UNITED STATES
SECURITIES 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, 2006                   
|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, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

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

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 8.                                       |                                                                                                           | Financial Statements and Supplementary Data                                                                      |         
|           |                                               | Report of Independent Registered Public Accounting Firm                                                   |                                                                                                                  | 42      
|           |                                               | Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004                |                                                                                                                  | 43      
|           |                                               | Consolidated Balance Sheets as of December 31, 2006 and 2005                                              |                                                                                                                  | 44      
|           |                                               | Consolidated Statements of Changes in Owner's Equity for the Years Ended December 31, 2006, 2005 and 2004 |                                                                                                                  | 45      
|           |                                               | Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004                |                                                                                                                  | 46      
|           |                                               | Notes to the Consolidated Financial Statements                                                            |                                                                                                                  | 47      
|           |                                               | Supplementary Data                                                                                        |                                                                                                                  | 73      
|           | 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                                                                       |         
|           | Schedule IIValuation and Qualifying Accounts |                                                                                                           | 78                                                                                                              
|Signatures |                                               | 79                                                                                                       

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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.

News
Corporation, through its wholly-owned subsidiary Fox Entertainment Group, Inc., owns approximately 38% of our Parent's outstanding common stock. On December 22, 2006,
News Corporation announced an agreement with Liberty Media Corporation, or Liberty, to exchange certain assets, including its stake in our Parent company, for News Corporation shares held by Liberty.
The transaction is subject to certain regulatory approvals and must be approved by certain stockholders of News Corporation, but is expected to be consummated in the second half of 2007.

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 million subscribers with access to hundreds of channels of digital-quality video pictures and CD-quality
audio programming that we transmit directly to our 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 1,700 digital video and
audio channels, including about 185 basic entertainment channels including over 70 XM Satellite Radio music channels, 31 premium movie channels, over 35 regional and specialty sports networks, an
aggregate of over 1,300 local channels, over 95 Spanish and other foreign language special interest channels, and over 45 pay-per-view movie and event choices. Although we
distribute over 1,300 local channels, a subscriber generally receives only the local channels in the subscriber's home market. As of December 31, 2006, we provided local channel coverage in
standard definition to approximately 142 markets, covering about 94% of U.S. television households.

In
addition, as of December 31, 2006, we provided high definition, or HD, local channels in 49 markets representing 65% of U.S. TV households, as well as ten national HD
television channels. With the expected launch of two additional satellites, we expect to have the most HD capacity in the industry.

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We
also provide premium professional and collegiate sports programming such as the NFL SUNDAY TICKET package, which allows subscribers to view the biggest selection of NFL
games available each Sunday during the regular season. Under 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 our 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 our service by contacting us and subscribing to one of our programming packages.

Key Strengths



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Business Strategy

Our overall goal is to provide subscribers with the best television experience in the United States. Our strategy focuses on offering our subscribers
differentiated and exclusive content, attaining leadership in technology, and enhancing our 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 eight satellites at the following orbital locations: 101° WL (four), 110° WL (one), 119° WL (one), 72.5° WL
(one), and 95° WL (one-leased). We also have Ka-Band satellites at our 99° WL and (one) 103° WL (one) 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 two satellites, both of which are nearing
the end of their useful lives and which we previously used as in-orbit spares, to orbital locations controlled by Telesat, for use by Telesat for its own services broadcast into Canada.

Satellites Under Construction.We currently have three satellites under construction and plan to
launch DIRECTV 10 satellite in mid 2007, and DIRECTV 11 in early 2008. These two satellites will provide us with increased capability for local and national HD channels, as well as capacity for new
interactive and enhanced services, and standard-definition programming. Once launched, these satellites will operate from the Ka-Band orbital locations. The third satellite, DIRECTV 12,
will serve as a ground spare.

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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 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 have purchased launch insurance for DIRECTV 10 and DIRECTV 11. We do not currently expect to purchase in-orbit insurance for these satellites. As of
December 31, 2006, the net book value of in-orbit satellites was $1,335.7 million, of which $947.6 million was uninsured.

Digital Broadcast Centers.To gather programming content, ensure our digital quality, and transmit
content to our satellites, we 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 four uplink facilities which are used to provide local channels. One additional uplink center is being built so that we may continue to
expand local HD programming. 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, 2006, these HSPs performed approximately 90% of all in-home visits with over
16,000 technicians from nine 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, 2006, we used 31 customer service centers
employing over 17,000 customer service representatives. Most of these customer service centers are operated by Convergys Customer Management Group, Inc., Precision Response Corporation,
ClientLogic Operating Corporation and N.E.W. Customer Service Companies, Inc. We currently operate four customer service centers located in: Boise, Idaho; Tulsa, Oklahoma; Huntsville, Alabama;
and Missoula, Montana, that employ approximately 4,200 customer service representatives. Potential and existing subscribers can call
a single telephone number 24 hours a day, seven days a week, to request assistance for hardware, programming, installation, 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

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brand,
the quality and variety of video, audio and interactive programming, quality of picture, access to service, availability of a broadband Internet service, customer service and price are the key
elements for attaining and retaining 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 U.S. government regulation, primarily by the FCC and, to a certain extent, by Congress, other federal agencies, state and local authorities and
the International Telecommunications Union, or ITU, a specialized agency of the United Nations within which governments and the private sector coordinate global telecommunications networks and
services. Depending upon the circumstances, noncompliance with legislation or regulations promulgated by these entities could result in the suspension or revocation of our licenses or registrations,
the termination or loss of contracts or the imposition of contractual damages, civil fines or criminal penalties.

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

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

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



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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 our 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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In addition, although Congress has granted the FCC exclusive jurisdiction over the provision of DTH satellite services, aspects of DBS/DTH service remain regulated at the state and local
level. For example, the FCC has promulgated rules prohibiting restrictions by local government agencies, such as zoning commissions and private organizations, such as homeowners associations, on the
placement of DBS dish receiving antennas. Local governments and homeowners associations, however, may continue to regulate the placement of such antennas, if necessary, to accomplish a clearly defined
public safety objective or to preserve a recognized historic district, and may also apply to the FCC for a waiver of FCC rules if there are other local concerns of a special or unusual nature. In
addition, a number of state and local governments have attempted to impose consumer protection, customer service and other types of regulation on DBS operators. Also, while Congress has prohibited
local taxation of the provision of DBS service, taxation at the state level is permissible, and many states have imposed such taxes. Incident to conducting a consumer directed business, we
occasionally receive inquiries or complaints from authorities such as state attorneys general and state consumer protection offices. These matters are generally resolved in the ordinary course of
business.

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. The DIRECTV Group presently holds over 1,600 issued patents worldwide relating to our past and
present businesses, including over 200 patents developed by, or otherwise relating to, our businesses. The DIRECTV Group holds a worldwide portfolio of over 665 registered trademarks, including over
450 foreign registrations related to our name and the Cyclone Design. In addition, we hold over 95 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 structure 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 2007. 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, 2006, we had approximately 6,700 full-time and 200 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:

We may not sustain profitability.

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

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 risks include launch failure, incorrect orbital placement or
improper commercial operation. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take up to
36 months, and obtain other launch opportunities. The overall historical loss rate in our industry for all launches of commercial satellites in fixed orbits in the last five years is estimated
to be 5% but may be higher. Any significant delays or failures in successfully launching and deploying our satellites could materially adversely affect our ability to generate revenues. While we have
traditionally purchased insurance covering the launch and, in limited cases, operation of our satellites, such policies typically cover the loss of the satellite itself and not the business
interruption or other associated direct and indirect costs. We do not currently expect to purchase in-orbit insurance for any of our satellites scheduled for launch in 2007 and 2008.

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

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satellite
capacity. However, we cannot assure you that we will not experience anomalies in the future, nor can we assure you that our backup satellite capacity will be sufficient for our business
purposes. Any single anomaly or series of anomalies could materially adversely affect our operations and revenues, and our relationships with our subscribers, as well as our ability to attract new
subscribers for our services. Anomalies may also reduce the expected useful life of a satellite, thereby creating additional expenses due to the need to provide replacement or backup satellites and
potentially reducing revenues if service is interrupted. Finally, the occurrence of anomalies may materially adversely affect our ability to insure our satellites at commercially reasonable premiums,
if at all. While some anomalies are currently covered by existing insurance policies, others are not now covered or may not be covered in the future.

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



Generally,
the minimum design life of the satellites in our fleet is between 12 and 16 years. The actual useful lives of the satellites may be shorter, in some cases
significantly. Our operating results could be adversely affected if the useful life of any of our satellites were significantly shorter than 12 years from the date of launch.

In
the event of a failure or loss of any of our satellites, we may relocate another satellite and use it as a replacement for the failed or lost satellite. In the event of a complete
satellite failure, our services provided via that satellite could be unavailable for several days or longer while backup in-orbit satellites are repositioned and services are moved. We are
not insured for any resultant lost revenues. The use of backup satellite capacity for our programming may require us to discontinue some programming services due to potentially reduced capacity on the
backup satellite. Any relocation of our satellites would require prior FCC approval and, among other things, a demonstration to the FCC that the replacement satellite would not cause additional
interference compared to the failed or lost satellite. Such FCC approval may not be obtained. We believe we have in-orbit satellite capacity to expeditiously recover transmission of most
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 the unamortized book value of covered satellites. Although the
insurance generally does not compensate for business interruption or loss of

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future
revenues or subscribers, we rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact of satellite failure on our ability to
provide service.

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

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

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 Mid-Year 2006 Industry Overview, 108 million of the 110 million U.S. television households, or 99%, are passed by cable. Of
the 110 million U.S. television households, approximately 94 million, subscribe to a MVPD service and approximately 69% 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 base through mergers and acquisitions. Moreover, mergers, joint ventures and alliances among franchise, wireless or
private cable television operators, RBOCs, and others may result in providers capable of offering bundled cable television and telecommunications services in competition with our services.

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.

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

AT&T
recently acquired BellSouth, one of the RBOCs that sells our service. AT&T has a similar arrangement with EchoStar. It is possible that, as a result of this transaction, our
arrangements with BellSouth might be adversely affected.

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

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 multi-channel video programming distributors on
non-discriminatory terms
and conditions. The Communications Act and the FCC rules also prohibit certain types of exclusive programming contracts involving programming from cable-affiliated programmers.

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

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

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Corporation,
it is not clear that such provisions will be sufficient to assure our continued access to this programming on fair and nondiscriminatory terms.

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 these 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 be able to use capacity that could otherwise be used for new or additional local or national programming services.

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 recently adopted rules requiring us to negotiate in good faith with broadcast stations seeking carriage outside of the mandatory carriage regime described above. The rules for
"retransmission consent" negotiations, which are similar to those that have applied to broadcast stations for years, require us to comply with certain indicia of good faith negotiation, as well as to

18

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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 involuntary 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.

Our ability to keep pace with technological developments is uncertain.

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

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

To
access technologies and provide products that are necessary for us to remain competitive, particularly in the area of broadband services, we may make future acquisitions and
investments and may enter into strategic partnerships with other companies. Such investments may require a commitment of significant capital and human and other resources. The value of such
acquisitions, investments and partnerships and the technology accessed may be highly speculative. Arrangements

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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. 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 further compromised in the future.

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

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

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

We
may not be aware of all intellectual property rights that our services or the products used to transmit or receive our services may potentially infringe. In addition, patent
applications in the United States are confidential until the Patent and Trademark Office issues a patent. Therefore, we cannot

20

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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 of any one period. Further, no assurance can be given and that 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.

Other
regulatory risks include, among others:



21

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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 impacts our business. In addition, FCC proceedings to implement legislation and
enact additional regulations are ongoing. The outcomes of these legislative or regulatory proceedings or their effect on our business cannot be predicted.

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

As of December 31, 2006, News Corporation held approximately 38.3% of the issued and outstanding shares of our Parent's common stock. K. Rupert Murdoch,
Chairman and Chief Executive of News Corporation, is the Chairman of our Parent's Board of Directors, and Chase Carey, who is currently a director of and was formerly employed by News Corporation, is
our President and Chief Executive Officer and a member of our Board of Directors. Additionally, two other current News Corporation executives are members of our Parent's Board of Directors. As a
result, News Corporation has significant influence relating to our management and actions that require stockholder approval. The interests of News Corporation may differ from the interests of other
holders of our Parent's common stock. The extent of New Corporation'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.

On
December 22, 2006, News Corporation agreed to exchange its stake in our Parent with Liberty in exchange for shares of News Corporation held by Liberty. The transaction, subject
to various conditions, is currently expected to be completed in the second half of 2007. Under the transaction agreement, News Corporation has agreed that at closing, its three director designees will
resign as

22

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directors
of our Parent. It is expected that Liberty will seek election of its director designees to our Parent's Board of Directors. As a result, if the transaction is completed and Liberty director
designees are elected, Liberty is expected to have significant influence relating to our management and actions that require stockholder approval. The proposed 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 our Parent 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.

News
Corporation has agreed to certain "standstill" provisions relating to DIRECTV during the pendency of the transaction with Liberty, which may have the effect of limiting significant
transactions with third parties which would require stockholder approval.

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, 2006, we had 30 locations operating in 18 states and 27 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 six administrative offices, two broadcast centers and four 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, 2006 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 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 DIRECTV Group, DIRECTV Holdings, DIRECTV Enterprises, LLC, DIRECTV Operations, LLC,

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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 $78.9 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 us a compulsory
license. Under the license 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 $25.0 million because of the jury finding of willful infringement and awarded
pre-judgment interest of $13.4 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 $126.7 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 royalties pursuant to the compulsory license shall be paid and held in escrow pending outcome of the appeal. Through
December 31, 2006, the amount of the compulsory license fee amounted to $12.1 million, which was paid into escrow.

