                                   | Adjustments to reconcile income (loss) from continuing operations before cumulative effect of accounting changes to net cash provided by operating activities: |                                                             |                                                 
|                                                   |                                                                                                                                                                | Depreciation and amortization                               |                                                 
|                                                   |                                                                                                                                                                | (Gain) loss from asset sales and impairment charges, net    |                                                 
|                                                   |                                                                                                                                                                | Equity (earnings) losses from unconsolidated affiliates     |                                                 
|                                                   |                                                                                                                                                                | Net (gain) loss from sale of investments                    |                                                 
|                                                   |                                                                                                                                                                | Net unrealized gain on investments                          |                                                 
|                                                   |                                                                                                                                                                | Loss on disposal of fixed assets                            |                                                 
|                                                   |                                                                                                                                                                | Stock-based compensation expense                            |                                                 
|                                                   |                                                                                                                                                                | Write-off of debt issuance costs                            |                                                 
|                                                   |                                                                                                                                                                | Deferred income taxes and other                             |                                                 
|                                                   |                                                                                                                                                                | Accounts receivable credited against Pegasus purchase price |                                                 
|                                                   |                                                                                                                                                                | Change in other operating assets and liabilities            |                                                 
|                                                   |                                                                                                                                                                |                                                             | Accounts and notes receivable                   
|                                                   |                                                                                                                                                                |                                                             | Inventories                                     
|                                                   |                                                                                                                                                                |                                                             | Prepaid expenses and other                      
|                                                   |                                                                                                                                                                |                                                             | Accounts payable                                
|                                                   |                                                                                                                                                                |                                                             | Accrued liabilities                             
|                                                   |                                                                                                                                                                |                                                             | Unearned subscriber revenue and deferred credits
|                                                   |                                                                                                                                                                |                                                             | Other, net                                      
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|Cash Flows from Investing Activities               |                                                                                                                                                                |                                                             |                                                 
|                                                   | Purchase of short-term investments                                                                                                                             |                                                             |                                                 
|                                                   | Sale of short-term investments                                                                                                                                 |                                                             |                                                 
|                                                   | Investment in companies, net of cash acquired                                                                                                                  |                                                             |                                                 
|                                                   | Cash paid for acquired assets                                                                                                                                  |                                                             |                                                 
|                                                   | Cash paid for property and equipment                                                                                                                           |                                                             |                                                 
|                                                   | Cash paid for satellites                                                                                                                                       |                                                             |                                                 
|                                                   | Proceeds from sale of investments                                                                                                                              |                                                             |                                                 
|                                                   | Proceeds from sale of businesses                                                                                                                               |                                                             |                                                 
|                                                   | Other, net                                                                                                                                                     |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|Cash Flows from Financing Activities               |                                                                                                                                                                |                                                             |                                                 
|                                                   | Net decrease in short-term borrowings                                                                                                                          |                                                             |                                                 
|                                                   | Long-term debt borrowings                                                                                                                                      |                                                             |                                                 
|                                                   | Repayment of long-term debt                                                                                                                                    |                                                             |                                                 
|                                                   | Debt issuance costs                                                                                                                                            |                                                             |                                                 
|                                                   | Repayment of other long-term obligations                                                                                                                       |                                                             |                                                 
|                                                   | Stock options exercised                                                                                                                                        |                                                             |                                                 
|                                                   | Special cash dividend paid to General Motors                                                                                                                   |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|Cash Flows from Discontinued Operations (Revised)  |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|                                                   |                                                                                                                                                                |                                                             |                                                 
|Net increase in cash and cash equivalents          |                                                                                                                                                                |                                                             | 1,393.9                                         
|Cash and cash equivalents at beginning of the year |                                                                                                                                                                |                                                             | 2,307.4                                         
|                                                   |                                                                                                                                                                |                                                             |                                                 
|Cash and cash equivalents at end of the year       |                                                                                                                                                                | $                                                           | 3,701.3                                         
|                                                   |                                                                                                                                                                |                                                             |                                                 
|Supplemental Cash Flow Information                 |                                                                                                                                                                |                                                             |                                                 
|                                                   | Cash paid for interest                                                                                                                                         |                                                             | $                                               
|                                                   | Cash refunded (paid) for income taxes                                                                                                                          |                                                             |                                                 

---

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

66

---





THE DIRECTV GROUP, INC.        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Description of Business

We are a leading provider of digital television entertainment in the United States and Latin America. On March 16, 2004, we changed our corporate name from
Hughes Electronics Corporation to The DIRECTV Group, Inc. Our two continuing business segments, DIRECTV U.S. and DIRECTV Latin America, which are differentiated by their geographic location,
are engaged in acquiring, promoting, selling and/or distributing digital entertainment programming via satellite to residential and commercial subscribers. Through April 22, 2005 we also
operated the Network Systems segment, which was a provider of satellite-based private business networks and consumer broadband Internet access. Subsequent to the April 22, 2005 sale of a 50%
interest in the HNS Business to SkyTerra Communications, Inc., or SkyTerra, we accounted for our investment in HNS under the equity method of accounting. "Assets of business held for sale" and
"Liabilities of businesss held for sale" in the Consolidated Balance Sheets as of December 31, 2004 include substantially all of the then remaining assets and liabilities of HNS. Please refer
to Note 3 for more information regarding the sales of HNS' businesses and assets.



Discontinued Operations

During 2004, we completed the sale of our approximately 80.4% interest in PanAmSat Corporation, or PanAmSat, and a 55% interest in Hughes Software Systems, or
HSS. Revenues, operating costs and expenses, and other non-operating results for the discontinued operations of PanAmSat, which formerly comprised the Satellite Services segment, and HSS,
which was a component of the Network Systems segment, have been excluded from our results from continuing operations for all periods presented herein. Consequently, the financial results of PanAmSat
and HSS are presented in our Consolidated Statements of Operations in a single line item entitled "Income (loss) from discontinued operations, net of taxes." See Note 3 for additional
information regarding these divestitures.

News Corporation Transactions

On December 22, 2003, we, General Motors, or GM, and News Corporation completed a series of transactions that resulted in our split-off from GM
and the simultaneous sale of GM's 19.8% interest in us to News Corporation. GM split us off by distributing our common stock to the holders of the GM Class H common stock in exchange for their
GM Class H common shares on a one-for-one basis. Immediately after the split-off, News Corporation acquired an additional 14.2% of our outstanding

67

---



common
stock from the former GM Class H common stockholders, which provided News Corporation with a total of 34% of our outstanding common stock. In addition, we paid to GM a special cash
dividend of $275 million in connection with the transactions.

For
us, the transactions represented an exchange of equity interests by investors. As such, we continue to account for our assets and liabilities at historical cost and did not apply
purchase accounting. We recorded the $275 million special cash dividend payment to GM as a reduction to additional paid-in capital. We also recorded a $25.1 million decrease
to additional paid-in capital representing the difference between our consolidated tax receivable from GM as determined on a separate return basis and the receivable determined pursuant to
the amended
income tax allocation agreement between GM and us. See Note 10 for additional discussion regarding the amended income tax allocation agreement.

Upon
completion of the transactions in 2003, we expensed related costs of about $132 million that primarily included investment advisor fees of about $49 million, retention
benefits of about $65 million and severance benefits of about $15 million. In addition, certain of our employees earned about $36 million in additional retention benefits during
2004 subsequent to the completion of the News Corporation transactions.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

We present our accompanying financial statements on a consolidated basis and include our accounts and those of our domestic and foreign subsidiaries that we
control through equity ownership or for which we are deemed to be the primary beneficiary, after elimination of intercompany accounts and transactions. We allocate earnings and losses to minority
interests only to the extent of a minority investor's investment in a subsidiary.

Use of Estimates in the Preparation of the Consolidated Financial Statements

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, which requires us to
make estimates and assumptions that affect amounts reported herein. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be
reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates.

Reclassifications

Beginning in 2005, we report investments in auction rate securities as "Short-term investments" rather than our previous practice of reporting these
investments as part of "Cash and cash equivalents" in our Consolidated Balance Sheets. As a result, we reclassified $522.6 million from "Cash and cash equivalents" to "Short-term
investments" in our Consolidated Balance Sheets at December 31, 2004. Also, our cash flows from investing activities now include purchases and sales of auction rate securities. This
reclassification has no effect on our previously reported total current assets, total assets, working capital or results of operations and does not affect our previously reported cash flows from
operating or financing activities.

68

---



Revised Presentation of Cash Flows from Discontinued Operations

We have revised our 2004 and 2003 consolidated statements of cash flows to separately disclose the operating, investing and financing portions of cash flows
attributable to our discontinued operations. We had previously reported these amounts on a combined basis in a single line item.

Revenue Recognition

We recognize revenue as services are rendered or products are shipped. We recognize DTH subscription and pay-per-view revenues when
programming is broadcast to subscribers. We recognize subscriber fees for multiple set-top receivers, our published programming guide, warranty services and equipment rental as revenue, as
earned. We recognize advertising revenues when the related services are performed. We defer programming payments received from subscribers in advance of the broadcast as "Unearned subscriber revenue
and deferred credits" in the Consolidated Balance Sheets until earned.

Broadcast Programming and Other Costs of Sale

We recognize the costs of television programming distribution rights when we distribute the related programming. We recognize the costs of television programming
rights to distribute live sporting events
for a season or tournament using the straight-line method over the course of the season or tournament. However, we recognize the costs for live sporting events with multi-year
contracts and minimum guarantee payments based on the ratio of each period's revenues to the estimated total contract revenues to be earned over the contract period. We evaluate estimated total
contract revenues at least annually.

We
defer advance payments in the form of cash and equity instruments from programming content providers for carriage of their signal and recognize them as a reduction of "Broadcast
programming and other costs of sale" in the Consolidated Statements of Operations on a straight-line basis over the related contract term. We record equity instruments at fair value based
on quoted market prices or values determined by management, which may include independent third-party valuations. We also record the amortization of a provision for above-market programming contracts
that we recorded in connection with the 1999 acquisition of certain premium subscription programming contracts from United States Satellite Broadcasting Company, Inc. as a reduction of
programming costs. We determined the provision based upon an independent third-party appraisal and recorded the provision at its net present value, with interest expense recognized over the remaining
term of the contract. We record the current and long-term portions of these deferred credits in the Consolidated Balance Sheets in "Unearned subscriber revenues and deferred credits" and
"Other Liabilities and Deferred Credits" and amortize these deferred credits using the interest method over the related contract terms.

Subscriber Acquisition Costs

Subscriber acquisition costs, or SAC, in the Consolidated Statements of Operations consist of costs we incur to acquire new DIRECTV subscribers through third
parties and our direct customer acquisition program.

Effective
January 1, 2004, we changed our method of accounting for subscriber acquisition costs to expense subscriber acquisition costs as incurred as subscribers activate the
DIRECTV service. Previously, we deferred a portion of subscriber acquisition costs, equal to the amount of profit to be earned from the subscriber, typically over the 12 month subscriber
contract, and amortized these costs to expense over the contract period. We continue to capitalize costs under our subscriber lease programs. See "Accounting Changes" below for further discussion of
the change in accounting method.

69

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Third
party customer acquisition costs represent direct costs we incur to acquire new DIRECTV subscribers through third parties, which include our national retailers as well as
independent satellite television retailers, dealers, regional Bell operating companies and others. These costs also consist of
third party commissions, print and television advertising and subsidies we incur for DIRECTV System equipment, if any. Although paid in advance, the retailer or dealer earns substantially all
commissions paid for third party customer acquisitions over 12 months from the date of subscriber activation. Should the subscriber cancel DIRECTV® service during the
12 month service period, we are reimbursed for the unearned portion of the commission by the retailer or dealer and record a decrease to third party customer acquisition costs.

Direct
customer acquisition costs consist primarily of hardware, installation, advertising, marketing and customer call center expenses we incur for new DIRECTV subscribers added through
our direct customer acquisition program.

Upgrade and Retention Costs

Upgrade and retention costs in the Consolidated Statements of Operations consist primarily of costs for loyalty programs offered to existing subscribers. The
costs for loyalty programs include the costs of installing or providing hardware under our movers program (for subscribers relocating to a new residence), multiple set-top receiver offers,
DVR (digital video recorder), HD (high-definition), local channel upgrade programs and other similar initiatives, and third party commissions we incur for the sale of additional
set-top receivers to existing subscribers.

Effective
January 1, 2004, we changed our method of accounting for upgrade and retention costs to expense the cost of installation and hardware under our loyalty programs.
Previously, we deferred a portion of upgrade and retention costs equal to the amount of profit to be earned from the subscriber, typically over the 12 month subscriber contract, and amortized
these costs to expense over the contract period. We continue to capitalize costs under our subscriber lease programs. See "Accounting Changes" below for further discussion of the change in accounting
method.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments we purchase with original maturities of three months or less.

Inventories

We state inventories at the lower of cost or market principally using the average cost method. Inventories consist of finished goods for DIRECTV System equipment
and DIRECTV System access cards.

Property, Satellites and Depreciation

We carry property and satellites at cost, net of accumulated depreciation. The amount we capitalize for satellites currently being constructed and those that have
been successfully launched include the costs of construction, launch, launch insurance, incentive obligations and related capitalized interest. We generally compute depreciation using the
straight-line method over the estimated useful lives of the assets. We amortize leasehold improvements over the lesser of the life of the asset or term of the lease.

70

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Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite lives are carried at historical cost and are subject to write-down, as needed, based upon an impairment
analysis that we must perform at least annually, or sooner if an event occurs or circumstances change that would more likely than not result in an impairment loss. We perform our annual impairment
analysis in the fourth quarter of each year. If an impairment loss results from the annual impairment test, we would record the loss as a pre-tax charge to operating income.

We
amortize other intangible assets using the straight-line method over their estimated useful lives, which range from 4 to 15 years.

Valuation of Long-Lived Assets

We evaluate the carrying value of long-lived assets to be held and used, other than goodwill and intangible assets with indefinite lives, when events
or circumstances warrant such a review. We consider the carrying value of a long-lived asset impaired when the anticipated undiscounted future cash flow from such asset is separately
identifiable and is less than its carrying value. In that event, we would recognize a loss based on the amount by which the carrying value exceeds the fair value of the long-lived asset.
We determine fair value primarily using the estimated future cash flows associated with the asset under review, discounted at a rate commensurate with the risk involved, or other valuation techniques.
We determine losses on long-lived assets to be disposed of in a similar manner, except that we reduce the fair values for the cost of disposal.

Foreign Currency

The local currency of some of our foreign operations is 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. We record the resulting
translation adjustment as part of accumulated other comprehensive income (loss), which we refer to as OCI, a separate component of stockholders' equity.

We
also have foreign operations where the U.S. dollar is the functional currency. We recognize gains and losses resulting from remeasurement of the foreign currency denominated assets,
liabilities and transactions into the U.S. dollar currently in the Consolidated Statements of Operations.

Investments and Financial Instruments

We maintain investments in equity securities of unaffiliated companies. We carry non-marketable equity securities at cost. We consider marketable
equity securities available-for-sale and they are carried at current fair value based on quoted market prices with unrealized gains or losses (excluding
other-than-temporary losses), net of taxes, reported as part of OCI. We continually review our investments to determine whether a decline in fair value below the cost basis is
"other-than-temporary." We consider, among other factors: the magnitude and duration of the decline; the financial health and business outlook of the investee, including
industry and sector performance, changes in technology, and operational and financing cash flow factors; and our intent and ability to hold the investment. If we judge the decline in fair value to be
other-than-temporary, we write-down the cost basis of
the security to fair value and recognize the amount in the Consolidated Statements of Operations as part of "Other, net" and record it as a reclassification adjustment from OCI.

Short-term
investments include investments in auction rate securities, which are considered available-for-sale and carried at fair value.

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We
account for investments in which we own at least 20% of the voting securities or have significant influence under the equity method of accounting. We record equity method investments
at cost and adjust for the appropriate share of the net earnings or losses of the investee. We record investee losses up to the amount of the investment plus advances and loans made to the investee,
and financial guarantees made on behalf of the investee.

The
carrying value of cash and cash equivalents, short-term investments, accounts and notes receivable, investments and other assets, accounts payable, and amounts included
in accrued liabilities and other meeting the definition of a financial instrument or debt approximated their fair values at December 31, 2005 and 2004.

Debt Issuance Costs

We defer costs we incur to issue debt and amortize these costs to interest expense using the straight-line method over the term of the respective
obligation.

Stock-Based Compensation

We grant restricted stock units and common stock options to our employees. For grants and modifications of awards on or after January 1, 2003, we recognize
compensation expense equal to the fair value of the stock-based award at grant over the course of its vesting period following Statement of Financial Accounting Standards, or SFAS, No. 123,
"Accounting for Stock-Based Compensation," as amended. We accounted for stock options, restricted stock units and other stock-based awards granted prior to January 1, 2003 under the intrinsic
value method of Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees." However, due to the completion of the News Corporation transactions on
December 22, 2003, all awards were modified and therefore, all awards are now accounted for under the fair value based method.

The
following table presents the effect on loss from continuing operations before cumulative effect of accounting change of recognizing compensation cost as if the fair value based
method had been applied to all outstanding and unvested stock options and restricted stock units for the year ended December 31:

2003(Dollars in Millions, Except Per Share Amounts)Reported Income (loss) from continuing operations before cumulative effect of accounting changes

$
(375.3
)Add: Stock compensation cost, net of taxes, included above


11.9Deduct: Total stock compensation cost, net of taxes, under the fair value based method


(107.8
)Pro forma Income (loss) from continuing operations before cumulative effect of accounting changes

$
(471.2
)Basic and diluted income (loss) from continuing operations before cumulative effect of accounting changes per common share:Reported

$
(0.27
)Pro forma


(0.34
)


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The
2005 and 2004 stock compensation costs include the cost of options granted to our CEO to replace stock options that News Corporation, his former employer, cancelled
and the cost associated with former employees of News Corporation who retained their News Corporation stock options and are now employed by us. The 2003 stock compensation cost includes a charge of
$15.2 million, net of tax, resulting from the acceleration of vesting for 11.5 million stock options as a result of the completion of the News Corporation transactions.

Income Taxes

We determine income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Under SFAS No. 109, we determine deferred tax assets and
liabilities based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which we expect the differences to
reverse. We must make certain estimates and judgments in determining income tax provisions, assessing the likelihood of recovering our deferred tax assets, and evaluating tax positions.

In
addition, the calculation of our tax liabilities involves evaluations and judgments of uncertainties in interpretations of complex tax regulations by various taxing authorities. We
provide for the appropriate amount when it is probable and estimable that an income tax liability will be due. As additional information becomes available, or we resolve these uncertainties with the
taxing authorities, revisions to those liabilities may be required resulting in additional provision or benefit from income taxes in our Consolidated Statements of Operations. While it is often
difficult to predict the final outcome or the timing of resolution, we believe that our accruals reflect the most probable outcome of known tax contingencies. For a discussion of our current tax
matters, see Note 21.

