UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

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ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

|(Mark One)                                               |                                                                                         
|-------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                        | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 2007             
|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 333-106529                       

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DIRECTV HOLDINGS LLC
DIRECTV FINANCING CO., INC.(Exact Name of Registrant as Specified in Its Charter)

|DIRECTV Holdings LLCDelaware
DIRECTV Financing Co., Inc.Delaware |  | 25-1902628
59-3772785               
|------------------------------------------------------------------ |  | ------------------------------------
|(State or Other Jurisdiction of
Incorporation or Organization)     |  | (I.R.S. Employer Identification No.)
|2230 East Imperial Highway, El Segundo, California                 |  | 90245                               
|(Address of Principal Executive Offices)                           |  | (zip code)                          

Registrant's telephone number, including area code: (310) 964-5000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

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

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, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer o                                             |  | Accelerated filer o        
|--------------------------------------------------------------------- |  | ---------------------------
|Non-accelerated filer ý (Do not check if a smaller reporting company) |  | Smaller reporting company 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

State the aggregate market value of the voting and non-voting common equity held by non affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. None.

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



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TABLE OF CONTENTS

|           |                            |    |                                                                                                                  | Page No.                                                                                                 
|---------- | -------------------------- | -- | ---------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------
|Part I     |                            |   
|           | Item 1.                    |    | Business                                                                                                         |                                                                                                          
|           | Item 1A.                   |    | Risk Factors                                                                                                     |                                                                                                          
|           | Item 1B.                   |    | Unresolved Staff Comments                                                                                        |                                                                                                          
|           | Item 2.                    |    | Properties                                                                                                       |                                                                                                          
|           | Item 3.                    |    | Legal Proceedings                                                                                                |                                                                                                          
|           | Item 4.                    |    | Submission of Matters to a Vote of Security Holders                                                              |                                                                                                          
|Part II    |                            |   
|           | Item 5.                    |    | Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |                                                                                                          
|           | Item 6.                    |    | Selected Financial Data                                                                                          |                                                                                                          
|           | Item 7.                    |    | Management's Discussion and Analysis of Financial Condition and Results of Operations                            |                                                                                                          
|           | Item 7A.                   |    | Quantitative and Qualitative Disclosures About Market Risk                                                       |                                                                                                          
|           | Item 8.                    |    | Financial Statements and Supplementary Data                                                                      |                                                                                                          
|           |                            |    |                                                                                                                  | Report of Independent Registered Public Accounting Firm                                                  
|           |                            |    |                                                                                                                  | Consolidated Statements of Operations for the Years Ended December 31, 2007, 2006 and 2005               
|           |                            |    |                                                                                                                  | Consolidated Balance Sheets as of December 31, 2007 and 2006                                             
|           |                            |    |                                                                                                                  | Consolidated Statements of Changes in Owner's Equity for the Years Ended December 31, 2007, 2006 and 2005
|           |                            |    |                                                                                                                  | Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005               
|           |                            |    |                                                                                                                  | Notes to the Consolidated Financial Statements                                                           
|           |                            |    |                                                                                                                  | Supplementary Data                                                                                       
|           | Item 9.                    |    | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                             |                                                                                                          
|           | Item 9A.                   |    | Controls and Procedures                                                                                          |                                                                                                          
|           | Item 9B.                   |    | Other Information                                                                                                |                                                                                                          
|Part III   |                            |   
|           | Item 10, 11, 12, 13 and 14 |    | 74                                                                                                              
|Part IV    |                            |   
|           | Item 15.                   |    | Exhibits and Financial Statement Schedules                                                                       |                                                                                                          
|Signatures |                            | 78

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DIRECTV HOLDINGS LLC

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 our 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.

PART I

ITEM 1.    BUSINESS

DIRECTV Holdings LLC is a wholly-owned subsidiary of The DIRECTV Group, Inc. and consists of DIRECTV Enterprises, LLC and its wholly-owned
subsidiaries and DIRECTV Financing Co., Inc. We sometimes refer to DIRECTV Holdings LLC as DIRECTV Holdings, DIRECTV, we or us and sometimes refer to The DIRECTV
Group, Inc. as The DIRECTV Group or Parent.

On
December 23, 2006, News Corporation and Liberty Media Corporation, or Liberty, entered into an agreement to exchange Liberty's 16.3% ownership interest in News Corporation for News
Corporation's approximately 41% ownership in our Parent, three regional sports networks and a cash payment. The Federal Communications Commission, or FCC, approved the transaction on
February 25, 2008. News Corporation and Liberty consummated the transaction on February 27, 2008.

We
are the largest provider of direct-to-home, or DTH, digital television services and the second largest provider in the multi-channel video programming
distribution, or MVPD, industry in the United States. We provide over 16.8 million subscribers with access to hundreds of channels of digital-quality video pictures and CD-quality
audio programming that we transmit directly to subscribers' homes or businesses via high-powered geosynchronous satellites.

We
believe we provide one of the most extensive collections of programming available in the MVPD industry. We currently distribute to our subscribers more than 1,800 digital video and
audio channels, including about 190 basic entertainment channels including over 70 XM Satellite Radio music channels, 33 premium movie channels, over 36 regional and specialty sports networks, an
aggregate of over 1,400 local channels, over 101 Spanish and other foreign language special interest channels, and over 31 pay-per-view movie and event choices. Although we
distribute over 1,400 local channels, a subscriber generally receives only the local channels in the subscriber's home market. As of December 31, 2007, we provided local channel coverage in
standard definition to approximately 143 markets, covering about 94% of U.S. television households. In addition, we provided high definition, or HD, local channels in 68 markets representing 72% of
U.S. TV households, as well as over 90 national HD television channels. With the expected launch of one additional satellite, we expect to extend our advantage of having the most HD channels in the
industry.

We
also provide premium professional and collegiate sports programming such as the NFL SUNDAY TICKET package, which allows subscribers to view the largest selection of NFL
games

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available
each Sunday during the regular season. Under our contract with the NFL, we have 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 either us, our national retailers, independent satellite television retailers or dealers,
or regional Bell operating companies, or RBOCs. Most set-top receivers provided to new and existing subscribers are leased subsequent to the introduction of a lease program on
March 1, 2006.

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 contacting us and subscribing to one of our programming packages.

Key Strengths



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Business Strategy

Our primary goal is to provide subscribers with the best television experience in the United States. Our strategy focuses on offering subscribers differentiated
and exclusive content, attaining leadership in technology, and enhancing sales, marketing, distribution and customer service.



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Infrastructure

Satellites.We currently have a fleet of ten geosynchronous satellites, including nine owned
satellites and one leased satellite. We have seven Ku-Band satellites at the following orbital locations: 101° WL (three), 110° WL (one),
119° WL (one), 72.5° WL (one), and 95° WL (one-leased). We also

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have
three Ka-Band satellites at our 99° WL (one) and 103° WL (two) orbital locations. The 72.5° WL orbital location is used
pursuant to an arrangement with Telesat Canada. As a part of the arrangement with Telesat, we have transferred three satellites, one of which is no longer used as it was de-orbited at the
end of its service life and two of which are nearing the end of their useful lives, to orbital locations controlled by Telesat, for use by Telesat for its own services in Canada.

Satellites To Be Launched.DIRECTV 11 has finished construction and is planned for launch in
early 2008. DIRECTV 11 will operate from our 99° WL orbital location after successful completion of in-orbit testing. DIRECTV 11 will provide us with
increased capability for
local and national HD channels, as well as capacity for new interactive and enhanced services once it becomes operational. DIRECTV 12 is under construction and will be ready for launch in the
second half of 2009.

Satellite Risk Management.We use 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 a potential satellite failure on our ability to provide service. However, programming continuity cannot be assured in all instances or in the event of multiple satellite
losses.

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, we have launched satellites
without insurance. We expect to purchase launch insurance for DIRECTV 11. We do not currently expect to purchase in-orbit insurance for satellites to be launched. As of
December 31, 2007, the net book value of in-orbit satellites was $1,556 million, of which $1,337 million was uninsured.

Digital Broadcast Centers.To gather programming content, ensure its digital quality, and transmit
content to our satellites, we have 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 five uplink facilities which are used to provide HD local channels. Our broadcast centers receive programming from content providers via
satellite, fiber optic cable and/or special tape. Most satellite-delivered programming is then digitized, encoded and transmitted to our satellites. We designed each broadcast center and uplink
facility with redundant systems to minimize service interruptions.

Installation Network.DIRECTV HOME SERVICES® third party installation and service network
performs installation, upgrades and other service call work for us. For the year ended December 31, 2007, these HSPs performed approximately 94% of all in-home visits with over
17,000 technicians from 13 outsourced companies around the United States. In addition, we and our retailers also utilize employer-based or contract installation providers, which perform the remainder
of all new professional subscriber installations. We set the quality of installation and service standards, perform quality control, manage inventory and monitor the overall service network
performance for nearly all of the third party installation network.

Customer Service Centers.As of December 31, 2007, we used 31 customer service centers
employing over 16,000 customer service representatives. Most of these customer service centers are operated by Convergys Customer Management Group, Inc., Precision Response Corporation, Sitel
Operating Corporation and N.E.W. Customer Service Companies, Inc. We currently operate five customer service centers located in: Boise, Idaho; Tulsa, Oklahoma; Huntsville, Alabama; Missoula,
Montana; and Denver, Colorado that employ approximately 4,700 customer service representatives. Potential and existing subscribers can call a single telephone number 24 hours a day, seven days
a

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week,
to request assistance for hardware, programming, installation, technical and other support. We continue 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.

Competition

We face substantial competition in the MVPD industry and from emerging digital media distribution providers. Our 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 our competitors have access to substantially greater financial and marketing resources. We believe our brand, the quality and variety of video, audio and interactive programming,
quality of picture, access to service, availability of HD and DVR services, customer service and price are the key elements for attaining and retaining subscribers. According to the National
Cable & Telecommunications Association's Mid-Year 2007 Industry Overview, 100% of the U.S. television households are passed by cable. Our 16.8 million subscribers represent
approximately 17% of MVPD subscribers.



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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, including
potential wireless broadband investments or alliances, 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 government regulation in the United States, primarily by the FCC and, to a certain extent, by the legislative branches, other federal agencies,
state and local authorities and the International Telecommunications 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.

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DIRECTV HOLDINGS LLC

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 and Related Acts.The Communications Act and other
related acts give 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 or have been licensed by the FCC. Currently, three of our satellites are licensed by the government of Canada. 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 future satellites to support DIRECTV's services. 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 us, all of our intellectual property is owned by The DIRECTV Group for the benefit of all of its subsidiaries.

We
believe that our growing portfolio of pending and issued patents are important assets. Our Parent presently holds over 1,650 issued patents worldwide relating to our past and present
businesses, including over 250 patents developed by, or otherwise relating to, our businesses. Our Parent holds a worldwide portfolio of over 710 registered trademarks, including over 465 foreign
registrations related to the DIRECTV name and the Cyclone Design. In addition, we hold over 105 U.S. trademark registrations relating to our 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 our 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 function designed to facilitate and support our compliance with these requirements and attempt to maintain 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 environmental compliance to be material in 2008. 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.

EMPLOYEES

As of December 31, 2007, we had approximately 7,600 full-time and 300 part-time employees. We believe that our employee relations
are good. None of our employees is represented by labor unions.

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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.

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

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 due to competition for launch slots, weather and also due to general delays that result when a launch provider experiences
a launch failure, 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 and operational 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. We estimate the overall historical loss rate for all launches of commercial satellites in the last five years to be approximately 5%
but it 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 or a portion thereof, and not
the business interruption or other associated direct and indirect costs. For our DIRECTV 11 satellite, scheduled for launch in the first quarter of 2008, we expect to procure launch insurance
covering a portion of the satellite and launch vehicle costs in the event of a total loss of the satellite prior to separation from the launch vehicle. We do not currently expect to purchase
in-orbit insurance for the DIRECTV 11 satellite.

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

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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 16 years. The actual useful lives of the satellites may be shorter or longer, 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 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 or
will have in 2008, in-orbit satellite capacity to expeditiously recover transmission of most of our 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 all or a portion of the unamortized book value of covered satellites.
Although the insurance 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 that a satellite failure may have on our ability to provide service.

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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, even if insured, 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.

We 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, wireless companies and other land-based and satellite-based system operators with
service offerings including video,
audio and interactive programming, data and other 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's 2007 Industry Overview, 100% of the 112 million U.S. television households are passed by cable. Of the 112 million U.S. television
households, approximately 97 million subscribe to a MVPD service and approximately 66% of MVPD subscribers receive their programming from a cable operator. Cable television operators have
advantages relative to us, including or as a result of:



In
addition, cable television operators have grown their subscriber bases 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 television, data and telecommunications services in competition with our services.

We
do not currently offer local channel coverage to markets covering approximately six percent of U.S. television households, which places us at a competitive disadvantage in those
markets. We also have been unable to secure certain international programming, due to exclusive arrangements of programming providers with certain competitors, which has constrained our ability to
compete for subscribers who wish to obtain such programming.

In
the United States various RBOCs have deployed fiber optic lines directly to customers' homes or neighborhoods 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

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optic
lines for video grow substantially, we may be unable to develop other distribution methods to make up for lost sales through the RBOCs.

In
2006, AT&T acquired BellSouth, one of the RBOCs that sells the DIRECTV service. AT&T has a similar arrangement with EchoStar. In December 2007, AT&T advised DIRECTV that AT&T
was terminating the exclusivity arrangement with DIRECTV which had been part of the distribution agreement with BellSouth. AT&T is therefore free to sell and promote the services of any other
non-affiliated DBS provider in those territories covered by the agreement with BellSouth. Although the underlying distribution agreement continues in effect, the action of AT&T could
result in a reduction in the acquisition of subscribers through this distribution outlet.

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.

Emerging digital media competition could materially adversely affect us.

Our business is focused on television, and we face emerging competition from other providers of digital media, some of which have greater financial, marketing and
other resources than we do. Significant changes in consumer behavior with regard to the means by which they obtain video entertainment and information in response to this emerging digital media
competition, could materially adversely affect our revenues and earnings or otherwise disrupt our business.

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 MVPDs 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 were recently extended for another five years, through October 2012, though it is currently considering
proposals that could shorten the term of this extension to two years if a cable operator could show that competition from new entrant MVPDs at that time had reached a sufficient penetration level in
the relevant marketing area.

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. Although the FCC recently addressed some of these issues in a limited fashion by placing
access conditions on certain regional sports networks affiliated with Time Warner Cable, Inc. and Comcast Corporation, it is not clear that such provisions will be sufficient to assure our
continued access to this programming on fair and nondiscriminatory terms.

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DIRECTV HOLDINGS LLC

Carriage requirements may negatively affect our ability to deliver local broadcast stations, as well as other aspects of our business.

The FCC's interpretation, implementation and enforcement of provisions of SHVIA and SHVERA, as well as judicial decisions interpreting and enforcing these laws,
could hamper our ability to retransmit distant network and superstation signals, reduce the number of our existing or future subscribers that can qualify for receipt of these signals, impose costs on
us in connection with the process of complying with the rules, or subject us to fines, monetary damages or injunctions. In implementing SHVIA, the FCC has required satellite carriers to delete certain
programming, including sports programming, from the signals of certain distant stations. Compliance with those FCC requirements may require costly upgrades to our broadcast 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 our ability to deliver
such significantly viewed digital signals.

We
have limited capacity, and the projected number of markets in which we 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 requirements. We
may not be able to comply with these must carry rules, or compliance may mean that we are not able to use capacity that could otherwise be used for new or additional local or national programming
services. In addition, the FCC has begun to consider an obligation for carriage of local digital broadcast transmissions after the digital television transition currently scheduled for
February 17, 2009. If the FCC were to require us to carry all local signals in HD format wherever we carry any local signals in HD format as of that date, we would be unable to comply in many
markets where we currently carry such signals without ceasing HD local service entirely in such markets, and would be precluded from launching additional markets currently planned for later this year.

We 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 has adopted rules requiring us to negotiate in good faith with broadcast stations seeking carriage outside of the mandatory carriage regime described elsewhere. The rules for
"retransmission

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DIRECTV HOLDINGS LLC

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 at a lower cost 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 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 churn by subscribers
who are unable to pay their monthly subscription fees, a slowing economy, significant signal theft, consumer fraud, 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 and financial performance.