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.

***

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.

(b)   No
previous reported legal proceedings were terminated during the fourth quarter ended December 31, 2006.

***

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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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                                                                     |                                                                                                 | $                                   | 13,744.0                          
|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                                        |                                                                                                 |                                     | 873.0                             
|                                                                             |                                                                                                 |                                     |                                   
|                                                                             |                                                                                                 |                                     | Total Operating Costs and Expenses
|                                                                             |                                                                                                 |                                     |                                   
|Operating Profit                                                             |                                                                                                 |                                     | 2,347.7                           
|Interest income                                                              |                                                                                                 |                                     | 68.7                              
|Interest expense                                                             |                                                                                                 |                                     | (218.1                            
|Other expense                                                                |                                                                                                 |                                     | (2.9                              
|                                                                             |                                                                                                 |                                     |                                   
|Income (Loss) Before Income Taxes and Cumulative Effect of Accounting Change |                                                                                                 |                                     | 2,195.4                           
|Income tax (expense) benefit                                                 |                                                                                                 |                                     | (839.5                            
|                                                                             |                                                                                                 |                                     |                                   
|Income (Loss) Before Cumulative Effect of Accounting Change                  |                                                                                                 |                                     | 1,355.9                           
|Cumulative effect of accounting change, net of taxes                         |                                                                                                 |                                     |                                  
|                                                                             |                                                                                                 |                                     |                                   
|Net Income (Loss)                                                            |                                                                                                 | $                                   | 1,355.9                           
|                                                                             |                                                                                                 |                                     |                                   
|Other Data:                                                                  |                                                                                                 |                                     |                                   
|Operating Profit                                                             |                                                                                                 | $                                   | 2,347.7                           
|Add: Depreciation and amortization expense                                   |                                                                                                 |                                     | 873.0                             
|                                                                             |                                                                                                 |                                     |                                   
|Operating Profit Before Depreciation and Amortization(1)                     |                                                                                                 | $                                   | 3,220.7                           
|                                                                             |                                                                                                 |                                     |                                   
|Operating Profit Before Depreciation and AmortizationMargin(1)              |                                                                                                 |                                     | 23.4                              
|Net Cash Provided by Operating Activities                                    |                                                                                                 | $                                   | 2,342.4                           
|Net Cash Used in Investing Activities                                        |                                                                                                 |                                     | (1,778.8                          
|Net Cash (Used in) Provided by Financing Activities                          |                                                                                                 |                                     | (372.7                            
|Net Cash Provided by Operating Activities                                    |                                                                                                 | $                                   | 2,342.4                           
|Less: Cash paid for property and equipment                                   |                                                                                                 |                                     | (503.6                            
|Less: Cash paid for subscriber leased equipmentsubscriber acquisitions      |                                                                                                 |                                     | (598.6                            
|Less: Cash paid for subscriber leased equipmentupgrade and retention        |                                                                                                 |                                     | (472.9                            
|Less: Cash paid for satellites                                               |                                                                                                 |                                     | (222.3                            
|                                                                             |                                                                                                 |                                     |                                   
|Free cash flow(2)                                                            |                                                                                                 | $                                   | 545.0                             
|                                                                             |                                                                                                 |                                     |                                   

---

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27

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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. Under this program, set-top receivers leased to new and existing subscribers are capitalized and depreciated over their estimated useful lives of three years. Our subscribers who
lease their set-top receivers pay a monthly lease fee for each set-top receiver leased in lieu of a monthly mirroring fee. 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, most of the set-top receivers provided to new and existing subscribers are leased. We capitalized $598.6 million of set-top
receivers leased to new subscribers and $472.9 million of set-top receivers leased to existing subscribers during the year ended December 31, 2006 under the new lease
program. Depreciation expense on these capitalized receivers was $147.3 million for the year ended December 31, 2006.

Pegasus and NRTC Transactions.During the third quarter of 2004, we completed the acquisition of all
Pegasus and NRTC subscribers, as described in Note 3 of the Notes to the Consolidated Financial Statements in Item 8, Part II of this Annual Report, which resulted in our recording a
subscriber related
intangible asset of $951.3 million from the Pegasus transaction that we are amortizing over the estimated average subscriber lives of five years, and a subscriber related intangible asset of
$385.5 million that resulted from the NRTC transaction that we are amortizing over the estimated average subscriber lives of six years. Had the estimated average subscriber lives for these
intangible assets been decreased by one year, annual amortization expense would have increased by approximately $60.0 million.

Effective
June 1, 2004, we and the NRTC agreed to end the NRTC's exclusive DIRECTV service distribution agreement and all related agreements. As consideration, we agreed to pay
the NRTC approximately $4.4 million per month through June 2011. As a result of this agreement, we have the right to sell our service in all territories across the United States. We are
amortizing the distribution rights intangible asset of $334.1 million that was recorded as part of the transaction, which includes the present value of the cash payments and fees associated
with the transaction, to expense over the remaining life of the terminated service distribution agreement of seven years.

Long-Term Purchase Agreement.As part of The DIRECTV Group's sale of Hughes Network
Systems, Inc.'s, or HNS', set-top receiver manufacturing operations to Thomson in June 22, 2004, we entered into a long-term purchase agreement with Thomson for
the supply of set-top receivers. As part of this agreement, we received approximately $200 million in cash from Thomson, which was deferred and is being recognized as
set-top receivers purchased from Thomson under the contract are activated. In addition, we can earn additional rebates from Thomson based on aggregate purchases of set-top
receivers. See Note 3 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for further discussion of the above described transactions.

Financing Transactions.During the second quarter of 2005, we completed a series of refinancing
transactions that resulted in a pre-tax charge to "Other expense" in the Consolidated Statements of Operations of $64.9 million ($40.1 million after tax), of which
$41.0 million was associated with the premium that we paid for the redemption of a portion of our 8.375% senior notes and $23.9 million with our write-off of a portion of our
deferred debt issuance costs and other transaction costs. As a result of the refinancing transactions, which included a capital contribution from The DIRECTV Group, our debt increased
$136.7 million and cash increased $629.3 million, net of the premium paid and transaction costs. See Note 8 of the Notes to the Consolidated Financial Statements in
Part II, Item 8 of this Annual Report for further discussion of our refinancing transactions.

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Accounting Change.Effective January 1, 2004, we changed our method of accounting for
subscriber acquisition, upgrade and retention costs. Previously, we deferred a portion of these costs, equal to the amount of profit to be earned from the subscriber, typically over the
12 month subscriber contract, and amortized the deferred amounts to expense over the contract period. We determined that expensing such costs was preferable to our prior accounting method after
considering the accounting practices of our competitors and companies within similar industries and the added clarity and ease of understanding our reported results for investors. See "Accounting
Changes" in Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for additional information. In 2004, we recorded a $311.5 million
charge in "Cumulative effect of accounting changes, net of taxes."

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, pay-per-view programming, seasonal and live sporting events and DVR, and HD programming fees. 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, hardware revenues from subscribers who 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 our 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 our set-top receivers and
other system equipment, commissions we pay to national retailers, independent satellite television retailers, dealers, RBOCs and the cost of installation, advertising, marketing and customer call
center expenses associated with the acquisition of new our subscribers. Set-top receivers leased to new 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 acquisition activities is presented in the Consolidated
Statements of Cash Flows under the caption "Cash paid for subscriber leased equipment-subscriber acquisitions."

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 receivers and local channels, our multiple set-top receiver offer and similar initiatives. Retention costs also include the costs of installing and/or providing
hardware under our movers program for subscribers relocating to a new residence. Set-top receivers leased to existing

29

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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 presented in the Consolidated Statements of Cash Flows under the caption "Cash paid for subscriber leased
equipment-upgrade and retention."

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 the average number of our 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. For
2004, average subscribers include the subscribers in the former NRTC and Pegasus territories using a daily weighted average from the dates we acquired the subscribers through December 31, 2004.

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 during the period divided by the number of months in the period) by average subscribers for the period. Average monthly churn
includes the results from the former NRTC and Pegasus subscribers subsequent to the purchase of those subscribers in 2004.

Subscriber Count.The total number of 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 a 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 "Cash paid for subscriber leased equipment-subscriber acquisitions" during the period. We exclude the 1.4 million
subscribers purchased as part of the NRTC and Pegasus transactions during 2004, as well as gross new subscribers added in the former NRTC and Pegasus territories prior to the completion of the
transactions, from gross new subscribers used in the calculation of SAC for 2004.

EXECUTIVE OVERVIEW AND OUTLOOK

Revenues.In 2006, our revenue increased by 12.5% due to a larger subscriber base and a 5.9% increase
in ARPU. In 2007, we anticipate revenues will increase by 10% or more due to an increase in total subscribers and ARPU growth of 5.0% or more due to price increases and higher penetration of advanced
products. After accounting for churn, our net new subscriber additions in 2006 were 820,000 which increased our total subscriber base by 5.4% to 15.95 million customers. In 2007, we expect net
new subscriber additions to remain relatively consistent with 2006. We expect average monthly subscriber churn to improve in 2007 to closer to 1.50% as compared to average monthly subscriber churn of
1.60% for 2006. We expect churn to improve due to our continuing efforts to limit the

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number
of high risk subscribers added to our platform, an increase in the number of HD and DVR subscribers, and initiatives to further improve customer service.

Operating Results.In 2006, our operating profit before depreciation and amortization more than
doubled to $3,220.7 million and operating profit before depreciation and amortization margin improved from 12.3% in 2005 to 23.4%, primarily due to the capitalization of set-top
receivers under the lease program introduced on March 1, 2006, lower subscriber acquisition costs due to fewer gross subscriber additions, and a reduction in general and administrative expenses
mostly related to lower bad debt expense.

In
2007, we anticipate a 15% to 20% increase in operating profit before depreciation and amortization primarily due to the expected increase in revenues partially offset by higher
operating costs and expenses principally due to higher programming costs from annual programming rate increases, the larger subscriber base and the added cost of new programming contracts. Subscriber
services, broadcast operations and general and administrative expenses are also expected to increase in 2007 primarily due to the larger subscriber base and expenses related to the planned rollout of
additional HD channels.

We
also expect operating profit before depreciation and amortization margin to increase 1% to 2% in 2007 compared with 2006. Subscriber acquisition, upgrade and retention, subscriber
services, and general and administrative expenses as a percentage of revenue are expected to decline due primarily to increased scale and efficiencies. These improvements will be partially offset by
lower programming margin due to the increased programming costs discussed above and higher broadcast operations expenses relative to revenues due to the rollout of additional HD channels.

Operating
profit in 2007 is expected to be relatively consistent with the $2,347.7 million generated in 2006, as the anticipated higher operating profit before depreciation and
amortization is expected to be offset by the higher depreciation and amortization expense resulting from the set-top receiver lease program.

Additional Information.We expect upgrade and retention costs incurred, including those capitalized
under the lease program but excluding the cost of replacing MPEG-2 HD subscriber equipment with our new MPEG-4 HD subscriber equipment, to be relatively unchanged
with respect to the approximately $1,250 million spent in 2006. In addition, we expect subscriber acquisition cost per gross new subscriber (SAC) during 2007 to be within the range of $650 to
$700 compared to $641 in 2006 primarily due to an anticipated increase in the percentage of new subscribers leasing advanced set-top boxes. The amount of upgrade and retention and
subscriber acquisition costs capitalized for new subscribers under the lease program is also expected to be higher due to the full year effect of the lease program and an increase in the penetration
of advanced set-top boxes.

Free Cash Flow.In 2006, we generated $545.0 million of positive free cash flow, defined as
net cash provided by operating activities less cash paid for property, subscriber leased equipment and satellites. During 2007, we expect an increase in free cash flow from 2006 due to an increase in
operating profit before depreciation and amortization, partially offset by higher capital expenditures for leased subscriber equipment and for broadcast equipment to support the launch of new local HD
channels, and an increase in cash paid for income taxes.

31

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RESULTS OF OPERATIONS

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

Subscribers.The following table provides our key subscriber data:

|                                    |  | 2006   |   | 2005   |   | Change |   | % Change |   
|----------------------------------- |  | ------ | - | ------ | - | ------ | - | -------- | --
|Total number of subscribers (000's) |  | 15,953 |   | 15,133 |   | 820    |   | 5.4      | % 
|Gross subscriber additions (000's)  |  | 3,809  |   | 4,170  |   | (361   | ) | (8.7     | )%
|Net subscriber additions (000's)    |  | 820    |   | 1,193  |   | (373   | ) | (31.3    | )%
|Average monthly subscriber churn %  |  | 1.60   | % | 1.70   | % |       |   | (5.9     | )%

The
decrease in average monthly subscriber churn to 1.60% and the 361,000 decrease in gross subscriber additions in 2006 were primarily due to 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 373,000 reduction in the number of net new subscribers was mainly due to the lower number of gross subscriber
additions.

Revenues.The following table provides our revenues and ARPU:

|         |  |   |          |  |   | Change   | 
|-------- |  | - | -------- |  | - | -------- | 
|
|
|Revenues |  | $ | 13,744.0 |  | $ | 12,216.1 | 
|ARPU     |  | $ | 73.74    |  | $ | 69.61    | 

Our
revenues increased $1,527.9 million to $13,744.0 million resulting from higher ARPU and the larger subscriber base. The 5.9% increase in ARPU to $73.74 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.

