**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM 10-K**

| **x**                                                                    | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|
| **For the Fiscal Year Ended December 31, 2005**                     |
| **o**                                                                    | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
| **For the transition period from _________ to _________** |

 

**CommissionFile Number:  001-12223**

**UNIVISION COMMUNICATIONS INC.**

**Incorporatedin Delaware**

**I.R.S.Employer Identification Number:  95-4398884**

**1999 Avenue of the Stars, Suite 3050**

**Los Angeles, California90067**

**Tel:(310) 556-7676**

**Securitiesregistered pursuant to Section 12 (b) of the Act:**

|                                            |   | **Name of  Each Exchange** |
|--------------------------------------------|--------|----------------------------|
| **Title  of Each Class**                   |   | **on  which Registered**   |
| Class A  Common Stock, Par Value $.01 |   | New York Stock  Exchange   |

 

**Securitiesregistered pursuant to Section 12 (g) of the Act:  None**

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES x  NO o

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Exchange Act.  YES o  NO* *x

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  YES x  NO o.

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act.

Large accelerated filer  x   Accelerated filer  o   Non-accelerated filer  o

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Act).  YES o  NO x.

The aggregate market value of the Class A CommonStock of the Company held by non-affiliates on June 30, 2005 (the lastbusiness day of the Company’s most recently completed second fiscal quarter)was approximately $6,700,000,000, based on the closing sale price as reportedon the New York Stock Exchange. This calculation does not include the value ofany of the outstanding shares of Class P, Class T or Class VCommon Stock.

There were 236,761,768 shares of Class A CommonStock, 36,962,390 shares of Class P Common Stock, 13,593,034 shares of Class TCommon Stock and 17,837,164 of Class V Common Stock issued and outstandingas of February 13, 2006.

**DOCUMENTSINCORPORATED BY REFERENCE**

(1)    Portionsof the registrant’s Proxy Statement for the Annual Meeting of Stockholders tobe held May 10, 2006 are incorporated by reference into Parts II and IIIhereof.

 

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**TABLE OF CONTENTS**
| **PART I**   |   |                                                                                                                  |   |   |   |
|-------------------|--------|-----------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Item 1.           |   | Business                                                                                                              |   | 4      |   |
| Item  1A.         |   | Risk Factors.                                                                                                         |   | 17     |   |
| Item 1B.          |   | Unresolved Staff Comments.                                                                                            |   | 21     |   |
| Item 2.           |   | Properties                                                                                                            |   | 21     |   |
| Item  3.          |   | Legal Proceedings                                                                                                     |   | 22     |   |
| Item 4.           |   | Submission of Matters to a Vote of Security Holders                                                                   |   | 23     |   |
| **PART II**  |   |                                                                                                                  |   |   |   |
| Item 5.           |   | Market for Registrant’s Common Equity and Related  Stockholder Matters and Issuer Purchases of Equity Securities |   | 24     |   |
| Item  6.          |   | Selected  Financial Data                                                                                              |   | 26     |   |
| Item 7.           |   | Management’s Discussion and Analysis of Financial  Condition and Results   of Operations                         |   | 27     |   |
| Item 7A.          |   | Quantitative and Qualitative Disclosures About Market  Risk                                                           |   | 47     |   |
| Item 8.           |   | Financial Statements and Supplementary Data                                                                           |   | 47     |   |
| Item 9.           |   | Changes in and Disagreements with Accountants on  Accounting and   Financial Disclosures                              |   | 47     |   |
| Item 9A.          |   | Controls and Procedures                                                                                               |   | 48     |   |
| Item  9B.         |   | Other  Information                                                                                                    |   | 49     |   |
| **PART III** |   |                                                                                                                  |   |   |   |
| Item 10.          |   | Directors and Executive Officers of the Registrant                                                                    |   | 50     |   |
| Item 11.          |   | Executive Compensation                                                                                                |   | 50     |   |
| Item 12.          |   | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters        |   | 50     |   |
| Item 13.          |   | Certain Relationships and Related Transactions                                                                        |   | 50     |   |
| Item 14.          |   | Principal Accountant Fees and Services                                                                                |   | 50     |   |
| **PART IV**  |   |                                                                                                                  |   |   |   |
| Item 15.          |   | Exhibits, Financial Statement Schedules                                                                               |   | 51     |   |

 

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**FORWARD-LOOKING STATEMENTS**

Certain statements contained within this reportconstitute “forward-looking statements” within the meaning of the PrivateSecurities Litigation Reform Act of 1995. In some cases you can identifyforward-looking statements by terms such as “may,” “intend,” “might,” “will,” “could,”“would,” “expect,” “believe,” “plan,” “estimate,” “potential,” “anticipate” orthe negative of these terms, and similar expressions intended to identifyforward-looking statements.

These forward-looking statements reflect our currentviews with respect to future events and are based on assumptions and subject torisks and uncertainties. Also, these forward-looking statements present ourestimates and assumptions only as of the date of this report. Except for ourongoing obligation to disclose material information as required by federalsecurities laws, we do not intend to update you concerning any future revisionsto any forward-looking statements to reflect events or circumstances occurringafter the date of this report.

Factors that could cause actual results to differmaterially from those expressed or implied by the forward-looking statementsinclude, but are not limited to, those described in “Risk Factors” contained inthis report.

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**PART I**

**ITEM 1.**                Business

UnivisionCommunications Inc., together with its wholly-owned subsidiaries, is theleading Spanish-language media company in the United States. In 2005, theCompany operated in four business segments:

·       *Television:*   The Company’s principal businesssegment is television, which consists primarily of the Univision and TeleFuturanational broadcast networks, the Company’s owned and/or operated televisionstations and the Galavisión cable television network. For the year ended December 31,2005, the television segment accounted for approximately 70% of the Company’snet revenues. See “—Television Broadcasting.”

·       *Radio:*   Univision Radio is the largestSpanish-language radio broadcasting company in the United States. The Companyhas owned Univision Radio since the Company acquired Hispanic BroadcastingCorporation in September 2003. For the year ended December 31, 2005,the radio segment accounted for approximately 18% of the Company’s net revenues.See “—Univision Radio.”

·       *Music:*   The Company’s music recording andmusic publishing business, launched in April 2001, includes the UnivisionRecords label, the Fonovisa Records label, SGZ Records label, La Calle labeland Disa Records, which the Company began to consolidate on March 31,2004. See “Notes to Consolidated Financial Statements—14. Investments andVariable Interest Entities.” For the year ended December 31, 2005, the musicsegment accounted for approximately 11% of the Company’s net revenues. See “—Music Recording and Publishing.”

·       *Internet:*   UnivisionOnline, Inc. operates the Company’s Internet portal, *Univision.com*,which provides Spanish-language content directed at Hispanics in the U.S.,Mexico and Latin America. For the year ended December 31, 2005, theInternet segment accounted for approximately 1% of the Company’s net revenues. See“—Internet.”

At March 2, 2006, the Company had an approximate14.9% non-voting ownership interest on a fully converted basis in EntravisionCommunications Corporation (“Entravision”), a diversified Spanish-languagemedia company that owns and operates the majority of the Company’s non-ownedfull-power broadcast affiliates. Since September 22, 2003, Entravision hasbeen accounted for under the cost method of accounting. Prior to this,Entravision was accounted for under the equity method of accounting.Entravision operates television stations in 20 of the nation’s top 50 Hispanicmarkets. In addition, Entravision owns 49 of the Company’s affiliated stations.See “Notes to Consolidated Financial Statements—14. Investments and VariableInterest Entities” for a further discussion of our Entravision investment.

For a description of the financial information abouteach segment, see “Item 7—Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and “Notes to Consolidated FinancialStatements—16. Business Segments.” The Company was incorporated in Delaware in April 1992as Perenchio Communications, Inc. and changed its name to Univision Communications Inc.in June 1996. Its principal executive offices are located at 1999Avenue of the Stars, Suite 3050, Los Angeles, California 90067, telephonenumber (310) 556-7676. The Company’s stock is traded on the New YorkStock Exchange (UVN) and is part of the Standard & Poor’s S&P 500Index. The terms “Company,” “we,” “us” and “our”refer collectively to the parent company and the subsidiaries through which ourvarious businesses are conducted, unless the context otherwise requires.

The Company’s annualreports on Form 10-K, quarterly reports on Form 10-Q,current reports on Form 8-K, and amendments to reports filedpursuant to Sections 13 and 15(d) of the Securities Exchange 

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Act of1934, as amended, are available free of charge on the Company’s website at *www.univision.net*. The public may read andcopy materials the Company files with the SEC at the SEC’s Public ReferenceRoom at 450 Fifth Street, NW, Washington, DC 20549. The public may obtaininformation on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. The SEC maintains an Internet site (*http://www.sec.gov*)that contains reports, proxy and information statements, and other informationregarding issuers that file electronically. The Company’s *Corporate Governance Guidelines, DirectorIndependence Standards, Code of Conduct, Ethical Standards and BusinessPractices, Code of Ethics for Senior Financial Officers, Charter of AuditCommittee*and*Charter ofCompensation Committee* arealso available on the Company’s website, as well as in print to any stockholderwho requests them.

**Television Broadcasting**

The Company’s principal business segment is televisionbroadcasting, which consists primarily of the Univision, TeleFutura andGalavisión television networks, the Univision Television Group (“UTG”)owned-and-operated broadcast television stations (collectively, the “UTGO&Os”) and the TeleFutura Television Group (“TTG”) owned-and-operatedbroadcast television stations (collectively, the “TTG O&Os”). At December 31,2005, the UTG O&Os included one station in Salt Lake City, Utah that isowned but not operated by the Company. In addition, TTG O&Os include sixstations in Boston, Massachusetts; Orlando, Florida; Tampa, Florida; Denver,Colorado; Albuquerque, New Mexico; and Washington D.C. that are owned but notoperated by the Company. On June 30, 2005, the Company acquired twostations, WLII and WSUR, in Puerto Rico for $190,000,000, excluding acquisitioncosts.

The Company programs itsthree networks so that Univision Network, TeleFutura Network and Galavisióngenerally do not run the same type of program simultaneously.

*Univision Networkand Univision Television Group and Affiliates*

*UnivisionNetwork.**  *UnivisionNetwork is the leading Spanish-language television network in the U.S.,reaching approximately 98% of all U.S. “Hispanic Households” (defined as thosewith a head of household who is of Hispanic descent or origin, regardless ofthe language spoken in the household). From its operations center in Miami,Univision Network provides its broadcast and cable affiliates with 24 hours perday of Spanish-language programming with a prime time schedule ofsubstantially all first-run programming (*i.e.*, no re-runs)throughout the year. The operations center also provides production facilitiesfor Univision Network’s news and entertainment programming.

*UnivisionTelevision Group and Affiliates.**  *AtDecember 31, 2005, UTG O&Os had 19 full-power and eight low-powerstations, representing approximately 71% of its network broadcast distribution.Eighteen of the UTG O&Os broadcast Univision Network’s programming, andmost produce local news and other programming of local importance, coverspecial events and may acquire programs from other suppliers. One full-powerUTG O&O in Bakersfield is a UPN affiliate. Eleven of the 18 full-powerUTG O&Os are located in the top 15 DMAs in terms of number of HispanicHouseholds.

In addition to the UTG O&Os, as of December 31,2005, Univision Network had 18 full-power and 48 low-powertelevision station affiliates (“Univision Affiliated Stations”) andapproximately 1,280 cable affiliates. The Company also owns and operates twostations in Puerto Rico.

Univision Network produces and acquires programs,makes those programs available to its affiliates, including the UTG O&Os,and sells network advertising. The full-power UTG O&Os and full-powerUnivision Affiliated Stationstogether reach approximately 80% of Hispanic Households. The low-powerUTG O&Os and low-power UnivisionAffiliated Stations (including translators) together reach approximately9% of Hispanic Households. The cable affiliates and direct broadcast systemsreach approximately 9% of Hispanic Households.

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*Affiliation Agreements.**  *Each of Univision Network’s affiliates has the rightto preempt (*i.e.*, to decline to broadcast at all orat the time scheduled by Univision Network), without prior Univision Network permission,any and all Univision Network programming that it deems unsatisfactory,unsuitable or contrary to the public interest or to substitute programming itbelieves is of greater local or national importance. Univision Network may direct an affiliate to reschedule substitutedprogramming.

Each affiliation agreement (including the masteraffiliation agreement Univision Network has with Entravision for certainEntravision stations) grants Univision Network’s affiliate the right tobroadcast over the air the Univision Network’s entire program schedule. Theaffiliation agreements generally provide that a percentage of all advertisingtime be retained by Univision Network for Univision Network advertising and theremaining amount is allocated to Univision Network’s affiliate for local andnational spot advertising. However, this allocation may be modified atUnivision Network’s discretion.

The Univision Network retains 100% of networkadvertising revenues. The Univision Affiliated Stations retain 100% of all localand national revenues. The Company acts as the exclusive national salesrepresentative for the sale of all national advertising on Univision AffiliatedStations. For this service, the Company receives commission income equal to 15%of the Univision Affiliated Stations net national revenues.

Univision Network from time to time may enter intoaffiliation agreements with additional stations in new designated market areasbased upon its perception of the market for Spanish-language televisionand the Hispanic market in the station’s designated market area.

*Cable Affiliates.**  *Univision Network has historically used cableaffiliates to reach communities that could not support a broadcast affiliatebecause of the relatively small number of Hispanic Households. Cableaffiliation agreements may cover an individual system operator or a multiplesystem operator. Cable affiliation agreements are all non-exclusive,thereby giving Univision Network the right to license all forms of distributionin cable markets. Cable affiliates generally receive Univision Network’sprogramming for a fee based on the number of subscribers.

*TeleFutura Networkand TeleFutura Television Group and Affiliates*

*TeleFuturaNetwork.**  *In January 2002, the Company launcheda 24-hour general-interest Spanish-language broadcast network,TeleFutura, to meet the diverse preferences of the multi-faceted U.S. Hispaniccommunity. TeleFutura Network’s signal covers approximately 86% of all HispanicHouseholds through TTG O&Os, three full-power and 31 low-power stationaffiliates (“TeleFutura Affiliated Stations”). TeleFutura Network is designedto counter-program traditional Spanish-language lineups and draw additionalviewers to Spanish-language television by offering primetime Hollywood moviesdubbed in Spanish, original Spanish-language movies, primetime game shows andsports.

*TeleFuturaTelevision Group and Affiliates.*   The TTGO&Os consist of 18 full-power and 15 low-power Spanish-language televisionstations. Twelve of the 18 full-power TTG O&Os are located in the top 15designated market areas in terms of number of Hispanic Households. In addition,TeleFutura Network has entered into affiliation agreements with broadcasttelevision stations, and cable and satellite television distributors to provideTeleFutura Network and station programming on terms similar to those of theaffiliation agreements between Univision Network and its affiliates.

The TeleFutura Network retains 100% of networkadvertising revenues. The TeleFutura Affiliated Stations retain 100% of alllocal and national revenues. The Company acts as the exclusive national salesrepresentative for the sale of all national advertising on TeleFutura AffiliatedStations. For this service, the Company receives commission income equal to 15%of the TeleFutura Affiliated Stations net national revenues.

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*Cable Affiliates.*   TeleFuturaNetwork uses cable affiliates in a similar manner as Univision Network. See “UnivisionNetwork and Univision Television Group and Affiliates—*Cable Affiliates*.”

*Galavisión*

The Company also ownsGalavisión, the leading U.S. Spanish-language general entertainment basiccable television network, which is available in 124 Nielsen Designated Market Areas (“DMA”). Accordingto Nielsen Hispanic Television Index, Galavisión reaches approximately 47 millionU.S. cable households and 6.4 million or 81% of Hispanic Cable Plus households,which include satellite providers. According to Nielsen Media Research (“Nielsen”),there are approximately 11.2 million Hispanic households in the United States.The network has achieved record viewership levels since its new programminglaunch in May 2002. In addition, Galavisión’s schedule averages over 50hours of live news, sports, variety and entertainment programming each week.

**Univision Radio**

Univision Radio, headquartered in Dallas, Texas, ownsand operates 69 radio stations in 16 of the top 25 U.S. Hispanic markets and ownsand operates four radio stations in Puerto Rico. Univision Radio’s stationscover approximately 70% of the U.S. Hispanic radio listeners and have 11million listeners weekly.

Univision Radio’s strategy is to acquireunder-performing radio stations with good signal coverage of the targetpopulation and convert the existing station format to a Hispanic-targetedformat. In addition, Univision Radio has acquired radio stations whose radiosignals might eventually be upgraded or improved. Univision Radio programs morethan 50 individual or simulcast radio stations. Most music formats areprimarily variations of regional Mexican, tropical, reggaeton, tejano andcontemporary music styles. The regional Mexican format consists of varioustypes of music played in different regions of Mexico; the tropical formatconsists primarily of salsa, merengue and cumbia music; the reggaetón formatconsists of the current and prevalent form of Latin pop music; the tejanoformat consists of music originated in or indigenous to Texas but based onMexican themes; and the contemporary format consists of popular romantic andpop music forms. Hispanics who may use English along with Spanish, or perhapsfavor English over Spanish, are also reached by six of Univision Radio’sstations in three markets, which are programmed in the classic rock, country,hip hop and rhythmic/contemporary hit formats.

Radio revenues are derivedprimarily from sales of local, national, and network advertising. Accountexecutives at the Company’s various radio stations are responsible forgenerating (local) sales through local advertisers within the stations’respective markets. Sales with national advertisers are generated through KatzHispanic Media (a subsidiary of Clear Channel Communications, Inc.), theCompany’s national representation firm, and through coordination with nationalsales managers at the Company’s radio stations. The Company also sells nationaladvertising through its radio network, which allows an advertiser to place asingle buy that targets multiple stations across the Company’s various marketareas. The Company has special events that range from entertainment concerts tocommunity service events targeted to Hispanics, which are another source ofrevenues for the Company.

**Music Recording and Publishing**

Univision Music Group, launched in 2001, consists ofthe businesses under its wholly-owned subsidiary, Univision Music, Inc. Theprimary business under Univision Music, Inc. is Univision Music LLC, whichowns and operates Univision Records label, Fonovisa Records label, acquiredfrom Televisa in 2002, SGZ Records label, La Calle label, UMG-Mexico andUnivision Music Publishing. Univision Music, Inc. also owns 50% of Disa LLC,a Monterrey, Mexico-based record label and music publisher (“Disa”).

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Univision Music LLC’s membership units are owned 90%by the Company and 10% by Diara, Inc., which is wholly-owned by JoséBehar, President and Chief Executive Officer of Univision Music Group.Univision Music Group is headquartered in Los Angeles, California. See “Notesto Consolidated Financial Statements—3. Related Party Transactions.”

Univision Records, Fonovisa Records, SGZ Records andLa Calle labels have approximately 100 recording artists on their rosters. UnivisionMusic Group, including Disa, is the leader in record sales of Latin music inthe U.S. and Puerto Rico accounting for approximately 41% of the Latin musicand 75% of the regional Mexican music sold in the U.S. in 2005. Univision MusicPublishing is a major publisher of Spanish language songs with a catalog ofapproximately 10,000 published songs.

Disa LLC is operated bythe Chavez family, which owns the remaining 50% interest. Disa is anindependent Spanish-language record label with approximately 100 recordingartists on their roster and owns a large catalog of more than 2,500 masterrecordings of Mexican regional music. The Company has a call right and theChavez family has a put right starting in June 2006 pursuant to which theCompany will purchase the remaining 50% interest for $75,000,000, subject tocertain upward adjustments. See “Notes to Consolidated Financial Statements—14.Investments and Variable Interest Entities.”

**Internet**

Univision Online, Inc.operates the Company’s Internet portal, *Univision.com*,which is primarily directed at Hispanics in the United States and is intendedto appeal to a broad consumer interest, including entertainment, sports, news,personal finance and shopping. In 2001, its first full-year of operations, *Univision.com* became the #1Spanish-language website for U.S. Hispanics according to Nielsen Media Researchand has retained its leadership position ever since. Use of the Internet byU.S. Hispanics is climbing rapidly. In 1998, fewer than 10% of HispanicHouseholds had Internet access. By 2005 the percentage of Hispanic householdswith Internet access more than quadrupled to over 40%. It is expected tocontinue to increase in the upcoming years.

**TheHispanic Audience in the United States**

Management believes that Spanish-language media,in general, and the Company, in particular, have benefited and will continue tobenefit from a number of factors, including projected Hispanic populationgrowth, increasing Hispanic buying power and greater advertiser spending onSpanish-language media. Unless otherwise noted, the data provided below,pertaining to the Hispanic population in the U.S., was derived from GlobalInsights Hispanic Market Report—February 2005, a syndicated service.

*HispanicPopulation Growth and Concentration.**  *The Hispanic population of the U.S. increased by 58%between 1990 and 2000 to 35.3 million according to the 2000 U.S. Census. Thisrate of growth was more than 4 times that of the total U.S. population andapproximately seven times that of the U.S. non-Hispanic population. WhileHispanics accounted for 12.5% of the U.S. population in 2000, the U.S. CensusBureau projects that the Hispanic percentage will grow to approximately 20% ofthe total U.S. population by the year 2020, confirming a fundamental shift inthe ethnic makeup of the country. According to the 2000 U.S. Census, Hispanicsaccounted for 27% of the population of New York City and 46.5% of Los Angeles,the two cities with the largest total populations and largest Hispanicpopulations. Approximately 50% of all Hispanics are located in the eightlargest U.S. Hispanic markets, and the Company owns two or more televisionstations and three or more radio stations in each of these markets. Accordingto U.S. Census estimates published July 1, 2004, there are approximately41.3 million Hispanics living in the United States, which account forapproximately 14% of the U.S. population.

*GreaterHispanic Buying Power.**  *TheHispanic population represents $822 billion estimated Disposable Income in 2006(8.6% of the total U.S. disposable income), an increase of 64% since 2000. 

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Hispanics are expected toaccount for more than $1 trillion of U.S. disposable income (9.7% of the U.S.total) by 2010, outpacing the expected growth in total U.S. disposable income.

In addition to theanticipated growth of the Hispanic population, the Hispanic audience hasseveral other characteristics that the Company believes make it attractive toadvertisers. The Company believes the larger size and younger age of HispanicHouseholds leads Hispanics to spend more per household on many categories ofgoods. Hispanics are expected to continue to account for a disproportionateshare of growth in spending nationwide in many important consumer categories asthe Hispanic population and its disposable income continue to grow. Thesefactors make Hispanics an attractive target audience for many major U.S.advertisers.

**Ratings**

Until December 26, 2005, Univision Network solelysubscribed to Nielsen Media Research’s National Hispanic Television Index(NHTI) which measures only Hispanic audiences. As of December 26, 2005,Univision Network ratings also became available on Nielsen’s national ratingsservice, Nielsen Television Index (NTI), which provides television ratings forall of the major U.S. networks. NTI is based on the National People Metersample which is comprised of approximately 10,000 households and is subscribedto by broadcast networks, cable networks, syndicators, advertisers andadvertising agencies nationwide. The Univision Network will maintain itssubscription to NHTI until September 2007 when the National People Metersample will become the sole sample for both English-language media and Spanish-languagemedia.

*Television.**  *During the last five years, Univision Network hasconsistently ranked first in prime time television among all Hispanic adultsand has consistently had between 95% and 100% of the 20 most widely watchedprograms among all Hispanic Households based on the November NielsenHispanic Television Index.

Among Hispanics, the Spanish-language television shareof prime time viewing continues to increase. Currently in the 2005-2006season 54% of all Hispanic 18-49 year olds watching television in primetime are watching Spanish language programs. This compares with 47% in the 2000-2001season.

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Thefollowing table shows that the Univision Broadcast Networks prime time audienceratings during the last five years are considerably higher than the othernetworks among the age segment most targeted by advertisers:

**PrimeTime Ratings Among Hispanic Adults Aged 18 to 49**

| **MTWTFSS 7:00 PM-11:00 PM**  | ** **   | ** **   | ** ** | **2001**P18-49Average  Audience% | ** **   | **2002**P18-49Average  Audience% | ** ** | **2003**P18-49Average  Audience% | ** **   | **2004**P18-49Average  Audience% | ** ** | **2005**P18-49Average  Audience% | ** **   |
|----------------------------------------------|--------------|--------------|------------|----------------------------------|--------------|----------------------------------|------------|----------------------------------|--------------|----------------------------------|------------|----------------------------------|--------------|
| Univision (UNI)                              |         |         | 9.8        |                             |         |                             | 9.0        |                             |         |                             | 8.6        |                             |         |   | 8.8 |   |   |   | 10.0 |   |   |
| TeleFutura (TF)                              |         |         | —     |                             |         |                             | 1.0        |                             |         |                             | 1.6        |                             |         |   | 2.1 |   |   |   | 1.6 |   |   |
| Telemundo                                    |         |         | 2.5        |                             |         |                             | 2.7        |                             |         |                             | 2.2        |                             |         |   | 3.1 |   |   |   | 2.6 |   |   |
| ABC                                          |         |         | 1.8        |                             |         |                             | 1.6        |                             |         |                             | 1.4        |                             |         |   | 1.4 |   |   |   | 1.4 |   |   |
| CBS                                          |         |         | 1.4        |                             |         |                             | 1.2        |                             |         |                             | 1.1        |                             |         |   | 1.2 |   |   |   | 1.1 |   |   |
| NBC                                          |         |         | 1.9        |                             |         |                             | 1.8        |                             |         |                             | 1.6        |                             |         |   | 1.7 |   |   |   | 1.2 |   |   |
| FOX                                          |         |         | 2.4        |                             |         |                             | 1.8        |                             |         |                             | 2.2        |                             |         |   | 1.8 |   |   |   | 1.6 |   |   |
| WB                                           |         |         | 1.0        |                             |         |                             | 1.0        |                             |         |                             | 0.9        |                             |         |   | 0.9 |   |   |   | 0.7 |   |   |
| UPN                                          |         |         | 1.2        |                             |         |                             | 1.1        |                             |         |                             | 1.0        |                             |         |   | 1.0 |   |   |   | 0.8 |   |   |
| PAX                                          |         |         | 0.2        |                             |         |                             | 0.1        |                             |         |                             | 0.1        |                             |         |   | 0.1 |   |   |   | 0.1 |   |   |
| AZTECA AMERICA                               |         |         | —     |                             |         |                             | —     |                             |         |                             | —     |                             |         |   | 0.3 |   |   |   | 0.6 |   |   |
| SHARE  CALCULATIONS:                         |         |         |       |                             |         |                             |       |                             |         |                             |       |                             |         |   |   |   |   |   |   |   |   |
| Total Ratings                                |         |         | 22.2       |                             |         |                             | 21.3       |                             |         |                             | 20.7       |                             |         |   | 22.4 |   |   |   | 21.7 |   |   |
| UNI+TF Ratings                               |         |         | 9.8        |                             |         |                             | 10.0       |                             |         |                             | 10.2       |                             |         |   | 10.9 |   |   |   | 11.6 |   |   |
| **Univision  Combined Networks’ Share** | *** *** | *** *** | ***44.1*** | ***%***                          | *** *** | *** ***                     | ***46.9*** | ***%***                          | *** *** | *** ***                     | ***49.3*** | ***%***                          | *** *** | *** *** | ***48.7*** | ***%*** | *** *** | *** *** | ***53.5*** | ***%*** | *** *** |

 

Source: Nielsen Hispanic Television Index

Spanish-language television prime time is from7 p.m. to 11 p.m., Eastern and Pacific Standard Times, Sunday throughSaturday. English-language television prime time is from 8 p.m. to11 p.m., Eastern and Pacific Standard Times, Monday through Saturday and7 p.m. to 11 p.m., Eastern and Pacific Standard Times, Sunday.

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In addition, according to the November 2005Nielsen Station Index:

·       11of the 18 full-power UTG O&Os ranked first among Spanish-languagetelevision stations in “total day” in their respective designated market areas,based on total audience rank of adults 18 to 49 years of age. (UTG owns a full-powerstation in Bakersfield, which is a UPN English-language affiliate);

·       four of the 18 full-powerUTG O&Os ranked as the top station in “total day” in their respective designated market areas, English- orSpanish-language, based on total audience rank of adults 18 to 49 years of age.(UTG owns a full-power stationin Bakersfield, which is a UPN English-language affiliate);

·       15of the 18 full-power Univision Affiliated Stations ranked first amongSpanish-language television stations in their respective designated marketareas.

The Miami market did not have a November 2005sweep due to Hurricane Wilma. No audience data are available for five UTGO&O full-power stations and three Univision Affiliated Stations.

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*Radio.**  *Radio ratings are measured by Arbitron, amarketing and research firm serving primarily the radio industry andspecializing in audience ratings-measurement for marketing to advertisers.Arbitron measures radio station listening by market, in various day-parts anddemographics, with data collected from areas throughout a given market. Ratingstrends are released monthly and ratings books are issued each season. UnivisionRadio, according to the Summer 2005 Arbitron ratings book, operates the leadingSpanish-language radio station in the adult 25-54 age group, as measuredby Average Quarter Hour (AQH) audience rating, in 10 of the 15 top U.S.Hispanic radio markets as measured by Arbitron. During this same period, theCompany operated the number one station format in two markets and 18 stationformats ranked among the top-ten radio stations in AQH audience, regardless oflanguage or format, in their respective markets.

**Program License Agreements**

Through its program license agreements (the “ProgramLicense Agreements”) with Grupo Televisa S.A. and its affiliates (“Televisa”)and affiliates of Corporacion Venezolana del Television, C.A. (VENEVISION)(“Venevision”), the Company has the exclusive right until December 2017 toair in the U.S. all Spanish-language programming produced by or for them(with limited exceptions). The Program License Agreements provide the Company’stelevision and cable networks with access to programming to fill up to 100% oftheir daily schedules. Televisa and Venevision programming representedapproximately 39% and 15% in 2005 and 36% and 17% in 2004, respectively, ofUnivision Network’s non-repeat broadcast hours. Televisa and Venevisionprogramming represented approximately 23% and 7%, respectively, of TeleFuturaNetwork’s non-repeat broadcast hours in 2005 and 2004. SeeItem 3. Legal Proceedings.

The Program License Agreements allow the Company long-termaccess to Televisa and Venevision programs and the ability to terminateunsuccessful programs and replace them with other Televisa and Venevisionprograms without paying for the episodes that are not broadcast. This programavailability and flexibility permits the Company to adjust programming on allits networks to best meet the tastes of its viewers.

Televisa and Venevision programs available to theCompany are defined under the Program License Agreements as all programsproduced by or for each of them in the Spanish-language or with Spanishsubtitles other than programs for which they do not own U.S. broadcast rightsor as to which third parties have a right to a portion of the revenues fromU.S. broadcasts (“Co-produced Programs”). Televisa and Venevision have alsoagreed through their affiliates to use their best efforts to coordinate withthe Company to permit the Company to acquire U.S. Spanish-language rightsto certain Co-produced Programs and to special events produced by others,sporting events, political conventions, election coverage, parades, pageantsand variety shows.

In addition, Televisa and Venevision must use goodfaith efforts not to structure arrangements or agreements with respect toprograms in a manner intended to cause such programs not to be available to theCompany as “Programs” pursuant to the Program License Agreement.

In consideration for access to the programming ofTelevisa and Venevision, the Company pays royalties to Televisa and Venevision.For a discussion of how royalties are determined and the amounts paid under theProgram License Agreements, see “Notes to Consolidated Financial Statements—3. RelatedParty Transactions—Program License Agreements.”

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Under the Program License Agreements, Televisa andVenevision also have the right to use, without charge and subject tolimitations, advertising time that we do not either sell to advertisers or usefor our own purposes. The Agreements also provide that the Company willannually swap with each of Televisa and Venevision $10 million ofnon-preemptable advertising time. The Company accounts for this arrangement asa net barter transaction, with no effect on revenues, expenses or net income onan annual basis. Each of Televisa and Venevision may also purchase for its ownuse non-preemptable time at the lowest spot rate for the applicable timeperiod. Televisa received approximately 93,000, 23,000 and 9,000 of preemptableand non-preemptable 30-second commercial advertisements in 2005, 2004 and2003, respectively. Venevision received approximately 84,000, 83,000 and 33,000of preemptable and non-preemptable 30-second commercial advertisements in2005, 2004 and 2003, respectively.

The Company has the right to license Televisa andVenevision programs in Puerto Rico. Before May 2005, we also had a rightof first refusal, which we did not exercise, to license Televisa and Venevision’sprograms in Puerto Rico (subject to preexisting commitments) and, if exercised,we would have paid a program performance fee based on the ratings delivered bythe licensed programs. After May 2005, our rights are exclusive in amanner similar to the overall Program License Agreements (and we also licenseits programs to the Puerto Rico stations and networks), and we are required topay Televisa 12% of Puerto Rico net time sales (calculated in a manner similarto Combined Net Time Sales) and Venevision the greater of 6% of Puerto Rico nettime sales or the amount of a program performance fee based on ratings producedby Venevision programs that the Puerto Rico stations broadcast (but not morethan 12% of Puerto Rico net time sales).

The obligations ofTelevisa and Venevision’s respective affiliates have been guaranteed by, in thecase of Televisa, Grupo Televisa S.A. and, in the case of Venevision,Corporacion Venezolana de Television, C.A. (VENEVISION). Pursuant to theirrespective guarantees, Televisa has agreed to produce each year for the Company’suse at least 8,531 hours of programs, which will be of the quality of programsproduced by Televisa during the calendar year 2000, and Venevision has agreedto use commercially reasonable efforts to produce or acquire programs for theCompany’s use at least to the same extent of quality and quantity as incalendar years 1989, 1990 and 1991.

**Advertising**

During the last three years, no single customer hasaccounted for more than 10% of the Company’s gross revenues.

The Company’s television and radio advertisingrevenues are derived from network advertising, national spot advertising andlocal advertising, and come from diverse industries, with advertising for foodand beverages, personal care products, automobiles, other household goods andtelephone services representing the majority of network advertising revenues. Nationalspot advertising represents time sold to national and regional advertisersbased outside a station’s designated market area and is the means by which mostnew national and regional advertisers begin marketing to Hispanics. Nationalspot advertising primarily comes from new advertisers wishing to test a marketand from regional retailers and manufacturers without national distribution. Toa lesser degree, national spot advertising comes from advertisers wanting toenhance network advertising in a given market. Local advertising revenues aregenerated from both local merchants and service providers and regional andnational businesses and advertising agencies located in a particular designatedmarket area.

Currently, most of theCompany’s television stations do not receive their proportionate share ofadvertising revenues commensurate with their audience share. Approximately 50%of the Company’s radio stations currently receive their proportionate share ofadvertising revenues commensurate with their audience share. The Companystrives to close the gap between audience and revenue share by persuadingadvertisers of the benefits they may achieve by utilizing or increasing theirutilization of Spanish-language 

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televisionand radio advertising. The Company focuses much of its sales efforts ondemonstrating to advertisers its ability to reach the Hispanic audience.

**Marketing**

*Television.**  *Our television network and station marketing accountexecutives are divided into three groups: network sales, national spot salesand local sales. The account executives responsible for network sales targetand negotiate with accounts that advertise nationally. The national spot salesforce represents each broadcast affiliate for all sales placed from outside itsdesignated market areas. The localsales force represents the owned-and-operated stations for all sales placedfrom within its designated market area.

In addition, our television network and stationmarketing sales departments utilize research, including both ratings anddemographic information, to negotiate sales contracts as well as target majornational advertisers that are not purchasing advertising time or who areunder-purchasing advertising time on Spanish-language television.

Galavisión sells advertising time and also utilizes a cableaffiliate relations sales group that is responsible for generating cablesubscriber fee revenues for the Company.

*Radio.*   Ourradio network and station marketing account executives are divided into threegroups: network sales, national spot sales and local sales. The accountexecutives responsible for network and national sales target and negotiate withaccounts that advertise nationally. Univision Radio Corporate Sales representsthe Company’s radio stations for sales placed from outside its designatedmarket areas. The local sales force represents the owned-and-operated stationsfor all sales placed from within its designated market area. In addition,Univision Radio owned-and-operated stations’ sales departments utilizeresearch, including both ratings and demographic information, to negotiatesales contracts as well as target major local, regional, and nationaladvertisers that are not purchasing advertising time or that areunder-purchasing advertising time on Spanish-language and Hispanic-targetedradio stations. The owned-and-operated stations also derive sales from thesponsorship and organization of various special events.

*Music.**  *Univision MusicGroup generates revenues from its music recording and publishing businesses. UniversalMusic & Video Distribution Corp., a division of Universal Music Group,provides sales, distribution and manufacturing services to the Univision MusicGroup.

*Internet.**  *Univision Online, Inc. generates advertisingrevenues primarily from large national advertisers in the United States and isrepresented by a separate sales force. Univision Online, Inc. recognizesprimarily banner and sponsorship advertisement revenues.

**Competition**

Our business is highly competitive. Competition foradvertising revenues is based on the size of the market that the particularmedium can reach, the cost of such advertising and the effectiveness of suchmedium.

The Company’s television business competes for viewersand revenues with other Spanish-language and English-language televisionstations and networks, including the seven English-language broadcasttelevision networks as well as approximately 70 measured cable networks. Manyof these competitors are owned by companies much larger and having financialstrength greater than the Company. Certain of the English-language networks andothers have begun producing Spanish-language programming and simulcastingcertain programming in English and Spanish. Several cable broadcasters haverecently commenced or announced their intention to commence Spanish-languageservices as well.

The Company’s radio business competes for audiencesand advertising revenues with other radio stations of all formats. In addition,the radio broadcasting industry is subject to competition from new mediatechnologies that are being developed or introduced such as (1) satellite-delivereddigital audio 

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radio service, which hasresulted in the introduction of new subscriber based satellite radio serviceswith numerous niche formats; and (2) audio programming by cable systems,direct broadcast satellite systems, Internet content providers, personalcommunications services and other digital audio broadcast formats.

Many of our competitors have more television and radiostations, greater resources (financial or otherwise) and broader relationshipswith advertisers than we do. Furthermore, because our English-languagecompetitors are perceived to reach a broader audience than we do, they havebeen able to attract more advertisers and command higher advertising rates thanwe have.

The Company also competes for audience and revenueswith independent television and radio stations, other media, suppliers of cabletelevision programs, direct broadcast systems, newspapers, magazines and otherforms of entertainment and advertising. The Company’s television affiliateslocated near the Mexican border also compete for viewers with televisionstations operated in Mexico, many of which are affiliated with a Televisanetwork and are owned by Televisa.

The Company’s share of overall television and radioaudience has increased over the past five years. The Company attributes this tothe growth of the U.S. Hispanic population, the quality of our programming andthe quality and experience of our management. Telemundo, a wholly-owned andoperated subsidiary of NBC, a division of General Electric, is the Company’slargest television competitor that broadcasts Spanish-language television programming.In most of the Company’s designated market areas, the Company’s affiliatescompete for audience advertising directly with a station owned by or affiliatedwith Telemundo, as well as with other Spanish-language and English-languagestations. Clear Channel (the largest radio operator in the United States),Radio One, Infinity Broadcasting (a unit of Viacom), Spanish BroadcastingSystem, Entravision Communications, and Liberman Broadcasting are the Company’slargest radio competitors that broadcast Spanish-language radio programming inseveral of the Company’s designated market areas. Additionally, the Companyfaces competition from English-language stations that offer programmingtargeting Hispanic audiences. Clear Channel has established a Hispanic radiodivision and has begun converting stations to Hispanic targeted formats, inEnglish or Spanish, seeking niche formats within the current music available inSpanish or appealing to Hispanics. Radio One converted a station to Spanish andSpanish Broadcasting System has entered into a strategic alliance with Viacomto allow it to promote its radio stations on Viacom outdoor properties. ABCRadio networks and Spanish Broadcasting Systems have joined forces to syndicatethree popular Hispanic morning shows nationally and in markets where theCompany competes.

The rules and policies of the FCC encourageincreased competition among different electronic communications media. As aresult of rapidly developing technology, the Company may experience increasedcompetition from other free or pay systems by which information andentertainment are delivered to consumers, such as direct broadcast satelliteand video dial tone services.

Satellite-delivered audio, includingSirius Satellite Radio (with which the Company had a programming partneragreement from 1998 through January 2004) and XM Satellite Radio, provides a medium for the delivery by satelliteor supplemental terrestrial means of multiple new audio programming formats tolocal and/or national audiences.

Univision Music Group’s major Spanish-languagecompetitors are Sony/ BMG Norte, Universal Latino, WEA Latina and EMI Latin. TheGroup also competes against English-language music companies.

Univision Online competesfor advertising revenues with numerous direct competitors, including Web-basedportals, such as Yahoo! En Español, Terra and AOL Latino, individual Web sitesproviding content, commerce, community and similar features and other mediacompanies, such as those with newspaper or magazine publications, radiostations and broadcast stations or networks.

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**Employees**

As of December 31,2005, the Company employed approximately 4,219 full-time employees. Approximately8% of these employees are located in Chicago, Los Angeles, San Francisco, NewYork and Puerto Rico, and are represented by unions. The Company has collectivebargaining agreements covering the union employees with varying expirationdates through 2010. The Company is negotiating the collective bargainingagreements at the Los Angeles, New York and Puerto Rico television stations andthe New York radio station. Approximately 5% of full-time employees aresubject to collective bargaining agreements that are currently being negotiatedor that expire within one year. Management believes that its relations with itsnon-union and union employees, as well as with the union representatives,are generally good.

**Federal Regulation**

The ownership, operation and sale of television andradio broadcast stations are subject to the jurisdiction of the FCC under theCommunications Act of 1934, as amended (the “Communications Act”). TheCommunications Act and implementing FCC regulations establish an extensivesystem of regulation to which the Company’s stations are subject. The FCC mayimpose substantial penalties for violation of its regulations, including fines,license revocations, denial of license renewal or renewal of a station’slicense for less than the normal term.