Advertising and Research and Development Costs

We expense advertising costs primarily in "Subscriber acquisition costs" and research and development costs in "General and administrative expenses" in the
Consolidated Statements of Operations as incurred. Advertising expenses, net of payments received from programming content providers for marketing support, were $199.0 million in 2005,
$170.1 million in 2004 and $199.0 million in 2003. Expenditures for research and development were $16.0 million in 2005, $49.0 million in 2004 and $54.6 million in
2003.

Market Concentrations and Credit Risk

We sell programming services and extend credit, in amounts generally not exceeding $100 each, to a large number of individual residential subscribers throughout
the United States and Latin America. As applicable, we maintain allowances for anticipated losses.

Accounting Changes

Subscriber Acquisition, Upgrade and Retention Costs.Effective January 1, 2004, we changed our method of accounting
for subscriber acquisition, upgrade and retention costs. Previously, we deferred a portion of these costs, equal to the amount of profit to be earned from the subscriber, typically over the
12 month subscriber contract, and amortized to expense over the contract period. We now expense subscriber acquisition, upgrade and retention costs as incurred as subscribers activate the
DIRECTV service. We determined that expensing such costs was preferable to the prior accounting method after considering the accounting practices of competitors and companies within similar industries
and the added clarity and ease of understanding our reported results for investors. We continue to capitalize costs under our subscriber lease programs. As a result of the change, on January 1,
2004, we expensed

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our
deferred subscriber acquisition cost balance of $503.9 million that was included in "Prepaid expenses and other" in the Consolidated Balance Sheets as of December 31, 2003 as a
cumulative effect of accounting change. The amount of the cumulative effect was $310.5 million, net of taxes. Had the new method of accounting been applied during the year ended
December 31, 2003, operating costs would have increased by $89.3 million.

The
following table sets forth our income (loss) from continuing operations before cumulative effect of accounting changes and net income (loss) on a pro forma basis as if the change in
accounting for subscriber acquisition, upgrade and retention costs had been applied retroactively for the years ended December 31, 2004 and December 31, 2003:

|                                                                                                 |                                                            | 2004 |          | 2003  |  
|------------------------------------------------------------------------------------------------ | ---------------------------------------------------------- | ---- | -------- | ----- | -
|
|Reported income (loss) from continuing operations before cumulative effect of accounting changes |                                                            | $    | (1,056.4 | )     | $
|                                                                                                 | Reported basic and diluted income (loss) per common share  |      |          | (0.77 | )
|Pro forma income (loss) from continuing operations                                               |                                                            |      | (1,056.4 | )     |  
|                                                                                                 | Pro forma basic and diluted income (loss) per common share |      |          | (0.77 | )
|Reported net income (loss)                                                                       |                                                            |      | (1,949.2 | )     |  
|                                                                                                 | Reported basic and diluted income (loss) per common share  |      |          | (1.41 | )
|Pro forma net income (loss)                                                                      |                                                            |      | (1,638.7 | )     |  
|                                                                                                 | Pro forma basic and diluted income (loss) per common share |      |          | (1.18 | )

Variable Interest Entities.In January 2003, the Financial Accounting Standards Board, or FASB, issued Interpretation
No. 46 (revised December 2003), "Consolidation of Variable Interest Entitiesan interpretation of ARB No. 51," or FIN 46. FIN 46 requires the consolidation of a
variable interest entity, or VIE, where an equity investor achieves a controlling financial interest through arrangements other than voting interests, and it is determined that the investor will
absorb a majority of the expected losses and/or receive the majority of residual returns of the VIE. We applied this interpretation beginning on July 1, 2003 for entities created prior to
February 1, 2003. We determined that the partially-owned LOCs providing DIRECTV programming services in Venezuela and Puerto Rico, of which we owned 19.5% and 40.0%, respectively, were VIEs. As
a result, on July 1, 2003, we began consolidating the Venezuelan and Puerto Rican LOCs resulting in an increase in total assets of $55.1 million, which included $29.1 million of
cash. The adoption of this interpretation resulted in us recording an after-tax charge in 2003 of $64.6 million to cumulative effect of accounting changes in the Consolidated
Statements of Operations.

Prior
to July 1, 2003, we accounted for our investments in the Venezuelan and Puerto Rican LOCs under the equity method of accounting. As a result of the transactions completed
upon DLA LLC's emergence from bankruptcy in 2004, the Venezuelan and Puerto Rican LOC's are now wholly-owned consolidated subsidiaries of DLA LLC.

Stock-Based Compensation.As discussed above, beginning on January 1, 2003, we adopted the fair value based method of
accounting for stock-based employee compensation of SFAS No. 123, "Accounting for Stock-Based Compensation" as amended by SFAS No. 148, "Accounting for Stock-Based
CompensationTransition and Disclosurean Amendment of SFAS No. 123." Under this method, compensation expense equal to the fair value of the stock-based award at grant
is recognized over the course of its vesting period. We elected to follow the prospective method of adoption, which

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resulted
in the recognition of fair value based compensation cost in the Consolidated Statements of Operations for stock options and other stock-based awards granted to employees or modified on or
after January 1, 2003.

Other.In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assetsan
amendment of APB Opinion No. 29," or SFAS No. 153. SFAS No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets of APB Opinion No. 29 and
replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity
are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The
adoption of this standard did not have a significant impact on our consolidated results of operations or financial position.

New Accounting Standards

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting
Changes, and Statement No. 3, Reporting Accounting Changes in Interim Financial Statements," or SFAS No. 154. SFAS No. 154 changes the requirements for the accounting for, and
reporting of, a change in accounting principle. Previously, most voluntary changes in accounting principles were required to be recognized by way of a cumulative effect adjustment within net income
during the period of the change. SFAS No. 154 generally requires retrospective application to prior periods' financial statements of voluntary changes in accounting principles. SFAS
No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, SFAS No. 154 does not change the transition provisions of any existing
accounting pronouncements. We do not believe SFAS No. 154 will have a material effect on our consolidated results of operations or financial position on the date of adoption.

In
December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment," or SFAS No. 123R. SFAS No. 123R, which replaces SFAS No. 123 and
supersedes APB Opinion No. 25, requires that compensation cost relating to share-based payment transactions be recognized in the financial statements, based on the fair value of the equity or
liability instruments issued. SFAS No. 123R is effective as of the beginning of the first annual reporting period that begins after June 15, 2005 and
applies to all awards granted, modified, repurchased or cancelled after the effective date. We do not expect the adoption of this standard to have a significant impact on our consolidated results of
operations or financial position.

Note 3: Acquisitions, Divestitures and Other Transactions

Acquisitions



On October 8, 2004, we entered into a series of transactions with News Corporation, Televisa, Globo and Liberty that provide for the Sky Transactions. The
Sky Transactions are designed to strengthen the operating and financial performance of DTVLA by consolidating the DTH platforms of DTVLA and Sky Latin America into a single platform in each of the
major territories served in the region. Total cash consideration for the equity interests in the Sky Latin America platforms is approximately $602 million, of which we paid $398 million
in October 2004. The remainder is subject to adjustment and will be paid at the completion of the transactions. These transactions are discussed in more detail as follows.

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In
Brazil, DIRECTV Brasil and Sky Brasil have agreed to merge, with our DIRECTV Brasil subscribers migrating to the Sky Brasil platform. In addition, we intend to acquire the interests
of News Corporation and Liberty in Sky Brasil upon completion, acquiring in excess of 70% of the merged platform. The transactions in Brazil are subject to local regulatory approval, which we expect
to receive mid-year 2006. If we do not obtain required regulatory approvals, we may consider selling or shutting down DIRECTV Brasil with the expectation that following such an alternative
transaction, we would be able to obtain regulatory approval to purchase the interests of News Corporation and Liberty in Sky Brasil. We expect to pay $385 million, as adjusted, for the
acquisition of the News Corporation and Liberty interest in Sky Brasil, of which $368 million was prepaid on October 8, 2004. The prepayment, which is included in "Investments and Other
Assets" in our
Consolidated Balance Sheets as of December 31, 2005, must be refunded should the transactions be terminated due to the inability to obtain local regulatory approval. The remaining consideration
will be paid at the close of the transaction. We will consolidate the operations of Sky Brasil and have agreed to guarantee all of Sky Brasil's approximately $210 million of outstanding bank
debt as well as all of their long-term transponder obligations upon receipt of local regulatory approval.

DTVLA's
local operating company in Mexico, DIRECTV Mexico, has sold its subscriber list to Sky Mexico in exchange for a note receivable and, after completing the transfer of its
subscribers to Sky Mexico ceased providing services during 2005. As a result of the completion of the migration of the DIRECTV Mexico subscribers to Sky Mexico, we recognized a gain based on the
earned value of the note received from Sky Mexico of approximately $70.4 million in "(Gain) loss from asset sales and impairment charges, net" in our Consolidated Statements of Operations
during 2005. During 2004, we recorded a pre-tax charge of $36.5 million in "(Gain) loss from asset sales and impairment charges, net" in our Consolidated Statements of Operations to
write-down certain of DIRECTV Mexico's long-lived assets to their fair values in connection with the shut-down of its operations. We have the right to exchange the
note receivable for a 12% equity interest in Sky Mexico and plan to acquire the interests of News Corporation and Liberty in Sky Mexico for $373 million in cash, which would result in DTVLA
owning 47% of the equity of Sky Mexico. Televisa has the right to acquire a portion of the equity interest in Sky Mexico from us for $58.7 million in cash upon receipt of certain regulatory
approvals, which will reduce DTVLA's equity interest to approximately 41%. We will account for our investment in Sky Mexico under the equity method of accounting and upon completion of the
transaction, we have agreed to guarantee our attributable share of its long-term transponder obligations. See Note 22 for further discussion regarding the completion of this
transaction in 2006.

In
the rest of the region, we have acquired a 100% interest in Sky Multi-Country Partners and certain related entities, or PanAmericana, from News Corporation, Liberty, Globo and
Televisa, for $30 million, which was paid on October 8, 2004. We began consolidating Sky's PanAmericana entities on October 8, 2004 and have recorded approximately
$13.6 million of goodwill based on our allocation of the purchase price. As part of this transaction, News Corporation has agreed to reimburse us $127 million for Sky's PanAmericana
entities' net liabilities we assumed. The present value of News Corporation's $127 million future reimbursement to us is included in "Investments and Other Assets" in our Consolidated Balance
Sheets as of December 31, 2005. The $127 million reimbursement from News Corporation will be received at the completion of the Sky Brasil transaction.

In
Darlene Investments LLC, or Darlene, has filed suit alleging fraud, self-dealing and violation of fiduciary, contractual and other duties against us and certain of our
subsidiaries (including DLA LLC), News Corporation and others seeking, among other things, injunctive relief to preclude the consummation of the Sky Transactions. See Note 21 for more
information regarding this case.

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Effective June 1, 2004, DIRECTV U.S. and the NRTC agreed to end the NRTC's exclusive DIRECTV service distribution agreement and all related agreements. As
consideration, DIRECTV U.S. agreed to pay the NRTC approximately $4.4 million per month through June 2011, or $322.1 million on present value basis, calculated using an estimated
incremental annual borrowing rate of 4.3%. As a result of this agreement, DIRECTV U.S. has the right to sell its services in all territories across the United States. DIRECTV U.S. recorded the present
value of the cash payments to be made to the NRTC plus fees paid associated with the transaction, the total of which amounted to $334.1 million, in "Accounts payable and accrued liabilities"
and "Other Liabilities and Deferred Credits," with a corresponding amount recorded as distribution rights in "Intangible Assets, net" in our Consolidated Balance Sheets. DIRECTV U.S. is amortizing the
distribution rights intangible asset to expense over seven years, which represented the remaining life of the terminated DIRECTV service distribution agreement.

In
connection with the NRTC transaction described above, during the second and third quarters of 2004, all NRTC members, representing approximately 357,000 subscribers, excluding Pegasus
Satellite Television, Inc., or Pegasus, elected to sell their subscribers to DIRECTV U.S. We paid $187.2 million in the third quarter of 2004 for members electing a lump-sum
payout plus additional fees associated with the transaction and recorded $198.3 million in "Accrued liabilities and other" and "Other Liabilities and Deferred Credits" for those members
electing the long-term payment option of seven years plus interest. As a result, DIRECTV U.S. recorded a subscriber related intangible asset in "Intangible Assets, net" in our Consolidated
Balance Sheets amounting to $385.5 million, which is being amortized over the estimated subscriber lives of approximately six years.

As
of December 31, 2005, DIRECTV U.S. owes the NRTC and its members who elected the long-term payment option $424.0 million, which is payable approximately as
follows: $66.9 million in 2006, $71.0 million in 2007, $75.3 million in 2008, $79.9 million in 2009, $83.3 million in 2010, and $47.6 million thereafter.
These amounts are recorded in "Accrued liabilities and other" and "Other Liabilities and Deferred Credits" in our Consolidated Balance Sheets.



On August 27, 2004, DIRECTV U.S. acquired the subscribers and certain assets, consisting primarily of accounts receivable, of Pegasus for a total purchase
price of $987.9 million. The total net cash consideration DIRECTV U.S. paid to Pegasus amounted to $773.0 million, which is the total purchase price net of amounts owed by Pegasus for
programming and other services, and a May 2004 $63 million judgment in favor of DIRECTV U.S. As a result of the transaction, DIRECTV U.S. recorded a subscriber related intangible asset
in "Intangible Assets, net" in our Consolidated Balance Sheets
amounting to $951.3 million, which DIRECTV U.S. is amortizing over the estimated subscriber lives of approximately five years.

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As part of an arrangement with Telesat Canada, or Telesat, a Canadian telecommunications and broadcast services company, DIRECTV U.S. agreed to provide Telesat
the use of the DIRECTV 3 satellite, which was previously used as an in-orbit spare, through the end of its useful life and in return, Telesat agreed to allow DIRECTV U.S. to use its 72.5
degrees west longitude, or WL, orbital location through 2008. As additional consideration for DIRECTV U.S.' use of 72.5 WL, DIRECTV U.S. also agreed to allow Telesat to use DIRECTV 5 or a similar
satellite for a five year period, subject to certain conditions, beginning at the end of 2008. Upon receipt of final approval from the Federal Communications Commission, or FCC, in the third quarter
of 2004, DIRECTV U.S. transferred DIRECTV 3 to Telesat and relocated one of its satellites to 72.5 WL to provide additional local channels and other programming in the United States. We recorded these
transactions as an exchange of similar productive assets based on the net book values of the assets exchanged. As a result, we recorded a $162.6 million 72.5 WL orbital license intangible
asset, which is equal to the $71.5 million net book value of the DIRECTV 3 satellite transferred from satellites, net, and an accrual for deferred lease revenues of $91.1 million,
representing the value of the transferred satellite over the five year lease period. We are amortizing the 72.5 WL orbital license intangible asset over the four year contract period and will
recognize the deferred lease revenues as an offset to depreciation expense during the five year lease period beginning at the end of 2008.

Divestitures



On December 6, 2004, we announced an agreement, which we refer to as the SkyTerra transaction, to sell a 50% interest in HNS LLC to SkyTerra. On
April 22, 2005, upon receipt of regulatory approval and completion of the required financing transactions, we completed the contribution of the HNS net assets to HNS LLC and the sale of the 50%
interest in HNS LLC to SkyTerra. In exchange for our contribution of the HNS assets to HNS LLC we received cash proceeds of $196.0 million, and for the sale of the 50% interest in HNS LLC, we
received proceeds of $61.4 million, including cash of $50.0 million, and 300,000 shares of SkyTerra common stock with a fair value of $11.4 million.

We
recorded pre-tax impairment charges of $25.3 million during 2005 to "(Gain) loss from asset sales and impairment charges, net" in our Consolidated Statements of
Operations primarily related to an increase in the book value of the assets contributed in excess of the fair value indicated by the sale price. Including the $25.3 million of charges in 2005
and the $190.6 million charge we recorded upon announcement of this transaction in the fourth quarter of 2004, the total impairment charge related to this transaction was $215.9 million.

In
January 2006, we completed the sale of our remaining 50% interest in HNS LLC to SkyTerra.

"Assets
of business held for sale" and "Liabilities of business held for sale" in the Consolidated Balance Sheets as of December 31, 2004 include substantially all of the
remaining assets and liabilities of HNS. The carrying amounts of major classes of HNS' assets and liabilities that were included in

78

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"Assets
of business held for sale" and "Liabilities of business held for sale" in our Consolidated Balance Sheets were as follows:

December 31,
2004(Dollars in Millions)Total current assets

$
314.3Total assets


521.1Total current liabilities


204.9Total liabilities


240.6




As part of our sale of HNS' set-top receiver manufacturing operations to Thomson for $250.0 million in cash in June 2004, DIRECTV U.S.
entered into a long-term purchase agreement, or the Agreement, with Thomson for the supply of set-top receivers. The proceeds in excess of the book value of the HNS assets sold
of approximately $200 million have been deferred and will be recognized over the term of the Agreement, as described below. As part of the Agreement, as amended, DIRECTV U.S. can earn a
$57.0 million rebate from Thomson if Thomson's aggregate sales of DIRECTV U.S.' set-top receivers equal at least $4.0 billion over the initial five year contract term plus an
optional one year extension period, or the Contract Term. Also as part of the Agreement, as amended, DIRECTV U.S. can earn, on a pro rata basis, an additional $63.0 million rebate from Thomson
if Thomson's aggregate sales of DIRECTV U.S.' set-top receivers are in excess of $4.0 billion and up to $5.7 billion during the Contract Term. The approximate
$200 million of deferred proceeds have been recorded in "Accrued liabilities and other" and "Other Liabilities and Deferred Credits" in our Consolidated Balance Sheets and is recognized as an
offset to "Subscriber acquisition costs" and "Upgrade and retention costs" in our Consolidated Statements of Operations, as appropriate, on a pro rata basis as the set-top receivers
purchased from Thomson are activated. DIRECTV U.S. has determined that, based upon projected set-top receiver requirements, it is probable and reasonably estimable that the minimum
purchase requirement will be met for the $57.0 million rebate during the initial contract period. DIRECTV U.S. records a proportionate amount of the $57.0 million rebate as a credit to
"Subscriber acquisition costs" and "Upgrade and retention costs" in our Consolidated Statements of Operations upon set-top receiver activation over the initial contract period with a
corresponding entry to "Accounts and notes receivable, net" in our Consolidated Balance Sheets. As a result, in 2005 DIRECTV U.S. recognized $46.3 million of the deferral and the
initial rebate in our Consolidated Statements of Operations. DIRECTV U.S. recognized $21.4 million of the deferral and rebate in 2004.

