**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM 10-K**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe Fiscal Year Ended December 31, 2006**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe 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 $0.01 |   | New York Stock  Exchange  |

 

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

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

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act. YES o NO x

*Note—Checking the box above will not relieve any registrantrequired to file reports pursuant to Section 13 or 15(d) of theExchange Act from their obligations under those Sections.*

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. YES x NO o

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct.

Largeaccelerated filer x Accelerated filer o Non-acceleratedfiler o

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). YES o NO x

Theaggregate market value of the Class A Common Stock of the Company held bynon-affiliates on June 30, 2006 (the last business day of the Company’smost recently completed second fiscal quarter) was approximately$8,100,000,000, based on the closing sale price as reported on the New YorkStock Exchange. This calculation does not include the value of any of the outstandingshares of Class P, Class T or Class V Common Stock.

Therewere 249,721,609 shares of Class A Common Stock, 35,283,284 shares of Class PCommon Stock, 13,593,034 shares of Class T Common Stock and 10,954,706 of Class VCommon Stock issued and outstanding as of January 8, 2007.

**DOCUMENTS INCORPORATED BY REFERENCE**

**None**

 

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**TABLE OF CONTENTS**
| **PART I**   |                                                                                                                |   |   |
|-------------------|---------------------------------------------------------------------------------------------------------------------|--------|--------|
| Item 1.           | Business                                                                                                            |   | 4      |
| Item 1A.          | Risk Factors.                                                                                                       |   | 18     |
| Item  1B.         | Unresolved Staff Comments.                                                                                          |   | 24     |
| Item 2.           | Properties                                                                                                          |   | 24     |
| Item 3.           | Legal Proceedings                                                                                                   |   | 25     |
| Item  4.          | Submission of Matters to a  Vote of Security Holders                                                                |   | 27     |
| **PART II**  |                                                                                                                |   |   |
| Item 5.           | Market for Registrant’s  Common Equity, Related Stockholder Matters and Issuer Purchases of Equity  Securities |   | 28     |
| Item  6.          | Selected Financial Data                                                                                             |   | 31     |
| Item  7.          | Management’s Discussion and  Analysis of Financial Condition and Results of Operations                         |   | 32     |
| Item  7A.         | Quantitative and Qualitative  Disclosures About Market Risk                                                         |   | 54     |
| Item  8.          | Financial Statements and  Supplementary Data                                                                        |   | 55     |
| Item  9.          | Changes in and Disagreements  with Accountants on Accounting and Financial Disclosures                              |   | 55     |
| Item  9A.         | Controls and Procedures                                                                                             |   | 55     |
| Item 9B.          | Other Information                                                                                                   |   | 56     |
| **PART III** |                                                                                                                |   |   |
| Item 10.          | Directors, Executive  Officers and Corporate Governance                                                             |   | 57     |
| Item  11.         | Executive Compensation                                                                                              |   | 61     |
| Item  12.         | Security Ownership of  Certain Beneficial Owners and Management and Related Stockholder Matters                     |   | 73     |
| Item  13.         | Certain Relationships and  Related Transactions, and Director Independence                                          |   | 76     |
| Item  14.         | Principal Accountant Fees  and Services                                                                             |   | 82     |
| **PART IV**  |                                                                                                                |   |   |
| Item 15.          | Exhibits, Financial  Statement Schedules                                                                            |   | 83     |

 

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**FORWARD-LOOKINGSTATEMENTS**

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 “anticipate,” “plan,” “may,” “intend,”“will,” “expect,” “believe” or the negative of these terms, and similarexpressions intended to identify forward-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: cancellation or reductions in advertising; failure of our new orexisting businesses to produce projected revenues or cash flow; failure toobtain the benefits expected from cross-promotion of media; regional downturnsin economic conditions in those areas where our stations are located; changesin the rules and regulations of the Federal Communications Commission (“FCC”);a decrease in the supply or quality of programming; an increase in the cost ofprogramming; an increase in the preference among Hispanics for English-languageprogramming; the need for any unanticipated expenses; competitive pressuresfrom other broadcasters and other entertainment and news media; Internetpiracy, home copying and Internet downloading; further recorded music industrydeclines; potential impact of new technologies; unanticipated interruption inour broadcasting for any reason, including acts of terrorism; write downs ofthe carrying value of assets due to impairment; and a failure to achieveprofitability, growth or anticipated cash flows from acquisitions. Factors thatcould cause our forward-looking statements relating to the Merger to differmaterially from those expressed or implied by the forward-looking statementsinclude: financial performance of the Company through the completion of theMerger; satisfaction of the closing conditions set forth in the MergerAgreement; the occurrence of any event, change or other circumstance that couldgive rise to the termination of the Merger Agreement; the failure of the Mergerto close for any reason; business uncertainty and contractual restrictionsduring the pendency of the Merger; significant delay in the expected completionof the Merger; regulatory review, approvals and restrictions; and diversion ofmanagement’s attention from ongoing business concerns.

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

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**PART I**

**ITEM1.**                Business

UnivisionCommunications Inc., together with its subsidiaries, is the leading Spanish-languagemedia company in the United States. In 2006, the Company operated in fourbusiness segments:

·       *Television:*   The Company’s principal business segment istelevision, which consists primarily of the Univision and TeleFutura nationalbroadcast networks, the Company’s owned and/or operated television stations andthe Galavisión cable television network. For the year ended December 31,2006, the television segment accounted for approximately 74% of the Company’snet revenues. See “—Television Broadcasting.”

·       *Radio:*   UnivisionRadio is the largest Spanish-language radio broadcasting company in the UnitedStates. For the year ended December 31, 2006, the radio segment accountedfor approximately 17% of the Company’s net revenues. See “—Univision Radio.”

·       *Music:*   The Company’smusic recording and music publishing business, launched in April 2001,includes the Univision, Fonovisa, Disa and La Calle labels. For the year ended December 31,2006, the music segment accounted for approximately 7% of the Company’s netrevenues. See “—Music Recording andPublishing.”

·       *Internet:*   Univision Online, Inc. operates theCompany’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, 2006, theInternet segment accounted for approximately 2% of the Company’s net revenues. See“—Internet.”

For a description of thefinancial information about each segment, see “Item 7—Management’s Discussionand Analysis of Financial Condition and Results of Operations” and “Notes toConsolidated Financial Statements—17. Business Segments.” The Company wasincorporated in Delaware in April 1992 as Perenchio Communications, Inc.and changed its name to Univision Communications Inc. in June 1996. Itsprincipal executive offices are located at 1999 Avenue of the Stars, Suite 3050,Los Angeles, California 90067, telephone number (310) 556-7676. TheCompany’s stock is traded on the New York Stock Exchange (UVN) and is part ofthe Standard & Poor’s S&P 500 Index. The terms “Company,” “we,” “us” and “our” refer collectively toUnivision Communications Inc. and its subsidiaries through which its variousbusinesses 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, 14 and 15(d) of the Securities Exchange Act of1934, as amended, are available free of charge on the Company’s website at *www.univision.net*and in*print*. Thepublic may read and copy materials the Company files with the Securities andExchange Commission (“SEC”) at the SEC’s Public Reference Room at 100 FStreet, NE, Washington, DC 20549. The public may obtain information on theoperation of the Public Reference Room by calling the SEC at 1-800-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, Director IndependenceStandards, Code of Conduct, Ethical Standards and Business Practices, Code ofEthics for Senior Financial Officers, Charter of Audit Committee*and*Charter of Compensation Committee* are also available on the Company’s website,as well as in print to any stockholder who requests them.