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Total Operating Costs and Expenses.The following table provides our operating costs and expenses:

|                                                          |                                                                                                 |                                     |                                    |   |         | Change   |  
|--------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | - | ------- | -------- | -
|
|
|Operating Costs and Expenses                              |                                                                                                 |                                     |                                    |   |         |          |  
|                                                          | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |   |         |          |  
|                                                          |                                                                                                 | Broadcast programming and other     |                                    | $ | 5,830.4 |          | $
|                                                          |                                                                                                 | Subscriber service expenses         |                                    |   | 1,057.1 |          |  
|                                                          |                                                                                                 | Broadcast operations expenses       |                                    |   | 179.3   |          |  
|                                                          | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |   |         |          |  
|                                                          |                                                                                                 | Subscriber acquisition costs        |                                    |   | 1,844.5 |          |  
|                                                          |                                                                                                 | Upgrade and retention costs         |                                    |   | 851.7   |          |  
|                                                          |                                                                                                 | General and administrative expenses |                                    |   | 760.3   |          |  
|Depreciation and amortization expense                     |                                                                                                 |                                     | 873.0                              |   |         | 698.2    |  
|                                                          |                                                                                                 |                                     |                                    |   |         |          |  
|                                                          |                                                                                                 |                                     | Total Operating Costs and Expenses |   | $       | 11,396.3 |  
|                                                          |                                                                                                 |                                     |                                    |   |         |          |  
|Operating Profit Before Depreciation and Amortization     |                                                                                                 | $                                   | 3,220.7                            |   | $       | 1,500.2  |  
|Average subscriber acquisition costsper subscriber (SAC) |                                                                                                 | $                                   | 641                                |   | $       | 642      |  

Our
total operating costs and expenses decreased from $11,414.1 million to $11,396.3 million in 2006 due mostly to the capitalization of $1,071.5 million of
set-top receivers in 2006 under our new lease program, decreased subscriber acquisition costs resulting from lower gross subscriber additions, and lower general and administrative costs.
These decreases were partially offset by higher broadcast programming and other costs, and higher subscriber service, depreciation and amortization, and broadcast operations expenses. Operating costs
and expenses as a percentage of revenues decreased from approximately 93% in 2005 to 83% in 2006, primarily due to the capitalization of set-top receivers under the lease program
introduced on March 1, 2006, lower subscriber acquisition costs due to fewer gross subscriber additions and lower general and administrative costs.

Our
broadcast programming and other costs increased $780.3 million 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
$831.3 million decrease in subscriber acquisition costs was primarily due to the capitalization of $598.6 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 $218.1 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 $472.9 million of leased set-top receivers in 2006, resulting in a net decrease of $254.8 million compared to the prior year period. The
$42.0 million decrease in general and administrative expenses resulted mainly from $122.6 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.

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The increase in depreciation and amortization expense resulted mainly from the 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 Before Depreciation and Amortization.The improvement of operating profit before
depreciation and amortization of $1,720.5 million was primarily due to the gross profit generated from the higher revenues, the capitalization of $1,071.5 million of set-top
receivers under the lease program, fewer gross subscriber additions, and lower general and administrative expenses, partially offset by an increase in upgrade and retention costs.

Operating Profit.The increase in operating profit of $1,545.7 million was primarily due to
higher operating profit before depreciation and amortization, partially offset by the increase in depreciation and amortization expense.

Interest Income and Expense.The $43.2 million increase in interest income was due to higher
average cash balances and increased interest rates on our credit facility. The $9.3 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 $54.5 million in 2006 and
$30.5 million in 2005.

Other Expense.The $63.8 million decrease in Other Expense was primarily from a
$64.9 million charge related to our refinancing transaction in 2005.

Income Tax Expense.The $631.4 million increase in income tax expense was due to our higher
pre-tax income generated in 2006.

Year Ended December 31, 2005 Compared with the Year Ended December 31, 2004

Subscribers.The following table provides our key subscriber data:

|                                      |  | 2005   |   | 2004   |   | Change |   | % Change |   
|------------------------------------- |  | ------ | - | ------ | - | ------ | - | -------- | --
|Total number of subscribers (000's)   |  | 15,133 |   | 13,940 |   | 1,193  |   | 8.6      | % 
|Gross subscriber additions (000's)(1) |  | 4,170  |   | 4,218  |   | (48    | ) | (1.1     | )%
|Net subscriber additions (000's)      |  | 1,193  |   | 1,728  |   | (535   | ) | (31.0    | )%
|Average monthly subscriber churn %    |  | 1.70   | % | 1.59   | % |       |   | 6.9      | % 

---

The increase in average monthly subscriber churn to 1.70% was primarily due to higher involuntary churn from higher risk subscribers acquired in
2004 and early 2005, and a more competitive marketplace. The 48,000 decrease in gross subscriber additions in 2005 was mainly due to more
stringent credit policies implemented beginning in the second quarter of 2005. The 535,000 reduction in the number of net new subscribers was mainly due to higher churn on a larger subscriber base.

Revenues.The following table provides our revenues and ARPU:

|         |  |   |          |  |   | Change  | 
|-------- |  | - | -------- |  | - | ------- | 
|
|
|Revenues |  | $ | 12,216.1 |  | $ | 9,763.9 | 
|ARPU     |  | $ | 69.61    |  | $ | 66.95   | 

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Our
revenues increased $2,452.2 million to $12,216.1 million resulting from higher ARPU on the larger subscriber base and the full year effect of the Pegasus and NRTC
subscribers that we purchased in the second half of 2004. The 4.0% increase in ARPU to $69.61 resulted primarily from price increases on programming packages and higher mirroring fees from an increase
in the average number of set-top receivers per subscriber.

Total Operating Costs and Expenses.The following table provides our operating costs and expenses:

|                                                             |                                                                                                 |                                     |                                    |       |         | Change   |      
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ----- | ------- | -------- | -----
|
|
|Operating Costs and Expenses                                 |                                                                                                 |                                     |                                    |       |         |          |      
|                                                             | Costs of revenues, exclusive of depreciation expense                                            |                                     |                                    |       |         |          |      
|                                                             |                                                                                                 | Broadcast programming and other     |                                    | $     | 5,050.1 |          | $    
|                                                             |                                                                                                 | Subscriber service expenses         |                                    |       | 935.4   |          |      
|                                                             |                                                                                                 | Broadcast operations expenses       |                                    |       | 145.8   |          |      
|                                                             | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |       |         |          |      
|                                                             |                                                                                                 | Subscriber acquisition costs        |                                    |       | 2,675.8 |          |      
|                                                             |                                                                                                 | Upgrade and retention costs         |                                    |       | 1,106.5 |          |      
|                                                             |                                                                                                 | General and administrative expenses |                                    |       | 802.3   |          |      
|                                                             | Depreciation and amortization expense                                                           |                                     |                                    | 698.2 |         |          | 561.2
|                                                             |                                                                                                 |                                     |                                    |       |         |          |      
|                                                             |                                                                                                 |                                     | Total Operating Costs and Expenses |       | $       | 11,414.1 |      
|                                                             |                                                                                                 |                                     |                                    |       |         |          |      
|Operating Profit Before Depreciation and Amortization        |                                                                                                 | $                                   | 1,500.2                            |       | $       | 583.1    |      
|Average subscriber acquisition costsper subscriber (SAC)(1) |                                                                                                 | $                                   | 642                                |       | $       | 643      |      

---

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

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

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

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

The
$140.0 million increase in general and administrative expenses resulted primarily from higher bad debt expense resulting from the increase in the subscriber base and
involuntary churn discussed

35

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above,
and an increase in other expenses, such as labor, benefits and consulting, to support the larger business.

The
$137.0 million increase in depreciation and amortization expense resulted primarily from higher amortization expense of $181.0 million resulting from the intangible
assets recorded as part of the NRTC and Pegasus transactions, partially offset by lower depreciation expense resulting from assets becoming fully depreciated in 2005.

Operating Profit Before Depreciation and Amortization.The improvement of operating profit before
depreciation and amortization of $917.1 million was primarily due to the gross profit generated from the higher revenues partially offset by an increase in upgrade and retention costs and
general and administrative expenses.

Operating Profit.The improvement in operating profit of $780.1 million was primarily due to
the increase in operating profit before depreciation and amortization, partially offset by the increase in depreciation and amortization expense.

Interest Income and Expense.The $11.6 million increase in interest income was due to higher
average cash balances and increased interest rates. The $21.4 million increase in interest expense was primarily due to an increase in our outstanding borrowings and a higher interest rate on
our credit facility. We recorded capitalized interest of $30.5 million in 2005 and $15.8 million in 2004.

Other Expense.The $66.7 million increase in other expense was primarily due to our second
quarter of 2005 pre-tax charge of $64.9 million associated with our 2005 debt refinancing transactions.

Cumulative Effect of Accounting Change, net of taxes.The $311.5 million cumulative effect of
accounting change, net of taxes, was due to the January 1, 2004 change in our accounting for subscriber acquisition, upgrade and retention costs.

Income Tax (Expense) Benefit.We recognized income tax expense of $208.1 million in 2005
compared to an income tax benefit of $61.3 million in 2004. The change in income tax (expense) benefit was
primarily attributable to the change in income (loss) before income taxes and cumulative effect of accounting change.

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 $500.0 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 2006, we paid a $300.0 million dividend to our Parent. In 2004, we received $1,075.0 million of cash from our Parent, which consisted of
$200.0 million through a capital contribution and $875.0 million through additional borrowings, to fund the NRTC and Pegasus transactions. In the second quarter of 2005, we repaid the
$875.0 million of borrowings from our Parent and received a $538.3 million capital contribution from our Parent to redeem a portion of our senior notes as part of our refinancing
transactions discussed above in "Significant Events Affecting the Comparability of the Results of Operations."

At
December 31, 2006, we had cash and cash equivalents of $1,355.7 million compared to $1,164.8 million at December 31, 2005. The $190.9 million
increase in cash and cash equivalents during 2006 resulted primarily from $2,342.4 million in cash provided by operations, partially offset by $1,797.4 million of cash paid for
satellites, property and equipment and $67.1 million of payments made

36

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associated
with our obligations to the NRTC and its members, as well as the $300.0 million dividend paid to our Parent discussed above.

As
a measure of liquidity, our current ratio (ratio of current assets to current liabilities) was 1.09 at December 31, 2006 and 1.04 at December 31, 2005. Working capital
increased by $140.3 million to $237.7 million at December 31, 2006 from $97.4 million at December 31, 2005. The change was primarily due to our increase in cash
described above, partially offset by an increase in accounts payable resulting from payment timing differences, higher accrued programming costs and an increase in income taxes payable.

In
2006, we generated $545.0 million of positive free cash flow, defined as net cash provided by operating activities less, cash paid for property, subscriber leased equipment and
satellites. During 2007, we expect an increase in free cash flow from 2006 due to an increase in operating profit before depreciation and amortization, partially offset by higher capital expenditures
for leased subscriber equipment and for broadcast equipment to support the launch of new local HD channels, and an increase in cash paid for income taxes.

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" 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 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, 2006, we had $3,405.3 million in total outstanding borrowings,
bearing a weighted average interest rate of 7.0%. Our outstanding borrowings primarily consist of notes payable and amounts borrowed under a credit facility as more fully described in Note 8 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: $10.1 million in 2007, $47.6 million in 2008, $97.6 million in 2009, $297.5 million in 2010,
$97.6 million in 2011 and $2,852.1 million thereafter. 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, 2006 and 2005.

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CONTRACTUAL OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS AND CONTINGENCIES

Contractual Obligations.The following table sets forth our contractual obligations as of
December 31, 2006, including the future periods in which payments are expected. Additional details regarding these obligations are provided in the Notes to the Consolidated Financial Statements
in Part II, Item 8 referenced in the table.

|                                                                                                        |  | Payments due by period
|------------------------------------------------------------------------------------------------------- |  | ----------------------
|
|
|Long-Term Debt Obligations (Note 8)(a)                                                                  |  | $                     
|Purchase Obligations (Note 13)(b)                                                                       |  |                       
|Operating Leases Obligations (Note 13)(c)                                                               |  |                       
|Other Long-Term Liabilities Reflected on the Consolidated Balance Sheets under GAAP (Notes 3 and 13)(d) |  |                       
|                                                                                                        |  |                       
|Total                                                                                                   |  | $                     
|                                                                                                        |  |                       

---

Contingencies.For a discussion of "Contingencies," see Note 13 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 12 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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USE OF ESTIMATES IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to
make estimates, judgments and assumptions that affect amounts reported 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.

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

Contingent Matters.Determining when, or if, an accrual should be recorded for a contingent matter
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.

39

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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 $57.0 million rebate from Thomson if Thomson's aggregate sales of our set-top receivers equal
at least $4.0 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 $57.0 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 capitalization of
set-top receivers at the time such determination is made. See Note 3 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for
further discussion.

ACCOUNTING 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.

On
April 4, 2005, in connection with our April 2005 refinancing transactions, Moody's assigned a Ba1 rating to our senior secured credit facility. In addition, it affirmed
our Ba2 Corporate Family Rating and Ba2 senior unsecured ratings. On June 8, 2005, Moody's assigned a Ba2 rating to our 6.375% senior notes discussed in Note 8 of the Notes to the
Consolidated Financial Statements in Part II, Item 8 of this Annual Report. On September 22, 2006, Moody's changed our senior secured rating from Ba1 to Baa3 and our senior unsecured
rating from Ba2 to Ba3 in connection with the implementation of its new rating methodology. Our Corporate Family Rating was unchanged and all ratings remained on stable outlook. On December 22,
2006, Moody's affirmed our ratings, but changed our outlook from stable to negative, following the announcement of the pending transaction between News Corporation and Liberty.