*Licensesand Applications.*   Eachtelevision and radio station that we own must be licensed by the FCC. Licensesare granted for periods of up to eight years and we must obtain renewal oflicenses as they expire in order to continue operating the stations. We mustalso obtain FCC approval prior to the acquisition or disposition of a station,the construction of a new station or modification of the technical facilitiesof an existing station. Interested parties may petition to deny suchapplications and the FCC may decline to renew or approve the requestedauthorization in certain circumstances. Although we have generally receivedsuch renewals and approvals in the past, there can be no assurance that we willcontinue to do so in the future.

*Programmingand Operation.**  *The Communications Act requiresbroadcasters to serve the public interest through programming that isresponsive to local community problems, needs and interests. Our stations mustalso adhere to various content regulations that govern, among other things,political and commercial advertising, sponsorship identification, contests andlotteries, television programming and advertising addressed to children, payolaand obscene and indecent broadcasts.

*OwnershipRestrictions.*   FCCrules permit us to own up to two television stations with overlappingcontours where the stations are in different DMAs, where certain specifiedsignal contours do not overlap, where a specified number of separately-ownedfull-power broadcast stations will remain after the combination is created orwhere certain waiver criteria are met. Rules also limit the number ofradio stations that we may own in any single market (defined by Arbitron or bycertain signal strength contours). The FCC’s “cross-ownership rule” permits aparty to own both television and radio stations in the same local market incertain cases, depending primarily on the number of independent media voices inthat market. The “national audience cap” prohibits us from owning stationsthat, in the aggregate, reach more than a specified percentage of the nationalaudience.

In 2003, the FCC adopted changes to these rules thatwould generally relax many of the ownership restrictions discussed above. Exceptwith respect to radio, the effectiveness of these new rules has beenstayed by federal court order and the pre-existing media ownership rules willcontinue to apply until the stay is lifted.

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*AlienOwnership.*   TheCommunications Act generally prohibits foreign parties from having a 20% orgreater interest in a licensee entity or more than a 25% interest in the parententity of a licensee. The Company believes that, as presently organized, itcomplies with the FCC’s foreign ownership restrictions.

*NetworkRegulation.*   FCC rules affect thenetwork-affiliate relationship. Among other things, these rules requirethat network affiliation agreements (i) prohibit networks from requiringaffiliates to clear time previously scheduled for other use, (ii) permitaffiliates to preempt network programs that they believe are unsuitable fortheir audience and (iii) permit affiliates to substitute programs thatthey believe are of greater local or national importance for network programs.

*Cableand Satellite Carriage.*   FCC rules require that television stations make anelection every third year to exercise either “must-carry” or “retransmissionconsent” rights in connection with local cable carriage. Stations which fail tomake a cable carriage election are assumed to have elected “must-carry.”  Stations electing must-carry may requirecarriage on certain channels on cable systems within their market. Must-carryrights are not absolute, however, and are dependent on a number of factors,which may or may not be present in a particular case. Cable systems areprohibited from carrying the signals of a station electing retransmissionconsent until an agreement is negotiated with that station. At this time,must-carry rights extend to digital television signals only in limitedcircumstances. While there are proposals to adopt legislation to broaden suchrights, we cannot predict whether such legislation will be adopted or thedetails of any legislation that may be adopted.

Direct Broadcast Satellite (“DBS”) systems providetelevision programming on a subscription basis to consumers that have purchasedand installed a satellite signal receiving dish and associated decoderequipment. Under the Satellite Home Improvement Act, satellite carriers arepermitted to retransmit a local television station’s signal into its localmarket with the consent of the local television station. If a satellite carrierelects to carry one local station in a market, the satellite carrier must carrythe signals of all local television stations that also request carriage. Alltelevision stations operated by the Company at the time of election made timelyelections for DBS carriage and the Company intends to obtain DBS carriage foreach of its eligible stations.

A number of entities have commenced operation, orannounced plans to commence operation of internet protocol video systems, usingdigital subscriber line (“DSL”), fiber optic to the home (“FTTH”) and otherdistribution technologies. The issue of whether those services are subject tothe existing cable television regulations, including must-carry obligations,has not been resolved. There are proposals in Congress and at the FCC toresolve this issue. We cannot predict whether regulations will be adopted, or,if adopted, what form they might take. Pending such resolution, such systemsmay not retransmit the signals of our television stations without our consent.

*DTV.**  *FCC rules requirefull-power analog television stations, such as ours, to transition fromcurrently-provided analog service to digital (“DTV”) service. A multi-stepchannel election and repacking process is underway pursuant to which DTVstations will be assigned to their ultimate channel for digital transmissions. Weare unable to predict at this time when that process will be completed or whichchannels we will be permanently assigned for digital operation. Federal lawrequires TV stations to operate exclusively in the digital mode and surrenderany additional channels by December 31, 2006. While current legislationrequires the FCC extend that deadline under specific circumstances, proposedlegislation would establish a firm DTV transition deadline. We cannot predictwhether a revised deadline will be adopted, or, if adopted, when that deadlinewill be.

*OtherMatters.**  *The FCC has numerous other regulations andpolicies that affect its licensees, including rules requiringclose-captioning to assist television viewing by the physically handicapped andthe equal employment opportunities (“EEO”) rule requiring broadcastlicensees to provide equal opportunity in employment to all qualified jobapplicants and prohibiting discrimination against any person by broadcaststations based on race, color, religion, national origin or gender. The EEO rule alsorequires 

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each station to widelydisseminate information concerning its full-time job vacancies with limitedexceptions, provide notice of each full-time job vacancy to recruitmentorganizations that have requested such notice and complete a certain number oflonger-term recruitment initiatives within a two-year period. Licensees arealso required to collect, submit to the FCC and/or maintain for publicinspection extensive documentation regarding a number of aspects of theirstation operations.

The foregoing does notpurport to be a complete summary of all of the provisions of the CommunicationsAct, or of the regulations and policies of the FCC there under. Proposals foradditional or revised regulations and requirements are pending before, and areconsidered by Congress and federal regulatory agencies from time to time. Wegenerally cannot predict whether new legislation, court action or regulationsor a change in the extent of application or enforcement of current laws andregulations, would have an adverse impact on our operations.

**ITEM 1A.**        RiskFactors

You should carefullyconsider the following discussion of risks and the other information includedin this report in evaluating the Company and our business. The risks describedbelow are not the only ones facing the Company. Additional risks that we arenot presently aware of or that we currently believe are immaterial may alsoimpair our business operations.

**Wereceive from Televisa a significant amount of our network programming and weare engaged in litigation with Televisa.**

We receive substantial amounts of programming for ourthree networks from Televisa, S.A. de C.V., pursuant to a Second Amendedand Restated Programming License Agreement dated as of December 19, 2001(the “PLA”), and a separate letter agreement of the same date granting usrights to rebroadcast Televisa's feeds of certain Mexican League soccer games(the “Soccer Agreement”). The programming we receive under the PLA and theSoccer Agreement account for a majority of our prime time programming and asubstantial portion of the overall programming on all three networks. In May2005, Televisa filed a lawsuit against us, alleging certain breaches of the PLAand the Soccer Agreement, as well as violations of Televisa's copyrights incertain programs. In August 2005, we answered Televisa's First AmendedComplaint and asserted several Counterclaims against Televisa and its parentcompany, Grupo Televisa, S.A., for breaches of the PLA, the Soccer Agreement,and other agreements between our companies. Televisa filed a motion to dismisscertain of our counterclaims; that motion was denied by the Court on November 17,2005. Thereafter, Televisa and Grupo Televisa filed their Answer to ourCounterclaims. In that document, they asserted a number of affirmative defensesto our claims against them, and added, for the first time, an assertion that wewere in material breach of the PLA and the Soccer Agreement. On February 16,2006, Televisa and Grupo Televisa served a purported notice of materialbreaches under the PLA and the Soccer Agreement. On March 2, 2006, weresponded to Televisa’s purported notice of material breaches. In our response,we asserted that the notice was procedurally defective and that Televisa’sbreach claims were not, in any event, well-founded.

We do not believe that weare in breach of these agreements at all and certainly not in material breach.We have paid certain amounts sued for under protest and have filed or will filecounterclaims to recover such amounts. The PLA provides for cure periods of 90days for material monetary breaches and 180 days for material non-monetarybreaches. We intend to defend the litigation and pursue our counterclaimsvigorously. If the Company were held to be in material breach and unable toeffect a timely cure, Televisa could elect to terminate the PLA. (See Notes toConsolidated Financial Statements—“10. Contingencies.”)

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**Cancellationsor reductions of advertising could reduce our revenues.**

We have in the past derived, and we expect to continueto derive, a significant amount of our revenues from advertisers. Other thansome television network advertising that is presold on an annual basis, wegenerally have not obtained, and we do not expect to obtain, long-termcommitments from advertisers. Therefore, advertisers generally may cancel, reduce or postponeorders without penalty. Cancellations, reductions or delays in purchases ofadvertising could, and often do, occur as a result of a strike; a generaleconomic downturn; an economic downturn in one or more industries or in one ormore geographic areas; changes in population, demographics, audience tastes andother factors beyond our control; or a failure to agree on contractual terms.In addition, major incidents of terrorism, war, natural disasters or similarevents may require us to program without any advertising, which in turn wouldreduce our revenues and results of operations.

In addition, our stationscompete for audiences and advertising directly with other television and radiostations and the competitive climate can change rapidly and unpredictably inany particular geographic market. Other television and radio stations maychange their formats or programming, a new station may adopt a format tocompete directly with one or more of our stations, or stations might engage inaggressive promotional campaigns. As a result of this competition, ourstations’ audience ratings, market shares and advertising revenues may declineand any adverse change in a particular market could have a material adverseeffect on the revenue of our stations located in that market and on the resultsof operations of our business as a whole.

**Becausethe U.S. Hispanic population is concentrated geographically, our results ofoperations are sensitive to the economic conditions in particular markets andnegative events in those markets could reduce our revenues.**

Approximately 33% of allU.S. Hispanics live in the Los Angeles, New York and Miami-Fort Lauderdalemarkets and the top ten U.S. Hispanic markets collectively account forapproximately 56% of the U.S. Hispanic population. Our revenues are similarlyconcentrated in these key markets. As a result, an economic downturn, increasedcompetition, or another significant negative event in these markets couldreduce our revenues and results of operations more dramatically than othercompanies that do not depend as much on these markets.

**Wemust successfully respond to rapid changes in technology, services andstandards to remain competitive.**

Technology in the video, telecommunications, radio,music and data services used in the entertainment and Internet industries ischanging rapidly. Advances in technologies or alternative methods of productdelivery or storage or certain changes in consumer behavior driven by these orother technologies and methods of delivery and storage could have a negativeeffect on our businesses. Examples of such advances in technologies includevideo-on-demand, satellite radio, new video formats and downloading from theInternet. For example, devices that allow users to view or listen to televisionor radio programs on a time-delayed basis and technologies, which enable usersto fast-forward or skip advertisements, such as DVRs and portable digitaldevices, may cause changes in consumer behavior that could affect theattractiveness of our offerings to advertisers and could, therefore, adverselyaffect our revenues. In addition, further increases in the use of portabledigital devices which allow users to view or listen to content of their ownchoosing, in their own time, while avoiding traditional commercialadvertisements, could adversely affect our radio and television broadcastingadvertising revenues. Other cable providers and direct-to-home satelliteoperators are developing new techniques that allow them to transmit morechannels on their existing equipment to highly targeted audiences, reducing thecost of creating channels and potentially leading to the division of thetelevision marketplace into more specialized niche audiences. More televisionoptions increase competition for viewers and competitors 

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targetingprogramming to narrowly defined audiences may gain an advantage over us fortelevision advertising and subscription revenues. The ability to anticipate andadapt to changes in technology on a timely basis and exploit new sources ofrevenue from these changes will affect our ability to continue to grow andincrease our revenue.

**Ourvoting structure could delay or prevent us from being acquired and couldprevent our stockholders from realizing a premium for their shares of commonstock.**

Mr.  A. Jerrold Perenchio beneficially owns all of our outstanding Class Pcommon stock, which gives him ten votes per share compared to the one vote pershare of all of our other capital stock. As of December 31, 2005, andassuming no exercise of options or warrants, Mr. Perenchio controlledapproximately 61% of the voting power of the Class A and P common stock(which vote together to elect all of our directors except two) andapproximately 58% of our overall voting power. Therefore, Mr. Perenchiohas control over all matters submitted to our stockholders for vote (subject tocertain matters that require supermajority board approvals and subject to classvoting required by law), including election of directors, proxy contests,mergers and other transactions that could give our stockholders the opportunityto realize a premium over the then prevailing market price for their shares ofcommon stock. In addition, if either of our Class T and Class VDirectors votes against a merger, consolidation, reorganization or sale ofsubstantially all of our assets or liquidation, we will not be permitted to enterinto such a transaction unless the transaction is approved by a majority of ourBoard and 60% of our shares outstanding (treating all shares as having a singlevote for these purposes). Further, in such a transaction not resulting in achange in control, a vote of a Class T or Class V Director will berequired if the powers, rights and privileges of the holders of the Class Tand/or Class V common stock would be adversely affected.

**Becauseour television stations rely on “must carry” rights to obtain cable carriage,new laws or regulations that eliminate or limit the scope of these rights orfailures could significantly reduce our ability to obtain cable carriage andtherefore revenues.**

Pursuant to the “must carry” provisions of the CableTelevision Consumer Protection and Competition Act of 1992, televisionbroadcast stations may elect to require that a cable operator carry its signalif the cable operator is located in the same market as the broadcast station.However, in such cases the broadcast station cannot demand compensation fromthe cable operator. Such mandatory carriage is commonly referred to as “must-carry.”The future of “must carry” rights is uncertain, especially as they relate tothe carriage of digital television. Under the current FCC rules, must-carryrights extend to digital television signals only in limited circumstances. Whileproposed legislation to broaden such rights has been proposed, we cannotpredict whether such legislation will be adopted or the details of anylegislation that may be adopted. Our full-power television stations often relyon “must-carry” rights to obtain cable carriage on specific cable systems. Newlaws or regulations that eliminate or limit the scope of these cable carriagerights could significantly reduce our ability to obtain cable carriage, whichwould reduce our ability to distribute our programming and consequently ourability to generate revenues from advertising.

In addition, a number ofentities have commenced operation, or announced plans to commence operation ofinternet protocol video systems, using digital subscriber line (“DSL”), fiberoptic to the home (“FTTH”) and other distribution technologies. The issue ofwhether those services are subject to the existing cable televisionregulations, including must-carry obligations, has not been resolved. There areproposals in Congress and at the FCC to resolve this issue. We cannot predictwhether must-carry rights will cover such IPTV systems. In the event IPTVsystems gain a significant share of the video distribution marketplace, and newlaws and regulations fail to provide adequate must-carry rights, our ability todistribute our programming to the maximum number of potential viewers will belimited and consequently our revenue potential will be limited.

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**Wemay need to allocate significant amounts of our cash flow to make payments onour indebtedness, which in turn could reduce our financial flexibility andability to fund other activities.**

At December 31,2005, we had total debt, including capital lease obligations of approximately$1.5 billion, including $314.0 million drawn under our revolvingcredit facility, which expires July 18, 2006. Although we are negotiatinga new bank credit facility and expect to enter into a new credit agreement inthe first quarter of 2006, we cannot assure you that we will have a newfacility in place in a timely manner or on terms acceptable to us. See“Item 7 Management’s Discussion and Analysis of Financial Condition andResults of Operations—Liquidity and Capital Resources.” Our capital leaseobligations and outstanding amounts under our current credit facility couldhave important consequences depending on our financial needs. For example,because it could require us to dedicate a substantial portion of our cash flowfrom operations to payments on our indebtedness, the indebtedness could:

·       reducethe availability of our cash flow to fund working capital, capitalexpenditures, acquisitions, investments and other general corporate purposes;

·       limitour flexibility in planning for or reacting to downturns or fluctuations in ourbusiness; and

·       require us to seekalternative sources of debt or equity financing.

**Failure  to properly manage our rapid growth coulddistract our management or waste our resources.**

In general, we maycontinue to grow rapidly and this strategy could involve numerous risks,including the risk that certain acquisitions may prove unprofitable or fail togenerate anticipated cash flows. In addition, our growth strategy could resultin a strain on our infrastructure and internal systems or require us to recruitadditional senior management. We may not be able to fully realize the benefitsexpected from cross-promotion between our television, radio, music and Internetbusiness. Failure to effectively integrate newly-acquired companies ornewly-entered businesses could undermine the potential benefits intended byacquisitions or entry into new businesses, could distract our management orcould require us to unexpectedly allocate substantial resources (financial andotherwise) to the integration efforts.

**Manyof our competitors have greater resources and are more diversified than we are.**

There has beenconsolidation in the media industry and our competitors include marketparticipants with interests in multiple media businesses which are oftenvertically integrated and/or are part of large diversified corporate groupswith a variety of other operations that can provide stable sources of earningsthat may allow them better to offset fluctuations in the financial performanceof their media operations. In addition, these competitors may have moreresources with which to compete for ideas, storylines and scripts created bythird parties as well as for actors, musicians, directors and other personnelrequired for production. The resources of these competitors may also give theman advantage in acquiring other businesses or assets that we might also beinterested in acquiring.

**Wehave a significant amount of goodwill and other intangible assets and we maynever realize the full value of our intangible assets.**

Goodwill and intangibleassets totaled approximately $6.5 billion at December 31, 2005, primarilyattributable to acquisitions in the past three years. At least annually, theCompany tests its goodwill and intangible assets for impairment. Impairment mayresult from, among other things, deterioration in our performance, adversemarket conditions, adverse changes in applicable laws and regulations,including changes that restrict the activities of or affect the products orservices sold by our businesses and a variety of other factors. The amount ofany quantified impairment must be expensed immediately as a charge tooperations. Depending on future circumstances, we may never realize the fullvalue of our intangible 

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assets. Anyfuture determination of impairment of a significant portion of our goodwill andother intangibles would have an adverse effect on our financial condition andresults of operations.

**Wecannot assure you that the decision to explore strategic alternatives willsuccessfully result in a transaction.**

We announced on February 8, 2006 that our Boardof Directors has decided to begin a process to explore strategic alternativesto enhance shareholder value. As previously announced, Univision intends toexplore strategic alternatives, including but not limited to the raising ofcapital through the sale of securities or assets of the Company, arecapitalization, strategic acquisitions, and the combination, sale or mergerof the Company with another entity. The process to explore strategicalternatives is subject to a number of uncertainties, both within and outsideof our control, including those related to prevailing market conditions. As aresult, we cannot assure you that the process will successfully result in atransaction or, if it does, that it would occur within a specified time period.We do not intend to disclose developments with respect to the exploration ofstrategic alternatives unless and until our Board of Directors has approved aspecific transaction.

**If theexploration of strategic alternatives does result in a transaction, we areunable to predict what the market prices of our Class A Common Stock wouldbe after announcement of the transaction. We cannot assure you that if theexploration of strategic alternatives results in a transaction, it will produceany increase for our stockholders in the market value of their holdings in ourcompany. In addition, the market prices of our Class A Common Stock couldbe highly volatile for several months as we explore strategic alternatives andmay continue to be more volatile if and when a transaction is announced or weannounce that we are no longer exploring strategic alternatives.**

**ITEM 1B.**       UnresolvedStaff Comments

The Company has receivedno written comments regarding its periodic or current reports from the staff ofthe Securities and Exchange Commission that were issued 180 days or morepreceding the end of its 2005 fiscal year and that remain unresolved.

**ITEM 2.**                Properties

At December 31,2005, the principal buildings owned or leased by the Company and used primarilyby the television and radio segments are described below:

**Principal Properties of the Company**

| **Location(1)** | ** ** | ** ** | ** ** | **Aggregate  Size of Property   in Square Feet  (Approximate)** | ** ** | **Owned  or  Leased** | ** ** | **Lease  Expiration  Date** | ** ** |
|-----------------|------------|------------|------------|------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------------|------------|
| Miami, FL       |       |       | 315,123    |                                                                                     |       | Owned                 |       |                        | —     |   |   |
| Miami, FL       |       |       | 68,595     |                                                                                     |       | Leased                |       |                        | 12/31/12   | (2) |   |
| Los Angeles, CA |       |       | 166,272    |                                                                                     |       | Owned                 |       |                        | —     |   |   |
| Houston, TX     |       |       | 107,489    |                                                                                     |       | Owned                 |       |                        | —     |   |   |
| New York, NY    |       |       | 92,517     |                                                                                     |       | Leased                |       |                        | 6/30/15    |   |   |

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(1)          The Miami, Los Angelesand New York locations are used primarily by the television and Internetbusinesses. The Houston location, which was purchased in 2004 and is currentlybeing renovated, will be used primarily by the television and radio businesses.

(2)          Option to renewavailable.

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In December 2003, the Company entered into alease for a three-story building with approximately 92,500 square feet for therelocation of its owned and/or operated television and radio stations andstudio facilities in Puerto Rico. The building is to be constructed and ownedby the landlord, with occupancy of the premises expected during the latter partof 2007. The lease was amended in June 2005 and, among other things, theterm of the lease was extended from 40 to 50 years.

The Miami owned facilities primarily house UnivisionNetwork and TeleFutura Network administration, operations (including uplinkfacilities), sales, production and news. In addition, Galavisión operationsoccupy space in Univision Network’s facilities. The Company’s Miami televisionstations, WLTV and WAMI, occupy leased facilities. The Company broadcasts itsprograms to the Company’s affiliates on three separate satellites from fourtransponders. In addition, the Company uses a fifth transponder for news feeds.

The Company owns or leases remote antenna space andmicrowave transmitter space near each of its owned-and-operated stations. Also,the Company leases space in public warehouses and storage facilities, as needed**,**near some of its owned-and-operated stations.

The Company believes thatits principal properties, whether owned or leased, are suitable and adequatefor the purposes for which they are used and are suitably maintained for suchpurposes. Except for the inability to renew any leases of property on whichantenna towers stand or under which the Company leases transponders, theinability to renew any lease would not have a material adverse effect on theCompany’s financial condition or results of operations since the Companybelieves alternative space on reasonable terms is available in each city.

**ITEM 3.**                LegalProceedings

Televisa, S.A. de C.V. (“Televisa”) and the Companyare parties to a program license agreement (“PLA”) that provides our threetelevision networks with a majority of its prime time programming and asubstantial portion of its overall programming. The Company currently pays alicense fee to Televisa for programming, subject to certain upward adjustments.On June 16, 2005, Televisa filed an amended complaint in the UnitedStates District Court for the Central District of California alleging breach byus of our PLA with Televisa, including breach for our alleged failure to pay Televisaroyalties attributable to revenues from one of Univision’s programs, theCompany’s alleged unauthorized editing of certain Televisa programs and relatedcopyright infringement claims, a claimed breach of a soccerrights side-letter to the PLA, and a claim that we have not beenproperly carrying out a provision of the PLA that gives Televisa the secondaryright to use our unsold advertising inventory. Televisa seeks monetaryrelief in an amount not less than $1.5 million for breach, anticipated breach,declaratory relief against the Company’s ability to recover amounts ofapproximately $5.0 million previously paid in royalties to Televisa, and aninjunction against our alteration of Televisa programming without Televisa’sconsent. On August 15, 2005, the Company filed an answer to the amendedcomplaint denying Televisa’s claims and also filed counterclaims allegingvarious breaches of contract and covenants by Televisa. The Company seeksmonetary damages and injunctive relief.

On September 20,2005, Televisa filed a motion to dismiss certain of the Company’s counterclaims.On November 17, 2005, the District Court denied that motion in itsentirety. Thereafter, Televisa changed counsel and on January 31, 2006—afterseveral extensions of time granted by the Company—Televisa filed its answer tothe Company’s counterclaims. Without asserting any new matters of substance,Televisa in its answer now alleges that its claims rise to the level of amaterial breach of the PLA and delivered a purported notice of material breachon February 16, 2006. On March 2, 2006, we responded to Televisa’spurported notice of material breaches. In our response, we asserted that thenotice was procedurally defective and that Televisa’s breach claims were not,in any event, well-founded. We do not believe that we are in breach of ouragreements with Televisa at all and certainly not in material breach. Univisionintends 

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to takeall action necessary to ensure Televisa’s continued performance under the PLAuntil its expiration in 2017. We intend to defend the litigation and pursue ourcounterclaims vigorously. (See Notes to Consolidated Financial Statements—“10. Contingencies.”)

**ITEM 4.**                Submissionof Matters to a Vote of Security Holders

No matters were submittedto a vote of shareholders during the fourth quarter of the fiscal year coveredby this report.

**Executive Officers**

The executive officers of the Company serve at thediscretion of its Board of Directors subject to certain employment agreements.Messrs. Cahill, Hobson, Kranwinkle, and Rodriguez have employmentagreements with the Company.

Theexecutive officers of the Company as of December 31, 2005 were as follows:

| **Name**               | ** ** | ** ** | ** ** | **Age** | ** ** | **Position**                                                                            | ** ** |
|------------------------|------------|------------|------------|---------|------------|-----------------------------------------------------------------------------------------|------------|
| A. Jerrold  Perenchio  |       |       | 75         |    |       | Chairman  of the Board and Chief Executive Officer                                      |       |
| Robert V. Cahill       |       |       | 74         |    |       | Vice  Chairman and Corporate Secretary                                                  |       |
| Andrew W. Hobson       |       |       | 44         |    |       | Senior  Executive Vice President, Chief Strategic  Officer, and Chief Financial Officer |       |
|                   |       |       |       |    |       |                                                                                    |       |
| C. Douglas  Kranwinkle |       |       | 65         |    |       | Executive  Vice President and General Counsel                                           |       |
| Ray Rodriguez          |       |       | 54         |    |       | President and Chief  Operating Officer                                                  |       |

 

Mr. Perenchio has been Chairman of the Board and ChiefExecutive Officer of the Company since December 1992. From December 1992through January 1997, he was also the Company’s President. Mr. Perenchiohas owned and been active in Chartwell Partners LLC since it was formed in1983. Chartwell Partners LLC is an investment firm that is active in the mediaand communications industry.

Mr. Cahill has been Vice Chairman and Secretary of theCompany since May 2001. From December 1992 until May 2001, Mr. Cahillwas Secretary and Vice President of the Company. Mr. Cahill was ExecutiveVice President and General Counsel of Chartwell Partners, an affiliate of Mr. Perenchio,from 1985 to June 30, 2004.

Mr. Hobson has been Senior Executive Vice Presidentand Chief Strategic Officer since July 2004. In June 2005, Mr. Hobsonwas named to the additional position of Chief Financial Officer. Mr. Hobsonwas Executive Vice President of the Company from January 2001 through July 2004.From 1994 to 2000, Mr. Hobson was an Executive Vice President of UnivisionNetwork. Mr. Hobson served as a Principal at Chartwell Partners LLC, anaffiliate of Mr. Perenchio, from 1990 to 1994.

Mr. Kranwinkle has been Executive Vice President andGeneral Counsel of the Company since September 2000. From January 1989until September 2000, Mr. Kranwinkle was a partner of O’Melveny & MyersLLP, a law firm. While at O’Melveny & Myers LLP, Mr. Kranwinklewas the managing partner of its New York office from December 1993 until June 1997and the firm’s managing partner from April 1996 until September 2000.

Mr. Rodriguez has been President and Chief OperatingOfficer of the Company since February 2005. Prior to February 2005, Mr. Rodriguezhad been President and Chief Operating Officer of Univision Network since December 1992and President and Chief Operating Officer of TeleFutura Network and Galavisiónsince August 2001. Mr. Rodriguez serves as a member of the Board ofDirectors of the Company.

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**PART II**

**ITEM 5.**                Marketfor Registrant’s Common Equity, and Related Stockholder Matters and IssuerPurchases of Equity Securities

**(a)**           *MarketInformation*

The Company’s Class ACommon Stock is listed on the New York Stock Exchange and is traded under thesymbol “UVN”. The table below lists the high and low sales prices for the Class ACommon Stock as reported on the New York Stock Exchange for each full quarterlyperiod within the two most recent fiscal years.

| ** **     | ** ** | **Price Range** | ** ** |
|----------------|------------|----------------------|------------|
| ** **     | ** ** | **High**             | ** ** | **Low** | ** ** |
| 2004           |       |                 |       |   |   |
| First Quarter  |       | $                    | 40.05      |   | $ | 32.00 |   |
| Second Quarter |       | $                    | 36.79      |   | $ | 29.54 |   |
| Third Quarter  |       | $                    | 35.22      |   | $ | 28.38 |   |
| Fourth Quarter |       | $                    | 32.94      |   | $ | 27.30 |   |
| 2005           |       |                 |       |   |   |
| First Quarter  |       | $                    | 30.20      |   | $ | 25.80 |   |
| Second Quarter |       | $                    | 28.48      |   | $ | 25.00 |   |
| Third Quarter  |       | $                    | 29.55      |   | $ | 25.15 |   |
| Fourth Quarter |       | $                    | 31.15      |   | $ | 23.52 |   |

 

**(b)**          *Holders*

Therewere approximately 437 stockholders of record of Class A CommonStock, 4 stockholders of Class P Common Stock, 2 stockholders of Class TCommon Stock and 2 stockholders of Class V Common Stock as of February 13,2006.

**(c)**           *CashDividends*

TheCompany has never declared or paid dividends on any class of its common stock.The Company’s current credit agreement restricts the payment of cash dividendson common stock. The Company does not anticipate paying any cash dividends onits common stock in the foreseeable future. Future dividend policy will dependon the Company’s earnings, capital requirements, financial condition and otherfactors considered relevant by the Board of Directors.

**(d)**          *SecuritiesAuthorized for Issuance Under Equity Compensation Plans*

The information requiredby this item is contained under the caption “Equity Compensation PlanInformation” in a definitive Proxy Statement, which the registrant will filewith the Securities and Exchange Commission no later than 120 days after December 31,2005 (the “Proxy Statement”) and such information is incorporated herein byreference.

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**(e)**           *IssuerPurchases of Equity Securities*

A summary of theCompany’s purchases of its Class A Common Stock during the three monthsended December 31, 2005 under its $500 million stock repurchase planauthorized by its Board of Directors on February 17, 2005 is as follows:

| **Period**                 | ** ** | ** ** | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid per Share** | ** ** | **Total Number  of Shares  Purchasedas Part  of Publicly  Announced Plans** | ** ** | **Maximum Dollar  Value of Shares  that May Yet Be  Purchased  Under the Plan** | ** ** |
|----------------------------|------------|------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------|------------|
| October 1 - 31, 2005  |       |       | 4,235,900  |                                             |       |                                             | $          | 25.33                                                                                                |       |                                                                                                                    |       | 4,235,900 |   |   |   |   |   |   |
| November 1 - 30, 2005 |       |       | —     |                                             |       |                                             | —     |                                                                                                 |       |                                                                                                                    | —     |   |   |   |   |   |   |
| December 1 - 31, 2005 |       |       | —     |                                             |       |                                             | —     |                                                                                                 |       |                                                                                                                    | —     |   |   |   |   |   |   |
| Total                      |       |       | 4,235,900  |                                             |       |                                             | $          | 25.33                                                                                                |       |                                                                                                                    |       | 4,235,900 |   |   |   | $ | — |   |   |
|                            |            |            |            |                                                  |            |                                                  |            |                                                                                                      |            |                                                                                                                         |            |  |  |  |  |  |  |  |  |  |  |

 

On November 1, 2005,the Company’s Board of Directors approved the repurchase of an additional $500million of its outstanding Class A Common Stock. The share repurchase willbe made in the open market or negotiated transactions as market and businessconditions warrant, subject to securities laws and other legal requirements. Theshare repurchase plan will expire on December 31, 2006. Through December 31,2005, there were no share repurchases under the stock repurchase plan approvedon November 1, 2005.

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**ITEM6.**                Selected FinancialData

Presentedbelow is the selected historical financial data of Univision CommunicationsInc.

**FIVE-YEARSUMMARY OF SELECTED FINANCIAL DATA**

**(In thousands, except share and per-share data)**

| ** **                                                                              | ** ** | **2005(a)** | ** ** | **2004(a)** | ** ** | **2003(b)** | ** ** | **2002**    | ** ** | **2001**    | ** ** |
|-----------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| **Income Statement Data (for the years ended  December 31)**                       | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** |
| Net revenues                                                                            |       | $           | 1,952,531  |        | $          | 1,786,935   |       | $           | 1,311,015  |        | $          | 1,091,293 |   | $ | 887,870 |   |
| Direct operating  expenses (excluding depreciation and amortization)                    |       | 729,973     |       | 663,457     |       | 513,741     |       | 471,395     |       | 355,761     |       |
| Selling, general  and administrative expenses (excluding depreciation and amortization) |       | 559,281     |       | 528,841     |       | 363,674     |       | 287,960     |       | 231,610     |       |
| Cost reduction  plan                                                                    |       | 30,289      | (c)        | —      |       | —      |       | —      |       | —      |       |
| Depreciation and  amortization                                                          |       | 93,223      |       | 101,382     |       | 84,904      |       | 78,818      |       | 84,069      |       |
| Operating income                                                                        |       | 539,765     |       | 493,255     |       | 348,696     |       | 253,120     |       | 216,430     |       |
| Interest expense,  net                                                                  |       | 84,048      |       | 66,061      |       | 71,322      |       | 87,233      |       | 53,463      |       |
| Loss on  extinguishment of debt                                                         |       | —      |       | 467         |       | 4,122       |       | —      |       | 3,875       |       |
| Amortization of  deferred financing costs                                               |       | 3,309       |       | 3,470       |       | 3,832       |       | 3,846       |       | 2,488       |       |
| Stock dividend                                                                          |       | (1,812      | )          | (6,453      | )          | —      |       | —      |       | —      |       |
| Equity loss in  unconsolidated subsidiaries and other                                   |       | (959        | )          | 1,942       |       | 10,218      |       | 15,907      |       | 47,449      |       |
| Gain on change in  Entravision ownership interest                                       |       | —      |       | —      |       | (1,611      | )          | (1,898      | )          | (4,552      | )          |
| Nontemporary  decline in fair value of investments                                      |       | 81,877      | (d)        | —      |       | —      |       | —      |       | —      |       |
| Noncontrolling  interest in variable interest entities                             |       | 4,120       |       | 7,311       |       | —      |       | —      |       | —      |       |
| Income before  taxes                                                                    |       | 369,182     |       | 420,457     |       | 260,813     |       | 148,032     |       | 113,707     |       |
| Provision for  income taxes                                                             |       | 182,003     | (e)        | 164,574     |       | 105,386     |       | 61,504      |       | 61,296      |       |
| Net income                                                                              |       | 187,179     |       | 255,883     |       | 155,427     |       | 86,528      |       | 52,411      |       |
| Preferred stock  dividends/accretion                                                    |       | —      |       | —      |       | —      |       | (25         | )          | (70         | )          |
| Net income  available to common stockholders                                            |       | $           | 187,179    |        | $          | 255,883     |       | $           | 155,427    |        | $          | 86,503 |   | $ | 52,341 |   |
| As adjusted net  income available to common stockholders(f)                             |       | $           | 187,179    |        | $          | 255,883     |       | $           | 155,427    |        | $          | 86,503 |   | $ | 88,863 |   |
| **Earnings Per Share Available to Common  Stockholder**                                 |       |        |       |        |       |        |       |        |       |        |       |
| Basic Earnings Per  Share                                                               |       |        |       |        |       |        |       |        |       |        |       |
| Net income                                                                              |       | $           | 0.59       |        | $          | 0.79        |       | $           | 0.61       |        | $          | 0.39 |   | $ | 0.25 |   |
| As adjusted net  income(f)                                                              |       | $           | 0.59       |        | $          | 0.79        |       | $           | 0.61       |        | $          | 0.39 |   | $ | 0.43 |   |
| Weighted average  common shares outstanding                                             |       | 315,223,555 |       | 322,742,581 |       | 253,853,027 |       | 224,344,335 |       | 208,110,727 |       |
| Diluted Earnings Per Share                                                              |       |        |       |        |       |        |       |        |       |        |       |
| Net income                                                                              |       | $           | 0.54       |        | $          | 0.72        |       | $           | 0.55       |        | $          | 0.34 |   | $ | 0.22 |   |
| As adjusted net  income(f)                                                              |       | $           | 0.54       |        | $          | 0.72        |       | $           | 0.55       |        | $          | 0.34 |   | $ | 0.37 |   |
| Weighted average  common shares outstanding                                             |       | 344,445,842 |       | 353,019,601 |       | 283,838,587 |       | 256,337,046 |       | 239,817,378 |       |
| **Balance Sheet Data (at end of year)**                                                 |       |        |       |        |       |        |       |        |       |        |       |
| Current assets                                                                          |       | $           | 633,600    |        | $          | 638,489     |       | $           | 520,566    |        | $          | 384,958 |   | $ | 610,936 |   |
| Total assets                                                                            |       | 8,128,336   |       | 8,227,126   |       | 7,642,917   |       | 3,402,396   |       | 3,178,387   |       |
| Current  liabilities                                                                    |       | 909,521     |       | 291,515     |       | 288,633     |       | 223,222     |       | 269,680     |       |
| Long-term debt,  including capital leases                                               |       | 969,299     |       | 1,227,680   |       | 1,368,346   |       | 1,432,233   |       | 1,662,018   |       |
| Stockholders’  equity                                                              |       | 5,090,900   |       | 5,387,704   |       | 5,102,977   |       | 1,558,088   |       | 813,280     |       |
| **Other Data**                                                                          |       |        |       |        |       |        |       |        |       |        |       |
| Net cash provided  by operating activities                                              |       | $           | 415,259    |        | $          | 424,977     |       | $           | 329,777    |        | $          | 155,199 |   | $ | 217,295 |   |
| Net cash used in  investing activities                                                  |       | (325,618    | )          | (231,114    | )          | (197,360    | )          | (795,281    | )          | (816,175    | )          |
| Net cash (used in)  provided by financing activities                                    |       | (180,109    | )          | (80,672     | )          | (91,391     | )          | 294,904     |       | 925,181     |       |

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(a)        Includes the Company’s variable interest entities as ofMarch 31, 2004. See “Notes to Consolidated Financial Statements—14. Investmentsand Variable Interest Entities.”

(b)       The Company acquired Hispanic Broadcasting Corporation September 22,2003.

(c)        The Company reported a Cost Reduction Plan charge inthe fourth quarter of 2005. See “Notes to Consolidated Financial Statements—6. AccountsPayable and Accrued Liabilities.”

(d)       Charge related to the Company’s investments inEntravision and St. Louis/Denver LLC. See “Notes to Consolidated FinancialStatements—14. Investments and Variable Interest Entities.”

(e)        The Company reported no tax benefit related to the$81,877 charge related to its investments. See “Notes to Consolidated FinancialStatements—11. Income Taxes.”

(f)         Represents net income per share as ifStatement of Financial Accounting Standards No. 142 “Goodwill and OtherIntangibles” was effective January 1, 2000.

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**ITEM7.**                Management’sDiscussion and Analysis of Financial Condition and Results of Operations

**Executive Summary**

UnivisionCommunications Inc., together with its wholly-owned subsidiaries (the “Company,”“we,” “us” and “our”), operates in four business segments:

·                    *Television:*The Company’s principal business segmentis television, which consists primarily of the Univision and TeleFuturanational broadcast networks, the Company’s owned and/or operated televisionstations and the Galavisión cable television network. For the twelve monthsended December 31, 2005, the television segment accounted forapproximately 70% of the Company’s net revenues.

·                    *Radio:*UnivisionRadio is the largest Spanish-language radio broadcasting company in the UnitedStates. The Company has owned Univision Radio since the Company acquiredHispanic Broadcasting Corporation in September 2003. For the twelve monthsended December 31, 2005, the radio segment accounted for approximately 18%of the Company’s net revenues.

·                    *Music**:* The Company’smusic recording and music publishing business, launched in April 2001,includes the Univision Records label, Fonovisa Records label, SGZ Recordslabel, La Calle label and Disa Records, which the Company began to consolidateon March 31, 2004. See “Notes to Consolidated Financial Statements - 14.Investments and Variable Interest Entities.” For the twelve months ended December 31, 2005, the music segmentaccounted for approximately 11% of the Company’s net revenues.

·                    *Internet:*Univision Online, Inc. operatesthe Company’s Internet portal, *Univision.com*,which provides Spanish-language content directed at Hispanics in the U.S.,Mexico and Latin America. For the twelve months ended December 31, 2005,the Internet segment accounted for approximately 1% of the Company’s netrevenues.

Television net revenuesare generated from the sale of network, national and local spot advertisingtime, subscriber fees and sales commissionson national advertising aired on Univision affiliate television stations lessagency commissions, music license fees and station compensation paid toan affiliate. Univision Radio’s primary source of revenues is the sale ofbroadcasting time for advertising, with a majority of revenues coming fromlocal advertising and the remainder primarily from national spot and networkadvertising. The music business derives its revenues primarily from the sale ofrecorded music and the Internet business primarily from online advertising.

Direct operating expensesconsist primarily of programming, license fees, news and technical costs.  License fees related to our program licenseagreements (the “Program License Agreements”) with Grupo Televisa S.A. and itsaffiliates (“Televisa”) and affiliates of Corporacion Venezolana delTelevision, C.A. (VENEVISION) (“Venevision”) accounted for approximately 14%for the twelve months ended December 31, 2005 and 2004, respectively, ofour total direct operating and selling, general and administrative expenses.