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**Recent Developments**

*Acquisition of Disa*

On October 26, 2006,the Company acquired the remaining 50% of Disa, its Mexico-based music andrecording publishing company, for approximately $105 million. The Companyfinanced this transaction through borrowings under its revolving creditfacility.

**Acquisition of the Company by the Investors**

*Stockholder Merger Approval*

A special meeting of theCompany’s stockholders was held on September 27, 2006, and thestockholders voted in favor of the adoption of the Agreement and Plan of Merger(the “Merger Agreement”), dated as of June 26, 2006, by and among theCompany, Umbrella Holdings, LLC, a Delaware limited liability company (the “Buyer”),and Umbrella Acquisition, Inc., a Delaware corporation and a wholly-ownedsubsidiary of the Buyer (the “Acquisition Sub”). The transaction described inthe Merger Agreement is referred to as the “Merger.”

*The Merger Agreement*

As a result of the Merger,the separate corporate existence of Acquisition Sub will cease and Univisionwill continue as the surviving corporation in the Merger as a subsidiary ofBuyer. At the effective time of the Merger, each issued and outstanding shareof common stock (other than shares that were held in treasury or owned byAcquisition Sub or Buyer immediately prior to the Merger and shares held bystockholders who properly demand their appraisal rights), will be paid $36.25in cash, without interest, plus any additional consideration payable under theterms of the Merger Agreement. Under the terms of the Merger Agreement, if theMerger becomes effective after April 26, 2007, each holder of issued andoutstanding common stock will also receive an amount equal to the pro rataportion, based upon the number of days elapsed subsequent to April 26,2007, of $36.25 per share multiplied by 8% per annum, so long as certainconditions for closing the Merger have been satisfied or waived as of thatdate.

Each stock optionoutstanding and unexercised at the effective time of the Merger, whether vestedor unvested, with an exercise price per share less than the Mergerconsideration of $36.25 will be paid in cash for the difference between theexercise price per share and $36.25 multiplied by the number of sharesunderlying the option. Each warrant outstanding at the effective time of theMerger with an exercise price per share less than the Merger consideration of$36.25 will be cancelled and paid in cash for the difference between theexercise price per share and $36.25 multiplied by the number of sharesunderlying the warrant. Subject to certain exceptions, each restricted stockunit that remains outstanding as of the effective time of the Merger, will bepaid in cash.

Buyer and Acquisition Subare entities owned by an investment consortium consisting of Madison DearbornCapital Partners IV, L.P., Madison Dearborn Capital Partners V-A, L.P.,Providence Equity Partners V L.P. and related entities, SCG Investments II,LLC, TPG Partners V, L.P. and Thomas H. Lee Equity Fund VI, L.P. (together, the“Investors”). Buyer will assume or repay approximately $1.1 billion in debt ofthe Company, which in conjunction with the payments specified above and $500million in estimated fees and expenses in connection with the Merger,represents a transaction value of approximately $14.0 billion.

The Merger is subject toregulatory approval by the FCC. The Company has already obtained clearanceunder the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Merger isexpected to close in March 2007.

The Merger Agreementcontains certain termination rights and provides that, upon termination of theMerger Agreement under certain specified circumstances, including, among otherthings, if the Company’s 

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board ofdirectors (1) changes its recommendation to its stockholders to approveand adopt the Merger Agreement or (2) determines in good faith thatit has received an unsolicited bona fide Superior Proposal, (as such term isdefined in the Merger Agreement), and, afterconsidering any revised proposal the Buyer may make concurrently with the terminationof the Merger Agreement, enters into a definitive agreement with respect tosuch Superior Proposal, then the Company will be required to pay Buyer atermination fee of $300 million.

If the Company terminatesthe Merger Agreement due to Buyer’s failure to receive the requisite regulatoryapprovals prior to a specified date and all other conditions to Buyer’sobligations to consummate the Merger have been satisfied on that date, thenBuyer is required to pay the Company a termination fee equal to $500 million. Alternatively,if the Company terminates the Merger Agreement due to Buyer’s failure to effectthe closing because of a failure to receive adequate proceeds from one or moreof the financings contemplated by the financing commitments all otherconditions to Buyer’s obligations to consummate the Merger have been satisfied,then Buyer is required to pay the Company a termination fee equal to $300million. Neither the Buyer nor the Acquisition Sub will have any liability inexcess of $300 million in damages less any termination fee previously paid inrespect of the Company’s termination of the Merger Agreement for intentionalbreach of the Merger Agreement.

*Merger Debt and Equity Financing*

At December 31, 2006,the Company and Buyer estimate that the total amount of funds necessary tocomplete the Merger and the related transactions is anticipated to beapproximately****$14.0 billion, which includes approximately$12.4 billion to be paid out to the Company’s stockholders and holders ofequity-based interests in the Company, $1.0 billion related to the assumptionby Buyer of the Company’s financing arrangements and related transactions (excludingthe refinancing the Company’s existing bank credit facility) and $500 millionestimated to pay fees and expenses in connection with the Merger. Thesepayments are expected to be funded by the Buyer and the Acquisition Sub in acombination of equity contributions by the Investors, debt financing and, tothe extent available, cash of the Company. The Buyer and the Acquisition Subhave obtained equity and debt financing commitments, described below, inconnection with the transactions contemplated by the Merger Agreement.

The Buyer has informed theCompany that it intends to keep the Company’s existing senior notes outstandingafter completion of the Merger. The Company’s existing revolving creditfacility will terminate upon completion of the Merger.

The Investors havecollectively agreed to cause up to approximately $4.0 billion of cash to becontributed to the Buyer, which will constitute the equity portion of theMerger financing. Madison Dearborn Capital Partners V-A, L.P., ProvidenceEquity Partners V, L.P. and related entities, TPG Partners V, L.P. and ThomasH. Lee Equity Fund VI, L.P. have each delivered an equity commitment letter forapproximately $914 million to the Buyer and SCG Investments II, LLC hasdelivered an equity commitment letter for $300 million to the Buyer.

In connection with theexecution and delivery of the Merger Agreement, the Acquisition Sub hasobtained debt commitment letters from various lenders which, subject to certainconditions, provide for $10.25 billion in debt financing (not all of which isexpected to be drawn at closing) consisting of (1) a senior secured termloan facility, a senior bridge loan facility and a senior subordinated bridgeloan facility in an aggregate principal amount of up to $9.05 billion tofinance the payment of the aggregate Merger consideration and to pay, in part,fees and expenses in connection therewith, (2) a senior secured delayeddraw term loan facility in an aggregate principal amount of up to $450 million,which is available for a limited time to repay or prepay the Company’s existingsenior notes, and (3) a senior secured revolving credit facility in anaggregate amount of up to $750 million to pay fees and expenses in connectionwith the Merger and for working capital and other general corporate purposes.The senior bridge loan facility and the senior subordinated bridge loanfacility are expected to be utilized only to the extent the Acquisition 

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Sub isnot able to complete on or prior to the effective time of the Merger one ormore offerings of notes or other financings in an aggregate amount equal tocommitments under those facilities of approximately $2 billion.