We
included the approximately $200 million in cash received from Thomson in cash flows from operating activities in the Consolidated Statements of Cash Flows for the year ended
December 31, 2004.

As
we expect to have significant continuing transactions with the set-top receiver manufacturing operations resulting from the Agreement, the financial results of the
set-top receiver manufacturing operations prior to June 2004 are reported in continuing operations, and not as a discontinued operation.

HNS'
operating results are included in continuing operations in our Consolidated Statements of Operations through April 22, 2005. The following table sets forth our pro forma
revenues and

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operating
profit (loss) excluding the HNS operations that were contributed as part of the SkyTerra transaction and HNS' set-top receiver manufacturing operations that were sold in
June 2004:

Years Ended December 31,2005

2004(Dollars in Millions)Revenues

$
12,956.7

$
10,437.9Operating Profit (Loss)


693.4


(340.9
)




In 2004, we sold our approximately 80.4% interest in PanAmSat to an affiliate of Kohlberg Kravis Roberts & Co. L.P. for approximately $2.64 billion
in cash. The total loss on the sale of PanAmSat of $723.7 million, net of taxes, for the year ended December 31, 2004 includes direct costs associated with the transaction and our
retention of certain tax liabilities of PanAmSat.

Operating
results of the discontinued operations of PanAmSat were as follows:

Years Ended December 31,2004

2003(Dollars in Millions)Revenues

$
518.9

$
831.0Income before income taxes

$
65.3

$
134.5Income tax expense


(3.6
)

(30.4
)Minority interests and other


(13.6
)

(29.7
)Net income from discontinued operations, net of taxes

$
48.1

$
74.4




In the second quarter of 2004, HNS agreed to sell its approximate 55% ownership interest in HSS for $226.5 million in cash, which we received in
June 2004. We recognized an after-tax gain of approximately $90.7 million ($176.1 million pre-tax) during 2004, included in "Income (loss) from
discontinued operations, net of taxes" in our Consolidated Statements of Operations.

Operating
results of the discontinued operations of HSS are as follows:

Years Ended December 31,2004

2003(Dollars in Millions)Revenues

$
26.0

$
51.0Income before income taxes

$
5.4

$
17.2Income tax expense


(0.6
)

(2.0
)Minority interests and other


(2.1
)

(6.8
)Net income from discontinued operations, net of taxes

$
2.7

$
8.4


80

---





During 2003, we recorded a gain of $1.6 million to "Income (loss) from discontinued operations, net of taxes" in the Consolidated Statements of Operations
as a result of final adjustments to accruals recorded for the shut-down of DIRECTV Broadband. During 2003, we made net payments of $69.5 million to settle obligations of DIRECTV
Broadband, which are included in "Cash Flows from Discontinued Operations" in the Consolidated Statements of Cash Flows. These payments primarily represent cash used in operating activities.

Pursuant
to a settlement agreement executed on July 15, 2003 related to the purchase price adjustment dispute arising from the 2000 sale of our satellite systems manufacturing
businesses to The Boeing Company, or Boeing, we recorded an after-tax charge of $6.3 million to "Income (loss) from discontinued operations, net of taxes" in the Consolidated
Statements of Operations during 2003. On July 18, 2003, we paid the $360.0 million settlement amount to Boeing, which is included in "Cash Flows from Discontinued Operations" in the
Consolidated Statements of Cash Flows. This payment represents cash used in investing activities.

As
discussed in more detail in Note 21, during 2005, we recorded a $31.3 million gain in "Income (loss) from discontinued operations, net of taxes" in our Consolidated
Statements of Operations that resulted from a favorable tax settlement related to a previously discontinued operation.

"Income
(loss) from discontinued operations, net of taxes," as reported in the Consolidated Statements of Operations, is comprised of the following:

Years Ended December 31,2005

2004

2003(Dollars in Millions, Except Per Share Amounts)Income from discontinued operations, net of taxes

$


$
50.8

$
82.8Gain (loss) on sale of discontinued operations, net of taxes


31.3


(633.1
)

(4.7
)Income (loss) from discontinued operations, net of taxes

$
31.3

$
(582.3
)
$
78.1Basic and Diluted Earnings (Loss) Per Common Share:Income from discontinued operations, net of taxes

$


$
0.04

$
0.06Gain (loss) on sale of discontinued operations, net of taxes


0.02


(0.46
)

Income (loss) from discontinued operations, net of taxes

$
0.02

$
(0.42
)
$
0.06


81

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Note 4: Satellites, Net and Property and Equipment, Net

The following table sets forth the amounts recorded for satellites, net and property and equipment, net at December 31:

|                                        |                             | Estimated
Useful Lives
(years) |  | 2005 |         | 2004   
|--------------------------------------- | --------------------------- | ------------------------------ |  | ---- | ------- | -------
|
|Satellites                              |                             | 12-16                          |  | $    | 1,571.7 |        
|Satellites under construction           |                             |                               |  |      | 834.2   |        
|                                        |                             |                                |  |      |         |        
|Total                                   |                             |                                |  |      | 2,405.9 |        
|Less accumulated depreciation           |                             |                                |  |      | 530.4   |        
|                                        |                             |                                |  |      |         |        
|Satellites, net                         |                             |                                |  | $    | 1,875.5 |        
|                                        |                             |                                |  |      |         |        
|Land and improvements                   |                             | 9-30                           |  | $    | 29.2    |        
|Buildings and leasehold improvements    |                             | 4-30                           |  |      | 209.7   |        
|Machinery and equipment                 |                             | 3-24                           |  |      | 1,827.3 |        
|Subscriber leased set-top receivers     |                             | 4-7                            |  |      | 1,036.4 |        
|Furniture, fixtures and office machines |                             | 3-15                           |  |      | 71.9    |        
|Construction in-progress                |                             |                               |  |      | 290.9   |        
|                                        |                             |                                |  |      |         |        
|Total                                   |                             |                                |  |      | 3,465.4 |        
|Less accumulated depreciation           |                             |                                |  |      | 2,266.2 |        
|                                        |                             |                                |  |      |         |        
|                                        | Property and Equipment, net |                                |  |      | $       | 1,199.2
|                                        |                             |                                |  |      |         |        

We
capitalized interest costs of $30.5 million in 2005, $101.2 million in 2004 and $120.0 million in 2003 as part of the cost of our property and satellites under
construction. Depreciation expense was $501.6 million in 2005, $651.4 million in 2004 and $653.8 million in 2003.

Note 5: Asset Sales and Impairment Charges

We recorded the following transactions in "(Gain) loss from asset sales and impairment charges, net" in our Consolidated Statement of Operations during the years
ended December 31:

2005

2004(Dollars in Millions)SkyTerra transaction impairment charge

$
25.3

$
190.6DIRECTV Mexico gain on sale of subscriber list


(70.4
)

DIRECTV Mexico impairment charge





36.5SPACEWAY impairment charge





1,466.1Total

$
(45.1
)
$
1,693.2


See
Note 3 for further discussion of the SkyTerra and DIRECTV Mexico transactions.

SPACEWAY Assets

In the third quarter of 2004, we decided to utilize certain of our SPACEWAY assets for DIRECTV U.S. HD programming, which included two satellites, SPACEWAY 1 and
SPACEWAY 2, that were nearing completion and ground segment equipment and systems. This decision to no longer use these

82

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assets
for the SPACEWAY broadband service triggered an impairment test of our investment in the SPACEWAY assets under SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." The SPACEWAY system was designed as a next-generation satellite-based broadband data platform intended to upgrade and expand HNS' broadband data businesses.
Since the book value of the SPACEWAY system had been supported by the expected cash flows from the SPACEWAY broadband business plan that management no longer intended to pursue, the assets were
considered impaired. Further, a majority of the capitalized value of the SPACEWAY assets related to functionality that will not be utilized for the DTH business. The impairment charge was determined
by comparing the fair value of the SPACEWAY assets to their book value as of September 30, 2004. The fair value of the two satellites and certain related ground segment assets was determined
based on the fair value of those assets as configured to DIRECTV U.S.' DTH business. The estimation of fair value of the two satellites was based on an analysis performed by an independent valuation
expert.

Based
on the results of this analysis, we reduced the capitalized value of the SPACEWAY assets in "Satellites, net" by $1.099 billion to $305 million, and the capitalized
value in "Property and Equipment, net" by about $367 million to $30 million. These reductions were recorded as a $1.466 billion pre-tax loss in "(Gain) loss from asset
sales and impairment charges, net" ($903 million after-tax) in our Consolidated Statements of Operations during the third quarter of 2004.

Note 6: Goodwill and Intangible Assets

The changes in the carrying amounts of goodwill by reporting unit for the years ended December 31, 2005 and 2004 were as follows:

|                                |  | DIRECTV U.S. |         | DIRECTV
Latin America |   | Network
Systems |  | Total
|------------------------------- |  | ------------ | ------- | --------------------- | - | --------------- |  | -----
|
|Balance as of January 1, 2004   |  | $            | 3,031.7 |                       | $ |                |  | $    
|Additions and other             |  |              |        |                       |   | 12.4            |  |      
|                                |  |              |         |                       |   |                 |  |      
|Balance as of December 31, 2004 |  |              | 3,031.7 |                       |   | 12.4            |  |      
|Additions and other             |  |              |        |                       |   | 1.2             |  |      
|                                |  |              |         |                       |   |                 |  |      
|Balance as of December 31, 2005 |  | $            | 3,031.7 |                       | $ | 13.6            |  | $    
|                                |  |              |         |                       |   |                 |  |      

We
performed our annual impairment tests for goodwill and orbital slots in the fourth quarters of 2005, 2004, and 2003. The estimated fair values for each reporting unit and the orbital
slots exceeded our carrying values, and accordingly, no impairment losses were recorded during 2005, 2004, or 2003.

83

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The
following table sets forth the amounts recorded for intangible assets at December 31:

|                         |  |            |  | December 31, 2005 |         | December 31, 2004
|------------------------ |  | ---------- |  | ----------------- | ------- | -----------------
|
|
|Orbital slots            |  | Indefinite |  | $                 | 463.0   |                  
|72.5 WL Orbital license  |  | 4          |  |                   | 162.6   |                  
|Subscriber related       |  | 5-10       |  |                   | 1,340.1 |                  
|Dealer network           |  | 15         |  |                   | 130.0   |                  
|Distribution rights      |  | 7          |  |                   | 334.1   |                  
|Intangible pension asset |  |           |  |                   | 9.8     |                  
|                         |  |            |  |                   |         |                  
|Total Intangible Assets  |  |            |  | $                 | 2,439.6 |                  
|                         |  |            |  |                   |         |                  

Amortization
expense of intangible assets was $350.7 million in 2005 and $167.6 million in 2004 and $74.0 million in 2003.

Estimated
amortization expense for intangible assets in each of the next five years and thereafter is as follows: $350.9 million in 2006; $350.9 million in 2007;
$341.0 million in 2008; $248.1 million in 2009; $89.0 million in 2010 and $55.9 million thereafter.

Note 7: Investments

Investments in marketable equity and debt securities stated at current fair value and classified as available-for-sale were as follows:

December 31,2005

2004(Dollars in Millions)Marketable equity securities

$
71.2

$
60.2Marketable debt securities





112.9Total

$
71.2

$
173.1


We
recorded $23.1 million in 2005, $22.0 million in 2004 and $273.9 million in 2003 of accumulated unrealized gains, net of taxes, as part of accumulated other
comprehensive income.

We
have investments in companies that we accounted for under the equity method of accounting totaling $110.6 million in 2005 and $31.2 million in 2004.

See
Note 15 for additional information regarding our sale of investments.

84

---





Note 8: Accrued Liabilities and Deferred Credits

Accrued Liabilities and Other

|                                                                    |       | December 31,
|------------------------------------------------------------------- | ----- | ------------
|
|
|Payroll and other compensation                                      |       | $           
|Current portion of provision for above-market programming contracts |       |             
|Third party commissions                                             |       |             
|Interest payable                                                    |       |             
|Other                                                               |       |             
|                                                                    |       |             
|                                                                    | Total |             
|                                                                    |       |             

Other Liabilities and Deferred Credits

|                                                                       |       | December 31,
|---------------------------------------------------------------------- | ----- | ------------
|
|
|NRTC transaction obligations                                           |       | $           
|Programming costs and provision for above-market programming contracts |       |             
|Deferred credits                                                       |       |             
|Accrued income taxes                                                   |       |             
|Pension and other postretirement benefits                              |       |             
|Obligation under capital lease                                         |       |             
|Other                                                                  |       |             
|                                                                       |       |             
|                                                                       | Total |             
|                                                                       |       |             

Note 9: Short-Term Borrowings and Long-Term Debt

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

|                                  |                                                                   |              |   | December 31,
|--------------------------------- | ----------------------------------------------------------------- | ------------ | - | ------------
|
|
|
|Short-term borrowings             |                                                                   |             |   | $           
|Current portion of long-term debt |                                                                   | 5.813%-10.14 | % |             
|                                  |                                                                   |              |   |             
|                                  | Total short-term borrowings and current portion of long-term debt |              |   |             
|                                  |                                                                   |              |   |             

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---



Long-Term Debt

|                     |  |       |   | December 31,
|-------------------- |  | ----- | - | ------------
|
|
|
|8.375% senior notes  |  | 8.375 | % | $           
|6.375% senior notes  |  | 6.375 | % |             
|Credit facility      |  | 5.813 | % |             
|Other debt           |  |      |   |             
|                     |  |       |   |             
|Total long-term debt |  |       |   |             
|Less current portion |  |       |   |             
|                     |  |       |   |             
|Long-term debt       |  |       |   | $           
|                     |  |       |   |             

During
the second quarter of 2005, we refinanced a significant portion of our outstanding debt, as discussed in more detail below. As of December 31, 2005, our outstanding debt
included the following notes payable and credit facility:

Notes Payable.Our $910.0 million in senior notes outstanding at December 31, 2005 are due in 2013, bear
interest at 8.375%, and are referred to as the 8.375% senior notes. Principal on the 8.375% senior notes is payable upon maturity, while interest is payable semi-annually.

Our
$1,000.0 million in senior notes outstanding at December 31, 2005 are due in 2015, bear interest at 6.375%, and are referred to as the 6.375% senior notes. Principal on
the 6.375% senior notes is payable upon maturity, while interest is payable semi-annually beginning December 15, 2005.

The
8.375% senior notes and the 6.375% senior notes were issued by DIRECTV Holdings and its wholly owned subsidiary, DIRECTV Financing Co., Inc., or DIRECTV Financing, and have
been registered under the Securities Act of 1933, as amended. The 8.375% senior notes and the 6.375% senior notes are unsecured and have been fully and unconditionally guaranteed, jointly and
severally, by each of DIRECTV U.S.' material domestic subsidiaries (other than DIRECTV Financing).

The
fair value of our 8.375% senior notes was approximately $982.3 million at December 31, 2005 with a carrying value of $910.0 million and $1,569.8 million
at December 31, 2004 with a carrying value of $1,400.0 million. The fair value of our 6.375% senior notes was approximately $983.8 million at December 31, 2005 with a
carrying value of $1,000.0 million. The fair values were calculated based on quoted market prices on those dates.

Credit Facility.At December 31, 2005, our senior secured credit facility consisted of a $500.0 million
six-year Term Loan A, a $1,000.0 million eight-year Term Loan B and a $500.0 million undrawn six-year revolving credit facility. The Term Loan A and
Term Loan B components of the senior secured credit facility currently bear interest at a rate equal to the London InterBank Offered Rate, or LIBOR, plus 1.25% and 1.50%, respectively. In addition, we
pay a commitment fee of 0.225% per year for the unused commitment under the revolving credit facility. The interest rate and commitment fee may be increased or decreased under certain conditions. The
senior secured credit facility is secured by substantially all of DIRECTV U.S.' assets and is fully and unconditionally guaranteed, jointly and severally by all of DIRECTV U.S.' material domestic
subsidiaries (other than DIRECTV Financing).

86

---



Our
notes payable and credit facility mature as follows: $9.4 million in 2006; $10.1 million in 2007; $47.6 million in 2008; $97.6 million in 2009,
$297.5 million in 2010 and $2,949.7 million thereafter. These amounts do not reflect potential prepayments that may be required under our senior secured credit facility, which could
result from a computation of excess cash flows that we may be required to make at each year end under the credit agreement. We were not required to make a prepayment for the years ended
December 31, 2005 and 2004. However, we made a prepayment of $201.0 million on April 15, 2004 for the year ended December 31, 2003. The amount of interest accrued related
to our outstanding debt was $28.4 million at December 31, 2005 and $36.5 million at December 31, 2004. The unamortized bond premium included in other debt as of
December 31, 2005 was $3.1 million.

Covenants and Restrictions.The senior secured credit facility requires DIRECTV U.S. to comply with certain financial
covenants. The senior notes and the senior secured credit facility also include covenants that restrict DIRECTV U.S.' ability to, among other things, (i) incur additional indebtedness,
(ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates,
(v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vii) make voluntary prepayments of
certain debt, in each case subject to exceptions as provided in the credit agreement and senior notes indentures. Should we fail to comply with these covenants, all or a portion of our borrowings
under the senior notes and senior secured credit facility could become immediately payable and the revolving credit facility could be terminated. At December 31, 2005, DIRECTV U.S. was in
compliance with all such covenants.

2005 Refinancing Transactions.In April 2005, we replaced our prior credit facility with the senior secured credit
facility described above. The senior secured credit facility was initially comprised of a $500.0 million six-year Term Loan A, a $1,500.0 million eight-year Term
Loan B, both of which were fully funded, and a $500.0 million undrawn six-year revolving credit facility. We used a portion of the $2,000.0 million proceeds from the
transaction to repay our prior credit facility that had a then outstanding balance of $1,001.6 million and to pay related financing costs and accrued interest. Borrowings under the prior credit
facility bore interest at a rate equal to LIBOR plus 1.75%.

On
May 19, 2005, we redeemed $490.0 million of our then outstanding $1,400.0 million 8.375% senior notes at a redemption price of 108.375% plus accrued and unpaid
interest, for a total of $538.3 million.

On
June 15, 2005, the Co-Issuers issued $1,000.0 million of 6.375% senior notes. We used a portion of the proceeds from the transaction to repay
$500.0 million of the Term Loan B portion of our senior secured credit facility and to pay related financing costs.

The
repayment of our prior senior secured credit facility, the partial repayment of our senior secured credit facility and the partial redemption of our 8.375% senior notes resulted in a
2005 pre-tax charge of $64.9 million ($40.0 million after tax) of which $41.0 million was associated with the premium paid for the redemption of our 8.375% senior
notes and $23.9 million with the write-off of a portion of our deferred debt issuance costs and other transaction costs. The charge was recorded in "Other, net" in the Consolidated
Statements of Operations.