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,

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DIRECTV HOLDINGS LLC

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.

New
technologies could also create new competitors for us. 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. Satellite operators such as SES have begun offering turn-key packages of digital programming on a wholesale
basis for distribution by rural telephone companies. While these entities are not currently providing MVPD services on a significant basis, many have the capabilities for such services and some have
begun rolling out video services. We may not be able to compete successfully with new entrants in the market for video services.

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 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 provide our
subscribers with more advanced access cards that we believe significantly enhance the security of our signal. Currently, we believe these access cards have not been compromised. However, we cannot
guarantee that the new cards will prevent the theft of our satellite programming signals in the future. Furthermore, there can be no assurance that we will succeed in developing the technology we need
to effectively restrict or eliminate signal theft. If our current access cards are compromised, 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.

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.

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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 final disposition of these
claims is not expected to have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations for any one period. Further,
no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

See
"Legal Proceedings-Intellectual Property Litigation" in Part I, Item 3 of this Annual Report.

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.

In
certain cases, satellite system operators are obligated by governmental regulation and procedures of the ITU 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, the FCC has conditionally granted Spectrum Five authority to provide DBS service using
frequencies assigned to it by the Government of the Netherlands from an orbital slot located halfway between slots at which we
currently operate. 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. In addition, the FCC is currently conducting a rulemaking proceeding to
consider, among other things, the adoption of operating parameters under which such "tweener" systems would be automatically deemed coordinated.

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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 our 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 affects 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.

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

As of the closing of the transaction in which Liberty acquired News Corporation's interest in our Parent on February 27, 2008, Liberty acquired
approximately 41% of the issued and outstanding shares of our Parent's common stock. Dr. John C. Malone, Chairman of the Board of Liberty, has been elected the Chairman of our Parent's
Board of Directors. Additionally, one other current Liberty executive is a member of our Parent's Board of Directors. Liberty has advised our Parent that it intends to recommend a nominee to fill the
remaining vacancy on our Parent's Board, but such recommendation has not been made to the Board at the date of this report. As a result, Liberty has significant influence relating to our management
and actions that require stockholder approval. The interests of Liberty may differ from the interests of other holders of our Parent's common stock. The extent of Liberty's stock ownership in our
Parent also may have the effect of discouraging offers to acquire control of us and may preclude holders of our Parent's 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 our Parent.

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DIRECTV HOLDINGS LLC

We have significant debt.

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.

Results are impacted by the effect of, and changes, in United States economic conditions.

Our business may be affected by factors in the United States that are beyond our control, such as downturns in economic activity in a region, or in the MVPD
industry. Factors such as material adverse effect on our earnings and financial performance.

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, 2007, we had 29 locations operating in 15 states and 24 cities in the United States. At such date, we owned approximately
two million square feet of space and leased approximately
one million square feet of space. The major locations include eight administrative offices, two broadcast centers and five 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, 2007 or subsequent thereto, but before the filing of this report, are summarized below:

Intellectual Property Litigation.We are a defendant in several unrelated lawsuits claiming
infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect
that any potential liability would be the responsibility of our equipment vendors pursuant to applicable contractual indemnification provisions. To the extent that the allegations in these lawsuits
can be analyzed by us at this stage of their proceedings, we believe the claims are without merit and intend to defend the actions vigorously. The final disposition of these claims is not expected to
have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given
that any adverse outcome would not be material to our consolidated financial position.

In
this connection, 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. DIRECTV Operations, LLC, and The DIRECTV Group, Inc.; Thomson Inc.; and EchoStar Communications Corporation, EchoStar Satellite
Corporation and EchoStar Technologies Corporation. The action alleges infringement of three U.S. patents and seeks unspecified damages and injunctive

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relief.
Gemstar Development Corp. was added as a third party defendant because it asserted 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 and DIRECTV system manufacturers under all asserted claims of the patents in the case,
and judgment for all defendants dismissing the claims of infringement 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. In August, 2005 the court again granted summary judgment on two of the patents, dismissing the claims of
infringement relating to them with prejudice, leaving only one patent at issue which expired in 2005. The court then stayed activity relating to the remaining patent, pending determination of the
issue of Gemstar's license rights. After a bench trial, on July 19, 2007 the court entered judgment denying Gemstar's assertion and holding that SuperGuide has the relevant rights relating to
the remaining patent. Proceedings regarding the remaining patent are now underway, and trial on the issues of infringement, enforceability and validity is expected in the second half of 2008.

Finisar Corporation.On April 4, 2005, Finisar Corporation filed a patent infringement action in the United States
District Court for the Eastern District of Texas (Beaumont) alleging that The DIRECTV Group, DIRECTV Holdings LLC, DIRECTV Enterprises, LLC, DIRECTV Operations, LLC,
DIRECTV, Inc., and DTV Network Systems, Inc. infringed U.S. Patent No. 5,404,505. On June 23, 2006, the jury determined that we willfully infringed this patent and awarded
approximately $79 million in damages. On July 7, 2006, the Court entered its final written judgment which denied Finisar's request for an injunction and instead granted DIRECTV an
ongoing royalty. Under this grant, we would be obligated to pay Finisar $1.60 per new set-top box manufactured for use with the DIRECTV system beginning June 17, 2006 and continuing
until the patent expires in 2012 or is otherwise found to be invalid. The Court also increased the damages award by $25 million because of the jury finding of willful infringement and awarded
pre-judgment interest of $13 million to Finisar. Post-judgment interest accrues on the total judgment.

We
filed a notice of appeal to the Court of Appeals for the Federal Circuit on October 5, 2006, and Finisar also filed a notice of appeal on October 18, 2006. A bond was
submitted to the District Court in the amount of $127 million as required security for the damages awarded but not yet paid pending appeal plus interest for the anticipated duration of the
appeal. We were successful in obtaining an order that post-judgment ongoing royalties shall be held in escrow pending outcome of the appeal. Through December 31, 2007, the ongoing
royalties amounted to $33 million, which has been paid into escrow. Oral arguments on the appeal and cross-appeal were heard by the Court on January 7, 2008.

Based
on our review of the record in this case, including discussion with and analysis by counsel of the bases for our appeal, we have determined that we have a number of strong
arguments available on
appeal and, although there can be no assurance as to the ultimate outcome, we are confident that the judgment against us will ultimately be reversed, or remanded for a new trial in which we believe we
would prevail. As a result, we have concluded that it is not probable that Finisar will ultimately prevail in this matter; therefore, we have not recorded any liability for this judgment nor are we
recording any expense for the ongoing royalty.

***

Other.We are subject to other legal proceedings and claims that arise in the ordinary course of our
business. The amount of ultimate liability with respect to such actions is not expected to materially affect our financial position, results of operations or liquidity.

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(b)   No
previous reported legal proceedings were terminated during the fourth quarter ended December 31, 2007.

***

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

None.

PART II

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

All of DIRECTV Holdings LLC's equity is owned by The DIRECTV Group. All of DIRECTV Financing Co., Inc.'s common equity is owned by DIRECTV
Holdings LLC. There is no established public trading market for our equity. Dividends on equity will be paid when and if declared by our Boards of Directors. None of our equity is subject to
outstanding options or warrants.

ITEM 6.    SELECTED FINANCIAL DATA

Omitted.

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DIRECTV HOLDINGS LLC

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

The following is a discussion of our results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial
statements and related notes included elsewhere in this Annual Report. Information in this section is organized as follows:



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SUMMARY RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Consolidated Statements of Operations

|                                                                        |                                                                                                  | Years Ended December 31,            |                                   
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ----------------------------------
|
|
|Revenues                                                                |                                                                                                  | $                                   | 15,527                            
|Operating costs and expenses                                            |                                                                                                  |                                     |                                   
|                                                                        | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |                                   
|                                                                        |                                                                                                  | Broadcast programming and other     |                                   
|                                                                        |                                                                                                  | Subscriber service expenses         |                                   
|                                                                        |                                                                                                  | Broadcast operations expenses       |                                   
|                                                                        | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |                                   
|                                                                        |                                                                                                  | Subscriber acquisition costs        |                                   
|                                                                        |                                                                                                  | Upgrade and retention costs         |                                   
|                                                                        |                                                                                                  | General and administrative expenses |                                   
|                                                                        | Depreciation and amortization expense                                                            |                                     |                                   
|                                                                        |                                                                                                  |                                     |                                   
|                                                                        |                                                                                                  |                                     | Total operating costs and expenses
|                                                                        |                                                                                                  |                                     |                                   
|Operating profit                                                        |                                                                                                  |                                     | 2,402                             
|Interest income                                                         |                                                                                                  |                                     | 69                                
|Interest expense                                                        |                                                                                                  |                                     | (216                              
|Other, net                                                              |                                                                                                  |                                     | (5                                
|                                                                        |                                                                                                  |                                     |                                   
|Income before income taxes                                              |                                                                                                  |                                     | 2,250                             
|Income tax expense                                                      |                                                                                                  |                                     | (891                              
|                                                                        |                                                                                                  |                                     |                                   
|Net income                                                              |                                                                                                  | $                                   | 1,359                             
|                                                                        |                                                                                                  |                                     |                                   
|Other Data:                                                             |                                                                                                  |                                     |                                   
|Operating profit                                                        |                                                                                                  | $                                   | 2,402                             
|Add: Depreciation and amortization expense                              |                                                                                                  |                                     | 1,448                             
|                                                                        |                                                                                                  |                                     |                                   
|Operating profit before depreciation and amortization(1)                |                                                                                                  | $                                   | 3,850                             
|                                                                        |                                                                                                  |                                     |                                   
|Operating profit before depreciation and amortizationmargin(1)         |                                                                                                  |                                     | 24.8                              
|Capital expenditures(2)                                                 |                                                                                                  | $                                   | 2,330                             
|Net cash provided by operating activities                               |                                                                                                  | $                                   | 2,909                             
|Net cash used in investing activities                                   |                                                                                                  |                                     | (2,335                            
|Net cash (used in) provided by financing activities                     |                                                                                                  |                                     | (1,128                            
|Net cash provided by operating activities                               |                                                                                                  | $                                   | 2,909                             
|Less: Cash paid for property and equipment                              |                                                                                                  |                                     | (621                              
|Less: Cash paid for subscriber leased equipmentsubscriber acquisitions |                                                                                                  |                                     | (762                              
|Less: Cash paid for subscriber leased equipmentupgrade and retention   |                                                                                                  |                                     | (774                              
|Less: Cash paid for satellites                                          |                                                                                                  |                                     | (169                              
|                                                                        |                                                                                                  |                                     |                                   
|Free cash flow(3)                                                       |                                                                                                  | $                                   | 583                               
|                                                                        |                                                                                                  |                                     |                                   

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SIGNIFICANT EVENTS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS

Lease Program.On March 1, 2006, we introduced a new set-top receiver lease
program. Prior to March 1, 2006, we expensed most set-top receivers provided to new and existing subscribers upon activation as a subscriber acquisition or upgrade and retention
cost in the Consolidated Statements of Operations. Subsequent to the introduction of our lease program, we lease most set-top receivers provided to new and existing subscribers, and
therefore capitalize the set-top receivers in "Property and equipment, net" in the Consolidated Balance Sheets.

The
following table sets forth the amount of set-top receivers we capitalized, and depreciation expense we recorded under the lease program for each of the years presented:

|                                                                  |  | Years Ended December 31,
|----------------------------------------------------------------- |  | ------------------------
|
|
|Capitalized subscriber leased equipment:                          |  |                         
|Cash paid for subscriber leased equipmentsubscriber acquisitions |  | $                       
|Cash paid for subscriber leased equipmentupgrade and retention   |  |                         
|                                                                  |  |                         
|Total subscriber leased equipment capitalized                     |  | $                       
|                                                                  |  |                         
|Depreciation expensesubscriber leased equipment                  |  | $                       

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

Revenues.We earn revenues mostly from monthly fees we charge subscribers for subscriptions to basic
and premium channel programming, HD programming and access fees, pay-per-view programming, and seasonal and live sporting events. We also earn revenues from monthly fees that
we charge subscribers with multiple non-leased set-top receivers (which we refer to as mirroring fees), monthly fees we charge subscribers for leased set-top
receivers, monthly fees we charge subscribers for DVR service, hardware revenues from subscribers who lease or purchase set-top receivers from us, our published programming guide, warranty
service fees and advertising services.

Broadcast Programming and Other.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 subscribers, warranty service costs 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.

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 our signal.

Subscriber Acquisition Costs.These costs include the cost of set-top receivers and other
equipment, commissions we pay to national retailers, independent satellite television retailers, dealers, regional Bell operating companies, and the cost of installation, advertising, marketing and
customer call center expenses associated with the acquisition of new subscribers. Set-top receivers leased to new

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subscribers
are capitalized in "Property and equipment, net" in the Consolidated Balance Sheets and depreciated over their useful lives. The amount of set-top receivers capitalized each
period for subscriber acquisitions is included in "Cash paid for subscriber leased equipment-subscriber acquisitions" in the Consolidated Statements of Cash Flows.

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 average monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts include subscriber equipment upgrade
programs for DVR, HD and HD DVR receivers and local channels, our multiple set-top receiver offer and similar initiatives. Retention costs also include the costs of installing and
providing hardware under our movers program for subscribers relocating to a new residence. Set-top receivers leased to existing subscribers under upgrade and retention programs are
capitalized in "Property and equipment, net" in the Consolidated Balance Sheets and depreciated over their useful lives. The amount of set-top receivers capitalized each period for upgrade
and retention programs is included in "Cash paid for subscriber leased equipment-upgrade and retention" in the Consolidated Statements of Cash Flows.

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 subscribers for the period. We calculate average subscribers for the period by adding the number
of subscribers as of the beginning of the period 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.

Average Monthly Subscriber Churn.Average monthly subscriber churn represents the number of
subscribers whose service is disconnected, expressed as a percentage of the average total number of subscribers. We calculate average monthly subscriber churn by dividing the average monthly number of
disconnected subscribers for the period (total subscribers disconnected, net of reconnects, during the period divided by the number of months in the period) by average subscribers for the period.

Subscriber Count.The total number of subscribers represents the total number of subscribers actively
subscribing to our service, including seasonal subscribers and subscribers who are in the process of relocating.

SAC.We calculate SAC, which represents total subscriber acquisition costs stated on a per subscriber
basis, by dividing total subscriber acquisition costs for the period by the number of gross new subscribers acquired during the period. We calculate total subscriber acquisition costs for the period
by adding together "Subscriber acquisition costs" expensed during the period and the amount of cash paid for equipment leased to new subscribers during the period.

EXECUTIVE OVERVIEW AND OUTLOOK

Revenues.In 2007, our revenues increased by 13.0% due to a larger subscriber base and a 7.2%
increase in ARPU. In 2008, we anticipate revenues will increase by over 10.0% due to an increase in total subscribers and ARPU growth of 5.0% or more. ARPU increases are primarily expected to be
driven by price increases and higher penetration of advanced products. After accounting for churn, our net new subscriber additions in 2007 were 878,000 which increased our total subscriber base by
5.5% to 16.8 million customers. In 2008, we expect net new subscriber additions to decrease due to the

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DIRECTV HOLDINGS LLC

anticipated
reduction in the number of subscribers added through our RBOC distributors as well as churn on the larger cumulative subscriber base.

Operating Results.In 2007, our operating profit before depreciation and amortization increased 19.5%
to $3,850 million and operating profit before depreciation and amortization margin improved from 23.4% in 2006 to 24.8% in 2007, primarily due to the gross profit generated from the higher
revenues and an increase in the amount of set-top receivers capitalized in 2007 under the lease program introduced on March 1, 2006, partially offset by higher subscriber
acquisition, upgrade and retention costs due to the increased number of new and existing subscribers adding HD and DVR services.

In
2008, we expect both operating profit before depreciation and amortization and operating profit before depreciation and amortization margin to increase. These improvements are
anticipated to be due to the expected increase in revenues and improvements in most of our significant cost categories due to greater cost controls, scale and efficiencies.