The Acquisition Sub iscurrently pursuing financing which may be more favorable to it than the financingdescribed in this paragraph, however such pursuit of modified financing termsdoes not impact the commitments for the financing described above, and suchcommitments remain in full force and effect. The proposed terms of such modified financing are described under theheading “Liquidity and Capital Resources” herein.

*Change in Control Retention Bonus and Severance Plans*

The Company hasestablished a change in control retention bonus and severance plan toprovide retention incentives for key employees of the Company to encourage themto remain as employees of the Company, to use their best efforts to help theCompany achieve its operating plan and to ensure a successful completion of thechange in control.

The change in controlseverance plan applicable to the Company’s executive officers other than A. JerroldPerenchio, has estimated severance benefits payable to such officers upontermination of employment, without cause or for good reason, in connection witha change in control of approximately $33 million in cash, and estimatedprorated bonus payments to such officers totaling approximately $1.8 million incash (assuming that the closing date of the Merger occurs on March 26,2007). The executive officers (other than A. Jerrold Perenchio) were also awardedrestricted stock units that will remain outstanding at the closing of theMerger and will vest on the earlier of 90 days following the Merger (if theholder is employed by the Buyer on such date) or the termination date of theexecutive officer’s employment without cause or resignation for good reasonafter the Merger. The estimated value of these restricted stock units is $14.5million.

Estimated retention bonus payments,which are payable to other employees at the earlier of the Merger closing dateor March 2007 under the change in control employee retention bonus plan,are estimated to be $4.7 million in cash. This cost is being expensedratably through the expected date of the closing. Certain of these otheremployees are also entitled to a retention bonus on the one year anniversary ofthe Merger closing date provided that they are either employed on such date orhave a qualifying termination of employment prior to such date (and in suchlatter case, will be paid on the date of such termination). In addition, uponthe closing of the Merger, subject to certain exceptions, each restricted stockunit that remains outstanding as of the effective time of the Merger will bepaid in cash.

**Television Broadcasting**

The Company’s principalbusiness segment is television broadcasting, which consists primarily of theUnivision, TeleFutura and Galavisión television networks, the UnivisionTelevision Group (“UTG”) owned-and-operated broadcast television stations(collectively, the “UTG O&Os”) and the TeleFutura Television Group (“TTG”)owned-and-operated broadcast television stations (collectively, the “TTGO&Os”). At December 31, 2006, the UTG O&Os included a station inWashington, D.C., and the TTG O&Os include four stations in Boston,Massachusetts; Albuquerque, New Mexico; Orlando, Florida; and Tampa, Floridathat are owned by the Company but sell their local advertising through thirdparties, and a station in Denver, Colorado that is owned in part by the Companywith local advertising time sold by third parties.

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

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*Univision Network and Univision Television Group andAffiliates*

*Univision Network.**  *Univision Network is the leadingSpanish-language television network in the U.S., reaching approximately 99% ofall U.S. “Hispanic Households” (defined as those with a head of household whois of Hispanic descent or origin, regardless of the language spoken in thehousehold). According to Nielsen Media Research (“Nielsen”), there areapproximately 11.2 million Hispanic Households in the United States. From itsoperations center in Miami, Univision Network provides its broadcast and cableaffiliates with 24 hours per day of Spanish-language programming with aprime time schedule of substantially all first-run programming (*i.e.*, no re-runs) throughout the year. The operations centeralso provides production facilities for Univision Network’s news and entertainmentprogramming.

*Univision Television Groupand Affiliates.**  *AtDecember 31, 2006, UTG O&Os had 20 full-power and 10 low-powerstations, representing approximately 72% of the Univision Network broadcastdistribution. Nineteen of the UTG O&Os broadcast Univision Network’sprogramming, and most produce local news and other programming of localimportance, cover special events and may acquire programs from other suppliers.One full-power UTG O&O in Bakersfield, California is an affiliate ofMyNetworkTV. Eleven of the 20 full-power UTG O&Os are located in thetop 15 Nielson Designated Market Areas (“DMA”) in terms of number of Hispanichouseholds.

In addition to the UTGO&Os, as of December 31, 2006, Univision Network had 19 full-powerand 50 low-power television station affiliates (“Univision AffiliatedStations”) and 1,776 cable affiliates. The Company also owns and operates twotelevision stations in Puerto Rico.

Univision Network producesand acquires programs, makes those programs available to its affiliates,including the UTG O&Os, and sells network advertising. The full-powerUTG O&Os and full-power UnivisionAffiliated Stations together reach approximately 82% of HispanicHouseholds. The low-power UTG O&Os and low-power Univision Affiliated Stations (includingtranslators) together reach approximately 7% of Hispanic Households. The cableaffiliates and direct broadcast systems reach approximately 11% of HispanicHouseholds.

*Affiliation Agreements.**  *Each of Univision Network’saffiliates has the right to preempt (*i.e.*, todecline to broadcast at all or at the time scheduled by Univision Network),without prior Univision Network permission, any and all Univision Networkprogramming that it deems unsatisfactory, unsuitable or contrary to the publicinterest or to substitute programming it believes is of greater local ornational importance. Univision Network may direct an affiliate to reschedulesubstituted programming.

Each affiliation agreement(including the master affiliation agreement Univision Network has withEntravision for certain Entravision stations) grants Univision Network’saffiliate the right to broadcast over the air the Univision Network’s entireprogram schedule. The affiliation agreements generally provide that apercentage of all advertising time be retained by Univision Network forUnivision Network advertising and the remaining amount is allocated toUnivision Network’s affiliate for local and national spot advertising. However,this allocation may be modified at Univision Network’s discretion.

The Univision Networkretains 100% of network advertising revenues. The Univision Affiliated Stationsretain 100% of all local and national revenues. The Company acts as theexclusive national sales representative for the sale of all nationaladvertising on Univision Affiliated Stations. For this service, the Companyreceives commission income equal to 15% of the Univision Affiliated Stationsnet national revenues.

Univision Network fromtime to time may enter into affiliation agreements with additional stations innew DMAs based upon its perception of the market for Spanish-languagetelevision and the Hispanic market in the station’s DMA.

*Cable Affiliates.**  *Univision Network has historicallyused cable affiliates to reach communities that could not support a broadcastaffiliate because of the relatively small number of Hispanic Households. 

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Cable affiliationagreements may cover an individual system operator or a multiple systemoperator. Cable affiliation agreements are all non-exclusive, therebygiving Univision Network the right to license all forms of distribution incable markets. Cable affiliates generally receive Univision Network’sprogramming for a fee based on the number of subscribers.

*TeleFutura Network and TeleFutura Television Group andAffiliates*

*TeleFutura Network.**  *InJanuary 2002, the Company launched a 24-hour general-interestSpanish-language broadcast network, TeleFutura, to meet the diverse preferencesof the multi-faceted U.S. Hispanic community. TeleFutura Network’s signalcovers approximately 87% of all Hispanic Households through TTG O&Os andthree full-power and 31 low-power station affiliates (“TeleFutura AffiliatedStations”). TeleFutura Network counter-programs traditional Spanish-languagelineups, including the Univision Network, and is designed to draw additionalviewers to Spanish-language television by offering primetime Hollywood moviesdubbed in Spanish, original Spanish-language movies, primetime game shows andsports.