Prior Debt Transactions.During 2003, we raised approximately $2,625.0 million of cash through the issuance of
$1,400.0 million of 8.375% senior notes and $1,225.0 million of borrowings under a credit facility. We used a portion of these proceeds to repay the $506.3 million outstanding
principal balance plus accrued interest under a prior credit facility agreement, which then terminated.

87

---



Restricted Cash.Restricted cash of $19.3 million as of December 31, 2005 and $36.0 million as of
December 31, 2004 was included as part of "Prepaid expenses and other" in our Consolidated Balance Sheets. These deposits secure certain of our letters of credit and obligations of certain
foreign subsidiaries. Restrictions on the cash will be removed as the letters of credit expire and the foreign subsidiaries' obligations are satisfied or terminated.

Note 10: Income Taxes

We base our income tax expense or benefit on reported "Income (Loss) From Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of
Accounting Changes." 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.

Prior
to our split-off from GM on December 22, 2003, we and our domestic subsidiaries joined with GM in filing a consolidated U.S. federal income tax return and
combined returns for certain states. The portion of the consolidated income tax liability or receivable we recorded during this period was generally equivalent to the amount that would have been
recorded on a separate return basis.

Our
income tax (expense) benefit consisted of the following for the years ended December 31:

|                                |                 | 2005 |                                    | 2004   |   | 2003   |      
|------------------------------- | --------------- | ---- | ---------------------------------- | ------ | - | ------ | -----
|
|Current tax (expense) benefit:  |                 |      |                                    |        |   |        |      
|                                | U.S. federal    |      | $                                  | 14.3   |   | $      | (34.9
|                                | Foreign         |      |                                    | 6.5    |   |        | 6.0  
|                                | State and local |      |                                    | (1.4   | ) |        | (4.6 
|                                |                 |      |                                    |        |   |        |      
|                                |                 |      | Total                              |        |   | 19.4   |      
|                                |                 |      |                                    |        |   |        |      
|Deferred tax (expense) benefit: |                 |      |                                    |        |   |        |      
|                                | U.S. federal    |      |                                    | (170.1 | ) |        | 631.0
|                                | State and local |      |                                    | (22.5  | ) |        | 93.1 
|                                |                 |      |                                    |        |   |        |      
|                                |                 |      | Total                              |        |   | (192.6 | )    
|                                |                 |      |                                    |        |   |        |      
|                                |                 |      | Total income tax (expense) benefit |        | $ | (173.2 | )    
|                                |                 |      |                                    |        |   |        |      

"Income
(Loss) From Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Changes" included the following components:

|                   |       | 2005 |       | 2004  |   | 2003     |         
|------------------ | ----- | ---- | ----- | ----- | - | -------- | --------
|
|U.S. income (loss) |       | $    | 523.8 |       | $ | (1,614.5 | )       
|Foreign loss       |       |      | (43.5 | )     |   | (145.6   | )       
|                   |       |      |       |       |   |          |         
|                   | Total |      | $     | 480.3 |   | $        | (1,760.1
|                   |       |      |       |       |   |          |         

88

---



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

|                                                                     |                                    | 2005 |        | 2004   |   | 2003  |      
|-------------------------------------------------------------------- | ---------------------------------- | ---- | ------ | ------ | - | ----- | -----
|
|Expected (expense) benefit at U.S. federal statutory income tax rate |                                    | $    | (168.1 | )      | $ | 616.0 |      
|U.S. state and local income tax (expense) benefit                    |                                    |      | (15.5  | )      |   | 57.5  |      
|Resolution of tax contingencies                                      |                                    |      |       |        |   | 0.4   |      
|Tax basis differences attributable to divestitures                   |                                    |      |       |        |   | 8.9   |      
|Minority interests in partnership earnings                           |                                    |      | 2.9    |        |   | (4.6  | )    
|Non-deductible goodwill and intangible assets                        |                                    |      |       |        |   |      |      
|Foreign taxes, net of tax deduction                                  |                                    |      | 2.9    |        |   | 6.3   |      
|Extraterritorial income exclusion tax benefit                        |                                    |      | 2.1    |        |   | 1.7   |      
|Change in valuation allowance                                        |                                    |      | 10.4   |        |   | 14.6  |      
|Transaction costs and other                                          |                                    |      | (7.9   | )      |   | (10.2 | )    
|                                                                     |                                    |      |        |        |   |       |      
|                                                                     | Total income tax (expense) benefit |      | $      | (173.2 | ) | $     | 690.6
|                                                                     |                                    |      |        |        |   |       |      

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

|                                                        |                      | 2005 |         | 2004   
|------------------------------------------------------- | -------------------- | ---- | ------- | -------
|
|
|Accruals and advances                                   |                      | $    | 177.0   |        
|Prepaid expenses                                        |                      |      |        |        
|State taxes                                             |                      |      |        |        
|Depreciation, amortization and asset impairment charges |                      |      | 83.9    |        
|Net operating loss and tax credit carryforwards         |                      |      | 682.9   |        
|Programming contract liabilities                        |                      |      | 311.0   |        
|Unrealized gains on securities                          |                      |      |        |        
|Tax basis differences in investments and affiliates     |                      |      | 136.2   |        
|Other                                                   |                      |      | 41.6    |        
|                                                        |                      |      |         |        
|Subtotal                                                |                      |      | 1,432.6 |        
|Valuation allowance                                     |                      |      | (154.6  | )      
|                                                        |                      |      |         |        
|                                                        | Total deferred taxes |      | $       | 1,278.0
|                                                        |                      |      |         |        

We
assessed the deferred tax assets for the respective periods for recoverability and, where applicable, we recorded a valuation allowance to reduce the total deferred tax assets to an
amount that will, more likely than not, be realized in the future.

The
valuation allowance balances at December 31, 2005 and 2004 of $154.6 million and $214.6 million, respectively, are primarily attributable to the unused foreign
operating losses, and unused capital losses both of which are available for carry-forward. For the year ended December 31, 2005, the change in the valuation allowance was primarily attributable
to a $33.5 million decrease for the tax effect of current year capital gains adjusted for the tax effect of future capital gains and losses

89

---



for
which we have not recognized a tax benefit and a $26.5 million decrease for the expiration of foreign tax losses for which no tax benefit has previously been recognized.

Although
realization is not assured, we have concluded that it is more likely than not that our unreserved deferred tax assets will be realized in the ordinary course of operations based
on available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The underlying assumptions we use in forecasting future
taxable income require significant judgment and take into account our recent performance.

As
of December 31, 2005, we have approximately $950.3 million of federal net operating losses that expire in 2023, foreign net operating losses of $285.8 million
with varying expiration dates, federal research tax credits of $78.8 million that expire between 2017 and 2024, and alternative minimum tax credits of $41.6 million that can be carried
forward indefinitely.

No
income tax provision has been made for the portion of undistributed earnings of foreign subsidiaries deemed permanently reinvested that amounted to approximately $21.4 million
in 2004 and $24.5 million in 2003. It is not practicable to determine the amount of the unrecognized deferred tax liability related to the investments in foreign subsidiaries.

As
part of our split-off from GM in 2003, we and GM amended the income tax allocation agreement that governs the allocation of certain U.S. income tax liabilities and certain
other tax matters. Under the amended terms, for tax periods prior to our split-off from GM, we are treated as the common parent of a separate affiliated group of corporations filing a
consolidated return. GM will compensate us for any tax benefits, such as net operating loss and tax credit carryforwards that have not been used to offset our separate income tax liability through the
date of our split-off from GM, but have been used by the GM consolidated group. Such compensation will not exceed $75.4 million, and in the case of net operating losses and similar
tax attributes, the amount of compensation payable to GM is based on a 24% rate.

At
the time of our split-off from GM, the amount of our tax receivable from GM, as determined on a separate return basis, exceeded the receivable determined pursuant to the
amended income tax allocation agreement by $25.1 million. We reported such amount as a distribution to GM.

We
have agreements with Boeing and the Raytheon Company, which govern our rights and obligations with respect to U.S. federal and state income taxes for all periods prior to the sale or
spin-off of certain businesses to those companies. We are responsible for any income taxes pertaining to those periods prior to the sale or spin-off, including any additional
income taxes resulting from U.S. federal and state audits and we are entitled to any U.S. federal and state income tax refunds relating to those units prior to their sale or spin-off.

Our
U.S. federal income tax returns have been examined and all disputes between us and the Internal Revenue Service, or IRS, have been fully resolved for all tax years through 2000. The
IRS is currently examining our U.S. federal tax returns for years 2001 through 2003. We are also being examined by or expect to be examined by certain state and foreign taxing jurisdictions for
periods still open to examination. Management believes that adequate provision has been made for any adjustment that might be assessed for open years.

Note 11: Pension and Other Postretirement Benefits

Many of our employees are eligible to participate in our funded non-contributory defined benefit pension plan, which provides defined benefits based
on either years of service and final average salary, or eligible compensation while employed by the company. Additionally, we maintain a funded

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contributory
defined benefit plan for employees who elected to participate prior to 1991, and an unfunded, nonqualified pension plan for certain eligible employees. For participants in the
contributory pension plan, we also maintain a postretirement benefit plan for those eligible retirees to participate in health care and life insurance benefits generally until they reach age 65.
Participants may become eligible for these health care and life insurance benefits if they retire from our company between the ages of 55 and 65. The health care plan is contributory with
participants' contributions adjusted annually; the life insurance plan is non-contributory.

We
use a November 30 measurement date for our pension and postretirement benefit plans.

91

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The
components of the pension benefit obligation and the other postretirement benefit obligation, including amounts recognized in the Consolidated Balance Sheets, are shown below for the
years ended December 31:

|                                                                  |                                                                                            | Pension Benefits |                              | Other Postretirement Benefits |  
|----------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ---------------- | ---------------------------- | ----------------------------- | -
|
|
|Change in Net Benefit Obligation                                  |                                                                                            |                  |                              |                               |  
|Net benefit obligation at beginning of year                       |                                                                                            | $                | 532.9                        |                               | $
|Service cost                                                      |                                                                                            |                  | 17.6                         |                               |  
|Interest cost                                                     |                                                                                            |                  | 28.0                         |                               |  
|Plan participants' contributions                                  |                                                                                            |                  | 0.9                          |                               |  
|Special termination benefits                                      |                                                                                            |                  | 7.9                          |                               |  
|Actuarial loss (gain)                                             |                                                                                            |                  | 13.2                         |                               |  
|Benefits paid                                                     |                                                                                            |                  | (112.4                       | )                             |  
|                                                                  |                                                                                            |                  |                              |                               |  
|Net benefit obligation at end of year                             |                                                                                            |                  | 488.1                        |                               |  
|                                                                  |                                                                                            |                  |                              |                               |  
|Change in Plan Assets                                             |                                                                                            |                  |                              |                               |  
|Fair value of plan assets at beginning of year                    |                                                                                            |                  | 347.4                        |                               |  
|Actual return on plan assets                                      |                                                                                            |                  | 29.9                         |                               |  
|Employer contributions                                            |                                                                                            |                  | 90.1                         |                               |  
|Plan participants' contributions                                  |                                                                                            |                  | 0.9                          |                               |  
|Benefits paid                                                     |                                                                                            |                  | (112.4                       | )                             |  
|                                                                  |                                                                                            |                  |                              |                               |  
|Fair value of plan assets at end of year                          |                                                                                            |                  | 355.9                        |                               |  
|                                                                  |                                                                                            |                  |                              |                               |  
|Funded status at end of year                                      |                                                                                            |                  | (132.2                       | )                             |  
|                                                                  | Unamortized amount resulting from changes in plan provisions                               |                  |                              | 9.8                           |  
|                                                                  | Unamortized net amount resulting from changes in plan experience and actuarial assumptions |                  |                              | 89.8                          |  
|                                                                  |                                                                                            |                  |                              |                               |  
|                                                                  |                                                                                            |                  | Net liability at end of year |                               | $
|                                                                  |                                                                                            |                  |                              |                               |  
|Amounts recognized in the consolidated balance sheets consist of: |                                                                                            |                  |                              |                               |  
|                                                                  | Accrued benefit cost                                                                       |                  | $                            | (98.2                         | )
|                                                                  | Intangible asset                                                                           |                  |                              | 9.8                           |  
|                                                                  | Deferred tax assets                                                                        |                  |                              | 21.4                          |  
|                                                                  | Accumulated other comprehensive loss                                                       |                  |                              | 34.4                          |  
|                                                                  |                                                                                            |                  |                              |                               |  
|                                                                  |                                                                                            |                  | Net liability at end of year |                               | $
|                                                                  |                                                                                            |                  |                              |                               |  

The
accumulated benefit obligation for all pension plans was $454.2 million as of December 31, 2005 and $499.7 million as of December 31, 2004.

92

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Information
for pension plans with an accumulated benefit obligation in excess of plan assets at December 31:

2005

2004(Dollars in Millions)Projected benefit obligation

$
488.1

$
532.9Accumulated benefit obligation


454.2


499.7Fair value of plan assets


355.9


347.4


Components
of net periodic benefit cost for the years ended December 31:

|                                                                                       |                                                                                | Pension Benefits |                           | Other Postretirement Benefits
|-------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ---------------- | ------------------------- | -----------------------------
|
|
|Components of net periodic benefit cost                                                |                                                                                |                  |                           |                              
|Benefits earned during the year                                                        |                                                                                | $                | 17.6                      |                              
|Interest accrued on benefits earned in prior years                                     |                                                                                |                  | 28.0                      |                              
|Expected return on assets                                                              |                                                                                |                  | (27.5                     | )                            
|Amortization components                                                                |                                                                                |                  |                           |                              
|                                                                                       | Amount resulting from changes in plan provisions                               |                  |                           | 1.7                          
|                                                                                       | Net amount resulting from changes in plan experience and actuarial assumptions |                  |                           | 6.3                          
|                                                                                       |                                                                                |                  |                           |                              
|                                                                                       |                                                                                |                  | Subtotal                  |                              
|Other costs                                                                            |                                                                                |                  |                           |                              
|                                                                                       | Curtailment costs                                                              |                  |                           |                             
|                                                                                       | Special termination benefits                                                   |                  |                           | 7.9                          
|                                                                                       | Settlement costs                                                               |                  |                           | 15.1                         
|                                                                                       |                                                                                |                  |                           |                              
|                                                                                       |                                                                                |                  | Net periodic benefit cost |                              
|                                                                                       |                                                                                |                  |                           |                              
|Additional information                                                                 |                                                                                |                  |                           |                              
|Increase (decrease) in minimum liability included in other comprehensive income (loss) |                                                                                | $                | (11.4                     | )                            

Assumptions

Weighted-average assumptions used to determine benefit obligations at December 31:

|                                         |  | Pension Benefits |   | Other Postretirement
Benefits |   |      |  
|---------------------------------------- |  | ---------------- | - | ----------------------------- | - | ---- | -
|
|Discount rateQualified Plan             |  | 5.78             | % | 6.00                          | % | 5.46 | %
|Discount rateNon-Qualified Plan         |  | 5.74             | % | 6.00                          | % |     |  
|Expected long-term return on plan assets |  | 8.75             | % | 9.00                          | % |     |  
|Rate of compensation increase            |  | 4.00             | % | 4.00                          | % | 4.00 | %

93

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Weighted-average
assumptions used to determine net periodic benefit cost for the years ended December 31:

|                                         |  | Pension Benefits |   | Other Postretirement
Benefits |  
|---------------------------------------- |  | ---------------- | - | ----------------------------- | -
|
|Discount rateQualified Plan             |  | 6.00             | % | 6.14                          | %
|Discount rateNon-Qualified Plan         |  | 6.00             | % | 6.14                          | %
|Expected long-term return on plan assets |  | 9.00             | % | 9.00                          | %
|Rate of compensation increase            |  | 4.00             | % | 4.50                          | %

We
base our expected long-term return on plan assets assumption on a periodic review and modeling of the plans' asset allocation and liability structure over a
long-term horizon. Expectations of returns for each asset class are the most important of the assumptions used in the review and modeling and are based on comprehensive reviews of
historical data and economic/financial market theory.

A
hypothetical 0.25% decrease in our discount rate would have had the effect of increasing our 2005 pension expense by approximately $1.0 million and our minimum pension liability
by approximately $8.0 million. A hypothetical 0.25% decrease in our expected return on plan assets would have had the effect of increasing our 2005 pension expense by $0.6 million.

The
following table provides assumed health care costs trend rates:

|                                                                              |  | 2005  |   | 2004  |  
|----------------------------------------------------------------------------- |  | ----- | - | ----- | -
|Health care cost trend rate assumed for next year                             |  | 10.00 | % | 10.00 | %
|Rate to which the cost trend rate is assumed to decline (ultimate trend rate) |  | 5.00  | % | 5.00  | %
|Year that trend rate reaches the ultimate trend rate                          |  | 2011  |   | 2010  |  

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

|                                                        |  | 1-Percentage
Point Increase |     | 1-Percentage
Point Decrease |  
|------------------------------------------------------- |  | --------------------------- | --- | --------------------------- | -
|
|Effect on total of service and interest cost components |  | $                           | 0.1 |                             | $
|Effect on postretirement benefit obligation             |  |                             | 1.6 |                             |  

94

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Plan Assets

Our target asset allocation for 2006 and actual pension plan weighted average asset allocations at December 31, 2005 and 2004, by asset categories, are as
follows:

|                  |  | Target
Allocation |   | Percentage of
Plan Assets
at December 31, |  
|----------------- |  | ----------------- | - | ----------------------------------------- | -
|
|Equity securities |  | 50-70             | % | 54                                        | %
|Debt securities   |  | 30-50             | % | 35                                        | %
|Real estate       |  | 0-20              | % | 2                                         | %
|Other             |  | 0-20              | % | 9                                         | %
|                  |  |                   |   |                                           |  
|Total             |  |                   |   | 100                                       | %
|                  |  |                   |   |                                           |  

Our
investment policy includes various guidelines and procedures designed to ensure we invest assets in a manner necessary to meet expected future benefits earned by participants. The
investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges (shown above) by major asset categories.

The
objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed
the Plans' actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.

The
investment policy is periodically reviewed by us and a designated third-party fiduciary for investment matters. We establish and administer the policy in a manner so as to comply at
all times with applicable government regulations.

There
were no shares of our common stock included in plan assets at December 31, 2005 and 2004.

Cash Flows



We expect to contribute approximately $65.0 million and $16.9 million to our qualified and nonqualified pension plans, respectively, in 2006.

95

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We expect the following benefit payments, which reflect expected future service, as appropriate, to be paid by the plans during the years ending
December 31:

|          |  | Estimated Future Benefit Payments
|--------- |  | ---------------------------------
|
|
|2006      |  | $                                
|2007      |  |                                  
|2008      |  |                                  
|2009      |  |                                  
|2010      |  |                                  
|2011-2015 |  |                                  

We
maintain 401(k) plans for qualified employees. We match a portion of our employee contributions and our match amounted to $9.9 million in 2005, $13.3 million in 2004 and
$8.2 million in 2003.