On
April 5, 2005, in connection with our April 2005 refinancing transactions, S&P assigned a BB rating to our senior secured credit facility and affirmed our BB corporate
and BB- senior unsecured

40

---



ratings.
On June 8, 2005, S&P assigned a BB-rating to our 6.375% senior notes and affirmed our corporate, senior secured and unsecured ratings. All ratings remain on stable outlook.

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 $3,402.5 million at December 31, 2006, excluding the unamortized bond premium, which consisted of fixed rate
borrowings of $1,910.0 million and variable rate borrowings of $1,492.5 million. As of December 31, 2006, 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.

***

41

---





DIRECTV HOLDINGS LLC

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board
of Directors
DIRECTV Holdings LLC
El Segundo, California

We
have audited the accompanying consolidated balance sheets of DIRECTV Holdings LLC (the "Company") as of December 31, 2006 and 2005, 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, 2006. Our audits also included the financial statement schedule listed in the
Index at Item 15. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule 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 include 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, 2006 and 2005, and
the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

As
discussed in Note 2 of the notes to the consolidated financial statements, effective January 1, 2004, DIRECTV Holdings LLC changed its method of accounting for
subscriber acquisition, upgrade and retention costs.

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

Los
Angeles, California

February 28,
2007

42

---





DIRECTV HOLDINGS LLC        CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                             |                                                                                                 | Years Ended December 31,            |         
|---------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------- | --------
|
|
|Revenues                                                                     |                                                                                                 | $                                   | 13,744.0
|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                                                             |                                                                                                 |                                     | 2,347.7 
|Interest income                                                              |                                                                                                 |                                     | 68.7    
|Interest expense                                                             |                                                                                                 |                                     | (218.1  
|Other expense                                                                |                                                                                                 |                                     | (2.9    
|                                                                             |                                                                                                 |                                     |         
|Income (Loss) Before Income Taxes and Cumulative Effect of Accounting Change |                                                                                                 |                                     | 2,195.4 
|Income tax (expense) benefit                                                 |                                                                                                 |                                     | (839.5  
|                                                                             |                                                                                                 |                                     |         
|Income (Loss) Before Cumulative Effect of Accounting Change                  |                                                                                                 |                                     | 1,355.9 
|Cumulative effect of accounting change, net of taxes                         |                                                                                                 |                                     |        
|                                                                             |                                                                                                 |                                     |         
|Net Income (Loss)                                                            |                                                                                                 | $                                   | 1,355.9 
|                                                                             |                                                                                                 |                                     |         

---

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

43

---





DIRECTV HOLDINGS LLC        CONSOLIDATED BALANCE SHEETS

|                                       |                                                           | December 31,                         |        
|-------------------------------------- | --------------------------------------------------------- | ------------------------------------ | -------
|
|
|ASSETS                                 |                                                           |                                      |        
|Current Assets                         |                                                           |                                      |        
|                                       | Cash and cash equivalents                                 |                                      | $      
|                                       | Accounts receivable, net of allowances of $58.7 and $75.0 |                                      |        
|                                       | Inventories                                               |                                      |        
|                                       | Deferred income taxes                                     |                                      |        
|                                       | Prepaid expenses and other                                |                                      |        
|                                       |                                                           |                                      |        
|                                       |                                                           | Total Current Assets                 |        
|Satellites, net                        |                                                           |                                      | 2,000.5
|Property and Equipment, net            |                                                           |                                      | 2,026.5
|Goodwill                               |                                                           |                                      | 3,031.7
|Intangible Assets, net                 |                                                           |                                      | 1,545.9
|Other Assets                           |                                                           |                                      | 173.7  
|                                       |                                                           |                                      |        
|                                       |                                                           | 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                         |                                                           |                                      | 3,394.9
|Other Liabilities and Deferred Credits |                                                           |                                      | 993.8  
|Deferred Income Taxes                  |                                                           |                                      | 239.8  
|Commitments and Contingencies          |                                                           |                                      |        
|Owner's Equity                         |                                                           |                                      |        
|                                       | Capital stock and additional paid-in capital              |                                      |        
|                                       | Retained earnings (deficit)                               |                                      |        
|                                       |                                                           |                                      |        
|                                       |                                                           | Total Owner's Equity                 |        
|                                       |                                                           |                                      |        
|                                       |                                                           | Total Liabilities and Owner's Equity |        
|                                       |                                                           |                                      |        

---

Reference
should be made to the Notes to the 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) |   | Accumulated
Other
Comprehensive
Income (Loss) |   | Total
Owner's
Equity |   | Comprehensive
Income (Loss) |  
|-------------------------------- |  | -------------------------------------------- | ------- | --------------------------- | - | --------------------------------------------- | - | -------------------- | - | --------------------------- | -
|
|Balance at January 1, 2004       |  | $                                            | 2,798.9 |                             | $ | (659.4                                        | ) | $                    |  |                             | $
|Net Loss                         |  |                                              |         |                             |   | (420.4                                        | ) |                      |   |                             |  
|Capital contribution from Parent |  |                                              | 659.8   |                             |   |                                               |   |                      |   |                             |  
|                                 |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|Comprehensive loss               |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|                                 |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|Balance at December 31, 2004     |  |                                              | 3,458.7 |                             |   | (1,079.8                                      | ) |                      |  |                             |  
|Net Income                       |  |                                              |         |                             |   | 325.3                                         |   |                      |   |                             |  
|Capital contribution from Parent |  |                                              | 592.2   |                             |   |                                               |   |                      |   |                             |  
|                                 |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|Comprehensive income             |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|                                 |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|Balance at December 31, 2005     |  |                                              | 4,050.9 |                             |   | (754.5                                        | ) |                      |  |                             |  
|Net Income                       |  |                                              |         |                             |   | 1,355.9                                       |   |                      |   |                             |  
|Dividend to Parent               |  |                                              | (300.0  | )                           |   |                                               |   |                      |   |                             |  
|Capital contribution from Parent |  |                                              | 35.2    |                             |   |                                               |   |                      |   |                             |  
|                                 |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|Comprehensive income             |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|                                 |  |                                              |         |                             |   |                                               |   |                      |   |                             |  
|Balance at December 31, 2006     |  | $                                            | 3,786.1 |                             | $ | 601.4                                         |   | $                    |  |                             | $
|                                 |  |                                              |         |                             |   |                                               |   |                      |   |                             |  

---

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

45

---





DIRECTV HOLDINGS LLC        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                                |                                                                   | Years Ended December 31,                         |                                                    
|--------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------------------
|
|
|Cash Flows from Operating Activities                                                                            |                                                                   |                                                  |                                                    
|Net Income (Loss)                                                                                               |                                                                   | $                                                | 1,355.9                                            
|Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of acquired assets |                                                                   |                                                  |                                                    
|                                                                                                                | Cumulative effect of accounting change, net of taxes              |                                                  |                                                    
|                                                                                                                | Depreciation and amortization expense                             |                                                  |                                                    
|                                                                                                                | Share-based compensation expense                                  |                                                  |                                                    
|                                                                                                                | Equity in losses from unconsolidated affiliates                   |                                                  |                                                    
|                                                                                                                | Amortization of debt issuance costs                               |                                                  |                                                    
|                                                                                                                | Write-off of debt issuance costs                                  |                                                  |                                                    
|                                                                                                                | Deferred income taxes and other                                   |                                                  |                                                    
|                                                                                                                | Accounts receivable credited against Pegasus purchase price       |                                                  |                                                    
|                                                                                                                | Change in other operating assets and liabilities                  |                                                  |                                                    
|                                                                                                                |                                                                   | Accounts receivable, net                         |                                                    
|                                                                                                                |                                                                   | Inventories                                      |                                                    
|                                                                                                                |                                                                   | Prepaid expenses and other                       |                                                    
|                                                                                                                |                                                                   | Other assets                                     |                                                    
|                                                                                                                |                                                                   | Accounts payable and accrued liabilities         |                                                    
|                                                                                                                |                                                                   | Unearned subscriber revenue and deferred credits |                                                    
|                                                                                                                |                                                                   | Other liabilities and deferred credits           |                                                    
|                                                                                                                |                                                                   |                                                  |                                                    
|                                                                                                                |                                                                   |                                                  | 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                                          |                                                  |                                                    
|                                                                                                                | Cash paid for acquired assets                                     |                                                  |                                                    
|                                                                                                                | Proceeds from sale of property                                    |                                                  |                                                    
|                                                                                                                | Other                                                             |                                                  |                                                    
|                                                                                                                |                                                                   |                                                  |                                                    
|                                                                                                                |                                                                   |                                                  | Net Cash Used in Investing Activities              
|                                                                                                                |                                                                   |                                                  |                                                    
|Cash Flows from Financing Activities                                                                            |                                                                   |                                                  |                                                    
|                                                                                                                | Cash proceeds from refinancing transactions                       |                                                  |                                                    
|                                                                                                                | Repayment of long-term debt                                       |                                                  |                                                    
|                                                                                                                | Repayment of borrowing from Parent                                |                                                  |                                                    
|                                                                                                                | Repayment of other long-term obligations                          |                                                  |                                                    
|                                                                                                                | Cash dividend to Parent                                           |                                                  |                                                    
|                                                                                                                | Cash contribution from Parent                                     |                                                  |                                                    
|                                                                                                                | Excess tax benefit from share-based compensation                  |                                                  |                                                    
|                                                                                                                | Borrowing from Parent                                             |                                                  |                                                    
|                                                                                                                | Debt issuance costs                                               |                                                  |                                                    
|                                                                                                                |                                                                   |                                                  |                                                    
|                                                                                                                |                                                                   |                                                  | Net Cash (Used in) Provided by Financing Activities
|                                                                                                                |                                                                   |                                                  |                                                    
|Net increase (decrease) in cash and cash equivalents                                                            |                                                                   |                                                  | 190.9                                              
|Cash and cash equivalents at beginning of the year                                                              |                                                                   |                                                  | 1,164.8                                            
|                                                                                                                |                                                                   |                                                  |                                                    
|Cash and cash equivalents at end of the year                                                                    |                                                                   | $                                                | 1,355.7                                            
|                                                                                                                |                                                                   |                                                  |                                                    
|Supplemental Cash Flow Information                                                                              |                                                                   |                                                  |                                                    
|Interest paid                                                                                                   |                                                                   | $                                                | 215.1                                              
|Income taxes paid                                                                                               |                                                                   |                                                  | 728.0                                              

---

Reference should be made to the Notes to the 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 require 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 costs" in the Consolidated Statements of Operations on a straight-line basis over the related contract term. We record equity instruments at fair value based on
quoted market prices or values determined by management, which may include independent third party valuations. Through the end of 2006, we also record the amortization of a provision for above-market
programming contracts that we recorded in connection with the 1999 acquisition of certain premium subscription programming

47

---



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. See Note 5 below for additional information. 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."



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 subscribers under upgrade and retention
programs. 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. See Note 5 below for additional information. 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."



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

---





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, 2006 and 2005.



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

---





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, which replaces SFAS No. 123, "Accounting for Stock-Based Compensation," as amended.

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.

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



We expense advertising costs as incurred and include these expenses 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 $190.6 million in 2006, $163.1 million in 2005 and
$123.7 million in 2004.



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.



Share-Based Payment.On January 1, 2006, we adopted SFAS No. 123R, which replaces SFAS No. 123,
"Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The adoption of this standard did not

50

---



have
a significant effect on our consolidated results of operations or financial position, as the fair value based calculation of compensation expense under SFAS No. 123R is substantially
similar to the calculation we applied under SFAS No. 123. However, as a result of the adoption of SFAS No. 123R, beginning in the first quarter of 2006, we 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.

Subscriber Acquisition, Upgrade and Retention Costs.Effective January 1, 2004, we changed our method of accounting
for subscriber acquisition, upgrade and retention costs. Previously, we deferred a portion of these costs, equal to the amount of profit to be earned from the subscriber, typically over the
12 month subscriber contract, and amortized the deferred amounts to expense over the contract period. We now expense subscriber acquisition, upgrade and retention costs as incurred as
subscribers activate the DIRECTV service. We determined that expensing such costs was preferable to our prior accounting method after considering the accounting practices of our competitors and
companies within similar industries and the added clarity and ease of understanding our reported results for investors. As a result of the change, on January 1, 2004, we expensed the total of
the deferred costs, which amounted to $503.9 million ($311.5 million, net of taxes) as of December 31, 2003, as a cumulative effect of accounting change.

Other.On January 1, 2006, we adopted SFAS No. 154, "Accounting Changes and Error Corrections, a replacement of
APB Opinion No. 20, Accounting Changes, and Statement No. 3, Reporting Accounting Changes in Interim Financial Statements." SFAS No. 154 changes the requirements for the
accounting for, and reporting of, a change in accounting principle. Previously, most voluntary changes in accounting principles were required to be recognized by way of a cumulative effect adjustment
within net income during the period of the change. SFAS No. 154 generally requires retrospective application to prior periods' financial statements of voluntary changes in accounting
principles. The adoption of SFAS No. 154 on January 1, 2006 had no effect on our consolidated results of operations or financial position.