In
2007, operating profit increased 2.3% to $2,402 million primarily due to higher operating profit before depreciation and amortization, partially offset by an increase in
depreciation of leased set-top receivers capitalized under the new lease program and higher depreciation resulting from an increase in equipment purchased to support our broadcast
operations. Operating profit in 2008 is expected to increase as the anticipated higher operating profit before depreciation and amortization is expected to be only partially offset by higher
depreciation and amortization expense resulting from the set-top receiver lease program.

Free Cash Flow.In 2007, we generated $583 million of free cash flow, defined as net cash
provided by operating activities less cash paid for property, subscriber leased equipment and satellites. During 2008, we expect significant free cash flow growth as a result of the anticipated
increase in operating profit before depreciation and amortization and a decrease in capital expenditures for leased set top receivers, satellite construction and broadcast equipment to support our HD
ground infrastructure.

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DIRECTV HOLDINGS LLC

RESULTS OF OPERATIONS

Year Ended December 31, 2007 Compared with the Year Ended December 31, 2006

The following table provides operating results and a summary of key subscriber data:

|                                                          |                                                                                                  |                                     |                                    |       |       | Change |    
|--------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ---------------------------------- | ----- | ----- | ------ | ---
|
|
|Revenues                                                  |                                                                                                  | $                                   | 15,527                             |       | $     | 13,744 |    
|Operating costs and expenses                              |                                                                                                  |                                     |                                    |       |       |        |    
|                                                          | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |                                    |       |       |        |    
|                                                          |                                                                                                  | Broadcast programming and other     |                                    |       | 6,681 |        |    
|                                                          |                                                                                                  | Subscriber service expenses         |                                    |       | 1,137 |        |    
|                                                          |                                                                                                  | Broadcast operations expenses       |                                    |       | 216   |        |    
|                                                          | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |                                    |       |       |        |    
|                                                          |                                                                                                  | Subscriber acquisition costs        |                                    |       | 1,901 |        |    
|                                                          |                                                                                                  | Upgrade and retention costs         |                                    |       | 958   |        |    
|                                                          |                                                                                                  | General and administrative expenses |                                    |       | 784   |        |    
|                                                          | Depreciation and amortization expense                                                            |                                     |                                    | 1,448 |       |        | 873
|                                                          |                                                                                                  |                                     |                                    |       |       |        |    
|                                                          |                                                                                                  |                                     | Total operating costs and expenses |       |       | 13,125 |    
|                                                          |                                                                                                  |                                     |                                    |       |       |        |    
|Operating profit                                          |                                                                                                  | $                                   | 2,402                              |       | $     | 2,348  |    
|                                                          |                                                                                                  |                                     |                                    |       |       |        |    
|Other data:                                               |                                                                                                  |                                     |                                    |       |       |        |    
|Operating profit before depreciation & amortization       |                                                                                                  | $                                   | 3,850                              |       | $     | 3,221  |    
|                                                          |                                                                                                  |                                     |                                    |       |       |        |    
|Total number of subscribers (000's)                       |                                                                                                  |                                     | 16,831                             |       |       | 15,953 |    
|ARPU                                                      |                                                                                                  | $                                   | 79.05                              |       | $     | 73.74  |    
|Average monthly subscriber churn %                        |                                                                                                  |                                     | 1.51                               | %     |       | 1.60   | %  
|Gross subscriber additions (000's)                        |                                                                                                  |                                     | 3,847                              |       |       | 3,809  |    
|Net subscriber additions (000's)                          |                                                                                                  |                                     | 878                                |       |       | 820    |    
|Average subscriber acquisition costsper subscriber (SAC) |                                                                                                  | $                                   | 692                                |       | $     | 641    |    

Subscribers.In 2007, gross subscriber additions increased due to higher demand for
HD and DVR services, partially offset by the effect of more stringent credit policies. Average monthly subscriber churn decreased primarily due to increased sales of HD and DVR services as well as the
effect of more stringent credit policies. Net subscriber additions increased due to the higher gross subscriber additions and lower average monthly subscriber churn.

Revenues.Our revenues increased as of result of higher ARPU and the larger subscriber base. The
increase in ARPU resulted primarily from price increases on programming packages, higher HD and DVR equipment and service fees, and an increase in lease fees due to higher average number of receivers
per subscriber.

Operating profit before depreciation and amortization.The improvement of operating profit before
depreciation and amortization was primarily due to the gross profit generated from the higher revenues and the increase in the amount of set-top receivers capitalized in 2007 under the
lease program implemented on March 1, 2006, partially offset by higher subscriber acquisition, upgrade and retention costs for the increased number of new and existing customers adding HD and
DVR services.

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DIRECTV HOLDINGS LLC

Broadcast
programming and other costs increased due to annual program supplier rate increases and the larger number of subscribers in 2007. Subscriber service expenses increased due to
the larger subscriber base in 2007. Broadcast operations expense increased in 2007 due primarily to costs to support new HD local channel markets.

Subscriber
acquisition costs increased due to higher advertising and direct sales marketing costs as well as higher costs associated with the increase in subscribers taking advanced
products in 2007. This increase was partially offset by $159 million of higher costs in 2006 related to set top receivers being expensed prior to the implementation of the lease program on
March 1, 2006, after which most set-top receivers were capitalized as well as lower set-top receivers costs. SAC per subscriber, which includes the cost of capitalized
set-top receivers, increased
due to higher direct sales marketing and advertising costs and higher costs associated with the increase in subscribers taking HD and DVR services, partially offset by lower set top receiver costs.

Upgrade
and retention costs increased in 2007 due to higher volume of subscribers upgrading to HD and DVR services, partially offset by $115 million of higher costs in 2006
related to set top receivers being expensed prior to the implementation of the lease program and lower set top receivers costs.

General
and administrative expenses increased in 2007 due to higher labor, employee benefit, and legal costs, partially offset by a $10 million reduction in bad debt expense
compared to 2006.

Operating profit.The increase in operating profit was primarily due to higher operating profit
before depreciation and amortization, partially offset by higher depreciation and amortization expense in 2007 resulting from the capitalization of set-top receivers under the lease
program.

Income tax expense.The $52 million increase in income tax expense was primarily due to an
increase in the state effective income tax rate from 5.0% in 2006 to 6.6% in 2007 resulting from changes in state filing methods.

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DIRECTV HOLDINGS LLC

Year Ended December 31, 2006 Compared with the Year Ended December 31, 2005

The following table provides operating results and a summary of key subscriber data:

|                                                          |                                                                                                  |                                     |                                    |     |       | Change |    
|--------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ---------------------------------- | --- | ----- | ------ | ---
|
|
|Revenues                                                  |                                                                                                  | $                                   | 13,744                             |     | $     | 12,216 |    
|Operating Costs and Expenses                              |                                                                                                  |                                     |                                    |     |       |        |    
|                                                          | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |                                    |     |       |        |    
|                                                          |                                                                                                  | Broadcast programming and other     |                                    |     | 5,830 |        |    
|                                                          |                                                                                                  | Subscriber service expenses         |                                    |     | 1,057 |        |    
|                                                          |                                                                                                  | Broadcast operations expenses       |                                    |     | 179   |        |    
|                                                          | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |                                    |     |       |        |    
|                                                          |                                                                                                  | Subscriber acquisition costs        |                                    |     | 1,844 |        |    
|                                                          |                                                                                                  | Upgrade and retention costs         |                                    |     | 852   |        |    
|                                                          |                                                                                                  | General and administrative expenses |                                    |     | 761   |        |    
|                                                          | Depreciation and amortization expense                                                            |                                     |                                    | 873 |       |        | 698
|                                                          |                                                                                                  |                                     |                                    |     |       |        |    
|                                                          |                                                                                                  |                                     | Total Operating Costs and Expenses |     |       | 11,396 |    
|                                                          |                                                                                                  |                                     |                                    |     |       |        |    
|Operating Profit                                          |                                                                                                  | $                                   | 2,348                              |     | $     | 802    |    
|                                                          |                                                                                                  |                                     |                                    |     |       |        |    
|Other Data:                                               |                                                                                                  |                                     |                                    |     |       |        |    
|Operating Profit Before Depreciation & Amortization       |                                                                                                  | $                                   | 3,221                              |     | $     | 1,500  |    
|                                                          |                                                                                                  |                                     |                                    |     |       |        |    
|Total number of subscribers (000's)                       |                                                                                                  |                                     | 15,953                             |     |       | 15,133 |    
|ARPU                                                      |                                                                                                  | $                                   | 73.74                              |     | $     | 69.61  |    
|Average monthly subscriber churn %                        |                                                                                                  |                                     | 1.60                               | %   |       | 1.70   | %  
|Gross subscriber additions (000's)                        |                                                                                                  |                                     | 3,809                              |     |       | 4,170  |    
|Net subscriber additions (000's)                          |                                                                                                  |                                     | 820                                |     |       | 1,193  |    
|Average subscriber acquisition costsper subscriber (SAC) |                                                                                                  | $                                   | 641                                |     | $     | 642    |    

Subscribers.The decrease in average monthly subscriber churn and the decrease in
gross subscriber additions in 2006 were primarily due to the effect of more stringent credit policies we implemented beginning in the second quarter of 2005, and changes made to our distribution
network to better align dealers with our objective to improve the overall credit quality of our subscribers. Our gross subscriber additions and churn were also affected by increased competition. The
reduction in the number of net new subscribers was mainly due to the lower number of gross subscriber additions.

Revenues.Our revenues increased as a result of higher ARPU and the larger subscriber base. The
increase in ARPU resulted primarily from price increases on programming packages and an increase in the number of subscribers paying mirroring, lease, DVR and HD programming fees, and equipment
upgrade fees.

Operating profit before depreciation and amortization.The improvement of operating profit before
depreciation and amortization in 2006 was primarily due to the gross profit generated from the higher revenues, the capitalization of $1,072 million of set-top receivers under the
lease program implemented on March 1, 2006, and fewer gross subscriber additions.

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DIRECTV HOLDINGS LLC

Broadcast programming and other costs increased primarily from the increased number of subscribers and annual program supplier rate increases. Subscriber service
expenses increased mostly from the larger subscriber base and an increase in service calls and costs incurred at our call centers to support the increase in the number of subscribers with advanced
products. Broadcast operations expenses increased as a result of the costs to support new HD local channel markets and launch of new advanced products.

The
decrease in subscriber acquisition costs was primarily due to the capitalization of $599 million of set-top receivers under our new lease program and lower gross
subscriber additions in 2006.

Including
the cost of set-top receivers capitalized under our retention and upgrade programs, upgrade and retention costs incurred increased by $218 million in 2006
due mostly to increased volume under our HD and HD-DVR upgrade programs. This increase in upgrade and retention costs incurred was offset by the capitalization of $473 million of
leased set-top receivers in 2006, resulting in a net decrease of $255 million compared to the prior year period.

The
decrease in general and administrative expenses resulted mainly from $123 million of lower bad debt expense, legal costs and severance costs in 2006, partially offset by an
increase in inventory management costs, property taxes mostly associated with leased set-top receivers, and labor, and employee benefit costs.

Operating profit.The increase in operating profit was primarily due to higher operating profit
before depreciation and amortization, partially offset by an increase in depreciation of leased set-top receivers capitalized under the new lease program and higher depreciation resulting
from an increase in equipment purchased to support our broadcast operations.

Interest income and expense.The $43 million increase in interest income was due to higher
average cash balances and increased interest rates on our credit facility. The $9 million decrease in interest expense was primarily due to an increase in capitalized interest related mostly to
an increase in capitalized costs for satellites under construction, partially offset by higher average interest rates. We recorded capitalized interest of $55 million in 2006 and
$31 million in 2005.

Other, net.The $64 million decrease in other expense was primarily from a $65 million
charge related to a refinancing transaction in 2005. During the second quarter of 2005, we completed a series of refinancing transactions that resulted in a $65 million pre-tax
charge, of which $41 million was associated with the premium that we paid for the redemption of a portion of our 8.375% senior notes and $24 million with our write-off of a
portion of our deferred debt issuance costs and other transaction costs.

Income tax expense.The $631 million increase in income tax expense was due to our higher
pre-tax income generated in 2006.

LIQUIDITY AND CAPITAL RESOURCES

We generally fund our cash requirements from cash on-hand and cash generated by our operations. We also have up to $500 million of borrowing
capacity under our revolving credit facility, which is available to us through 2011. In addition, we have paid dividends, received capital contributions and have borrowed amounts from our Parent in
the past to fund certain transactions. In February 2008, we paid a $100 million dividend to our Parent, and in 2007, we paid $1,050 million in dividends to our Parent to fund its
share repurchase programs. In 2006, we paid a $300 million dividend to our Parent.

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DIRECTV HOLDINGS LLC

At
December 31, 2007, we had cash and cash equivalents of $802 million compared to $1,356 million at December 31, 2006. The $554 million decrease in
cash and cash equivalents during 2007 resulted primarily from $2,326 million in cash paid for satellites, property and equipment and subscriber leased
equipment, and the $1,050 million in dividends paid to our Parent, partially offset by $2,909 million of cash provided by operating activities.

As
a measure of liquidity, our current ratio (ratio of current assets to current liabilities) was 0.87 at December 31, 2007 and 1.09 at December 31, 2006. The change was
primarily due to the decrease in cash and cash equivalents.

We
believe that our cash on-hand, future cash flows and amounts available to us under the revolving portion of our senior secured credit facility will be sufficient to fund
our operations and commitments for the foreseeable future. However, several factors may affect our ability to fund our operations and commitments we discuss in "Contractual Obligations, Off-Balance
Sheet Arrangements and Contingencies" below. Additionally, our ability to borrow under the senior secured credit facility is contingent upon our meeting financial and other covenants associated with
our debt.

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 under
our senior secured credit facility.

We
may provide additional dividends to our Parent to fund its cash requirements, including additional share repurchase programs or other distributions to its shareholders, or to fund
strategic transactions, which may include broadband investment opportunities. We may use available cash and cash equivalents, cash from operations, or incur additional borrowings to fund such
dividends.

Debt.At December 31, 2007, we had $3,395 million in total outstanding borrowings,
bearing a weighted average interest rate of 6.8%. Our outstanding borrowings primarily consist of notes payable and amounts borrowed under a credit facility as more fully described in Note 7 of
the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, which we incorporate herein by reference.

Our
notes payable and credit facility mature as follows: $48 million in 2008, $98 million in 2009, $297 million in 2010, $98 million in 2011,
$10 million in 2012 and $2,842 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, 2007 and 2006.

CONTRACTUAL OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS AND CONTINGENCIES

Contractual obligations.The following table sets forth our contractual obligations as of
December 31, 2007, including the future periods in which payments are expected. Additional details

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DIRECTV HOLDINGS LLC

regarding
these obligations are provided in the Notes to the Consolidated Financial Statements in Part II, Item 8 referenced in the table.

|                                                                                                      |  | Payments due by period
|----------------------------------------------------------------------------------------------------- |  | ----------------------
|
|
|Long-term debt obligations (Note 7)(a)                                                                |  | $                     
|Purchase obligations (Note 12)(b)                                                                     |  |                       
|Operating leases obligations (Note 12)(c)                                                             |  |                       
|Other long-term liabilities reflected on the Consolidated Balance Sheets under GAAP (Notes 12)(d),(e) |  |                       
|                                                                                                      |  |                       
|Total                                                                                                 |  | $                     
|                                                                                                      |  |                       

---

Contingencies.For a discussion of "Contingencies," see Note 12 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 11 of the Notes to the Consolidated Financial Statements in
Part II, Item 8 of this Annual Report, which we incorporate herein by reference.

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DIRECTV HOLDINGS LLC

CRITICAL ACCOUNTING ESTIMATES

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 therein. 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, our actual results reported in 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 our 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. Estimates of forecasted revenues rely
on
assumptions regarding the number of subscribers to a given sporting events package and the estimated package price throughout the contract. While we base our estimates on past experience and other
relevant factors, actual results could differ from our estimates. If actual results were to significantly vary from forecasted amounts, the profit recorded on such contracts in a future period could
vary from current rates and the resulting change in profits recorded could be material to our consolidated results of operations.

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 fro tax and financial statement purposes.