We
have 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, we do not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of our
company (other than pensions) represent legally enforceable liabilities of us.

Note 12: Stockholders' Equity

Capital Stock and Additional Paid-In Capital

We are a publicly-traded company with our common stock listed as "DTV" on the New York Stock Exchange. As part of the News Corporation transactions completed on
December 22, 2003, we amended our certificate of incorporation to provide for the following capital stock: common stock, par value $0.01 per share, 3,000,000,000 shares authorized;
Class B common stock, par value $0.01 per share, 275,000,000 shares authorized; excess stock, par value $0.01 per share, 800,000,000 shares authorized; and preferred stock, par value $0.01 per
share, 9,000,000 shares authorized. As of December 31, 2005 and 2004, there were no shares outstanding of the Class B common stock, excess stock or preferred stock.

Prior
to our split-off from GM on December 22, 2003, GM held all of our outstanding capital stock. GM Class H common stock was a publicly-traded security of GM
and was a "tracking stock" designed to provide holders with financial returns based on the financial performance of our company.

During
April 2003, our Board of Directors approved the reclassification of the outstanding Series B convertible preferred stock into Class B common stock of
equivalent value, and a subsequent stock split of our common stock and our Class B common stock through dividends of additional shares. GM, in its capacity as the holder of all our outstanding
capital stock, approved the reclassification. Shortly thereafter, GM converted a portion of its common stock of holdings in us into an equivalent number of shares of our Class B common stock.
As a result of these transactions, we had issued and outstanding 1,207,518,237 shares of common stock and 274,373,316 shares of Class B common stock, all of which were owned by GM.

96

---



Immediately
prior to the News Corporation transactions, we adjusted the number of shares of common and Class B common stock to assure that the stock outstanding and the stock
representing GM's interest accurately reflected the interests to be sold directly by GM to News Corporation and the interests to be distributed to holders of GM Class H common stock. After the
adjustment, there were 1,109,270,842 shares of our common stock then outstanding. We adjusted the number of shares of Class B common stock to equal 274,319,607 shares, representing GM's 19.8%
interest in us.

On
December 22, 2003, GM split us off by distributing our common stock to the holders of GM Class H common stock in exchange for the 1,109,270,842 GM Class H common
shares then outstanding on a one-for-one basis. Simultaneously, GM sold its 19.8% interest in us (represented by 274,319,607 shares of Class B common stock) to News
Corporation in exchange for cash and News Corporation Preferred ADSs. We then converted the shares of Class B common stock to shares of our common stock on a one-for-one
basis.

Accumulated Other Comprehensive Loss

|                                                     |                                            | As of December 31, |      
|---------------------------------------------------- | ------------------------------------------ | ------------------ | -----
|
|
|Minimum pension liability adjustment                 |                                            | $                  | (34.4
|Accumulated unrealized gains on securities           |                                            |                    | 23.1 
|Accumulated foreign currency translation adjustments |                                            |                    | (2.7 
|                                                     |                                            |                    |      
|                                                     | Total Accumulated Other Comprehensive Loss |                    | $    
|                                                     |                                            |                    |      

Other Comprehensive Income

The following represents changes in the components of OCI, net of taxes, as of December 31:

|                                                                                      |  | 2005 |      | 2004 |   | 2003 | 
|------------------------------------------------------------------------------------- |  | ---- | ---- | ---- | - | ---- | 
|
|
|Minimum pension liability adjustments                                                 |  | $    | 11.4 |      | $ | 4.4  | 
|Foreign currency translation adjustments:                                             |  |      |      |      |   |      | 
|Unrealized gains                                                                      |  |      | 2.6  |      |   |     | 
|Unrealized holding gains (losses) on securities:                                      |  |      |      |      |   |      | 
|Unrealized holding gains (losses)                                                     |  |      | 1.1  |      |   | 0.4  | 
|Less: reclassification adjustment for net losses (gains) recognized during the period |  |      | 0.6  |      |   | 0.2  | 

97

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Note 13: Earnings (Loss) Per Common Share

We compute Basic Earnings (Loss) Per Common Share, or EPS, by dividing net income (loss) by the weighted average number of common shares outstanding for the
period.

Diluted
EPS considers the effect of common equivalent shares, which we exclude from the computation in loss periods as their effect would be antidilutive. We also exclude common stock
options from the computation of diluted EPS when the exercise price is greater than the average market price of our common stock. Our existing common equivalent shares consist entirely of common stock
options and restricted stock units issued to employees. We excluded 66.1 million shares of common stock for the year ended December 31, 2005 because the options' exercise price was
greater than the average market price of our common stock. We excluded 88.9 million shares of common stock and 7.8 million restricted stock units for the year ended December 31,
2004 from the calculation of diluted EPS because they were antidilutive. For the year ended December 31, 2003, we excluded 91.2 million shares of common
stock and 3.6 million restricted stock units from the calculation of diluted EPS because they were antidilutive. We also excluded shares issuable upon conversion of our Preferred Stock prior to
the date of actual conversion because they were antidilutive.

For
purposes of calculating EPS, we calculate the weighted average number of common shares outstanding using the number of our common shares outstanding beginning on December 23,
2003 and the number of shares in the GM Class H Dividend Base prior to December 23, 2003. The GM Class H Dividend Base is equal to the number of shares of GM Class H common
stock which, if issued and outstanding, would have represented 100% of the tracking stock interest in our earnings prior to December 23, 2003.

The
following table sets forth comparative information regarding common shares outstanding based on the number of our common shares outstanding beginning on December 23, 2003 and
the number of shares in the GM Class H Dividend Base prior to December 23, 2003:

|                                                                       |  | 2005    |  | 2004    |  | 2003   
|---------------------------------------------------------------------- |  | ------- |  | ------- |  | -------
|
|Common shares outstanding at January 1                                 |  | 1,385.8 |  | 1,383.6 |  | 1,381.9
|Increase for stock options exercised and restricted stock units issued |  | 5.2     |  | 2.2     |  | 1.7    
|                                                                       |  |         |  |         |  |        
|Common shares outstanding at December 31                               |  | 1,391.0 |  | 1,385.8 |  | 1,383.6
|                                                                       |  |         |  |         |  |        
|Weighted average number of common shares outstanding                   |  | 1,388.4 |  | 1,384.8 |  | 1,382.5
|                                                                       |  |         |  |         |  |        

98

---



The
reconciliation of the amounts used in the basic and diluted EPS computation was as follows:

|                              |                                                                                           | Income
(Loss) |   | Shares |  | Per Share
Amounts
|----------------------------- | ----------------------------------------------------------------------------------------- | ------------- | - | ------ |  | -----------------
|
|Year Ended December 31, 2005: |                                                                                           |               |   |        |  |                  
|Basic EPS                     |                                                                                           |               |   |        |  |                  
|                              | Income from continuing operations before cumulative effect of accounting changes          |               | $ | 304.6  |  | 1,388.4          
|Effect of Dilutive Securities |                                                                                           |               |   |        |  |                  
|                              | Dilutive effect of stock options and restricted stock units                               |               |   |       |  | 6.4              
|                              |                                                                                           |               |   |        |  |                  
|Diluted EPS                   |                                                                                           |               |   |        |  |                  
|                              | Adjusted income from continuing operations before cumulative effect of accounting changes |               | $ | 304.6  |  | 1,394.8          
|                              |                                                                                           |               |   |        |  |                  

There
was no dilutive effect of stock options and restricted stock units for the years ended December 31, 2004 and 2003, due to the loss we incurred for both of those years.

Note 14: Incentive Plans

Under The DIRECTV Group, Inc. 2004 Stock Plan, or the 2004 Plan, as approved by our stockholders on June 2, 2004, shares, rights or options to
acquire up to 21 million shares of common stock plus any shares underlying awards cancelled, forfeited or expired from the HEC Plan referred to below, on a cumulative basis were authorized for
grant through March 16, 2014, subject to Compensation Committee approval.

In
connection with the News Corporation transactions, on December 22, 2003, we converted all 91.2 million outstanding GM Class H common stock options and
3.6 million restricted stock units, issued under the former Hughes Electronics Corporation Incentive Plan, or the HEC Plan, to our common stock options and restricted stock units on a
one-for-one basis with identical terms. Also, vesting accelerated for 11.5 million stock options because the News Corporation transactions represented a qualifying
change-in-control. The information presented below is based on the GM Class H common stock options outstanding through December 22, 2003, and our common stock
options and restricted stock units thereafter.

The
exercise price of the options granted under the 2004 Plan and the HEC Plan is equal to at least 100% of the fair market value of the common stock on the date we granted the options.
These nonqualified options generally vest over one to five years, vest immediately in the event of certain transactions, expire ten years from date of grant and are subject to earlier termination
under certain conditions.

99

---



Changes
in the status of outstanding options were as follows:

|                                 |  | Shares Under
Option |   | Weighted-Average
Exercise Price
|-------------------------------- |  | ------------------- | - | -------------------------------
|Outstanding at January 1, 2003   |  | 95,080,832          |   | $                              
|Granted                          |  | 25,000              |   |                                
|Exercised                        |  | (1,780,076          | ) |                                
|Terminated                       |  | (2,164,436          | ) |                                
|                                 |  |                     |   |                                
|Outstanding at December 31, 2003 |  | 91,161,320          |   |                                
|Granted                          |  | 1,883,764           |   |                                
|Exercised                        |  | (2,139,782          | ) |                                
|Terminated                       |  | (1,971,186          | ) |                                
|                                 |  |                     |   |                                
|Outstanding at December 31, 2004 |  | 88,934,116          |   |                                
|Granted                          |  |                    |   |                                
|Exercised                        |  | (4,170,758          | ) |                                
|Terminated                       |  | (6,048,852          | ) |                                
|                                 |  |                     |   |                                
|Outstanding at December 31, 2005 |  | 78,714,506          |   |                                
|                                 |  |                     |   |                                

The
following table summarizes information about stock options outstanding at December 31, 2005:

Options OutstandingOptions ExercisableWeighted-
Average
Remaining
Contractual
Life (years)Range of
Exercise Prices

Number
Outstanding

Weighted-
Average
Exercise
Price

Number
Exercisable

Weighted-
Average
Exercise
Price$9.00 to $16.99

20,090,642

2.4

$
12.71

20,090,642

$
12.7117.00 to 24.99

20,322,637

5.0


19.80

20,322,637


19.8025.00 to 32.99

16,080,804

5.0


27.77

16,080,804


27.7733.00 to 41.99

22,220,423

4.3


37.16

22,220,423


37.1678,714,506

2.9


24.52

78,714,506


24.52


Of
the options outstanding at December 31, 2004 there were 88.9 million options exercisable at a weighted average exercise price of $23.42, and of the options outstanding
at December 31, 2003, there were 87.6 million options exercisable at a weighted average price of $23.40.

The
following table presents the estimated weighted average fair value for stock options granted under the Plan using the Black-Scholes valuation model along with the assumptions used in
the fair value calculations:

2004

2003Estimated fair value per option granted

$
5.82

$
8.80Average exercise price per option granted


18.80


16.35Expected stock volatility


30.0
%

47.2
%Risk-free interest rate


3.7
%

3.8
%Expected option life (in years)


5.6


7.0


100

---



The
Compensation Committee has also granted restricted stock units that vest over two to four years under the 2004 Plan and the HEC Plan. During the year ended December 31, 2005,
the Compensation Committee granted 3.0 million restricted stock units with a weighted average grant-date fair value of approximately $16.61 per share. During the year ended
December 31, 2004, the Compensation Committee granted 4.4 million restricted stock units with a weighted average grant-date fair value of approximately $17.46 per share.
During the year ended December 31, 2003, the Compensation Committee granted 3.6 million restricted stock units with a weighted average grant-date fair value of approximately
$10.71 per share. At December 31, 2005, there were 7.6 million unvested restricted stock units with a weighted average grant-date fair value of approximately $16.03.

Note 15: Other, Net

The following table summarizes the components of "Other, net" for the years ended December 31:

|                                                           |                  | 2005 |       | 2004  |   | 2003  |      
|---------------------------------------------------------- | ---------------- | ---- | ----- | ----- | - | ----- | -----
|
|Equity in earnings (losses) from unconsolidated affiliates |                  | $    | 0.7   |       | $ | (0.2  | )    
|Net unrealized gain on investments                         |                  |      |      |       |   |      |      
|Net (loss) gain from sale of investments                   |                  |      | (0.6  | )     |   | 396.5 |      
|Refinancing transaction expenses                           |                  |      | (64.9 | )     |   |      |      
|Other                                                      |                  |      | (0.2  | )     |   | 1.3   |      
|                                                           |                  |      |       |       |   |       |      
|                                                           | Total Other, net |      | $     | (65.0 | ) | $     | 397.6
|                                                           |                  |      |       |       |   |       |      

During
2005, DIRECTV U.S. completed a series of refinancing transactions that resulted in a pre-tax charge of $64.9 million ($40.0 million after tax), of which
$41.0 million was associated with the premium paid for the redemption of a portion of our 8.375% senior notes and $23.9 million with the write-off of a portion of our
deferred debt issuance costs and other transaction costs.

During
2005, we sold an equity investment for $113.1 million in cash. As a result, we recognized a net pre-tax loss of $0.6 million during 2005.

During
2004, we sold various equity investments for $510.5 million in cash and recorded a pre-tax gain of $396.5 million.

For
the year ended December 31, 2003, equity losses from unconsolidated affiliates are primarily comprised of losses at the DTVLA LOCs.

Net
unrealized gain on investments for 2003 includes a $79.6 million gain resulting from an increase in the fair market value of an investment in a convertible note.

Note 16: Severance, Retention and Pension Benefit Costs

During the first quarter of 2004, we announced the reduction of corporate office headcount by over half as a result of our plan to consolidate corporate and
DIRECTV U.S. support functions. There were also additional headcount reductions at DIRECTV U.S. and at DTVLA. As a result of the completion of the News Corporation transactions on December 22,
2003, certain of our employees earned retention benefits during the twelve month period subsequent to the completion of the transactions. As a result of these items and the strategic transactions
described above and in Note 3, we recognized $169.5 million in charges for retention benefits, severance and related costs under our

101

---



pension
benefit plans during 2004 in "General and administrative expenses" in the Consolidated Statements of Operations.

In
2004, the $113.0 million of charges recorded at Corporate and Other included $36.2 million for retention benefits resulting from the News Corporation transactions that
were paid in 2004, $20.4 million for severance which was paid in 2004, and $56.4 million in pension costs. At HNS, we accrued $25.6 million in severance costs as a result of the
lay-offs following the announcement of the Thomson and SkyTerra transactions. At DTVLA, we recorded $20.9 million in severance and retention charges, including $6.3 million
related to the shut-down of operations at DIRECTV Mexico, and headcount reductions following the emergence from bankruptcy. All severance and retention benefits were paid to employees
during 2005 and 2004.

Note 17: Related-Party Transactions

In the ordinary course of our operations, we enter into transactions with related parties. News Corporation and its affiliates are considered related parties
because, as of December 31, 2005, it owned approximately 34% of our outstanding common stock. Additionally, as an equity method investee, HNS LLC is considered a related party. As of
December 31, 2005, we had the following types of contractual arrangements with News Corporation entities: purchase of programming, products and advertising; license of certain intellectual
property, including patents; purchase of system access products, set-top receiver software and support services; sale of advertising space; purchase of employee services; and sublease of
facilities. Transactions with GM and its affiliates prior to December 23, 2003 were also considered related party transactions.

The
following table summarizes sales and purchase transactions with related parties:

2005

2004

2003(Dollars in Millions)Sales

$
17.9

$
10.1

$
99.5Purchases


707.0


476.7


69.7


The
following table sets forth the amount of assets and liabilities resulting from transactions with related parties as of December 31:

2005

2004(Dollars in Millions)Accounts receivable

$
8.2

$
12.3Accounts payable


154.0


113.5


The
accounts receivable and accounts payable balances as of December 31, 2005 and 2004 are primarily related to affiliates of News Corporation.

In
addition to the items described above, we have agreed to purchase News Corporation's interests in the Sky Latin America businesses for cash payments totaling $500.5 million, of
which we paid $342.5 million during the fourth quarter of 2004. During 2005 and 2004, we also recorded stock-based compensation cost associated with former employees of News Corporation who
became our employees and retained their News Corporation stock options.

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Note 18. DLA LLC Reorganization

On March 18, 2003, DLA LLC filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
District of Delaware, or Bankruptcy Court. On February 13, 2004, the Bankruptcy Court confirmed DLA LLC's Plan of Reorganization, or the Reorganization Plan, which became effective on
February 24, 2004.

Also,
effective February 24, 2004, we made a contribution of certain claims, loans, equity and other interests in LOCs selling the DIRECTV service in Latin America, and converted
certain debt into equity, which increased our equity interest in the restructured DLA LLC from 74.7% to approximately 86%. Darlene, which also contributed its equity and other interests in various
LOCs, holds the remaining approximately 14% equity interest in the restructured DLA LLC. The restructuring in bankruptcy and the contributions by us and Darlene provided DLA LLC with direct control of
the most significant LOCs and assets. The net result of these transactions was an increase in minority interests of $47.3 million.

Reorganization
income was $43.0 million in 2004 compared to reorganization expense of $212.3 million in 2003. The reorganization income in 2004 includes a
$62.6 million gain that resulted from the settlement of certain obligations in connection with the confirmation of the Reorganization Plan, partially offset by costs incurred to file the
bankruptcy petition, legal and consulting costs and other charges related to the DLA LLC reorganization. Reorganization expense of $212.3 million in 2003 includes the costs incurred to file the
bankruptcy petition, legal and consulting costs, costs of settlement agreements reached with creditors, the write-off of intangible assets and other charges related to the reorganization.
Also included in reorganization expense are accruals for claims allowed in the Chapter 11 proceeding.

Note 19: Derivative Financial Instruments and Risk Management

Our 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 our equity investments. We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial
instruments. We enter into derivative instruments only to the extent considered necessary to meet our risk management objectives, and do not enter into derivative contracts for speculative purposes.
As of December 31, 2005 and 2004, we had no significant foreign currency or interest related derivative financial instruments outstanding.

Note 20: Segment Reporting

Our two continuing business segments, DIRECTV U.S. and DIRECTV Latin America, which are differentiated by their geographic location, are engaged in acquiring,
promoting, selling and/or distributing digital entertainment programming via satellite to residential and commercial subscribers. Through April 22, 2005, we also operated the Network Systems
segment, a provider of satellite-based private business networks and broadband Internet access. As a result of the SkyTerra transactions described in Note 3, after April 22, 2005, we no
longer consolidate HNS, which formerly comprised the Network Systems segment. Eliminations and other includes the corporate office and other entities.