On November 2, 2005,the Company announced a cost reduction plan that reduced its workforce andabandoned certain less profitable programming in an effort to achievesustainable improvement in financial performance. The plan included reducingapproximately 5.6% of the workforce by eliminating job redundancies andinefficiencies. The Company incurred a pre-tax charge of approximately $30.3million in the fourth quarter of 2005. The plan was substantially completedduring the fourth quarter of 2005. See “Notes to Consolidated Financial Statements—6. AccountsPayable and Accrued Liabilities.”

In the fourth quarter of2005, the Company recorded a charge of $24.7 million related to an other thantemporary decline in the value of its Entravision stock. The charge is based onthe fair value of our investment in Entravision common stock of $7.12 per shareon the last trading day of 2005 compared to our average cost basis of $7.79 pershare. Any gain or loss on future transactions involving Entravision stock willbe measured by comparing the newly established cost basis of $7.12 per share tothe fair value of 

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theEntravision stock at the transaction date. Entravision’s stock price at March 9,2006 was $7.60. In the second quarter 2005, the Company also recorded a chargeof $48.3 million related to the other than temporary decline in the value ofits Entravision stock, bringing the full year 2005 charge to $73.1 million. See“Notes to ConsolidatedFinancial Statements—14. Investments and Variable InterestEntities.”

On March 2, 2006, theCompany and Entravision Communications Corporation completed the repurchase byEntravision of 7 million shares of Entravision Class U common stock held by theCompany, for an aggregate purchase price of $51.1 million, or $7.30 per share.As part of its acquisition of Hispanic Broadcasting Corporation in 2003, theCompany reached an agreement with the United States Department of Justice toreduce its stake in Entravision to 15% non-voting ownership interest on a fullyconverted basis, as defined in the consent decree with the DOJ, by March 26,2006.  This share repurchase transaction, coupled with the recent closingof the Company’s purchase of Entravision’s radio stations serving the SanFrancisco/San Jose market for approximately 12.6 million shares of EntravisionClass U common stock, will reduce the Company’s non-voting ownership intereston a fully converted basis in Entravision to approximately 14.9%.

On November 7, 2002the Company entered into a limited liability company agreement with RobertsBrothers Broadcasting, LLC (“Roberts”), called St. Louis / Denver LLC (the “LLC”).The majority of the LLC’s assets are FCC licenses. On October 1, 2005, theCompany performed its annual impairment testing analysis and obtained anappraised value of the Denver and St. Louis FCC licenses. Based in part on thisappraisal, the Company determined that the fair value of the FCC licenses wasless than the book carrying value and recorded an impairment charge of $8.8million in the fourth quarter of 2005. See “Notes to Consolidated Financial Statements—14. Investmentsand Variable Interest Entities.”

On November 2, 2005,the Company acquired the Spanish-language broadcast rights in the U.S. to the2010 and 2014 Fédération Internationale de Football Association (“FIFA”) WorldCup soccer games and other 2007-2014 FIFA events. A series ofpayments totaling $325 million is due over the term of the agreement. Inaddition to these payments, and consistent with past coverage of the World Cupgames, the Company will be responsible for all costs associated withadvertising, promotion and broadcast of the World Cup games, as well as theproduction of certain television programming related to the World Cup games.

On June 30, 2005, theCompany acquired two stations, WLII and WSUR, in Puerto Rico for $190,000,000,excluding acquisition costs. These stations had been reported by the Company asvariable interest entities since March 31, 2004. See “Notes toConsolidated Financial Statements—14. Investments and Variable Interest Entities.”

Until December 26,2005, Univision Network solely subscribed to Nielsen Media Research’s NationalHispanic Television Index (NHTI) which measures only Hispanics audiences. As ofDecember 26, 2005, Univision Network ratings also became available onNielsen’s national ratings service, Nielsen Television Index (NTI), whichprovides television ratings for all of the major U.S. networks. NTI is based onthe National People Meter sample which is comprised of approximately 10,000households and is subscribed to by broadcast networks, cable networks,syndicators, advertisers and advertising agencies nationwide. The UnivisionNetwork will maintain its subscription to NHTI until September 2007 whenthe National People Meter sample will become the sole sample for bothEnglish-language media and Spanish-language media.

On January 1, 2006,the Company acquired radio stations KBRG(FM) and KLOK(AM) serving the SanFrancisco/San Jose, California market from Entravision for approximately $90million. The Company paid for the acquisition with shares of Entravision commonstock held by the Company.

On November 1, 2005,the Company’s Board of Directors approved the repurchase of $500 million of itsoutstanding Class A Common Stock. The share repurchases will be made inthe open market or negotiated transactions as market and business conditionswarrant, subject to securities laws and other legal requirements. The sharerepurchase plan will expire on December 31, 2006. No shares have beenrepurchased pursuant to the November plan. On February 17, 2005, theCompany announced that its 

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Board ofDirectors had approved the repurchase of up to $500 million of its outstanding Class ACommon Stock. On October 24, 2005, the Company completed repurchasingapproximately $500 million, 19,096,600 shares, in accordance with its stockrepurchase plan.

Televisa, S.A. de C.V. (“Televisa”)and the Company are parties to a program license agreement (“PLA”) thatprovides our three television networks with a majority of its prime timeprogramming and a substantial portion of its overall programming. The Companycurrently pays a license fee to Televisa for programming, subject to certainupward adjustments. On June 16, 2005, Televisa filed an amendedcomplaint in the United States District for the Court Central District ofCalifornia alleging breach by us of our PLA with Televisa, including breach forour alleged failure to pay Televisa royalties attributable to revenues from oneof Univision’s programs, the Company’s alleged unauthorized editing of certainTelevisa programs and related copyright infringement claims, a claimed breachof a soccer rights side-letter to the PLA, and a claim thatwe have not been properly carrying out a provision of the PLA that givesTelevisa the secondary right to use our unsold advertising inventory. Televisaseeks monetary relief in an amount not less than $1.5 million for breach,anticipated breach, declaratory relief against the Company’s ability to recoveramounts of approximately $5.0 million previously paid in royalties to Televisa,and an injunction against our alteration of Televisa programming withoutTelevisa’s consent. On August 15, 2005, the Company filed an answer to theamended complaint denying Televisa’s claims and also filed counterclaimsalleging various breaches of contract and covenants by Televisa. The Companyseeks monetary damages and injunctive relief.

On September 20,2005, Televisa filed a motion to dismiss certain of the Company’s counterclaims.On November 17, 2005, the District Court denied that motion in itsentirety. Thereafter, Televisa changed counsel and on January 31, 2006—afterseveral extensions of time granted by the Company—Televisa filed its answer tothe Company’s counterclaims. Without asserting any new matters of substance,Televisa in its answer now alleges that its claims rise to the level of amaterial breach of the PLA and delivered a purported notice of material breachon February 16, 2006. On March 2, 2006, we responded to Televisa’spurported notice of material breaches. In our response, we asserted that thenotice was procedurally defective and that Televisa’s breach claims were not,in any event, well-founded. We do not believe that we are in breach of ouragreements with Televisa at all and certainly not in material breach. Univisionintends to take all action necessary to ensure Televisa’s continued performanceunder the PLA until its expiration in 2017. We intend to defend the litigationand pursue our counterclaims vigorously. (See Notes to Consolidated FinancialStatements—“10. Contingencies.”)

As of March 31, 2004,the Company adopted Financial Accounting Standards Board Interpretation No. 46,“Consolidation of Variable Interest Entities.” (“FIN 46”). Under the guidelinesof FIN 46, the Company began consolidating its investment in Disa Records, S.A.de C.V. (“Disa”) and WLII/WSUR Inc. (“WLII”), which owns two televisionstations in Puerto Rico, as variable interest entities. Prior periods were notrestated upon the adoption of FIN 46. The Company consolidated the balancesheets of the variable interest entities as of March 31, 2004 and theirstatements of operations beginning April 1, 2004. The consolidation ofthese entities had a positive impact on net revenues and operating income butno impact on net income. On June 30, 2005, the Company acquired WLII forapproximately $190,000,000, excluding acquisition costs. See “Notes toConsolidated Financial Statements—14. Investments and Variable Interest Entities” for the impactof the variable interest entities.

**CriticalAccounting Policies**

***Program Costs forTelevision Broadcast***

Program costs pursuant tothe Program License Agreements are expensed monthly by the Company as a licensefee, which is based principally on a percentage of the Company’s televisioncombined net time sale, as defined in the PLA. All other costs incurred inconnection with the production of or purchase of rights to programs that areready, available and to be broadcast within one year are classified as currentassets, while costs of those programs to be broadcast subsequently areconsidered non-current. Program 

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costsare charged to operating expense as the programs are broadcast. In the case ofmulti-year sports contracts, program costs are charged to operating expensebased on the flow-of-income method over the term of the contract.

***Revenue Recognition***

Net revenues are comprisedof gross revenues from the Company’s television and radio broadcast, cable,music and Internet businesses, including subscriber fees, commission incomepayable to the Company by the affiliated stations, less agency commissions,music license fees paid by television and radio and compensation costs paid tocertain affiliated stations. The Company’s television and radio gross revenuesare recognized when advertising spots are aired. The music business, whichincludes Univision Music Group and Disa, recognizes revenues from the sale ofrecorded music upon delivery of products to third parties based on terms F.O.B.destination, less an allowance for returns, cooperative advertising anddiscounts. The Internet business recognizes primarily banner and sponsorshipadvertisement revenues. Banner revenues are recognized as “impressions” aredelivered and sponsorship revenues are recognized ratably over their contractperiod. “Impressions” are defined as the number of times that an advertisementappears in pages viewed by users of the Company’s online properties.Revenues are recognized when collection of the resulting receivable is reasonablyassured.

***Accounting forIntangibles and Impairment***

Goodwill and otherintangible assets with indefinite lives, such as broadcast licenses, are notamortized and are tested for impairment annually. The television and radiobroadcast licenses have an indefinite life because the Company expects to renewthem and renewals are routinely granted with little cost, provided that thelicensee has complied with the applicable rules and regulations of theFederal Communications Commission (“FCC”). Over the last five years, alltelevision and radio licenses that have been up for renewal have been renewedand there has been no compelling challenge to the license renewal. Thetechnology used in broadcasting is not expected to be replaced by anothertechnology in the foreseeable future. Therefore, the television and radiobroadcast licenses and the related cash flows are expected to continueindefinitely. These indefinite cash flows indicate that the broadcast licenseshave an indefinite useful life. Therefore, the license would not be amortizeduntil its useful life is deemed to no longer be indefinite. The licenses, otherindefinite-lived intangible assets and goodwill are tested annually forimpairment, or more frequently if circumstances indicate a possible impairmentexists.

Goodwill is allocated tovarious reporting units, which are either the operating segments or onereporting level below the operating segment. For purposes of performing theimpairment test of goodwill as required by SFAS No. 142, we established thefollowing reporting units: Television, Radio, Music and Internet. SFAS No. 142requires the Company to compare the fair value of the reporting unit to itscarrying amount on an annual basis to determine if there is potential goodwillimpairment. If the fair value of the reporting unit is less than its carryingvalue, an impairment loss is recorded to the extent that the fair value of thegoodwill within the reporting unit is less than its carrying value. SFAS No. 142also requires the Company to compare the fair value of an indefinite-livedintangible asset to its carrying amount. If the carrying amount of anindefinite-lived intangible asset exceeds its fair value, an impairment loss isrecognized. Fair value for broadcast licenses, other indefinite-livedintangible assets and goodwill are determined based on discounted cash flows,market multiples or appraised values as appropriate. The Company evaluated itslicenses, other indefinite-lived intangible assets and goodwill, as of October 1,2005, and concluded that it does not have an impairment loss related to theseassets. In the future, the Company may incur impairment charges under SFAS No. 142if market values decline and the Company does not achieve expected cash flowgrowth rates.

***Investment Valuation***

The Company monitors thevalue of its equity and cost method investments for indicators of impairment,including changes in market conditions and/or the operating results of itsunderlying 

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investmentsthat may result in the inability to recover the carrying value of theinvestment. The Company will record an impairment charge if and when itbelieves any investment has experienced a decline that is other than temporary.

***Related PartyTransactions***

Televisa and Venevision,which are principal stockholders of the Company, have program licenseagreements with us that provide our three television networks with asubstantial amount of programming. The Company currently pays a license fee ofapproximately 15% of television net revenues to Televisa and Venevision fortheir programming, subject to certain upward adjustments. The Company believesthat the program license agreements and all other agreements with Televisa andVenevision have been negotiated as arms-length transactions.

***Stock-basedCompensation***

On January 1, 2006,the Company adopted Financial Accounting Standards Board Statement (“FASB”) No. 123(revised 2004), Share-Based Payment (“SFAS No. 123R”). SFAS No. 123Rrequires all share-based payments to employees, including grants of employeestock options and restricted stock, to be recognized in the financialstatements based on their fair values (i.e., footnote disclosure is no longeran alternative to financial statement recognition). Prior to the adoption ofSFAS No. 123R, the Company accounted for employee stock-based compensationusing the intrinsic-value method prescribed in Accounting Principles BoardOpinion (“APB Opinion”) No. 25, “Accounting for Stock Issued to Employees”and related interpretations.

**RecentAccounting Pronouncements**

In December 2004, the FASB issued SFAS No. 123R,which replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”)and supersedes APB Opinion No. 25, “Accounting for Stock Issued toEmployees.” SFAS No. 123R requires all share-based payments to employees,including grants of employee stock options, to be recognized in the financialstatements based on their fair value. The pro forma disclosures previouslypermitted under SFAS No. 123 no longer will be an alternative to financialstatement recognition. We were required to adopt SFAS No. 123R beginning January 1,2006. Under SFAS No. 123R, we must determine the appropriate fairvalue model to be used for valuing share-based payments, the amortizationmethod for compensation cost and the transition method to be used at the dateof adoption. The transition methods include prospective and retrospectiveadoption options. Under the retrospective option, prior periods may be restatedeither as of the beginning of the year of adoption or for all periods presented.The prospective method requires that compensation expense be recorded for allunvested stock options and restricted stock at the beginning of the firstquarter of adoption of SFAS No. 123R, while the retrospective methodswould record compensation expense for all unvested stock options and restrictedstock beginning with the first period restated.

On September 14,2005, the Compensation Committee of the Board of Directors of the Companyapproved the acceleration of vesting of all unvested stock options outstandingwhose exercise price was above the then current market price of $25.56. TheCompensation Committee’s decision to accelerate the vesting of the affectedstock options was based upon the issuance of SFAS No. 123R, which willrequire the Company to treat unvested stock options as compensation expenseeffective January 1, 2006. Because the Company accounts for stock basedcompensation using the intrinsic value method prescribed in APB Opinion No. 25,and because these options were priced above current market on that date, theacceleration of vesting of these options did not require accounting recognitionin the Company’s financial statements. Vesting acceleration increased pro formastock based compensation under the provisions of SFAS No. 123 by approximately$59 million before income tax. Assuming that there are no modifications to theaffected options, the Company believes that it will not be required torecognize any compensation 

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expensein future periods associated with the affected options. As of December 31,2005, substantially all of the Company’s outstanding options have been expenseddue to the acceleration.

On January 1, 2006,the Company adopted SFAS No. 123R and elected to use the modifiedprospective method as prescribed in the statement; therefore, periods prior tothe adoption of SFAS No. 123R will not be restated. Under the modifiedprospective method, this statement will be applied to new awards granted afterthe time of adoption, as well as to the unvested portion of previously grantedequity-based awards for which the requisite service had not been rendered as ofJanuary 1, 2006. Under SFAS No. 123R, the estimated fair value of newawards will be charged to income on a straight-line basis over the requisiteservice period, which is generally the vesting period. The fair value of eachnew stock award will be estimated on the date of grant using the Black-Scholesoption-pricing model, which is the same model that was used by the Companyprior to the adoption of SFAS No. 123R. The Company expects that stock-basedcompensation recognized under SFAS No. 123R will reduce its dilutedearnings per share by approximately $0.02 for the year ended December 31,2006.

In December 2004, the FASB issued SFAS No. 153,“Exchange of Nonmonetary Assets,” which is an amendment of APB Opinion No. 29,“Accounting for Nonmonetary Transactions.” The guidance in APB Opinion No. 29is based on the principle that exchanges of nonmonetary assets should bemeasured based on the fair value of the assets exchanged, with certainexceptions to that principle. SFAS No. 153 eliminates the exception fornonmonetary exchanges of similar productive assets and replaces it with ageneral exception for exchanges of nonmonetary assets that do not havecommercial substance. A nonmonetary exchange has commercial substance if thefuture cash flows of the entity are expected to change significantly as aresult of the exchange. The adoption of SFAS No. 153 is effective fornonmonetary asset exchanges occurring in fiscal periods beginning after June 15,2005. The effect on the Company’s financial position and results of operationswill primarily depend on the significance of television and radio stationexchange transactions the Company enters into in the future.

**Overview**

Incomparing our results of operations for the twelve months ended 2005 (“2005”)with those ended 2004 (“2004”), the following should be noted:

·       OnNovember 2, 2005, the Company announced a cost reduction plan that reducedits workforce and abandoned certain less profitable programming in an effort toachieve sustainable improvement in financial performance. The plan includedreducing approximately 5.6% of the workforce by eliminating job redundanciesand inefficiencies. The Company incurred a pre-tax charge of approximately$30,289,000 in the fourth quarter of 2005 consisting of employee terminationsof $17,761,000 and abandonment of programming costs and other costs of$12,528,000. See “Notes to Consolidated Financial Statements—6. AccountsPayable and Accrued Liabilities.”

·       TheCompany recorded a charge for a nontemporary decline in the fair value of itsEntravision investment of $73,077,000 in 2005. The Company also recorded animpairment charge of $8,800,000 in the fourth quarter of 2005 in connectionwith its Denver and St. Louis LLC investment. The Company did not record a taxbenefit related to these transactions. See “Notes to Consolidated FinancialStatements—14. Investments and Variable Interest Entities.”

·       Underthe guidelines of FIN 46, the Company began consolidating its investment inDisa and WLII, which owned two television stations in Puerto Rico, as variableinterest entities as of March 31, 2004. The Company consolidated thebalance sheets of the variable interest entities as of March 31, 2004 andtheir results of operations beginning April 1, 2004. The impact of thevariable interest entities on the results of operations of the Company isexplained below for the twelve months ended December 31, 2005. OnJune 30, 2005, the Company acquired WLII for $190,000,000, excludingacquisition costs. Also see “Notes to Consolidated Financial Statements—14. Investmentsand Variable Interest Entities.”

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·       OnFebruary 17, 2005, the Company announced that the Board of Directors hadapproved the repurchase of up to $500 million of its outstanding Class ACommon Stock. On October 24, 2005, the Company completed repurchasingapproximately $500 million, 19,096,600 shares, in accordance with its stockrepurchase plan.

·       OnNovember 1, 2005, the Company’s Board of Directors approved the repurchaseof an additional $500 million of its outstanding Class A Common Stock. Theshare repurchases will be made in the open market or negotiated transactions asmarket and business conditions warrant, subject to securities laws and otherlegal requirements. The share repurchase plan will expire on December 31,2006. No shares have been repurchased pursuant to the plan.

·       In the first quarter of2004, the Company recorded stock dividend income of $4,641,000 ($4,100,000 netof tax) related to the periods June 8, 2001 to December 31, 2003 inconnection with its investment in Equity Broadcasting Corporation.

**YearEnded December 31, 2005 (“2005”), Compared to Year Ended December 31,2004 (“2004”)**

***Revenues.******  ***Net revenueswere $1,952,531,000 in 2005 compared to $1,786,935,000 in 2004, an increase of$165,596,000 or 9.3%. Existing operations accounted for 7.1% of the increase,while 2.2% was attributable to the variable interest entities that began to beconsolidated by the Company on March 31, 2004. The Company’s televisionsegment revenues were $1,360,694,000 in 2005 compared to $1,261,840,000 in2004, an increase of $98,854,000 or 7.8%. The growth was attributable to theCompany’s three television networks, resulting primarily from increasedviewership, higher rates for advertising spots and increased subscriber fees.The owned-and-operated stations also had increased revenues attributableprimarily to the Los Angeles, Dallas, Phoenix, Houston and Chicago markets. TheCompany’s radio segment had revenues of $359,107,000 in 2005 compared to$328,392,000 in 2004, an increase of $30,715,000 or 9.4%. The growth wasattributable primarily to radio network advertising and the stations in theChicago, Dallas, Los Angeles, San Antonio and Phoenix markets. The Company’smusic segment generated revenues of $206,444,000 in 2005 compared to$178,560,000 in 2004, an increase of $27,884,000 or 15.6%. The variableinterest entity, Disa, had net revenues of $76,523,000 in 2005 compared to$50,947,000 in 2004, an increase of $25,576,000. The remainder of the increasein the music segment is due primarily to the success of several album releasesin 2005. The Company’s Internet segment had revenues of $26,286,000 in 2005compared to $18,143,000 in 2004, an increase of $8,143,000 or 44.9%, primarilyrelated to new advertisers and increased spending from existing advertisers.

***Expenses.*****  **Direct operating expenses increased to $729,973,000in 2005 from $663,457,000 in 2004, an increase of $66,516,000 or 10%. Existingoperations accounted for 6.7% of the increase, while 3.3% was attributable tothe variable interest entities. The Company’s television segment directoperating expenses were $536,209,000 in 2005 compared to $488,446,000 in 2004,an increase of $47,763,000 or 9.8%. The increase is due to increased licensefee expense of $16,479,000 paid under our Program License Agreements, increasedprogramming costs of $34,314,000 offset by a decrease in technical cost of$3,030,000. The Company’s radio segment had direct operating expenses of$65,772,000 in 2005 compared to $60,121,000 in 2004, an increase of $5,651,000or 9.4%. The increase is due to increased programming costs of $4,914,000 andtechnical cost of $737,000. The Company’s music segment’s direct operatingexpenses were $115,364,000 in 2005 compared to $102,316,000 in 2004, anincrease of $13,048,000. The music segment’s variable interest entity costrelated to Disa was $11,854,000 and the remainder of the increase wasattributable to increased production costs resulting from higher sales. TheCompany’s Internet segment had direct operating expenses of $12,628,000 in 2005compared to $12,574,000 in 2004, an increase of $54,000 or .4%. As a percentageof net revenues, the Company’s direct operating expenses increased from 37.1%in 2004 to 37.4% in 2005.

Selling, general andadministrative expenses increased to $559,281,000 in 2005 from $528,841,000 in2004, an increase of $30,440,000 or 5.8%. Existing operations accounted for4.7% of the increase, while 

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1.1% wasattributable to the variable interest entities. The Company’s televisionsegment selling, general and administrative expenses were $335,215,000 in 2005compared to $311,916,000 in 2004, an increase of $23,299,000 or 7.5%. Theincrease is due to increased selling costs of $10,225,000 reflecting highersales in 2005, increased general and administrative compensation costs of $7,005,000,increased research costs of $6,703,000 offset by a decrease in various othercosts of $634,000. The Company’s radio segment had selling, general andadministrative expenses of $151,985,000 in 2005 compared to $151,690,000 in2004, an increase of $295,000. The increase is due in part to increased sellingcosts of $5,853,000 reflecting higher sales in 2005 offset in part by decreasesin compensation related costs of $1,341,000, legal fees of $1,131,000, rentexpense of $1,117,000, insurance costs of $571,000 and various other costssavings of $1,398,000. The Company’s music segment had selling, general andadministrative expenses of $59,595,000 in 2005 compared to $52,964,000 in 2004,an increase of $6,631,000. The increase is due to variable interest entitycosts related to Disa of $4,178,000 and various other cost increases of$2,453,000. The Company’s Internet segment had selling, general andadministrative expenses of $12,486,000 in 2005 compared to $12,271,000 in 2004,an increase of $215,000. As a percentage of net revenues, the Company’sselling, general and administrative expenses decreased from 29.6% in 2004 to28.6% in 2005.

***Cost Reduction Plan.******  ***On November 2, 2005, theCompany announced a cost reduction plan that reduced its workforce andabandoned certain less profitable programming in an effort to achievesustainable improvement in financial performance. The plan included reducingapproximately 5.6% of the workforce by eliminating job redundancies andinefficiencies. The Company incurred a pre-tax charge of approximately$30,289,000 in the fourth quarter of 2005 consisting of employee terminationsof $17,761,000 and abandonment of programming costs and other costs of$12,528,000. The cost reduction charge related the television segment was$29,993,000, the radio segment $73,000, the music segment $33,000 and theInternet segment $190,000.

***Depreciation and Amortization.******  ***Depreciation and amortizationdecreased to $93,223,000 in 2005 from $101,382,000 in 2004, a decrease of$8,159,000 or 8%. Existing operations accounted for a decrease of 9.5%, whilethe variable interest entities accounted for an increase of 1.5%. The Company’sdepreciation expense decreased to $79,095,000 in 2005 from $82,157,000 in 2004,a decrease of $3,062,000 primarily related to the disposal and acceleration ofdepreciation expense of certain assets. The Company had amortization ofintangible assets of $14,128,000 and $19,225,000 in 2005 and 2004,respectively, a decrease of $5,097,000, which is due primarily to eliminationof amortization of radio intangible assets related to advertising contracts anda reduction of music intangible assets being amortized, primarily artistcontracts. Depreciation and amortization expense for the television segmentincreased by $898,000 to $66,927,000 in 2005 from $66,029,000 in 2004 due toincreased depreciation expense of $213,000 and amortization expense of $685,000,primarily related to WLII. Depreciation and amortization expense for the radiosegment decreased by $4,414,000 to $11,649,000 in 2005 from $16,063,000 in 2004due to a decrease in amortization of intangibles of $2,861,000 resultingprimarily from the elimination of radio intangible assets related toadvertising contracts and a decrease in depreciation expense of $1,553,000.Advertiser contracts were being amortized over a nine-month period that expiredin June 2004. Depreciation and amortization expense for the music segmentdecreased by $2,566,000 to $12,877,000 in 2005 from $15,443,000 in 2004,primarily related to a reduction of intangible assets being amortized relatedto artist contracts. These contracts acquired from Fonovisa are being amortizedover 10 years but most will be fully amortized by the end of 2005. Depreciationand amortization expense for the Internet segment decreased by $2,077,000 to$1,770,000 in 2005 from $3,847,000 in 2004, which was primarily related to adecrease in depreciation expense related to equipment fully depreciated in2004.

***Operating Income.****  *As a result of the above factors, operating incomeincreased to $539,765,000 in 2005 from $493,255,000 in 2004, an increase of$46,510,000 or 9.4%. Existing operations accounted for 7.4% of the increase,while the variable interest entities accounted for an increase of 2%. TheCompany’s television segment had operating income of $392,350,000 in 2005 and$395,449,000 in 2004, a decrease of $3,099,000 or .8%. The Company’s radiosegment had operating income of $129,628,000 in 2005 compared 

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to $100,518,000 in2004, an increase of $29,110,000 or 29%. The Company’s music segment hadoperating income of $18,575,000 in 2005 compared to $7,837,000 in 2004, anincrease of $10,738,000. The Company’s Internet segment had an operating lossof $788,000 in 2005 compared to a loss of $10,549,000 in 2004, an improvementof $9,761,000. As a percentage of net revenues, the Company’s operating incomewas 27.6% in 2004 and 2005.

***Interest Expense, Net.****  *Interest expense increased to $84,048,000 in 2005from $66,061,000 in 2004, an increase of $17,987,000 or 27.2%. The increase isdue to higher interest rates and borrowings related to the Company’s stockrepurchase plan and acquisition of WLII. See “Liquidity and Capital Resources—DebtInstruments.”

***Stock dividend.******  ***Equity Broadcasting Corporation stockdividend income decreased to $1,812,000 in 2005 from $6,453,000 in 2004, adecrease of $4,641,000. This decrease is related to stock dividend income of$4,641,000 ($4,100,000 net of tax) recorded in the first quarter 2004 for theperiods June 8, 2001 to December 31, 2003 based on the Company’sinitial investment in Equity Broadcasting Corporation of approximately$26,000,000 made in June 2001. The Series A convertible preferredstock has a mandatory redemption date of June 8, 2008.

***Noncontrolling interest of variable interest entities.***   Underthe guidelines of FIN 46, the Company is required to consolidate the operatingresults of Disa, which is owned 50% by the Company and 50% by the Chavezfamily, until the Company’s June 30, 2005 acquisition of WLII, WLII, whichhad been owned 100% by Raycom. On June 30, 2005, the Company acquired WLIIfor approximately $190,000,000, excluding acquisition costs, see “Notes toConsolidated Financial Statements - 14. Investments and Variable Interest Entities.”  The Company recorded a noncontrollinginterest loss of $4,120,000 in 2005, which consists of a charge of $5,975,000related to the Chavez family’s 50% ownership of Disa and income of $1,855,000related to Raycom’s 100% ownership of WLII. In 2004, the Company recorded anoncontrolling interest loss of $7,311,000 related to its variable interestentities. By recording noncontrolling interest (the portion not owned by theCompany), the results of operations of the VIEs do not have an impact on our netincome. The use of the equity method of accounting prior to March 31, 2004and the consolidation of Disa since April 1, 2004 have the same effect onthe Company’s net income. WLII’s net income has no impact on our net incomethrough June 30, 2005 since Raycom owned 100% of WLII. Beginning July 1,2005, WLII’s net income is included in the Company’s consolidated net income.

***Equity (Income) Loss in Unconsolidated Subsidiariesand Other.******  ***Equity(income) loss in unconsolidated subsidiaries and other improved by $2,901,000to income of $959,000 in 2005 from a loss of $1,942,000 in 2004, due primarilyto lower losses on equity method investments of $1,873,000 and a decrease inother losses of $1,028,000.

***Nontemporary decline in fair value of investment.******  ***The Company recorded a charge for anontemporary decline in the fair value of its investments in Entravision and St.Louis/Denver LLC of $81,877,000. The charges related to the Entravision and St.Louis/Denver LLC investments are $73,077,000 and $8,800,000, respectively. See “Notes to Consolidated Financial Statements—14. Investmentsand Variable Interest Entities.”

***Provision for Income Taxes.******  ***In 2005, the Company reportedan income tax provision of $182,003,000, representing $125,482,000 of currenttax expense and $56,521,000 of deferred tax expense. In 2004, the Companyreported an income tax provision of $164,574,000, representing $98,703,000 ofcurrent tax expense and $65,871,000 of deferred tax expense. The totaleffective tax rate was 49.3% in 2005 and 39.1% in 2004. The Company’s effectivetax rate of 49.3% for 2005 is higher than the 39.1% for 2004 due primarily tothe charges for the nontemporary decline in the fair value of the Entravisionand St. Louis/Denver LLC investments, for which no tax benefit was recorded,and a tax benefit recorded in the second quarter of 2004 of $4,737,000,resulting from the resolution of various federal and state income tax audits.

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***Net Income.******  ***As a result of the abovefactors, the Company reported net income in 2005 of $187,179,000 compared tonet income of $255,883,000 in 2004, a decrease of $68,704,000 or 26.8%.Following the adoption of FIN 46 on March 31, 2004, the Company’sinclusion of the variable interest entity, Disa, and WLII while it was a VIE,in the Company’s results of operations did not have an impact on our net income.The equity method of accounting and the VIE consolidation of Disa have the sameeffect on the Company’s net income. While WLII was a VIE, WLII’s net income hadno impact on our net income since Raycom owned 100% of WLII. As a percentage ofnet revenues, the Company’s net income decreased from 14.3% in 2004 to 9.6% in2005.

***Operating Income before Depreciation and Amortization.******  ***Operating income beforedepreciation and amortization increased to $632,988,000 in 2005 from$594,637,000 in 2004, an increase of $38,351,000 or 6.4%.  Operating income before depreciation andamortization includes a cost reduction plan charge of $30,289,000. Existingoperations accounted for 4.5% of the increase, while 1.9% was attributable tothe variable interest entities. As a percentage of net revenues, the Company’soperating income before depreciation and amortization decreased from 33.3% in2004 to 32.4% in 2005.

TheCompany uses the key indicator of “operating income before depreciation andamortization” primarily to evaluate the Company’s operating performance and forplanning and forecasting future business operations. In addition, this keyindicator is commonly used as a measure of performance for broadcast companies,is used by investors to measure a company’s ability to service debt and othercash needs, and provides investors the opportunity to evaluate the Company’sperformance as it is viewed by management. Operating income before depreciationand amortization is not, and should not be used as, an indicator of or analternative to operating income, net income or cash flow as reflected in the consolidatedfinancial statements, is not a measure of financial performance under generallyaccepted accounting principles (“GAAP”) and should not be considered inisolation or as a substitute for measures of performance prepared in accordancewith GAAP. Since the definition of operating income before depreciation andamortization may vary among companies and industries it should not be used as ameasure of performance among companies. In accordance with SEC guidelines, theCompany is providing on a consolidated basis a reconciliation of the non-GAAPterm operating income before depreciation and amortization to net income, whichis the most directly comparable GAAP financial measure, and to operating incomefor the segments for the twelve months ended December 31, 2005 and 2004:

| ** **                                                     | ** ** | **Twelve Months Ended  December 31,** | ** ** |
|----------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                     | ** ** | **2005**                                             | ** ** | **2004** | ** ** |
| ** **                                                     | ** ** | **(unaudited)**                                      | ** ** | **(unaudited)** | ** ** |
| ** **                                                     | ** ** | **(In thousands)**                              | ** ** |
| Operating income  before depreciation and amortization         |       |                                                 | $     | 632,988 | (a) |   |   | $ | 594,637 |   |   |
| Depreciation and  amortization                                 |       |                                                 | 93,223     |   |   |   | 101,382 |   |   |
| Operating income                                               |       |                                                 | 539,765    |   |   |   | 493,255 |   |   |
| Other expense (income):                                        |       |                                                 |       |   |   |   |   |   |   |
| Interest expense, net                                          |       |                                                 | 84,048     |   |   |   | 66,061 |   |   |
| Loss on extinguishment of debt                                 |       |                                                 | —     |   |   |   | 467 |   |   |
| Amortization of deferred financing costs                       |       |                                                 | 3,309      |   |   |   | 3,470 |   |   |
| Stock dividend                                                 |       |                                                 | (1,812     | ) |   |   | (6,453 | ) |   |
| Equity (income) loss in unconsolidated subsidiaries  and other |       |                                                 | (959       | ) |   |   | 1,942 |   |   |
| Nontemporary decline in fair value of investments              |       |                                                 | 81,877     |   |   |   | — |   |   |
| Noncontrolling interest of variable interest  entities         |       |                                                 | 4,120      |   |   |   | 7,311 |   |   |
| Provision for  income taxes                                    |       |                                                 | 182,003    |   |   |   | 164,574 |   |   |
| Net income                                                     |       |                                                 | $          | 187,179 |   |   |   | $ | 255,883 |   |   |

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(a)           Includesa cost reduction plan charge of $30,289,000.

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| ** **                                               | ** ** | **Twelve Months Ended December 31, 2005** | ** ** |
|----------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                               | ** ** | **Consolidated**                                                   | ** ** | **Television** | ** ** | **Radio** | ** ** | **Music** | ** ** | **Internet** | ** ** |
| ** **                                               | ** ** | **(In thousands)**                                            | ** ** |
| Operating income  before   depreciation and amortization |       |                                                               | $     | 632,988 | (a) |   | $  | 459,277 | (a) | $ | 141,277 |   | $  | 31,452 | (a) | $ | 982 |   |
| Depreciation and  amortization                           |       |                                                               | 93,223     |   |   | 66,927 |   | 11,649 |   | 12,877 |   | 1,770 |   |
| Operating income (loss)                                  |       |                                                               | $          | 539,765 |   |   | $ | 392,350 |   | $ | 129,628 |   | $ | 18,575 |   | $ | (788 | ) |

 

| ** **                                                    | ** ** | **Twelve Months Ended December 31, 2004** | ** ** |
|---------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                    | ** ** | **Consolidated**                                                   | ** ** | **Television** | ** ** | **Radio** | ** ** | **Music** | ** ** | **Internet** | ** ** |
| Operating income  (loss) before depreciation and amortization |       |                                                               | $     | 594,637 | (b) |   | $  | 461,478 | (b) | $ | 116,581 |   | $  | 23,280 | (b) | $ | (6,702 | ) |
| Depreciation and  amortization                                |       |                                                               | 101,382    |   |   | 66,029 |   | 16,063 |   | 15,443 |   | 3,847 |   |
| Operating income (loss)                                       |       |                                                               | $          | 493,255 |   |   | $ | 395,449 |   | $ | 100,518 |   | $ | 7,837 |   | $ | (10,549 | ) |

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(a)           Consolidated VIE operating income before depreciation andamortization totaled $21,768,000, the television and music VIEs contributedincome of $2,430,000 and $19,338,000 to the total, respectively. For comparisonpurposes, WLII, which was a variable interest entity until June 30, 2005,had EBITDA of $9,907,000 for the six-months ended December 31, 2005.

(b)          Consolidated VIE operating income before depreciation andamortization totaled $20,312,000. The television and music VIEs contributed$10,518,000 and $9,794,000 to the total, respectively.

**Overview**

In comparing ourresults of operations for the twelve months ended 2004 with those of 2003, thefollowing should be noted:

·       Theresults of operations of Univision Radio (acquired September 22, 2003) areincluded for the twelve months ended December 31, 2004 but are onlyincluded from September 23, 2003 through December 31, 2003 for thetwelve months ended 2003.

·       Under the guidelines of FIN46, the Company began consolidating its investment in Disa and WLII, which ownstwo television stations in Puerto Rico, as variable interest entities as ofMarch 31, 2004. The Company consolidated the balance sheets of thevariable interest entities as of March 31, 2004 and their results ofoperations beginning April 1, 2004. The impact of the variable interestentities on the results of operations of the Company is explained below for thetwelve months ended December 31, 2004. Also see “Notes to ConsolidatedFinancial Statements—14. Investments and Variable Interest Entities.”

**Year Ended December 31, 2004 (“2004”), Comparedto Year Ended December 31, 2003 (“2003”)**

***Revenues.******  ***Net revenueswere $1,786,935,000 in 2004 compared to $1,311,015,000 in 2003, an increaseof  $475,920,000 or 36.3%. Existingoperations accounted for 10.2% of the increase, while 18.7% was attributable tothe radio business, resulting from our acquisition of HBC on September 22,2003, and 7.4% to the variable interest entities that began to be consolidatedby the Company on March 31, 2004. The Company’s television segmentrevenues were $1,261,840,000 in 2004 compared to $1,098,276,000 in 2003, anincrease of $163,564,000 or 14.9%. The growth was primarily attributable to theCompany’s three television networks, resulting primarily from increasedviewership and higher rates for advertising spots. The owned-and-operatedstations also had increased revenues, attributable primarily to the LosAngeles, Phoenix, Miami, New York and Austin markets offset in part by smalldecreases in the San Francisco, Dallas and Fresno markets. The variableinterest entity, WLII, added $46,147,000, or 3.5% to the net revenues of thetelevision segment. The Company’s radio segment, which began operating for theCompany following the acquisition of HBC on September 22, 2003, hadrevenues of $328,392,000 in 2004 

37

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compared to $83,595,000 in2003. The Company’s music segment generated revenues of $178,560,000 in 2004compared to $113,197,000 in 2003, an increase of $65,363,000 or 57.7%. Thevariable interest entity, Disa, added $50,947,000, or 28.5%, to the netrevenues of the music segment. The remainder of the increase is due primarily tothe success of certain album releases in 2004. The Company’s Internet segmenthad revenues of $18,143,000 in 2004 compared to $15,947,000 in 2003, anincrease of $2,196,000 or 13.8%, primarily related to an increase inadvertisers.

***Expenses.*****  **Direct operating expenses increased to $663,457,000in 2004 from $513,741,000 in 2003, an increase of $149,716,000 or 29.1%.Existing operations accounted for 10.5% of the increase, while 8.7% wasattributable to the radio business and 9.9% to the variable interest entities.The Company’s television segment direct operating expenses were $488,446,000 in2004 compared to $420,475,000 in 2003, an increase of $67,971,000 or 16.2%. Theincrease is due to increased programming costs of $24,753,000, increased licensefee expense of $14,888,000 paid under our Program License Agreements, increasedtechnical costs of $5,658,000 and variable interest entity costs related toWLII of $22,672,000. The Company’s radio segment had direct operating expensesof $60,121,000 in 2004 compared to $15,211,000 in 2003. The Company’s musicsegment’s direct operating expenses were $102,316,000 in 2004 compared to$64,497,000 in 2003, an increase of $37,819,000. The music segment’s variableinterest entity cost related to Disa was $28,261,000 and the remainder of theincrease was attributable to increased production costs resulting from highersales. The Company’s Internet segment had direct operating expenses of$12,574,000 in 2004 compared to $13,558,000 in 2003, an improvement of $984,000or 7.3%. As a percentage of net revenues, the Company’s direct operatingexpenses decreased from 39.2% in 2003 to 37.1% in 2004.

Selling, general and administrative expenses increasedto $528,841,000 in 2004 from $363,674,000 in 2003, an increase of $165,167,000or 45.4%. Existing operations accounted for 6.9% of the increase, while 31.4%was attributable to the radio business and 7.1% to the variable interestentities. The Company’s television segment selling, general and administrativeexpenses were $311,916,000 in 2004 compared to $275,622,000 in 2003, anincrease of $36,294,000 or 13.2%. The increase is due in part to increasedcompensation costs and benefits of $10,048,000, increased selling costs of$7,066,000 reflecting higher sales in 2004, increased research costs of$3,681,000 and variable interest entity costs related to WLII of $12,957,000.The Company’s radio segment had selling, general and administrative expenses of$151,690,000 in 2004 compared to $37,511,000 in 2003. The Company’s musicsegment had selling, general and administrative expenses of $52,964,000 in 2004compared to $39,151,000 in 2003, an increase of $13,813,000. The music segment’svariable interest entity cost related to Disa was $12,892,000. The Company’sInternet segment had selling, general and administrative expenses of$12,271,000 in 2004 compared to $11,390,000 in 2003, an increase of $881,000,related in part to increased selling costs. As a percentage of net revenues,the Company’s selling, general and administrative expenses increased from 27.7%in 2003 to 29.6% in 2004.