Defined Benefit Postretirement Plans.In September 2006, the FASB issued 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)." SFAS No. 158 requires an employer to recognize in its
statement of financial position an asset for a plan's overfunded status or a liability for a plan's underfunded status, measure a plan's assets and its obligations that determine its funded status as
of the end of the employer's fiscal year, and recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. These changes are to be reported
as a component of other comprehensive income, net of tax. The adoption of this standard as of December 31, 2006 had no effect on our consolidated results of operations and financial position,
as DIRECTV Holdings does not sponsor postretirement plans, but rather our employees participate in plans that are sponsored and carried as an obligation by our Parent.



In February 2007, the Financial Accounting Standards Board, or 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 are currently assessing the effect SFAS No. 159 may have, if any, to our consolidated results of operations or financial position when adopted on January 1,
2008.

51

---



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 Board 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" or EITF No. 06-1. 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 are currently assessing the effect EITF No. 06-1 may have, if any, to our
consolidated results of operations when adopted, as required, on January 1, 2008.

In
July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109," or FIN 48.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements according to SFAS No. 109, "Accounting for Income Taxes." FIN 48 provides for the recognition
of only those 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. Additionally, FIN 48 gives guidance on derecognition, classification, interest, penalties, accounting in interim periods and disclosure related to
uncertain tax positions. Any adjustment resulting from the adoption of FIN 48 will be recorded as an adjustment to our
accumulated deficit in the Consolidated Balance Sheets. FIN 48 is effective for fiscal periods beginning after December 15, 2006. We are currently assessing the effect FIN 48 may have, if any,
to our consolidated results of operations and financial position.

Note 3: Acquisitions and Other Transactions



Effective June 1, 2004, we and the National Rural Telecommunication Cooperative or NRTC, agreed to end the NRTC's exclusive DIRECTV service distribution
agreement and all related agreements. As consideration, we agreed to pay the NRTC approximately $4.4 million per month through June 2011. As a result of this agreement, we have the right
to sell our services in all territories across the United States. We are amortizing the distribution rights intangible asset of $334.1 million that was recorded as part of the transaction,
which includes the present value of the cash payments and fees associated with the transaction, to expense over the remaining life of the terminated service distribution agreement of seven years.

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

52

---



As of December 31, 2006, we owe the NRTC and its members who elected the long-term payment option $357.1 million, which is payable as
follows: $71.0 million in 2007, $75.3 million in 2008, $79.9 million in 2009, $83.3 million in 2010 and $47.6 million in 2011. These amounts are recorded in
"Accounts payable and accrued liabilities" and "Other Liabilities and Deferred Credits" in the Consolidated Balance Sheets.



On August 27, 2004, we acquired the subscribers and certain assets, consisting primarily of accounts receivable, of Pegasus for a total purchase price of
$987.9 million. The total net cash consideration we paid to Pegasus amounted to $773.0 million, which is the total purchase price net of amounts owed by Pegasus for programming and other
services and a May 2004 $63.0 million judgment in our favor. As a result of the transaction, we recorded a subscriber related intangible asset in "Intangible Assets, net" in the
Consolidated Balance Sheets amounting to $951.3 million, which we are amortizing over the estimated subscriber lives of approximately five years.

During
the third quarter of 2004, we funded the cash requirements for the Pegasus and NRTC transactions described above by $875.0 million of borrowings from our Parent and a
$200.0 million capital contribution from our Parent.



As part of an arrangement with Telesat, a Canadian telecommunications and broadcast services company, we agreed to provide Telesat the use of a DIRECTV satellite,
which was previously used as an in-orbit spare, through the end of its useful life and in return, Telesat agreed to allow us the use of its 72.5o west longitude, or WL,
orbital location through 2008. As additional consideration for our use of 72.5o WL, we also agreed to allow Telesat to use an additional DIRECTV satellite for a five year period, subject
to certain conditions, beginning at the end of 2008. Upon receipt of final approval from the Federal Communications Commission, or FCC, in the third quarter of 2004, we transferred the first satellite
to Telesat and relocated one of our satellites to 72.5o WL to provide additional local channels and other programming in the United States. We recorded these transactions based on the
net book values of the assets exchanged. As a result, we recorded a $172.5 million 72.5o
WL orbital license intangible asset, which is equal to the $81.4 million net book value of the first satellite provided to Telesat which was transferred from satellites, net, and an accrual for
deferred lease revenues of $91.1 million, representing the value of the additional satellite over the five year lease period. We are amortizing the 72.5o WL orbital license
intangible asset over the contract period and will recognize the deferred lease revenues as an offset to depreciation expense during the five year lease period beginning at the end of 2008.



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, or the Agreement, with Thomson for the supply of set-top receivers. As part of this Agreement, as amended, we received approximately
$200.0 million in cash from Thomson and can earn a $57.0 million rebate from Thomson if Thomson's aggregate sales of our set-top receivers equal at least $4.0 billion
over the initial five year Contract Term plus an additional one year optional extension period, or the Contract Term. Also as part of the Agreement, as amended, we can earn, on a pro rata basis, an
additional $63.0 million rebate from Thomson if Thomson's aggregate sales of our set-top receivers are in excess of $4.0 billion and up to $5.7 billion during the
Contract Term. The approximately $200.0 million in cash received

53

---



from
Thomson was recorded as "Unearned subscriber revenue and deferred credits" and "Other Liabilities and Deferred Credits" in the Consolidated Balance Sheets and is recorded as a pro rata reduction
to the cost of set-top receivers purchased from Thomson. 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 $57.0 million rebate during the contract term. We record a proportionate amount of the $57.0 million rebate as a
pro-rata reduction to the cost of set-top receivers purchased with a corresponding entry to "Accounts receivable, net" in the Consolidated Balance Sheets. We recognized
$46.7 million of the deferral and the $57.0 million rebate in 2006, $46.3 million in 2005 and $21.4 million in 2004 in the Consolidated Statements of Operations. As of
December 31, 2006, the accrued rebate receivable from Thomson amounted to $24.7 million.

We
included the approximately $200.0 million in cash we received from Thomson in cash flows from operating activities in the Consolidated Statements of Cash Flows for the year
ended December 31, 2004.

Note 4: Accounts Receivable, Net

The following table sets forth the amounts recorded for accounts receivable at December 31:

|                                      |                          | 2006 |         | 2005    |  
|------------------------------------- | ------------------------ | ---- | ------- | ------- | -
|
|Subscriber                            |                          | $    | 755.0   |         | $
|Trade                                 |                          |      | 570.9   |         |  
|                                      |                          |      |         |         |  
|Subtotal                              |                          |      | 1,325.9 |         |  
|Less: allowance for doubtful accounts |                          |      | (58.7   | )       |  
|                                      |                          |      |         |         |  
|                                      | Accounts receivable, net |      | $       | 1,267.2 |  
|                                      |                          |      |         |         |  

54

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Note 5: Satellites, Net and Property and Equipment, Net

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

|                                     |                             | Estimated
Useful Lives
(years) |  | 2006 |          | 2005    |  
|------------------------------------ | --------------------------- | ------------------------------ |  | ---- | -------- | ------- | -
|
|Satellites                           |                             | 12-16                          |  | $    | 1,815.2  |         | $
|Satellites under construction        |                             |                                |  |      | 664.8    |         |  
|                                     |                             |                                |  |      |          |         |  
|Total                                |                             |                                |  |      | 2,480.0  |         |  
|Less: accumulated depreciation       |                             |                                |  |      | (479.5   | )       |  
|                                     |                             |                                |  |      |          |         |  
|                                     | Satellites, net             |                                |  |      | $        | 2,000.5 |  
|                                     |                             |                                |  |      |          |         |  
|Land and improvements                |                             |                               |  | $    | 19.6     |         | $
|Buildings and leasehold improvements |                             | 4-30                           |  |      | 191.0    |         |  
|Machinery and equipment              |                             | 3-24                           |  |      | 1,809.2  |         |  
|Subscriber leased set-top receivers  |                             | 3-5                            |  |      | 1,270.7  |         |  
|Construction in progress             |                             |                               |  |      | 434.8    |         |  
|                                     |                             |                                |  |      |          |         |  
|Total                                |                             |                                |  |      | 3,725.3  |         |  
|Less: accumulated depreciation       |                             |                                |  |      | (1,698.8 | )       |  
|                                     |                             |                                |  |      |          |         |  
|                                     | Property and Equipment, net |                                |  |      | $        | 2,026.5 |  
|                                     |                             |                                |  |      |          |         |  

We
capitalized interest costs of $54.5 million during 2006, $30.5 million during 2005 and $15.8 million during 2004, as part of the cost of our property and
satellites under construction. Depreciation expense was $518.5 million in 2006, $344.1 million in 2005 and $392.1 million in 2004.

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. Now, with the introduction of the lease
program, most set-top receivers provided to new and existing subscribers are leased. During the year ended December 31, 2006, we capitalized $598.6 million for
set-top receivers leased to new subscribers and $472.9 million for set-top receivers leased to existing subscribers. Depreciation expense on these capitalized receivers
was $147.3 million for the year ended December 31, 2006.

Note 6: Goodwill and Intangible Assets

We performed our annual impairment tests for goodwill and orbital slots in the fourth quarters of 2006, 2005 and 2004. Based on our annual impairment tests, no
impairment existed.

55

---



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

|                         |                         |            |  | 2006 |         | 2005   
|------------------------ | ----------------------- | ---------- |  | ---- | ------- | -------
|
|
|Orbital slots            |                         | Indefinite |  | $    | 432.4   |        
|72.5° WL Orbital license |                         | 5          |  |      | 192.9   |        
|Subscriber related       |                         | 5-10       |  |      | 1,344.1 |        
|Dealer network           |                         | 15         |  |      | 130.0   |        
|Distribution rights      |                         | 7          |  |      | 334.1   |        
|                         |                         |            |  |      |         |        
|                         | Total Intangible Assets |            |  |      | $       | 2,433.5
|                         |                         |            |  |      |         |        

The
following table represents the amounts recorded as amortization expense for intangible assets for the years ended December 31:

|                         |                                                  | 2006 |       | 2005  |   | 2004 
|------------------------ | ------------------------------------------------ | ---- | ----- | ----- | - | -----
|
|72.5° WL Orbital license |                                                  | $    | 41.7  |       | $ | 41.8 
|Subscriber related       |                                                  |      | 255.4 |       |   | 254.8
|Dealer network           |                                                  |      | 9.2   |       |   | 9.3  
|Distribution rights      |                                                  |      | 47.2  |       |   | 47.3 
|                         |                                                  |      |       |       |   |      
|                         | Total Amortization Expense for Intangible Assets |      | $     | 353.5 |   | $    
|                         |                                                  |      |       |       |   |      

Estimated
amortization expense for intangible assets in each of the next five years and thereafter is as follows: $353.6 million in 2007, $353.6 million in 2008,
$259.0 million in 2009, $89.4 million in 2010, $33.6 million in 2011 and $24.3 million thereafter.

Note 7: Accounts Payable and Accrued Liabilities; Other Liabilities and Deferred Credits

The significant components of accounts payable and accrued liabilities are as follows:

|                                                                    |       | December 31,
|------------------------------------------------------------------- | ----- | ------------
|
|
|Programming costs                                                   |       | $           
|Accounts payable                                                    |       |             
|Commissions due to installers and dealers                           |       |             
|Income taxes payable to Parent                                      |       |             
|Current portion of provision for above-market programming contracts |       |             
|Payroll and employee benefits                                       |       |             
|Other                                                               |       |             
|                                                                    |       |             
|                                                                    | Total |             
|                                                                    |       |             

56

---



The significant components of other liabilities and deferred credits are as follows:

|                                                                       |       | December 31,
|---------------------------------------------------------------------- | ----- | ------------
|
|
|NRTC transaction obligations                                           |       | $           
|Programming costs and provision for above-market programming contracts |       |             
|Deferred credits                                                       |       |             
|Other                                                                  |       |             
|                                                                       |       |             
|                                                                       | Total |             
|                                                                       |       |             

Note 8: 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 | % |             
|Credit facility                         |                | 6.599 | % |             
|Other                                   |                |      |   |             
|                                        |                |       |   |             
|                                        | Total debt     |       |  |             
|Less: current portion of long-term debt |                |       |   |             
|                                        |                |       |   |             
|                                        | Long-term debt |       |   |             
|                                        |                |       |   |             

Notes Payable.Our $910.0 million in senior notes outstanding at December 31, 2006 are due in 2013, bear
interest at 8.375%, and are referred to as the 8.375% senior notes. Principal on the 8.375% senior notes is payable upon maturity, while interest is payable semi-annually.

Our
$1,000.0 million in senior notes outstanding at December 31, 2006 are due in 2015, bear interest at 6.375%, and are referred to as the 6.375% senior notes. Principal on
the 6.375% senior notes is payable upon maturity, while interest is payable semi-annually.

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.

The
fair value of our 8.375% senior notes was approximately $948.1 million at December 31, 2006 and $982.3 million at December 31, 2005. The fair value of our
6.375% senior notes was approximately $961.9 million at December 31, 2006 and $983.8 million at December 31, 2005. The fair values were calculated based on quoted market
prices on those dates.

Credit Facility.At December 31, 2006, our senior secured credit facility consisted of a $500.0 million
six-year Term Loan A, a $992.5 million eight-year Term Loan B and a $500.0 million undrawn six-year revolving credit facility. The Term Loan A and
Term Loan B components of the

57

---



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 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: $10.1 million in 2007, $47.6 million in 2008, $97.6 million in 2009, $297.5 million in 2010,
$97.6 million in 2011 and $2,852.1 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, 2006, 2005 or 2004. However, we made a prepayment of $201.0 million on April 15, 2004 under our prior credit facility for the year ended December 31, 2003. The
amount of interest accrued related to our outstanding debt was $26.5 million at December 31, 2006 and $28.4 million at December 31, 2005. The unamortized bond premium
included in total debt as of December 31, 2006 was $2.8 million and $3.1 million as of December 31, 2005.