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Selected information for our operating segments is reported as follows:

|                                                                |  | DIRECTV
U. S. |          | DIRECTV Latin
America |   | Network
Systems |   | Eliminations
and Other |          | Total |  
|--------------------------------------------------------------- |  | ------------- | -------- | --------------------- | - | --------------- | - | ---------------------- | -------- | ----- | -
|
|2005                                                            |  |               |          |                       |   |                 |   |                        |          |       |  
|External Revenues                                               |  | $             | 12,211.3 |                       | $ | 741.9           |   | $                      | 211.4    |       | $
|Intersegment Revenues                                           |  |               | 4.8      |                       |   | 0.2             |   |                        |         |       |  
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Revenues                                                        |  | $             | 12,216.1 |                       | $ | 742.1           |   | $                      | 211.4    |       | $
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Operating Profit (Loss)                                         |  | $             | 802.0    |                       | $ | (18.7           | ) | $                      | (60.8    | )     | $
|Add: Depreciation and amortization                              |  |               | 698.2    |                       |   | 160.2           |   |                        |         |       |  
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Operating Profit (Loss) Before Depreciation and Amortization(1) |  | $             | 1,500.2  |                       | $ | 141.5           |   | $                      | (60.8    | )     | $
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Segment Assets                                                  |  | $             | 10,525.0 |                       | $ | 1,147.9         |   | $                      |         |       | $
|Capital Expenditures(2)                                         |  |               | 782.0    |                       |   | 90.4            |   |                        | 18.1     |       |  
|2004                                                            |  |               |          |                       |   |                 |   |                        |          |       |  
|External Revenues                                               |  | $             | 9,738.1  |                       | $ | 675.2           |   | $                      | 946.7    |       | $
|Intersegment Revenues                                           |  |               | 25.8     |                       |   |                |   |                        | 152.4    |       |  
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Revenues                                                        |  | $             | 9,763.9  |                       | $ | 675.2           |   | $                      | 1,099.1  |       | $
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Operating Profit (Loss)                                         |  | $             | 21.9     |                       | $ | (142.0          | ) | $                      | (1,778.5 | )     | $
|Add: Depreciation and amortization                              |  |               | 561.2    |                       |   | 187.9           |   |                        | 95.6     |       |  
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Operating Profit (Loss) Before Depreciation and Amortization(1) |  | $             | 583.1    |                       | $ | 45.9            |   | $                      | (1,682.9 | )     | $
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Segment Assets                                                  |  | $             | 8,994.2  |                       | $ | 1,086.7         |   | $                      | 521.1    |       | $
|Capital Expenditures(2)                                         |  |               | 671.5    |                       |   | 81.7            |   |                        | 132.1    |       |  
|2003                                                            |  |               |          |                       |   |                 |   |                        |          |       |  
|External Revenues                                               |  | $             | 7,654.1  |                       | $ | 597.7           |   | $                      | 1,105.2  |       | $
|Intersegment Revenues                                           |  |               | 41.5     |                       |   |                |   |                        | 165.8    |       |  
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Revenues                                                        |  | $             | 7,695.6  |                       | $ | 597.7           |   | $                      | 1,271.0  |       | $
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Operating Profit (Loss)                                         |  | $             | 458.8    |                       | $ | (284.6          | ) | $                      | (103.4   | )     | $
|Add: Depreciation and amortization                              |  |               | 497.0    |                       |   | 199.3           |   |                        | 70.8     |       |  
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Operating Profit (Loss) Before Depreciation and Amortization(1) |  | $             | 955.8    |                       | $ | (85.3           | ) | $                      | (32.6    | )     | $
|                                                                |  |               |          |                       |   |                 |   |                        |          |       |  
|Segment Assets                                                  |  | $             | 7,285.2  |                       | $ | 682.9           |   | $                      | 2,555.3  |       | $
|Capital Expenditures(2)                                         |  |               | 389.0    |                       |   | 57.9            |   |                        | 159.6    |       |  

---

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The
following represents a reconciliation of operating profit (loss) before depreciation and amortization to reported net loss on the Consolidated Statements of Operations:

|                                                                                                                             |  | Years Ended December 31, |        
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | -------
|
|
|Operating Profit (Loss) Before Depreciation and Amortization                                                                 |  | $                        | 1,485.8
|Depreciation and amortization                                                                                                |  |                          | (853.2 
|                                                                                                                             |  |                          |        
|Operating Profit (Loss)                                                                                                      |  |                          | 632.6  
|Interest income                                                                                                              |  |                          | 150.3  
|Interest expense                                                                                                             |  |                          | (237.6 
|Reorganization income (expense)                                                                                              |  |                          |       
|Other, net                                                                                                                   |  |                          | (65.0  
|                                                                                                                             |  |                          |        
|Income (loss) from Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Changes |  |                          | 480.3  
|Income tax (expense) benefit                                                                                                 |  |                          | (173.2 
|Minority interests in net (earnings) losses of subsidiaries                                                                  |  |                          | (2.5   
|                                                                                                                             |  |                          |        
|Income (loss) from continuing operations before cumulative effect of accounting changes                                      |  |                          | 304.6  
|Income (loss) from discontinued operations, net of taxes                                                                     |  |                          | 31.3   
|                                                                                                                             |  |                          |        
|Income (loss) before cumulative effect of accounting changes                                                                 |  |                          | 335.9  
|Cumulative effect of accounting changes, net of taxes                                                                        |  |                          |       
|                                                                                                                             |  |                          |        
|Net Income (Loss)                                                                                                            |  | $                        | 335.9  
|                                                                                                                             |  |                          |        

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The
following table presents revenues earned from subscribers located in different geographic areas. Property is grouped by its physical location.

|                                |                   | Years Ended and As of December 31,   
|------------------------------- | ----------------- | -------------------------------------
|
|
|
|North America                   |                   |                                      
|                                | United States     |                                      
|                                | Canada and Mexico |                                      
|                                |                   |                                      
|                                |                   | Total North America                  
|                                |                   |                                      
|Europe                          |                   |                                      
|                                | United Kingdom    |                                      
|                                | Other             |                                      
|                                |                   |                                      
|                                |                   | Total Europe                         
|                                |                   |                                      
|South America and the Caribbean |                   |                                      
|                                | Brazil            |                                      
|                                | Argentina         |                                      
|                                | Venezuela         |                                      
|                                | Other             |                                      
|                                |                   |                                      
|                                |                   | Total South America and the Caribbean
|                                |                   |                                      
|Asia                            |                   |                                      
|                                | Korea             |                                      
|                                | India             |                                      
|                                | China             |                                      
|                                | Other             |                                      
|                                |                   |                                      
|                                |                   | Total Asia                           
|                                |                   |                                      
|Total Middle East               |                   |                                      
|                                |                   |                                      
|Total Africa                    |                   |                                      
|                                |                   |                                      
|                                |                   | Total                                
|                                |                   |                                      

Note 21: Commitments and Contingencies

Litigation

Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, claims and
proceedings are pending against us arising in the ordinary course of business. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. Some of the
matters may involve compensatory, punitive, or treble damage claims, or demands that, if granted, could require us to pay damages or make other expenditures in amounts that could not be estimated at
December 31, 2005. After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not

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expected
to have a material adverse effect on our consolidated results of operations or financial position.

On
August 27, 2004, the U.S. Bankruptcy Court, District of Maine, entered an order approving among other things, the acquisition transaction with Pegasus described above in
Note 3, as well as a Global Settlement Agreement pursuant to which all pending litigation between DIRECTV U.S., us, the NRTC and Pegasus was settled and mutual releases of claims were affected.
Pegasus had filed a voluntary petition for Chapter 11 bankruptcy in such court following entry of judgment on May 24, 2004 in favor of DIRECTV U.S. for approximately $63 million in a
case arising out of Pegasus' breach of the parties' Seamless Marketing Agreement. This judgment was stayed under applicable bankruptcy law, and Pegasus also had filed various claims in the bankruptcy
proceeding against DIRECTV U.S. and the NRTC. As part of the purchase price paid by DIRECTV U.S. in the transactions with Pegasus, DIRECTV U.S. received credit for the $63 million judgment. As
a result of the settlement and release, all previously pending litigation discussed above between DIRECTV U.S., us and Pegasus has been dismissed with prejudice.

On
October 18, 2004, Darlene filed suit in the circuit court for Miami-Dade County, Florida, against us and certain of our subsidiaries (including DLA LLC), News
Corporation, and others, or collectively the Defendants. The suit alleges fraud and violation of fiduciary, contractual and other duties owed Darlene and to DLA LLC by one or more of the Defendants.
Among other things, Darlene alleges that the Sky Transactions were unfair to DLA LLC and its members, including Darlene. Darlene further alleges that we entered into an oral put agreement that would
have required DLA LLC to acquire Darlene's interest in DLA LLC based on a pricing formula and that Darlene was fraudulently induced to release its rights under that put and other rights. Darlene seeks
injunctive relief to preclude DLA LLC from consummating the Sky Transactions, $1 billion in damages and other relief. As part of the Sky Transactions, we have agreed to indemnify News
Corporation against claims by Darlene against News Corporation. We believe Darlene's claims are without merit and we are defending against these claims.

We
and certain other defendants filed in state court motions to compel arbitration of certain claims and to dismiss others for improper venue, and on November 3, 2005, the judge
entered an order
essentially staying the proceedings pending the arbitration between Darlene, DIRECTV and DLA, LLC. We and Darlene have filed demands for arbitration under the terms of the dispute resolution provision
of the DLA LLC limited liability company agreement. The parties have agreed upon a potential arbitration panel, and we anticipate that these demands for arbitration will be consolidated for hearing.

Finally,
in June 2005, we filed suit against Darlene in the United States District Court for the Southern District of New York seeking specific performance and declaratory relief
with respect to the release agreement and covenant not to sue executed by Darlene in February 2004 in connection with the DLA LLC reorganization and related transactions. Darlene has filed an
answer and counterclaim.

Income Tax Matters

In the second quarter of 2005, a settlement was reached in connection with adjustments proposed by the IRS for the tax years 1991 through 1994 in regards to the
determination and allocation of the purchase price with respect to a prior business acquisition. As a result of the favorable settlement, we recognized an income tax benefit of approximately
$31.3 million which was reported in "Income (loss) from discontinued operations, net of taxes" in our Consolidated Statements of Operations.

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As
part of the sale of our interest in PanAmSat, we agreed to indemnify PanAmSat for certain taxes related to periods ending on or prior to the day of the closing in amounts equal to 80%
of the first $75.0 million of such taxes and 100% of any such taxes in excess of the first $75.0 million. PanAmSat has outstanding tax claims relating to withholding taxes assessed on
revenues derived from broadcasters inside and outside of India who broadcast from or into India. These claims would be subject to the indemnification provided by us. The Indian government has assessed
approximately $7.3 million against one of the PanAmSat subsidiaries for the Indian tax year ended March 31, 1997. This assessment is being appealed to the Income Tax Appeals Tribunal.
For the Indian tax years ended March 31, 1996 through 2002, the Indian government has assessed approximately $44.4 million in the aggregate against PanAmSat, including interest. This
assessment has been appealed to the Commissioner of Income Tax (Appeals). PanAmSat is contesting the imposition of such taxes. If unsuccessful in its contest, PanAmSat could be subject to comparable
claims for subsequent years, which would include additional years covered by the indemnification agreement.

While
the outcome of these and other tax issues cannot be predicted with certainty, we believe that the ultimate outcome will not have a material adverse effect on our consolidated
results of operations or financial position.

Satellites

We may purchase in-orbit and launch insurance to mitigate the potential financial impact of satellite fleet launch and in-orbit failures
if the premium costs are considered economic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites. We do not insure against lost
revenues in the event of a total or partial loss of the capacity of a satellite. We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to
mitigate the impact a satellite failure could have on our ability to provide service. At December 31, 2005, the net book value of uninsured satellites amounted to $605.7 million.

Other

We are contingently liable under standby letters of credit and bonds in the aggregate amount of $16.2 million which were undrawn at December 31,
2005.

At
December 31, 2005, minimum future commitments under noncancelable operating leases having lease terms in excess of one year were primarily for satellite transponder leases and
real property and aggregated $610.9 million, payable as follows: $90.4 million in 2006, $90.2 million in 2007, $81.7 million in 2008, $67.9 million in 2009,
$69.6 million in 2010 and $211.1 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases, net of
sublease income, were $108.8 million in 2005, $180.5 million in 2004 and $177.3 million in 2003.

We
have minimum commitments under noncancelable satellite construction and launch contracts, programming agreements, telemetry, tracking and control services, or TT&C, services
agreements, billing system agreements, customer call center maintenance agreements and other vendor obligations. As of December 31, 2005, minimum payments over the terms of applicable contracts
are anticipated to be approximately $5,094.2 million, payable as follows: $911.0 million in 2006, $997.5 million in 2007, $944.2 million in 2008, $889.4 million in
2009, $887.1 million in 2010 and $465.0 million thereafter.

The
DLA LLC Second Amended and Restated Limited Liability Company Agreement, as amended in February 2004, or the DLA LLC Agreement, provides Darlene the right, under certain
circumstances, to require us to purchase all of Darlene's equity interests in DLA LLC for

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$200.0 million
(plus the amount of any outstanding debt of DLA LLC owed to Darlene). The DLA LLC Agreement also provides that we have the right, under certain circumstances, to require Darlene
to sell all of its equity interests in DLA LLC to us for $400.0 million (plus the amount of any outstanding debt of DLA LLC owed to Darlene). Such events are triggered if certain conditions are
satisfied, including a combination of the business or operations of DLA LLC with substantially all of the DTH satellite business or operations of Sky Latin America, an affiliate of News Corporation,
or other events as described in the DLA LLC Agreement, or a Sky Deal. We do not believe that at December 31, 2005, the conditions necessary to trigger these events had been satisfied. In
addition, under the terms of the DLA LLC Agreement, from February 24, 2005 through February 24, 2010, either we or Darlene may provide notice to the other that the notifying party wishes
to attempt a sale of DLA LLC or an initial public offering of the equity of DLA LLC. The delivery of such notices starts a process which, among other things, may trigger certain call rights by the
non-notifying party. If such a notice were delivered by Darlene within the period provided, and independent third party appraisal of DLA LLC indicated a valuation in excess of
approximately $1.6 billion, then we could be obligated to cooperate with attempts by Darlene to sell all of DLA LLC, conduct an initial public offering of the equity of DLA LLC or exercise our
call rights, which would cost approximately $400 million. These rights are subject to many conditions and requirements, which are described in more detail in the DLA LLC Agreement. As discussed
above, in a lawsuit filed in October 2004 by Darlene against us and others, Darlene asserts, among other claims, that it was fraudulently induced to enter into the DLA LLC Agreement and that
the Sky Deal is prohibited by the DLA LLC Agreement.

Note 22: Subsequent Events

In January 2006, we completed the sale of our remaining 50% interest in HNS LLC to SkyTerra. In exchange for our remaining 50% interest and resolution of a
working capital adjustment from the April 22, 2005 transaction we received cash proceeds of $110 million. As a result of the transaction, in the first quarter of 2006, we will record a
net gain and equity earnings of $24.8 million to "Other, net" in the Consolidated Statements of Operations.

On
February 7, 2006, our Board of Directors authorized a share repurchase program. Under the repurchase program, we are authorized to spend up to $3.0 billion to repurchase
outstanding shares of our common stock. The source of funds for the proposed purchases is from our existing cash on hand and cash from operations. We implemented the repurchase program on
February 10, 2006. There is no fixed termination date for the repurchase program and purchases may be made in the open market, through block trades and other negotiated transactions. The
program may be suspended, discontinued or accelerated at any time. Repurchased shares will cease to be issued and outstanding but remain authorized for registration and issuance in the future. Through
March 7, 2006, we have repurchased approximately 110.3 million shares for $1.7 billion, at an average price of $15.50 per share, which
includes 100 million shares of our common stock purchased from General Motors employee pension and benefit trusts.

On
February 16, 2006, we completed the acquisition of a 47% equity interest in Sky Mexico. The 47% equity interest includes a 12% interest issued by Sky Mexico that we acquired by
exchanging the Sky Mexico note receivable that we received from the migration of our DIRECTV Mexico subscribers to Sky Mexico, and a 35% interest acquired from News Corporation and Liberty for
$373.0 million in cash. As a result of the completion of this transaction, we will report a gain of approximately $58 million related to the exchange of the note receivable for the
higher value 12% equity interest during the first quarter of 2006. Additionally, Televisa has the right to acquire a portion of our equity interest in Sky Mexico for $58.7 million upon receipt
of regulatory approval. If Televisa elects to acquire this interest then our equity interest will be reduced to approximately 41%. We will account for our investment in Sky Mexico under the equity
method of accounting.

*
* *

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SUPPLEMENTARY DATA

|Selected Quarterly Data (Unaudited)                                                                                             |  | 1st |         | 2nd |   | 3rd     |   | 4th |         
|------------------------------------------------------------------------------------------------------------------------------- |  | --- | ------- | --- | - | ------- | - | --- | --------
|
|2005 Quarters                                                                                                                   |  |     |         |     |   |         |   |     |         
|Revenues                                                                                                                        |  | $   | 3,147.9 |     | $ | 3,187.9 |   | $   | 3,233.2 
|Income (Loss) from Continuing Operations Before Income Taxes and Minority Interests                                             |  |     | (89.1   | )   |   | 210.5   |   |     | 139.1   
|Income tax (expense) benefit                                                                                                    |  |     | 43.7    |     |   | (75.6   | ) |     | (41.7   
|Minority interests in net (earnings) losses of subsidiaries                                                                     |  |     | 4.0     |     |   | (4.7    | ) |     | (2.8    
|                                                                                                                                |  |     |         |     |   |         |   |     |         
|Income (loss) from continuing operations                                                                                        |  |     | (41.4   | )   |   | 130.2   |   |     | 94.6    
|Income from discontinued operations, net of taxes                                                                               |  |     |        |     |   | 31.3    |   |     |        
|                                                                                                                                |  |     |         |     |   |         |   |     |         
|Net Income (Loss)                                                                                                               |  | $   | (41.4   | )   | $ | 161.5   |   | $   | 94.6    
|                                                                                                                                |  |     |         |     |   |         |   |     |         
|Basic and diluted earnings (loss) per common share from continuing operations                                                   |  | $   | (0.03   | )   | $ | 0.10    |   | $   | 0.07    
|2004 Quarters                                                                                                                   |  |     |         |     |   |         |   |     |         
|Revenues                                                                                                                        |  | $   | 2,493.2 |     | $ | 2,642.8 |   | $   | 2,861.9 
|Income (Loss) from Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Change (1) |  |     | 323.0   |     |   | (40.7   | ) |     | (1,553.1
|Income tax (expense) benefit                                                                                                    |  |     | (147.1  | )   |   | 20.1    |   |     | 624.3   
|Minority interests in net earnings of subsidiaries                                                                              |  |     | (0.7    | )   |   | 3.0     |   |     | 3.2     
|                                                                                                                                |  |     |         |     |   |         |   |     |         
|Income (loss) from continuing operations before cumulative effect of accounting change                                          |  |     | 175.2   |     |   | (17.6   | ) |     | (925.6  
|Income (loss) from discontinued operations, net of taxes                                                                        |  |     | (503.5  | )   |   | 4.3     |   |     | (83.0   
|                                                                                                                                |  |     |         |     |   |         |   |     |         
|Income (loss) before cumulative effect of accounting changes                                                                    |  |     | (328.3  | )   |   | (13.3   | ) |     | (1,008.6
|Cumulative effect of accounting change, net of taxes                                                                            |  |     | (310.5  | )   |   |        |   |     |        
|                                                                                                                                |  |     |         |     |   |         |   |     |         
|Net Income (Loss)                                                                                                               |  | $   | (638.8  | )   | $ | (13.3   | ) | $   | (1,008.6
|                                                                                                                                |  |     |         |     |   |         |   |     |         
|Basic and diluted earnings (loss) per common share from continuing operations before cumulative effect of accounting change     |  | $   | 0.12    |     | $ | (0.01   | ) | $   | (0.67   

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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation as of the end of the year covered by this Annual Report on Form 10-K under the supervision and with the
participation of management, including our principal executive officers and our financial officers, of the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on the evaluation, our principal executive officers and
our financial officers concluded that our disclosure controls and procedures were effective as of December 31, 2005.