***Depreciation andAmortization.******  ***Depreciationand amortization increased to $101,382,000 in 2004 from $84,904,000 in 2003, anincrease of $16,478,000 or 19.4%. The radio business accounted for 12.3% of theincrease, the variable interest entities accounted for 10.8%, while existingoperations accounted for a decrease of 3.7%. The Company’s depreciation expenseincreased to $82,157,000 in 2004 from $72,340,000 in 2003, an increase of$9,817,000 primarily due to increased capital expenditures and acquisitions.The variable interest entities accounted for $1,375,000 of the increase. TheCompany had amortization of intangible assets of $19,225,000 and $12,564,000 in2004 and 2003, respectively, an increase of $6,661,000, which is due primarilyto an increase of $1,567,000 related to the acquisition of HBC on September 22,2003 and $7,825,000 related to the variable interest entities, offset in partby a reduction of intangible assets being amortized, primarily artistcontracts, acquired as a result of our acquisition of Fonovisa in April 2002of $2,676,000 and other reductions of $55,000. Depreciation and amortizationexpense for the television segment increased by $1,988,000 to $66,029,000 in2004 from $64,041,000 in 2003 due to increased depreciation primarily relatedto higher capital expenditures and station assets acquired. 

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Depreciation andamortization related to the television variable interest entity, WLII, was$1,199,000. Depreciation and amortization expense for the radio segmentincreased by $10,469,000 to $16,063,000 in 2004 from $5,594,000 in 2003,$8,902,000 related to depreciation expense and $1,567,000 to intangibleamortization related to the valuation of amortizable identified intangibles, primarilyadvertising contracts, acquired as a result of our acquisition of HBC in September 2003.Advertiser contracts were being amortized over a nine-month period that expiredin June 2004. Depreciation and amortization expense for the music segmentincreased by $5,465,000 to $15,443,000 in 2004 from $9,978,000 in 2003. Themusic variable interest entity, Disa, accounted for $8,001,000 of the increase,which was offset by decrease of $2,536,000 primarily related to the reductionof intangible assets being amortized related to artist contracts. Thesecontracts acquired from Fonovisa are being amortized over 10 years, but mostwill be amortized in the first three years following the 2002 acquisition. Depreciationand amortization expense for the Internet segment decreased by $1,444,000 to$3,847,000 in 2004 from $5,291,000 in 2003.

***Operating Income.****  *As a result of the above factors, operating incomeincreased to $493,255,000 in 2004 from $348,696,000 in 2003, an increase of$144,559,000 or 41.5%. Existing operations accounted for 16.7%, while 21.6% wasattributable to the radio business and 3.2% to the variable interest entities. TheCompany’s television segment had operating income of $395,449,000 in 2004 and$338,138,000 in 2003, an increase of $57,311,000. Operating income related tothe television variable interest entity, WLII, was $9,319,000. The Company’sradio segment had operating income of $100,518,000 in 2004 compared to$25,279,000 in 2003. The Company’s music segment had operating income of$7,837,000 in 2004 and an operating loss of $429,000 in 2003, an improvement of$8,266,000. Operating income related to the music variable interest entity,Disa, was $1,793,000. The Company’s Internet segment had an operating loss of$10,549,000 in 2004 and $14,292,000 in 2003, an improvement of $3,743,000. As apercentage of net revenues, the Company’s operating income increased from 26.6%in 2003 to 27.6% in 2004.

***Interest Expense,Net.****  *Interestexpense decreased to $66,061,000 in 2004 from $71,322,000 in 2003, a decreaseof $5,261,000 or 7.4%. The decrease is due to lower interest rates and lowerbank borrowings.

***Loss onExtinguishment of Debt.******  ***TheCompany’s loss on extinguishment of debt of $467,000 in 2004 is due to thewrite-off of deferred financing costs related to repayment of outstandingbalance under the bank term credit facility of $100,000,000 in the thirdquarter of 2004. The Company’s loss on extinguishment of debt of $4,122,000 in2003 is due to the write-off of deferred financing costs related to its reducedbank term credit facility of $620,000,000 in the fourth quarter of 2003.

***Stock dividend.******  ***In the first quarter of 2004, theCompany recorded a stock dividend of $5,094,000 based on the Company’s initialinvestment of approximately $26,000,000 pursuant to an amendment to EquityBroadcasting Corporations’ Articles of Incorporation. The stock dividend incomefor the twelve months ended December 31, 2004 was $6,453,000. The Series Aconvertible preferred stock has a mandatory redemption date of June 8,2008.

***Noncontrollinginterest of variable interest entities.******  ***Under the guidelines of FIN46, the Company is required to consolidate the assets, liabilities andoperating results of Disa, which is owned 50% by the Company and 50% by theChavez family, and WLII, which is owned 100% by Raycom, see “Notes to Consolidated Financial Statements—14. Investmentsand Variable Interest Entities.” Consequently, the Company recorded a noncontrolling interest charge of$7,311,000 in 2004, which consists of $564,000 related to the Chavez family’s50% ownership of Disa and $6,747,000 related to Raycom’s 100% ownership ofWLII. By recording noncontrolling interest (the portion not owned by theCompany), the results of operations of the VIEs do not have an impact on ournet income. The use of the equity method of accounting prior to March 31,2004 and the consolidation of Disa since April 1, 2004 have the sameeffect on the Company’s net income. WLII’s net income has no impact on our netincome since Raycom owns 100% of WLII.

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***Equity (Income)Loss in Unconsolidated Subsidiaries and Other.******  ***Equity loss in unconsolidatedsubsidiaries and other decreased to $1,942,000 in 2004 from $10,218,000 in2003, an improvement of $8,276,000 due to lower equity losses of $8,854,000,offset by net losses of $578,000 related to other various items. In September 2003,the Company began accounting for its investment in Entravision under the costmethod of accounting, as a result of the HBC acquisition. Therefore, theCompany did not record an Entravision equity income or loss in its results ofoperating in 2004, but did record an equity loss in unconsolidated subsidiaryrelated to its Entravision investment of $2,269,000 in 2003. Under theguidelines of FIN 46, the Company began consolidating the VIE, Disa, as of March 31,2004, which had been previously reported under the equity method. As a result,the Company had a decrease of $5,685,000 in equity loss in unconsolidatedsubsidiaries in 2004 when compared to 2003. There were other equity lossincreases of $900,000 when comparing 2004 to 2003.

***Gain on Change inEntravision Ownership Interest.***   The gain onchange in Entravision ownership interest was $1,611,000 in 2003. These gainswere derived in accordance with Securities and Exchange Commission guidelines,Staff Accounting Bulletin No. 51 “Accounting for the Sale of Stock by aSubsidiary,” under which the Company elected to recognize gains and losses fromits unconsolidated subsidiaries’ stock issuances. In September 2003, theCompany began accounting for its investment in Entravision under the costmethod of accounting, as a result of the HBC acquisition, and stoppedrecognizing these gains and losses.

***Provision forIncome Taxes.******  ***In2004, the Company reported an income tax provision of $164,574,000,representing $98,703,000 of current tax expense and $65,871,000 of deferred taxexpense. In 2003, the Company reported an income tax provision of $105,386,000,representing $50,785,000 of current tax expense and $54,601,000 of deferred taxexpense. The total effective tax rate was 39.1% in 2004 and 40.4% in 2003. TheCompany’s effective tax rate of 39.1% for 2004 is lower than the 40.4% for 2003due primarily to a tax benefit recorded in the second quarter of 2004 of$4,737,000, resulting primarily from the resolution of various federal andstate income tax audits.

***Net Income.******  ***As a result of the abovefactors, the Company reported net income in 2004 of $255,883,000 compared tonet income of $155,427,000 in 2003, an increase of $100,456,000 or 64.6%. Followingthe adoption of FIN 46 on March 31, 2004, the Company’s inclusion of thevariable interest entities, Disa and WLII, in the Company’s results ofoperations did not have an impact on our net income. The equity method ofaccounting and the VIE consolidation of Disa have the same effect on theCompany’s net income. WLII’s net income had no impact on our net income sinceRaycom owns 100% of WLII. As a percentage of net revenues, the Company’s netincome increased from 11.9% in 2003 to 14.3% in 2004.

***Operating Incomebefore Depreciation and Amortization.******  ***Operating income beforedepreciation and amortization increased to $594,637,000 in 2004 from$433,600,000 in 2003, an increase of $161,037,000 or 37.1%. Existing operationsaccounted for 12.6%, while 19.8% was attributable to the radio business and4.7% to the variable interest entities. As a percentage of net revenues, theCompany’s operating income before depreciation and amortization increased from33.1% in 2003 to 33.3% in 2004.

TheCompany uses the key indicator of “operating income before depreciation andamortization” primarily to evaluate the Company’s operating performance and forplanning and forecasting future business operations. In addition, this keyindicator is commonly used as a measure of performance for broadcast companies,is used by investors to measure a company’s ability to service debt and othercash needs and provides investors the opportunity to evaluate the Company’sperformance as it is viewed by management. Operating income before depreciationand amortization is not, and should not be used as, an indicator of or analternative to operating income, net income or cash flow as reflected in theconsolidated financial statements, is not a measure of financial performanceunder generally accepted accounting principles (“GAAP”) and should not beconsidered in isolation or as a substitute for measures of 

40

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performance prepared in accordance with GAAP. Sincethe definition of operating income before depreciation and amortization mayvary among companies and industries it should not be used as a measure ofperformance among companies. In accordance with SEC guidelines, the Company isproviding on a consolidated basis a reconciliation of the non-GAAP termoperating income before depreciation and amortization to net income, which isthe most directly comparable GAAP financial measure, and to operating incomefor the segments for the twelve months ended December 31, 2004 and 2003:

| ** **                                             | ** ** | **Twelve Months Ended  December 31,** | ** ** |
|--------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                             | ** ** | **2004**                                             | ** ** | **2003** | ** ** |
| ** **                                             | ** ** | **(unaudited)**                                      | ** ** | **(unaudited)** | ** ** |
| ** **                                             | ** ** | **(In thousands)**                              | ** ** |
| Operating income  before depreciation and amortization |       |                                                 | $          | 594,637 |   |   |   | $ | 433,600 |   |   |
| Depreciation and  amortization                         |       |                                                 | 101,382    |   |   |   | 84,904 |   |   |
| Operating income                                       |       |                                                 | 493,255    |   |   |   | 348,696 |   |   |
| Other expense /  (income):                             |       |                                                 |       |   |   |   |   |   |   |
| Interest expense,  net                                 |       |                                                 | 66,061     |   |   |   | 71,322 |   |   |
| Loss on extinguishment  of debt                        |       |                                                 | 467        |   |   |   | 4,122 |   |   |
| Amortization of  deferred financing costs              |       |                                                 | 3,470      |   |   |   | 3,832 |   |   |
| Stock dividend                                         |       |                                                 | (6,453     | ) |   |   | — |   |   |
| Equity loss in  unconsolidated subsidiaries and other  |       |                                                 | 1,942      |   |   |   | 10,218 |   |   |
| Gain on change in  Entravision ownership interest      |       |                                                 | —     |   |   |   | (1,611 | ) |   |
| Noncontrolling  interest of variable interest entities |       |                                                 | 7,311      |   |   |   | — |   |   |
| Provision for  income taxes                            |       |                                                 | 164,574    |   |   |   | 105,386 |   |   |
| Net income                                             |       |                                                 | $          | 255,883 |   |   |   | $ | 155,427 |   |   |

 

| ** **                                                    | ** ** | **Twelve Months Ended December 31, 2004** | ** ** |
|---------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                    | ** ** | **Consolidated**                                                   | ** ** | **Television** | ** ** | **Radio** | ** ** | **Music** | ** ** | **Internet** | ** ** |
| ** **                                                    | ** ** | **(Dollars in thousands)**                               | ** ** |
| Operating income  (loss) before depreciation and amortization |       |                                                               | $          | 594,637 | (a) |   | $  | 461,478 | (a) | $ | 116,581 |   | $  | 23,280 | (a) | $ | (6,702 | ) |
| Depreciation and  amortization                                |       |                                                               | 101,382    |   |   | 66,029 |   | 16,063 |   | 15,443 |   | 3,847 |   |
| Operating income (loss)                                       |       |                                                               | $          | 493,255 |   |   | $ | 395,449 |   | $ | 100,518 |   | $ | 7,837 |   | $ | (10,549 | ) |

 

| ** **                                                      | ** ** | **Twelve Months Ended December 31, 2003** | ** ** |
|-----------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **Consolidated**                                                   | ** ** | **Television** | ** ** | **Radio(b)** | ** ** | **Music** | ** ** | **Internet** | ** ** |
| Operating income  (loss) before   depreciation and amortization |       |                                                               | $          | 433,600 |   |   | $ | 402,179 |   |   | $ | 30,873 |   |   | $ | 9,549 |   | $ | (9,001 | ) |
| Depreciation and  amortization                                  |       |                                                               | 84,904     |   |   | 64,041 |   |   | 5,594 |   |   | 9,978 |   | 5,291 |   |
| Operating income (loss)                                         |       |                                                               | $          | 348,696 |   |   | $ | 338,138 |   |   | $ | 25,279 |   |   | $ | (429 | ) | $ | (14,292 | ) |

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(a)           Consolidated VIE operating income before depreciation andamortization totaled $20,312,000. The television and music VIEs contributed$10,518,000 and $9,794,000 to the total, respectively. Since the Company beganaccounting for the VIEs on April 1, 2004, the 2003 information reportedbelow does not include the results of operations of the VIEs.

(b)          UnivisionRadio acquired September 22, 2003.

**Liquidityand Capital Resources**

The Company has negativeworking capital of $275,921,000 at December 31, 2005, due to the revolvingcredit facility balance of $314,000,000 being classified as a current liability.The revolving credit facility matures on July 18, 2006. The Companyintends to refinance the revolving credit facility by the end 

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of thefirst quarter in 2006. Management feels that it will be able to refinance therevolving credit facility and service its debt requirements with cash providedby operations.

The Company’s primarysource of cash flow is its television and radio operations. Funds for debtservice, capital expenditures and operations historically have been, and weexpect will continue to be provided by, funds from operations and byborrowings.

Cash and cash equivalentswere $99,400,000 at December 31, 2005, and $189,868,000 at December 31,2004. The decrease of $90,468,000 was attributable to capital expenditures of$102,553,000, station acquisitions of $220,690,000 and share repurchases of$499,994,000 offset by net cash provided from operating activities of$415,259,000, net proceeds from borrowings of $309,260,000 and other sources offunds of $8,250,000. Cash and cash equivalents related to Disa is $36,246,000at December 31, 2005. Disa and WLII cash and cash equivalents were$25,820,000 at December 31, 2004.

***CapitalExpenditures***

Capital expenditurestotaled $102,553,000 for the twelve months ended December 31, 2005. TheCompany’s capital expenditures exclude the capitalized lease obligations of theCompany. In 2006, the Company plans on spending a total of approximately$105,000,000, which consists of $23,000,000 for television station facilitiesprimarily in Houston and Puerto Rico; $16,000,000 for Univision Networkupgrades and facilities expansion; $6,000,000 primarily for radio stationfacility upgrades; $5,000,000 for TeleFutura Network upgrades and facilitiesexpansion; and approximately $55,000,000 primarily for normal capitalimprovements.

***Stock Purchase Plan***

On February 17, 2005,the Company announced that its Board of Directors had approved the repurchaseof up to $500 million of its outstanding Class A Common Stock. OnOctober 24, 2005, the Company completed repurchasing approximately $500million, 19,096,600 shares, in accordance with its stock repurchase plan.

On November 1, 2005,the Company’s Board of Directors approved the repurchase of an additional $500million of its outstanding Class A Common Stock. The share repurchaseswill be made in the open market or negotiated transactions as market andbusiness conditions warrant, subject to securities laws and other legalrequirements. The share repurchase plan will expire on December 31, 2006.No shares have been repurchased pursuant to the plan.

On December 21, 2005,the Company retired the 20,113,780 shares that it held in treasury. This amountrepresents the 19,096,600 shares that were repurchased during 2005 and the1,017,180 shares held by the Company at December 31, 2004.

***Debt Instruments***

The Company’s 7.85% seniornotes due 2011 have a face value of $500,000,000 and bear simple interest at7.85%. These senior notes pay interest on January 15 and July 15 ofeach year. The 7.85% senior notes due 2011 with a face value of $500,000,000and book value of $496,989,000 have a fair value of approximately $556,900,000at December 31, 2005.

On October 15, 2003,the Company issued three-, four- and five-year senior notes due 2006, 2007 and2008 with a face value of $700,000,000. These senior notes have a face value of$250,000,000, $200,000,000 and $250,000,000, respectively. These senior notespay simple interest on April 15 and October 15 of each year. As partof the $700,000,000 note transaction, the Company entered into afixed-to-floating interest rate swap that results in a fair value hedge that isperfectly effective. At December 31, 2005, the Company had a swapliability with a fair value of $13,977,000 reported in other long-termliabilities related to this transaction. The $700,000,000 senior notes arecarried at fair value at December 31, 2005.

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The Company’s senior notes are the Company’s seniorunsecured obligations, are equal in right of payment with all of the Company’sexisting and future senior unsecured indebtedness, are senior in right ofpayment to any of the Company’s future subordinated indebtedness and are fullyand unconditionally guaranteed by all of the Company’s guarantors. The Companyhas the option to redeem all or a portion of the senior notes at any time atthe redemption prices set forth in the note indenture. The indenture does notcontain any provisions that would require us to repurchase or redeem orotherwise modify the terms of the senior notes upon a change of control. Theindenture does not limit our ability to incur indebtedness or require themaintenance of financial ratios or specified levels of net worth or liquidity.

At December 31, 2005, the Company had a$500,000,000 revolving credit facility with a syndicate of commercial lendersthat will mature on July 18, 2006. At December 31, 2005, the Companyhad bank borrowings outstanding under its revolving credit facility of$314,000,000 resulting primarily from the Company’s repurchases of its Class ACommon Stock. In the third quarter of 2005, the Company classified itsrevolving credit facility as a current liability. The Company is in the processof negotiating a new bank credit facility and expects to enter into a newcredit agreement in the first quarter of 2006. The Company has approximately$56,000,000 of letters of credit outstanding under the credit facility, whichprimarily includes $49,000,000 related to the FIFA World Cup Agreement.

Loans made under the revolving credit facility bearinterest determined by reference to LIBOR or a base rate equal to the higher ofthe prime rate of Chase Manhattan Bank or 0.50% per annum over the federalfunds rate. Depending on the rating assigned by rating agencies to our seniorunsecured debt, the LIBOR interest rate margin on the Company’s revolvingcredit facility ranges from 0.75% to 1.5% per annum and the base rate marginranges from 0% to 0.50% per annum. The Company’s LIBOR interest rate marginapplicable to the revolving credit facility was 1.00% as of December 31,2005. The Company borrows at the prime rate from time to time but attempts tomaintain these loans at a minimum. Interest is generally payable quarterly.During the twelve months ended December 2005, the Company’s effectiveinterest rate, excluding deferred financing costs, on its bank debt and seniornotes was approximately 5.44%.

The credit agreement contains customary covenants,including restrictions on liens and dividends and financial covenants relatingto interest coverage and maximum leverage. Under the credit agreement, theCompany is also limited in the amount of other debt it can incur and in itsability to engage in mergers, sell assets and make material changes to itsProgram License Agreements in a manner the lenders determine is materiallyadverse to the Company. At December 31, 2005, the Company was incompliance with its financial covenants.

The subsidiaries thatguarantee the Company’s obligations under its credit agreement also guaranteethe senior notes. The subsidiary guarantors under the credit facilities are allof our domestic subsidiaries other than certain immaterial subsidiaries. Theguarantees are full and unconditional and joint and several and anysubsidiaries of the Company other than the subsidiary guarantors are minor.Univision Communications Inc. is not a guarantor and has no independent assetsor operations. The Company’s variable interest entity, Disa, which is notwholly-owned by the Company, does not guarantee the Company’s bank creditagreement or senior notes. The guarantees of the obligations under therevolving credit facility and the senior notes will be released if our seniorunsecured debt is rated BBB or better by Standard & Poor’s RatingServices and Baa2 or better by Moody’s Investor Service, Inc. Theguarantees of such subsidiary will be reinstated if such ratings fall below BBB-by Standard & Poor’s or Baa3 by Moody’s. The Company’s seniorunsecured debt is currently rated BBB- by Standard & Poor’s RatingServices and Baa2 by Moody’s Investor Service, Inc.

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***Acquisitions***

The Company acquired WLII for $190,000,000, excludingacquisition costs, on June 30, 2005 (See Notes to Consolidated FinancialStatements—“14. Investments and Variable Interest Entities.”). Inaddition, the Company acquired a construction permit to build a station in theSan Antonio, Texas market for approximately $19,700,000, approximately$15,500,000 was paid in 2005 and $4,200,000 was paid in 2000. The Company paidfor the acquisition primarily from its revolving credit facility.

On January 1, 2006, the Company acquired radiostations KBRG(FM) and KLOK(AM) serving the San Francisco/San Jose, Californiamarket from Entravision for approximately $90 million. The Company paid for theacquisition with shares of Entravision common stock held by the Company.

The Company expects toexplore acquisition opportunities to complement and capitalize on its existingbusiness and management. The purchase price for any future acquisitions may bepaid with (a) cash derived from operating cash flow, (b) proceedsavailable under bank facilities, (c) proceeds from future debt or equityofferings, or (d) any combination thereof.

***Contractual Obligations & Other PendingTransactions***

In December 2003, the Company entered into alease for a three-story building with approximately 92,500 square feet for therelocation of its owned and/or operated television and radio stations and studiofacilities in Puerto Rico. The building is to be constructed and owned by thelandlord, with occupancy of the premises expected during the latter part of2007. The lease was amended in June 2005 and, among other things, the termof the lease was extended from 40 to 50 years. The sum of the lease paymentswill be approximately $74,000,000 over 50 years.

In June 2001, the Company acquired a 50% interestin Disa. The Company has a call right and the Chavez family, who owns the other50% interest in Disa, has a put right starting in June 2006, which willrequire the Company to purchase the remaining 50% interest for $75,000,000,subject to certain upward adjustments. The Company expects that in 2006 it willexercise its option to acquire the remaining 50% of Disa.

In January 2004, the Company amended itsemployment arrangement with José Behar, President and Chief Executive Officerof Univision Music Group, and assigned the employment agreement to UnivisionMusic LLC, and as a result has amended the operating agreement of UnivisionMusic LLC. Under the terms of the amended operating agreement, in 2006, DiaraInc., which is wholly-owned by José Behar, has a put right and the Company hasa call right that would require the Company to purchase a portion of Diara’sinterest in Univision Music LLC. At December 31, 2005, the Company hasaccrued $11,800,000 for the 2006 purchase of a portion of Diara’s interest inUnivision Music LLC. In 2009, Diara has a put right and the Company has a callright that would require the Company to purchase the remainder of Diara’sinterest in Univision Music LLC.

On November 2, 2005, the Company announced a costreduction plan that reduced its workforce and abandoned certain less profitableprogramming in an effort to achieve sustainable improvement in financialperformance. The plan included reducing approximately 5.6% of the workforce byeliminating job redundancies and inefficiencies. The Company incurred a pre-taxcharge of approximately $30.3 million in the fourth quarter of 2005. The planwas substantially completed during the fourth quarter of 2005.

On November 2, 2005, the Company acquired theSpanish-language broadcast rights in the U.S. to the 2010 and 2014 FédérationInternationale de Football Association (“FIFA”) World Cup soccer games andother 2007-2014 FIFA events. A series of payments totaling $325million are due over the term of the agreement. In addition to these payments,and consistent with past coverage of the World Cup games, the Company will beresponsible for all costs associated with advertising, promotion and broadcastof the World Cup games, as well as the production of certain televisionprogramming related to the World Cup 

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games. The funds for thesepayments are expected to come from income from operations and/or borrowingsfrom the Company’s bank credit facility.

In August 2000,the Company acquired the Spanish-language television rights in the U.S. to the2002 and 2006 FIFA World Cup soccer games and other 2000-2006 FIFA events.A series of payments totaling $150,000,000 are due over the term of theagreement with the remaining payments as of December 31, 2005 due asfollows:

| 30 days before  start of 2006 World Cup   |   | $          | 33,000,000 |   |
|-------------------------------------------|--------|------------|------------|--------|
| 45 days after  last day of 2006 World Cup |   | 33,000,000 |       |
|                                      |   | $          | 66,000,000 |   |

 

As the Company makes each payment, the next scheduledpayment under the contract will be supported by a letter of credit. In additionto these payments and consistent with past coverage of the World Cup games, theCompany will be responsible for all costs associated with advertising,promotion and broadcast of the World Cup games, as well as the production ofcertain television programming related to the World Cup games. The rights feesare being amortized over the 2002/2006 World Cups and other interim FIFA eventsbased on the flow of income method. Under the flow of income method, the costsfor the 2006 World Cup games, excluding advertising, promotion and broadcastcosts, will be approximately $100,000,000 for the rights fees.

The funds for any payments discussed above areexpected to come from cash from operations and/or borrowings from the Company’sbank credit facility.

As part of the consent decree pursuant to which theUnited States Department of Justice (“DOJ”) approved our acquisition ofHispanic Broadcasting Corporation, the Company exchanged all of its Entravisionvoting common stock for 36,926,600 shares of Class U common stock. TheEntravision Class U common stock has limited voting rights and does notinclude the right to elect directors. Also, as part of the consent decree withthe DOJ, we are required to sell enough of our Entravision stock so that ourownership of Entravision on a fully converted basis, which includes fullconversion of employee options and all convertible securities, does not exceed15% by March 26, 2006 and 10% by March 26, 2009.

The Company recorded a charge of $24,741,000 for thethree months ended December 31, 2005, related to an other than temporarydecline in the value of its Entravision stock. The charge is based on the fairvalue of our investment in Entravision common stock of $7.12 per share on thelast trading day of 2005 compared to our average cost basis of $7.79 per share.The Company’s new cost basis in its investment in Entravision stock is now$7.12. Entravision’s stock price at March 9, 2006 was $7.60. Any gain orloss on future transactions involving Entravision stock will be measured bycomparing our newly established cost basis of $7.12 per share to the fair valueof the Entravision stock at the transaction date. The Company recorded a chargeof $48,336,000 for the three months ended June 30, 2005, related to another than temporary decline in the value of its investment in Entravisionstock. We will continue to monitor the Entravision stock price, its operatingresults, the performance and outlook for the media sector in general and otherinformation available to determine if the value of our investment becomes otherthan temporarily impaired in subsequent reporting periods. The future sale ofthe stock will have no impact on the Company’s existing television stationaffiliation agreements with Entravision. At December 31, 2005, the Company’sownership of Entravision on a fully converted basis was approximately 27%. Followingthe acquisition of the Entravision radio stations on January 1, 2006, theCompany’s ownership of Entravision on a fully converted basis was approximately20%.

The Company did not record a tax benefit related tothe Entravision charge. The Company recorded a deferred tax asset of$28,573,000 related to its Entravision investment that was offset by avaluation allowance for the same amount since, based on the weight of availableevidence, it is more likely than not 

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that the deferred taxasset recorded will not be realized. Due to the tax benefit of the charge notbeing recorded, the Company’s total effective tax rate increased to 49.3% forthe year ended December 31, 2005. The Company’s effective tax rate of 39.1%for the year ended December 31, 2004 was due primarily to a tax benefitrecorded in the second quarter of 2004 of $4,737,000, resulting from theresolution of various federal and state income tax audits.

On March 2, 2006, the Company and Entravision CommunicationsCorporation completed the repurchase by Entravision of 7 million shares ofEntravision Class U common stock held by the Company, for an aggregate purchaseprice of $51.1 million, or $7.30 per share. This share repurchase transaction,coupled with the recent closing of the Company’s purchase of Entravision’sradio stations serving the San Francisco/San Jose market for approximately 12.6million shares of Entravision Class U common stock, will reduce the Company’snon-voting ownership interest on a fully converted basis in Entravision toapproximately 14.9%.

The Company is in the process of negotiating a newbank credit facility and expects to enter into a new credit agreement in thefirst quarter of 2006. Based on our current level of operations, plannedcapital expenditures, expected future acquisitions and major contractualobligations listed below, the Company believes that its cash flow fromoperations, together with available cash and ability to obtain financing willbe adequate to meet liquidity needs in the near and foreseeable future.

Belowis a summary of the Company’s major contractual payment obligations as of December 31,2005:

**Major Contractual Obligations**As of December 31, 2005

| ** **                        | ** ** | **Payments Due By Period** | ** ** |
|-----------------------------------|------------|-------------------------------------------|------------|
| ** **                        | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** | **TOTAL** | ** ** |
| ** **                        | ** ** | **(In thousands)**                   | ** ** |
| Senior notes principal            |       | $                                         | 250,000    |   | $ | 200,000 |   | $ | 250,000 |   | $ | — |   | $ | — |   |   | $ | 500,000 |   |   | $ | 1,200,000 |   |
| Senior notes interest-fixed       |       | 39,250                                    |       | 39,250 |   | 39,250 |   | 39,250 |   | 39,250 |   |   | 39,250 |   |   | 235,500 |   |
| Senior notes interest-variable(a) |       | 32,055                                    |       | 20,886 |   | 11,631 |   | — |   | — |   |   | — |   |   | 64,572 |   |
| Estimated bank debt interest      |       | 6,484                                     |       | — |   | — |   | — |   | — |   |   | — |   |   | 6,484 |   |
| Bank Debt                         |       | 314,000                                   |       | — |   | — |   | — |   | — |   |   | — |   |   | 314,000 |   |
| Operating leases                  |       | 35,296                                    |       | 33,670 |   | 32,084 |   | 28,669 |   | 26,419 |   |   | 138,422 |   |   | 294,560 |   |
| Capital leases(b)                 |       | 7,460                                     |       | 7,260 |   | 7,260 |   | 7,260 |   | 7,260 |   |   | 37,023 |   |   | 73,523 |   |
| Puerto Rico building lease        |       | —                                    |       | — |   | 1,017 |   | 1,017 |   | 1,017 |   |   | 70,931 |   |   | 73,982 |   |
| Spanish programming(c)            |       | 101,334                                   |       | 48,302 |   | 38,749 |   | 43,616 |   | 87,034 |   |   | 170,675 |   |   | 489,710 |   |
| English programming(d)            |       | 2,560                                     |       | 1,662 |   | 1,396 |   | 1,351 |   | 223 |   |   | — |   |   | 7,192 |   |
| Nielsen(e)                        |       | 31,835                                    |       | 17,909 |   | 18,609 |   | 19,782 |   | 21,028 |   |   | 26,115 |   |   | 135,278 |   |
| Music  License Fees               |       | 15,669                                    |       | 11,098 |   | 7,848 |   | 4,648 |   | — |   |   | — |   |   | 39,263 |   |
|                              |       | $835,943                                  |       | $ | 380,037 |   | $ | 407,844 |   | $ | 145,593 |   | $ | 182,231 |   |   | $ | 982,416 |   |   | $ | 2,934,064 |   |
|                                   |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(a)        Interest expense is based on the LIBORrate at December 31, 2005.

(b)       Amounts include a transponder agreementthat will be capitalized by the Company in the first quarter 2006, totaling$23,400,000.

(c)        Amounts exclude the license fees that willbe paid in accordance with the Program License Agreement, which is basedprimarily on 15% of Combined Net Time Sales. Amounts include broadcast rights’costs for the 2006, 2010, and 2014 World Cup and other FIFA events.

(d)       Programming costs relates to the USABroadcasting acquisition in 2001.

(e)        In June 2005, the Company enteredinto an agreement with Nielsen Media Research to provide local markettelevision programming ratings services through 2012 at a total cost ofapproximately $132,000,000. The Company has other agreements with Nielsen, oneof which expires in 2006.

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**Beloware items not included in the summary table above:**

The Company has a contractual obligation to fund itsTuTV joint venture up to $20,000,000 through June 30, 2006. As of December 31,2005, the Company has funded $3,500,000 and does not anticipate any additionalfunding for this joint venture.

The Company, which owns50% of Disa, has a call right and the Chavez family, who owns the other 50%interest in Disa, has a put right starting in June 2006, that will requirethe Company to purchase the remaining 50% interest for $75,000,000, subject tocertain upward adjustments. This amount is not reflected in the table abovesince the Company is not obligated to exercise its call right and the ChavezFamily is not obligated to exercise its put right to purchase the remaining 50%interest in Disa.

**ITEM 7A.**        Quantitativeand Qualitative Disclosures About Market Risk

The Company’s primary interest rate exposure resultsfrom changes in the short-term interest rates applicable to the Company’s LIBORloans. The Company borrows at the U.S. prime rate from time to time butattempts to maintain these loans at a minimum. Based on the Company’s overallinterest rate exposure on its fixed-to-float interest rate swap on its seniornotes of $700,000,000 and its bank loans outstanding of $314,000,000 at December 31,2005, a change of 10% in interest rates would have an impact of approximately$5,000,000 on pre-tax earnings and pre-tax cash flows over a one-year period.The Company has an immaterial foreign exchange exposure in Mexico.

On October 15, 2003, the Company issued three-,four- and five-year senior notes due 2006, 2007 and 2008 with a face value of$700,000,000. The Company’s 2.875%, 3.5% and 3.875% senior notes have a facevalue of $250,000,000, $200,000,000 and $250,000,000, respectively. We receivednet proceeds of $694,526,000 from the issuance of these senior notes, which paysimple interest on April 15 and October 15 of each year. As part ofthe transaction the Company entered into a fixed-to-floating interest rate swapthat results in a fair value hedge that is perfectly effective. At December 31,2005, the Company had a swap liability of $13,977,000 reported in other long-termliabilities related to this transaction.

Under the interest rateswap contract, the Company agreed to receive a fixed rate payment for afloating rate payment. Since the fair value hedge is perfectly effective underthe guidelines of Financial Accounting Standards Board No. 133 “Accountingfor Derivative Instruments and Hedging Activities”, the changes in the fairvalue of interest rate swap are expected to perfectly offset the changes in thefair value of the senior notes. On a quarterly basis, the Company adjusts thecarrying amount of the swap to its fair value and adjusts the carrying amountof the senior notes by the same amount to reflect the change in its fair valueattributable to the hedged risk. There is no hedge ineffectiveness to berecorded to earnings. The Company monitors the credit ratings of the counterparty and obtains fair value swap valuations from the counter parties and thirdparties on a quarterly basis.

**ITEM 8.**                FinancialStatements and Supplementary Data

**See pages F-1through F- 46**

**ITEM 9.**                Changesin and Disagreements with Accountants on Accounting and Financial Disclosures

Not applicable.

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**ITEM 9A.**        Controlsand Procedures

**Conclusion Regarding the Effectiveness of DisclosureControl and Procedures**

Disclosure controlsand procedures are designed to ensure that information required to be disclosedin our periodic reports filed or submitted under the Securities Exchange Act of1934 is recorded, processed, summarized and reported within the required timeperiods. As of December 31, 2005, the end of the period covered by thisreport, the Company carried out an evaluation under the supervision and withthe participation of our Chief Executive Officer and Chief Financial Officer ofthe effectiveness of our disclosure controls and procedures. Based on thatevaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that our disclosure controls and procedures were effective. TheCompany reviews its disclosure controls and procedures, on an ongoing basis,and may from time to time make changes aimed at enhancing their effectivenessand to ensure that they evolve with the Company’s business.

In addition, no change inour internal control over financial reporting (as defined in Rule 13a-15(f) underthe Securities Exchange Act of 1934) occurred during the fourth quarter of ourfiscal year ended December 31, 2005 that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

**Management’s Report on Internal Control Over FinancialReporting**

Our management is responsible for establishing andmaintaining adequate internal control over financial reporting. Our internalcontrol over financial reporting is a process designed under the supervision ofour Chief Executive Officer and Chief Financial Officer to provide reasonableassurance regarding the reliability of financial reporting and the preparationof our financial statements for external reporting purposes in accordance withU.S. generally accepted accounting principles.

As of the end of our 2005 fiscal year, managementconducted an assessment of the effectiveness of our internal control overfinancial reporting based on the framework in Internal Control-IntegratedFramework issued by the Committee of Sponsoring Organizations for the TreadwayCommission. Based on our evaluation under that framework, management concludedour internal control over financial reporting as of December 31, 2005 waseffective.

Our internal control over financial reporting includespolicies and procedures that pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect transactions and dispositionsof assets; provide reasonable assurances that transactions are recorded asnecessary to permit preparation of financial statements in accordance withU.S. generally accepted accounting principles, and that receipts andexpenditures are being made only in accordance with authorizations ofmanagement and the directors of the Company; and provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use or dispositionof the Company’s assets that could have a material effect on our financialstatements.

Ernst & Young LLP, an independent registeredpublic accounting firm, has issued an audit report on our assessment of ourinternal control over financial reporting, which is included herein.

Because of their inherentlimitations, internal control over financial reporting may not prevent ordetect all misstatements. Therefore, even those systems, controls andprocedures determined to be effective can only provide reasonable assurancewith respect to financial statement preparation and presentation.

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**ITEM 9B.**       OtherInformation

*RestrictedStock Unit Agreement.*   The Company has enteredinto Restricted Stock Unit Agreements, dated as of January 13, 2006 (eacha “Stock Unit Agreement”), with each of the Named Executive Officers, otherthan A. Jerrold Perenchio. The form of Stock Unit Agreement is attached as Exhibit 10.3.3and incorporated herein by reference. The Stock Unit Agreements evidence thegrants by the Company to each of the Named Executive Officers as follows:  42,300 to Mr. RayRodriguez, 22,300 to Mr. Andrew Hobson, 16,700 to Mr. C. DouglasKranwinkle and 16,700 to Mr. Robert V. Cahill. The restricted stockunits will be paid, on a one-for-one basis, in shares of the Company’s Class ACommon Stock and vest at a rate of 25% per year over the four-year periodfollowing the date of grant. However, an executive officer’s restricted stockunits may vest on an accelerated basis if such executive officer’s employmentterminates under certain circumstances.

In addition, the Company awarded non-qualified stockoptions to the Named Executive Officers, other than A. Jerrold Perenchio, andto its directors in the following amounts: 133,300 to Mr. Rodriguez, 133,300 to Mr. Hobson, 100,000 to Mr. Kranwinkle,100,000 to Mr. Cahill and 25,000 to the following directors and alternatedirector: Messrs. Gaba, Horn, Cassara, Tichenor, Johnson, Cisneros andRivera.

*AmendedEmployment Agreements.*   As of December 31,2005, the Company entered into Amendments to Employment Agreements(collectively, the “Amendments”) with each of the following executiveofficers:  Mr. Rodriguez, Mr. Hobson,Mr. Kranwinkle and Mr. Cahill. Pursuant to these Amendments, attachedas Exhibits 10.12.3, 10.13.3, 10.14.3, and 10.16.3, respectively, andincorporated herein by reference, the expiration dates of each executive’semployment agreement are extended through December 31, 2008. In addition,the executives’ annual base salaries for 2006 through 2008 are as follows:  for Rodriguez $1,000,000, for Hobson$850,000, for Kranwinkle $700,000 and for Cahill $750,000. Other than as notedabove, all other terms and conditions in each executive’s employment agreementwill remain in effect.

*ExecutiveBonus Awards.*   In 2005, the Company awarded cashbonuses to each of our executive officers (other than Mr. Perenchio who isnot compensated in his employment capacity) as follows:  Mr. Robert V. Cahill $750,000, Mr. AndrewHobson $1,000,000, Mr. Douglas Kranwinkle $700,000 and Mr. RayRodriguez $1,000,000. The Compensation Committee, based upon management’srecommendation and in accordance with its philosophy that bonus compensationshould fluctuate with the Company’s success in achieving financial and othergoals, approved the cash bonuses for 2005 to each of the above executiveofficers. Approximately 45% of the Named Executive Officers’ bonuses wasdetermined using an EBITDA performance goal set at the beginning of 2005. Inconsidering the subjective portion of the bonuses, the Committee took intoaccount the employee’s responsibilities, his performance during the prior year,and other factors such as profitability, market share, industry position,increased responsibilities and outstanding achievements.

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**PART III**

**ITEM 10.**         Directorsand Executive Officers of the**Registrant

The information relating to directors required by thisItem will be contained under the captions “Proposal 1: Election of Directors”and “Board of Directors and Corporate Governance” in the Company’s ProxyStatement, and such information is incorporated herein by reference.

The information relating to executive officersrequired by this item is included herein in Part I under the caption “ExecutiveOfficers”.

The information required pursuant to Item 405 ofRegulation S-K will be contained under the caption “Section 16(a) BeneficialOwnership Reporting Compliance” in the Company’s Proxy Statement and suchinformation is incorporated herein by reference.

The information requiredpursuant to Item 406 of Regulation S-K will be contained under the caption “Boardof Directors and Corporate Governance” in the Company’s Proxy Statement andsuch information is incorporated herein by reference.

**ITEM 11.**         ExecutiveCompensation

The information requiredby this item will be contained under the captions “Summary Table of ExecutiveCompensation” and “Employment Agreements and Arrangements” in the Company’sProxy Statement and such information is incorporated herein by reference.