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, 2006, 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 $500.0 million six-year Term Loan A, a $1,500.0 million eight-year Term
Loan B, both of which were fully funded, and a $500.0 million undrawn six-year revolving credit facility. We used a portion of the $2,000.0 million proceeds from the
transaction to repay our prior credit facility that had a then outstanding balance of $1,001.6 million, to repay our $875.0 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 $490.0 million of our then outstanding $1,400.0 million 8.375% senior notes at a redemption price of 108.375% plus accrued and unpaid
interest, for a total of $538.3 million, which was funded by a capital contribution from our Parent.

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

The
repayment of our prior senior secured credit facility, the partial repayment of our senior secured credit facility and the partial redemption of our 8.375% senior notes resulted in a
2005 pre-tax charge of $64.9 million ($40.1 million after tax) of which $41.0 million was associated with the premium

58

---



that
we paid for the redemption of our 8.375% senior notes and $23.9 million with our write-off of a portion of our deferred debt issuance costs and other transaction costs. The
charge was recorded in "Other expense" in the Consolidated Statements of Operations.

Borrowing from Parent.During 2004, as part of NRTC and Pegasus transactions discussed in Note 3, we borrowed
$875.0 million from our Parent. As mentioned above, during 2005 we repaid the $875.0 million borrowing to our Parent in conjunction with our 2005 refinancing transactions.

Note 9: Income Taxes

We base our income tax expense or benefit on our reported income or loss before income taxes. Our 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.

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

|                                                            |                                    | 2006 |        | 2005   |   | 2004  
|----------------------------------------------------------- | ---------------------------------- | ---- | ------ | ------ | - | ------
|
|Taxes currently (payable) receivableU.S. federal and state |                                    | $    | (667.5 | )      | $ | (199.3
|Deferred tax liabilities, netU.S. federal and state        |                                    |      | (172.0 | )      |   | (8.8  
|                                                            |                                    |      |        |        |   |       
|                                                            | Total income tax (expense) benefit |      | $      | (839.5 | ) | $     
|                                                            |                                    |      |        |        |   |       

Our
provision for income taxes varies from the provision 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:

2006

2005

2004(Dollars in Millions)Expected income tax (expense) benefit at U.S. statutory rate of 35%

$
(768.4
)
$
(186.7
)
$
59.5U.S. state income tax (expense) benefit


(70.2
)

(18.5
)

4.4Other expense


(0.9
)

(2.9
)

(2.6
)Total income tax (expense) benefit

$
(839.5
)
$
(208.1
)
$
61.3


Temporary
differences and carry-forwards that gave rise to the deferred tax assets and liabilities at December 31 were as follows:

2006

2005Deferred
Tax
Assets

Deferred
Tax
Liabilities

Deferred
Tax
Assets

Deferred
Tax
Liabilities(Dollars in Millions)Depreciation and amortization

$


$
421.2

$


$
419.3Accruals and advances


125.1


49.8


103.6


32.4Programming contract liabilities


162.4





306.4


Prepaid expenses





41.0





28.4Other temporary differences


0.7


4.6


20.8


7.0Total deferred taxes

$
288.2

$
516.6

$
430.8

$
487.1


59

---



In
addition to the amounts recorded in the deferred income tax asset and liability accounts, there is $6.0 million of deferred tax assets recorded in "Other Assets" related to
state income taxes.

Note 10: 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 $14.7 million in 2006, $11.6 million in 2005 and $11.1 million in 2004.

Note 11: 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, 2006, our employees were granted 3.0 million restricted stock units with a weighted average grant-date fair value of $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. During the year ended December 31, 2004, our employees were granted 2.7 million restricted stock units with a weighted average grant-date fair
value of approximately $17.46 per share.

As
of December 31, 2006, there was $37.3 million of unrecognized compensation costs related to unvested restricted stock units, which we expect to recognize as follows:
$26.5 million in 2007 and $10.8 million in 2008.

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 value of the common stock on the date the options were granted. These
nonqualified options generally vested over one to five years, expire ten years from date of grant and are subject to earlier termination under certain conditions. No stock options were granted to our
employees during 2006, 2005 or 2004 and all stock options were fully vested as of December 31, 2006.

60

---



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

2006

2005

2004(Dollars in Millions)Share-based compensation expense recognized

$
34.0

$
27.1

$
28.0Tax benefits associated with share-based compensation expense


13.0


10.3


10.7Actual tax benefits realized for the deduction of share-based compensation expense


13.4


6.0


0.6


As
of December 31, 2006 our employees held 17.6 million stock options and 7.7 million restricted stock units.

Note 12: Related-Party Transactions

The DIRECTV Group and affiliates.We enter into related-party transactions with The DIRECTV Group and certain of its
affiliates as part of normal operations.

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; Cheap Stock."

On
July 14, 2006 we paid a $300.0 million dividend to our Parent from available cash and cash equivalents. During 2004, as part of the NRTC and Pegasus transactions
discussed in Note 3, we borrowed $875.0 million from The DIRECTV Group and received a capital contribution of $200.0 million from The DIRECTV Group. Interest expense incurred
related to the borrowing from The DIRECTV Group was $6.5 million in 2005 and $5.9 million in 2004. During 2005, we repaid the $875.0 million borrowing and received a
$538.3 million capital contribution from The DIRECTV Group in conjunction with our debt refinancing. See Note 8 for further discussion of the debt refinancing.

Also
during 2004, The DIRECTV Group contributed certain assets to us that included two satellites, SPACEWAY 1 and SPACEWAY 2, and the related ground segment equipment, and goodwill that
resulted from the 1997 repurchase of our stock from a third party. We recorded these transactions in 2004 as a capital contribution from Parent in the amount of $431.8 million. During 2005, The
DIRECTV Group contributed to us certain SPACEWAY satellite assets at its cost in the amount of $26.8 million, which we also recorded as a capital contribution.

We
purchased telemetry, tracking and control services, or TT&C, for certain of our satellites and lease additional satellite capacity from PanAmSat Corporation (now Intelsat), which was
a subsidiary of The DIRECTV Group until its sale on August 20, 2004. Prior to the PanAmSat sale, our transactions were considered related-party with the costs included in "Broadcast operations
expenses" in the Consolidated Statements of Operations.

Prior
to The DIRECTV Group's sale of Hughes Network System, Inc.'s, or HNS', set-top receiver manufacturing operations to Thomson on June 22, 2004, we purchased
DIRECTV System equipment from and provided system access cards to HNS. We recorded the cost of purchases of DIRECTV System equipment from HNS in inventory and recognized the cost of the equipment in
"Subscriber acquisition costs" or "Upgrade and retention costs" in accordance with our accounting policies

61

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discussed
in Note 2. We recorded DIRECTV System access cards provided to HNS as "Revenues" in the Consolidated Statements of Operations.

News Corporation and affiliates.In the ordinary course of our operations, we enter into transactions with related parties.
News Corporation and its affiliates are considered related parties because, as of December 31, 2006, it owned approximately 38% 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 space; 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:

2006

2005

2004(Dollars in Millions)Sales:The DIRECTV Group and affiliates

$
1.4

$
4.8

$
25.8News Corporation and affiliates


21.8


17.9


10.1Total

$
23.2

$
22.7

$
35.9Purchases:The DIRECTV Group and affiliates

$
0.3

$
14.8

$
187.8News Corporation and affiliates


740.3


652.2


447.8Other


9.7


9.1


Total

$
750.3

$
676.1

$
635.6


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

2006

2005(Dollars in Millions)Accounts receivable

$
10.1

$
9.5Accounts payable:The DIRECTV Group and affiliates

$
24.2

$
40.4News Corporation and affiliates


155.8


150.0Other


23.4


11.4Total

$
203.4

$
201.8


62

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Note 13: Commitments and Contingencies



At December 31, 2006, minimum future commitments under noncancelable operating leases having lease terms in excess of one year were primarily for real
property and aggregated $172.3 million, payable as follows: $30.0 million in 2007, $32.4 million in 2008, $22.0 million in 2009, $20.8 million in 2010,
$21.3 million in 2011 and $45.8 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options, which we have not considered in the amounts
disclosed. Our rental expense under operating leases was $49.4 million for the year ended December 31, 2006, $45.5 million for the year ended December 31, 2005 and
$44.2 million for the year ended December 31, 2004.

At
December 31, 2006, 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 and satellite construction, and launch contracts aggregate $4,601.8 million, payable as follows: $1,066.1 million in 2007,
$916.8 million in 2008, $979.3 million in 2009, $955.9 million in 2010, $546.3 million in 2011 and $137.4 million thereafter.

At
December 31, 2006, other long-term obligations totaling $390.1 million are payable approximately as follows: $72.4 million in 2007,
$76.9 million in 2008, $81.6 million in 2009, $85.5 million in 2010, $50.2 million in 2011 and $23.5 million thereafter. These amounts are recorded in "Accounts
payable and accrued liabilities" and "Other Liabilities and Deferred Credits" in our Consolidated Balance Sheets.



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, 2006. 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.

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, 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 $78.9 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 us a compulsory license. Under the license, 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
$25.0 million, because of the jury finding of willful infringement and awarded pre-judgment interest of $13.4 million to Finisar. Post-judgment interest accrues
on the total judgment.

63

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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 $126.7 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 royalties pursuant to the compulsory license shall be held in escrow pending outcome
of the appeal, and the initial quarterly payment has been made. Through December 31, 2006, the compulsory license fee amounted to $12.1 million, which was paid into escrow.

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 compulsory license.

On
August 27, 2004, the U.S. Bankruptcy Court, District of Maine, entered an order approving among other things, the acquisition transaction with Pegasus described above in
Note 3, as well as a Global Settlement Agreement pursuant to which all pending litigation between us, The DIRECTV Group, the NRTC and Pegasus was settled and mutual releases of claims were
affected. Pegasus had filed a voluntary petition for Chapter 11 bankruptcy in such court following entry of judgment on May 24, 2004 in our favor for approximately $63.0 million in a
case arising out of Pegasus' breach of the parties' Seamless Marketing Agreement. This judgment was stayed under applicable bankruptcy law, and Pegasus also had filed various claims in the bankruptcy
proceeding against us, The DIRECTV Group and the NRTC. As part of the purchase price we paid in the transactions with Pegasus, we received credit for the $63.0 million judgment. As a result of
the settlement and release, all previously pending litigation described above between us and Pegasus has been dismissed with prejudice.

Satellites.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 that a satellite failure could have on our ability to provide service. At December 31, 2006, the net book value of
in-orbit satellites was $1,335.7 million, of which $947.6 million was uninsured.

Other.As of December 31, 2006, included in "Investments and Other Assets" in the Consolidated Balance Sheets is a
receivable for $24.7 million of the $57.0 million rebate that we can earn from Thomson by purchasing at least $4.0 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.

64

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Note 14: Condensed Consolidating Financial Statements

The following presents the condensed consolidating statements of operations for the years ended December 31, 2006, 2005 and 2004, the condensed
consolidating balance sheets as of December 31, 2006 and 2005, and the condensed consolidating statements of cash flows for the years ended December 31, 2006, 2005 and 2004 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. 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, 2006

|                                                      |                                                                                                 | Co-Issuers                          |                                    | Guarantor
Subsidiaries |   | Eliminations |       | DIRECTV
Holdings
Consolidated |         
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ---------------------- | - | ------------ | ----- | ----------------------------- | --------
|
|Revenues                                              |                                                                                                 | $                                   |                                   |                        | $ | 13,744.0     |       | $                             |        
|Operating Costs and Expenses                          |                                                                                                 |                                     |                                    |                        |   |              |       |                               |         
|                                                      | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |                        |   |              |       |                               |         
|                                                      |                                                                                                 | Broadcast programming and other     |                                    |                        |  |              |       | 5,830.4                       |         
|                                                      |                                                                                                 | Subscriber service expenses         |                                    |                        |  |              |       | 1,057.1                       |         
|                                                      |                                                                                                 | Broadcast operations expenses       |                                    |                        |  |              |       | 179.3                         |         
|                                                      | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |                        |   |              |       |                               |         
|                                                      |                                                                                                 | Subscriber acquisition costs        |                                    |                        |  |              |       | 1,844.5                       |         
|                                                      |                                                                                                 | Upgrade and retention costs         |                                    |                        |  |              |       | 851.7                         |         
|                                                      |                                                                                                 | General and administrative expenses |                                    |                        |  |              |       | 760.3                         |         
|                                                      | Depreciation and amortization expense                                                           |                                     |                                    |                       |   |              | 873.0 |                               |         
|                                                      |                                                                                                 |                                     |                                    |                        |   |              |       |                               |         
|                                                      |                                                                                                 |                                     | Total Operating Costs and Expenses |                        |   |             |       |                               | 11,396.3
|                                                      |                                                                                                 |                                     |                                    |                        |   |              |       |                               |         
|Operating Profit                                      |                                                                                                 |                                     |                                   |                        |   | 2,347.7      |       |                               |        
|Equity in pre-tax income of consolidated subsidiaries |                                                                                                 |                                     | 2,314.9                            |                        |   |             |       |                               | (2,314.9
|Interest income                                       |                                                                                                 |                                     | 68.3                               |                        |   | 0.4          |       |                               |        
|Interest expense                                      |                                                                                                 |                                     | (187.8                             | )                      |   | (30.3        | )     |                               |        
|Other expense                                         |                                                                                                 |                                     |                                   |                        |   | (2.9         | )     |                               |        
|                                                      |                                                                                                 |                                     |                                    |                        |   |              |       |                               |         
|Income Before Income Taxes                            |                                                                                                 |                                     | 2,195.4                            |                        |   | 2,314.9      |       |                               | (2,314.9
|Income tax expense                                    |                                                                                                 |                                     | (839.5                             | )                      |   | (885.3       | )     |                               | 885.3   
|                                                      |                                                                                                 |                                     |                                    |                        |   |              |       |                               |         
|Net Income                                            |                                                                                                 | $                                   | 1,355.9                            |                        | $ | 1,429.6      |       | $                             | (1,429.6
|                                                      |                                                                                                 |                                     |                                    |                        |   |              |       |                               |         