There
has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during our fiscal quarter ended December 31, 2005, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Internal Control Over Financial Reporting



Management of The DIRECTV Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934. Those rules define internal control over financial reporting as a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America, or GAAP, and includes those policies and procedures that:



Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, our management used the criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the

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Treadway
Commission (COSO). Based on their assessment and those criteria, management believes that, as of December 31, 2005, our internal control over financial reporting is effective.

Our
independent registered public accounting firm has issued an audit report on management's assessment of internal control over financial reporting, which appears below.

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

To
the Board of Directors and Stockholders of The DIRECTV Group, Inc.
El Segundo, California

We
have audited management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting, that The DIRECTV Group, Inc. ("the
Company") maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established inInternal
ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

112

---



In
our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material
respects, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the
criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway
Commission.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement
schedules as of and for the year ended December 31, 2005 of the Company and our report dated March 6, 2006 expressed an unqualified opinion on those financial statements and financial
statement schedules and included an explanatory paragraph regarding the Company's change of its method of accounting for subscriber acquisition, upgrade and retention costs and a change in the
Company's presentation of its consolidated statements of cash flows to present separate disclosure of cash flows from operating, investing and financing activates of discontinued operations.

|/S/ DELOITTE & TOUCHE LLPDELOITTE & TOUCHE LLP |  | 
|---------------------------------------------- |  | 

Los
Angeles, California
March 6, 2006

113

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ITEM 9B. OTHER INFORMATION

None.

*
* *

PART III

ITEMS 10, 11, 12, 13 and 14

We hereby incorporate by reference information required by Part III (Items 10, 11, 12, 13 and 14) of this Annual Report from The DIRECTV
Group, Inc.'s definitive Proxy Statement for its 2005 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year.

*
* *

PART IV

ITEM 15.     EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

|    |  |    |  |                                                                                                                        |  | Page
Number
|--- |  | -- |  | ---------------------------------------------------------------------------------------------------------------------- |  | -----------
|(a) |  | 1. |  | All Consolidated Financial Statements                                                                                  |  | See Part II
|    |  | 2. |  | Financial Statement Schedule ICondensed Financial Information of the Registrant                                       |  | 122        
|    |  |    |  | Financial Statement Schedule IIValuation and Qualifying Accounts for the Years Ended December 31, 2005, 2004 and 2003 |  | 125        
|    |  | 3. |  | Exhibits                                                                                                               |  |            

|Exhibit
Number |  | Exhibit Name                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*2.1           |  | Transaction Agreement, dated as of April 20, 2004, by and among The DIRECTV Group, Inc., PAS Merger Sub, Inc., PanAmSat Corporation and Constellation LLC (incorporated herein by reference to Exhibit 1 to Amendment No. 8 to Schedule 13D of PanAmSat
Corporation as filed by The DIRECTV Group, Inc. with the Securities and Exchange Commission on April 22, 2004)                                                                                                             
|*2.2           |  | 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 herein 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)
|*2.3           |  | Stock Purchase Agreement, dated as of April 9, 2003, by and among The News Corporation Limited, Hughes Electronics Corporation and General Motors Corporation (incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 8-K of
Hughes Electronics Corporation filed April 14, 2003 (the "April 14, 2003 8-K"))                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

114

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|*2.4  |  | Amendment No. 1 to the Stock Purchase Agreement, dated as of April 25, 2003, by and among The News Corporation Limited, Hughes Electronics Corporation and General Motors Corporation (incorporated herein by reference to Exhibit 2.2 to the Registration
Statement on Form S-4 of Hughes Electronics Corporation (Registration No. 105851), filed June 5, 2003 (the "Form S-4"))
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*2.5  |  | Amendment No. 2 to the Stock Purchase Agreement, dated as of August 20, 2003, by and among The News Corporation Limited, Hughes Electronics Corporation and General Motors Corporation (incorporated herein by reference to Exhibit 2.7 to Amendment
No. 2 to the Form S-4, filed August 21, 2003 ("Amendment No. 2"))                                                            
|*2.6  |  | Letter Agreement, dated as of August 15, 2003, by and among Hughes Electronics Corporation, The News Corporation Limited, GMH Merger Sub, Inc. and General Motors Corporation (incorporated herein by reference to Exhibit 2.6 to Amendment
No. 2)                                                                                                                                
|*2.7  |  | Agreement and Plan of Merger, dated as of April 9, 2003, by and among Hughes Electronics Corporation, The News Corporation Limited, and GMH Merger Sub, Inc. (incorporated herein by reference to Exhibit 99.3 to the April 14, 2003 8-K)                                                                                                                                         
|*2.8  |  | Amendment No. 1 to the Agreement and Plan of Merger, dated as of July 16, 2003, by and among Hughes Electronics Corporation, The News Corporation Limited and GMH Merger Sub, Inc. (incorporated herein by reference to Exhibit 2.5 to Amendment No. 1 to
the Form S-4, filed July 24, 2003)                                                                                      
|*2.9  |  | Separation Agreement, dated as of April 9, 2003, by and between General Motors Corporation and Hughes Electronics Corporation (incorporated herein by reference to Exhibit 99.4 to the April 14, 2003 8-K)                                                                                                                                                                        
|*2.10 |  | Letter Agreement, dated as of August 12, 2004, between The DIRECTV Group, Inc. and Constellation, LLC, and acknowledged by PanAmSat Corporation (incorporated by reference to Exhibit (d) 3 to Amendment No. 4 to Schedule 13E-3 filed with the Securities
and Exchange Commission on August 12, 2004 by The DIRECTV Group, Inc. and certain other filing persons)                
|*3.1  |  | Amended and Restated Certificate of Incorporation of Hughes Electronics Corporation, dated as of December 22, 2003 (incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 8-K of Hughes Electronics Corporation, dated December
22, 2003 (the "December 22, 2003 Form 8-K"))                                                                             
|*3.2  |  | Certificate of Ownership and Merger of The DIRECTV Group, Inc. with and into Hughes Electronics Corporation dated March 16, 2004 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc., dated
March 16, 2004)                                                                                                             
|*3.3  |  | Amended and Restated By-laws of Hughes Electronics Corporation, dated as of December 22, 2003 (incorporated herein by reference to Exhibit 99.3 to the December 22, 2003 Form 8-K)                                                                                                                                                                                                
|*4.1  |  | Specimen form of certificate representing common stock of The DIRECTV Group, Inc. (incorporated herein by reference to Exhibit 4.1 to the Annual Report on Form 10-K of The DIRECTV Group, Inc. for the year ended December 31, 2003 (the "2003
Form 10-K"))                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                   

115

---



|*4.2     |  | Indenture, dated as of February 28, 2003, by and among DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., as Issuers, DIRECTV, Inc., USSB II, Inc., DIRECTV Customer Services, Inc., DIRECTV Merchandising, Inc., DIRECTV Enterprises, LLC, DIRECTV
Operations, LLC, as Guarantors, and the Bank of New York as Trustee (incorporated herein by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q of Hughes Electronics Corporation, filed on May 8, 2003 (the "March 31, 2003 Form 10-Q"))
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*4.3     |  | Form of 8.375% Senior Notes due 2013 (incorporated herein by reference to Exhibit 4.2 to the March 31, 2003 Form 10-Q)                                                                                                                                                                                                                                                                                                                                                                                
|*4.4     |  | Supplemental Indenture dated as of September 30, 2004 by and among DIRECTV Home Services, LLC, DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors and The Bank of New York, as trustee (incorporated herein by reference to Exhibit 4.2 to
the Annual Report on Form 10-K for the year ended December 31, 2004 of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc.)                                                                                                                
|*4.5     |  | Indenture, dated as of June 15, 2005, by and among DIRECTV Holdings LLC, DIRECTV Financing Co, Inc., the Guarantors signatory thereto and the Bank of New York, as trustee (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form
8-K of DIRECTV Holdings LLC and DIRECTV Financing Co, Inc., filed on June 20, 2005 (the "Holdings June 20, 2005 8-K")).                                                                                                                    
|*4.6     |  | Form of 63/8% Senior Notes due 2015 (incorporated by reference to Exhibit 10.1 to the June 20, 2005 Form 8-K) *10.Credit Agreement, dated February 24, 2004, among DIRECTV Latin America, LLC, as Borrower, the Material
Subsidiaries of the Borrower Party Hereto, and Hughes Electronics Corporation, as Lender (incorporated herein by reference to Exhibit 10.20 to the 2003 Form 10-K)                                                                                                           
|*10.1    |  | Credit Agreement, dated February 24, 2004, among DIRECTV Latin America, LLC, as Borrower, the Material Subsidiaries of the Borrower Party Hereto, and Hughes Electronics Corporation, as Lender (incorporated herein by reference to
Exhibit 10.20 to the 2003 Form 10-K)                                                                                                                                                                                                                             
|*10.2    |  | Second Amended and Restated Limited Liability Company Agreement of DIRECTV Latin America, LLC (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Hughes Electronics Corporation filed March 2, 2004 (the "March 2,
2004 8-K"))                                                                                                                                                                                                                                    
| *10.3 |  | Employment Agreement, effective as of January 1, 2004, between The DIRECTV Group, Inc. and Chase Carey (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of The DIRECTV Group, Inc. for the quarterly period ended
March 31, 2004 (the "March 31, 2004 10-Q"))                                                                                                                                                                                                   
| *10.4 |  | Employment Agreement, effective as of January 1, 2004, between The DIRECTV Group, Inc. and Bruce Churchill (incorporated herein by reference to Exhibit 10.2 to the March 31, 2004 10-Q)                                                                                                                                                                                                                                                                                                              
| *10.5 |  | Employment Agreement, effective as of January 1, 2004, between The DIRECTV Group, Inc. and Larry Hunter (incorporated herein by reference to Exhibit 10.4 to the March 31, 2004 10-Q)                                                                                                                                                                                                                                                                                                                 
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

116

---



| *10.6 |  | Employment Agreement, effective as of January 1, 2004, between The DIRECTV Group, Inc. and Romulo Pontual (incorporated herein by reference to Exhibit 10.5 to the March 31, 2004 10-Q)                                                                                                                                                                                                                                                                                                                                     
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| *10.7 |  | Employment Agreement, effective as of January 1, 2004, among The DIRECTV Group, Inc., DIRECTV Holdings LLC and Mitchell Stern (incorporated herein by reference to Exhibit 10.6 to the March 31, 2004 10-Q)                                                                                                                                                                                                                                                                                                                 
| *10.8 |  | Employment Agreement between The DIRECTV Group, Inc. and Michael W. Palkovic effective as of March 19, 2005 (incorporated herein by reference to Exhibit 10.7 to the Form 10-Q of The DIRECTV Group, Inc. for the quarter ended March 31, 2005 (the "March
31, 2005 Form 10-Q")                                                                                                                                                                                                                                             
|*10.9    |  | Agreement of Termination, dated as of June 1, 2004, by and between DIRECTV, Inc., as assignee of Hughes Communications Galaxy, Inc., Hughes Communications Galaxy, Inc., as predecessor-in-interest and National Rural Telecommunications Cooperative
(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc., as filed with the Securities and Exchange Commission on June 2, 2004 ("the June 2, 2004 Form 8-K"))                                                   
|*10.10   |  | Member Offer Agreement (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc., as filed with the Securities and Exchange Commission on June 3, 2004)                                                                                                                                                                                                                                                                                                                
|*10.11   |  | Asset Purchase Agreement, dated as of July 30, 2004, by and among Pegasus Satellite Television, Inc., Golden Sky Systems, Inc., and each other entity listed as a "Seller" on the signature pages thereto, DIRECTV, Inc., and, solely for purposes of
Section 12.12 thereof, The DIRECTV Group, Inc. (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc., as filed with the Securities and Exchange Commission on August 3, 2004 (the "August 3, 2004
Form 8-K"))
|*10.12   |  | Cooperation Agreement, dated as of July 30, 2004, by and among Pegasus Satellite Television, Inc. (on its own behalf and on behalf of its direct and indirect subsidiaries that are listed as a "Seller" on the signature pages to the Asset Purchase
Agreement), and DIRECTV, Inc. (incorporated herein by reference to Exhibit 10.2 to the August 3, 2004 Form 8-K)                                                                                                                                                       
|*10.13   |  | Global Settlement Agreement, dated as of July 30, 2004, by and among Pegasus Satellite Communications, Inc., Pegasus Communications Corporation, DIRECTV, Inc., National Rural Telecommunications Cooperative, the creditors' committee in Pegasus'
Chapter 11 proceedings and certain other parties (incorporated herein by reference to Exhibit 10.3 to the August 3, 2004 Form 8-K)                                                                                                                                      
|*10.14   |  | Office Sublease for Corporate Headquarters between Raytheon Company, f/k/a Hughes Aircraft Company, and DIRECTV, Inc. dated March 20, 1996 (incorporated by reference to Exhibit 10.17 of the Form S-4).                                                                                                                                                                                                                                                                                                                    
|*10.15 |  | The DIRECTV Group, Inc. 2004 Stock Plan (incorporated herein by reference to Exhibit 99 to the Registration Statement on Form S-8 of The DIRECTV Group, Inc. as filed with the Securities and Exchange Commission on June 3, 2004)                                                                                                                                                                                                                                                                                          
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

117

---



|*10.16 |  | The DIRECTV Group, Inc. Executive Officer Cash Bonus Plan (incorporated herein by reference to Annex C to the Definitive Proxy Statement on Schedule 14A of The DIRECTV Group, Inc. as filed with the Securities and Exchange Commission on April 16,
2004)                                                                                                                                                                                              
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.17   |  | Brazil Business Combination Agreement, dated as October 8, 2004, by and among Globo Comunicações e Participações S.A., The News Corporation Limited, The DIRECTV Group, Inc., DIRECTV Latin America, LLC and GLA Brasil Ltda.
(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc., as filed with the Securities and Exchange Commission on October 15, 2004 (the "October 15, 2004 Form 8-K"))
|*10.18   |  | Participation Agreement, dated as of October 8, 2004, by and among Globo Comunicações e Participações S.A., The News Corporation Limited and The DIRECTV Group, Inc. (incorporated herein by reference to Exhibit 10.2 to the
October 15, 2004 Form 8-K)                                                                                                                                                                                                 
|*10.19   |  | Latin America Purchase Agreement, dated as of October 8, 2004, by and between The News Corporation Limited and The DIRECTV Group, Inc. (incorporated herein by reference to Exhibit 10.3 to the October 15, 2004 Form 8-K)                                                                                                                                                                                                                               
|*10.20   |  | Latin America Purchase Agreement, dated as of October 8, 2004, by and between Liberty Media International, Inc. and The DIRECTV Group, Inc. (incorporated herein by reference to Exhibit 10.4 to the October 15, 2004 Form 8-K)                                                                                                                                                                                                                          
|*10.21   |  | Purchase and Sale Agreement, dated as of October 8, 2004, by and between Grupo Galaxy Mexicana S. de R.L. de C.V. and Corporacion Novavisión, S. de R.L. de C.V. (incorporated herein by reference to Exhibit 10.5 to the October 15, 2004 Form
8-K)                                                                                                                                                                                                     
|*10.22   |  | Option Agreement Letter, dated as of October 8, 2004, among Innova, S. de R.L. de C.V., Innova Holdings, S. de R.L. de C.V., Novavisión, S. de R.L. de C.V., Grupo Televisa, S.A., The News Corporation Limited, The DIRECTV Group, Inc. and
DIRECTV Latin America, LLC (incorporated herein by reference to Exhibit 10.6 to the October 15, 2004 Form 8-K)                                                                                              
|*10.23   |  | Post-Migration Payment Letter Agreement, dated as of October 8, 2004, by and between Grupo Galaxy Mexicana S. de R.L. de C.V. and Corporacion Novavisión, S. de R.L. de C.V. (incorporated herein by reference to Exhibit 10.7 to the October 15,
2004 Form 8-K)                                                                                                                                                                                         
|*10.24   |  | DTH Agreement, dated as of October 8, 2004, by and among Grupo Televisa, S.A., The News Corporation Limited, Innova, S. de R.L. de C.V., The DIRECTV Group, Inc. and DIRECTV Latin America, LLC (incorporated herein by reference to Exhibit 10.8 to the
October 15, 2004 Form 8-K)                                                                                                                                                                      
|*10.25   |  | Televisa Letter Agreement, dated as of October 8, 2004, by and between Grupo Televisa, S.A. and The DIRECTV Group, Inc. (incorporated herein by reference to Exhibit 10.9 to the October 15, 2004 Form 8-K)                                                                                                                                                                                                                                              
|*10.26   |  | Purchase and Sale Agreement (Multi-Country Platform), dated as of October 8, 2004, by and among Grupo Televisa, S.A. and The DIRECTV Group, Inc. (incorporated herein by reference to Exhibit 10.10 to the October 15, 2004 Form 8-K)                                                                                                                                                                                                                    
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                          