**ITEM 12.**         SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters

The information requiredby this item will be contained under the captions “Common Stock Ownership ofCertain Beneficial Owners and Management” and “Equity Compensation Plan Information”in the Company’s Proxy Statement and such information is incorporated herein byreference.

**ITEM 13.**         CertainRelationships and Related Transactions

The information requiredby this item is contained under the caption “Certain Relationships And RelatedTransactions” in the Company’s Proxy Statement and such information isincorporated herein by reference.

**ITEM 14.**         PrincipalAccountant Fees and Services

The information required by this item is containedunder the caption “Auditors Fees” in the Company’s Proxy Statement and suchinformation is incorporated herein by reference.

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**PART IV**

**ITEM 15.**         Exhibits,Financial Statement Schedules

**(a) Exhibits**

| Exhibit   Number | ** ** | ** **                                                                                                                                                                                                  | ** ** | **Description** |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
|  2.1(10)    |       | Agreement and  Plan of Reorganization, dated June 11, 2002, by and among Univision  Communications Inc., Hispanic Broadcasting Corporation, and Univision  Acquisition Corporation                     |
|  3.1(9)     |       | Restated  Certificate of Incorporation of the Company                                                                                                                                                       |
|  3.2(12)    |       | Certificate of  Amendment of Restated Certificate of Incorporation of the Company                                                                                                                           |
|  3.3(18)    |       | Amended and  Restated Bylaws of the Company                                                                                                                                                                 |
|  4.1(2)     |       | Form of  specimen stock certificate                                                                                                                                                                    |
|  4.2(7)     |       | Indenture dated  as of July 18, 2001, between Univision Communications Inc. and The Bank  of New York as Trustee                                                                                       |
|  4.3(7)     |       | Form of  Supplemental Indenture to be delivered by additional guarantors, among  Univision Communications Inc., the Guaranteeing Subsidiaries to be named  therein and The Bank of New York as Trustee |
|  4.4(13)    |       | Officer’s  Certificate dated July 18, 2001 relating to the Company’s 7.85% Notes  due 2011                                                                                                   |
|  4.5(14)    |       | Form of  Officer’s Certificate for the Company’s 2006, 2007, and 2008 Senior Notes                                                                                                           |
|  4.6(14)    |       | Form of  Supplemental Indenture for the Company’s Senior Notes Due 2006, 2007, and  2008                                                                                                          |
|  4.7(14)    |       | Form of  2.875% Senior Notes Due 2006                                                                                                                                                                  |
|  4.8(14)    |       | Form of  Guarantee to Senior Notes Due 2006                                                                                                                                                            |
|  4.9(14)    |       | Form of  3.500% Senior Notes Due 2007                                                                                                                                                                  |
|  4.10(14)   |       | Form of  Guarantee to Senior Notes Due 2007                                                                                                                                                            |
|  4.11(14)   |       | Form of  3.875% Senior Notes Due 2008                                                                                                                                                                  |
|  4.12(14)   |       | Form of  Guarantee to Senior Notes Due 2008                                                                                                                                                            |
| 10.1(15)         |       | Form of  Indemnification Agreement between the Company and each of its executive  officers and directors                                                                                               |
| 10.2.1(2)        |       | Registration  Rights Agreement dated as of October 2, 1996                                                                                                                                             |
| 10.2.2(11)       |       | Registration  Rights Agreement dated September 22, 2003 by and between the Company and  members of the Tichenor family                                                                                 |
| 10.3.1(4)        |       | 1996 Performance  Award Plan                                                                                                                                                                                |
| 10.3.2(16)       |       | 2004 Performance  Award Plan                                                                                                                                                                                |
| 10.3.3           |       | Form of employee  restricted stock unit agreement                                                                                                                                                           |
| 10.3.4           |       | Form of director  stock option agreement                                                                                                                                                                    |
| 10.3.5           |       | Form of  employee stock option agreement form                                                                                                                                                          |
| 10.3.6           |       | Summary of  director compensation                                                                                                                                                                           |
| 10.4.1(8)        |       | Second Amended  and Restated Program License Agreement dated as of December 19, 2001 by  and between Venevision International Corp. and the Company                                                    |

51

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| 10.4.2(8)   |   | Second Amended  and Restated Program License Agreement dated as of December 19, 2001 by  and between Productora de Teleprogramas, S.A. de C.V. and the Company                                                                                                                                                                                                                                         |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.5(2)     |   | Participation  Agreement dated as of October 2, 1996 by and among the Company,  Perenchio, Televisa, Venevision and certain of their affiliates                                                                                                                                                                                                                                                        |
| 10.6(8)     |   | Amended and  Restated International Program Rights Agreement dated as of December 19,  2001 by and among the Company, Venevision International, Inc. and Grupo  Televisa, S.A.                                                                                                                                                                                                                    |
| 10.7.1(2)   |   | Amended and  Restated Warrant issued to Venevision dated as of October 2, 1996, as  amended                                                                                                                                                                                                                                                                                                            |
| 10.7.2(8)   |   | Amended and  Restated Warrant issued to Televisa Internacional, S.A. de C.V. dated as of  December 19, 2001                                                                                                                                                                                                                                                                                            |
| 10.7.3(8)   |   | Warrants issued  to Grupo Televisa, S.A. dated as of December 19, 2001                                                                                                                                                                                                                                                                                                                                 |
| 10.7.4(8)   |   | Warrants issued  to VVI Investments Corporation dated as of December 19, 2001                                                                                                                                                                                                                                                                                                                          |
| 10.7.5(8)   |   | Warrants issued  to Venevision Investments LLC dated as of December 19, 2001                                                                                                                                                                                                                                                                                                                           |
| 10.7.6(12)  |   | Warrant issued to  Television Holdings USA, LLC dated April 12, 2002                                                                                                                                                                                                                                                                                                                                   |
| 10.8(6)     |   | Credit Agreement  dated as of July 18, 2001 among Univision Communications Inc., a  Delaware corporation, Univision of Puerto Rico Inc., a Delaware corporation,  the lenders from time to time party hereto, the Chase Manhattan Bank, as  Administrative Agent, and BNP Paribas, as Documentation Agent                                                                                              |
| 10.9(8)     |   | Subsidiary  Guaranty dated as of July 18, 2001 made by the Univision guarantors to  the Credit Agreement dated as of July 18, 2001 among Univision  Communications Inc., a Delaware corporation, Univision of Puerto Rico Inc., a  Delaware corporation, the lenders from time to time party hereto, the Chase  Manhattan Bank, as Administrative Agent, and BNP Paribas, as Documentation  Agent |
| 10.10(11)   |   | Voting Agreement  dated June 11, 2002, by and among A. Jerrold Perenchio and McHenry  Tichenor, Jr.                                                                                                                                                                                                                                                                                               |
| 10.12.1(1)  |   | Employment  Agreement dated as of January 1, 1995 between the Univision Network  Limited Partnership and Ray Rodriguez                                                                                                                                                                                                                                                                                 |
| 10.12.2(17) |   | Amendment to  Employment Agreement effective as of December 31, 2004 between The  Univision Network Limited Partnership and Ray Rodriguez                                                                                                                                                                                                                                                              |
| 10.12.3     |   | Amendment to  Employment Agreement effective as of December 31, 2005 between The  Univision Network Limited Partnership and Ray Rodriguez                                                                                                                                                                                                                                                              |
| 10.13.1(8)  |   | Employment  Agreement dated as of January 1, 1996 between The Univision Network  Limited Partnership and Andrew Hobson                                                                                                                                                                                                                                                                                 |
| 10.13.2(17) |   | Amendment to  Employment Agreement effective as of December 31, 2004 between Univision  Management Company and Andrew Hobson                                                                                                                                                                                                                                                                           |
| 10.13.3     |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and Andrew Hobson                                                                                                                                                                                                                                                                           |
| 10.14.1(5)  |   | Employment  Agreement dated as of August 17, 2000 between the Univision  Communications Inc. and C. Douglas Kranwinkle                                                                                                                                                                                                                                                                                 |
| 10.14.2(17) |   | Amendment to  Employment Agreement effective as of December 31, 2004 between Univision  Management Company and C. Douglas Kranwinkle                                                                                                                                                                                                                                                                   |

52

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| 10.14.3     |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and C. Douglas Kranwinkle                            |
|-------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.15(11)   |   | Employment  Agreement, dated as of June 11, 2002, by and among Univision  Communications Inc. and McHenry Tichenor, Jr.                                    |
| 10.16.1(17) |   | Employment  Agreement dated as of July 1, 2004 between the Univision Communications  Inc. and Robert V. Cahill                                                  |
| 10.16.2(17) |   | Amendment to  Employment Agreement effective as of December 31, 2004 between Univision  Management Company and Robert V. Cahill                                 |
| 10.16.3     |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and Robert V. Cahill                                 |
| 10.17(3)    |   | Reimbursement  Agreement between the Company and Chartwell Services Inc.                                                                                             |
| 10.18.1(8)  |   | Letter Agreement  by and between Univision Communications Inc. and Grupo Televisa S.A. dated  December 19, 2001                                                 |
| 10.18.2(8)  |   | First Amendment  dated January 11, 2002 to Letter Agreement by and between Univision  Communications Inc. and Grupo Televisa S.A. dated December 19, 2001  |
| 10.18.3(8)  |   | Second Amendment  dated January 28, 2002 to Letter Agreement by and between Univision  Communications Inc. and Grupo Televisa S.A. dated December 19, 2001 |
| 10.18.4(8)  |   | Third Amendment  dated February 27, 2002 to Letter Agreement by and between Univision  Communications Inc. and Grupo Televisa S.A. dated December 19, 2001 |
| 10.18.5(8)  |   | Fourth Amendment  dated March 7, 2002 to Letter Agreement by and between Univision  Communications Inc. and Grupo Televisa S.A. dated December 19, 2001    |
| 21.1        |   | Subsidiaries of  the Company                                                                                                                                         |
| 31.1        |   | Certification of  CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                     |
| 31.2        |   | Certification of  CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                     |
| 32.1        |   | Certification of CEO and  CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                                             |

----

(1)          Previously filed as anexhibit to Univision Communications Inc. Registration Statement on Form S-1(File No. 333-6309)

(2)          Previously filed as anexhibit to Univision Communications Inc.’s Annual Report on Form 10-Kfor the year ended December 31, 1996

(3)          Previously filed as anexhibit to Univision Communications Inc.’s Quarterly Report on Form 10-Qfor the period ended March 31, 1999

(4)          Previously filed as anexhibit to Univision Communications Inc. Definitive Proxy Statement dated March 30,2000

(5)          Previously filed as anexhibit to Univision Communications Inc.’s Annual Report on Form 10-Kfor the year ended December 31, 2000

(6)          Previously filed as anexhibit to Univision Communications Inc.’s Quarterly Report on Form 10-Qfor the period ended June 30, 2001

(7)          Previously filed as anexhibit to Univision Communications Inc. Registration Statement on Form S-4(File No. 333-71426-01)

53

----

(8)          Previously filed as anexhibit to Univision Communications Inc.’s Annual Report on Form 10-Kfor the year ended December 31, 2001

(9)          Previously filed as anexhibit to Univision Communications Inc. Definitive Proxy Statement dated April 8,2002

(10)   Previously filed as an exhibitto Univision Communications Inc.’s Report on Form 8-K filed June 13,2002

(11)   Previously filed as an exhibitto Univision Communications Inc.’s Registration Statement on Form S-4filed on August 30, 2002 (File No. 333-99037)

(12)   Previously filed as an exhibitto Univision Communications Inc.’s Annual Report on Form 10-K forthe year ended December 31, 2002

(13)   Previously filed as an exhibitto Univision Communications Inc.’s Registration Statement on Form S-3filed on September 30, 2003 (File No. 333-105933)

(14)   Previously filed as an exhibitto Univision Communications Inc.’s Report on Form 8-K filed October 15,2003

(15)   Previously filed as an exhibitto Univision Communications Inc.’s Annual Report on Form 10-K forthe year ended December 31, 2003

(16)   Previously filed as an exhibitto Univision Communications Inc. Definitive Proxy Statement on March 19,2004

(17)   Previously filed as an exhibitto Univision Communications Inc.’s Annual Report on Form 10-K forthe year ended December 31, 2004

(18)   Previously filed as an exhibitto Univision Communications Inc.’s Annual Report on Form 10-Q forthe period ended September 30, 2005.

**(b) Financial Statement Schedules**

**ScheduleII—Valuation and Qualifying Accounts**

All other schedules for which provision is made in theapplicable accounting regulation of the Securities Exchange Act of 1934 are notrequired under the related instructions or are inapplicable and therefore havebeen omitted.

54

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**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized on March 10, 2006.

UNIVISIONCOMMUNICATIONS INC.

|   | By:    | /s/ PETER H. LORI                |
|--------|--------|----------------------------------|
|   |   | Peter H. Lori                    |
|   |   | *Corporate Controller and Chief* |
|   |   | *Accounting Officer*             |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned by the following persons in the capacities and on the dates soindicated.

Each person whosesignature appears below appoints each of Robert V. Cahill, C. AndrewHobson, Douglas Kranwinkle and Peter H. Lori, severally and not jointly,to be his true and lawful attorney-in-fact and agent, with full power ofsubstitution and resubstitution, for him and in his name, place and stead, inany and all capacities, to sign any amendments to the Company’s AnnualReport on Form 10-K for the fiscal year ended December 31,2005; granting unto said attorney-in-fact and agent, full power and authorityto do and perform each and every act and thing requisite and necessary to bedone, as fully for all intents and purposes as he might or could do in person,hereby ratifying and confirming all that said attorney-in-fact and agent, orhis substitute or substitutes, shall lawfully do or cause to be done by virtuehereof.

| /s/ A. JERROLD PERENCHIO       |   | Chairman of the Board         |   | March 10,  2006 |
|--------------------------------|--------|-------------------------------|--------|----------------------|
| A. Jerrold  Perenchio          |   | and Chief Executive Officer   |   |                 |
|                           |   | (Principal Executive Officer) |   |                 |
| /s/  ANDREW W. HOBSON          |   | Chief Financial Officer       |   | March 10,  2006 |
| Andrew W. Hobson               |   |                          |   |                 |
| /s/  PETER H. LORI             |   | Corporate Controller and      |   | March 10,  2006 |
| Peter H. Lori                  |   | Chief Accounting Officer      |   |                 |
| /s/  ANTHONY CASSARA           |   | Director                      |   | March 10,  2006 |
| Anthony Cassara                |   |                          |   |                 |
| /s/  GUSTAVO A. CISNEROS       |   | Director                      |   | March 10,  2006 |
| Gustavo A.  Cisneros           |   |                          |   |                 |
| /s/  HAROLD GABA               |   | Director                      |   | March 10,  2006 |
| Harold Gaba                    |   |                          |   |                 |
| /s/  ALAN F. HORN              |   | Director                      |   | March 10,  2006 |
| Alan F. Horn                   |   |                          |   |                 |
| /s/  MICHAEL O. JOHNSON        |   | Director                      |   | March 10,  2006 |
| Michael O.  Johnson            |   |                          |   |                 |
| /s/  JOHN G. PERENCHIO         |   | Director                      |   | March 10,  2006 |
| John G. Perenchio              |   |                          |   |                 |
| /s/  RAY RODRIGUEZ             |   | Director                      |   | March 10,  2006 |
| Ray Rodriguez                  |   |                          |   |                 |
| /s/  MCHENRY T. TICHENOR, JR.  |   | Director                      |   | March 10,  2006 |
| McHenry T.  Tichenor, Jr. |   |                          |   |                 |

 

55

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**INDEX TO EXHIBITS**

| Exhibit   Number | ** ** | ** **                                                                                                                                                                                                  | ** ** | **Description** |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
|  2.1(10)    |       | Agreement and  Plan of Reorganization, dated June 11, 2002, by and among Univision  Communications Inc., Hispanic Broadcasting Corporation, and Univision  Acquisition Corporation                     |
|  3.1(9)     |       | Restated  Certificate of Incorporation of the Company                                                                                                                                                       |
|  3.2(12)    |       | Certificate of  Amendment of Restated Certificate of Incorporation of the Company                                                                                                                           |
|  3.3(18)    |       | Amended and  Restated Bylaws of the Company                                                                                                                                                                 |
|  4.1(2)     |       | Form of  specimen stock certificate                                                                                                                                                                    |
|  4.2(7)     |       | Indenture dated  as of July 18, 2001, between Univision Communications Inc. and The Bank  of New York as Trustee                                                                                       |
|  4.3(7)     |       | Form of  Supplemental Indenture to be delivered by additional guarantors, among  Univision Communications Inc., the Guaranteeing Subsidiaries to be named  therein and The Bank of New York as Trustee |
|  4.4(13)    |       | Officer’s  Certificate dated July 18, 2001 relating to the Company’s 7.85% Notes  due 2011                                                                                                   |
|  4.5(14)    |       | Form of  Officer’s Certificate for the Company’s 2006, 2007, and 2008 Senior Notes                                                                                                           |
|  4.6(14)    |       | Form of  Supplemental Indenture for the Company’s Senior Notes Due 2006, 2007, and  2008                                                                                                          |
|  4.7(14)    |       | Form of  2.875% Senior Notes Due 2006                                                                                                                                                                  |
|  4.8(14)    |       | Form of  Guarantee to Senior Notes Due 2006                                                                                                                                                            |
|  4.9(14)    |       | Form of  3.500% Senior Notes Due 2007                                                                                                                                                                  |
|  4.10(14)   |       | Form of  Guarantee to Senior Notes Due 2007                                                                                                                                                            |
|  4.11(14)   |       | Form of  3.875% Senior Notes Due 2008                                                                                                                                                                  |
|  4.12(14)   |       | Form of  Guarantee to Senior Notes Due 2008                                                                                                                                                            |
| 10.1(15)         |       | Form of  Indemnification Agreement between the Company and each of its executive officers  and directors                                                                                               |
| 10.2.1(2)        |       | Registration  Rights Agreement dated as of October 2, 1996                                                                                                                                             |
| 10.2.2(11)       |       | Registration  Rights Agreement dated September 22, 2003 by and between the Company and  members of the Tichenor family                                                                                 |
| 10.3.1(4)        |       | 1996 Performance  Award Plan                                                                                                                                                                                |
| 10.3.2(16)       |       | 2004 Performance  Award Plan                                                                                                                                                                                |
| 10.3.3           |       | Form of  employee restricted stock unit agreement                                                                                                                                                      |
| 10.3.4           |       | Form of  director stock option agreement                                                                                                                                                               |
| 10.3.5           |       | Form of  employee stock option agreement form                                                                                                                                                          |
| 10.3.6           |       | Summary of  director compensation                                                                                                                                                                           |
| 10.4.1(8)        |       | Second Amended  and Restated Program License Agreement dated as of December 19, 2001 by  and between Venevision International Corp. and the Company                                                    |
| 10.4.2(8)        |       | Second Amended  and Restated Program License Agreement dated as of December 19, 2001 by  and between Productora de Teleprogramas, S.A. de C.V. and the Company                                         |

56

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| 10.5(2)     |   | Participation  Agreement dated as of October 2, 1996 by and among the Company,  Perenchio, Televisa, Venevision and certain of their affiliates                                                                                                                                                                                                                                                        |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.6 (8)    |   | Amended and  Restated International Program Rights Agreement dated as of December 19,  2001 by and among the Company, Venevision International, Inc. and Grupo  Televisa, S.A.                                                                                                                                                                                                                    |
| 10.7.1(2)   |   | Amended and  Restated Warrant issued to Venevision dated as of October 2, 1996, as  amended                                                                                                                                                                                                                                                                                                            |
| 10.7.2(8)   |   | Amended and  Restated Warrant issued to Televisa Internacional, S.A. de C.V. dated as of  December 19, 2001                                                                                                                                                                                                                                                                                            |
| 10.7.3(8)   |   | Warrants issued  to Grupo Televisa, S.A. dated as of December 19, 2001                                                                                                                                                                                                                                                                                                                                 |
| 10.7.4(8)   |   | Warrants issued  to VVI Investments Corporation dated as of December 19, 2001                                                                                                                                                                                                                                                                                                                          |
| 10.7.5(8)   |   | Warrants issued  to Venevision Investments LLC dated as of December 19, 2001                                                                                                                                                                                                                                                                                                                           |
| 10.7.6(12)  |   | Warrant issued to  Television Holdings USA, LLC dated April 12, 2002                                                                                                                                                                                                                                                                                                                                   |
| 10.8(6)     |   | Credit Agreement  dated as of July 18, 2001 among Univision Communications Inc., a  Delaware corporation, Univision of Puerto Rico Inc., a Delaware corporation,  the lenders from time to time party hereto, the Chase Manhattan Bank, as  Administrative Agent, and BNP Paribas, as Documentation Agent                                                                                              |
| 10.9(8)     |   | Subsidiary  Guaranty dated as of July 18, 2001 made by the Univision guarantors to  the Credit Agreement dated as of July 18, 2001 among Univision  Communications Inc., a Delaware corporation, Univision of Puerto Rico Inc., a  Delaware corporation, the lenders from time to time party hereto, the Chase  Manhattan Bank, as Administrative Agent, and BNP Paribas, as Documentation  Agent |
| 10.10(11)   |   | Voting Agreement  dated June 11, 2002, by and among A. Jerrold Perenchio and McHenry  Tichenor, Jr.                                                                                                                                                                                                                                                                                               |
| 10.12.1(1)  |   | Employment  Agreement dated as of January 1, 1995 between the Univision Network  Limited Partnership and Ray Rodriguez                                                                                                                                                                                                                                                                                 |
| 10.12.2(17) |   | Amendment to  Employment Agreement effective as of December 31, 2004 between The  Univision Network Limited Partnership and Ray Rodriguez                                                                                                                                                                                                                                                              |
| 10.12.3     |   | Amendment to  Employment Agreement effective as of December 31, 2005 between The  Univision Network Limited Partnership and Ray Rodriguez                                                                                                                                                                                                                                                              |
| 10.13.1(8)  |   | Employment  Agreement dated as of January 1, 1996 between The Univision Network  Limited Partnership and Andrew Hobson                                                                                                                                                                                                                                                                                 |
| 10.13.2(17) |   | Amendment to  Employment Agreement effective as of December 31, 2004 between Univision  Management Company and Andrew Hobson                                                                                                                                                                                                                                                                           |
| 10.13.3     |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and Andrew Hobson                                                                                                                                                                                                                                                                           |
| 10.14.1(5)  |   | Employment  Agreement dated as of August 17, 2000 between the Univision  Communications Inc. and C. Douglas Kranwinkle                                                                                                                                                                                                                                                                                 |
| 10.14.2(17) |   | Amendment to  Employment Agreement effective as of December 31, 2004 between Univision  Management Company and C. Douglas Kranwinkle                                                                                                                                                                                                                                                                   |
| 10.14.3     |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and C. Douglas Kranwinkle                                                                                                                                                                                                                                                                   |

57

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| 10.15(11)   |   | Employment  Agreement, dated as of June 11, 2002, by and among Univision  Communications Inc. and McHenry Tichenor, Jr.                                    |
|-------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.16.1(17) |   | Employment  Agreement dated as of July 1, 2004 between the Univision Communications  Inc. and Robert V. Cahill                                                  |
| 10.16.2(17) |   | Amendment to  Employment Agreement effective as of December 31, 2004 between Univision  Management Company and Robert V. Cahill                                 |
| 10.16.3     |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and Robert V. Cahill                                 |
| 10.17(3)    |   | Reimbursement  Agreement between the Company and Chartwell Services Inc.                                                                                             |
| 10.18.1(8)  |   | Letter Agreement  by and between Univision Communications Inc. and Grupo Televisa S.A. dated  December 19, 2001                                                 |
| 10.18.2(8)  |   | First Amendment  dated January 11, 2002 to Letter Agreement by and between Univision  Communications Inc. and Grupo Televisa S.A. dated December 19, 2001  |
| 10.18.3(8)  |   | Second Amendment  dated January 28, 2002 to Letter Agreement by and between Univision  Communications Inc. and Grupo Televisa S.A. dated December 19, 2001 |
| 10.18.4(8)  |   | Third Amendment  dated February 27, 2002 to Letter Agreement by and between Univision  Communications Inc. and Grupo Televisa S.A. dated December 19, 2001 |
| 10.18.5(8)  |   | Fourth Amendment  dated March 7, 2002 to Letter Agreement by and between Univision  Communications Inc. and Grupo Televisa S.A. dated December 19, 2001    |
| 21.1        |   | Subsidiaries of  the Company                                                                                                                                         |
| 31.1        |   | Certification of  CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                     |
| 31.2        |   | Certification of  CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                     |
| 32.1        |   | Certification of CEO and  CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                                             |

----

(1)          Previously filed as anexhibit to Univision Communications Inc. Registration Statement on Form S-1(File No. 333-6309)

(2)          Previously filed as anexhibit to Univision Communications Inc.’s Annual Report on Form 10-K forthe year ended December 31, 1996

(3)          Previously filed as anexhibit to Univision Communications Inc.’s Quarterly Report on Form 10-Qfor the period ended March 31, 1999

(4)          Previously filed as anexhibit to Univision Communications Inc. Definitive Proxy Statement dated March 30,2000

(5)          Previously filed as anexhibit to Univision Communications Inc.’s Annual Report on Form 10-K forthe year ended December 31, 2000

(6)          Previously filed as anexhibit to Univision Communications Inc.’s Quarterly Report on Form 10-Qfor the period ended June 30, 2001

(7)          Previously filed as anexhibit to Univision Communications Inc. Registration Statement on Form S-4(File No. 333-71426-01)

(8)          Previously filed as anexhibit to Univision Communications Inc.’s Annual Report on Form 10-K forthe year ended December 31, 2001

58

----

(9)          Previously filed as anexhibit to Univision Communications Inc. Definitive Proxy Statement dated April 8,2002

(10)   Previously filed as an exhibitto Univision Communications Inc.’s Report on Form 8-K filed June 13,2002

(11)   Previously filed as an exhibitto Univision Communications Inc.’s Registration Statement on Form S-4filed on August 30, 2002 (File No. 333-99037)

(12)   Previously filed as an exhibitto Univision Communications Inc.’s Annual Report on Form 10-K for the yearended December 31, 2002

(13)   Previously filed as an exhibitto Univision Communications Inc.’s Registration Statement on Form S-3filed on September 30, 2003 (File No. 333-105933)

(14)   Previously filed as an exhibitto Univision Communications Inc.’s Report on Form 8-K filed October 15,2003

(15)   Previously filed as an exhibitto Univision Communications Inc.’s Annual Report on Form 10-K for the yearended December 31, 2003

(16)   Previously filed as an exhibitto Univision Communications Inc. Definitive Proxy Statement on March 19,2004

(17)   Previously filed as an exhibitto Univision Communications Inc.’s Annual Report on Form 10-K for the yearended December 31, 2004

(18)   Previously filed as an exhibitto Univision Communications Inc.’s Annual Report on Form 10-Q for theperiod ended September 30, 2005.

59

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**SCHEDULE II**

**UNIVISIONCOMMUNICATIONS INC. AND SUBSIDIARIESVALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2003, 2004 and 2005(In thousands)**

| ** **                                     | ** ** | ** ** | ** ** | **Additions**                                  | ** ** | ** **                                    | ** ** | ** **                           | ** ** |
|------------------------------------------------|------------|------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------------------|------------|
| **Description**                                | ** ** | ** ** | ** ** | **Balance at  Beginning of  Period** | ** ** | **Charged to  Costs and  Expenses** | ** ** | **Charged to  Other  Accounts** | ** ** | **Deductions** | ** ** | **Balance  at end of  Period** | ** ** |
| **For the  Year Ended December 31, 2003** |       |       |       |                                           |       |                                          |       |                                 |       |   |   |   |   |   |   |   |   |   |   |
| Allowance for  doubtful accounts               |       |       | $          | 20,089                                         |       |                                          |       | $                                    | 2,634      |   |   |   | $ | 3,057 | (1) |   |   | $ | 3,729 | (2) |   | $ | 22,051 |   |
| Allowance for  returns                         |       |       | 9,554      |                                           |       |                                          | 2,384      |                                 |       |   | — |   |   |   | 7,139 | (3) |   | 4,799 |   |
| Allowance for  doubtful accounts and returns   |       |       | $          | 29,643                                         |       |                                          |       | $                                    | 5,018      |   |   |   | $ | 3,057 | (1) |   |   | $ | 10,868 |   |   | $ | 26,850 |   |
| **For the  Year Ended December 31, 2004** |       |       |       |                                           |       |                                          |       |                                 |       |   |   |   |   |   |   |   |   |   |   |
| Allowance for  doubtful accounts               |       |       | $          | 22,051                                         |       |                                          |       | $                                    | 426        |   |   |   | $ | 455 | (1) |   |   | $ | 5,240 | (2) |   | $ | 17,692 |   |
| Allowance for  returns                         |       |       | 4,799      |                                           |       |                                          | 1,554      |                                 |       |   | 3,229 | (1) |   |   | 1,016 | (3) |   | 8,566 |   |
| Allowance for  doubtful accounts and returns   |       |       | $          | 26,850                                         |       |                                          |       | $                                    | 1,980      |   |   |   | $ | 3,684 | (1) |   |   | $ | 6,256 |   |   | $ | 26,258 |   |
| **For the  Year Ended December 31, 2005** |       |       |       |                                           |       |                                          |       |                                 |       |   |   |   |   |   |   |   |   |   |   |
| Allowance for  doubtful accounts               |       |       | $          | 17,692                                         |       |                                          |       | $                                    | 423        |   |   |   | $ | — |   |   |   | $ | 4,982 | (2) |   | $ | 13,133 |   |
| Allowance for  returns                         |       |       | 8,566      |                                           |       |                                          | 5,507      |                                 |       |   | — |   |   |   | 4,055 | (3) |   | 10,018 |   |
| Allowance for doubtful  accounts and returns   |       |       | $          | 26,258                                         |       |                                          |       | $                                    | 5,930      |   |   |   | $ | — |   |   |   | $ | 9,037 |   |   | $ | 23,151 |   |
|                                                |            |            |            |                                                |            |                                               |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

(1)          Acquisition relatedadjustments.

(2)          Write-off of accountsreceivable.

(3)          Reductions to theallowance for returns.

60

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**UNIVISIONCOMMUNICATIONS INC. AND SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                            | ** ** | **Page** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| Reports of Independent Registered Public Accounting  Firm                                                                  |       |     | F-2        |   |   |
| Consolidated  Balance Sheets at December 31, 2005 and 2004                                                            |       |     | F-4        |   |   |
| Consolidated Statements of Income for the Years Ended  December 31, 2005, 2004 and 2003                               |       |     | F-5        |   |   |
| Consolidated Statements of Changes in Stockholders’  Equity for the Years Ended December 31, 2003, 2004 and 2005 |       |     | F-6        |   |   |
| Consolidated Statements of Cash Flows for the Years  Ended December 31, 2005, 2004 and 2003                           |       |     | F-7        |   |   |
| Notes  to Consolidated Financial Statements                                                                                |       |     | F-8        |   |   |

 

F-1

----

**FINANCIALSTATEMENT OPINIONREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

Board of Directors and StockholdersUnivision Communications Inc.

We have audited the accompanying consolidated balancesheets of Univision Communications Inc. and subsidiaries as of December 31,2005 and 2004 and the related consolidated statements of income, stockholders’equity, and cash flows for each of the three years in the period ended December 31,2005. Our audits also included the financial statement schedule of UnivisionCommunications Inc. and subsidiaries listed in index at Item 15(b). Thesefinancial statements and the schedule are the responsibility of management. Ourresponsibility is to express an opinion on these financial statements andschedule based on our audits.

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

In our opinion, the financial statements referred toabove present fairly, in all material respects, the consolidated financialposition of Univision Communications Inc. and subsidiaries at December 31,2005 and 2004 and the consolidated results of their operations and their cashflows for each of the three years in the period ended December 31, 2005 inconformity with U.S. generally accepted accounting principles. Also, in ouropinion, the financial statement schedule, when considered in relation to thebasic financial statements taken as a whole, present fairly in all materialrespects the information set forth therein.

Wealso have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the effectiveness of UnivisionCommunications Inc.’s internal control over financial reporting as of December 31,2005, based on criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commissionand our report dated March 10, 2006 expressed an unqualified opinionthereon.
|                     |   | /s/ Ernst &Young LLP |
|---------------------|--------|-------------------------------|
| New York, New York  |   |                          |
| March 10, 2006 |   |                          |

 

F-2

----

**OPINIONON INTERNAL CONTROLS**

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMON INTERNAL CONTROL OVER FINANCIAL REPORTING**

Board of Directors and StockholdersUnivision Communications Inc.

We have audited management’s assessment included inthe accompanying Report on Internal Control Over Financial Reporting, includedin Item 9A. “Controls and Procedures” of this Annual Report on Form 10-K,that Univision Communications Inc. maintained effective internal controlover financial reporting as of December 31, 2005, based on criteria established in Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (the COSO criteria). Univision Communications Inc.’smanagement is responsible for maintaining effective internal control overfinancial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting. Our responsibility is to express an opinionon management’s assessment and an opinion on the effectiveness of the company’sinternal control over financial reporting based on our audit.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, evaluatingmanagement’s assessment, testing and evaluating the design and operatingeffectiveness of internal control, and performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides areasonable basis for our opinion.

A company’s internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

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

In our opinion, management’s assessment that UnivisionCommunications Inc. maintained effective internal control over financialreporting as of December 31, 2005, is fairly stated, in all materialrespects, based on the COSO criteria. Also, in our opinion, UnivisionCommunications Inc. maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2005, based on theCOSO criteria.

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated balance sheets of Univision Communications Inc.and subsidiaries as of December 31, 2005 and 2004 and the relatedconsolidated statements of income, stockholders’ equity, and cash flows foreach of the three years in the period ended December 31, 2005 and ourreport dated March 10, 2006 expressed an unqualified opinion thereon.
|                      |   | /s/Ernst & Young LLP |
|----------------------|--------|-------------------------------|
| New York, New  York  |   |                          |
| March 10,  2006 |   |                          |

 

F-3

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share and per-share data)**

| ** **                                                                                                                                                                                  | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                  | ** ** | **2005**              | ** ** | **2004** | ** ** |
| **ASSETS**                                                                                                                                                                                  | ** ** | ** **            | ** ** | ** ** | ** ** |
| Current assets:                                                                                                                                                                             |       |                  |       |   |   |
| Cash and cash equivalents                                                                                                                                                                   |       | $                     | 99,400     |   | $ | 189,868 |   |
| Accounts receivable, less allowance for doubtful  accounts and returns of $23,151 in 2005 and $26,258 in 2004                                                                               |       | 395,508               |       | 331,824 |   |
| Program rights                                                                                                                                                                              |       | 29,878                |       | 34,434 |   |
| Income taxes                                                                                                                                                                                |       | 3,194                 |       | — |   |
| Deferred tax assets                                                                                                                                                                         |       | 23,150                |       | 21,518 |   |
| Prepaid expenses and other                                                                                                                                                                  |       | 82,470                |       | 60,845 |   |
| Total current assets                                                                                                                                                                        |       | 633,600               |       | 638,489 |   |
| Property and equipment, net, less accumulated  depreciation of $389,838 in 2005 and $320,299 in 2004                                                                                        |       | 563,958               |       | 551,138 |   |
| Intangible assets, net                                                                                                                                                                      |       | 4,271,584             |       | 4,283,049 |   |
| Goodwill                                                                                                                                                                                    |       | 2,231,238             |       | 2,199,199 |   |
| Deferred financing costs, net, less accumulated  amortization of $11,742 in 2005 and $8,432 in 2004                                                                                         |       | 7,123                 |       | 10,433 |   |
| Program rights                                                                                                                                                                              |       | 25,960                |       | 36,879 |   |
| Investments in equity method investees                                                                                                                                                      |       | 54,644                |       | 63,885 |   |
| Investments in cost method investees                                                                                                                                                        |       | 299,775               |       | 371,040 |   |
| Other assets                                                                                                                                                                                |       | 40,454                |       | 73,014 |   |
| Total assets                                                                                                                                                                                |       | $                     | 8,128,336  |   | $ | 8,227,126 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                               |       |                  |       |   |   |
| Current liabilities:                                                                                                                                                                        |       |                  |       |   |   |
| Accounts payable and accrued liabilities                                                                                                                                                    |       | $                     | 283,509    |   | $ | 229,493 |   |
| Income taxes                                                                                                                                                                                |       | —                |       | 2,226 |   |
| Accrued interest                                                                                                                                                                            |       | 25,639                |       | 23,110 |   |
| Accrued license fees                                                                                                                                                                        |       | 20,548                |       | 13,623 |   |
| Program rights obligations                                                                                                                                                                  |       | 15,809                |       | 18,323 |   |
| Current portion of long-term debt and capital lease  obligations                                                                                                                            |       | 564,016               |       | 4,740 |   |
| Total current liabilities                                                                                                                                                                   |       | 909,521               |       | 291,515 |   |
| Long-term debt                                                                                                                                                                              |       | 935,493               |       | 1,190,374 |   |
| Capital lease obligations                                                                                                                                                                   |       | 33,806                |       | 37,306 |   |
| Program rights obligations                                                                                                                                                                  |       | 20,948                |       | 30,881 |   |
| Deferred tax liabilities                                                                                                                                                                    |       | 1,019,803             |       | 961,074 |   |
| Other long-term liabilities                                                                                                                                                                 |       | 59,976                |       | 68,878 |   |
| Total liabilities                                                                                                                                                                           |       | 2,979,547             |       | 2,580,028 |   |
| Noncontrolling interest of variable interest entities                                                                                                                                       |       | 57,889                |       | 259,394 |   |
| Commitments and  contingencies (see notes 8 and 10)                                                                                                                                         |       |                  |       |   |   |
| Stockholders’ equity:                                                                                                                                                                  |       |                  |       |   |   |
| Preferred stock, $.01 par value; 10,000,000 shares  authorized; no shares issued or outstanding                                                                                             |       | —                |       | — |   |
| Common stock, $.01 par value; 1,040,000,000 shares  authorized; 304,982,531 shares issued and outstanding in 2005 and 324,349,028  shares issued and 323,331,848 shares outstanding in 2004 |       | 3,049                 |       | 3,243 |   |
| Paid-in-capital                                                                                                                                                                             |       | 4,133,889             |       | 4,640,554 |   |
| Deferred compensation                                                                                                                                                                       |       | (1,333                | )          | (1,847 | ) |
| Retained earnings                                                                                                                                                                           |       | 956,500               |       | 769,321 |   |
| Accumulated other comprehensive losses                                                                                                                                                      |       | (1,205                | )          | (1,374 | ) |
|                                                                                                                                                                                        |       | 5,090,900             |       | 5,409,897 |   |
| Treasury stock, at cost, 1,017,180 shares at  December 31, 2004                                                                                                                        |       | —                |       | (22,193 | ) |
| Total stockholders’ equity                                                                                                                                                             |       | 5,090,900             |       | 5,387,704 |   |
| Total liabilities  and stockholders’ equity                                                                                                                                            |       | $                     | 8,128,336  |   | $ | 8,227,126 |   |

 

F-4

----

**UNIVISIONCOMMUNICATIONS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFor the Years Ended December 31,(In thousands, except share and per-share data)**

| ** **                                                                              | ** ** | **2005**    | ** ** | **2004**    | ** ** | **2003**    | ** ** |
|-----------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
| Net revenues:                                                                           | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** |
| Television, radio and Internet services                                                 |       | $           | 1,746,087  |        | $          | 1,608,375   |       | $ | 1,197,818 |   |
| Music products and publishing                                                           |       | 206,444     |       | 178,560     |       | 113,197     |       |
| Total net  revenues                                                                     |       | 1,952,531   |       | 1,786,935   |       | 1,311,015   |       |
| Direct operating  expenses of television, radio and Internet services                   |       | 614,609     |       | 561,141     |       | 449,244     |       |
| Direct operating  expenses of music products and publishing                             |       | 115,364     |       | 102,316     |       | 64,497      |       |
| Total direct  operating expenses (excluding depreciation and amortization)              |       | 729,973     |       | 663,457     |       | 513,741     |       |
| Selling, general  and administrative expenses (excluding depreciation and amortization) |       | 559,281     |       | 528,841     |       | 363,674     |       |
| Cost reduction  plan                                                                    |       | 30,289      |       | —      |       | —      |       |
| Depreciation and  amortization                                                          |       | 93,223      |       | 101,382     |       | 84,904      |       |
| Operating  expenses                                                                     |       | 1,412,766   |       | 1,293,680   |       | 962,319     |       |
| Operating income                                                                        |       | 539,765     |       | 493,255     |       | 348,696     |       |
| Other expense (income):                                                                 |       |        |       |        |       |        |       |
| Interest expense, net                                                                   |       | 84,048      |       | 66,061      |       | 71,322      |       |
| Loss on extinguishment of debt                                                          |       | —      |       | 467         |       | 4,122       |       |
| Amortization of deferred financing costs                                                |       | 3,309       |       | 3,470       |       | 3,832       |       |
| Stock dividend                                                                          |       | (1,812      | )          | (6,453      | )          | —      |       |
| Equity (income)/ loss in unconsolidated subsidiaries  and other                         |       | (959        | )          | 1,942       |       | 10,218      |       |
| Gain on change in Entravision ownership interest                                        |       | —      |       | —      |       | (1,611      | )          |
| Nontemporary decline in fair value of investments                                       |       | 81,877      |       | —      |       | —      |       |
| Noncontrolling interest of variable interest  entities                                  |       | 4,120       |       | 7,311       |       | —      |       |
| Income before  taxes                                                                    |       | 369,182     |       | 420,457     |       | 260,813     |       |
| Provision for  income taxes                                                             |       | 182,003     |       | 164,574     |       | 105,386     |       |
| Net income                                                                              |       | $           | 187,179    |        | $          | 255,883     |       | $ | 155,427 |   |
| Net income per  common share:                                                           |       |        |       |        |       |        |       |
| Basic                                                                                   |       | $           | 0.59       |        | $          | 0.79        |       | $ | 0.61 |   |
| Diluted                                                                                 |       | $           | 0.54       |        | $          | 0.72        |       | $ | 0.55 |   |
| Weighted average  common shares outstanding:                                            |       |        |       |        |       |        |       |
| Basic                                                                                   |       | 315,223,555 |       | 322,742,581 |       | 253,853,027 |       |
| Diluted                                                                                 |       | 344,445,842 |       | 353,019,601 |       | 283,838,587 |       |