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 activites, we could record additional 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 recognition of a tax benefit for tax positions involves dealing with uncertainties in the application of complex tax regulations. Judgment is required in assessing the
future tax consequences of events that have been recognized in our financial statements or tax returns. We provide for taxes for uncertain tax positions where assessments have not been received in
accordance with FIN 48. We believe such tax reserves are adequate in relation to the potential for additional assessments. Once established, we adjust these amounts only when more information
is available or when an event occurs necessitating a change to the reserves. Future events such as changes in the facts or law, judicial decisions regarding the application of existing law or a
favorable audit outcome will result in changes to the amounts provided.

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DIRECTV HOLDINGS LLC

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 judgments 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.

Depreciable Lives of Leased Set-Top Receivers.We currently lease most
set-top receivers provided to new and existing subscribers and therefore capitalize the cost of those set-top receivers. We depreciate capitalized set-top receivers
over a three year estimated useful life, which is based on, among other things, management's judgment of the risk of technological obsolescence. Changes in the estimated useful lives of
set-top receivers capitalized could result in significant changes to the amounts recorded as depreciation expense. Based on the book value of our set-top receivers capitalized
as of December 31, 2007, if we extended the depreciable life of the set-top receivers by one half of a year, it would result in an approximately $120 million reduction in
annual depreciation expense.

Recognition of Rebate Related to Long-Term Purchase Agreement.As part of The DIRECTV
Group's sale of HNS' set-top receiver manufacturing operations to Thomson in June 2004, we entered into a long-term purchase agreement with Thomson for the supply of
set-top receivers. As part of this transaction, as amended, we can earn a $57 million rebate from Thomson if Thomson's aggregate sales of our 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. We have 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 million rebate during the Contract Term. We base
our probability assessment for meeting the minimum purchase requirement on our current and future business projections, including our 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 our
ability to earn the rebate. On a quarterly basis, we assess whether the rebate is probable over the Contract Term. If we subsequently determine that it is no longer probable that we will earn the
rebate, we would be required to reverse the amount of the credit recognized to date as a charge to our Consolidated Statement of Operations and an increase in the capitalized value of leased
set-top receivers at the time such determination is made.

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DIRECTV HOLDINGS LLC

ACCOUNTING CHANGES AND NEW ACCOUNTING PRONOUNCEMENTS

For a discussion of accounting changes and new accounting pronouncements 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 Baa
range for Moody's Investors Service, or Moody's, and the BBB range for Standard & Poor's Ratings Services, or S&P, generally indicate adequate current protection of interest payments and
principal security, with certain protective elements lacking. Ratings in the Ba range for Moody's and the BB range for S&P, generally indicate moderate protection of interest and principal payments,
potentially outweighed by exposure to uncertainties or adverse conditions. 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.

Currently,
DIRECTV U.S. has the following security ratings:

Senior Secured

Senior Unsecured

Corporate

OutlookStandard & Poor's

BBB-

BB-

BB

StableMoody's

Baa3

Ba3

Ba2

Negative


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 these 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.

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 $3,393 million at December 31, 2007, excluding the unamortized bond premium, which consisted of fixed rate
borrowings of $1,910 million and variable rate borrowings of $1,483 million. As of December 31, 2007, 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.

***

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DIRECTV HOLDINGS LLC

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors of
DIRECTV Holdings LLC
El Segundo, California

We
have audited the accompanying consolidated balance sheets of DIRECTV Holdings LLC (the "Company") as of December 31, 2007 and 2006, and the related consolidated
statements of operations, changes in owner's equity, and cash flows for each of the three years in the period ended December 31, 2007. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, 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 DIRECTV Holdings LLC at December 31, 2007 and
2006, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, 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, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48,Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109.

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

Los
Angeles, California

February 25,
2008

42

---





DIRECTV HOLDINGS LLC        CONSOLIDATED STATEMENTS OF OPERATIONS

|                             |                                                                                                  | Years Ended December 31,            |       
|---------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ------
|
|
|Revenues                     |                                                                                                  | $                                   | 15,527
|Operating costs and expenses |                                                                                                  |                                     |       
|                             | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |       
|                             |                                                                                                  | Broadcast programming and other     |       
|                             |                                                                                                  | Subscriber service expenses         |       
|                             |                                                                                                  | Broadcast operations expenses       |       
|                             | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |       
|                             |                                                                                                  | Subscriber acquisition costs        |       
|                             |                                                                                                  | Upgrade and retention costs         |       
|                             |                                                                                                  | General and administrative expenses |       
|                             | Depreciation and amortization expense                                                            |                                     |       
|                             |                                                                                                  |                                     |       
|                             |                                                                                                  | Total operating costs and expenses  |       
|                             |                                                                                                  |                                     |       
|Operating profit             |                                                                                                  |                                     | 2,402 
|Interest income              |                                                                                                  |                                     | 69    
|Interest expense             |                                                                                                  |                                     | (216  
|Other, net                   |                                                                                                  |                                     | (5    
|                             |                                                                                                  |                                     |       
|Income before income taxes   |                                                                                                  |                                     | 2,250 
|Income tax expense           |                                                                                                  |                                     | (891  
|                             |                                                                                                  |                                     |       
|Net income                   |                                                                                                  | $                                   | 1,359 
|                             |                                                                                                  |                                     |       

---

The accompanying notes are an integral part of these Consolidated Financial Statements.

43

---





DIRECTV HOLDINGS LLC        CONSOLIDATED BALANCE SHEETS

|                                       |                                                  | December 31,                        
|-------------------------------------- | ------------------------------------------------ | ------------------------------------
|
|
|ASSETS                                 |                                                  |                                     
|Current assets                         |                                                  |                                     
|                                       | Cash and cash equivalents                        |                                     
|                                       | Accounts receivable, net                         |                                     
|                                       | Inventories                                      |                                     
|                                       | Prepaid expenses and other                       |                                     
|                                       |                                                  |                                     
|                                       |                                                  | Total current assets                
|Satellites, net                        |                                                  |                                     
|Property and equipment, net            |                                                  |                                     
|Goodwill                               |                                                  |                                     
|Intangible assets, net                 |                                                  |                                     
|Other assets                           |                                                  |                                     
|                                       |                                                  |                                     
|                                       |                                                  | Total assets                        
|                                       |                                                  |                                     
|LIABILITIES AND OWNER'S EQUITY         |                                                  |                                     
|Current liabilities                    |                                                  |                                     
|                                       | Accounts payable and accrued liabilities         |                                     
|                                       | Unearned subscriber revenue and deferred credits |                                     
|                                       | Current portion of long-term debt                |                                     
|                                       |                                                  |                                     
|                                       |                                                  | Total current liabilities           
|Long-term debt                         |                                                  |                                     
|Deferred income taxes                  |                                                  |                                     
|Other liabilities and deferred credits |                                                  |                                     
|Commitments and contingencies          |                                                  |                                     
|Owner's equity                         |                                                  |                                     
|                                       | Capital stock and additional paid-in capital     |                                     
|                                       | Retained earnings                                |                                     
|                                       |                                                  |                                     
|                                       |                                                  | Total owner's equity                
|                                       |                                                  |                                     
|                                       |                                                  | Total liabilities and owner's equity
|                                       |                                                  |                                     

---

The accompanying notes are an integral part of these Consolidated Financial Statements.

44

---





DIRECTV HOLDINGS LLC        CONSOLIDATED STATEMENTS OF CHANGES IN OWNER'S EQUITY

|                                                                                |  | Capital stock and additional paid-in capital |        | Retained earnings (deficit) |   | Total owner's equity |  
|------------------------------------------------------------------------------- |  | -------------------------------------------- | ------ | --------------------------- | - | -------------------- | -
|
|Balance at January 1, 2005                                                      |  | $                                            | 3,459  |                             | $ | (1,079               | )
|Net income                                                                      |  |                                              |        |                             |   | 325                  |  
|Capital contribution from Parent                                                |  |                                              | 592    |                             |   |                      |  
|                                                                                |  |                                              |        |                             |   |                      |  
|Balance at December 31, 2005                                                    |  |                                              | 4,051  |                             |   | (754                 | )
|Net income                                                                      |  |                                              |        |                             |   | 1,356                |  
|Dividend to Parent                                                              |  |                                              | (300   | )                           |   |                      |  
|Capital contribution from Parent                                                |  |                                              | 34     |                             |   |                      |  
|Other                                                                           |  |                                              | 1      |                             |   |                      |  
|                                                                                |  |                                              |        |                             |   |                      |  
|Balance at December 31, 2006                                                    |  |                                              | 3,786  |                             |   | 602                  |  
|Net income                                                                      |  |                                              |        |                             |   | 1,359                |  
|Dividend to Parent                                                              |  |                                              | (1,050 | )                           |   |                      |  
|Capital contribution from Parent                                                |  |                                              | 41     |                             |   |                      |  
|Adjustment to initially record cumulative effect of adopting FIN 48, net of tax |  |                                              |        |                             |   | (3                   | )
|Other                                                                           |  |                                              | 5      |                             |   |                      |  
|                                                                                |  |                                              |        |                             |   |                      |  
|Balance at December 31, 2007                                                    |  | $                                            | 2,782  |                             | $ | 1,958                |  
|                                                                                |  |                                              |        |                             |   |                      |  

---

The accompanying notes are an integral part of these Consolidated Financial Statements.

45

---





DIRECTV HOLDINGS LLC        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                 |                                                                   | Years Ended December 31,                         |                                                    
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------------------
|
|
|Cash Flows from Operating Activities                                             |                                                                   |                                                  |                                                    
|Net income                                                                       |                                                                   | $                                                | 1,359                                              
|Adjustments to reconcile net income to net cash provided by operating activities |                                                                   |                                                  |                                                    
|                                                                                 | Depreciation and amortization expense                             |                                                  |                                                    
|                                                                                 | Amortization of deferred revenues and deferred credits            |                                                  |                                                    
|                                                                                 | Share-based compensation expense                                  |                                                  |                                                    
|                                                                                 | Equity in losses from unconsolidated affiliates                   |                                                  |                                                    
|                                                                                 | Loss on sale of investment                                        |                                                  |                                                    
|                                                                                 | Amortization of debt issuance costs                               |                                                  |                                                    
|                                                                                 | Write-off of debt issuance costs                                  |                                                  |                                                    
|                                                                                 | Deferred income taxes and other                                   |                                                  |                                                    
|                                                                                 | Change in other operating assets and liabilities                  |                                                  |                                                    
|                                                                                 |                                                                   | Accounts receivable, net                         |                                                    
|                                                                                 |                                                                   | Inventories                                      |                                                    
|                                                                                 |                                                                   | Prepaid expenses and other                       |                                                    
|                                                                                 |                                                                   | Accounts payable and accrued liabilities         |                                                    
|                                                                                 |                                                                   | Unearned subscriber revenue and deferred credits |                                                    
|                                                                                 |                                                                   | Other, net                                       |                                                    
|                                                                                 |                                                                   |                                                  |                                                    
|                                                                                 |                                                                   |                                                  | Net cash provided by operating activities          
|                                                                                 |                                                                   |                                                  |                                                    
|Cash Flows from Investing Activities                                             |                                                                   |                                                  |                                                    
|                                                                                 | Cash paid for property and equipment                              |                                                  |                                                    
|                                                                                 | Cash paid for subscriber leased equipmentsubscriber acquisitions |                                                  |                                                    
|                                                                                 | Cash paid for subscriber leased equipmentupgrade and retention   |                                                  |                                                    
|                                                                                 | Cash paid for satellites                                          |                                                  |                                                    
|                                                                                 | Proceeds from sale of property                                    |                                                  |                                                    
|                                                                                 | Other                                                             |                                                  |                                                    
|                                                                                 |                                                                   |                                                  |                                                    
|                                                                                 |                                                                   |                                                  | Net cash used in investing activities              
|                                                                                 |                                                                   |                                                  |                                                    
|Cash Flows from Financing Activities                                             |                                                                   |                                                  |                                                    
|                                                                                 | Repayment of long-term debt                                       |                                                  |                                                    
|                                                                                 | Cash proceeds from refinancing transactions                       |                                                  |                                                    
|                                                                                 | Repayment of borrowing from Parent                                |                                                  |                                                    
|                                                                                 | Repayment of other long-term obligations                          |                                                  |                                                    
|                                                                                 | Cash dividends to Parent                                          |                                                  |                                                    
|                                                                                 | Cash contribution from Parent                                     |                                                  |                                                    
|                                                                                 | Excess tax benefit from share-based compensation                  |                                                  |                                                    
|                                                                                 | Debt issuance costs                                               |                                                  |                                                    
|                                                                                 |                                                                   |                                                  |                                                    
|                                                                                 |                                                                   |                                                  | Net cash (used in) provided by financing activities
|                                                                                 |                                                                   |                                                  |                                                    
|Net increase (decrease) in cash and cash equivalents                             |                                                                   |                                                  | (554                                               
|Cash and cash equivalents at beginning of the year                               |                                                                   |                                                  | 1,356                                              
|                                                                                 |                                                                   |                                                  |                                                    
|Cash and cash equivalents at end of the year                                     |                                                                   | $                                                | 802                                                
|                                                                                 |                                                                   |                                                  |                                                    
|Supplemental Cash Flow Information                                               |                                                                   |                                                  |                                                    
|Interest paid                                                                    |                                                                   | $                                                | 211                                                
|Income taxes paid                                                                |                                                                   |                                                  | 730                                                

---

The accompanying notes are an integral part of these Consolidated Financial Statements.

46

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Description of Business

DIRECTV Holdings LLC is a wholly-owned subsidiary of The DIRECTV Group, Inc. and consists of DIRECTV Enterprises, LLC and its wholly-owned
subsidiaries and DIRECTV Financing Co., Inc. We sometimes refer to DIRECTV Holdings LLC as DIRECTV Holdings, DIRECTV, we or us and sometimes refer to The DIRECTV
Group, Inc. as The DIRECTV Group or Parent. We are the largest provider of direct-to-home, or DTH, digital television services and the second largest provider in the
multi-channel video programming distribution, or MVPD, industry in the United States.

Note 2: Summary of Significant Accounting Policies



We include the accounts of DIRECTV Holdings and our majority owned subsidiaries, after elimination of intercompany accounts and transactions, in the accompanying
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. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under
the circumstances. Due to the inherent uncertainty involved in making estimates, our actual results reported in future periods may be affected by changes in those estimates.



We recognize 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.



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 to expense 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" 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. Through the end of 2006, we also recorded the amortization of a provision for above-market programming contracts that we recorded in connection with
the 1999 acquisition of

47

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

certain
premium subscription programming contracts from United States Satellite Broadcasting Company, Inc. as a reduction of programming costs.



Subscriber acquisition costs consist of costs we incur to acquire new subscribers. We include the cost of our set-top receivers and other equipment,
commissions we pay to national retailers, independent satellite television retailers, dealers, regional Bell operating companies and the cost of installation, advertising, marketing and customer call
center expenses associated with the acquisition of new subscribers in subscriber acquisition costs. We expense these costs as incurred, or when subscribers activate the DIRECTV® service,
as appropriate, except for the cost of set-top receivers leased to new subscribers, which we capitalize in "Property and equipment, net" in the Consolidated Balance Sheets. Although paid
in advance, the retailer or dealer earns substantially all commissions paid for customer acquisitions over 12 months from the date of subscriber activation. Should the subscriber cancel our
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 subscriber acquisition costs. We
implemented a lease program on March 1, 2006 after which most set-top receivers provided to new subscribers are capitalized. We present the amount of our set-top
receivers capitalized each period for subscriber acquisition activities in the Consolidated Statements of Cash Flows under the caption "Cash paid for subscriber leased equipmentsubscriber
acquisitions." See Note 4 below for additional information.



Upgrade and retention costs consist primarily of costs we incur 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, digital video recorder, or DVR,
high-definition, or HD, local channel upgrade programs and other similar initiatives, and third party commissions we incur for the sale of
additional set-top receivers provided to existing subscribers. We expense these costs as incurred, except for the cost of set-top receivers leased to existing subscribers,
which we capitalize in "Property and equipment, net" in the Consolidated Balance Sheets. We implemented a lease program on March 1, 2006, after which most set-top receivers provided
to existing subscribers under upgrade and retention programs are capitalized. We present the amount of our set-top receivers capitalized each period for upgrade and retention activities in
the Consolidated Statements of Cash Flows under the caption "Cash paid for subscriber leased equipmentupgrade and retention." See Note 4 below for additional information.