*TeleFutura TelevisionGroup and Affiliates.**  *TheTTG O&Os consist of 18 full-power and 13 low-power Spanish-languagetelevision stations. Twelve of the 18 full-power TTG O&Os are located inthe top 15 DMAs 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 Networkretains 100% of network advertising revenues. The TeleFutura AffiliatedStations retain 100% of all local and national revenues. The Company acts asthe exclusive national sales representative for the sale of all national advertisingon TeleFutura Affiliated Stations. For this service, the Company receivescommission income equal to 15% of the TeleFutura Affiliated Stations netnational revenues.

*Cable Affiliates.**  *TeleFutura Network uses cableaffiliates in a similar manner as Univision Network. See “Univision Network andUnivision Television Group and Affiliates—*CableAffiliates*.”

*Galavisión*

The Company also ownsGalavisión, the leading U.S. Spanish-language general entertainment basiccable television network, which is available in 135 DMAs. Galavisión’s schedule averages over 50 hours of live news,sports, variety and entertainment programming each week. According to NielsenHispanic Television Index, Galavisión reaches approximately 47.6 million U.S.cable households and 7.4 million or 84% of Hispanic Cable Plus households,which include satellite providers. The network has achieved record viewershiplevels since its new programming launch in May 2002.

**Univision Radio**

Univision Radio,headquartered in Dallas, Texas, owns and operates 69 radio stations in 16 ofthe top 25 U.S. Hispanic markets and owns and operates five radio stations inPuerto Rico. Univision Radio’s stations cover approximately 70% of the U.S.Hispanic radio listeners and have 11 million listeners weekly.

Univision Radio hashistorically acquired under-performing radio stations with good signal coverageof the target population and converted the existing station format to aHispanic-targeted format. In addition, Univision Radio has acquired radio stationswhose radio signals might eventually be upgraded or improved. Univision Radioprograms more than 60 individual or simulcast radio stations. Most musicformats are primarily variations of regional Mexican, tropical, reggaeton,tejano and contemporary music styles. The regional Mexican format consists ofvarious types of music played in different regions of Mexico; the Latin adultformat is a relatively new format that is a compilation of the best “hits” ofregional 

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Mexicanmusic from the 70’s, 80’s and 90’s; the tropical format consists primarily ofsalsa, merengue and cumbia music; the reggaetón format consists of the currentand prevalent form of Latin urban and pop music; the tejano format consists ofmusic originated in or indigenous to Texas but based on Mexican themes; and thecontemporary format consists of popular romantic and pop music forms. Hispanicswho may use English along with Spanish, or perhaps favor English over Spanish,are also reached by five of Univision Radio’s stations in three markets, whichare programmed in the classic rock, hip hop and rhythmic/contemporary hitformats.

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 of the businesses under its wholly-owned subsidiary,Univision Music, Inc. The primary business under Univision Music, Inc.is Univision Music LLC, which owns and operates the Univision Records, FonovisaRecords, and La Calle Records labels, Univision Music Group—Mexico andUnivision Music Publishing. Univision Music, Inc. also owns Disa, aMonterrey, Mexico-based record label and music publisher.

Univision Music LLC’smembership units are owned 90% by the Company and 10% by Diara, Inc.,which is wholly-owned by José Behar, President and Chief Executive Officer ofUnivision Music Group. Univision Music Group is headquartered in Los Angeles,California. See “Notes to Consolidated Financial Statements—4. Related PartyTransactions.”

Univision Records,Fonovisa Records, Disa Records and La Calle Records have approximately 150recording artists on their combined rosters. Univision Music Group is theleader in record sales of Latin music in the U.S. and Puerto Rico accountingfor approximately 39% of the Latin music sold in the U.S. in 2006. Within theU.S. Latin music market, the Univision Music Group accounted for approximately74% of the regional Mexican genre.

**Internet**

Univision Online, Inc.operates the Company’s Internet portal, Univision.com, which is primarilydirected at Hispanics in the United States and is intended to appeal to a broadconsumer interest, including entertainment, sports, news, personal finance andshopping. In 2001, its first full-year of operations, *Univision.com*became the #1 Spanish-language website for U.S. Hispanics and has retained itsleadership position ever since, according to Nielsen Media Research and the HispanicInternet Usage and Engagement Study, Simmons Custom Research, August 2006. Theuse of the Internet by U.S. Hispanics is climbing rapidly, with unique visitsto Univision.com growing to 300 million in 2006 from 81 million in 2002,an increase of over 270%.

**The Hispanic Audience in the United States**

Management believes thatSpanish-language media, in general, and the Company, in particular, havebenefited and will continue to benefit from a number of factors, includingprojected Hispanic population growth, increasing Hispanic buying power andgreater advertiser spending on Spanish-language media. 

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Unlessotherwise noted, the data provided below, pertaining to the Hispanic populationin the U.S., was derived from Global Insights Hispanic Market Report—February 2005,a syndicated service.

*Hispanic Population Growthand Concentration.**  *TheHispanic population of the U.S. increased by 58% between 1990 and 2000 to 35.3million according to the 2000 U.S. Census. This rate of growth was more thanfour times that of the total U.S. population and approximately seven times thatof the U.S. non-Hispanic population. While Hispanics accounted for 12.5% of theU.S. population in 2000, the U.S. Census Bureau projects that the Hispanicpercentage will grow to approximately 20% of the total U.S. population by theyear 2020, confirming a fundamental shift in the ethnic makeup of the country. Accordingto the 2000 U.S. Census, Hispanics accounted for 27% of the population of NewYork City and 46.5% of Los Angeles, the two cities with the largest totalpopulations and largest Hispanic populations. Approximately 50% of allHispanics are located in the eight largest U.S. Hispanic markets, and theCompany owns two or more television stations and three or more radio stationsin each of these markets. According to U.S. Census estimates published July 1,2005, there are approximately 42.7 million Hispanics living in the UnitedStates, which account for approximately 14.4% of the U.S. population.

*Greater Hispanic BuyingPower.**  *TheHispanic population is projected to represent $872 billion in estimateddisposable income in 2007 (8.6% of the total U.S. disposable income), anincrease of 74% since 2000. Hispanics are expected to account for more than $1trillion of U.S. disposable income (9.7% of the U.S. total) by 2010, outpacingthe 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 solely subscribed to Nielsen Media Research’s NationalHispanic Television Index (“NHTI”), which measures only Hispanic audiences. Asof December 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.

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

Among Hispanics, theSpanish-language television share of prime time viewing continues to increase. Currentlyin the 2006-2007 season, 53% of all Hispanic 18-49 year oldswatching television in prime time are watching Spanish language programs. Thiscompares with 47% in the 2000-2001 season.