 

F-5

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFor the Years Ended December 31, 2003, 2004 and 2005(In thousands)**

| ** **                                                                                                             | *** *** | **Common  Stock** | ** ** | **Paid-in-  Capital** | ** ** | **Deferred  Compensation** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (loss)** | ** ** | **Treasury  Stock** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|--------------|-------------------|------------|-----------------------|------------|----------------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|---------------------|------------|-----------|------------|
| Balance, January 1, 2003                                                                                          |         |              | $          | 2,291                 |       |                       | $          | 1,219,884              |       |                                                      | $          | —              |       |      |       | $ | 358,011 |   |   |   | $ | 95 |   |   | $ | (22,193 | ) | $ | 1,558,088 |   |
| Net income for the year                                                                                                |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | 155,427    |      |       |   | — |   |   | — |   | 155,427 |   |
| Currency translation adjustment loss                                                                                   |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | —     |      |       |   | (233 | ) |   | — |   | (233 | ) |
| Comprehensive income                                                                                                   |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 155,194 |   |
| Preferred stock dividend accretion                                                                                     |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | — |   |
| Issuance of common stock for the Hispanic  Broadcasting Corporation acquisition                                        |         |              | 927        |                  |       | 3,354,903                  |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 3,355,830 |   |
| Valuation of Hispanic Broadcasting Corporation’s  unvested options following the acquisition, net of amortization |         |              | -          |                  |       | —                     |       |                   | (2,410     | )                                                         |       |                | —     |      |       |   | — |   |   | — |   | (2,410 | ) |
| Exercise of stock options including related tax  benefits                                                              |         |              | 14         |                  |       | 36,261                     |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 36,275 |   |
| Balance, December 31, 2003                                                                                        |         |              | 3,232      |                  |       | 4,611,048                  |       |                   | (2,410     | )                                                         |       |                | 513,438    |      |       |   | (138 | ) |   | (22,193 | ) | 5,102,977 |   |
| Net income for the year                                                                                                |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | 255,883    |      |       |   | — |   |   | — |   | 255,883 |   |
| Currency translation adjustment loss                                                                                   |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | —     |      |       |   | (1,236 | ) |   | — |   | (1,236 | ) |
| Comprehensive income                                                                                                   |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 254,647 |   |
| Stock issuance costs                                                                                                   |         |              | —     |                  |       | (57                        | )          |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | (57 | ) |
| Issuance of common stock                                                                                               |         |              | —     |                  |       | 599,426                    |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 599,426 |   |
| Purchase of common stock                                                                                               |         |              | —     |                  |       | (599,426                   | )          |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | (599,426 | ) |
| Amortization of deferred compensation                                                                                  |         |              | —     |                  |       | —                     |       |                   | 563        |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 563 |   |
| Exercise of stock options including related tax  benefits                                                              |         |              | 11         |                  |       | 29,563                     |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 29,574 |   |
| Balance December 31, 2004                                                                                         |         |              | 3,243      |                  |       | 4,640,554                  |       |                   | (1,847     | )                                                         |       |                | 769,321    |      |       |   | (1,374 | ) |   | (22,193 | ) | 5,387,704 |   |
| Net income for the year                                                                                                |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | 187,179    |      |       |   | — |   |   | — |   | 187,179 |   |
| Currency translation adjustment loss                                                                                   |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | —     |      |       |   | 169 |   |   | — |   | 169 |   |
| Comprehensive income                                                                                                   |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 187,348 |   |
| Treasury stock acquired                                                                                                |         |              | —     |                  |       | —                     |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | (499,994 | ) | (499,994 | ) |
| Treasury stock retired                                                                                                 |         |              | (201       | )                     |       | (521,986                   | )          |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | 522,187 |   | — |   |
| Amortization of deferred compensation                                                                                  |         |              | —     |                  |       | —                     |       |                   | 514        |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 514 |   |
| Stock compensation costs                                                                                               |         |              | —     |                  |       | 467                        |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 467 |   |
| Exercise of stock options, including related tax  benefits                                                             |         |              | 7          |                  |       | 14,854                     |       |                   | —     |                                                      |       |                | —     |      |       |   | — |   |   | — |   | 14,861 |   |
| Balance,  December 31, 2005                                                                                       |         |              | $          | 3,049                 |       |                       | $          | 4,133,889              |       |                                                      | $          | (1,333              | )          |      |       | $ | 956,500 |   |   |   | $ | (1,205 | ) |   | $ | — |   | $ | 5,090,900 |   |

 

F-6

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended December 31,(In thousands)**

| ** **                                                                                    | ** ** | **2005** | ** ** | **2004** | ** ** | **2003**   | ** ** |
|-----------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|------------|------------|
| Net income                                                                                    |       | $        | 187,179    |     | $          | 255,883    |       | $ | 155,427 |   |
| Adjustments to reconcile  net income to net cash from operating activities:                   |       |     |       |     |       |       |       |
| Depreciation                                                                                  |       | 79,095   |       | 82,157   |       | 72,340     |       |
| Amortization of intangible assets and deferred  financing costs                               |       | 17,438   |       | 22,695   |       | 16,396     |       |
| Deferred income taxes                                                                         |       | 56,521   |       | 65,878   |       | 53,046     |       |
| Stock dividend                                                                                |       | (1,812   | )          | (6,453   | )          | —     |       |
| Noncontrolling interest of variable interest entities                                         |       | 4,120    |       | 7,311    |       | —     |       |
| Equity (income) loss in unconsolidated subsidiaries                                           |       | (945     | )          | 928      |       | 8,171      |       |
| Nontemporary decline in fair value of investments                                             |       | 81,877   |       | —   |       | —     |       |
| (Gain) loss on sale of property and equipment                                                 |       | (1,467   | )          | 717      |       | 800        |       |
| Loss on extinguishment of debt                                                                |       | —   |       | 467      |       | 4,122      |       |
| Other non-cash items                                                                          |       | 1,469    |       | 268      |       | (3,957     | )          |
| Changes in operating  assets and liabilities, net of assets acquired and liabilities assumed: |       |     |       |     |       |       |       |
| Accounts receivable                                                                           |       | (63,408  | )          | (7,319   | )          | (15,491    | )          |
| Program rights                                                                                |       | 15,475   |       | 7,344    |       | 3,475      |       |
| Prepaid expenses and other                                                                    |       | (3,297   | )          | (3,370   | )          | (2,717     | )          |
| Accounts payable and accrued liabilities                                                      |       | 37,370   |       | 9,107    |       | 7,933      |       |
| Income taxes                                                                                  |       | 1,632    |       | (4,596   | )          | 24,793     |       |
| Income tax benefit from options exercised                                                     |       | 4,236    |       | 5,026    |       | 10,006     |       |
| Accrued interest                                                                              |       | 2,529    |       | (114     | )          | 2,674      |       |
| Accrued license fees                                                                          |       | 6,925    |       | 296      |       | 1,533      |       |
| Program rights obligations                                                                    |       | (12,447  | )          | (3,399   | )          | (2,626     | )          |
| Other, net                                                                                    |       | 2,769    |       | (7,849   | )          | (6,148     | )          |
| Net cash provided by operating activities                                                     |       | 415,259  |       | 424,977  |       | 329,777    |       |
| Cash flow from investing  activities:                                                         |       |     |       |     |       |       |       |
| Acquisitions, net of acquired cash                                                            |       | (220,690 | )          | (128,704 | )          | (146,544   | )          |
| Capital expenditures                                                                          |       | (102,553 | )          | (120,144 | )          | (56,283    | )          |
| (Distributions to) contributions from Disa partner                                            |       | (7,599   | )          | 543      |       | 1,785      |       |
| Cash of variable interest entities                                                            |       | —   |       | 12,196   |       | —     |       |
| Proceeds from sale of property and equipment                                                  |       | 5,158    |       | 6,414    |       | 1,000      |       |
| Other, net                                                                                    |       | 66       |       | (1,419   | )          | 2,682      |       |
| Net cash used in investing activities                                                         |       | (325,618 | )          | (231,114 | )          | (197,360   | )          |
| Cash flow from financing activities:                                                          |       |     |       |     |       |       |       |
| Proceeds  from issuance of long-term debt                                                     |       | 492,000  |       | 170,000  |       | 266,000    |       |
| Repayment of long-term debt                                                                   |       | (182,740 | )          | (274,897 | )          | (1,076,964 | )          |
| Proceeds from senior notes                                                                    |       | —   |       | —   |       | 694,526    |       |
| Purchases of treasury shares                                                                  |       | (499,994 | )          | —   |       | —     |       |
| Proceeds from issuance of common stock                                                        |       | —   |       | 599,426  |       | —     |       |
| Repurchase of common stock                                                                    |       | —   |       | (599,426 | )          | —     |       |
| Exercise of stock options                                                                     |       | 10,625   |       | 24,548   |       | 26,270     |       |
| Payment of offering costs                                                                     |       | —   |       | (57      | )          | (50        | )          |
| Deferred financing costs                                                                      |       | —   |       | (266     | )          | (1,173     | )          |
| Net cash used in financing activities                                                         |       | (180,109 | )          | (80,672  | )          | (91,391    | )          |
| Net (decrease) increase in cash                                                               |       | (90,468  | )          | 113,191  |       | 41,026     |       |
| Cash and cash equivalents, beginning of year                                                  |       | 189,868  |       | 76,677   |       | 35,651     |       |
| Cash and cash equivalents, end of year                                                        |       | $        | 99,400     |     | $          | 189,868    |       | $ | 76,677 |   |
| Supplemental disclosure of cash flow information:                                             |       |     |       |     |       |       |       |
| Interest paid                                                                                 |       | $        | 71,452     |     | $          | 70,779     |       | $ | 67,820 |   |
| Income taxes paid                                                                             |       | $        | 117,041    |     | $          | 81,429     |       | $ | 16,881 |   |

 

F-7

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2005**

**1.**   Organizationof the Company 

Univision CommunicationsInc., together with the subsidiaries through which its businesses are conducted(the “Company,” “we,” “us” and “our”), is the leading Spanish-language mediacompany in the United States and operates in four business segments:television, radio, music and Internet. The Company’s television operationsinclude the Univision and TeleFutura networks, the Company’s owned and operatedtelevision stations and Galavisión, the Company’s cable television network. UnivisionRadio, Inc. (“Univision Radio”) operates the Company’s radio business,which includes its radio network and owned and operated radio stations. TheCompany’s music operations include the Univision Records label, FonovisaRecords label, SGZ Records label, La Calle label and the variable interestentity, Disa Records, S.A. de C.V. (“Disa”). Univision Online, Inc. (“UnivisionOnline”) operates the Company’s Internet portal, *Univision.com*. See note “14. Investments and VariableInterest Entities” for a discussion of Disa.

**2.**   SignificantAccounting Policies

*Principles ofConsolidation*

The consolidated financial statements include theaccounts and operations of the Company and its majority owned subsidiaries. Ourconsolidated financial statements also include the accounts of variableinterest entities (“VIEs”), which are entities that among other things, lacksufficient equity to finance their activities without additional support fromother parties. With regard to the VIEs, the Company is considered the primarybeneficiary of the risks and rewards of these entities, regardless of ourownership interest, see note “14. Investments and Variable Interest Entities.”  All significant intercompany accounts andtransactions have been eliminated. The operating results of acquired companiesare included in the consolidated income statement of the Company from the dateof acquisition.

For investments in whichthe Company owns 20% to 50% of voting shares and does have significantinfluence over operating and financial policies, the equity method ofaccounting is used. Accordingly, the Company’s share of the earnings and lossesof these companies are included in the equity loss in unconsolidatedsubsidiaries in the accompanying consolidated statements of income of the Company.For investments in which the Company owns more than 20% of the non-votingshares (the Company has an approximate 14.9% non-voting ownership interest on afully converted basis in Entravision) and does not have significant influenceover operating and financial policies of the investees, the cost method ofaccounting is used. For investments in which the Company owns less than 20% ofthe voting shares and does not have significant influence, the cost method ofaccounting is used. Under the cost method of accounting, the Company does notrecord its share in the earnings and losses of the companies in which it has aninvestment.

*Reclassifications*

Certain reclassificationshave been made to the prior year’s financial statements to conform to thecurrent year’s presentation.

F-8

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**2. Significant Accounting Policies(Continued)**

*Use of Estimates*

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities, disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenue and expenses during the reporting period.Actual results could differ from those estimates.

*Cash and CashEquivalents*

Cash and cash equivalentsinclude all highly liquid investments with maturities of less than 90 days.Included in our cash and cash equivalents is $36,246,000 related to ourvariable interest entities.

*Revenue Recognition*

Net revenues comprisegross revenues from the Company’s television and radio broadcast, cable, musicand Internet businesses, including subscriber fees, sales commissions onnational advertising aired on Univision affiliated television stations, lessagency commissions, music license fees and compensation costs paid to anaffiliated station of $302,500,000, $273,491,000 and $203,407,000 in 2005, 2004and 2003, respectively. The Company’s television and radio gross revenues arerecognized when advertising spots are aired and performance guaranties, if any,are achieved. The music business, which includes Univision Music Group andDisa, recognizes revenues from the sale of recorded music upon delivery ofproducts to third parties based on terms F.O.B. destination, less an allowancefor returns, cooperative advertising and discounts. The Internet businessrecognizes primarily banner and sponsorship advertisement revenues. Bannerrevenues are recognized as “impressions” are delivered and sponsorship revenuesare recognized ratably over their contract period. “Impressions” are defined asthe number of times that an advertisement appears in pages viewed by usersof the Company’s online properties. Revenues are recognized when collection ofthe resulting receivable is reasonably assured.

*Fair Value ofFinancial Instruments*

The carrying amounts offinancial instruments, including cash, accounts receivable, cost methodinvestments, accounts payable and accrued liabilities approximate their fairvalue. See note “7. Debt” for the fair value of the Company’s debt and hedgecontracts. Also see note “14. Investments and Variable Interest Entities” withregards to our Entravision Investment.

*Concentration of CreditRisk*

Financial instruments thatpotentially subject the Company to concentrations of risk include primarilycash, trade receivables and financial instruments used in hedging activities.The Company places cash with high-quality-credit institutions and limits theamount of credit exposure with any one financial institution. The Company sellsits products and services to a large number of diverse customers in a number ofdifferent industries, thus spreading the trade credit risk. No one customerrepresented more than 10% of gross revenues of the Company in 2005, 2004 or2003. The Company extends credit based on an evaluation of the customers’financial condition, generally without requiring collateral. The Companymonitors its 

F-9

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**2. Significant Accounting Policies (Continued)**

exposure for credit losses and maintains allowancesfor anticipated losses. The counterparties to the agreements relating to theCompany’s interest rate instruments consist of major, internationalinstitutions. The Company does not believe that there is significant risk ofnonperformance by these counterparties as the Company monitors the creditratings of such counterparties and limits the financial exposure with any oneinstitution.

*InvestmentValuation*

The Company monitors thevalue of its equity and cost method investments for indicators of impairment,including changes in market conditions and/or the operating results of itsunderlying investments that may result in the inability to recover the carryingvalue of the investment. The Company will record an impairment charge if andwhen it believes any investment has experienced a decline that is other thantemporary. See note “14. Investments and Variable Interest Entities.”

*Accounting for Goodwill,Intangible and Long-Lived Assets*

Goodwill and other intangible assets with indefinitelives, such as broadcast licenses, are not amortized and are tested forimpairment annually. The television and radio broadcast licenses have anindefinite life because the Company expects to renew them and renewals areroutinely granted with little cost, provided that the licensee has compliedwith the applicable rules and regulations of the Federal CommunicationsCommission (“FCC”). Over the last five years, all the television and radiolicenses that have been up for renewal have been renewed and there has been nocompelling challenge to the license renewal. The technology used inbroadcasting is not expected to be replaced by another technology in the foreseeablefuture, therefore, the television and radio broadcast licenses and the relatedcash flows are expected to continue indefinitely. These indefinite cash flowsindicate that the broadcast licenses have an indefinite useful life. Thelicenses would not be amortized until their useful life is deemed to no longerbe indefinite. The licenses, other indefinite-lived intangible assets andgoodwill are tested annually for impairment, or more frequently ifcircumstances indicate a possible impairment exists.

Goodwill is allocated to various reporting units,which are the operating segments. For purposes of performing the impairmenttest of goodwill, we established the following reporting units: television,radio, music and Internet. The Company compares the fair value of the reportingunit to its carrying amount on an annual basis to determine if there ispotential goodwill impairment. If the fair value of the reporting unit is lessthan its carrying value, an impairment loss is recorded to the extent that thefair value of the goodwill within the reporting unit is less than its carryingvalue. The Company also compares the fair value of indefinite-lived intangibleassets to their carrying amount. If the carrying amount of an indefinite-livedintangible asset exceeds its fair value, an impairment loss is recognized. Fairvalue for broadcast licenses, other indefinite-lived intangible assets andgoodwill are determined primarily based on discounted cash flows, marketmultiples or appraised values as appropriate. The Company has evaluated itslicenses, other indefinite-lived intangible assets and goodwill, as of October 1,2005 and has concluded that it does not have an impairment loss related tothese assets. In the future, the Company may incur impairment charges underSFAS No. 142 if market values decline and the Company does not achieveexpected cash flow growth rates. The Company uses the direct value method tovalue intangible assets other than goodwill acquired in business combinationsand for purposes of impairment testing.

F-10

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**2. SignificantAccounting Policies (Continued)**

The Company has various intangible assets that arebeing amortized.  The Nielsen contract isbeing amortized through December 2012, the Fonovisa contracts are beingamortized through June 2012, the Disa contracts are being amortized throughDecember 2011, the broadcast agreement is being amortized through January 2015,advertiser related intangibles are being amortized through June 2006 and otheramortizable intangibles have various amortization periods.  The Nielsen contract, broadcast agreement,advertiser related intangibles, and a majority of the other amortizableintangibles are being amortized on a straight-line basis.  The Fonovisa and Disa contracts are beingamortized based on a revenue allocation of the artist and songwriter contracts.

In accordance with SFASNo. 144 “Accounting for Impairment or Disposal of Long-Lived Assets,”long-lived assets, such as property, plant and equipment and purchasedintangibles subject to amortization, are reviewed for impairment whereverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Recoverability of assets to be held and used ismeasured by a comparison of the carrying amount of an asset to its estimatedundiscounted future cash flows expected to be generated by the asset. If thecarrying amount of an asset exceeds its estimated future cash flows, animpairment charge is recognized by the amount by which the carrying amount ofthe asset exceeds the fair value of the asset. Intangible assets with definitelives are amortized over their useful lives.

*Trade AccountsReceivables*

Trade accounts receivablesare recorded at the invoice amount and do not bear interest. The allowance fordoubtful accounts is the Company’s estimate of the amount of credit losses inthe Company’s existing accounts receivable. The Company determines theallowance based on historical write-off experience. The Company reviews itsallowance for doubtful accounts monthly. Past due balances are reviewedindividually for collectibility. Account balances are charged off against theallowance after all means of collection have been exhausted and potential forrecovery is considered remote. The Company does not have any off-balance-sheetexposure related to its customers.

*Stock-BasedCompensation*

The Company accounts for stock options granted toemployees and directors using the intrinsic-value method under the recognitionand measurement principles of Accounting Principles Board Opinion No. 25, “Accountingfor Stock Issued to Employees” (“APB No. 25”), which results in no chargeto earnings when options are issued with an exercise price equal to fair marketvalue at the date of grant.

The Company elected not to adopt the fair value-basedmethod of accounting for stock-based employee compensation, as permitted bySFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting forStock-Based Compensation—Transition and Disclosure—as amended).”  If the Company adopted the fair value-basedmethod provisions of SFAS No. 123, it would have recorded a non-cashexpense for the portion of the estimated fair value of the stock options thatthe Company granted to its employees and directors. See note “15. PerformanceAward and Incentive Plans.”

In December 2004, the FASB issued SFAS No. 123(revised 2004), “Share-Based Payment” (“SFAS No. 123R”), whichreplaces SFAS No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”)and supersedes APB Opinion No. 25, “Accounting for Stock Issued toEmployees.” 

F-11

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**2. Significant Accounting Policies (Continued)**

SFAS No. 123Rrequires all share-based payments to employees, including grants of employeestock options, to be recognized in the financial statements based on their fairvalue. The pro forma disclosures previously permitted under SFAS No. 123no longer will be an alternative to financial statement recognition. We wererequired to adopt SFAS No. 123R beginning January 1, 2006.

On January 1, 2006, the Company adopted SFAS No. 123Rand elected to use the modified prospective method as prescribed in thestatement; therefore, periods prior to the adoption of SFAS No. 123R willnot be restated. Under the modified prospective method, this statement will beapplied to new awards granted after the time of adoption, as well as to theunvested portion of previously granted equity-based awards for which therequisite service had not been rendered as of January 1, 2006. Under SFAS No. 123R,the estimated fair value of new awards will be charged to income on astraight-line basis over the requisite service period, which is generally thevesting period. The fair value of each new stock award will be estimated on thedate of grant using the Black-Scholes option-pricing model, which is the samemodel that was used by the Company prior to the adoption of SFAS No. 123R.The Company expects that stock-based compensation recognized under SFAS No. 123Rwill reduce its diluted earnings per share by approximately $0.02 for the yearended December 31, 2006.

On September 14, 2005, the Compensation Committeeof the Board of Directors of the Company approved the acceleration of vestingof substantially all unvested stock options outstanding whose exercise pricewas above the then current market price of $25.56. The Compensation Committee’sdecision to accelerate the vesting of the affected stock options was based uponthe issuance by the Financial Accounting Standards Board of Statement ofFinancial Accounting Standard No. 123 (Revised 2004), “Share-Based Payment”which requires the Company to treat unvested stock options as compensationexpense effective January 1, 2006. Because the Company accounts for stockbased compensation using the intrinsic value method prescribed in AccountingPrinciples Board (APB) No. 25, and because these options were priced abovecurrent market on that date, the acceleration of vesting of these options didnot result in a charge in the Company’s financial statements. Vestingacceleration increased pro forma stock based compensation, disclosed below,under the provisions of SFAS No. 123 by approximately $59 million beforeincome tax. Assuming that there are no modifications to the affected options,the Company believes that it will not be required to recognize any compensationexpense in future periods associated with the affected options. As of December 31,2005, substantially all of the Company’s outstanding options have been expenseddue to the acceleration.

F-12

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**2. Significant Accounting Policies (Continued)**

The table below comparesthe “as reported” net income and earnings per share to the “pro forma” netincome and earnings per share that the Company would have recorded if it hadelected to recognize compensation expense in accordance with the fairvalue-based method of accounting of SFAS No. 123.

| ** **                                                         | ** ** | **Basic Earnings Per Share**                   | ** ** | **Diluted Earnings Per Share** | ** ** |
|--------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                         | ** ** | **2005**                                                      | ** ** | **2004**                                      | ** ** | **2003** | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                         | ** ** | **(In thousands, except per-share data)** | ** ** |
| Net income—as  reported                                       |       | $                                                             | 187,179    |                                          | $          | 255,883 |   | $ | 155,427 |   | $ | 187,179 |   | $ | 255,883 |   | $ | 155,427 |   |
| Stock-based  employee compensation, net of tax—actual    |       | 3,201                                                         |       | 2,962                                         |       | 1,116 |   | 3,201 |   | 2,962 |   | 1,116 |   |
| Stock-based  employee compensation, net of tax—pro forma |       | (71,116                                                       | )          | (40,275                                       | )          | (33,565 | ) | (71,116 | ) | (40,275 | ) | (33,565 | ) |
| Net income—pro  forma                                         |       | $                                                             | 119,264    |                                          | $          | 218,570 |   | $ | 122,978 |   | $ | 119,264 |   | $ | 218,570 |   | $ | 122,978 |   |
| Earnings per  share—as reported                               |       | $                                                             | 0.59       |                                          | $          | 0.79 |   | $ | 0.61 |   | $ | 0.54 |   | $ | 0.72 |   | $ | 0.55 |   |
| Earnings per share—pro  forma                                 |       | $                                                             | 0.38       |                                          | $          | 0.68 |   | $ | 0.48 |   | $ | 0.35 |   | $ | 0.62 |   | $ | 0.43 |   |

 

Thefair value of each option grant is estimated on the date of grant using theBlack-Scholes option-pricing model with the following weighted-averageassumptions used for grants in 2005, 2004 and 2003, respectively: dividendyield of 0%, expected volatility of 45.589%, 46.546% and 48.467%, risk-freeinterest rate of 4.08%, 3.72% and 3.68% and expected life of six years. TheCompany currently uses graded (accelerated) vesting as its amortization policy,which results in higher compensation expense in the early years of the vestingperiod. The Black-Scholes option pricing model was developed for use inestimating the value of traded options that have no vesting restrictions andare fully transferable. In addition, option pricing models require the input ofhighly subjective assumptions, including the expected stock price volatilityand expected life. The Company uses projected data for expected volatility andexpected life of its stock options based upon historical and other economicdata trended into future years. The Company’s employee stock options havecharacteristics significantly different from those of traded options andchanges in the subjective input assumptions can materially affect the estimate.The estimated fair value of the Company’s employee stock options may besubstantially different if a pricing model that factors in the uniquecharacteristics of employee options is utilized.

*Consolidation of Variable Interest Entities*

On March 31, 2004,the Company was required to adopt Financial Accounting Standards BoardInterpretation No. 46, “Consolidation of Variable Interest Entities”, (“FIN46”). FIN 46 expands upon and strengthens existing accounting guidance thataddresses when a company should consolidate in its financial statements theassets, liabilities and operating results of another entity. Under previousguidance, a company generally included another entity in its consolidatedfinancial statements only if it controlled the entity through voting interests.FIN No. 46 requires a variable interest entity (“VIE”) to be consolidatedby a company if that company is the “primary beneficiary” of that entity. Anentity is a VIE if, among other things, it has equity investors that do notabsorb the expected losses or receive the expected returns of the entity. Theprimary beneficiary is subject to a majority of the risk of loss from the VIE’sactivities or is 

F-13

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**2. Significant Accounting Policies (Continued)**

entitled to receive a majority of the VIE’s residualreturns, or both. See note “14. Investments and Variable Interest Entities” fora discussion of the Company’s variable interest entities.

*Derivative Instruments and Hedging Activities*

The Company formally documents all relationshipsbetween hedging instruments and hedged items, as well as its risk managementobjectives and strategies for undertaking the hedge transactions. The Companyutilizes a fixed to floating interest rate swap to hedge the fair valueexposure on its three-, four- and five-year senior notes due 2006, 2007 and2008 with a face value of $700,000,000. See note “7. Debt.”

Under the interest rateswap contract, the Company agreed to receive a fixed rate payment for afloating rate payment. Since the fair value hedge is perfectly effective underthe guidelines of Financial Accounting Standards Board No. 133 “Accountingfor Derivative Instruments and Hedging Activities”, the changes in the fairvalue of the interest rate swap are expected to perfectly offset the changes inthe fair value of the senior notes. On a quarterly basis, the Company adjuststhe carrying amount of the swap to its fair value and adjusts the carryingamount of the senior notes by the same amount to reflect its change in its fairvalue attributable to the hedged risk. There is no hedge ineffectiveness to berecorded to earnings. The Company monitors the credit ratings of the counterparty and obtains fair value swap valuations from the counter parties and thirdparties on a quarterly basis.

*Earnings per Share*

The Company is required tocalculate basic earnings per share, which is computed by dividing incomeavailable to common stockholders (the numerator) by the weighted-average numberof common shares outstanding (the denominator) during the period. Incomeavailable to common stockholders is computed by deducting both the dividendsdeclared in the period on preferred stock (whether or not paid) and dividendsaccumulated for the period on cumulative preferred stock (whether or notearned) from net income. The Company is also required to compute dilutedearnings per share, which is similar to basic earnings per share, except thatthe denominator is increased to include the number of additional common sharesthat would have been outstanding if the dilutive potential common shares hadbeen issued.

*Property andEquipment and Related Depreciation*

Property and equipment,including capital leases, are carried at historical cost. Depreciation isprovided using the straight-line method over the estimated useful lives of theassets. The cost of property and equipment and the related accumulateddepreciation are removed from the accounts upon retirement or disposal of suchassets. The resulting gain or loss, if any, is recognized upon the disposition.Land improvements are depreciated up to 15 years, buildings and improvementsare depreciated up to 40 years, broadcast equipment over 5 to 20 years andfurniture, computer and other equipment over 3 to 7 years. Leaseholdimprovements and transponder equipment, which are capitalized, are amortizedover the shorter of their useful life or the remaining life of the lease.Repairs and maintenance costs are expensed by the Company.

F-14

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**2.**   SignificantAccounting Policies (Continued)

*Deferred FinancingCosts*

Deferred financing costsare amortized over the life of the related debt using the straight-line method,which is not materially different than the effective interest method.

*Program Rights forTelevision Broadcast*

Costs incurred inconnection with the production of or purchase of rights to programs to bebroadcast within one year are classified as current assets, while costs ofthose programs to be broadcast beyond a one year period are considerednon-current. Program costs are charged to operating expense as the programs arebroadcast. The rights fees related to the 2002/2006 World Cups and otherinterim FIFA events are being amortized using the flow of income method.

*Income Taxes*

The Company uses theliability method of accounting for income taxes. Deferred taxes are providedfor temporary differences between amounts of assets and liabilities forfinancial reporting purposes and such amounts as measured by tax laws. See note“11. Income Taxes.”

*Recent AccountingPronouncements*

In December 2004, theFASB issued SFAS No. 153, “Exchange of Nonmonetary Assets,” which is anamendment of APB Opinion No. 29, “Accounting for NonmonetaryTransactions.” The guidance in APB Opinion No. 29 is based on theprinciple that exchanges of nonmonetary assets should be measured based on thefair value of the assets exchanged, with certain exceptions to that principle.SFAS No. 153 eliminates the exception for nonmonetary exchanges of similarproductive assets and replaces it with a general exception for exchanges ofnonmonetary assets that do not have commercial substance. A nonmonetaryexchange has commercial substance if the future cash flows of the entity areexpected to change significantly as a result of the exchange. The Companyadopted SFAS No. 153 on its effective date of July 1, 2005. Theeffect on the Company’s financial position and results of operations willdepend on the significance of television and radio station swap transactions theCompany enters into in the future.

**3.**   RelatedParty Transactions

Televisa and Venevision,which are principal stockholders of the Company, have program licenseagreements with us that provide our three television networks with asubstantial amount of programming. The Company currently pays a license fee ofapproximately 15% of television net revenues to Televisa and Venevision fortheir programming, subject to certain upward adjustments. The Company believesthat the program license agreements and all other agreements with Televisa andVenevision have been negotiated as arms-length transactions.

*Program LicenseAgreements*

Our program license agreements (the “Program LicenseAgreements”) with each of Grupo Televisa S.A. and its affiliates (“Televisa”)and affiliates of Corporacion Venezolana de Television, C.A. (VENEVISION) (“Venevision”)extend until December 2017. Under these agreements, we have the 

F-15

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**3. Related Party Transactions (Continued)**

exclusive right to air inthe United States all Spanish-language programming (with certainexceptions) produced by or for Televisa and Venevision. Under the ProgramLicense Agreements, we pay 15% of Combined Net Time Sales (time sales frombroadcasting, including barter, trade, and television subscription revenues,less advertising commissions, certain special event revenues, music licensefees, outside affiliate compensation, time sales relating to advertising soldto Televisa or provided to Venevision and taxes other than withholding taxes)for the Univision and Galavisión networks and affiliated owned-and-operatedstations plus for Televisa, 3% of incremental sales over the 2001 base amountfor 2002 and subsequent years and for Venevision, up to 3% of incremental salesover the 2001 base amount for 2002 and subsequent years if Venevision programscontribute 30% or more of Univision’s and Galavisión’s ratings. For theTeleFutura Network and affiliated owned and operated stations, we pay Televisa12% of TeleFutura net time sales (calculated in a manner similar to CombinedNet Time Sales) less certain of TeleFutura’s other programming costs and we payVenevision royalties based on the ratings delivered by the Venevision programsbroadcast on TeleFutura. Under the agreements, the Company incurred anaggregate net royalty of approximately $186,574,000 in 2005, $170,095,000 in2004 and $155,207,000 in 2003. The Company has accrued license fees payable toTelevisa and Venevision of $20,548,000 and $13,623,000 at December 31,2005 and 2004, respectively. The obligations of their respective affiliateshave been guaranteed by, in the case of Televisa, Grupo Televisa S.A. and, inthe case of Venevision, Corporacion Venezolana de Television, C.A. (VENEVISION).Televisa and Venevision programming represented approximately 39% and 15% in2005 and 36% and 17% in 2004, respectively, of Univision Network’s non-repeatbroadcast hours. Televisa and Venevision programming represented approximately23% and 7%, respectively, of TeleFutura Network’s non-repeat broadcasthours in 2005 and 2004. See note “10. Contingencies.”

Under the Program License Agreements, Televisa andVenevision also have the right to use, without charge and subject tolimitations, advertising time that we do not either sell to advertisers or usefor our own purposes. The Agreements also provide that the Company will annuallyswap with each of Televisa and Venevision $10 million of non-preemptableadvertising time. The Company accounts for this arrangement as a net bartertransaction, with no effect on revenues, expenses or net income on an annualbasis. Each of Televisa and Venevision may also purchase for its own usenon-preemptable time at the lowest spot rate for the applicable time period. Televisareceived approximately 93,000, 23,000 and 9,000 of preemptable andnon-preemptable 30-second commercial advertisements in 2005, 2004 and2003, respectively. Venevision received approximately 84,000, 83,000 and 33,000of preemptable and non-preemptable 30-second commercial advertisements in2005, 2004 and 2003, respectively.

Before May 2005, we also had a right of firstrefusal, which we did not exercise, to license Televisa and Venevision’sprograms in Puerto Rico (subject to preexisting commitments) and, if exercised,we would have paid a program performance fee based on the ratings delivered bythe licensed programs. After May 2005, our rights are exclusive in amanner similar to the overall Program License Agreements (and we also licenseits programs to the Puerto Rico stations and networks), and we are required topay Televisa 12% of Puerto Rico net time sales (calculated in a manner similarto Combined Net Time Sales) and Venevision the greater of 6% of Puerto Rico nettime sales or the amount of a program performance fee 

F-16

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**3. RelatedParty Transactions (Continued)**

based onratings produced by Venevision programs that the Puerto Rico stations broadcast(but not more than 12% of Puerto Rico net time sales). The required payments in2005 were approximately $4,734,224 to Televisa, which Televisa has not acceptedto date, and $2,583,135 to Venevision.

*InternationalProgram Rights Agreement*

We have granted Televisaand Venevision rights to exploit various programming produced by us or oursubsidiaries for use on the Univision and Galavisión networks on a royalty-freebasis. These rights cover all countries outside of the U.S. for programsproduced before our initial public offering or that replace such programs (“GrandfatheredPrograms”) and cover Mexico and Venezuela for all other programs. ForGrandfathered Programs, the rights described above will revert back to us fromTelevisa or Venevision when the applicable Program License Agreementterminates. For other programs, Televisa or Venevision’s rights revert back tous when that entity owns less than 30% of the Company securities that it ownedon the date of our initial public offering (other than on account of a mergeror similar transaction). We have also granted Televisa and Venevision certain rightsof first offer for Mexico and Venezuela, respectively, to license programsproduced by us or our subsidiaries for TeleFutura or other future networks thatwe may own.

*Program RightsAgreement—Venevision*

In January 2003, theCompany paid $3,000,000 to Venevision International Corporation to acquire therights to certain programs in perpetuity and to license these rights to theCompany to broadcast on Univision Network and Galavision in the continentalUnited States excluding Puerto Rico. The Company did not enter into similaragreements in 2004 or 2005.

*DistributionAgreement—Venevision*

On March 28, 2003,the Company entered into an agreement with Venevision that grants Venevisionthe sole and exclusive right during the term to distribute Univision Network,TeleFutura Network and Galavision produced Spanish-language programs throughoutVenezuela. As compensation for its distribution services, Venevision paid theCompany approximately 85% of gross receipts less certain expenses. Although theagreement expired on March 27, 2004, the Company and Venevision haveagreed to extend the contract on a monthly basis. The Company received $350,000and $278,000 in 2005 and 2004, respectively.

*DistributionAgreement—Televisa*

On September 1, 2003, the Company entered into anagreement with Televisa that grants Televisa the sole and exclusive rightduring the term to distribute Univision Network, TeleFutura Network andGalavision produced Spanish-language programs throughout Mexico. Ascompensation for its distribution services, Televisa will pay the Companyapproximately 85% of gross receipts less certain expenses. Although theagreement expired on August 31, 2004, the Company and Televisa have agreedto extend the contract on a monthly basis. The Company received $346,000 and$99,000 in 2005 and 2004, respectively.

F-17

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**3. Related Party Transactions (Continued)**

*Televisa SoccerAgreement*

In December 2001, theCompany entered into an agreement with Televisa to purchase the rights tobroadcast Mexican league soccer. The Company agreed to pay Televisa an amountequal to a percentage of the aggregate costs incurred by Televisa to purchasethe exclusive worldwide television rights to broadcast certain Mexican firstdivision professional soccer matches. In 2004, Televisa and the Company amendedand extended the terms of the original agreement until December 18, 2007.In 2005, 2004 and 2003, the Company incurred costs of $14,788,000, $16,464,000and $14,606,000, respectively.

*Programming Agreement*

In December 2003, theCompany agreed with Paloma Productions LLC, an affiliate of Mr. Perenchio,to license a novela entitled “Te Amare en Silencio.”  The novela was comprised of 100 episodes andbegan airing in December 2003. The license period ended in 2004. Thelicense payment for the novela was based on ratings in Hispanic households(those with a head of household who is of Hispanic descent or origin,regardless of the language spoken in the household). The Company made nopayments in 2005 and paid $1,640,000 in 2004.

*ParticipationAgreement*

Pursuant to aparticipation agreement, Mr. Perenchio, Televisa and Venevision haveagreed that none of them will enter into certain transactions involving Spanish-languagetelevision broadcasting or a Spanish-language television network in theU.S. without first offering the Company the opportunity to acquire a 50%economic interest. The Participation Agreement provides that if the Companyelects to participate in any of these transactions, the offeror will havesubstantial control over management of such transaction.

*Warrants*

In connection with Mr. Perenchio, Televisa andVenevision’s December 1992 acquisition of our predecessors, Televisa andVenevision were issued warrants to purchase Common Stock, of which Televisa andVenevision retain 2,000 and 27,437,700, respectively. Also, in December 2001,the Company issued additional warrants to purchase 9,000,000 shares of CommonStock to Televisa and 2,800,000 shares of Common Stock to Venevision. The1992 warrants are exercisable for Class T and Class V Common Stock atan exercise price of $0.032195 per share. The 2001 warrants are exercisable for6,274,864 and 74,864 shares of Class A Common Stock for Televisa andVenevision, respectively, and 2,725,136 shares of Class T and Class VCommon Stock for Televisa and Venevision, respectively. The exercise price forthe 2001 warrants is $38.261 per share. At the option of Televisa orVenevision, as the case may be, or if the warrants are not held by Televisa orVenevision or their permitted transferees at the time of exercise, the Class Tand Class V Warrants are exercisable for Class A Common Stock.

In April 2002, Univision also issued anadditional warrant to purchase 100,000 shares of Class A Common Stock toTelevisa, at an exercise price of $38.261 per share, in connection with theacquisition of Fonovisa Music Group (“Fonovisa”).

F-18

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**3. Related Party Transactions (Continued)**

No warrant discussed aboveis exercisable unless it is lawful for the holder to own the number of sharesissuable as a result of such exercise, and such exercise would not violate theCommunications Act of 1934, as amended. Subject to applicable securities laws,the warrants are freely transferable. At December 31, 2005, if allwarrants discussed above were fully exercised and all voting securities wereconverted to Class A Common Stock (not including options), Venevisionwould own approximately 15% of our Common Stock and Televisa would ownapproximately 12% of our Common Stock. The Company accounted for the warrantsissued to Televisa and Venevision within stockholders’ equity, except for the100,000 warrants issued in connection with the Fonovisa acquisition that hasbeen accounted for as part of its purchase price.

*Registration RightsAgreement*

We have a registration rights agreement with Mr. Perenchio,Televisa and Venevision, pursuant to which we have agreed to file registrationstatements covering our securities owned by them. As of February 14, 2006,Mr. Perenchio had the right to demand three registration statements,Venevision had the right to demand two and Televisa had the right to demandone. In addition, we gave these stockholders various piggyback registrationrights. In general, we will pay all fees, costs and expenses of any suchregistration statements.

We also have aregistration rights agreement with Mr. McHenry T. Tichenor Jr., one of ourdirectors, and some of his family members, where we have agreed to anunderwritten offering and to file registration statements covering the sale ofour Class A Common Stock. As of February 14, 2006, the Tichenorfamily members had the right to demand two registration statements. Theagreement also provides the Tichenor family members with various piggybackregistration rights. All of these rights are subject to customary terms,conditions, procedures and restrictions.