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



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

48

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



We carry property and equipment, and satellites at cost, net of accumulated depreciation. The amounts 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.



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 5 to 15 years.



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 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 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 value for the cost of disposal.



We maintain investments in equity securities of unaffiliated companies. 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.

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 financial instrument approximated their fair values at December 31, 2007 and 2006.



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.

49

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



At times, The DIRECTV Group grants restricted stock units and common stock options to employees, including DIRECTV employees. We recognize compensation expense
equal to the fair value of the stock-based award at grant over the course of its requisite service period following Statement of Financial Accounting Standards, or SFAS, No. 123 (revised 2004),
"Share-Based Payment," or SFAS No. 123R.

We
record compensation expense for restricted stock units and stock options on a straight-line basis over the service period of up to four years based upon the value of the
award on the date approved, reduced for estimated forfeitures and adjusted for anticipated payout percentages related to the achievement of performance targets.



We join in the filing of The DIRECTV Group's consolidated U.S. federal income tax return. We determine our income taxes based upon our tax sharing agreement with
The DIRECTV Group, which generally provides that the current income tax liability or receivable be computed as if we were a separate taxpayer.

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.

With
the adoption of the Financial Accounting Standards Board, or FASB, Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement No. 109," or FIN 48, on January 1, 2007, we now recognize a benefit in "Income tax expense" in the Consolidated Statements of Operations for uncertain tax positions that
are more-likely-than-not to be sustained upon examination, measured at the largest amount that has a greater than 50% likelihood of being realized upon settlement.
Unrecognized tax benefits represent tax benefits taken or expected to be taken in income tax returns, for which the benefit has not yet been recognized in "Income tax expense" in the Consolidated
Statements of Operations due to the uncertainty of whether such benefits will be ultimately realized. We recognize interest and penalties accrued related to unrecognized tax benefits in "Income tax
expense" in the Consolidated Statements of Operations. Unrecognized tax benefits are recorded in "Income tax expense" in the Consolidated Statement of Operations at such time that the benefit is
effectively settled.



We expense advertising costs primarily in "Subscriber acquisition costs" in the Consolidated Statements of Operations as incurred. Advertising expenses, net of
payments received from programming content providers for marketing support, were $178 million in 2007, $191 million in 2006 and $163 million in 2005.



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. As applicable, we maintain allowances for anticipated losses.

50

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Uncertain Tax Positions.On January 1, 2007, we adopted FIN 48. The cumulative effect of adopting FIN 48
resulted in a $3 million decrease to the January 1, 2007 balance of "Retained earnings" in the Consolidated Balance Sheets. As of the date of adoption, our unrecognized tax benefits
totaled $26 million, including $3 million of tax positions the recognition of which would affect the annual effective income tax rate. As of the date of adoption, we have accrued
$1 million in interest and penalties as part of our liability for unrecognized tax benefits. See Note 8 below for additional information regarding unrecognized tax benefits.

Defined Benefit Postretirement Plans.On December 31, 2007, our Parent adopted the measurement date provision of SFAS
No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R)." This provision
requires the measurement of plan assets and benefit obligations as of the date of our fiscal year end and accordingly resulted in a change in the measurement date, which was previously
November 30. On December 31, 2006, our Parent adopted the provisions of SFAS No. 158 that requires our Parent to recognize the funded status of its defined benefit postretirement
plans in its Consolidated Balance Sheets and recognize changes in the funded status of its defined benefit postretirement plans as a component of other comprehensive income, net of tax, in
stockholders' equity in the Consolidated Balance Sheets, in the year in which changes occur. The adoption of this standard had no effect on out consolidated results of operations or financial
position, as DIRECTV Holdings does not sponsor postretirement plans, but rather our employees participate in the plans that are sponsored and carried as an obligation by our Parent.

Share-Based Payment.On January 1, 2006, we adopted SFAS No. 123R. The adoption of this standard did not have a
significant effect on our consolidated results of operations or financial position. However, as a result of the adoption of SFAS No. 123R, we now report the excess income tax benefit associated
with the exercise of stock options or pay-out of restricted stock units as a cash flow from financing activities in our Consolidated Statements of Cash Flows.



In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statementsan amendment to ARB
No. 51." SFAS No. 160 establishes standards of accounting and reporting of noncontrolling interests in subsidiaries, currently known as minority interests, in consolidated financial
statements, provides guidance on accounting for changes in the
parent's ownership interest in a subsidiary and establishes standards of accounting of the deconsolidation of a subsidiary due to the loss of control. SFAS No. 160 requires an entity to present
minority interests as a component of equity. Additionally, SFAS No. 160 requires an entity to present net income and consolidated comprehensive income attributable to the parent and the
minority interest separately on the face of the consolidated financial statements. We are currently assessing the effect SFAS No. 160 will have on our consolidated results of operations and
financial position when adopted, as required, on January 1, 2009.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations." SFAS No. 141R requires the acquiring entity to recognize and measure at an
acquisition date fair value all identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree. The Statement recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase. SFAS No. 141R requires disclosures about the nature and financial effect of the business combination and also changes the accounting for
certain income tax assets recorded in

51

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

purchase
accounting. We are currently assessing the effect SFAS No. 141R will have on our consolidated results of operations and financial position when adopted, as required, on
January 1, 2009.

In
February 2007, the FASB, issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement
No. 115." SFAS No. 159 permits, but does not require, companies to report at fair value the majority of recognized financial assets, financial liabilities and firm commitments. Under
this standard, unrealized gains and losses on items for which the fair value option is elected are reported in earnings at each subsequent reporting date. We do not expect the adoption of SFAS
No. 159 on January 1, 2008 to have any effect on our consolidated results of operations or financial position.

In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, sets out a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair value measurements of assets and liabilities. SFAS No. 157 applies under other accounting pronouncements previously
issued by the FASB that require or permit fair value measurements. We do not expect the adoption of SFAS No. 157 on January 1, 2008 to have any effect on our consolidated results of
operations or financial position.

In
September 2006, the Emerging Issues Task Force, or EITF, issued EITF No. 06-1, "Accounting for Consideration Given by a Service Provider to a Manufacturer or
Reseller of Equipment Necessary for an End-Customer to Receive Service from the Service Provider." EITF No. 06-1 provides guidance to service providers regarding the
proper reporting of consideration given to manufacturers or resellers of equipment necessary for an end-customer to receive its services. Depending on the circumstances, such consideration
is reported as either an expense or a reduction of revenues. We do not expect the adoption of EITF No. 06-1 on January 1, 2008 to have any effect on our consolidated results
of operations.

Note 3: Accounts Receivable, Net

The following table sets forth the amounts recorded for "Accounts receivable" in our Consolidated Balance Sheets at December 31:

|                                      |                          | 2007 |       | 2006  |  
|------------------------------------- | ------------------------ | ---- | ----- | ----- | -
|
|Subscriber                            |                          | $    | 774   |       | $
|Trade                                 |                          |      | 652   |       |  
|                                      |                          |      |       |       |  
|Subtotal                              |                          |      | 1,426 |       |  
|Less: Allowance for doubtful accounts |                          |      | (39   | )     |  
|                                      |                          |      |       |       |  
|                                      | Accounts receivable, net |      | $     | 1,387 |  
|                                      |                          |      |       |       |  

52

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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" in our Consolidated Balance Sheets at
December 31:

|                                     |                             | Estimated Useful Lives (years) |  | 2007 |        | 2006  |  
|------------------------------------ | --------------------------- | ------------------------------ |  | ---- | ------ | ----- | -
|
|Satellites                           |                             | 10-15                          |  | $    | 2,179  |       | $
|Satellites under construction        |                             |                                |  |      | 474    |       |  
|                                     |                             |                                |  |      |        |       |  
|Total                                |                             |                                |  |      | 2,653  |       |  
|Less: Accumulated depreciation       |                             |                                |  |      | (623   | )     |  
|                                     |                             |                                |  |      |        |       |  
|                                     | Satellites, net             |                                |  |      | $      | 2,030 |  
|                                     |                             |                                |  |      |        |       |  
|Land and improvements                |                             |                               |  | $    | 24     |       | $
|Buildings and leasehold improvements |                             | 6-30                           |  |      | 250    |       |  
|Machinery and equipment              |                             | 3-23                           |  |      | 2,395  |       |  
|Subscriber leased set-top receivers  |                             | 3-5                            |  |      | 2,673  |       |  
|Construction in progress             |                             |                               |  |      | 344    |       |  
|                                     |                             |                                |  |      |        |       |  
|Total                                |                             |                                |  |      | 5,686  |       |  
|Less: Accumulated depreciation       |                             |                                |  |      | (2,456 | )     |  
|                                     |                             |                                |  |      |        |       |  
|                                     | Property and equipment, net |                                |  |      | $      | 3,230 |  
|                                     |                             |                                |  |      |        |       |  

We capitalized interest costs of $51 million in 2007, $55 million in 2006 and $31 million in 2005, as part of the cost of our
property and satellites under construction. Depreciation expense was $1,094 million in 2007, $519 million in 2006 and $344 million in 2005.

On
March 1, 2006, we introduced a new set-top receiver lease program. Prior to March 1, 2006, most set-top receivers provided to new and existing
subscribers were immediately expensed upon activation as a subscriber acquisition or upgrade and retention cost in the Consolidated Statements of Operations. Subsequent to the introduction of the
lease program, we lease most set-top receivers provided to new and existing subscribers, and therefore capitalize the receivers in "Property and equipment, net" in the Consolidated Balance
Sheets. We depreciate capitalized set-top receivers over a three year estimated useful life.

The
following table sets forth the amount of set-top receivers we capitalized, and depreciation expense we recorded under the lease program for each of the periods presented:

|                                                                  |  | Years Ended December 31,
|----------------------------------------------------------------- |  | ------------------------
|
|
|Capitalized subscriber leased equipment:                          |  |                         
|Cash paid for subscriber leased equipmentsubscriber acquisitions |  | $                       
|Cash paid for subscriber leased equipmentupgrade and retention   |  |                         
|                                                                  |  |                         
|Total subscriber leased equipment capitalized                     |  | $                       
|                                                                  |  |                         
|Depreciation expensesubscriber leased equipment                  |  | $                       

53

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Note 5: Goodwill and Intangible Assets

We performed our annual impairment tests for goodwill and orbital slots in the fourth quarters of 2007, 2006 and 2005. Based on our annual impairment tests, no
impairment existed.

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

|                         |                         |            |  | 2007 |       | 2006 
|------------------------ | ----------------------- | ---------- |  | ---- | ----- | -----
|
|
|Orbital slots            |                         | Indefinite |  | $    | 432   |      
|72.5° WL orbital license |                         | 5          |  |      | 219   |      
|Subscriber related       |                         | 5-10       |  |      | 1,348 |      
|Dealer network           |                         | 15         |  |      | 130   |      
|Distribution rights      |                         | 7          |  |      | 334   |      
|                         |                         |            |  |      |       |      
|                         | Total intangible assets |            |  |      | $     | 2,463
|                         |                         |            |  |      |       |      

Amortization expense for intangible assets was $353 million in 2007, 2006 and 2005.

Estimated
amortization expense for intangible assets in each of the next five years and thereafter is as follows: $352 million in 2008, $289 million in 2009,
$90 million in 2010, $34 million in 2011, $10 million in 2012 and $16 million thereafter.

Note 6: Accounts Payable and Accrued Liabilities; Other Liabilities and Deferred Credits

The significant components of "Accounts payable and accrued liabilities" in our Consolidated Balance Sheets are as follows:

|                                          |                                                | December 31,
|----------------------------------------- | ---------------------------------------------- | ------------
|
|
|Programming costs                         |                                                | $           
|Accounts payable                          |                                                |             
|Commissions due to installers and dealers |                                                |             
|Income taxes payable to Parent            |                                                |             
|Payroll and employee benefits             |                                                |             
|Other                                     |                                                |             
|                                          |                                                |             
|                                          | Total accounts payable and accrued liabilities |             
|                                          |                                                |             

54

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

The significant components of "Other liabilities and deferred credits" in our Consolidated Balance Sheets are as follows:

|                  |                                              | December 31,
|----------------- | -------------------------------------------- | ------------
|
|
|Programming costs |                                              | $           
|Deferred credits  |                                              |             
|Other             |                                              |             
|                  |                                              |             
|                  | Total other liabilities and deferred credits |             
|                  |                                              |             

Note 7: Debt

The following table sets forth our outstanding debt:

|                                        |                |       |   | December 31,
|--------------------------------------- | -------------- | ----- | - | ------------
|
|
|
|8.375% senior notes due in 2013         |                | 8.375 | % | $           
|6.375% senior notes due in 2015         |                | 6.375 | % |             
|Senior secured credit facility          |                | 6.102 | % |             
|Other                                   |                |      |   |             
|                                        |                |       |   |             
|                                        | Total debt     |       |  |             
|Less: Current portion of long-term debt |                |       |   |             
|                                        |                |       |   |             
|                                        | Long-term debt |       |   |             
|                                        |                |       |   |             

Notes Payable.The 8.375% senior notes and the 6.375% senior notes were issued by DIRECTV Holdings and
DIRECTV Financing Co., Inc., or DIRECTV Financing (together with DIRECTV Holdings, the Co-Issuers) 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 Holdings' material domestic
subsidiaries (other than DIRECTV Financing), which we refer to as the Guarantor Subsidiaries. Principal on the 8.375% senior notes and the 6.375% senior notes is payable upon maturity,
while interest is payable semi-annually.

The
fair value of our 8.375% senior notes was approximately $948 million at December 31, 2007 and December 31, 2006. The fair value of our
6.375% senior notes was approximately $962 million at December 31, 2007 and December 31, 2006. The fair values were calculated based on quoted market prices on those dates.

Credit Facility.At December 31, 2007, our senior secured credit facility consisted of a $500 million
six-year Term Loan A, a $983 million eight-year Term Loan B and a $500 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 0.75% and 1.50%,
respectively. In addition, we pay a commitment fee of 0.175% 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

55

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

substantially
all of our assets and is fully and unconditionally guaranteed, jointly and severally, by the Guarantor Subsidiaries.

Our
notes payable and credit facility mature as follows: $48 million in 2008, $98 million in 2009, $297 million in 2010, $98 million in 2011,
$10 million in 2012 and $2,842 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,
2007, 2006 or 2005. The amount of interest accrued related to our outstanding
debt was $26 million at December 31, 2007 and $27 million at December 31, 2006. The unamortized bond premium included in other debt as of December 31, 2007 was
$2 million and $3 million as of December 31, 2006.

Covenants and Restrictions.The senior secured credit facility requires us to comply with certain financial covenants. The
senior notes and the senior secured credit facility also include covenants that restrict the Co-Issuers and the Guarantor Subsidiaries' 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 entity, (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, 2007, we were 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 million six-year Term Loan A, a $1,500 million eight-year
Term Loan B, both of which were fully funded, and a $500 million undrawn six-year revolving credit facility. We used a portion of the $2,000 million proceeds from the
transaction to repay our prior credit facility that had a then outstanding balance of $1,002 million, to repay our $875 million borrowing from Parent, 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 million of our then outstanding $1,400 million 8.375% senior notes at a redemption price of 108.375% plus accrued and unpaid
interest, for a total of $538 million, which was funded by a capital contribution from our Parent.

On
June 15, 2005, the Co-Issuers issued $1,000 million of 6.375% senior notes. We used a portion of the proceeds from the transaction to repay
$500 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 $65 million ($40 million after tax) of which $41 million was associated with the premium that we paid for the redemption of our
8.375% senior notes and $24 million with our 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.

56

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Note 8: Income Taxes

We base our income tax expense or benefit on reported "Income before income taxes." 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, which are available to us pursuant to our tax
sharing agreement with The DIRECTV Group and as measured by applying currently enacted tax laws.