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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**

| ** **                                   | ** **   | **2002**     | ** ** | **2003**               | ** **   | **2004**               | ** ** | **2005**               | ** **   | **2006**               | ** ** |
|----------------------------------------------|--------------|--------------|------------|------------------------|--------------|------------------------|------------|------------------------|--------------|------------------------|------------|
| **Daily 7:00 PM-11:00 PM**    | ** **   | ** **   | ** ** | **Average  Audience%** | ** **   | **Average  Audience%** | ** ** | **Average  Audience%** | ** **   | **Average  Audience%** | ** ** | **Average  Audience%** | ** ** |
| Univision (UNI)                              |         |         | 9.0        |                   |         |                   | 8.6        |                   |         |                   | 8.8        |   |   |   | 10.0 |   |   |   | 8.7 |   |   |
| TeleFutura (TF)                              |         |         | 1.0        |                   |         |                   | 1.6        |                   |         |                   | 2.1        |   |   |   | 1.6 |   |   |   | 1.8 |   |   |
| Telemundo                                    |         |         | 2.7        |                   |         |                   | 2.2        |                   |         |                   | 3.1        |   |   |   | 2.6 |   |   |   | 3.0 |   |   |
| ABC                                          |         |         | 1.6        |                   |         |                   | 1.4        |                   |         |                   | 1.4        |   |   |   | 1.4 |   |   |   | 1.6 |   |   |
| CBS                                          |         |         | 1.2        |                   |         |                   | 1.1        |                   |         |                   | 1.2        |   |   |   | 1.1 |   |   |   | 1.0 |   |   |
| NBC                                          |         |         | 1.8        |                   |         |                   | 1.6        |                   |         |                   | 1.7        |   |   |   | 1.2 |   |   |   | 1.1 |   |   |
| FOX                                          |         |         | 1.8        |                   |         |                   | 2.2        |                   |         |                   | 1.8        |   |   |   | 1.6 |   |   |   | 1.6 |   |   |
| WB                                           |         |         | 1.0        |                   |         |                   | 0.9        |                   |         |                   | 0.9        |   |   |   | 0.7 |   |   |   | 0.6 |   |   |
| UPN                                          |         |         | 1.1        |                   |         |                   | 1.0        |                   |         |                   | 1.0        |   |   |   | 0.8 |   |   |   | 0.8 |   |   |
| PAX                                          |         |         | 0.1        |                   |         |                   | 0.1        |                   |         |                   | 0.1        |   |   |   | 0.1 |   |   |   | 0.1 |   |   |
| AZTECA AMERICA                               |         |         | —     |                   |         |                   | —     |                   |         |                   | 0.3        |   |   |   | 0.6 |   |   |   | 0.6 |   |   |
| CW                                           |         |         | —     |                   |         |                   | —     |                   |         |                   | —     |   |   |   | — |   |   |   | 1.0 |   |   |
| SHARE  CALCULATIONS:                         |         |         |       |                   |         |                   |       |                   |         |                   |       |   |   |   |   |   |   |   |   |   |   |
| Total Ratings                                |         |         | 21.3       |                   |         |                   | 20.7       |                   |         |                   | 22.4       |   |   |   | 21.7 |   |   |   | 20.8 |   |   |
| UNI+TF Ratings                               |         |         | 10.0       |                   |         |                   | 10.2       |                   |         |                   | 10.9       |   |   |   | 11.6 |   |   |   | 10.5 |   |   |
| **Univision Combined Networks’  Share** | *** *** | *** *** | ***46.9*** | ***%***                | *** *** | *** ***           | ***49.3*** | ***%***                | *** *** | *** ***           | ***48.7*** | ***%*** | *** *** | *** *** | ***53.5*** | ***%*** | *** *** | *** *** | ***50.5*** | ***%*** | *** *** |
|                                              |              |              |            |                        |              |                        |            |                        |              |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

Source: Nielsen HispanicTelevision Index

Spanish-languagetelevision prime time is from 7 p.m. to 11 p.m., Eastern and PacificStandard Times, Sunday through Saturday. English-language television prime timeis from 8 p.m. to 11 p.m., Eastern and Pacific Standard Times, Mondaythrough Saturday and 7 p.m. to 11 p.m., Eastern and Pacific StandardTimes, Sunday.

Note: The CW network waslaunched on September 18, 2006 and is a combination of the WB and UPNnetworks.

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Inaddition, according to the November 2006 Nielsen Station Index:

·       all14 full-power UTG O&Os for which such data are available ranked first amongSpanish-language television stations in “total day” in their respective DMAs,based on total audience rank of adults 18 to 49 years of age;

·       fourof the 14 full-power UTG O&Os for which such data are availableranked as the top station in “total day” in their respective DMAs, English- or Spanish-language, basedon total audience rank of adults 18 to 49 years of age;

·       all15 of the full-power Univision Affiliated Stations for which such data areavailable ranked first among Spanish-language television stations in theirrespective DMAs.

No audience data are available for five UTG O&Ofull-power stations and four Univision Affiliated Stations due to theirrelatively low audience share.

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*Radio.**  *Radio ratings are measured byArbitron, a marketing and research firm serving primarily the radio industryand specializing 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 2006 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 12 top U.S.Hispanic radio markets as measured by Arbitron. During this same period, theCompany operated the number one station format in six markets and 24 stationformats ranked among the top-ten radio stations in AQH audience, regardless oflanguage or format, in their respective markets.

**Program License Agreements**

Through its programlicense agreements (the “PLAs”) 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 untilDecember 2017 to air in the U.S. all Spanish-language programmingproduced by or for them (with limited exceptions). The PLAs provide theCompany’s television and cable networks with access to programming to fill upto 100% of their daily schedules. Televisa and Venevision programmingrepresented approximately 42% and 19% in 2006 and 39% and 15% in 2005,respectively, of Univision Network’s non-repeat broadcast hours. Televisaand Venevision programming represented approximately 19% and 6% in 2006 and 23%and 7% in 2005, respectively, of TeleFutura Network’s non-repeat broadcasthours. See Item 3. Legal Proceedings for a description of the litigation withrespect to our PLA with Televisa.

The PLAs allow the Companylong-term access to Televisa and Venevision programs and the ability toterminate unsuccessful programs and replace them with other Televisa andVenevision programs without paying for the episodes that are not broadcast.This program availability and flexibility permits the Company to adjustprogramming on all its networks to best meet the tastes of its viewers.

Televisa and Venevisionprograms available to the Company are defined under the PLAs 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 andVenevision must use good faith efforts not to structure arrangements oragreements with respect to programs in a manner intended to cause such programsnot to be available to the Company as “Programs” pursuant to the PLA.

In consideration foraccess to the programming of Televisa and Venevision, the Company paysroyalties to Televisa and Venevision. For a discussion of how royalties aredetermined and the amounts paid under the program license agreements for PuertoRico, see “Certain Relationships and Transactions, and Director Independence”and see also “Notes to Consolidated Financial Statements—4. Related PartyTransactions—PLAs.”