*Voting Agreement*

Messrs. Perenchio and Tichenor are parties to avoting agreement whereby Mr. Perenchio has agreed to nominate and thenvote to elect to the board as Class A/P Directors both Mr. Tichenorand another individual independent of the Company, subject to Mr. Perenchio’sreasonable approval. Mr. Tichenor designated Mr. Johnson to fill aboard position with Mr. Perenchio’s approval. In accordance with the termsof the agreement, Mr. Perenchio also agreed to vote against anytransaction in which the stock rights, or the per share consideration, to bereceived by the Class P common stockholders would differ from those to bereceived by the Class A common stockholders, unless approved by theholders of a majority of the outstanding shares of Class A Common Stockother than shares held by Mr. Perenchio and his affiliates.

If Mr. Tichenor is incapacitated or ceases to bea Class A/P Director, the resulting vacancy would be filled according toUnivision’s Certificate of Incorporation. If Mr. Tichenor’s other designeeis incapacitated or ceases to be a Class A/P Director, Mr. Tichenor(or, if Mr. Tichenor is incapacitated, then other members of the Tichenorfamily) may again designate someone independent of Univision to fill theresulting vacancy, subject to Mr. Perenchio’s reasonable approval.

F-19

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**3. Related Party Transactions (Continued)**

Mr. Perenchio’sobligation to vote for Mr. Tichenor and Mr. Tichenor’s other designeeterminates when Mr. Tichenor and members of the Tichenor family cease toown at least 60% of their originally issued Univision shares. The votingagreement also terminates upon the earliest to occur of the conversion of all Class PCommon Stock, the incapacitation of Mr. Perenchio, the date that Mr. Perenchioand Mr. Tichenor agree to terminate the voting agreement, the death of Mr. Tichenor,or September 23, 2008.

*Reimbursement Arrangementsat Cost with No Mark-Up*

Chartwell Services, Inc. and Chartwell Partners LLCare affiliates of Mr. Perenchio (collectively, “Chartwell”).  All arrangements between the Company andChartwell were at cost and Chartwell realized no profit from any of thereimbursements.  Pursuant to an agreementbetween the Company and Chartwell, services will continue to be providedthrough December 2006, subject to automatic one-year extensions.  Cash reimbursements to Chartwell totaled$762,008, $1,277,557 and $2,465,034 in 2005, 2004 and 2003,  respectively. For 2005, the reimbursementswere limited to business expense and other cost reimbursements totaling$620,718, and the allocation of varying portions of the salary, benefits andpayroll taxes of Chartwell employees not otherwise affiliated with the Companywho provide administrative support to the Company, totaling $141,290.  For 2004 and 2003, the Company reimbursedChartwell approximately $173,118 and $319,968, respectively, for one-half thesalary, benefits and payroll taxes and $614,451 in 2003 for 100% of the bonusand related payroll taxes relating to the Company’s Vice Chairman and CorporateSecretary, Robert Cahill.  Effective July1, 2004, Robert Cahill was compensated directly by the Company and is no longersubject to the reimbursement agreement. For 2004 and 2003, the Company also reimbursed Chartwell for theservices of Anthony Cassara, who became a director of the Company in 2005, theamounts of $269,225 and $531,348, respectively.   Effective July 1, 2004, Anthony Cassaraceased being compensated by the Company under the reimbursement agreement.  The Company also reimbursed Chartwellapproximately $337, 332 and $662,149, in 2004 and 2003, respectively, forvarying portions of the salary, benefits and payroll taxes of otherindividuals.  In addition, options for55,000 shares of  Class A Common Stockwere granted during 2003 to three Chartwell employees who devoted time to theCompany’s activities.  Included in the55,000 options granted above, Anthony Cassara received 25,000 options in 2003,the Company agreed to reimburse Chartwell $497,882 and $337,188  in 2004 and 2003, respectively, for businessexpenses and other costs.  No optionswere granted in 2005 or 2004.

*Pay TelevisionVenture*

In April 2003, theCompany entered into a limited liability company agreement with Televisa Pay-TVVenture, Inc. to form a 50/50 joint venture called TuTV LLC. The jointventure was formed to broadcast Televisa’s pay television channels, other thangeneral entertainment channels or novelas, in the United States. The serviceconsists of five channels. In May 2003, TuTV entered into a five-yeardistribution agreement with EchoStar Communications Corporation for three ofthe channels. The joint venture is jointly controlled by Televisa and theCompany with each agreeing to fund up to a maximum of $20,000,000 over thefirst three years of the venture. During 2005, the Company received a dividend of$1,500,000 from TuTv LLC. In 2004, the Company and Televisa each funded thejoint venture $1,000,000.

F-20

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**3. Related Party Transactions (Continued)**

*Co-productionAgreement*

In December 2003, theCompany and Televisa entered into an agreement whereby Televisa would producethe show “100 Mexicanos Dijeron”, which is based on the “Family Fued” formatand the Company would pay Televisa approximately half of the costs per episode.Under the terms of the agreement, the Company made payments of $4,700,000 and$5,020,000 in 2005 and 2004, respectively, to Televisa in connection with theproduction of the show. The Agreement with Televisa was not renewed butproduction will continue in the U.S.

*Share PurchaseAgreement*

In December 2001, theCompany entered into a share purchase agreement with Televisa pursuant to whichTelevisa purchased 375,000 preferred shares in exchange for $375,000,000. Thepreferred shares automatically converted into 10,594,500 shares of the Company’sClass A Common Stock upon expiration of the waiting period under theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, on February 25,2002.

*Fonovisa MusicGroup*

In April 2002, we consummated the acquisition ofFonovisa from Televisa for 6,000,000 shares of our Class A Common Stockand a warrant to purchase 100,000 shares of our Class A Common Stock(having an exercise price of $38.261 per share). Fonovisa has become a part ofour Univision Music Group. The purchase agreement for the acquisition includedcertain working capital adjustments. In August 2004, the Company andTelevisa finalized working capital adjustments related to the Company’sacquisition of Fonovisa, which was completed in April 2002. The Companyreceived approximately $16,500,000, which has been accounted for as anadjustment to the Fonovisa purchase price resulting in a reduction to goodwilland minor adjustments to certain current assets and liabilities.

In connection with ouracquisition of Fonovisa, we have the right to receive $5,000,000 of preemptableadvertising from Televisa in Mexico during each of the first three years afterthe April 2002 closing of such acquisition for the promotion of our musicbusiness and its affiliates.

*Univision MusicGroup*

Univision Music Group consists of the businesses underits wholly-owned subsidiary, Univision Music, Inc. The primary businessunder Univision Music, Inc. is Univision Music LLC, which owns andoperates the Univision Records label, Fonovisa Records label, SGZ Records labeland La Calle label and whose membership units are owned 90% by the Company and10% by Diara, Inc. (“Diara”), which is wholly-owned by José Behar,President and Chief Executive Officer of Univision Music Group. Diara’smembership units consist solely of B-1 and B-2 units discussedbelow.

The Company amended its employment arrangement withJosé Behar and assigned the employment agreement to Univision Music LLC, and asa result, has amended the operating agreement of Univision Music LLC. UnivisionMusic LLC will now hold all of the Company’s wholly-owned record labels. Also,Diara has been given a new class of securities, designated “B-2 Units”(and its existing units have been designated “B-1 Units”). In 2006, Diarahas a put right and the Company has a call right that would 

F-21

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**3. Related Party Transactions (Continued)**

require the Company topurchase all of Diara’s B-1 Units for a purchase price equal to 20% often times the average earnings before interest, taxes, depreciation andamortization of Univision Music’s business as it existed prior to theamendment, subject to a cap of $8,000,000. Additionally, Diara has a put rightand the Company has a call right on Diara’s B-2 Units in 2009. To theextent the fair market value of Univision Music LLC at the put or call dateexceeds the fair value at the grant date, which is decreased each year by theamount of cash generated by Univision Music LLC, in December 2003, thepurchase price of these units will be equal to 20% of the first $100,000,000 ofsuch excess, 10% of the next $100,000,000 of such excess and 1% of any excessamount thereafter. This amount will be reduced by any amount paid by theCompany for the B-1 Units. The put and call rights may be accelerated inthe event of Mr. Behar’s termination, death or disability.

The Company is accounting for these arrangements inaccordance with FIN No. 28 “Accounting for Stock Appreciation Rights andOther Variable Stock Option or Award Plans.” FIN No. 28 requirescompensation cost to be recognized when the quoted market value exceeds thegrant price. Compensation is charged to expense over the period the employeeperforms the services. In 2005, 2004 and 2003, the Company recordedapproximately $1,600,0000, $4,300,000 and $1,700,000, respectively, ofcompensation expense on the B-1 Units. In 2005, the Company recordedapproximately $4,200,000 of compensation expense on the B-2 units.

The amended employment agreement with Mr. Beharwas extended through March 31, 2009 and allows for minimum incentive bonusamounts during each year and the payment in 2003 ofa $1,100,000 bonus, which was applied against his outstandingloan. The Company expensed this payment in 2003. As of December 31,2005, he owes approximately $900,000 in principal to the Company, which bearsinterest at 3.5%.

**4.**   Propertyand Equipment

Propertyand equipment consists of the following as of December 31, 2005 and 2004:

| ** **                                 | ** ** | **2005**                | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                 | ** ** | **(In thousands)** | ** ** |
| Land and  improvements                     |       | $                       | 64,917     |     | $          | 54,040 |   |
| Buildings and improvements                 |       | 272,943                 |       | 250,311  |       |
| Broadcast  equipment                       |       | 450,789                 |       | 411,502  |       |
| Furniture,  computer and other equipment   |       | 102,855                 |       | 93,299   |       |
| Capital leases—transponder  equipment |       | 62,292                  |       | 62,285   |       |
|                                       |       | 953,796                 |       | 871,437  |       |
| Accumulated  depreciation                  |       | (389,838                | )          | (320,299 | )          |
|                                       |       | $                       | 563,958    |     | $          | 551,138 |   |

 

Accumulated depreciationrelated to capital leases for the transponder equipment for 2005 and 2004 is$31,210 and $26,442, respectively. Depreciation expense on property andequipment was $79,095,000, $82,157,000 and $72,340,000 in 2005, 2004 and 2003,respectively.

F-22

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**5.**   IntangibleAssets and Goodwill

Thefollowing is an analysis of the Company’s intangible assets currently beingamortized, intangible assets not being amortized, goodwill by segments andestimated aggregate amortization expense for the years 2006 through 2010:

| ** **                                                     | ** ** | **As of December 31, 2005** | ** ** |
|----------------------------------------------------------------|------------|-------------------------------------------------|------------|
| **Intangible Assets Being Amortized**           | ** ** | ** **                                      | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulate  Amortization** | ** ** | **Net Carrying  Amount** | ** ** |
| ** **                                                     | ** ** | **(In thousands)**                         | ** ** |
| Nielsen contract                                               |       |                                            | $          | 20,700 |   |   |   | $ | 13,498 |   |   |   | $ | 7,202 |   |   |
| Fonovisa contracts, primarily artist contracts                 |       |                                            | 44,580     |   |   |   | 36,193 |   |   |   | 8,387 |   |   |
| Disa contracts, primarily artist contracts                     |       |                                            | 66,328     |   |   |   | 59,444 |   |   |   | 6,884 |   |   |
| Broadcast agreement                                            |       |                                            | 9,892      |   |   |   | 2,305 |   |   |   | 7,587 |   |   |
| Advertiser related intangibles, primarily advertiser contracts |       |                                            | 4,991      |   |   |   | 4,727 |   |   |   | 264 |   |   |
| Other amortizable intangibles                                  |       |                                            | 5,262      |   |   |   | 2,137 |   |   |   | 3,125 |   |   |
| Total                                                          |       |                                            | $          | 151,753 |   |   |   | $ | 118,304 |   |   |   | 33,449 |   |   |
|                                                                |            |                                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| **Intangible Assets Not Being Amortized** | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------|------------|
| Broadcast licenses                                            |       | 4,220,180  |       |
| Goodwill                                                      |       | 2,231,238  |       |
| Music trademarks                                              |       | 15,800     |       |
| Other intangible assets                                       |       | 2,155      |       |
|                                                          |       | 6,469,373  |       |
| **Total Net  Intangible Assets**                              |       | $          | 6,502,822  |       |
|                                                               |            |            |            |            |            |  |

 

 

| ** **                                                     | ** ** | **As of December 31, 2004** | ** ** |
|----------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                     | ** ** | **Gross Carrying  Amount**                 | ** ** | **Accumulated  Amortization** | ** ** | **Net Carrying  Amount** | ** ** |
| **Intangible Assets Being Amortized**           | ** ** | ** **                                      | ** ** | **(In thousands)** | ** ** |
| Nielsen contract                                               |       |                                            | $          | 20,700 |   |   |   | $ | 12,463 |   |   |   | $ | 8,237 |   |   |
| Fonovisa contracts, primarily artist contracts                 |       |                                            | 44,580     |   |   |   | 32,219 |   |   |   | 12,361 |   |   |
| Disa contracts, primarily artist contracts                     |       |                                            | 66,328     |   |   |   | 52,584 |   |   |   | 13,744 |   |   |
| Advertiser related intangibles, primarily advertiser contracts |       |                                            | 4,991      |   |   |   | 4,454 |   |   |   | 537 |   |   |
| Other amortizable intangibles                                  |       |                                            | 5,203      |   |   |   | 1,135 |   |   |   | 4,068 |   |   |
| Total                                                          |       |                                            | $          | 141,802 |   |   |   | $ | 102,855 |   |   |   | 38,947 |   |   |
|                                                                |            |                                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| **Intangible Assets Not Being Amortized** | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------|------------|
| Broadcast licenses                                            |       | 4,226,288  |       |
| Goodwill                                                      |       | 2,199,199  |       |
| Music trademarks                                              |       | 15,800     |       |
| Other intangible assets                                       |       | 2,014      |       |
| Total                                                         |       | 6,443,301  |       |
| **Total Net  Intangible Assets**                              |       | $          | 6,482,248  |       |
|                                                               |            |            |            |            |            |  |

 

F-23

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**5. Intangible Assets and Goodwill(Continued)**

The Company has various intangible assets that arebeing amortized.  The Nielsen contract isbeing amortized through December 2012, the Fonovisa contracts are beingamortized through June 2012, the Disa contracts are being amortized throughDecember 2011, the broadcast agreement is being amortized through January 2015,advertiser related intangibles are being amortized through June 2006 and otheramortizable intangibles have various amortization periods.  The Nielsen contract, broadcast agreement,advertiser related intangibles, and a majority of the other amortizable intangiblesare being amortized on a straight-line basis. The Fonovisa and Disa contracts are being amortized based on a revenueallocation of the artist and songwriter contracts.  The Company incurred amortization expense of$14,128,000, $19,225,000 and $12,564,000 in 2005, 2004 and 2003 respectively.

The changes in goodwillare as follows:

| ** **                                               | ** ** | **Segments**            | ** ** | **Total** | ** ** |
|----------------------------------------------------------|------------|-------------------------|------------|-----------|------------|
| ** **                                               | ** ** | **Television**          | ** ** | **Radio** | ** ** | **Music** | ** ** | **Internet** | ** ** | **Goodwill** | ** ** |
| ** **                                               | ** ** | **(In thousands)** | ** ** |
| Goodwill balance as of December 31, 2003            |       | $                       | 321,412    |      | $          | 1,680,604 |   | $ | 190,824 |   |   | $ | — |   |   | $ | 2,192,840 |   |
| Finalization of purchase price allocation                |       | —                  |       | (155,782  | )          | (17,565 | ) |   | — |   |   | (173,347 | ) |
| Consolidation of variable interest entities              |       | 90,571                  |       | —    |       | 89,135 |   |   | — |   |   | 179,706 |   |
| Balance as of December 31, 2004                     |       | 411,983                 |       | 1,524,822 |       | 262,394 |   |   | — |   |   | 2,199,199 |   |
| Deferred tax (asset) liability                           |       | (1,502                  | )          | 3,112     |       | — |   |   | — |   |   | 1,610 |   |
| Radio appraisal adjustment                               |       | —                  |       | (7,596    | )          | — |   |   | — |   |   | (7,596 | ) |
| Fonovisa goodwill adjustment                             |       | —                  |       | —    |       | (200 | ) |   | — |   |   | (200 | ) |
| Purchase consideration and appraisal adjustment for WLII |       | 38,225                  |       | —    |       | — |   |   | — |   |   | 38,225 |   |
| Balance  as of December 31, 2005                    |       | $                       | 448,706    |      | $          | 1,520,338 |   | $ | 262,194 |   |   | $ | — |   |   | 2,231,238 |   |
|                                                          |            |                         |            |           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Estimatedamortization expense for the five years subsequent to December 31, 2005are as follows:

| **Year**   | ** ** | ** **              | ** ** | **Amount** | ** ** |
|------------|------------|-------------------------|------------|------------|------------|
| ** ** | ** ** | **(In thousands)** | ** ** |
| 2006       |       |                    | $          | 8,700      |       |   |
| 2007       |       |                    | $          | 6,600      |       |   |
| 2008       |       |                    | $          | 5,000      |       |   |
| 2009       |       |                    | $          | 3,600      |       |   |
| 2010       |       |                    | $          | 3,000      |       |   |

 

F-24

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**6.**   AccountsPayable and Accrued Liabilities

Accountspayable and accrued liabilities consist of the following as of December 31,2005 and 2004:

| ** **                            | ** ** | **2005**                | ** ** | **2004** | ** ** |
|---------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                            | ** ** | **(In thousands)** | ** ** |
| Trade accounts  payable and accruals  |       | $                       | 102,176    |     | $          | 80,598 |   |
| Music copyright  and artist royalties |       | 62,810                  |       | 56,352   |       |
| Accrued  compensation                 |       | 65,618                  |       | 63,895   |       |
| Accrued insurance                     |       | 12,062                  |       | 8,192    |       |
| Cost reduction  plan liability        |       | 11,309                  |       | —   |       |
| Deferred revenue                      |       | 13,366                  |       | 6,017    |       |
| Other                                 |       | 16,168                  |       | 14,439   |       |
|                                  |       | $                       | 283,509    |     | $          | 229,493 |   |

 

*Cost Reduction Plan*

On November 2, 2005,the Company announced a cost reduction plan that reduced its workforce andabandoned certain less profitable programming in an effort to achievesustainable improvement in financial performance. The plan included reducingapproximately 5.6% of the workforce by eliminating job redundancies andinefficiencies. The Company incurred a before-tax charge of approximately $30.3million in the fourth quarter of 2005. The plan was substantially completedduring the fourth quarter of 2005 and the unpaid portion will primarily be paidin 2006. The unpaid portion of the cost reduction plan as of December 31,2005 is as follows:

| ** **                                            | ** ** | **Employee **

**Terminations** | ** ** | **Abandonment of**

**Programming**

** Costs** | ** ** | **Other**

**Costs** | ** ** | **Total** | ** ** |
|-------------------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------------------------|------------|----------------------|------------|-----------|------------|
| ** **                                            | ** ** | **(In thousands)**              | ** ** |
| Cost reduction  plan charge                           |       |                                 | $          | 17,761                                                    |       |                 |       | $         | 12,196     |   |   |   | $ | 332 |   |   | $ | 30,289 |   |
| Cash paid in 2005                                     |       |                                 | 7,820      |                                                      |       |                 | 8,300      |      |       |   | 259 |   |   | 16,379 |   |
| Stock  compensation                                   |       |                                 | 158        |                                                      |       |                 | —     |      |       |   | — |   |   | 158 |   |
| Abandonment of  costs incurred in years prior to 2005 |       |                                 | —     |                                                      |       |                 | 2,443      |      |       |   | — |   |   | 2,443 |   |
| Liability as of  December 31, 2005               |       |                                 | $          | 9,783                                                     |       |                 |       | $         | 1,453      |   |   |   | $ | 73 |   |   | $ | 11,309 |   |

 

The cost reduction chargeof $30,289,000 related to each of the Company’s segments was $29,993,000,$73,000, $33,000 and $190,000 for the television, radio, music and Internetsegments, respectively. At January 31, 2006, the liability related to thecost reduction plan was approximately $6,500,000.

F-25

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**7.**   Debt

Long-termdebt consists of the following as of December 31, 2005 and 2004:

| ** **                                     | ** ** | **2005**                | ** ** | **2004**  | ** ** |
|------------------------------------------------|------------|-------------------------|------------|-----------|------------|
| ** **                                     | ** ** | **(In thousands)** | ** ** |
| Revolving Credit  Facility                     |       | $                       | 314,000    |      | $          | — |   |
| Senior notes  payable—7.85% due 7/18/11   |       | 496,989                 |       | 496,574   |       |
| Senior notes  payable—2.875% due 10/15/06 |       | 246,516                 |       | 247,408   |       |
| Senior notes  payable—3.5% due 10/15/07   |       | 195,400                 |       | 198,225   |       |
| Senior notes  payable—3.875% due 10/15/08 |       | 243,104                 |       | 248,167   |       |
|                                           |       | 1,496,009               |       | 1,190,374 |       |
| Less current  portion                          |       | 560,516                 |       | —    |       |
| Long-term debt                                 |       | $                       | 935,493    |      | $          | 1,190,374 |   |

 

The Company’s 7.85% senior notes due in 2011 have aface value of $500,000,000 and bear simple interest at 7.85%. These seniornotes pay interest on January 15 and July 15 of each year. The noteshave a fair value of approximately $556,900,000 at December 31, 2005.

On October 15, 2003, the Company issued three-,four- and five-year senior notes due in 2006, 2007 and 2008 with a face valueof $700,000,000. These senior notes have a face value of $250,000,000,$200,000,000 and $250,000,000, respectively. These senior notes pay simpleinterest on April 15 and October 15 of each year. As part of the $700,000,000note transaction the Company entered into a fixed-to-floatinginterest rate swap that results in a fair value hedge that is perfectlyeffective. At December 31, 2005, the Company had a swap liability with afair value of $13,977,000 reported in other long-term liabilities related tothis transaction. The $700,000,000 senior notes are carried at fair value at December 31,2005.

The Company’s senior notes are unsecured obligations,equal in right of payment with all of the Company’s existing and future seniorunsecured indebtedness, senior in right of payment to any of the Company’sfuture subordinated indebtedness and are fully and unconditionally guaranteedby all of the Company’s guarantors. The Company has the option to redeem all ora portion of the senior notes at any time at the redemption prices set forth inthe note indenture. The indenture does not contain any provisions that wouldrequire us to repurchase or redeem or otherwise modify the terms of the seniornotes upon a change of control. The indenture does not limit our ability toincur indebtedness or require the maintenance of financial ratios or specifiedlevels of net worth or liquidity.

At December 31, 2005, the Company had a$500,000,000 revolving credit facility with a syndicate of commercial lendersthat will mature on July 18, 2006. At December 31, 2005, the Companyhad bank borrowings outstanding under its revolving credit facility of$314,000,000 resulting primarily from the Company’s repurchases of its Class ACommon Stock. The Company classifies its revolving credit facility as a currentliability. The Company is in the process of negotiating a new bank creditfacility and expects to enter into a new credit agreement in the first quarterof 2006. The Company has approximately $56,000,000 of letters of creditoutstanding under the credit facility, which primarily includes $49,000,000related to the FIFA World Cup Agreement.

Loans made underthe revolving credit facility bear interest determined by reference to LIBOR ora base rate equal to the higher of the prime rate of Chase Manhattan Bank or0.50% per annum over the 

F-26

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**7. Debt(Continued)**

federal funds rate.Depending on the rating assigned by rating agencies to our senior unsecured debt,the LIBOR interest rate margin on the Company’s revolving credit facilityranges from 0.75% to 1.5% per annum and the base rate margin ranges from 0% to0.50% per annum. The Company’s LIBOR interest rate margin applicable to therevolving credit facility was 1.00% as of December 31, 2005. The Companyborrows at the prime rate from time to time but attempts to maintain theseloans at a minimum. Interest is generally payable quarterly. During the twelvemonths ended December 2005, the Company’s effective interest rate,excluding deferred financing costs, on its bank debt and senior notes wasapproximately 5.44%.

The credit agreement contains customary covenants,including restrictions on liens and dividends and financial covenants relatingto interest coverage and maximum leverage. Under the credit agreement, theCompany is also limited in the amount of other debt it can incur and in itsability to engage in mergers, sell assets and make material changes to itsProgram License Agreements in a manner the lenders determine is materiallyadverse to the Company. At December 31, 2005, the Company was incompliance with its financial covenants.

The subsidiaries that guarantee the Company’sobligations under its credit agreement also guarantee the senior notes. Thesubsidiary guarantors under the credit facilities are all of our domesticsubsidiaries other than certain immaterial subsidiaries. The guarantees arefull and unconditional and joint and several and any subsidiaries of theCompany other than the subsidiary guarantors are minor. UnivisionCommunications Inc. is not a guarantor and has no independent assets oroperations. The Company’s variable interest entity, Disa, which is notwholly-owned by the Company, does not guarantee the Company’s bank credit agreementor senior notes. The guarantees of the obligations under the revolving creditfacility and the senior notes will be released if our senior unsecured debt israted BBB or better by Standard & Poor’s Rating Services and Baa2 orbetter by Moody’s Investor Service, Inc. The guarantees of such subsidiarywill be reinstated if such ratings fall below BBB- by Standard &Poor’s or Baa3 by Moody’s. The Company’s senior unsecured debt is currentlyrated BBB- by Standard & Poor’s Rating Services and Baa2 by Moody’sInvestor Service, Inc.

Maturities of long-termdebt for the five years subsequent to December 31, 2005 are as follows:

| **Year**   | ** ** | ** **              | ** ** | **Amount** | ** ** |
|------------|------------|-------------------------|------------|------------|------------|
| ** ** | ** ** | **(In thousands)** | ** ** |
| 2007       |       |                    | $          | 195,400    |       |   |
| 2008       |       |                    | 243,104    |       |       |
| 2009       |       |                    | —     |       |       |
| 2010       |       |                    | —     |       |       |
| Thereafter |       |                    | 496,989    |       |       |
| Total      |       |                    | $          | 935,493    |       |   |

 

**8.**   Commitments

The Company has long-termoperating leases expiring on various dates for office, studio, automobile andtower rentals. The Company’s operating leases, which are primarily related tobuildings and tower properties, have various renewal terms and escalationclauses. The Company also has long-term capital lease obligations for itstransponders that are used to transmit and receive our network signals. In2004, the 

F-27

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**8. Commitments (Continued)**

Company entered into a new transponder capital leaseof $23,400,000. The following is a schedule by year of future minimum rentalpayments under noncancelable operating and capital leases as ofDecember 31, 2005:

| **Year**                                        | ** ** | ** **              | ** ** | **Operating**

**Leases** | ** ** | **Capital**

**Leases** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|---------------------------|------------|-------------------------|------------|
| ** **                                      | ** ** | **(In thousands)** | ** ** |
| 2006                                            |       | $                       | 35,296     |                      | $          | 6,030                   |       |
| 2007                                            |       | 33,670                  |       | 5,700                     |       |
| 2008                                            |       | 32,084                  |       | 5,700                     |       |
| 2009                                            |       | 28,669                  |       | 5,700                     |       |
| 2010                                            |       | 26,419                  |       | 5,700                     |       |
| Thereafter                                      |       | 138,422                 |       | 21,293                    |       |
| Total minimum  lease payments                   |       | $                       | 294,560    |                      | 50,123     |                    |
| Interest                                        |       |                    |       | (12,817                   | )          |
| Total present  value of minimum lease payments  |       |                    |       | 37,306                    |       |
| Current portion                                 |       |                    |       | (3,500                    | )          |
| Capital lease  obligation, less current portion |       |                    |       | $                         | 33,806     |                    |

 

Rent expense totaled $43,994,000, $42,406,000 and$27,449,000 in 2005, 2004 and 2003, respectively.

On December 23, 2003, the Company entered into a40-year lease for a three-story building with approximately 92,500 squarefeet for the relocation of its owned and/or operated television and radiostations and studio facilities in Puerto Rico. The building is to beconstructed and owned by the landlord, with occupancy of the premises expectedduring the latter part of 2007. The lease was amended in June 2005 and,among other things, the term of the lease was extended from 40 to 50 years. Thesum of the lease payments will be approximately $74,000,000 over 50 years.

In 2003, the Company entered into a transponder leaseagreement for TeleFutura Network that was capitalized in May 2004 forapproximately $15,538,000. Also, in 2003, the Company entered into a transponderlease agreement for Univision Network that is expected to be capitalized in thefirst quarter 2006 for approximately $15,546,000. According to the EmergingIssues Task Force published Issue 01-8 “Determining Whether anArrangement Contains a Lease,” if the Company negotiates a new transponderlease agreement, the Company will not capitalize, or incur depreciationexpense, for its transponder lease agreements and will expense the cost as aservice fee. EITF 01-8 became effective for agreements entered into afterMay 2003. The Company does not expect to negotiate new transponder leaseagreements until two existing transponder lease agreements expire inDecember 2012. When and if the Company decides to transmit a highdefinition signal, it will be required to negotiate new transponder leases.

In June 2005, the Company entered into a newseven-year contract with Nielsen Media Research (“Nielsen”), to provide localmarket television programming ratings services for the Univision TelevisionGroup and the TeleFutura Television Group at a total cost of approximately$132,000,000. The aggregate payment remaining under the agreement, atDecember 31, 2005, is approximately $120,000,000, which will be paidthrough February 2012.

F-28

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**8.**   Commitments(Continued)

In February 2002, theCompany entered into a new five-year contract with Nielsen, expiring in December 2006,to provide television audience measurement services for Univision Network andTeleFutura Network. The remaining payments for Univision Network and TeleFuturaNetwork total approximately $12,000,000, payable through December 31, 2006.The Company also entered into a five-year contract with Nielsen for TeleFuturaowned and operated stations, which have remaining payments of approximately$3,500,000 payable through January 31, 2007.

In January 2001,Univision Network entered into a program license agreement with CoralInternational Television Corp. (the exclusive distributing agent for RadioCaracas Television) to acquire approximately 780 hours of new novelas per yearthrough January 2011. In 2005, the aggregate payment under the contractwas adjusted to approximately $72,181,000, with an aggregate payment remainingunder the contract of approximately $42,476,000 at December 31, 2005.

In June 2001,Univision Network entered into a program license agreement with RCN to acquireapproximately 300 hours of new novelas per year through June 2007. Theaggregate payment under the contract is approximately $28,950,000 payable overfour years, in increasing installments, with an aggregate payment remainingunder the contract of approximately $1,650,000 at December 31, 2005.

In 2002, 2003 and 2004,the Company entered into several program license agreements to acquire approximately2,000 movies. The agreements commenced in January 2002 and expire onvarious dates through March 2016. The remaining payments under theagreements are approximately $14,300,000, $10,400,000, $7,000,000, $4,100,000and $674,000 for the years 2006, 2007, 2008, 2009 and the period January 2010through March 2016, respectively.

As a result of theacquisition of the USA Broadcasting stations, the Company acquiredEnglish-language programming contracts. At December 31, 2005, theremaining payments are $2,560,000 in 2006, $1,662,000 in 2007, $1,395,000 in2008, $1,351,000 in 2009 and $223,000 through February 2010. The Companyis attempting to sub-license or arrange a sale of this programming to reduceits liability.

In April 2001, theCompany launched a music publishing and recording division, Univision MusicGroup. In June 2001, Univision Music Group acquired a 50% interest in DisaRecords from the Chavez family. The Company has a call right and the Chavezfamily has a put right starting in June 2006 that will require the Companyto purchase the remaining 50% interest for $75,000,000, subject to certainupward adjustments. The Company expects that in 2006 it will exercise itsoption to acquire the remaining 50% of Disa.

The Company has variousmusic license agreements for its television and radio businesses. Thesecontracts grant the Company a license to broadcast musical compositions. Theremaining payments under these contracts are approximately $15,669,000,$11,098,000, $7,848,000 and $4,648,000 in 2006, 2007, 2008 and 2009,respectively.

On November 2, 2005, the Company acquired theSpanish-language broadcast rights in the U.S. to the 2010 and 2014 FédérationInternationale de Football Association (“FIFA”) World Cup soccer games andother 2007 through 2014 FIFA events. A series of payments totaling$325,000,000 is due over the term of the agreement, with approximately$317,000,000 remaining as of December 31, 2005. In addition to thesepayments, and consistent with past coverage of the World Cup games, the Companywill be responsible for all costs associated with advertising, promotion andbroadcast of the World Cup games, as well as the production of certaintelevision programming related to the World Cup games.

F-29

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**8. Commitments (Continued)**

On August 9,2000, the Company acquired the Spanish-language broadcast rights in the U.S. tothe 2002 and 2006 FIFA World Cup soccer games and other 2000-2006 FIFAevents. The payments remaining at December 31, 2005 totaled $66,000,000,which is due in 2006. In addition to these payments, and consistent with pastcoverage of the World Cup games, the Company was responsible for all costsassociated with advertising, promotion and broadcast of the World Cup games, aswell as the production of certain television programming related to the WorldCup games. The cost for the 2002 World Cup games was approximately $55,000,000.The rights fees are being amortized over the 2002/2006 World Cups andother interim FIFA events based on the flow of income method. Under the flow ofincome method, the costs for the 2006 World Cup games, excluding advertising,promotion and broadcast costs, will be approximately $100,000,000 for therights fees. The funds for these paymentsare expected to come from income from operations and/or borrowings from theCompany’s revolving credit facility. In addition, the Company has also acquiredthe Spanish-language broadcast rights in the U.S. for various sports contractswith various expiration dates through November 2007. The aggregatepayments under the contracts are approximately $78,900,000 at December 31,2005, the remaining payments under the contracts are approximately $8,400,000in 2006 and $10,400,000 in 2007.

**9.**   EmployeeBenefits

The Company has a 401(k) retirementsavings plan (the “401(k) Plan”) covering all eligible employees who havecompleted one year of service. The 401(k) Plan allows the employees todefer a portion of their annual compensation and the Company may match aportion of the employees’ contributions. For the years ended December 31,2005, 2004 and 2003, the Company made matching cash contributions to the 401(k) Plantotaling $6,194,000, $6,033,000 and $3,931,000, respectively. The Companymatches 100% of the first 3% of eligible employee compensation that wascontributed to the plan.

**10. Contingencies**

Televisa, S.A. de C.V. (“Televisa”) and the Companyare parties to a program license agreement (“PLA”) that provides our threetelevision networks with a majority of its prime time programming and asubstantial portion of its overall programming. The Company currently pays alicense fee to Televisa for programming, subject to certain upward adjustments.On June 16, 2005, Televisa filed an amended complaint in the UnitedStates District Court for the Central District of California alleging breach byus of our PLA with Televisa, including breach for our alleged failure to payTelevisa royalties attributable to revenues from one of Univision’s programs,the Company’s alleged unauthorized editing of certain Televisa programs andrelated copyright infringement claims, a claimed breach of a soccerrights side-letter to the PLA, and a claim that we have not beenproperly carrying out a provision of the PLA that gives Televisa the secondaryright to use our unsold advertising inventory. Televisa seeks monetaryrelief in an amount not less than $1.5 million for breach, anticipated breach,declaratory relief against the Company’s ability to recover amounts ofapproximately $5.0 million previously paid in royalties to Televisa, and aninjunction against our alteration of Televisa programming without Televisa’sconsent. On August 15, 2005, the Company filed an answer to the amendedcomplaint denying Televisa’s claims and also filed counterclaims allegingvarious breaches of contract and covenants by Televisa. The Company seeksmonetary damages and injunctive relief.

F-30

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**10. Contingencies (Continued)**

On September 20,2005, Televisa filed a motion to dismiss certain of the Company’s counterclaims.On November 17, 2005, the District Court denied that motion in itsentirety. Thereafter, Televisa changed counsel and on January 31, 2006—afterseveral extensions of time granted by the Company—Televisa filed its answer tothe Company’s counterclaims. Without asserting any new matters of substance,Televisa in its answer now alleges that its claims rise to the level of amaterial breach of the PLA and delivered a purported notice of material breachon February 16, 2006. On March 2, 2006, we responded to Televisa’spurported notice of material breaches. In our response, we asserted that thenotice was procedurally defective and that Televisa’s breach claims were not,in any event, well-founded. We do not believe that we are in breach of ouragreements with Televisa and certainly not in material breach. Univisionintends to take all action necessary to ensure Televisa’s continued performanceunder the PLA until its expiration in 2017. At December 31, 2005, theCompany accrued a charge of approximately $6 million related to a payment theCompany intends to make under protest related to the Televisa litigation. TheCompany will seek recovery of this amount via a counterclaim. We intend todefend the litigation and pursue our counterclaims vigorously.

There are various otherlegal actions and claims pending against the Company incidental to its businessand operations. In the opinion of management, the resolution of these matterswill not have a material effect on the consolidated financial position orresults of operations or liquidity.

Approximately 33% of allU.S. Hispanics live in the Los Angeles, New York and Miami-Fort Lauderdalemarkets and the top ten U.S. Hispanic markets collectively account forapproximately 56% of the U.S. Hispanic population. Our revenues are similarlyconcentrated in these key markets. As a result, an economic downturn, increasedcompetition, or another significant negative event in these markets couldreduce our revenues and results of operations more dramatically than othercompanies that do not depend as much on these markets.

The Company maintainsinsurance coverage for various risks, where deemed appropriate by management,at rates and terms that management considers reasonable. The Companyself-insures its employee medical benefits and its media errors and omissionsexposures. The Company also has deductibles for various risks, including thoseassociated with windstorm and earthquake damage. In management’s opinion, thepotential exposure in future periods, if uninsured losses were to be incurred,should not be material to the consolidated financial position or results ofoperations.

**11. IncomeTaxes**

TheCompany files a consolidated federal income tax return. The income taxprovision for the years ended December 31, 2005, 2004 and 2003 comprisedthe following charges:

| ** ** | ** ** | **2005**                | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** ** | ** ** | **(In thousands)** | ** ** |
| Current:   |       |                    |       |     |       |     |       |
| Federal    |       | $                       | 112,324    |     | $          | 88,833   |       | $ | 43,888 |   |
| State      |       | 13,158                  |       | 9,870    |       | 6,897    |       |
| Deferred:  |       |                    |       |     |       |     |       |
| Federal    |       | 50,595                  |       | 58,964   |       | 47,186   |       |
| State      |       | 5,926                   |       | 6,907    |       | 7,415    |       |
| Total      |       | $                       | 182,003    |     | $          | 164,574  |       | $ | 105,386 |   |

 

F-31

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**11. IncomeTaxes (Continued)**

The Company accounts forincome taxes under the liability method pursuant to SFAS No. 109 “Accountingfor Income Taxes.” Deferred income taxes reflect the net tax effects oftemporary differences between the carrying amounts of assets and liabilitiesfor financial reporting purposes and the amounts used for income tax purposes.Significant components of the Company’s deferred tax assets and liabilities asof December 31, 2005 and 2004 are as follows:

| ** **                                 | ** ** | **2005**                | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                 | ** ** | **(In thousands)** | ** ** |
| Current deferred  tax assets:              |       |                    |       |     |       |
| Accrued severance and litigation           |       | $                       | 3,280      |     | $          | 2,100 |   |
| Accrued vacation                           |       | 4,025                   |       | 3,700    |       |
| Allowances                                 |       | 8,110                   |       | 8,500    |       |
| Accrued facility-related costs             |       | 1,355                   |       | 1,400    |       |
| Accrued insurance                          |       | 5,110                   |       | 3,000    |       |
| Other assets, net                          |       | 1,270                   |       | 2,818    |       |
| Total current  deferred tax assets         |       | $                       | 23,150     |     | $          | 21,518 |   |
| Long-term deferred tax assets:             |       |                    |       |     |       |
| Equity loss in unconsolidated subsidiaries |       | $                       | 10,776     |     | $          | 14,000 |   |
| Deferred compensation                      |       | 2,840                   |       | 2,900    |       |
| Capital and state loss carryforwards       |       | 933                     |       | 4,200    |       |
| Nontemporary decline in investments        |       | 32,014                  |       | —   |       |
| Other assets, net                          |       | 1,105                   |       | 1,106    |       |
| Long-term  deferred tax assets             |       | 47,668                  |       | 22,206   |       |
| Less: valuation  allowance                 |       | (32,014                 | )          | —   |       |
| Total net  long-term deferred tax assets   |       | 15,654                  |       | 22,206   |       |
| Long-term deferred tax liabilities:        |       |                    |       |     |       |
| Property and equipment, net                |       | 50,594                  |       | 63,500   |       |
| Intangible assets, net                     |       | 984,863                 |       | 919,780  |       |
| Total long-term  deferred tax liabilities  |       | 1,035,457               |       | 983,280  |       |
| Net long-term deferred  tax liabilities    |       | $                       | 1,019,803  |     | $          | 961,074 |   |

 

The Company recorded adeferred tax asset of $32,014,000 relating to the nontemporary decline in thevalue of its investments in Entravision and the St. Louis/Denver joint venture,offset by a valuation allowance for the same amount since, based on the weightof available evidence, it is more likely than not the deferred tax assetrecorded will not be realized.

As a result of various acquisitions, the Companyrecorded goodwill representing the consideration given in excess of the fairvalue of net assets acquired. No deferred tax liability is established forgoodwill that is not deductible for tax purposes.