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

2007

2006

2005(Dollars in Millions)Current tax expense:U.S. federal

$
(633
)
$
(556
)
$
(169
)State and local


(156
)

(111
)

(30
)Total


(789
)

(667
)

(199
)Deferred tax (expense) benefit:U.S. federal


(82
)

(175
)

(11
)State and local


(20
)

3


2Total


(102
)

(172
)

(9
)Total income tax expense

$
(891
)
$
(839
)
$
(208
)


Our income tax 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 for the years ended December 31:

2007

2006

2005(Dollars in Millions)Expected tax expense at U.S. federal statutory income tax rate

$
(788
)
$
(768
)
$
(187
)U.S. state and local income tax expense


(102
)

(70
)

(18
)Tax credits and other


(1
)

(1
)

(3
)Total income tax expense

$
(891
)
$
(839
)
$
(208
)


57

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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

2007

2006Deferred Tax Assets

Deferred Tax Liabilities

Deferred Tax Assets

Deferred Tax Liabilities(Dollars in Millions)Depreciation and amortization

$


$
515

$


$
421Accruals and advances


108


49


125


50Programming contract liabilities


168





162


Prepaid expenses





38





41State taxes


19








Other temporary differences


6


4


1


5Subtotal


301


606


288


517Valuation allowance


(2
)







Total deferred taxes

$
299

$
606

$
288

$
517


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 of $2 million at December 31, 2007, is attributable to unused capital losses which are available for carry-forward.

Included
in "Prepaid expenses and other" in the Consolidated Balance Sheets are $29 million and $5 million of current deferred tax assets at December 31, 2007 and
2006, respectively.

A
reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits, excluding accrued interest and penalties, is as follows
(in millions):

Gross unrecognized tax benefits at January 1, 2007

$
25Increases in tax positions for prior years


31Increases in tax positions for current year


32Gross unrecognized tax benefits at December 31, 2007

$
88


As of December 31, 2007, our unrecognized tax benefits totaled $92 million, including accrued interest and penalties of
$4 million. If our tax positions are ultimately sustained by the tax authorities in our favor, approximately $5 million would reduce the annual effective income tax rate.

During
the year ended December 31, 2007, we recognized $3 million of interest expense for unrecognized tax benefits in "Income tax expense" in the Consolidated Statement of
Operations.

We
file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state jurisdictions. For U.S. federal tax purposes, the tax years 2001 through
2007 remain open to examination. The California tax years 1994 through 2007 remain open to examination and the income tax returns in the other state tax jurisdictions in which we have operations are
generally subject to examination for a period of 3 to 5 years after filing of the respective return.

We
anticipate that the examination of the federal income tax returns for 2001 through 2003 will conclude in 2008, however, we do not anticipate that this will have a significant effect
on our results of

58

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

operations
or financial position. We do not anticipate other changes to the total unrecognized tax benefits in the next twelve months will have a significant effect our results of operations or
financial position.

Note 9: Pension and Other Post-Retirement Benefits

Most of our employees participate in funded and unfunded contributory and non-contributory defined benefit pension plans maintained by The DIRECTV
Group. The plans provide defined benefits based on years of service and final average salary or based on eligible compensation while employed by us. We have not separately determined the accumulated
benefit obligation and net assets available for benefits for our employees and do not include these items in our Consolidated Balance Sheets. In addition to pension benefits, The DIRECTV Group
charges us for the cost of certain other post-retirement benefits. The accumulated other post-retirement benefit obligation related to our employees has not been separately
determined and is not included in the accompanying Consolidated Balance Sheets. We also participate in other health and welfare plans of The DIRECTV Group. Our portion of the cost of these benefit
plans, allocated from The DIRECTV Group, amounted to $16 million in 2007, $15 million in 2006 and $12 million in 2005.

Note 10: Share-Based Payment

Restricted Stock Units.The Compensation Committee of The DIRECTV Group Board of Directors has granted restricted stock units
under The DIRECTV Group, Inc. 2004 Stock Plan and a former plan to certain of our employees and executives. Annual awards are mostly performance-based, with final payments in shares
of our Parent's common stock. Final payment can be reduced from the target award amounts based on the company's performance over a three or four year performance period in comparison with
pre-established targets.

During
the year ended December 31, 2007, our employees were granted 2.5 million restricted stock units with a weighted average grant-date fair value of $23.69
per share. During the year ended December 31, 2006, our employees were granted 2.7 million restricted stock units with a weighted average grant-date fair value of
approximately $13.57 per share. During the year ended December 31, 2005, our employees were granted 2.4 million restricted stock units with a weighted average grant-date fair
value of approximately $16.64 per share. The grant date fair value of restricted stock units is based on the closing stock price of our Parent's common stock on the date of grant.

Stock Options.The DIRECTV Group Compensation Committee has also granted stock options to acquire our Parent's common
stock to certain of our employees and executives. The exercise price of options granted is equal to at least 100% of the fair market value of the common stock on the date the options were granted.
These nonqualified options generally vest over one to five years, expire ten years from date of grant and are subject to earlier termination under certain conditions. During the year ended
December 31, 2007, our employees were granted 1.2 million stock options with a
grant-date fair value of approximately $8.27 per share. No stock options were granted to our employees during 2006 or 2005. The grant date fair value of common stock options is determined
by our Parent using the Black-Scholes valuation model.

59

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

The
following table presents amounts recorded related to share-based compensation for the years ended December 31:

2007

2006

2005(Dollars in Millions)Share-based compensation expense recognized

$
41

$
34

$
27Tax benefits associated with share-based compensation expense


16


13


10Actual tax benefits realized for the deduction of share-based compensation expense


19


13


6


As of December 31, 2007, there was $58 million of unrecognized compensation costs related to unvested restricted stock units and
stock options, which we expect to recognize as follows: $31 million in 2008, $21 million in 2009 and $6 million in 2010.

As
of December 31, 2007 our employees held 16.4 million stock options and 7.8 million restricted stock units.

Note 11: Related-Party Transactions

In the ordinary course of our operations, we enter into related-party transactions with The DIRECTV Group, News Corporation, their affiliates,
and companies in which we hold equity method investments.

The DIRECTV Group and affiliates.We determine our income taxes based upon our tax sharing agreement with The
DIRECTV Group, which generally provides that the current income tax liability or receivable be computed as if we were a separate taxpayer. Payments made to our Parent under this tax sharing
arrangement were $709 million in 2007, $727 million in 2006 and $36 million in 2005. We receive an allocation of employee benefit expenses from The DIRECTV Group. We
believe that our consolidated financial statements reflect our cost of doing business in accordance with Securities and Exchange Commission Staff Accounting Bulleting No. 55, "Allocation of
Expenses and Related Disclosures in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity."

We
paid dividends to our Parent in the amounts of $1,050 million in 2007 and $300 million in 2006. These dividends were from available cash and cash equivalents. Interest
expense incurred related to $875 million borrowed from The DIRECTV Group was $7 million in 2005. During 2005, we repaid the $875 million borrowing and received a
$538 million capital contribution from The DIRECTV Group in conjunction with our debt refinancing. See Note 7 for further discussion of the debt refinancing.

During
2005, The DIRECTV Group contributed to us certain SPACEWAY satellite assets at its cost in the amount of $27 million, which we recorded as a capital contribution.

News Corporation and affiliates.News Corporation and its affiliates are considered related parties because, as of
December 31, 2007, it owned approximately 41% of our Parent's outstanding common stock. Companies in which our Parent holds equity method investments are also considered related parties, which
include HNS LLC from April 22, 2005 until the investment was sold in January 2006. We have 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

60

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

space
and purchase of employee services; and use of facilities. The majority of payments under contractual arrangements with News Corporation entities relate to multi-year programming
contracts. Payments under these contracts are typically subject to annual rate increases and are based on the number of subscribers receiving the related programming.

The
following table summarizes related-party transactions for the years ended December 31:

2007

2006

2005(Dollars in Millions)Sales:News Corporation and affiliates

$
17

$
22

$
18The DIRECTV Group and affiliates





1


5Total

$
17

$
23

$
23Purchases:News Corporation and affiliates

$
835

$
740

$
652The DIRECTV Group and affiliates


1





15Other


23


10


9Total

$
859

$
750

$
676


The following table sets forth the amount of accounts receivable from and accounts payable to related-parties as of
December 31:

2007

2006(Dollars in Millions)Accounts receivable

$
20

$
10Accounts payable:News Corporation and affiliates

$
207

$
156The DIRECTV Group and affiliates


22


24Other


41


23Total

$
270

$
203


The accounts receivable balances as of December 31, 2007 and December 31, 2006 are primarily related to affiliates of News
Corporation. Accounts receivable as of December 31, 2007 includes $11 million for costs incurred on behalf of a News Corporation entity, which will be reimbursed pursuant to a
reimbursement agreement.

Note 12: Commitments and Contingencies



At December 31, 2007, minimum future commitments under noncancelable operating leases having lease terms in excess of one year were primarily for real
property and aggregated $132 million, payable as follows: $32 million in 2008, $21 million in 2009, $19 million in 2010, $20 million in 2011, $21 million in
2012 and $19 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options, which we have not considered in the amounts disclosed. Rental expense under
operating leases was $52 million for the year ended December 31, 2007, $49 million for the year ended December 31, 2006 and $46 million for the year ended
December 31, 2005.

61

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

At December 31, 2007, our minimum payments under agreements to purchase broadcast programming, and the purchase of services that we have outsourced to
third parties, such as billing services, satellite telemetry, tracking and control, satellite construction, and launch contracts and broadcast center services aggregate $4,733 million, payable
as follows: $1,253 million in 2008, $1,247 million in 2009, $1,142 million in 2010, $727 million in 2011, $199 million in 2012 and $165 million thereafter.

At
December 31, 2007, other long-term obligations totaling $325 million are payable approximately as follows: $76 million in 2008, $83 million in
2009, $86 million in 2010, $50 million in 2011, $5 million in 2012 and $25 million thereafter. These amounts are recorded in "Accounts payable and accrued liabilities" and
"Other liabilities and deferred credits" in our Consolidated Balance Sheets.

As
part of an amended arrangement with Telesat Canada, a Canadian telecommunications and broadcast services company, we agreed to provide Telesat the use of three of our satellites,
beginning in 2004, which were previously used as in-orbit spares, through the end of their useful lives and in return, Telesat agreed to allow us to use its 72.5° west
longitude, or WL, orbital location through 2009. As part of these transactions, we recorded a $219 million 72.5° WL orbital license intangible asset and an accrual for
deferred lease revenues of $117 million. We are amortizing the 72.5° WL orbital license intangible asset over an approximate five year
period ending in 2009 and are recognizing the deferred lease revenues in "Revenues" in the Consolidated Statements of Operations over an approximate two year period ending in the first quarter of
2009.



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, 2007. After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not expected
to have a material adverse effect on our consolidated results of operations or financial position.

Finisar Corporation.On April 4, 2005, Finisar Corporation filed a patent infringement action in the United States
District Court for the Eastern District of Texas (Beaumont) alleging that The DIRECTV Group, DIRECTV Holdings LLC, DIRECTV Enterprises, LLC, DIRECTV Operations, LLC,
DIRECTV, Inc., and DTV Network Systems, Inc. infringed U.S. Patent No. 5,404,505. On June 23, 2006, the jury determined that we willfully infringed this
patent and awarded approximately $79 million in damages. On July 7, 2006, the Court entered its final written judgment which denied Finisar's request for an injunction and instead
granted DIRECTV an ongoing royalty. Under this grant, we would be obligated to pay Finisar $1.60 per new set-top box manufactured for use with the DIRECTV system beginning
June 17, 2006 and continuing until the patent expires in 2012 or is otherwise found to be invalid. The Court also increased the damages award by $25 million because of the jury finding
of willful infringement and awarded pre-judgment interest of $13 million to Finisar. Post-judgment interest accrues on the total judgment.

We
filed a notice of appeal to the Court of Appeals for the Federal Circuit on October 5, 2006, and Finisar also filed a notice of appeal on October 18, 2006. A bond was
submitted to the District

62

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Court
in the amount of $127 million as required security for the damages awarded but not yet paid pending appeal plus interest for the anticipated duration of the appeal. We were successful in
obtaining an order that post-judgment ongoing royalties shall be held in escrow pending outcome of the appeal. Through December 31, 2007, the ongoing royalties amounted to
$33 million, which has been paid into escrow. Oral arguments on the appeal and cross-appeal were heard by the Court on January 7, 2008.

Based
on our review of the record in this case, including discussion with and analysis by counsel of the bases for our appeal, we have determined that we have a number of strong
arguments available on appeal and, although there can be no assurance as to the ultimate outcome, we are confident that the judgment against us will ultimately be reversed, or remanded for a new trial
in which we believe we would prevail. As a result, we have concluded that it is not probable that Finisar will ultimately prevail in this matter; therefore, we have not recorded any liability for this
judgment nor are we recording any expense for the ongoing royalty.



We may purchase in-orbit and launch insurance to mitigate the potential financial impact of satellite 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, 2007, the net book value of in-orbit satellites was $1,556 million, of which
$1,337 million was uninsured.

Other.As of December 31, 2007, included in "Investments and other assets" in the Consolidated Balance Sheets is a
receivable for $34 million of the $57 million rebate that we can earn from Thomson by purchasing at least $4 billion of set-top receivers through June 2010. We
have accrued this receivable based on our assessment that achievement of the minimum purchase requirement is both probable and reasonably estimable. On a quarterly basis, we assess the probability of
earning the rebate over the contract term. If we subsequently determine that it is no longer probable that we will earn the rebate, we would be required to reverse the amount of the rebate earned to
date as a charge to the Consolidated Statements of Operations at the time such determination is made. In connection with this agreement, we received approximately $200 million in cash in 2004
which has been deferred to "Unearned subscriber revenue and deferred credits" and "Other liabilities and deferred credits" in our Consolidated Balance Sheets and is recognized as a
pro-rata reduction to the cost of set-top receivers purchased from Thomson.

63

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Note 13: Condensed Consolidating Financial Statements

The following presents the condensed consolidating statements of operations for the years ended December 31, 2007, 2006 and 2005, the condensed
consolidating balance sheets as of December 31, 2007 and 2006, and the condensed consolidating statements of cash flows for the years ended December 31, 2007, 2006 and 2005 of
DIRECTV Holdings together with DIRECTV Financing Co., Inc., or the Co-Issuers, and each of DIRECTV Holdings' material subsidiaries (other than
DIRECTV Financing), or the Guarantor Subsidiaries, and the eliminations necessary to present DIRECTV Holdings' financial statements on a consolidated basis. Prior year amounts have been
revised to conform to the current presentation. These condensed consolidating financial statements should be read in conjunction with the accompanying consolidated financial statements of
DIRECTV Holdings.

Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2007

|                                              |                                                                                                  | Co-Issuers                          |                                    | Guarantor
Subsidiaries |   | Eliminations |       | DIRECTV
Holdings
Consolidated |       
|--------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ---------------------------------- | ---------------------- | - | ------------ | ----- | ----------------------------- | ------
|
|Revenues                                      |                                                                                                  | $                                   | 67                                 |                        | $ | 15,527       |       | $                             | (67   
|Operating costs and expenses                  |                                                                                                  |                                     |                                    |                        |   |              |       |                               |       
|                                              | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |                                    |                        |   |              |       |                               |       
|                                              |                                                                                                  | Broadcast programming and other     |                                    |                        |  |              |       | 6,681                         |       
|                                              |                                                                                                  | Subscriber service expenses         |                                    |                        |  |              |       | 1,137                         |       
|                                              |                                                                                                  | Broadcast operations expenses       |                                    |                        |  |              |       | 216                           |       
|                                              | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |                                    |                        |   |              |       |                               |       
|                                              |                                                                                                  | Subscriber acquisition costs        |                                    |                        |  |              |       | 1,901                         |       
|                                              |                                                                                                  | Upgrade and retention costs         |                                    |                        |  |              |       | 958                           |       
|                                              |                                                                                                  | General and administrative expenses |                                    |                        |  |              |       | 851                           |       
|                                              | Depreciation and amortization expense                                                            |                                     |                                    |                       |   |              | 1,448 |                               |       
|                                              |                                                                                                  |                                     |                                    |                        |   |              |       |                               |       
|                                              |                                                                                                  |                                     | Total operating costs and expenses |                        |   |             |       |                               | 13,192
|                                              |                                                                                                  |                                     |                                    |                        |   |              |       |                               |       
|Operating profit                              |                                                                                                  |                                     | 67                                 |                        |   | 2,335        |       |                               |      
|Equity in income of consolidated subsidiaries |                                                                                                  |                                     | 1,394                              |                        |   |             |       |                               | (1,394
|Interest income                               |                                                                                                  |                                     | 69                                 |                        |   |             |       |                               |      
|Interest expense                              |                                                                                                  |                                     | (193                               | )                      |   | (23          | )     |                               |      
|Other, net                                    |                                                                                                  |                                     |                                   |                        |   | (5           | )     |                               |      
|                                              |                                                                                                  |                                     |                                    |                        |   |              |       |                               |       
|Income before income taxes                    |                                                                                                  |                                     | 1,337                              |                        |   | 2,307        |       |                               | (1,394
|Income tax benefit (expense)                  |                                                                                                  |                                     | 22                                 |                        |   | (913         | )     |                               |      
|                                              |                                                                                                  |                                     |                                    |                        |   |              |       |                               |       
|Net income                                    |                                                                                                  | $                                   | 1,359                              |                        | $ | 1,394        |       | $                             | (1,394
|                                              |                                                                                                  |                                     |                                    |                        |   |              |       |                               |       

64

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2006

|                                              |                                                                                                  | Co-Issuers                          |                                    | Guarantor
Subsidiaries |   | Eliminations |     | Consolidated |       
|--------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ---------------------------------- | ---------------------- | - | ------------ | --- | ------------ | ------
|
|Revenues                                      |                                                                                                  | $                                   |                                   |                        | $ | 13,744       |     | $            |      
|Operating costs and expenses                  |                                                                                                  |                                     |                                    |                        |   |              |     |              |       
|                                              | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |                                    |                        |   |              |     |              |       
|                                              |                                                                                                  | Broadcast programming and other     |                                    |                        |  |              |     | 5,830        |       
|                                              |                                                                                                  | Subscriber service expenses         |                                    |                        |  |              |     | 1,057        |       
|                                              |                                                                                                  | Broadcast operations expenses       |                                    |                        |  |              |     | 179          |       
|                                              | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |                                    |                        |   |              |     |              |       
|                                              |                                                                                                  | Subscriber acquisition costs        |                                    |                        |  |              |     | 1,844        |       
|                                              |                                                                                                  | Upgrade and retention costs         |                                    |                        |  |              |     | 852          |       
|                                              |                                                                                                  | General and administrative expenses |                                    |                        |  |              |     | 761          |       
|                                              | Depreciation and amortization expense                                                            |                                     |                                    |                       |   |              | 873 |              |       
|                                              |                                                                                                  |                                     |                                    |                        |   |              |     |              |       
|                                              |                                                                                                  |                                     | Total operating costs and expenses |                        |   |             |     |              | 11,396
|                                              |                                                                                                  |                                     |                                    |                        |   |              |     |              |       
|Operating profit                              |                                                                                                  |                                     |                                   |                        |   | 2,348        |     |              |      
|Equity in income of consolidated subsidiaries |                                                                                                  |                                     | 1,430                              |                        |   |             |     |              | (1,430
|Interest income                               |                                                                                                  |                                     | 69                                 |                        |   |             |     |              |      
|Interest expense                              |                                                                                                  |                                     | (189                               | )                      |   | (29          | )   |              |      
|Other, net                                    |                                                                                                  |                                     |                                   |                        |   | (4           | )   |              |      
|                                              |                                                                                                  |                                     |                                    |                        |   |              |     |              |       
|Income before income taxes                    |                                                                                                  |                                     | 1,310                              |                        |   | 2,315        |     |              | (1,430
|Income tax expense                            |                                                                                                  |                                     | 46                                 |                        |   | (885         | )   |              |      
|                                              |                                                                                                  |                                     |                                    |                        |   |              |     |              |       
|Net income                                    |                                                                                                  | $                                   | 1,356                              |                        | $ | 1,430        |     | $            | (1,430
|                                              |                                                                                                  |                                     |                                    |                        |   |              |     |              |       

65

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2005

|                                              |                                                                                                  | Co-Issuers                          |                                    | Guarantor
Subsidiaries |     | Eliminations |     | DIRECTV
Holdings
Consolidated |       
|--------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ---------------------------------- | ---------------------- | --- | ------------ | --- | ----------------------------- | ------
|
|Revenues                                      |                                                                                                  | $                                   | 689                                |                        | $   | 12,216       |     | $                             | (689  
|Operating costs and expenses                  |                                                                                                  |                                     |                                    |                        |     |              |     |                               |       
|                                              | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |                                    |                        |     |              |     |                               |       
|                                              |                                                                                                  | Broadcast programming and other     |                                    |                        | 579 |              |     | 5,159                         |       
|                                              |                                                                                                  | Subscriber service expenses         |                                    |                        |    |              |     | 935                           |       
|                                              |                                                                                                  | Broadcast operations expenses       |                                    |                        |    |              |     | 146                           |       
|                                              | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |                                    |                        |     |              |     |                               |       
|                                              |                                                                                                  | Subscriber acquisition costs        |                                    |                        |    |              |     | 2,676                         |       
|                                              |                                                                                                  | Upgrade and retention costs         |                                    |                        |    |              |     | 1,106                         |       
|                                              |                                                                                                  | General and administrative expenses |                                    |                        | 1   |              |     | 803                           |       
|                                              | Depreciation and amortization expense                                                            |                                     |                                    |                       |     |              | 698 |                               |       
|                                              |                                                                                                  |                                     |                                    |                        |     |              |     |                               |       
|                                              |                                                                                                  |                                     | Total operating costs and expenses |                        |     | 580          |     |                               | 11,523
|                                              |                                                                                                  |                                     |                                    |                        |     |              |     |                               |       
|Operating profit                              |                                                                                                  |                                     | 109                                |                        |     | 693          |     |                               |      
|Equity in income of consolidated subsidiaries |                                                                                                  |                                     | 390                                |                        |     |             |     |                               | (390  
|Interest income                               |                                                                                                  |                                     | 26                                 |                        |     |             |     |                               |      
|Interest expense                              |                                                                                                  |                                     | (175                               | )                      |     | (52          | )   |                               |      
|Other, net                                    |                                                                                                  |                                     | (66                                | )                      |     | (2           | )   |                               |      
|                                              |                                                                                                  |                                     |                                    |                        |     |              |     |                               |       
|Income before income taxes                    |                                                                                                  |                                     | 284                                |                        |     | 639          |     |                               | (390  
|Income tax expense                            |                                                                                                  |                                     | 41                                 |                        |     | (249         | )   |                               |      
|                                              |                                                                                                  |                                     |                                    |                        |     |              |     |                               |       
|Net income                                    |                                                                                                  | $                                   | 325                                |                        | $   | 390          |     | $                             | (390  
|                                              |                                                                                                  |                                     |                                    |                        |     |              |     |                               |       

66

---





DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Condensed Consolidating Balance Sheet  As of December 31, 2007

|                                       |                                              | Co-Issuers           |       | Guarantor
Subsidiaries |       | Eliminations |       | DIRECTV
Holdings
Consolidated
|-------------------------------------- | -------------------------------------------- | -------------------- | ----- | ---------------------- | ----- | ------------ | ----- | -----------------------------
|
|ASSETS                                 |                                              |                      |       |                        |       |              |       |                              
|Total current assets                   |                                              | $                    | 865   |                        | $     | 1,763        |       | $                            
|Satellites, net                        |                                              |                      |      |                        |       | 2,030        |       |                              
|Property and equipment, net            |                                              |                      |      |                        |       | 3,230        |       |                              
|Goodwill                               |                                              |                      | 1,828 |                        |       | 1,204        |       |                              
|Intangible assets, net                 |                                              |                      |      |                        |       | 1,223        |       |                              
|Other assets                           |                                              |                      | 6,126 |                        |       | 490          |       |                              
|                                       |                                              |                      |       |                        |       |              |       |                              
|Total assets                           |                                              | $                    | 8,819 |                        | $     | 9,940        |       | $                            
|                                       |                                              |                      |       |                        |       |              |       |                              
|LIABILITIES AND OWNER'S EQUITY         |                                              |                      |       |                        |       |              |       |                              
|Total current liabilities              |                                              | $                    | 132   |                        | $     | 2,865        |       | $                            
|Long-term debt                         |                                              |                      | 3,347 |                        |       |             |       |                              
|Deferred income taxes                  |                                              |                      |      |                        |       | 559          |       |                              
|Other liabilities and deferred credits |                                              |                      | 600   |                        |       | 958          |       |                              
|Owner's equity                         |                                              |                      |       |                        |       |              |       |                              
|                                       | Capital stock and additional paid-in capital |                      |       | 2,782                  |       |              | 4,420 |                              
|                                       | Retained earnings                            |                      |       | 1,958                  |       |              | 1,138 |                              
|                                       |                                              |                      |       |                        |       |              |       |                              
|                                       |                                              | Total owner's equity |       |                        | 4,740 |              |       | 5,558                        
|                                       |                                              |                      |       |                        |       |              |       |                              
|Total liabilities and owner's equity   |                                              | $                    | 8,819 |                        | $     | 9,940        |       | $                            
|                                       |                                              |                      |       |                        |       |              |       |                              

67

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Condensed Consolidating Balance Sheet
As of December 31, 2006

|                                       |                                              | Co-Issuers           |       | Guarantor
Subsidiaries |       | Eliminations |       | DIRECTV
Holdings
Consolidated
|-------------------------------------- | -------------------------------------------- | -------------------- | ----- | ---------------------- | ----- | ------------ | ----- | -----------------------------
|
|ASSETS                                 |                                              |                      |       |                        |       |              |       |                              
|Total current assets                   |                                              | $                    | 1,398 |                        | $     | 1,519        |       | $                            
|Satellites, net                        |                                              |                      |      |                        |       | 2,000        |       |                              
|Property and equipment, net            |                                              |                      |      |                        |       | 2,026        |       |                              
|Goodwill                               |                                              |                      | 1,828 |                        |       | 1,204        |       |                              
|Intangible assets, net                 |                                              |                      |      |                        |       | 1,546        |       |                              
|Other assets                           |                                              |                      | 4,585 |                        |       | 150          |       |                              
|                                       |                                              |                      |       |                        |       |              |       |                              
|Total assets                           |                                              | $                    | 7,811 |                        | $     | 8,445        |       | $                            
|                                       |                                              |                      |       |                        |       |              |       |                              
|LIABILITIES AND OWNER'S EQUITY         |                                              |                      |       |                        |       |              |       |                              
|Total current liabilities              |                                              | $                    | 28    |                        | $     | 2,651        |       | $                            
|Long-term debt                         |                                              |                      | 3,395 |                        |       |             |       |                              
|Deferred income taxes                  |                                              |                      |      |                        |       | 417          |       |                              
|Other liabilities and deferred credits |                                              |                      |      |                        |       | 993          |       |                              
|Owner's equity                         |                                              |                      |       |                        |       |              |       |                              
|                                       | Capital stock and additional paid-in capital |                      |       | 3,786                  |       |              | 4,637 |                              
|                                       | Retained earnings (deficit)                  |                      |       | 602                    |       |              | (253  | )                            
|                                       |                                              |                      |       |                        |       |              |       |                              
|                                       |                                              | Total owner's equity |       |                        | 4,388 |              |       | 4,384                        
|                                       |                                              |                      |       |                        |       |              |       |                              
|Total liabilities and owner's equity   |                                              | $                    | 7,811 |                        | $     | 8,445        |       | $                            
|                                       |                                              |                      |       |                        |       |              |       |                              

68

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2007

|                                                     |                                                                  | Co-Issuers                            |       | Guarantor
Subsidiaries |        | DIRECTV
Holdings
Consolidated |      
|---------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------- | ----- | ---------------------- | ------ | ----------------------------- | -----
|
|Cash flows from operating activities                 |                                                                  |                                       |       |                        |        |                               |      
|                                                     | Net cash provided by operating activities                        |                                       | $     | 496                    |        | $                             | 2,413
|                                                     |                                                                  |                                       |       |                        |        |                               |      
|Cash flows from investing activities                 |                                                                  |                                       |       |                        |        |                               |      
|                                                     | Cash paid for property and equipment                             |                                       |       |                       |        |                               | (621 
|                                                     | Cash paid for subscriber leased equipment-subscriber
acquisition |                                       |       |                       |        |                               | (762 
|                                                     | Cash paid for subscriber leased equipment-upgrade and retention  |                                       |       |                       |        |                               | (774 
|                                                     | Cash paid for satellites                                         |                                       |       |                       |        |                               | (169 
|                                                     | Other                                                            |                                       |       |                       |        |                               | (9   
|                                                     |                                                                  |                                       |       |                        |        |                               |      
|                                                     |                                                                  | Net cash used in investing activities |       |                        |       |                               |      
|                                                     |                                                                  |                                       |       |                        |        |                               |      
|Cash flows from financing activities                 |                                                                  |                                       |       |                        |        |                               |      
|                                                     | Repayment of long-term debt                                      |                                       |       | (10                    | )      |                               |     
|                                                     | Repayment of other long-term obligations                         |                                       |       |                       |        |                               | (72  
|                                                     | Cash dividend to Parent                                          |                                       |       | (1,050                 | )      |                               |     
|                                                     | Excess tax benefit from share-based compensation                 |                                       |       |                       |        |                               | 4    
|                                                     |                                                                  |                                       |       |                        |        |                               |      
|                                                     |                                                                  | Net cash used in financing activities |       |                        | (1,060 | )                             |      
|                                                     |                                                                  |                                       |       |                        |        |                               |      
|Net (decrease) increase in cash and cash equivalents |                                                                  |                                       | (564  | )                      |        | 10                            |      
|Cash and cash equivalents at beginning of the year   |                                                                  |                                       | 1,354 |                        |        | 2                             |      
|                                                     |                                                                  |                                       |       |                        |        |                               |      
|Cash and cash equivalents at the end of the year     |                                                                  | $                                     | 790   |                        | $      | 12                            |      
|                                                     |                                                                  |                                       |       |                        |        |                               |      

69

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2006

|                                                   |                                                                   | Co-Issuers                            |       | Guarantor
Subsidiaries |      | DIRECTV
Holdings
Consolidated |      
|-------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------- | ----- | ---------------------- | ---- | ----------------------------- | -----
|
|Cash flows from operating activities               |                                                                   |                                       |       |                        |      |                               |      
|                                                   | Net cash provided by operating activities                         |                                       | $     | 497                    |      | $                             | 1,845
|                                                   |                                                                   |                                       |       |                        |      |                               |      
|Cash flows from investing activities               |                                                                   |                                       |       |                        |      |                               |      
|                                                   | Cash paid for property and equipment                              |                                       |       |                       |      |                               | (504 
|                                                   | Cash paid for subscriber leased equipment-subscriber acquisition. |                                       |       |                       |      |                               | (599 
|                                                   | Cash paid for subscriber leased equipment-upgrade and retention   |                                       |       |                       |      |                               | (473 
|                                                   | Cash paid for satellites                                          |                                       |       |                       |      |                               | (222 
|                                                   | Proceeds from sale of property                                    |                                       |       |                       |      |                               | 12   
|                                                   | Other                                                             |                                       |       |                       |      |                               | 7    
|                                                   |                                                                   |                                       |       |                        |      |                               |      
|                                                   |                                                                   | Net cash used in investing activities |       |                        |     |                               |      
|                                                   |                                                                   |                                       |       |                        |      |                               |      
|Cash flows from financing activities               |                                                                   |                                       |       |                        |      |                               |      
|                                                   | Repayment of long-term debt                                       |                                       |       | (8                     | )    |                               |     
|                                                   | Repayment of other long-term obligations                          |                                       |       |                       |      |                               | (67  
|                                                   | Cash dividend to Parent                                           |                                       |       | (300                   | )    |                               |     
|                                                   | Excess tax benefit from share-based compensation                  |                                       |       |                       |      |                               | 3    
|                                                   |                                                                   |                                       |       |                        |      |                               |      
|                                                   |                                                                   | Net cash used in financing activities |       |                        | (308 | )                             |      
|                                                   |                                                                   |                                       |       |                        |      |                               |      
|Net increase in cash and cash equivalents          |                                                                   |                                       | 189   |                        |      | 2                             |      
|Cash and cash equivalents at beginning of the year |                                                                   |                                       | 1,165 |                        |      |                              |      
|                                                   |                                                                   |                                       |       |                        |      |                               |      
|Cash and cash equivalents at the end of the year   |                                                                   | $                                     | 1,354 |                        | $    | 2                             |      
|                                                   |                                                                   |                                       |       |                        |      |                               |      