Under the PLAs, Televisaand Venevision 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 PLAs also provide that the Company will annually swapwith each of Televisa and Venevision $10 million of non-preemptable advertisingtime. The Company accounts for this arrangement as a net barter transaction,with no effect on revenues, expenses or net income on an annual basis. Each ofTelevisa and Venevision may also purchase for its own use non-preemptable timeat the lowest spot rate for the 

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applicabletime period. Televisa received approximately 129,000, 93,000 and 23,000 ofpreemptable and non-preemptable 30-second commercial advertisements in2006, 2005 and 2004, respectively. Venevision received approximately 55,000,84,000 and 83,000 of preemptable and non-preemptable 30-second commercialadvertisements in 2006, 2005 and 2004, respectively.

The Company has programlicense agreements for Puerto Rico where its rights are exclusive in a mannersimilar to the overall PLAs pursuant to which we are required to pay royaltiesto Televisa and Venevision. The required payments in 2006 were approximately $7.0million to Televisa and $3.6 million to Venevision. For a discussion of how royalties aredetermined and the amounts paid under the program license agreements for PuertoRico, see “Certain Relationships and Transactions, and Director Independence”and see also “Notes to Consolidated Financial Statements—4. Related Party Transactions—PLAs.”

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 threeyears, no single customer has accounted for more than 10% of the Company’s netrevenues.

The Company’s televisionand radio advertising revenues are derived from network advertising, nationalspot advertising and local advertising, and come from diverse industries, withadvertising for food and beverages, personal care products, automobiles, otherhousehold goods and telephone services representing the majority of network advertisingrevenues. National spot advertising represents time sold to national andregional advertisers based outside a station’s DMA and is the means by whichmost new 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 DMA.

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 television and radio advertising. The Companyfocuses much of its sales efforts on demonstrating to advertisers its abilityto 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 itsDMAs. The local sales forcerepresents the owned-and-operated stations for all sales placed from within itsDMA.

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In addition, ourtelevision network and station marketing sales departments utilize research,including both ratings and demographic information, to negotiate salescontracts as well as target major national advertisers that are not purchasingadvertising time or who are under-purchasing advertising time on Spanish-languagetelevision.

Galavisión sellsadvertising time and also utilizes a cable affiliate relations sales group thatis responsible for generating cable subscriber fee revenues for the Company.

*Radio.**  *Our radio network and stationmarketing account executives are divided into three groups: network sales,national spot sales and local sales. The account executives responsible fornetwork and national sales target and negotiate with accounts that advertisenationally. Univision Radio Corporate Sales represents the Company’s radiostations for sales placed from outside its DMAs. The local sales forcerepresents the owned-and-operated stations for all sales placed from within itsDMA. In addition, Univision Radio owned-and-operated stations’ salesdepartments utilize research, including both ratings and demographicinformation, to negotiate sales contracts as well as target major local,regional, and national advertisers that are not purchasing advertising time orthat are under-purchasing advertising time on Spanish-language andHispanic-targeted radio stations. The owned-and-operated stations also derivesales from the sponsorship and organization of various special events.

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

*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 highlycompetitive. Competition for advertising revenues is based on the size of themarket that the particular medium can reach, the cost of such advertising andthe effectiveness of such medium.

The Company’s television businesscompetes for viewers and revenues with other Spanish-language andEnglish-language television stations and networks, including the sevenEnglish-language broadcast television networks as well as approximately 84measured cable networks. Many of these competitors are owned by companies muchlarger and having financial strength greater than the Company. Certain of theEnglish-language networks and others have begun producing Spanish-languageprogramming and simulcasting certain programming in English and Spanish.Several cable broadcasters have recently commenced or announced their intentionto commence Spanish-language services as well.

The Company’s radiobusiness competes for audiences and advertising revenues with other radiostations of all formats. In addition, the radio broadcasting industry issubject to competition from new media technologies that are being developed orintroduced such as (1) satellite-delivered digital audio radio service,which has resulted in the introduction of new subscriber based satellite radioservices with numerous niche formats; and (2) audio programming by cablesystems, direct broadcast satellite systems, Internet content providers,personal communications services and other digital audio broadcast formats.

Many of our competitorshave more television and radio stations, greater resources (financial orotherwise) and broader relationships with advertisers than we do. Furthermore,because our English-language competitors are perceived to reach a broaderaudience than we do, they have been able to attract more advertisers andcommand higher advertising rates than we have.

The Company also competesfor audience and revenues with independent television and radio stations, othermedia, suppliers of cable television programs, direct broadcast systems,newspapers, magazines and other forms of entertainment and advertising. TheCompany’s television affiliates located 

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near theMexican border also compete for viewers with television stations operated inMexico, many of which are affiliated with a Televisa network and are owned byTelevisa.

The Company’s share ofoverall television and radio audience has increased over the past five years. TheCompany attributes this to the growth of the U.S. Hispanic population, thequality of our programming and the quality and experience of our management. Telemundo,a subsidiary of NBC, a division of General Electric, is the Company’s largesttelevision competitor that broadcasts Spanish-language television programming.In most of the Company’s DMAs, the Company’s affiliates compete for advertisingdollars directly with a station owned by or affiliated with Telemundo, as wellas with other Spanish-language and English-language stations. Clear Channel(the largest radio operator in the United States), CBS Radio, SpanishBroadcasting System, Entravision Communications, Liberman Broadcasting andBorder Media Partners are the Company’s largest radio competitors thatbroadcast Spanish-language radio programming in several of the Company’s DMAs. Additionally,the Company faces competition from English-language stations that offerprogramming targeting Hispanic audiences. Clear Channel has established aHispanic radio division and has begun converting stations to Hispanic targetedformats, in English or Spanish, seeking niche formats within the current musicavailable in Spanish or appealing to Hispanics. Radio One converted a stationto Spanish, and Spanish Broadcasting System has entered into a strategicalliance with Viacom to allow it to promote its radio stations on Viacomoutdoor properties. ABC Radio networks and Spanish Broadcasting Systems havejoined forces to syndicate three popular Hispanic morning shows nationally andin markets where the Company competes.

The rules andpolicies of the FCC encourage increased competition among different electroniccommunications media. As a result of rapidly developing technology, the Companymay experience increased competition from other free or pay systems by whichinformation and entertainment are delivered to consumers, such as directbroadcast satellite and video dial tone services.

Satellite-delivered audio,including XM Satellite Radio and Sirius Satellite Radio, provides a medium forthe delivery by satellite or supplemental terrestrial means of multiple newaudio programming formats to local and/or national audiences.

Univision Music Group’smajor Spanish-language competitors are Sony/BMG Norte, Universal Latino, WEALatina and EMI Latin. The Group also competes against English-language musiccompanies.

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.

**Employees**

As of December 31,2006, the Company employed 4,233 full-time employees. Approximately 8.0%of these employees are located in Chicago, Los Angeles, San Francisco, New Yorkand 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, San Francisco, New York and Puerto Ricotelevision stations and the New York radio station, which account for 4.4%of the Company’s full-time employees. Management believes that itsrelations with its non-union and union employees, as well as with theunion representatives, are generally good.

**Federal Regulation**

The ownership, operationand sale of television and radio broadcast stations are subject to thejurisdiction of the FCC under the Communications Act of 1934, as amended (the “CommunicationsAct”). 

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TheCommunications Act and FCC regulations establish an extensive system ofregulation to which the Company’s stations are subject. The FCC may imposesubstantial 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.