F-32

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**11. Income Taxes (Continued)**

For the years ended December 31,2005, 2004 and 2003, a reconciliation of the federal statutory tax rate to theCompany’s effective tax rate is as follows:

| ** **                                                | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Federal statutory tax  rate                               |       | 35.0     | %          | 35.0     | %          | 35.0     | %          |
| State and local income  taxes, net of federal tax benefit |       | 4.1      |       | 4.1      |       | 5.5      |       |
| Wages and benefits                                        |       | 0.8      |       | 0.5      |       | 0.5      |       |
| Credits and state  refunds                                |       | (0.1     | )          | (1.2     | )          | (1.5     | )          |
| Intangibles                                               |       | 0.0      |       | 0.0      |       | 0.5      |       |
| Valuation allowance                                       |       | 9.5      |       | 0.0      |       | 0.0      |       |
| Other                                                     |       | 0.0      |       | 0.7      |       | 0.4      |       |
| Total effective tax rate                                  |       | 49.3     | %          | 39.1     | %          | 40.4     | %          |

 

**12. Earnings Per Share**

TheCompany is required to calculate basic earnings per share, which is computed bydividing income available to common stockholders (the numerator) by theweighted-average number of common shares outstanding (the denominator) duringthe period. The Company is also required to compute diluted earnings per share,which is similar to basic earnings per share, except that the denominator isincreased to include the number of additional common shares that would havebeen outstanding if the dilutive potential common shares had been issued. Thefollowing is the reconciliation of the numerator and the denominator of thebasic and diluted earnings-per-share computations:

| ** **                                       | ** ** | **For the Year Ended**                                                  | ** ** |
|--------------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2005**                                                                               | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                       | ** ** | **(In thousands, except share and per share data)** | ** ** |
| Numerator:                                       |       |                                                                                   |       |   |   |   | ** ** |
| Net income                                       |       | $                                                                                      | 187,179    |   | $ | 255,883 |   | $ | 155,427 | ** ** |
| Denominator:                                     |       |                                                                                   |       |   |   |   |   |
| Denominator for basic earnings per share    |       | 315,223,555                                                                            |       | 322,742,581 |   | 253,853,027 |   |
| Effect of dilutive securities:                   |       |                                                                                   |       |   |   |   |   |
| Warrants                                         |       | 27,407,437                                                                             |       | 27,412,547 |   | 27,410,468 |   |
| Stock options                                    |       | 1,814,850                                                                              |       | 2,864,473 |   | 2,575,092 |   |
| Denominator for  diluted earnings per share |       | 344,445,842                                                                            |       | 353,019,601 |   | 283,838,587 |   |
|                                                  |            |                                                                                        |            |  |  |  |  |  |  |  |

 

Warrants and stockoptions, which were excluded from the computation of diluted earnings per sharedue to their antidilutive effect, amounted to 28,600,326, 20,971,125, and21,179,813 shares for the years ended December 31, 2005, 2004 and 2003,respectively.

On January 13, 2006,the Company granted 817,800 restricted stock unit awards and 1,207,100 stockoptions at the market price of $31.59.

F-33

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**13. Common Stock,Preferred Stock and Warrants**

The Company’s common stock consists of Class A,Class P, Class T and Class V shares. The Class A shares arelisted on the New York Stock Exchange and are primarily held by non-affiliates.The Class P, T and V shares are held by affiliates and are nottraded. All classes of common stock have substantially the same rights, withthe exception of Class P shares, which have ten votes per share on allmatters on which shareholders are entitled to vote and Class T and V,which each have the right to elect one member of the Company’s board ofdirectors. At December 31, 2005, there were 236,589,943 shares ofClass A Common Stock issued and outstanding, 36,962,390 shares ofClass P Common Stock issued and outstanding, 13,593,034 shares ofClass T Common Stock issued and outstanding and 17,837,164 of Class VCommon Stock issued and outstanding. The Company’s Class A Common Stockoutstanding decreased during 2005 by 18,349,317 shares from 254,939,260 to236,589,943 due to a decrease of 19,096,600 resulting from the repurchase oftreasury shares and an increase of 747,283 due the exercise of options.

On February 17, 2005, the Company announced thatits Board of Directors had approved the repurchase of up to $500 million of itsoutstanding Class A Common Stock. On October 24, 2005, the Companycompleted repurchasing approximately $500 million, 19,096,600 shares, inaccordance with its stock repurchase plan.

On November 1, 2005, the Company’s Board ofDirectors approved the repurchase of an additional $500 million of itsoutstanding Class A Common Stock. The share repurchases will be made inthe open market or negotiated transactions as market and business conditionswarrant, subject to securities laws and other legal requirements. The sharerepurchase plan will expire on December 31, 2006. No shares have beenrepurchased pursuant to the plan.

On December 21, 2005, the Company retired the20,113,780 shares that it held in treasury. This amount represents the19,096,600 shares that were repurchased during 2005 and the 1,017,180 sharesheld by the Company at December 31, 2004.

The Company had 10,000,000 shares of preferred stock,$.01 par value, authorized at December 31, 2005 and 2004.

At December 31, 2005, Televisa and Venevisionowned a total of 9,102,000 and 30,237,700 warrants, respectively. Thesewarrants include 27,439,700 warrants issued in 1992 that are exercisable forClass T and Class V Common Stock at an exercise price of $0.0322 pershare. The Company accounted for the warrants issued to Televisa and Venevisionwithin stockholders’ equity, except for the 100,000 warrants issued inconnection with the Fonovisa acquisition that have been accounted for as partof its purchase price.

The Televisa and Venevision warrants cannot beexercised by either Televisa or Venevision (or by any other non-U.S.citizen) if such exercise would result in a violation of the foreign ownershiprestrictions of the Communications Act of 1934. Subject to certainrestrictions, Televisa and Venevision may transfer such warrants.

If Televisa and Venevision were to exercise theirwarrants, their ultimate ownership of the Company would be approximately 12%for Televisa and 15% for Venevision.

F-34

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**13. Common Stock,Preferred Stock and Warrants (Continued)**

On January 12, 2004,the Company offered 15,815,999 shares of Class A common stock to thepublic for $599,426,000 and used the net proceeds to repurchase an equal amountof shares held by Clear Channel Communications Inc. The shares repurchased bythe Company were cancelled immediately and there was no dilution to earningsper share.

**14. Investments andVariable Interest Entities**

Investmentsconsist of the following as of December 31, 2005 and 2004:

| ** **                                   | ** ** | **2005**                | ** ** | **2004** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                   | ** ** | **(In thousands)** | ** ** |
| **Investments  in equity method investees:** |       |                    |       |     |       |
| St. Louis / Denver LLC                       |       | $                       | 52,165     |     | $          | 61,402 |   |
| TuTV LLC                                     |       | 2,479                   |       | 2,483    |       |
|                                         |       | $                       | 54,644     |     | $          | 63,885 |   |
| **Investments in cost method investees:**    |       |                    |       |     |       |
| Entravision Communications Corporation       |       | $                       | 262,918    |     | $          | 335,995 |   |
| Equity Broadcasting Corporation              |       | 36,857                  |       | 35,045   |       |
|                                         |       | $                       | 299,775    |     | $          | 371,040 |   |

 

***Investments***

As part of the consent decree pursuant to which theUnited States Department of Justice (“DOJ”) approved our acquisition ofHispanic Broadcasting Corporation, the Company exchanged all of its Entravisionvoting common stock for 36,926,600 shares of Class U common stock. TheEntravision Class U common stock has limited voting rights and does notinclude the right to elect directors. Also, as part of the consent decree withthe DOJ, we are required to sell enough of our Entravision stock so that ourownership of Entravision on a fully converted basis, which includes fullconversion of employee options and all convertible securities, does not exceed15% by March 26, 2006 and 10% by March 26, 2009.

The Company recorded a charge of $24,741,000 for thethree months ended December 31, 2005, related to an other than temporarydecline in the value of its Entravision stock. The charge is based on the fairvalue of our investment in Entravision common stock of $7.12 per share on thelast trading day of 2005 compared to our average cost basis of $7.79 per share.The Company’s new cost basis in its investment in Entravision stock is now$7.12. Entravision’s stock price at March 9, 2006 was $7.60. Any gain orloss on future transactions involving Entravision stock will be measured bycomparing our newly established cost basis of $7.12 per share to the fair valueof the Entravision stock at the transaction date. The Company recorded a chargeof $48,336,000 for the three months ended June 30, 2005, related to another than temporary decline in the value of its Entravision stock. We willcontinue to monitor the Entravision stock price, its operating results, theperformance and outlook for the media sector in general and other informationavailable to determine if the value of our investment becomes other thantemporarily impaired in subsequent reporting periods. The future sale of thestock will have no impact on the Company’s existing television stationaffiliation agreements with Entravision. At December 31, 2005, the Company’sownership of Entravision on a fully converted basis was approximately 27%. Followingthe acquisition of 

F-35

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**14. Investmentsand Variable Interest Entities (Continued)**

the Entravision radiostations on January 1, 2006, the Company’s ownership of Entravision on afully converted basis was approximately 20%.

On March 2, 2006, the Company and EntravisionCommunications Corporation completed the repurchase by Entravision of 7 millionshares of Entravision Class U common stock held by the Company, for anaggregate purchase price of $51.1 million, or $7.30 per share. This sharerepurchase transaction, coupled with the recent closing of the Company’spurchase of Entravision’s radio stations serving the San Francisco/San Josemarket for approximately 12.6 million shares of Entravision Class U commonstock, will reduce the Company’s non-voting ownership interest on a fullyconverted basis in Entravision to approximately 14.9%.

On November 7, 2002, the Company, through itswholly-owned subsidiary TeleFutura, entered into a limited liability companyagreement with Roberts Brothers Broadcasting, LLC (“Roberts”), called St. Louis/ Denver LLC (the “LLC”). In 2002, TeleFutura contributed $26,000,000 and in2003 contributed its minority interests in the St. Louis and Denver stations ofapproximately $34,000,000 and Roberts contributed its majority interests in theSt. Louis and Denver stations to the LLC. The Company owns 45% of the jointventure. In addition, TeleFutura and Roberts have each entered into timebrokerage agreements (“TBA”) to program the Denver and St. Louis stations,respectively. The TeleFutura TBA became effective on February 23, 2003. OnOctober 1, 2005, the Company performed its annual impairment testinganalysis and obtained an appraised value of the Denver and St. Louis FCClicenses, which are the primary assets of the LLC. Based in part on thisappraisal, the Company determined that the fair value of its investment in theLLC was less than the book carrying value and recorded an impairment charge of$8.8 million in the fourth quarter of 2005. In 2005, the Company also reportedan equity loss from unconsolidated subsidiary of $580,000 and the investmenthad $143,000 of other increases related to the joint venture.

In June 2001, the Company completed theacquisition of a 50% interest in Disa Records for approximately $75,000,000 incash. In addition, the Company agreed to provide $5,000,000 per year ofadvertising to Disa Records for the five-year period July 1, 2001 to June 30,2006. On March 31, 2004, the Company was required to adopt FinancialAccounting Standards Board Interpretation No. 46, “Consolidation ofVariable Interest Entities”, (“FIN 46”). Under the guidelines of FIN 46, theCompany is required to consolidate the assets, liabilities and operatingresults of Disa, which is owned 50% by the Company and 50% by the Chavezfamily. The use of the equity method of accounting prior to March 31, 2004and the consolidation of Disa since April 1, 2004 have the same effect onthe Company’s net income.

In June 2001, the Company purchased for$26,000,000 an approximate 20% non-voting preferred stock equity interest inEquity Broadcasting Corporation (“EBC”), which has 33 full power and/or networktelevisions permits, licenses, and applications and 60 low-power televisionproperties. In addition, in September 2001, the Company purchased sharesof Equity Broadcasting’s Class A common stock for approximately $2,500,000.The Company currently owns approximately 6% of Equity Broadcasting’s votingcommon stock. This investment is accounted for under the cost method.

In January 2004, theCompany, EBC and others agreed to amend EBC’s Articles of Incorporation toallow shares of Series A convertible preferred stock of EBC to receive astock dividend of 7% of the original issue price commencing on the date of theinitial issuance, which was June 8, 2001. The dividend is 

F-36

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**14. Investmentsand Variable Interest Entities (Continued)**

paid inpreference to all other junior stock as and when declared or on liquidation, isadded to amounts received on redemption and is to be converted on conversioninto common stock. Since the Company was not entitled to the dividend prior to January 2004,the Company recorded a stock dividend of $5,094,000 in the first quarter of2004 based on the Company’s initial investment of approximately $26,000,000made in June 2001. The Series A convertible preferred stock has amandatory redemption date of June 8, 2008. The stock dividend income forthe twelve months ended December 31, 2005 was $1,812,000. The EBCstockholders approved the Articles amendment in July 2004.

In April 2003, theCompany entered into a limited liability company agreement with Televisa Pay-TVVenture, Inc. to form a 50/50 joint venture called TuTV LLC. See note “3.Related Party Transactions.”

***Variable InterestEntities***

On March 31, 2004,the Company was required to adopt Financial Accounting Standards BoardInterpretation No. 46, “Consolidation of Variable Interest Entities”, (“FIN46”). FIN 46 expands upon and strengthens existing accounting guidance thataddresses when a company should consolidate in its financial statements theassets, liabilities and operating results of another entity. Under previousguidance, a company generally included another entity in its consolidatedfinancial statements only if it controlled the entity through voting interests.FIN 46 requires a variable interest entity (“VIE”) to be consolidated by acompany if that company is the “primary beneficiary” of that entity. An entityis a VIE if, among other things, it has equity investors that do not absorb theexpected losses or receive the expected returns of the entity. The primarybeneficiary is subject to a majority of the risk of loss from the VIE’sactivities, or is entitled to receive a majority of the VIE’s residual returns,or both.

Under the guidelines ofFIN 46, since March 31, 2004, the Company has been required to consolidatethe assets, liabilities and operating results of Disa Records, which is aMexico-based music recording and publishing company, owned 50% by the Companyand 50% by the Chavez family, who manages the business. The Company has a callright and the Chavez family has a put right, beginning in June 2006, whichrequires the Company to purchase the remaining 50% of Disa Records for aminimum of $75,000,000, subject to certain upward adjustments. The Companyexpects that in 2006 it will exercise its option to acquire the remaining 50%of Disa. As a result of Disa’s put right, the Company has the majority ofexpected losses that could arise from the variability of the fair value of DisaRecords. Under the rules governing FIN 46, the Company is consideredthe primary beneficiary of Disa Records and consequently is required toconsolidate it.

In addition, under theguidelines of FIN 46, since March 31, 2004, the Company was required toconsolidate the assets, liabilities, and operating results of the Puerto Ricostations, WLII/WSUR, Inc., a Delaware corporation (“WLII”), which werewholly-owned by Raycom Media, Inc. (“Raycom”). On June 30, 2005, theCompany acquired Raycom’s ownership interest in WLII in Puerto Rico forapproximately $190,000,000, excluding acquisition costs. The funds cameprimarily from the Company’s bank credit facility. WLII is now a wholly ownedsubsidiary of the Company and is no longer a VIE.

Prior periods were notrestated upon the adoption of FIN 46. Since the Company adopted FIN 46 on March 31,2004, the operating results of Disa Records and WLII are not included in theoperating results of the Company for the three months ended March 31,2004. Beginning April 1, 2004, Disa Records’ net revenues and operatingincome were included in the Company’s operating results and the Company’s net 

F-37

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**14. Investmentsand Variable Interest Entities (Continued)**

incomeremained the same, as it would have been under the equity method of accountingthat we used before we adopted FIN 46. WLII’s net revenues and operating incomewere also included in the Company’s operating results from April 1, 2004through June 30, 2005, but our net income was not affected since Raycomowned 100% of WLII in 2004 and for the six months ended June 30, 2005. TheCompany will continue to consolidate Disa Records under the guidelines of FIN46 until the Company exercises its call right or the Chavez family exercisestheir put right and the Company purchases Disa Records. The Company hasconsolidated the results of operations of WLII under the guidelines of FIN 46for the six months ended June 30, 2005 and continues to consolidate WLIIfrom June 30, 2005 forward since WLII is now a wholly-owned subsidiary ofthe Company.

The following representsthe VIE income statement and balance sheet information consolidated by theCompany:

| ** **                                                                              | ** ** | **Combined VIEs**  | ** ** | **Year Ended**

**December 31, 2005**

**Disa Records** | ** ** | **Six months Ended**

**June 30, 2005**

**WLII(a)** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                                                                              | ** ** | **(In thousands)** | ** ** |
| Net revenues                                                                            |       |                    | $          | 102,053                                                                     |       |                                                                     |       | $ | 76,523 |   |   |   | $ | 25,530 |   |   |
| Direct operating  expenses (excluding depreciation and amortization)                    |       |                    | 56,553     |                                                                        |       |                                                                     | 40,115     |   |   |   | 16,438 |   |   |
| Selling, general  and administrative expenses (excluding depreciation and amortization) |       |                    | 23,732     |                                                                        |       |                                                                     | 17,070     |   |   |   | 6,662 |   |   |
| Depreciation and  amortization                                                          |       |                    | 9,012      |                                                                        |       |                                                                     | 7,444      |   |   |   | 1,568 |   |   |
| Operating income                                                                        |       |                    | 12,756     |                                                                        |       |                                                                     | 11,894     |   |   |   | 862 |   |   |
| Other expense (income)                                                                  |       |                    | 2,043      |                                                                        |       |                                                                     | (673       | ) |   |   | 2,717 |   |   |
| Noncontrolling  interest of variable interest entities                                  |       |                    | 4,120      |                                                                        |       |                                                                     | 5,974      |   |   |   | (1,855 | ) |   |
| Income before  taxes                                                                    |       |                    | 6,593      |                                                                        |       |                                                                     | 6,593      |   |   |   | — |   |   |
| Provision for  income taxes                                                             |       |                    | 618        |                                                                        |       |                                                                     | 618        |   |   |   | — |   |   |
| Net income                                                                              |       |                    | $          | 5,975                                                                       |       |                                                                     |       | $ | 5,975 |   |   |   | $ | — |   |   |

----

(a)           WLIIwas acquired by the Company on June 30, 2005.

F-38

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**14. Investmentsand Variable Interest Entities (Continued)**

| ** **                                                                              | ** ** | **Nine months ended December 31, 2004** | ** ** |
|-----------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                                                                              | ** ** | **Combined VIEs**                                           | ** ** | **Disa Records** | ** ** | **WLII** | ** ** |
| ** **                                                                              | ** ** | **(In thousands)**                                          | ** ** |
| Net revenues                                                                            |       |                                                             | $          | 97,094 |   |   |   | $ | 50,947 |   |   | $ | 46,147 |   |
| Direct operating  expenses (excluding depreciation and amortization)                    |       |                                                             | 50,933     |   |   |   | 28,261 |   |   | 22,672 |   |
| Selling, general  and administrative expenses (excluding depreciation and amortization) |       |                                                             | 25,849     |   |   |   | 12,892 |   |   | 12,957 |   |
| Depreciation and  amortization                                                          |       |                                                             | 9,200      |   |   |   | 8,001 |   |   | 1,199 |   |
| Operating income                                                                        |       |                                                             | 11,112     |   |   |   | 1,793 |   |   | 9,319 |   |
| Noncontrolling  interest of variable interest entities                                  |       |                                                             | 7,311      |   |   |   | 564 |   |   | 6,747 |   |
| Other expense /  (income)                                                               |       |                                                             | 2,407      |   |   |   | (48 | ) |   | 2,455 |   |
| Income before  taxes                                                                    |       |                                                             | 1,394      |   |   |   | 1,277 |   |   | 117 |   |
| Provision for  income taxes                                                             |       |                                                             | 831        |   |   |   | 714 |   |   | 117 |   |
| Net income                                                                              |       |                                                             | $          | 563 |   |   |   | $ | 563 |   |   | $ | — |   |

 

| ** **                                           | ** ** | **At December 31, 2005** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                           | ** ** | **Disa Records**                   | ** ** |
| ** **                                           | ** ** | **(In thousands)**                 | ** ** |
| Cash and cash  equivalents                           |       |                                    | $          | 36,246 |   |   |
| Accounts  receivable, net                            |       |                                    | 3,133      |   |   |
| Prepaid expenses  and other                          |       |                                    | 10,215     |   |   |
| Property and  equipment, net                         |       |                                    | 948        |   |   |
| Intangible  assets, net                              |       |                                    | 6,885      |   |   |
| Goodwill                                             |       |                                    | 89,136     |   |   |
| Total assets                                         |       |                                    | $          | 146,563 |   |   |
| Accrued liabilities                                  |       |                                    | $          | 28,495 |   |   |
| Noncontrolling  interest of variable interest entity |       |                                    | 57,889     |   |   |
| Total  stockholders’ equity                     |       |                                    | 60,179     |   |   |
| Total liabilities and  stockholders’ equity     |       |                                    | $          | 146,563 |   |   |

 

F-39

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**14. Investments and Variable InterestEntities (Continued)**

*Unaudited*

| ** **                                             | ** ** | **At December 31, 2004** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                             | ** ** | **Combined VIEs**                  | ** ** | **Disa Records** | ** ** | **WLII** | ** ** |
| ** **                                             | ** ** | **(In thousands)**                 | ** ** |
| Cash                                                   |       |                                    | $          | 25,820 |   |   |   | $ | 23,864 |   |   | $ | 1,956 |   |
| Accounts  receivable, net                              |       |                                    | 10,800     |   |   |   | 2,174 |   |   | 8,626 |   |
| Prepaid expenses  and other                            |       |                                    | 12,092     |   |   |   | 11,408 |   |   | 684 |   |
| Property and  equipment, net                           |       |                                    | 11,614     |   |   |   | 1,326 |   |   | 10,288 |   |
| Intangibles  assets, net                               |       |                                    | 113,745    |   |   |   | 13,745 |   |   | 100,000 |   |
| Goodwill                                               |       |                                    | 179,706    |   |   |   | 89,135 |   |   | 90,571 |   |
| Other assets                                           |       |                                    | 7,204      |   |   |   | — |   |   | 7,204 |   |
| Total assets                                           |       |                                    | $          | 360,981 |   |   |   | $ | 141,652 |   |   | $ | 219,329 |   |
| Accrued liabilities                                    |       |                                    | $          | 29,096 |   |   |   | $ | 20,576 |   |   | $ | 8,520 |   |
| Other long-term  liabilities                           |       |                                    | 10,929     |   |   |   | — |   |   | 10,929 |   |
| Noncontrolling  interest of variable interest entities |       |                                    | 259,394    |   |   |   | 59,514 |   |   | 199,880 |   |
| Total  stockholders’ equity                       |       |                                    | 61,562     |   |   |   | 61,562 |   |   | — |   |
| Total liabilities and  stockholders’ equity       |       |                                    | $          | 360,981 |   |   |   | $ | 141,652 |   |   | $ | 219,329 |   |

 

**15. Performance Award andIncentive Plans**

The Company has a 1996 and 2004 Performance Award Plan(the “Plans”). The 2004 Performance Award Plan (“2004 Plan”) reserves shares ofClass A Common Stock for issuance to Company officers, key employees andother eligible persons as determined by the Board of Directors or PlanCommittee (as appointed by the Board). The Company no longer issues new awardsunder its 1996 Performance Award Plan (“1996 Plan”) but the plan continues tohave grants outstanding.

The 2004 Plan was adopted as of May 2004, inpart, to increase the maximum number of shares of Class A Common Stockcurrently available under the 1996 Plan and to give the Company sufficientauthority and flexibility to adequately provide for future incentives. A totalof 15,936,550 shares of Class A Common Stock were registered under the2004 Plan, 12,600,000 shares were made available under the 2004 Plan and3,336,550 shares were made available from the 1996 Plan. The maximum number ofshares that may be granted to any individual during any calendar year is3,000,000. The maximum number of shares that may be granted during any calendaryear is 5,000,000 (not including those shares, if any, that have been cancelledduring the same year they were granted) unless the Plan Committee gives itsunanimous consent. The Plan provides that shares granted come from theCompany’s authorized but unissued Class A Common Stock and any shares ofthe Company’s Class A Common Stock held as treasury shares. Grants may bein the form of either nonqualified stock options, incentive stock options,stock appreciation rights, restricted stock awards, restricted stock unitawards, performance share awards, stock bonuses or cash bonus awards.

F-40

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**15. PerformanceAward and Incentive Plans (Continued)**

The price of the optionsgranted pursuant to the Plans may not be less than 100% of the fair marketvalue of the shares on the date of grant (110% in the case of an incentivestock option granted to any person owning more than 10% of the Company’s totalcombined voting power). No award will be exercisable after ten years from thedate granted. Unless approved by the Plan Committee, no award may vest at arate greater than 25% per year, other than in the case of awards granted inlieu of cash bonuses, which may vest at the rate of 50% per year.

On September 14,2005, the Compensation Committee of the Board of Directors of the Companyapproved the acceleration of vesting of substantially all unvested stock optionsoutstanding whose exercise price was above the then current market price of$25.56. The Compensation Committee’s decision to accelerate the vesting of theaffected stock options was based upon the issuance by the Financial AccountingStandards Board of Statement of Financial Accounting Standard No. 123(Revised 2004), “Share-Based Payment” which requires the Company to treatunvested stock options as compensation expense effective January 1, 2006. Becausethe Company accounts for stock based compensation using the intrinsic valuemethod prescribed in Accounting Principles Board (APB) No. 25, and becausethese options were priced above current market on that date, the accelerationof vesting of these options did not result in a charge in the Company’sfinancial statements. Vesting acceleration increased pro forma stock basedcompensation, under the provisions of SFAS No. 123 by approximately $59million before income tax. Assuming that there are no modifications to theaffected options, the Company believes that it will not be required torecognize any compensation expense in future periods associated with theaffected options. As of December 31, 2005, substantially all of theCompany’s outstanding options have been expensed due to the acceleration.

In connection with the acquisition of HBC on September 22,2003, the Company assumed outstanding stock options previously issued under theHBC Long-Term Incentive Plan. The assumed stock option and their respectivegrant price have been converted in accordance with the acquisition agreement.No new awards were granted under this plan upon and following the acquisition.The maximum term of each assumed option is ten years from the original grantdate, subject to earlier termination in connection with the recipient’stermination of employment with or service to the Company. The assumed optionsvest in accordance with the HBC Long-Term Incentive Plan and the acquisitionagreement.

F-41

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**15. Performance Award and Incentive Plans (Continued)**

Information regarding the Performance Award Plans for2005, 2004 and 2003 and the HBC Long-Term Incentive Plan, from September 22,2003, is as follows:

| ** **                                                        | ** ** | **2005**   | ** ** | **2004**   | ** ** | **2003**   | ** ** |
|-------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Number of shares under  stock options:                            |       |       |       |       |       |       |       |
| Outstanding at beginning  of year                                 |       | 30,611,447 |       | 27,246,871 |       | 20,197,320 |       |
| HBC options assumed                                               |       | —     |       | —     |       | 5,242,777  |       |
| Granted(a)                                                        |       | 141,000    |       | 5,076,871  |       | 3,829,000  |       |
| Exercised                                                         |       | (759,183   | )          | (1,103,879 | )          | (1,438,223 | )          |
| Canceled                                                          |       | (423,968   | )          | (608,416   | )          | (584,003   | )          |
| Outstanding at end of  year                                       |       | 29,569,296 |       | 30,611,447 |       | 27,246,871 |       |
| Available for grant at  end of year                               |       | 11,697,775 |       | 11,493,950 |       | 3,418,300  |       |
| Exercisable at end of  year                                       |       | 29,183,176 |       | 20,218,437 |       | 18,116,943 |       |
| Weighted average  exercise price:                                 |       |       |       |       |       |       |       |
| Granted                                                           |       | $26.76     |       | $28.84     |       | $35.53     |       |
| Exercised                                                         |       | $14.21     |       | $22.18     |       | $18.07     |       |
| Canceled                                                          |       | $31.96     |       | $36.27     |       | $36.27     |       |
| Outstanding at end of  year                                       |       | $29.76     |       | $29.42     |       | $29.38     |       |
| Exercisable at end of  year                                       |       | $29.76     |       | $28.58     |       | $27.39     |       |
| Weighted average fair value of options granted during  the period |       | $13.22     |       | $14.25     |       | $18.05     |       |

----

(a)           On January 13,2006, the Company granted 817,800 restricted stock unit awards and 1,207,100stock options at the market price of $31.59.

| ** **                                  | ** ** | **Options Outstanding** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|
| **Range of Exercise Prices** | ** ** | ** **                   | ** ** | **Number Outstanding at**

**December 31, 2005** | ** ** | **Weighted Average**

**Remaining**

**Contractual Life (years)** | ** ** | **Weighted Average**

**Exercise Price** | ** ** |
| $5.75 - $10.00                              |       |                         | 1,145,343  |   |   |   | 0.75 |   |   |   | $ | 5.81 |   |   |
| $10.01 - $20.00                             |       |                         | 4,302,580  |   |   |   | 2.36 |   |   |   | $ | 16.20 |   |   |
| $20.01 - $30.00                             |       |                         | 9,828,562  |   |   |   | 7.40 |   |   |   | $ | 27.43 |   |   |
| $30.01 - $40.00                             |       |                         | 11,114,761 |   |   |   | 6.25 |   |   |   | $ | 35.54 |   |   |
| $40.01 - $50.00                             |       |                         | 3,122,350  |   |   |   | 4.03 |   |   |   | $ | 43.53 |   |   |
| $50.01 - $59.48                             |       |                         | 55,700     |   |   |   | 4.28 |   |   |   | $ | 53.89 |   |   |
|                                        |       |                         | 29,569,296 |   |   |   |   |   |   |   |   |   |   |
|                                             |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                  | ** ** | **Options Exercisable** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|
| **Range of Exercise Prices** | ** ** | ** **                   | ** ** | **Number Exercisable at**

**December 31, 2005** | ** ** | **Weighted Average**

**Exercise Price** | ** ** |
| $5.75 - $10.00                              |       |                         | 1,145,343  |   |   |   | $ | 5.81 |   |   |
| $10.01 - $20.00                             |       |                         | 4,302,580  |   |   |   | $ | 16.20 |   |   |
| $20.01 - $30.00                             |       |                         | 9,680,977  |   |   |   | $ | 27.45 |   |   |
| $30.01 - $40.00                             |       |                         | 10,876,226 |   |   |   | $ | 35.62 |   |   |
| $40.01 - $50.00                             |       |                         | 3,122,350  |   |   |   | $ | 43.53 |   |   |
| $50.01 - $59.48                             |       |                         | 55,700     |   |   |   | $ | 53.89 |   |   |
|                                        |       |                         | 29,183,176 |   |   |   |   |   |   |
|                                             |            |                              |            |  |  |  |  |  |  |  |  |  |

 

F-42

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**15. PerformanceAward and Incentive Plans (Continued)**

During the year ended December 31,2005, 759,183 options were exercised from the Company’s option plans for759,183 shares of Class A Common Stock, resulting in increases to commonstock and paid-in-capital of approximately $7,000 and $14,854,000,respectively, which included a tax benefit of $4,236,000 associated with thetransactions.

**16. Business Segments**

TheCompany’s principal business segment is television, which includes theoperations of the Company’s Univision Network, TeleFutura Network, Galavisiónand owned-and-operated stations and the variable interest entity, WLII. In September 2003,the Company completed its acquisition of HBC, now called Univision Radio. Theoperating segments reported below are the segments of the Company for whichseparate financial information is available and for which segment results areevaluated regularly by management in deciding how to allocate resources and inassessing performance. Presented below is segment information pertaining to theCompany’s television, radio, music and Internet businesses.

| ** **                                                                                    | ** ** | **Year Ended December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                    | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                                                    | ** ** | **(In thousands)**                    | ** ** |
| Net  revenue:                                                                                 |       |                                       |       |   |   |   |   |
| Television                                                                                    |       | $                                          | 1,360,694  |   | $ | 1,261,840 |   | $ | 1,098,276 |   |
| Radio                                                                                         |       | 359,107                                    |       | 328,392 |   | 83,595 |   |
| Music                                                                                         |       | 206,444                                    |       | 178,560 |   | 113,197 |   |
| Internet                                                                                      |       | 26,286                                     |       | 18,143 |   | 15,947 |   |
| Consolidated                                                                                  |       | 1,952,531                                  |       | 1,786,935 |   | 1,311,015 |   |
| Direct expenses (excluding depreciation and amortization):                                    |       |                                       |       |   |   |   |   |
| Television                                                                                    |       | 536,209                                    |       | 488,446 |   | 420,475 |   |
| Radio                                                                                         |       | 65,772                                     |       | 60,121 |   | 15,211 |   |
| Music                                                                                         |       | 115,364                                    |       | 102,316 |   | 64,497 |   |
| Internet                                                                                      |       | 12,628                                     |       | 12,574 |   | 13,558 |   |
| Consolidated                                                                                  |       | 729,973                                    |       | 663,457 |   | 513,741 |   |
| Selling, general and administrative expenses (excluding  depreciation and amortization): |       |                                       |       |   |   |   |   |
| Television                                                                                    |       | 335,215                                    |       | 311,916 |   | 275,622 |   |
| Radio                                                                                         |       | 151,985                                    |       | 151,690 |   | 37,511 |   |
| Music                                                                                         |       | 59,595                                     |       | 52,964 |   | 39,151 |   |
| Internet                                                                                      |       | 12,486                                     |       | 12,271 |   | 11,390 |   |
| Consolidated                                                                                  |       | 559,281                                    |       | 528,841 |   | 363,674 |   |
|                                                                                               |            |                                            |            |  |  |  |  |  |  |  |

 

F-43

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**16. BusinessSegments (Continued)**

| ** **                                                           | ** ** | **Year Ended December 31,** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                           | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                           | ** ** | **(In thousands)**                    | ** ** |
| Cost reduction plan:                                                 |       |                                       |       |   |   |   |   |
| Television                                                           |       | $                                          | 29,993     |   | $ | — |   | $ | — |   |
| Radio                                                                |       | 73                                         |       | — |   | — |   |
| Music                                                                |       | 33                                         |       | — |   | — |   |
| Internet                                                             |       | 190                                        |       | — |   | — |   |
| Consolidated                                                         |       | 30,289                                     |       | — |   | — |   |
| Operating income (loss) before  depreciation  and amortization: |       |                                       |       |   |   |   |   |
| Television                                                           |       | 459,277                                    |       | 461,478 |   | 402,179 |   |
| Radio                                                                |       | 141,277                                    |       | 116,581 |   | 30,873 |   |
| Music                                                                |       | 31,452                                     |       | 23,280 |   | 9,549 |   |
| Internet                                                             |       | 982                                        |       | (6,702 | ) | (9,001 | ) |
| Consolidated                                                         |       | 632,988                                    |       | 594,637 |   | 433,600 |   |
| Depreciation and amortization:                                       |       |                                       |       |   |   |   |   |
| Television                                                           |       | 66,927                                     |       | 66,029 |   | 64,041 |   |
| Radio                                                                |       | 11,649                                     |       | 16,063 |   | 5,594 |   |
| Music                                                                |       | 12,877                                     |       | 15,443 |   | 9,978 |   |
| Internet                                                             |       | 1,770                                      |       | 3,847 |   | 5,291 |   |
| Consolidated                                                         |       | 93,223                                     |       | 101,382 |   | 84,904 |   |
| Operating income (loss):                                             |       |                                       |       |   |   |   |   |
| Television                                                           |       | 392,350                                    |       | 395,449 |   | 338,138 |   |
| Radio                                                                |       | 129,628                                    |       | 100,518 |   | 25,279 |   |
| Music                                                                |       | 18,575                                     |       | 7,837 |   | (429 | ) |
| Internet                                                             |       | (788                                       | )          | (10,549 | ) | (14,292 | ) |
| Consolidated                                                         |       | $                                          | 539,765    |   | $ | 493,255 |   | $ | 348,696 |   |
| Capital expenditures:                                                |       |                                       |       |   |   |   |   |
| Television                                                           |       | $                                          | 85,505     |   | $ | 105,462 |   | $ | 49,728 |   |
| Radio                                                                |       | 14,700                                     |       | 13,074 |   | 2,685 |   |
| Music                                                                |       | 340                                        |       | 681 |   | 2,811 |   |
| Internet                                                             |       | 2,008                                      |       | 927 |   | 1,059 |   |
| Consolidated                                                         |       | $                                          | 102,553    |   | $ | 120,144 |   | $ | 56,283 |   |
| Total assets:                                                        |       |                                       |       |   |   |   |   |
| Television                                                           |       | $                                          | 3,447,159  |   | $ | 3,552,158 |   | $ | 3,176,858 |   |
| Radio                                                                |       | 4,299,197                                  |       | 4,291,074 |   | 4,103,148 |   |
| Music                                                                |       | 371,030                                    |       | 374,330 |   | 347,963 |   |
| Internet                                                             |       | 10,950                                     |       | 9,564 |   | 14,948 |   |
| Consolidated                                                         |       | $                                          | 8,128,336  |   | $ | 8,227,126 |   | $ | 7,642,917 |   |

 

F-44

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**16. BusinessSegments (Continued)**

The Company usesthe key indicator of “operating income before depreciation and amortization”primarily to evaluate the Company’s operating performance and for planning andforecasting future business operations. In addition, this key indicator iscommonly used as a measure of performance for broadcast companies, is used byinvestors to measure a company’s ability to service debt and other cash needsand provides investors the opportunity to evaluate the Company’s performance asit is viewed by management. Operating income before depreciation andamortization is not, and should not be used as, an indicator of or analternative to operating income, net income or cash flow as reflected in theconsolidated financial statements, is not a measure of financial performanceunder generally accepted accounting principles (“GAAP”) and should not beconsidered in isolation or as a substitute for measures of performance preparedin accordance with GAAP. Since the definition of operating income beforedepreciation and amortization may vary among companies and industries it shouldnot be used as a measure of performance among companies. In accordance with SECguidelines, the Company is providing on a consolidated basis a reconciliationof the non-GAAP term operating income before depreciation and amortization tonet income, which is the most directly comparable GAAP financial measure, forthe year ended December 31, 2005, 2004 and 2003:

| ** **                                             | ** ** | **Year Ended December 31,** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                             | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                             | ** ** | **(In thousands)**                    | ** ** |
| Operating income  before depreciation and amortization |       | $                                          | 632,988    | (a) | $ | 594,637 |   | $ | 433,600 |   |
| Depreciation and  amortization                         |       | 93,223                                     |       | 101,382 |   | 84,904 |   |
| Operating income                                       |       | 539,765                                    |       | 493,255 |   | 348,696 |   |
| Interest expense,  net                                 |       | 84,048                                     |       | 66,061 |   | 71,322 |   |
| Loss on  extinguishment of debt                        |       | —                                     |       | 467 |   | 4,122 |   |
| Amortization of  deferred financing costs              |       | 3,309                                      |       | 3,470 |   | 3,832 |   |
| Stock dividend                                         |       | (1,812                                     | )          | (6,453 | ) | — |   |
| Equity loss in  unconsolidated subsidiaries and other  |       | (959                                       | )          | 1,942 |   | 10,218 |   |
| Gain on change in  Entravision ownership interest      |       | —                                     |       | — |   | (1,611 | ) |
| Nontemporary  decline in fair value of investments     |       | 81,877                                     |       | — |   | — |   |
| Noncontrolling  interest of variable interest entities |       | 4,120                                      |       | 7,311 |   | — |   |
| Provision for  income taxes                            |       | 182,003                                    |       | 164,574 |   | 105,386 |   |
| Net income                                             |       | $                                          | 187,179    |   | $ | 255,883 |   | $ | 155,427 |   |

----

(a)           Includesa cost reduction plan charge of $30,289,000.

F-45

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2005**

**17. QuarterlyFinancial Information (unaudited)**

| ** **                    | ** ** | **1st  Quarter**                                                                  | ** ** | **2nd  Quarter** | ** ** | **3rd  Quarter** | ** ** | **4th  Quarter** | ** ** | **Total  Year** | ** ** |
|-------------------------------|------------|-----------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|-----------------|------------|
| ** **                    | ** ** | **(In thousands, except share and per-share data)** | ** ** |
| ***2005***                    |       |                                                                              |       |             |       |             |       |             |       |            |       |
| Net revenues                  |       | $                                                                                 | 433,019    |             | $          | 508,464          |       | $                | 497,499    |            | $          | 513,549 |   | $ | 1,952,531 |   |
| Net income                    |       | $                                                                                 | 44,478     |             | $          | 36,104           |       | $                | 79,164     |            | $          | 27,433 |   | $ | 187,179 |   |
| Net income per  common share: |       |                                                                              |       |             |       |             |       |             |       |            |       |
| Basic                         |       | $                                                                                 | 0.14       |             | $          | 0.11             |       | $                | 0.25       |            | $          | 0.09 |   | $ | 0.59 |   |
| Diluted                       |       | $                                                                                 | 0.13       |             | $          | 0.10             |       | $                | 0.23       |            | $          | 0.08 |   | $ | 0.54 |   |
| ***2004***                    |       |                                                                              |       |             |       |             |       |             |       |            |       |
| Net revenues                  |       | $                                                                                 | 352,884    |             | $          | 495,291          |       | $                | 477,425    |            | $          | 461,335 |   | $ | 1,786,935 |   |
| Net income                    |       | $                                                                                 | 31,553     |             | $          | 83,744           |       | $                | 73,401     |            | $          | 67,185 |   | $ | 255,883 |   |
| Net income per  common share: |       |                                                                              |       |             |       |             |       |             |       |            |       |
| Basic                         |       | $                                                                                 | 0.10       |             | $          | 0.26             |       | $                | 0.23       |            | $          | 0.21 |   | $ | 0.79 |   |
| Diluted                       |       | $                                                                                 | 0.09       |             | $          | 0.24             |       | $                | 0.21       |            | $          | 0.19 |   | $ | 0.72 |   |

 

F-46

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