65

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

|                                                      |                                                                                                 | Co-Issuers                          |                                    | Guarantor
Subsidiaries |       | Eliminations |       | DIRECTV
Holdings
Consolidated |         
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ---------------------- | ----- | ------------ | ----- | ----------------------------- | --------
|
|Revenues                                              |                                                                                                 | $                                   | 688.9                              |                        | $     | 12,216.1     |       | $                             | (688.9  
|Operating Costs and Expenses                          |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|                                                      | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |                        |       |              |       |                               |         
|                                                      |                                                                                                 | Broadcast programming and other     |                                    |                        | 579.1 |              |       | 5,159.2                       |         
|                                                      |                                                                                                 | Subscriber service expenses         |                                    |                        |      |              |       | 935.4                         |         
|                                                      |                                                                                                 | Broadcast operations expenses       |                                    |                        |      |              |       | 145.8                         |         
|                                                      | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |                        |       |              |       |                               |         
|                                                      |                                                                                                 | Subscriber acquisition costs        |                                    |                        |      |              |       | 2,675.8                       |         
|                                                      |                                                                                                 | Upgrade and retention costs         |                                    |                        |      |              |       | 1,106.5                       |         
|                                                      |                                                                                                 | General and administrative expenses |                                    |                        | 0.8   |              |       | 802.2                         |         
|                                                      | Depreciation and amortization expense                                                           |                                     |                                    |                       |       |              | 698.2 |                               |         
|                                                      |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|                                                      |                                                                                                 |                                     | Total Operating Costs and Expenses |                        |       | 579.9        |       |                               | 11,523.1
|                                                      |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|Operating Profit                                      |                                                                                                 |                                     | 109.0                              |                        |       | 693.0        |       |                               |        
|Equity in pre-tax income of consolidated subsidiaries |                                                                                                 |                                     | 639.5                              |                        |       |             |       |                               | (639.5  
|Interest income                                       |                                                                                                 |                                     | 32.0                               |                        |       |             |       |                               |        
|Interest expense                                      |                                                                                                 |                                     | (182.2                             | )                      |       | (51.7        | )     |                               |        
|Other expense                                         |                                                                                                 |                                     | (64.9                              | )                      |       | (1.8         | )     |                               |        
|                                                      |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|Income Before Income Taxes                            |                                                                                                 |                                     | 533.4                              |                        |       | 639.5        |       |                               | (639.5  
|Income tax expense                                    |                                                                                                 |                                     | (208.1                             | )                      |       | (249.5       | )     |                               | 249.5   
|                                                      |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|Net Income                                            |                                                                                                 | $                                   | 325.3                              |                        | $     | 390.0        |       | $                             | (390.0  
|                                                      |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         

66

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Condensed Consolidating Statement of Operations  For the Year Ended December 31, 2004

|                                                                    |                                                                                                 | Co-Issuers                          |                                    | Guarantor
Subsidiaries |       | Eliminations |       | DIRECTV
Holdings
Consolidated |         
|------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ---------------------- | ----- | ------------ | ----- | ----------------------------- | --------
|
|Revenues                                                            |                                                                                                 | $                                   | 926.2                              |                        | $     | 9,763.9      |       | $                             | (926.2  
|Operating Costs and Expenses                                        |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|                                                                    | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |                        |       |              |       |                               |         
|                                                                    |                                                                                                 | Broadcast programming and other     |                                    |                        | 627.5 |              |       | 4,308.6                       |         
|                                                                    |                                                                                                 | Subscriber service expenses         |                                    |                        |      |              |       | 740.2                         |         
|                                                                    |                                                                                                 | Broadcast operations expenses       |                                    |                        |      |              |       | 129.7                         |         
|                                                                    | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |                        |       |              |       |                               |         
|                                                                    |                                                                                                 | Subscriber acquisition costs        |                                    |                        |      |              |       | 2,644.9                       |         
|                                                                    |                                                                                                 | Upgrade and retention costs         |                                    |                        |      |              |       | 993.2                         |         
|                                                                    |                                                                                                 | General and administrative expenses |                                    |                        | 1.0   |              |       | 661.9                         |         
|                                                                    | Depreciation and amortization expense                                                           |                                     |                                    |                       |       |              | 561.2 |                               |         
|                                                                    |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|                                                                    |                                                                                                 |                                     | Total Operating Costs and Expenses |                        |       | 628.5        |       |                               | 10,039.7
|                                                                    |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|Operating Profit                                                    |                                                                                                 |                                     | 297.7                              |                        |       | (275.8       | )     |                               |        
|Equity in pre-tax income of consolidated subsidiaries               |                                                                                                 |                                     | (789.7                             | )                      |       |             |       |                               | 789.7   
|Interest income                                                     |                                                                                                 |                                     | 8.4                                |                        |       | 11.4         |       |                               | (5.9    
|Interest expense                                                    |                                                                                                 |                                     | (190.6                             | )                      |       | (21.3        | )     |                               | 5.9     
|                                                                    |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|Loss Before Income Taxes and Cumulative Effect of Accounting Change |                                                                                                 |                                     | (674.2                             | )                      |       | (285.7       | )     |                               | 789.7   
|Income tax benefit                                                  |                                                                                                 |                                     | 253.8                              |                        |       | 102.9        |       |                               | (295.4  
|                                                                    |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|Loss Before Cumulative Effect of Accounting Change                  |                                                                                                 |                                     | (420.4                             | )                      |       | (182.8       | )     |                               | 494.3   
|Cumulative effect of accounting change, net of taxes                |                                                                                                 |                                     |                                   |                        |       | (311.5       | )     |                               |        
|                                                                    |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         
|Net Loss                                                            |                                                                                                 | $                                   | (420.4                             | )                      | $     | (494.3       | )     | $                             | 494.3   
|                                                                    |                                                                                                 |                                     |                                    |                        |       |              |       |                               |         

67

---



Condensed Consolidating Balance Sheet  As of December 31, 2006

|                                       |                                              | Co-Issuers           |         | Guarantor
Subsidiaries |         | Eliminations |         | DIRECTV
Holdings
Consolidated
|-------------------------------------- | -------------------------------------------- | -------------------- | ------- | ---------------------- | ------- | ------------ | ------- | -----------------------------
|
|ASSETS                                 |                                              |                      |         |                        |         |              |         |                              
|Total Current Assets                   |                                              | $                    | 1,397.5 |                        | $       | 1,519.2      |         | $                            
|Satellites, net                        |                                              |                      |        |                        |         | 2,000.5      |         |                              
|Property and Equipment, net            |                                              |                      |        |                        |         | 2,026.5      |         |                              
|Goodwill                               |                                              |                      | 1,827.6 |                        |         | 1,204.1      |         |                              
|Intangible Assets, net                 |                                              |                      |        |                        |         | 1,545.9      |         |                              
|Other Assets                           |                                              |                      | 4,585.4 |                        |         | 149.1        |         |                              
|                                       |                                              |                      |         |                        |         |              |         |                              
|Total Assets                           |                                              | $                    | 7,810.5 |                        | $       | 8,445.3      |         | $                            
|                                       |                                              |                      |         |                        |         |              |         |                              
|LIABILITIES AND OWNER'S EQUITY         |                                              |                      |         |                        |         |              |         |                              
|Total Current Liabilities              |                                              | $                    | 28.1    |                        | $       | 2,650.9      |         | $                            
|Long-Term Debt                         |                                              |                      | 3,394.9 |                        |         |             |         |                              
|Other Liabilities and Deferred Credits |                                              |                      |        |                        |         | 993.8        |         |                              
|Deferred Income Taxes                  |                                              |                      |        |                        |         | 416.5        |         |                              
|Owner's Equity                         |                                              |                      |         |                        |         |              |         |                              
|                                       | Capital stock and additional paid-in capital |                      |         | 3,786.1                |         |              | 4,636.5 |                              
|                                       | Retained earnings (deficit)                  |                      |         | 601.4                  |         |              | (252.4  | )                            
|                                       |                                              |                      |         |                        |         |              |         |                              
|                                       |                                              | Total Owner's Equity |         |                        | 4,387.5 |              |         | 4,384.1                      
|                                       |                                              |                      |         |                        |         |              |         |                              
|Total Liabilities and Owner's Equity   |                                              | $                    | 7,810.5 |                        | $       | 8,445.3      |         | $                            
|                                       |                                              |                      |         |                        |         |              |         |                              

68

---



Condensed Consolidating Balance Sheet  As of December 31, 2005

|                                       |                                              | Co-Issuers           |         | Guarantor
Subsidiaries |         | Eliminations |          | DIRECTV
Holdings
Consolidated |         
|-------------------------------------- | -------------------------------------------- | -------------------- | ------- | ---------------------- | ------- | ------------ | -------- | ----------------------------- | --------
|
|ASSETS                                 |                                              |                      |         |                        |         |              |          |                               |         
|Total Current Assets                   |                                              | $                    | 1,206.8 |                        | $       | 1,528.0      |          | $                             | (7.7    
|Satellites, net                        |                                              |                      |        |                        |         | 1,907.9      |          |                               |        
|Property and Equipment, net            |                                              |                      |        |                        |         | 848.3        |          |                               |        
|Goodwill                               |                                              |                      | 1,827.6 |                        |         | 1,204.1      |          |                               |        
|Intangible Assets, net                 |                                              |                      |        |                        |         | 1,875.0      |          |                               |        
|Other Assets                           |                                              |                      | 3,748.9 |                        |         | 100.2        |          |                               | (3,714.1
|                                       |                                              |                      |         |                        |         |              |          |                               |         
|Total Assets                           |                                              | $                    | 6,783.3 |                        | $       | 7,463.5      |          | $                             | (3,721.8
|                                       |                                              |                      |         |                        |         |              |          |                               |         
|LIABILITIES AND OWNER'S EQUITY         |                                              |                      |         |                        |         |              |          |                               |         
|Total Current Liabilities              |                                              | $                    | 81.6    |                        | $       | 2,555.8      |          | $                             | (7.7    
|Long-Term Debt                         |                                              |                      | 3,405.3 |                        |         |             |          |                               |        
|Other Liabilities and Deferred Credits |                                              |                      |        |                        |         | 1,324.6      |          |                               | (131.0  
|Owner's Equity                         |                                              |                      |         |                        |         |              |          |                               |         
|                                       | Capital stock and additional paid-in capital |                      |         | 4,050.9                |         |              | 4,875.0  |                               |         
|                                       | Accumulated deficit                          |                      |         | (754.5                 | )       |              | (1,291.9 | )                             |         
|                                       |                                              |                      |         |                        |         |              |          |                               |         
|                                       |                                              | Total Owner's Equity |         |                        | 3,296.4 |              |          | 3,583.1                       |         
|                                       |                                              |                      |         |                        |         |              |          |                               |         
|Total Liabilities and Owner's Equity   |                                              | $                    | 6,783.3 |                        | $       | 7,463.5      |          | $                             | (3,721.8
|                                       |                                              |                      |         |                        |         |              |          |                               |         

69

---



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                        |                                       | $       | 496.5                  |        | $                             | 1,845.9
|                                                   |                                                                  |                                       |         |                        |        |                               |        
|Cash Flows from Investing Activities               |                                                                  |                                       |         |                        |        |                               |        
|                                                   | Cash paid for property and equipment                             |                                       |         |                       |        |                               | (503.6 
|                                                   | Cash paid for subscriber leased equipment-subscriber acquisition |                                       |         |                       |        |                               | (598.6 
|                                                   | Cash paid for subscriber leased equipment-upgrade and retention  |                                       |         |                       |        |                               | (472.9 
|                                                   | Cash paid for satellites                                         |                                       |         |                       |        |                               | (222.3 
|                                                   | Cash paid for acquired assets                                    |                                       |         |                       |        |                               | (4.0   
|                                                   | Proceeds from sale of property                                   |                                       |         |                       |        |                               | 12.4   
|                                                   | Other                                                            |                                       |         |                       |        |                               | 10.2   
|                                                   |                                                                  |                                       |         |                        |        |                               |        
|                                                   |                                                                  | Net Cash Used in Investing Activities |         |                        |       |                               |        
|                                                   |                                                                  |                                       |         |                        |        |                               |        
|Cash Flows from Financing Activities               |                                                                  |                                       |         |                        |        |                               |        
|                                                   | Repayment of long-term debt                                      |                                       |         | (7.5                   | )      |                               |       
|                                                   | Repayment of other long-term obligations                         |                                       |         |                       |        |                               | (67.1  
|                                                   | Cash dividend to Parent                                          |                                       |         | (300.0                 | )      |                               |       
|                                                   | Excess tax benefit from share-based compensation                 |                                       |         |                       |        |                               | 1.9    
|                                                   |                                                                  |                                       |         |                        |        |                               |        
|                                                   |                                                                  | Net Cash Used in Financing Activities |         |                        | (307.5 | )                             |        
|                                                   |                                                                  |                                       |         |                        |        |                               |        
|Net increase in cash and cash equivalents          |                                                                  |                                       | 189.0   |                        |        | 1.9                           |        
|Cash and cash equivalents at beginning of the year |                                                                  |                                       | 1,164.8 |                        |        |                              |        
|                                                   |                                                                  |                                       |         |                        |        |                               |        
|Cash and cash equivalents at the end of the year   |                                                                  | $                                     | 1,353.8 |                        | $      | 1.9                           |        
|                                                   |                                                                  |                                       |         |                        |        |                               |        