*Licenses and Applications.*   Each television and radio stationthat we own must be licensed by the FCC. Licenses are granted for periods of upto eight years and we must obtain renewal of licenses as they expire in orderto continue operating the stations. We must also obtain FCC approval prior tothe acquisition or disposition of a station, the construction of a new stationor modification of the technical facilities of an existing station. Interestedparties may petition to deny such applications and the FCC may decline to renewor approve the requested authorization in certain circumstances. Although wehave generally received such renewals and approvals in the past, there can beno assurance that we will continue to do so in the future.

*Programming and 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.

*Ownership Restrictions.*   FCC rules permit us to own upto two television stations with overlapping contours where the stations are indifferent DMAs, where certain specified signal contours do not overlap, where aspecified number of separately-owned full-power broadcast stations will remainafter the combination is created or where certain waiver criteria are met.Rules also limit the number of radio stations that we may own in anysingle market (defined by Arbitron or by certain signal strength contours). TheFCC’s “cross-ownership rule” permits a party to own both television and radiostations in the same local market in certain cases, depending primarily on thenumber of independent media voices in that market. The “national audience cap”prohibits us from owning television stations that, in the aggregate, reach morethan a specified percentage of the national audience.

In 2003, the FCC adoptedchanges to these rules that would generally relax many of the ownershiprestrictions discussed above. Except with respect to radio, the effectivenessof these new rules has been stayed by federal court order and thepre-existing media ownership rules will continue to apply until the stayis lifted.

*Alien Ownership.*   TheCommunications Act generally prohibits foreign parties from having more than a20% 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 and will continue tocomply after the consummation of the Merger.

*Network Regulation.*   FCCrules affect the network-affiliate relationship. Among other things, theserules require that network affiliation agreements (i) prohibitnetworks from requiring affiliates to clear time previously scheduled for otheruse, (ii) permit affiliates to preempt network programs that they believeare unsuitable for their audience and (iii) permit affiliates tosubstitute programs that they believe are of greater local or nationalimportance for network programs.

*Cable and SatelliteCarriage.*   FCC rules require that televisionstations make an election 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 require carriage on certain channels on cablesystems within their market. Must-carry rights are not absolute, however, andare dependent on a number of factors, which may or may not be present in aparticular case. Cable systems are prohibited from carrying the signals of astation electing retransmission consent until an agreement is negotiated withthat station. At this time, must-carry rights extend to digital televisionsignals only in limited circumstances. While there are proposals to adopt 

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legislation tobroaden such rights, we cannot predict whether such legislation will be adoptedor the details of any legislation that may be adopted.

Direct Broadcast Satellite(“DBS”) systems provide television programming on a subscription basis toconsumers that have purchased and installed a satellite signal receiving dishand associated decoder equipment. Under the Satellite Home Improvement Act,satellite carriers are permitted to retransmit a local television station’ssignal into its local market with the consent of the local television station. Ifa satellite carrier elects to carry one local station in a market, thesatellite carrier must carry the signals of all local television stations thatalso request carriage. All television stations operated by the Company at thetime of election made timely elections for DBS carriage and the Company intendsto obtain DBS carriage for each of its eligible stations.

A number of entities havecommenced operation, or announced plans to commence operation of Internetprotocol video systems, using digital subscriber line (“DSL”), fiber optic tothe home (‘FTTH”) and other distribution technologies. The issue of whetherthose services are subject to the existing cable television regulations,including must-carry obligations, has not been resolved. There are proposals inCongress and at the FCC to resolve this issue. We cannot predict whetherregulations will be adopted, or, if adopted, what form they might take. Pendingsuch resolution, such systems may not retransmit the signals of our televisionstations without our consent.

*DTV.**  *FCC rules require full-poweranalog television stations, such as ours, to transition from currently-providedanalog service to digital (“DTV”) service. A multi-step channel election andrepacking process is underway pursuant to which DTV stations will be assignedto their ultimate channel for digital transmissions. We are unable to predictat this time when the channel assignment process will be completed or whichchannels we will be permanently assigned for digital operation. Federal lawrequires TV stations to complete the digital transition, to operate exclusivelyin the digital mode and surrender any additional channels by February 17,2009.

*Other Matters.**  *The FCC has numerous otherregulations and policies that affect its licensees, including rules requiringclosed-captioning to assist television viewing by the physically handicappedand the equal employment opportunities (“EEO”) rule requiring broadcast licenseesto provide equal opportunity in employment to all qualified job applicants andprohibiting discrimination against any person by broadcast stations based onrace, color, religion, national origin or gender. The EEO rule alsorequires each station to widely disseminate information concerning itsfull-time job vacancies with limited exceptions, provide notice of eachfull-time job vacancy to recruitment organizations that have requested suchnotice and engage in a certain number of longer-term recruitment initiatives. Licenseesare also 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 thereunder. 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.

**ITEM1A.**        Risk Factors

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.

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

We receive substantial amountsof programming for our three networks from Televisa pursuant to our PLA withTelevisa, and a separate letter agreement of the same date (referred to as the “SoccerAgreement”) granting us rights to rebroadcast Televisa’s feeds of certainMexican League soccer games. The programming we receive under the PLA accountsfor a majority of our prime time programming and a substantial portion of theoverall programming on all three networks. We currently pay a license fee toTelevisa for programming, which is subject to certain upward adjustments. In June 2005,Televisa began litigation against us. Televisa’scurrent claims include breach for our alleged failure to pay Televisa royaltiesattributable to revenues from one of Univision’s programs, the Company’s allegedunauthorized editing of certain Televisa programs and related copyrightinfringement claims, a claimed breach of the Soccer Agreement, 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. Televisacurrently asserts that we were in material breach of the PLA and the SoccerAgreement, thereby giving Televisa the right to suspend or terminate thoseagreements. To date, mediation has failed. Televisa is seeking a declarationthat we are in material breach of the PLA, that Televisa has the right tosuspend or terminate its performance under the PLA and that Televisa may,without liability to Univision, transmit or permit others to transmit any televisionprogramming into the United States from Mexico over or by means of the Internet.We intend to continue to defend the litigation and pursue our counterclaimsvigorously and plan to take all action necessary to ensure Televisa’s continuedperformance under the PLA until its expiration in 2017. Any settlement relatedto the Televisa litigation is subject to the prior written consent of Buyer. Ifwe were held to be in material breach and unable to effect a timely cure,Televisa could elect to terminate the PLA and the Soccer Agreement, and wecould be required to pay monetary damages, which could have a material adverseeffect on our business and our results of operations. The programming wereceive from Televisa has been very popular and it has helped us to achievehigh ratings and grow our audience share. If Televisa were to stop providing us programming for any reason, it couldbe difficult to develop or acquire replacement programming of comparablequality whether on similar terms or at all, and our failure to do so could havea material adverse effect on the popularity of our network and TV stations,which in turn would have a material adverse effect on our results ofoperations. For a description of the litigation process, see Item 3. “LegalProceedings.”