118

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|*10.27   |  | Purchase and Sale Agreement (Multi-Country Platform), dated as of October 15, 2004, by and among Globo Comunicações e Participações S.A., DTH USA, Inc. and The DIRECTV Group, Inc. (incorporated herein by reference to
Exhibit 10.12 to the Quarter Report on Form 10-Q of The DIRECTV Group, Inc. for the quarter ended September 30, 2004)                                                                                                  
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.28 |  | Retirement and Release Agreement, dated as of December 2, 2004, by and between The DIRECTV Group, Inc. and Eddy Hartenstein (incorporated by reference to Exhibit 10.35 to the Annual Report on Form 10-K for the year ended December 31, 2004 of The
DIRECTV Group, Inc. (the "2004 Form 10-K"))                                                                                                                                               
|*10.29 |  | Amended and Restated Hughes Electronics Corporation Long-Term Achievement Plan, amended and effective as of December 22, 2003 (incorporated by reference to Exhibit 10.36 to the 2004 Form 10-K)                                                                                                                                                                                                                                                
|*10.30 |  | Long-Term Achievement Plan Form of Award, dated April 29, 2003 (incorporated by reference to Exhibit 10.37 to the 2004 Form 10-K)                                                                                                                                                                                                                                                                                                               
|*10.31 |  | Hughes Electronics Corporation Executive Deferred Compensation Plan, amended and effective as of December 22, 2003 (incorporated by reference to Exhibit 10.38 to the 2004 Form 10-K)                                                                                                                                                                                                                                                           
|*10.32 |  | Performance Stock Unit Award Agreement, dated as of March 16, 2004, between The DIRECTV Group, Inc. and Chase Carey (incorporated by reference to Exhibit 10.39 to the 2004 Form 10-K)                                                                                                                                                                                                                                                          
|*10.33 |  | Non-Qualified Stock Option Agreement, dated as of March 16, 2004, between The DIRECTV Group, Inc. and Chase Carey (incorporated by reference to Exhibit 10.40 to the 2004 Form 10-K)                                                                                                                                                                                                                                                            
|*10.34 |  | Performance Stock Unit Award Agreement, dated as of March 16, 2004, between The DIRECTV Group, Inc. and Mitchell Stern (incorporated by reference to Exhibit 10.41 to the 2004 Form 10-K)                                                                                                                                                                                                                                                       
|*10.35   |  | First Amended and Restated Registration Rights Agreement, by and among General Motors Corporation and United States Trust Company of New York, as Trustee of The General Motors Special Hourly Employees Pension Trust, as Trustee of The General Motors
Special Salaried Employees Pension Trust and as Trustee of The Sub-Trust of The General Motors Welfare Benefit Trust (incorporated by reference to Exhibit 10.42 to the 2004 Form 10-K)
|*10.36   |  | Succession Agreement, dated as of December 22, 2003, by and between General Motors Corporation and Hughes Electronics Corporation (incorporated by reference to Exhibit 10.43 to the 2004 Form 10-K)                                                                                                                                                                                                                                            
|*10.37   |  | Contribution and Membership Interest Purchase Agreement, dated as of December 3, 2004, by and among The DIRECTV Group, Inc., Hughes Network Systems, Inc., SkyTerra Communications, Inc. and Hughes Network Systems, LLC (incorporated herein by reference
to Exhibit 10.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc., dated December 3, 2004)                                                                                
|*10.38 |  | Terms and Conditions of restricted stock unit awards to independent directors (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc. filed February 15, 2005 (the "February 15, 2005 8-K"))                                                                                                                                                                                                    
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 

119

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|*10.39 |  | Terms and Conditions of restricted stock unit awards to applicable executive officers (incorporated herein by reference to Exhibit 10.2 to the February 15, 2005 Form 8-K)                                                                                                                                                                                                                                                                                                              
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.40 |  | Amended and Restated Executive Change in Control Severance Agreement, dated as of July 3, 2001 by and between Hughes Electronics Corporation and Patrick Doyle (incorporated by reference to Exhibit 10.48 to the 2004 Form 10-K)                                                                                                                                                                                                                                                       
|*10.41 |  | Amended and Restated Executive Change in Control Severance Agreement, dated as of July 3, 2001 by and between Hughes Electronics Corporation and Larry Hunter (incorporated by reference to Exhibit 10.49 to the 2004 Form 10-K)                                                                                                                                                                                                                                                        
|*10.42 |  | Acknowledgement Agreement and Amendment to Executive Change in Control Severance Agreement, entered into on December 22, 2003, by and between Hughes Electronics Corporation and Patrick Doyle (incorporated by reference to Exhibit 10.51 to the 2004
Form 10-K)                                                                                                                                                                                                                       
|*10.43 |  | Acknowledgement Agreement and Amendment to Executive Change in Control Severance Agreement, entered into on December 22, 2003, by and between Hughes Electronics Corporation and Larry Hunter (incorporated by reference to Exhibit 10.52 to the 2004 Form
10-K)                                                                                                                                                                                                                        
|*10.44   |  | Employee Matters Agreement, dated as of April 9, 2003, by and between Hughes Electronics Corporation and The News Corporation Limited (incorporated by reference to Exhibit 99.5 to the Form S-4)                                                                                                                                                                                                                                                                                       
|*10.45   |  | Special Employee Items Agreement, dated as of April 9, 2003, by and between General Motors Corporation and Hughes Electronics Corporation (incorporated by reference to Exhibit 99.4 to the Form S-4)                                                                                                                                                                                                                                                                                   
|*10.46   |  | Amended and Restated Agreement for the Allocation of United States Income Taxes, dated as of April 9, 2003, by and between General Motors Corporation and Hughes Electronics Corporation (incorporated by reference to Exhibit 99.3 to the Form
S-4)                                                                                                                                                                                                                                    
|*10.47 |  | Executive Change in Control Agreement Amended by and between The DIRECTV Group, Inc. and Michael W. Palkovic, as amended and restated through February 1, 2004 (incorporated herein by reference to Exhibit 10.8 of the March 31, 2005 Form
10-Q)                                                                                                                                                                                                                                       
|*10.48   |  | Services Agreement dated November 1, 2005 by and between News Corporation and The DIRECTV Group, Inc (incorporated herein by reference to Exhibit 10.1 of the September 30, 2005 Form 10-Q)                                                                                                                                                                                                                                                                                             
|*10.49   |  | Terms and Conditions of restricted stock unit awards to independent director (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc. filed February 10, 2006 (the "February 10, 2006 8-K"))                                                                                                                                                                                                                                             
|*10.50   |  | Terms and Conditions of restricted stock unit awards to applicable executive officers (incorporated herein by reference to Exhibit 10.2 to the February 10, 2006 Form 8-K).                                                                                                                                                                                                                                                                                                             
|*10.51   |  | Letter Agreement dated February 24, 2006 between The DIRECTV Group, Inc. and United States Trust Company of New York acting in its capacity as independent trustee for the General Motors Special Hourly Employees Pension Trust, the General Motors
Special Salaried Employees Pension Trust and the Sub-Trust of the General Motors Welfare Benefit Trust (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The DIRECTV Group, Inc. filed March 1, 2006)
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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|**10.52 |  | First Amendment to Hughes Electronics Corporation Executive Deferred Compensation Plan dated November 2005                                                                                                                                                                             
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*14     |  | Hughes Electronics Corporation Code of Ethics and Business Conduct, adopted January 28, 2004 (incorporated herein by reference to Exhibit 14 to the 2003 Form 10-K)                                                                                                                    
|**21    |  | Subsidiaries of the Registrant as of December 31, 2005                                                                                                                                                                                                                                 
|**23    |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                       
|**31.1  |  | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                 
|**31.2  |  | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                 
|**32.1  |  | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                  
|**32.2  |  | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                  
|*99.1   |  | First Amended Plan of Reorganization of DIRECTV Latin America, LLC Under Chapter 11 of the Bankruptcy Code (incorporated herein by reference to Exhibit 99.2 to the March 2, 2004 8-K)                                                                                                 
|*99.2   |  | Finding of Facts, Conclusions of Law and Order Confirming First Amended Plan of Reorganization of DIRECTV Latin America, LLC, Under Chapter 11 of the Bankruptcy Code Dated January 7, 2004: Docket No. 529 (incorporated herein by reference to Exhibit
99.1 to the March 2, 2004 8-K)

---

A
copy of any of the exhibits included in this Annual Report on Form 10-K, other than those as to which confidential treatment has been granted by the Securities and
Exchange Commission, upon payment of a fee to cover the reasonable expenses of furnishing such exhibits, may be obtained by written request to us at the address set forth on the front cover, attention
General Counsel.

121

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SCHEDULE ICONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS
(Parent Company Only)

|                                                |                                     | Years Ended December 31, |       
|----------------------------------------------- | ----------------------------------- | ------------------------ | ------
|
|
|Operating Costs and Expenses                    |                                     |                          |       
|                                                | General and administrative expenses |                          | $     
|                                                |                                     |                          |       
|Total Operating Costs and Expenses              |                                     |                          | 91.2  
|Operating Loss                                  |                                     |                          | (91.2 
|Interest income                                 |                                     |                          | 109.8 
|Interest expense                                |                                     |                          | (4.7  
|Equity in net earnings (losses) of subsidiaries |                                     |                          | 464.9 
|Reorganization expense                          |                                     |                          |      
|Other, net                                      |                                     |                          | (1.0  
|                                                |                                     |                          |       
|Income (loss) Before Income Taxes               |                                     |                          | 477.8 
|Income tax (expense) benefit                    |                                     |                          | (141.9
|                                                |                                     |                          |       
|Net Income (Loss)                               |                                     | $                        | 335.9 
|                                                |                                     |                          |       

CONDENSED BALANCE SHEETS
(Parent Company Only)

|                                           |                                                     | December 31,        
|------------------------------------------ | --------------------------------------------------- | --------------------
|
|
|ASSETS                                     |                                                     |                     
|Current Assets                             |                                                     |                     
|                                           | Cash and cash equivalents                           |                     
|                                           | Short-term investments                              |                     
|                                           | Accounts and interest receivables from subsidiaries |                     
|                                           | Deferred income taxes                               |                     
|                                           | Prepaid expenses and other                          |                     
|                                           |                                                     |                     
|                                           |                                                     | Total Current Assets
|Deferred Income Taxes                      |                                                     |                     
|Loans Receivable from Subsidiaries         |                                                     |                     
|Investments in Subsidiaries                |                                                     |                     
|Other Assets                               |                                                     |                     
|                                           |                                                     |                     
|Total Assets                               |                                                     | $                   
|                                           |                                                     |                     
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                     |                     
|Current Liabilities                        |                                                     |                     
|                                           | Accounts payable, accrued liabilities and other     |                     
|                                           |                                                     |                     
|Total Current Liabilities                  |                                                     |                     
|Other Liabilities and Deferred Credits     |                                                     |                     
|Commitments and Contingencies              |                                                     |                     
|Stockholders' Equity                       |                                                     |                     
|                                           |                                                     |                     
|Total Liabilities and Stockholders' Equity |                                                     | $                   
|                                           |                                                     |                     

---

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

122

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CONDENSED STATEMENTS OF CASH FLOWS  (Parent Company Only)

|                                                   |                                                     | Years Ended December 31, |         
|-------------------------------------------------- | --------------------------------------------------- | ------------------------ | --------
|
|
|Cash Flows from Operating Activities               |                                                     |                          |         
|                                                   | Net Cash Used in Operating Activities               |                          | $       
|                                                   |                                                     |                          |         
|Cash Flows from Investing Activities               |                                                     |                          |         
|Purchase of short-term investments                 |                                                     |                          | (4,672.7
|Sale of short-term investments                     |                                                     |                          | 4,512.1 
|Net investments in subsidiaries                    |                                                     |                          | (149.8  
|Net (increase) decrease in loans to subsidiaries   |                                                     |                          | 875.0   
|Proceeds from sale of investments                  |                                                     |                          | 37.0    
|Cash paid for property, equipment and satellites   |                                                     |                          | (27.9   
|Other, net                                         |                                                     |                          | 6.2     
|                                                   |                                                     |                          |         
|                                                   | Net Cash Provided by Investing Activities           |                          |         
|                                                   |                                                     |                          |         
|Cash Flows from Financing Activities               |                                                     |                          |         
|Net decrease in notes and loans payable            |                                                     |                          |        
|Stock options exercised                            |                                                     |                          | 45.2    
|Special cash dividend paid to General Motors       |                                                     |                          |        
|                                                   |                                                     |                          |         
|                                                   | Net Cash Provided by (Used in) Financing Activities |                          |         
|                                                   |                                                     |                          |         
|Net increase in cash and cash equivalents          |                                                     |                          | 255.2   
|Cash and cash equivalents at beginning of the year |                                                     |                          | 2,179.8 
|                                                   |                                                     |                          |         
|Cash and cash equivalents at end of the year       |                                                     | $                        | 2,435.0 
|                                                   |                                                     |                          |         

---

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

123

---



NOTES TO THE CONDENSED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

As discussed in Note 9 of the Notes to the Consolidated Financial Statements, the terms of the DIRECTV Holdings LLC credit facility limit DIRECTV Holdings
LLC and its respective subsidiaries from transferring funds to us in the form of cash dividends, loans or advances. In the parent company only financial statements, we state our investments in
subsidiaries at cost, net of equity in earnings (losses) of subsidiaries, since the date of formation/acquisition. As a result, we include our interest in the net assets of DIRECTV Holdings LLC, which
total about $3.3 billion and $2.4 billion at December 31, 2005 and 2004, respectively, in "Investments in Subsidiaries" in the accompanying Condensed Balance Sheets of the parent
company. The parent company only financial statements and related notes should be read in conjunction with our consolidated financial statements and notes thereto.

Note 2: Loss on Sale of PanAmSat

On August 20, 2004, we completed the sale of our approximately 80.4% interest in PanAmSat to an affiliate of Kohlberg Kravis Roberts & Co. L.P for
$2.64 billion in cash. We recorded a pre-tax loss of $1,078.1 million in "Other, net" in 2004 in the accompanying Condensed Statements of Operations as a result of this
transaction. The $2.64 billion in cash received for this transaction is reflected in "Net investment in subsidiaries" in the Condensed Statements of Cash Flows. See Note 3 of the Notes
to the Consolidated Financial Statements for more information.

Note 3: Loans Receivable from Subsidiaries

On August 27, 2004, in connection with the completion of the Pegasus and NRTC transactions described in Note 3 of the Notes to the Consolidated
Financial Statements, we provided DIRECTV U.S.
$875.0 million in the form a unsecured promissory note. DIRECTV U.S. repaid the $875.0 note in full during the second quarter of 2005.

Note 4: Credit Facilities

See Note 9 of the Notes to the Consolidated Financial Statements.

Note 5: Contingencies

See Note 21 of the Notes to the Consolidated Financial Statements.

124

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THE DIRECTV GROUP, INC.  SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

|Description                                              |                                                          | Balance at
beginning
of year                             |        | Additions
charged to
costs and
expenses |       | Additions
charged
to other
accounts |        | Deductions |        | Balance at
end of
year |      
|-------------------------------------------------------- | -------------------------------------------------------- | -------------------------------------------------------- | ------ | --------------------------------------- | ----- | ----------------------------------- | ------ | ---------- | ------ | ---------------------- | -----
|
|For the Year Ended December 31, 2005                     |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      
|Allowances Deducted from Assets                          |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      
|                                                         | Accounts and notes receivable (for doubtful receivables) |                                                          | $      | (121.7                                  | )     | $                                   | (248.7 | )          | $      | (101.3                 | )(a) 
|                                                         |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      
|For the Year Ended December 31, 2004                     |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      
|Allowances Deducted from Assets                          |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      
|Accounts and notes receivable (for doubtful receivables) |                                                          | $                                                        | (112.7 | )                                       | $     | (207.9                              | )      | $          | (77.9) | (a)                    | $    
|                                                         |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      
|For the Year Ended December 31, 2003                     |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      
|Allowances Deducted from Assets                          |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      
|                                                         |                                                          | Accounts and notes receivable (for doubtful receivables) |        | $                                       | (91.0 | )                                   | $      | (181.7     | )      | $                      | (80.9
|                                                         |                                                          |                                                          |        |                                         |       |                                     |        |            |        |                        |      

---



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

125

---





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.

|                     |  | THE DIRECTV GROUP, INC.(Registrant)
|-------------------- |  | -----------------------------------
|Date: March 10, 2006 |  |                                    
|                     |  | By:                                

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 10th day of March 2006 by the following persons on behalf of the
Registrant and in the capacities indicated.

|Signature                                   |  | Title                                                |  |   |  |                             
|------------------------------------------- |  | ---------------------------------------------------- |  | - |  | ----------------------------
|/s/K. RUPERT MURDOCH(K. Rupert Murdoch)     |  | Chairman of the Board of Directors                   |  |   |  |                             
|/s/CHASE CAREY(Chase Carey)                 |  | Director, President and Chief Executive Officer      |  | } |  | Principal Executive Officer 
|/s/MICHAEL W. PALKOVIC(Michael W. Palkovic) |  | Executive Vice President and Chief Financial Officer |  | } |  | Principal Financial Officer 
|/s/PATRICK T. DOYLE(Patrick T. Doyle)       |  | Senior Vice President, Treasurer and Controller      |  | } |  | Principal Accounting Officer
|/s/NEIL R. AUSTRIAN(Neil R. Austrian)       |  | Director                                             |  |   |  |                             
|/s/RALPH F. BOYD, JR.(Ralph F. Boyd, Jr.)   |  | Director                                             |  |   |  |                             
|/s/PETER CHERNIN(Peter Chernin)             |  | Director                                             |  |   |  |                             
|/s/JAMES M. CORNELIUS(James M. Cornelius)   |  | Director                                             |  |   |  |                             
|/s/DAVID F. DEVOE(David F. DeVoe)           |  | Director                                             |  |   |  |                             
|/s/NANCY S. NEWCOMB(Nancy Newcomb)          |  | Director                                             |  |   |  |                             
|                                            |  |                                                      |  |   |  |                             

126

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|/s/CHARLES R. LEE(Charles R. Lee) |  | Director |  |  |  | 
|--------------------------------- |  | -------- |  |  |  | 
|/s/PETER A. LUND(Peter A. Lund)   |  | Director |  |  |  | 
|/s/HAIM SABAN(Haim Saban)         |  | Director |  |  |  | 

*
* *

127

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EXHIBIT INDEX

|Exhibit
Number |  | Exhibit Name                                                                                                                                         
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|**10.52        |  | First Amendment to Hughes Electronics Corporation Executive Deferred Compensation Plan dated November 2005                                           
|**21           |  | Subsidiaries of the Registrant as of December 31, 2005                                                                                               
|**23           |  | Consent of Deloitte & Touche LLP                                                                                                                     
|**31.1         |  | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|**31.2         |  | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|**32.1         |  | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|**32.2         |  | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

---

A
copy of any of the exhibits included in this Annual Report on Form 10-K, other than those as to which confidential treatment has been granted by the Securities and
Exchange Commission, upon payment of a fee to cover the reasonable expenses of furnishing such exhibits, may be obtained by written request to us at the address set forth on the front cover, attention
General Counsel.

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