70

---



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 |                                                     | $       | (384.3                 | )       | $                             | 1,667.5
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|Cash Flows from Investing Activities                 |                                                     |                                                     |         |                        |         |                               |        
|                                                     | Cash paid for property and equipment                |                                                     |         |                       |         |                               | (380.5 
|                                                     | Cash paid for satellites                            |                                                     |         |                       |         |                               | (366.6 
|                                                     | Cash paid for acquired assets                       |                                                     |         |                       |         |                               | (3.3   
|                                                     | Proceeds from sale of property                      |                                                     |         |                       |         |                               | 0.5    
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|                                                     |                                                     | Net Cash Used in Investing Activities               |         |                        |        |                               |        
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|Cash Flows from Financing Activities                 |                                                     |                                                     |         |                        |         |                               |        
|                                                     | Cash proceeds from financing transactions           |                                                     |         | 3,003.3                |         |                               |       
|                                                     | Cash contribution from Parent                       |                                                     |         | 538.3                  |         |                               |       
|                                                     | Repayment of debt                                   |                                                     |         | (2,001.8               | )       |                               |       
|                                                     | Repayment of borrowing from Parent                  |                                                     |         | (875.0                 | )       |                               |       
|                                                     | Borrowings from (loans to) related parties          |                                                     |         | 875.0                  |         |                               | (875.0 
|                                                     | Repayment of other long-term obligations            |                                                     |         |                       |         |                               | (63.1  
|                                                     | Debt issuance costs                                 |                                                     |         | (4.7                   | )       |                               |       
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|                                                     |                                                     | Net Cash Provided by (Used in) Financing Activities |         |                        | 1,535.1 |                               |        
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|Net increase (decrease) in cash and cash equivalents |                                                     |                                                     | 1,150.8 |                        |         | (20.5                         | )      
|Cash and cash equivalents at beginning of the year   |                                                     |                                                     | 14.0    |                        |         | 20.5                          |        
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|Cash and cash equivalents at the end of the year     |                                                     | $                                                   | 1,164.8 |                        | $       |                              |        
|                                                     |                                                     |                                                     |         |                        |         |                               |        

71

---



Condensed Consolidating Statement of Cash Flows  For the Year Ended December 31, 2004

|                                                     |                                                     | Co-Issuers                                          |        | Guarantor
Subsidiaries |       | DIRECTV
Holdings
Consolidated |       
|---------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | ---------------------- | ----- | ----------------------------- | ------
|
|Cash Flows from Operating Activities                 |                                                     |                                                     |        |                        |       |                               |       
|                                                     | Net Cash Provided by (Used in) Operating Activities |                                                     | $      | (381.7                 | )     | $                             | 806.2 
|                                                     |                                                     |                                                     |        |                        |       |                               |       
|Cash Flows from Investing Activities                 |                                                     |                                                     |        |                        |       |                               |       
|                                                     | Cash paid for property and equipment                |                                                     |        |                       |       |                               | (249.0
|                                                     | Cash paid for satellites                            |                                                     |        |                       |       |                               | (422.5
|                                                     | Cash paid for acquired assets                       |                                                     |        |                       |       |                               | (965.8
|                                                     | Proceeds from sale of property                      |                                                     |        |                       |       |                               | 3.7   
|                                                     |                                                     |                                                     |        |                        |       |                               |       
|                                                     |                                                     | Net Cash Used in Investing Activities               |        |                        |      |                               |       
|                                                     |                                                     |                                                     |        |                        |       |                               |       
|Cash Flows from Financing Activities                 |                                                     |                                                     |        |                        |       |                               |       
|                                                     | Repayment of debt                                   |                                                     |        | (213.2                 | )     |                               |      
|                                                     | Cash contribution from Parent                       |                                                     |        | 200.0                  |       |                               |      
|                                                     | Borrowing from Parent                               |                                                     |        | 875.0                  |       |                               |      
|                                                     | Borrowings from (loans to) related parties          |                                                     |        | (875.0                 | )     |                               | 875.0 
|                                                     | Repayment of other long-term obligations            |                                                     |        |                       |       |                               | (31.5 
|                                                     | Debt issuance costs                                 |                                                     |        | (2.4                   | )     |                               |      
|                                                     |                                                     |                                                     |        |                        |       |                               |       
|                                                     |                                                     | Net Cash Provided by (Used in) Financing Activities |        |                        | (15.6 | )                             |       
|                                                     |                                                     |                                                     |        |                        |       |                               |       
|Net increase (decrease) in cash and cash equivalents |                                                     |                                                     | (397.3 | )                      |       | 16.1                          |       
|Cash and cash equivalents at beginning of the year   |                                                     |                                                     | 411.3  |                        |       | 4.4                           |       
|                                                     |                                                     |                                                     |        |                        |       |                               |       
|Cash and cash equivalents at the end of the year     |                                                     | $                                                   | 14.0   |                        | $     | 20.5                          |       
|                                                     |                                                     |                                                     |        |                        |       |                               |       

72

---





DIRECTV HOLDINGS LLC        SUPPLEMENTARY DATA

|Selected Quarterly Data (Unaudited) |                                                                                                 | 1st                                 |                                    | 2nd   |         | 3rd     |       | 4th     |        
|----------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ----- | ------- | ------- | ----- | ------- | -------
|
|2006 Quarters                       |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|Revenues                            |                                                                                                 | $                                   | 3,193.5                            |       | $       | 3,318.3 |       | $       | 3,403.1
|Operating Costs and Expenses        |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|                                    | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |       |         |         |       |         |        
|                                    |                                                                                                 | Broadcast programming and other     |                                    |       | 1,331.5 |         |       | 1,314.4 |        
|                                    |                                                                                                 | Subscriber service expenses         |                                    |       | 236.7   |         |       | 255.5   |        
|                                    |                                                                                                 | Broadcast operations expenses       |                                    |       | 42.0    |         |       | 45.6    |        
|                                    | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |       |         |         |       |         |        
|                                    |                                                                                                 | Subscriber acquisition costs        |                                    |       | 567.6   |         |       | 401.4   |        
|                                    |                                                                                                 | Upgrade and retention costs         |                                    |       | 293.1   |         |       | 143.8   |        
|                                    |                                                                                                 | General and administrative expenses |                                    |       | 178.0   |         |       | 180.9   |        
|                                    | Depreciation and amortization expense                                                           |                                     |                                    | 182.2 |         |         | 202.4 |         |        
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|                                    |                                                                                                 |                                     | Total Operating Costs and Expenses |       |         | 2,831.1 |       |         | 2,544.0
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|Operating Profit                    |                                                                                                 |                                     | 362.4                              |       |         | 774.3   |       |         | 597.4  
|Interest income                     |                                                                                                 |                                     | 14.4                               |       |         | 17.3    |       |         | 17.8   
|Interest expense                    |                                                                                                 |                                     | (55.9                              | )     |         | (53.9   | )     |         | (53.6  
|Other expense                       |                                                                                                 |                                     | (0.6                               | )     |         | (0.7    | )     |         | (0.6   
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|Income Before Income Taxes          |                                                                                                 |                                     | 320.3                              |       |         | 737.0   |       |         | 561.0  
|Income tax expense                  |                                                                                                 |                                     | (122.4                             | )     |         | (281.7  | )     |         | (214.1 
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|Net Income                          |                                                                                                 | $                                   | 197.9                              |       | $       | 455.3   |       | $       | 346.9  
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|2005 Quarters                       |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|Revenues                            |                                                                                                 | $                                   | 2,800.8                            |       | $       | 2,960.5 |       | $       | 3,048.4
|Operating Costs and Expenses        |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|                                    | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |       |         |         |       |         |        
|                                    |                                                                                                 | Broadcast programming and other     |                                    |       | 1,149.6 |         |       | 1,137.7 |        
|                                    |                                                                                                 | Subscriber service expenses         |                                    |       | 220.5   |         |       | 219.2   |        
|                                    |                                                                                                 | Broadcast operations expenses       |                                    |       | 35.4    |         |       | 35.3    |        
|                                    | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |       |         |         |       |         |        
|                                    |                                                                                                 | Subscriber acquisition costs        |                                    |       | 745.6   |         |       | 622.2   |        
|                                    |                                                                                                 | Upgrade and retention costs         |                                    |       | 252.2   |         |       | 223.2   |        
|                                    |                                                                                                 | General and administrative expenses |                                    |       | 181.9   |         |       | 218.3   |        
|                                    | Depreciation and amortization expense                                                           |                                     |                                    | 177.2 |         |         | 171.4 |         |        
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|                                    |                                                                                                 |                                     | Total Operating Costs and Expenses |       |         | 2,762.4 |       |         | 2,627.3
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|Operating Profit (Loss)             |                                                                                                 |                                     | 38.4                               |       |         | 333.2   |       |         | 170.6  
|Interest income                     |                                                                                                 |                                     | 0.8                                |       |         | 3.7     |       |         | 8.2    
|Interest expense                    |                                                                                                 |                                     | (56.8                              | )     |         | (57.9   | )     |         | (60.6  
|Other expense                       |                                                                                                 |                                     | (0.4                               | )     |         | (65.2   | )     |         | (0.8   
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|Income (Loss) Before Income Taxes   |                                                                                                 |                                     | (18.0                              | )     |         | 213.8   |       |         | 117.4  
|Income tax (expense) benefit        |                                                                                                 |                                     | 6.9                                |       |         | (82.0   | )     |         | (45.1  
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        
|Net Income (Loss)                   |                                                                                                 | $                                   | (11.1                              | )     | $       | 131.8   |       | $       | 72.3   
|                                    |                                                                                                 |                                     |                                    |       |         |         |       |         |        

73

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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

We carried out an evaluation as of the end of the period covered by this Annual Report on Form 10-K under the supervision and with the
participation of management, including our principal executive officers and our financial officers, of the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities and 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, 2006.

There
has been no change in the 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 year ended December 31, 2006, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 2006 and 2005 were:

Type of Fees

2006

2005(Dollars in Millions)Audit Fees

$
1.8

$
0.5Audit-Related Services


0.2


0.1Total

$
2.0

$
0.6


"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.

74

---



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, 2006, 2005 and 2004 |  | 78         
|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).                                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                

75

---



|*10.2  |  | Office Sublease for Corporate Headquarters between Raytheon Company, f/k/a Hughes Aircraft Company, and DIRECTV, Inc. dated March 20, 1996 (incorporated by reference to Exhibit 10.17 of the Form S-4).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.3  |  | Member Offer Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of DIRECTV Holdings LLC filed June 3, 2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*10.4  |  | Asset Purchase Agreement, dated as of July 30, 2004, by and among Pegasus Satellite Television, Inc., Golden Sky Systems, Inc., and each other entity listed as a "Seller" on the signature pages thereto, DIRECTV, Inc., and, solely for purposes of
Section 12.12 thereof, The DIRECTV Group, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of DIRECTV Holdings LLC filed on August 3, 2004).                                                                                                                                                                                                                                                                                                                
|*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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

76

---



|**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.

77

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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, 2006 |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     
|Allowances Deducted from Assets      |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     
|                                     | Accounts receivable (allowance for doubtful receivables) |                              | $ | (75.0                                   | ) | $                                   | (192.2 | )          | $ | (119.4                 | )(a)
|                                     |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     
|For the Year Ended December 31, 2005 |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     
|Allowances Deducted from Assets      |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     
|                                     | Accounts receivable (allowance for doubtful receivables) |                              | $ | (86.4                                   | ) | $                                   | (233.9 | )          | $ | (100.8                 | )(a)
|                                     |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     
|For the Year Ended December 31, 2004 |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     
|Allowances Deducted from Assets      |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     
|                                     | Accounts receivable (allowance for doubtful receivables) |                              | $ | (51.1                                   | ) | $                                   | (188.6 | )          | $ | (77.9                  | )(a)
|                                     |                                                          |                              |   |                                         |   |                                     |        |            |   |                        |     

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

78

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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 28, 2007 |  | By:                              

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 28th day of February 2007 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/MICHAEL W. PALKOVICMichael W. Palkovic |  | Executive Vice President, Chief Financial Officer and Director    |  | }Principal Financial Officer 
|/s/PATRICK T. DOYLEPatrick T. Doyle       |  | Senior Vice President and Controller                              |  | }Principal Accounting Officer
|/s/LARRY D. HUNTERLarry D. Hunter         |  | Executive Vice President, General Counsel, Secretary and Director |  |                              

79

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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 28, 2007 |  | By:                                     

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 28th day of February 2007 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/MICHAEL W. PALKOVICMichael W. Palkovic |  | Executive Vice President and Chief Financial Officer |  | }Principal Financial Officer 
|/s/PATRICK T. DOYLEPatrick T. Doyle       |  | Senior Vice President and Controller                 |  | }Principal Accounting Officer

80

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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.                                                                                          

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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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