70

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2005

|                                                     |                                                     | Co-Issuers                                          |       | Guarantor Subsidiaries |       | DIRECTV Holdings Consolidated |      
|---------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ----- | ---------------------- | ----- | ----------------------------- | -----
|
|Cash flows from operating activities                 |                                                     |                                                     |       |                        |       |                               |      
|                                                     | Net cash provided by (used in) operating activities |                                                     | $     | (385                   | )     | $                             | 1,668
|                                                     |                                                     |                                                     |       |                        |       |                               |      
|Cash flows from investing activities                 |                                                     |                                                     |       |                        |       |                               |      
|                                                     | Cash paid for property and equipment                |                                                     |       |                       |       |                               | (381 
|                                                     | Cash paid for satellites                            |                                                     |       |                       |       |                               | (367 
|                                                     | Cash paid for acquired assets                       |                                                     |       |                       |       |                               | (3   
|                                                     | Proceeds from sale of property                      |                                                     |       |                       |       |                               | 1    
|                                                     |                                                     |                                                     |       |                        |       |                               |      
|                                                     |                                                     | Net cash used in investing activities               |       |                        |      |                               |      
|                                                     |                                                     |                                                     |       |                        |       |                               |      
|Cash flows from financing activities                 |                                                     |                                                     |       |                        |       |                               |      
|                                                     | Cash proceeds from financing transactions           |                                                     |       | 3,003                  |       |                               |     
|                                                     | Cash contribution from Parent                       |                                                     |       | 538                    |       |                               |     
|                                                     | Repayment of debt                                   |                                                     |       | (2,002                 | )     |                               |     
|                                                     | Repayment of borrowing from Parent                  |                                                     |       | (875                   | )     |                               |     
|                                                     | Borrowings from (loans to) related parties          |                                                     |       | 875                    |       |                               | (875 
|                                                     | Repayment of other long-term obligations            |                                                     |       |                       |       |                               | (63  
|                                                     | Debt issuance costs                                 |                                                     |       | (4                     | )     |                               |     
|                                                     |                                                     |                                                     |       |                        |       |                               |      
|                                                     |                                                     | Net cash provided by (used in) financing activities |       |                        | 1,535 |                               |      
|                                                     |                                                     |                                                     |       |                        |       |                               |      
|Net increase (decrease) in cash and cash equivalents |                                                     |                                                     | 1,150 |                        |       | (20                           | )    
|Cash and cash equivalents at beginning of the year   |                                                     |                                                     | 15    |                        |       | 20                            |      
|                                                     |                                                     |                                                     |       |                        |       |                               |      
|Cash and cash equivalents at the end of the year     |                                                     | $                                                   | 1,165 |                        | $     |                              |      
|                                                     |                                                     |                                                     |       |                        |       |                               |      

71

---





DIRECTV HOLDINGS LLC        SUPPLEMENTARY DATA

|Selected Quarterly Data (Unaudited) |                                                                                                 | 1st                                 |                                    | 2nd |       | 3rd   |     | 4th   |      
|----------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | --- | ----- | ----- | --- | ----- | -----
|
|2007 Quarters                       |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|Revenues                            |                                                                                                 | $                                   | 3,539                              |     | $     | 3,726 |     | $     | 3,885
|Operating costs and expenses        |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|                                    | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |     |       |       |     |       |      
|                                    |                                                                                                 | Broadcast programming and other     |                                    |     | 1,483 |       |     | 1,513 |      
|                                    |                                                                                                 | Subscriber service expenses         |                                    |     | 280   |       |     | 281   |      
|                                    |                                                                                                 | Broadcast operations expenses       |                                    |     | 52    |       |     | 53    |      
|                                    | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |     |       |       |     |       |      
|                                    |                                                                                                 | Subscriber acquisition costs        |                                    |     | 432   |       |     | 447   |      
|                                    |                                                                                                 | Upgrade and retention costs         |                                    |     | 226   |       |     | 197   |      
|                                    |                                                                                                 | General and administrative expenses |                                    |     | 197   |       |     | 173   |      
|                                    | Depreciation and amortization expense                                                           |                                     |                                    | 303 |       |       | 340 |       |      
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|                                    |                                                                                                 |                                     | Total operating costs and expenses |     |       | 2,973 |     |       | 3,004
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|Operating profit                    |                                                                                                 |                                     | 566                                |     |       | 722   |     |       | 538  
|Interest income                     |                                                                                                 |                                     | 21                                 |     |       | 23    |     |       | 16   
|Interest expense                    |                                                                                                 |                                     | (52                                | )   |       | (54   | )   |       | (56  
|Other, net                          |                                                                                                 |                                     | (2                                 | )   |       | 1     |     |       | 1    
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|Income before income taxes          |                                                                                                 |                                     | 533                                |     |       | 692   |     |       | 499  
|Income tax expense                  |                                                                                                 |                                     | (208                               | )   |       | (276  | )   |       | (198 
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|Net income                          |                                                                                                 | $                                   | 325                                |     | $     | 416   |     | $     | 301  
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|2006 Quarters                       |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|Revenues                            |                                                                                                 | $                                   | 3,193                              |     | $     | 3,319 |     | $     | 3,403
|Operating costs and expenses        |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|                                    | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |     |       |       |     |       |      
|                                    |                                                                                                 | Broadcast programming and other     |                                    |     | 1,331 |       |     | 1,315 |      
|                                    |                                                                                                 | Subscriber service expenses         |                                    |     | 237   |       |     | 255   |      
|                                    |                                                                                                 | Broadcast operations expenses       |                                    |     | 42    |       |     | 46    |      
|                                    | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |     |       |       |     |       |      
|                                    |                                                                                                 | Subscriber acquisition costs        |                                    |     | 568   |       |     | 401   |      
|                                    |                                                                                                 | Upgrade and retention costs         |                                    |     | 293   |       |     | 144   |      
|                                    |                                                                                                 | General and administrative expenses |                                    |     | 178   |       |     | 180   |      
|                                    | Depreciation and amortization expense                                                           |                                     |                                    | 182 |       |       | 203 |       |      
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|                                    |                                                                                                 |                                     | Total operating costs and expenses |     |       | 2,831 |     |       | 2,544
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|Operating profit                    |                                                                                                 |                                     | 362                                |     |       | 775   |     |       | 597  
|Interest income                     |                                                                                                 |                                     | 14                                 |     |       | 18    |     |       | 17   
|Interest expense                    |                                                                                                 |                                     | (56                                | )   |       | (54   | )   |       | (53  
|Other, net                          |                                                                                                 |                                     |                                   |     |       | (2    | )   |       |     
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|Income before income taxes          |                                                                                                 |                                     | 320                                |     |       | 737   |     |       | 561  
|Income tax expense                  |                                                                                                 |                                     | (122                               | )   |       | (282  | )   |       | (214 
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      
|Net income                          |                                                                                                 | $                                   | 198                                |     | $     | 455   |     | $     | 347  
|                                    |                                                                                                 |                                     |                                    |     |       |       |     |       |      

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DIRECTV HOLDINGS LLC

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 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, 2007.

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, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Internal Control Over Financial Reporting



Our management 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, 2007. 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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DIRECTV HOLDINGS LLC

Treadway
Commission (COSO). Based on their assessment and those criteria, management believes that, as of December 31, 2007, our internal control over financial reporting is effective.

This
annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's
report in this annual report.

ITEM 9B.    OTHER INFORMATION

None.

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Omitted.

ITEM 11.    EXECUTIVE COMPENSATION

Omitted.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Omitted

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Omitted.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees Deloitte & Touche LLP billed for professional services in 2007 and 2006 were:

Type of Fees

2007

2006(Dollars in Millions)Audit Fees and Audit-Related Services

$
2

$
2


"Audit Fees" are fees Deloitte & Touche LLP bills us for professional services for the audit of our consolidated financial
statements included in Form 10-K and review of our consolidated financial statements included in Form 10-Qs. Deloitte & Touche LLP bills us for
"Audit-Related Services," which are principally for accounting consultations and assurance and related services associated with our financing transactions. The DIRECTV Group engages our accountant on
our behalf to render audit and non-audit services for us.

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DIRECTV HOLDINGS LLC

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

|   |  |                                                                                                                        |  | Page Number
|-- |  | ---------------------------------------------------------------------------------------------------------------------- |  | -----------
|1. |  | All Financial Statements                                                                                               |  | See Part II
|2. |  | Financial Statement Schedule II-Valuation and Qualifying Accounts for the Years Ended December 31, 2007, 2006 and 2005 |  | 77         
|3. |  | Exhibits (Including Those Incorporated By Reference)                                                                   |  |            

|
|

|Exhibit
Number |  | Exhibit Name                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*3.1           |  | Certificate of Formation of DIRECTV Holdings LLC dated as of June 11, 2002 (incorporated by reference to Exhibit 3.1 to the Form S-4 of DIRECTV Holdings LLC filed June 26, 2003 (the
"Form S-4")).                                                                                                                                                                                                                                             
|*3.2           |  | Certificate of Incorporation of DIRECTV Financing Co., Inc. dated as of February 5, 2003 (incorporated by reference to Exhibit 3.2 to the Form S-4).                                                                                                                                                                                                                                                                                            
|*3.3           |  | Limited Liability Company Agreement of DIRECTV Holdings LLC dated as of June 11, 2002 (incorporated by reference to Exhibit 3.9 to the Form S-4).                                                                                                                                                                                                                                                                                               
|*3.4           |  | Bylaws of DIRECTV Financing Co., Inc. (incorporated by reference to Exhibit 3.10 to the Form S-4).                                                                                                                                                                                                                                                                                                                                              
|*4.1           |  | Indenture dated as of February 28, 2003 by and among DIRECTV Holdings LLC, 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 by reference to Exhibit 4.1 to the Form 10-Q of Hughes Electronics Corporation ("HEC") filed
May 8, 2003).
|*4.2           |  | 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 by reference
to Exhibit 4.2 to the Form 10-K of DIRECTV Holdings LLC filed February 28, 2005).                                                                                                                              
|*4.4           |  | Form of 83/8% Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 to the Form 10-Q of HEC filed May 8, 2003).                                                                                                                                                                                                                                                                                                                       
|*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 by reference to Exhibit 10.1 to the
Current Report on Form 8-K of the DIRECTV Holdings LLC filed on June 20, 2005 (the "June 20, 2005 Form 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).                                                                                                                                                                                                                                                                                                                                  
|*10.1          |  | Intellectual Property License Agreement dated as of February 10, 2003, between HEC and DIRECTV Enterprises, LLC, as licensee (incorporated by reference to Exhibit 10.16 of the Form S-4).                                                                                                                                                                                                                                                      

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DIRECTV HOLDINGS LLC

|*10.5  |  | Credit Agreement dated as of April 13, 2005 by and among DIRECTV Holdings LLC, Bank of America, N.A., as Administrative Agent and Collateral Agent, the lenders party to the Credit Agreement, certain subsidiaries of the DIRECTV
Holdings LLC, as guarantors, JP Morgan Chase Bank, N.A., as Syndication Agent, Credit Suisse First Boston, Goldman Sachs Credit Partners, L.P. and Citicorp North America, Inc. as Co-Documentation Agents, and Banc of America
Securities LLC and J.P. Morgan Securities Inc., as Co-Lead Arrangers and Co-Book Managers (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of DIRECTV Holdings LLC and DIRECTV
Financing Co., Inc. filed April 13, 2005 (the "April 13, 2005 8-K")).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.6  |  | Security Agreement, dated as of April 13, 2005, by and among DIRECTV Holdings LLC, its subsidiaries named therein as grantors and Bank of America, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.2 to the
April 13, 2005 8-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|*10.7  |  | Pledge Agreement, dated as of April 13, 2005, by and among DIRECTV Holdings LLC, its subsidiaries named therein as pledgors and Bank of America, N.A., as Collateral Agent (incorporated by reference to Exhibit 10.3 to the April 13,
2005 8-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|**31.1 |  | Certification of Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ("Section 302").                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|**31.2 |  | Certification of Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|**31.3 |  | Certification of Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|**31.4 |  | Certification of Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|**32.1 |  | Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906").                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|**32.2 |  | Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|**32.3 |  | Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|**32.4 |  | Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

---

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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DIRECTV HOLDINGS LLC        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, 2007 |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     
|Allowances Deducted from Assets      |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     
|                                     | Accounts receivable (allowance for doubtful receivables) |                              | $ | (39                                     | ) | $                                   | (172 | )          | $ | (158)                  | (a) 
|                                     |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     
|For the Year Ended December 31, 2006 |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     
|Allowances Deducted from Assets      |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     
|                                     | Accounts receivable (allowance for doubtful receivables) |                              | $ | (50                                     | ) | $                                   | (184 | )          | $ | (119                   | )(a)
|                                     |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     
|For the Year Ended December 31, 2005 |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     
|Allowances Deducted from Assets      |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     
|                                     | Accounts receivable (allowance for doubtful receivables) |                              | $ | (64                                     | ) | $                                   | (231 | )          | $ | (101                   | )(a)
|                                     |                                                          |                              |   |                                         |   |                                     |      |            |   |                        |     

---

The accompanying notes are an integral part of these Consolidated Financial Statements. Prior year amounts have been revised to conform to the
current presentation to exclude amounts related to non-trade receivables.

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DIRECTV HOLDINGS LLC

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.

|                        |  | DIRECTV HOLDINGS LLC
(Registrant)
|----------------------- |  | ---------------------------------
|Date: February 27, 2008 |  | By:                              

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 27th day of February 2008 by the following
persons on behalf of the registrant and in the capacities indicated.

|/s/CHASE CAREYChase Carey           |  | President, Chief Executive Officer and Director                   |  | }Principal Executive Officer 
|----------------------------------- |  | ----------------------------------------------------------------- |  | -----------------------------
|/s/PATRICK T. DOYLEPatrick T. Doyle |  | Senior Vice President, Chief Financial Officer                    |  | }Principal Financial Officer 
|/s/JOHN F. MURPHYJohn F. Murphy     |  | Senior Vice President, Controller and Chief Accounting Officer    |  | }Principal Accounting Officer
|/s/LARRY D. HUNTERLarry D. Hunter   |  | Executive Vice President, General Counsel, Secretary and Director |  |                              

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DIRECTV HOLDINGS LLC

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.

|                        |  | DIRECTV FINANCING CO., INC.
(Registrant)
|----------------------- |  | ----------------------------------------
|Date: February 27, 2008 |  | By:                                     

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 27th day of February 2008 by the following
persons on behalf of the registrant and in the capacities indicated.

|/s/CHASE CAREYChase Carey           |  | President, Chief Executive Officer and Director                |  | }Principal Executive Officer 
|----------------------------------- |  | -------------------------------------------------------------- |  | -----------------------------
|/s/PATRICK T. DOYLEPatrick T. Doyle |  | Senior Vice President and Chief Financial Officer              |  | }Principal Financial Officer 
|/s/JOHN F. MURPHYJohn F. Murphy     |  | Senior Vice President, Controller and Chief Accounting Officer |  | }Principal Accounting Officer

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DIRECTV HOLDINGS LLC

EXHIBIT INDEX

|Exhibit Number |  | Exhibit Name                                                                                                                                                                                  
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1*          |  | Certification of Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ("Section 302").                                                   
|31.2*          |  | Certification of Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.                                                                                                     
|31.3*          |  | Certification of Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.                                                                                              
|31.4*          |  | Certification of Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.                                                                                              
|32.1*          |  | Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906").
|32.2*          |  | Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.                                                                                                 
|32.3*          |  | Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.                                                                                          
|32.4*          |  | Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.                                                                                          

---

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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