**Cancellations, reductions or postponements ofadvertising could reduce our revenues.**

We have in the pastderived, and we expect to continue to derive, a significant amount of ourrevenues from advertisers. Other than some television network advertising thatis presold on an annual basis, we generally have not obtained, and we do notexpect to obtain, long-term commitments from advertisers. Therefore,advertisers generally may cancel, reduce or postpone orders without penalty. Cancellations,reductions or postponements in purchases of advertising could, and often do,occur as a result of a strike; a general economic downturn; an economicdownturn in one or more industries that have historically invested more inadvertising; an economic downturn in one or more major markets such as NewYork, Los Angeles or Miami-Fort Lauderdale; changes in population,demographics, audience preferences and other factors beyond our control; or afailure to agree on contractual terms with advertisers. In addition, major incidentsof terrorism, war, natural disasters or similar events may require us toprogram without any advertising. Any material cancellations, reductions, orpostponements of advertising for any of the foregoing reasons could adverselyaffect our revenues and results of operations.

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**Lack of audienceacceptance of our content could decrease our ratings and, therefore, ourrevenues.**

Television and radio content production anddistribution are inherently risky businesses because the revenues derived fromthe production and distribution of a television or radio program, and from thelicensing of rights to the intellectual property associated with the program,depend primarily upon their acceptance by the public. The commercial success ofa television or radio program also depends upon the quality and acceptance ofother competing programs released into the marketplace at or near the sametime, the availability of alternative forms of entertainment and leisure timeactivities, general or specific geographic economic conditions and other tangibleand intangible factors, many of which are outside our control. Other televisionand radio stations may change their formats or programming, a new station mayadopt a format to compete directly with one or more of our stations, orstations might engage in aggressive promotional campaigns. Certain of theEnglish-language networks and others have begun producing Spanish-languageprogramming and simulcasting certain programming in English and Spanish.  Several cable broadcasters have recentlycommenced or announced their intention to commence Spanish-language services aswell. A decrease in our audience acceptance because of these factors can leadto lower ratings. Rating points are the primary factors that are weighed whendetermining the advertising rates that we receive. Poor ratings can lead to areduction in pricing and advertising spending. As a result of theunpredictability of program performance and of competition, our stations’audience ratings, market shares and advertising revenues may decline.

Our music business is dependent on identifying,signing and retaining artists with long-term, potential, whose debut albums arewell received on release, whose subsequent albums are anticipated by consumersand whose music will continue to generate sales as part of our catalog foryears to come. Our financial results may be adversely affected by the absenceof superstar artist releases during a particular period.

We acquire programming(including sports programming) and make long-term creative talent commitmentsin advance of a season and in some cases make multi-year commitments eventhough we cannot predict the ratings they will generate. Similarly in our musicbusiness, we make long-term commitments with artists well before an album isproduced. A shortfall, now or in the future, in the expected popularity of suchprogramming or music could lead to lower revenue and may prohibit us fromrecouping these upfront costs through corresponding revenues which could leadto decreased profitability. In addition, we must still pay the same programlicense fees pursuant to the PLA even if the programming supplied under the PLAis no longer popular or is not utilized to the same extent as the programmingthat was previously utilized. We may replace unpopular programming before werecapture any significant portion of the costs incurred in connection with theprogramming or before we have fully amortized the costs.

**Because our programming and music businesses aredependent on popular acceptance, which we cannot predict at the time we incurrelated costs, our results of operations and cash flows have fluctuated, andmay continue to fluctuate, significantly from period to period.**

Operating results from ourprogramming businesses fluctuate primarily with the acceptance of suchprogramming by the public, which is difficult to predict. Our net music salesand profitability, like those of other companies in the music business, arelargely affected by the number and quality of albums that we release, ourrelease schedule, and, more importantly, the consumer demand for these releases.We also make advance payments to recording artists and songwriters, whichimpact our operating cash flows. The timing of album releases and advancepayments is largely based on business and other considerations and is madewithout regard to the timing of the release of our financial results. We reportresults of operations quarterly and our results of operations and cash flows inany reporting period may be materially affected by the lack of popularity ofprogramming and the timing of releases and advance payments, which may resultin significant fluctuations from period to period.

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**Because the U.S. Hispanic population is concentratedgeographically, our results of operations are sensitive to the economic conditionsin particular markets and negative events in those markets could reduce ourrevenues.**

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 55% of the U.S. Hispanic population. Our revenues are, therefore,concentrated 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.

**Piracy of our programming and other content, includingdigital and Internet piracy, home copying and Internet downloading, maydecrease sales.**

Piracy of programming,particularly industrial pirated music, is prevalent in many parts of the worldand is made easier by technological advances allowing conversion of programmingand other content into digital formats, which facilitates the creation,transmission and sharing of high quality unauthorized copies of our content. Inaddition, the decreasing cost of electronic and computer equipment and relatedtechnology such as CD burners and the conversion of music into digital formatshave made it easier for consumers to create unauthorized copies of our musicrecordings in the form of, for example, CDs and MP3 files. A substantialportion of our music revenue comes from the sale of audio products that arepotentially subject to unauthorized copying and widespread dissemination on theInternet without an economic return to us. The proliferation of unauthorizedcopies and piracy of these products has an adverse effect on our businesses andprofitability because unauthorized copies and piracy contribute to the decreasein the volume of legitimate sales and put pressure on the price of legitimateproducts. They have had, and may continue to have, an adverse effect on ourbusiness.

**The recorded music industry has been declining and maycontinue to decline, which may adversely affect our music segment prospects andour results of operations.**

Illegal downloading ofmusic from the Internet, CD piracy, industrial piracy, economic recession,bankruptcies of record wholesalers and retailers and growing competition forconsumer discretionary spending and retail shelf space are all contributing toa declining recorded music industry. Additionally, the period of growth inrecorded music sales driven by the introduction and penetration of the CDformat has ended, and consumers are purchasing music on a song-by-song basisrather than purchasing an entire album, thereby generating lower sales. Theindustry may continue to decline and we cannot predict the timing or the extentof any improvement in the industry. A declining recorded music industry islikely to lead to reduced levels of revenue and operating income generated byour recorded music business. Additionally, a declining recorded music industryis also likely to have a negative impact on our music publishing business,which generates a portion of its revenues from mechanical royalties, primarilyfrom the sale of music in CD and other recorded music formats.

**If we do not successfully respond to rapid changes intechnology, services and standards, we may not remain competitive.**

Technology in the video,telecommunications, radio, music and data services used in the entertainmentand Internet industries is changing rapidly. Advances in technologies oralternative methods of product delivery or storage or certain changes inconsumer behavior driven by these or other technologies and methods of deliveryand storage could have a negative effect on our businesses. Examples of suchadvances in technologies include video-on-demand, satellite radio, video games,MP3 players and other personal video and audio systems (e.g., iPods), wirelessdevices, text messaging and downloading from the Internet. For example, devicesthat allow users to view or listen to television or radio programs on 

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atime-delayed basis and technologies which enable users to fast-forward or skipadvertisements, such as DVRs (e.g., TiVo) and portable digital devices, maycause changes in consumer behavior that could affect the attractiveness of ourofferings to advertisers, and could, therefore, adversely affect our revenues.In addition, further increases in the use of portable digital devices whichallow users to view or listen to content of their own choosing, in their owntime, while avoiding traditional commercial advertisements, could adverselyaffect our radio and television broadcasting advertising revenues. Other cableproviders and direct-to-home satellite operators are developing new videocompression techniques that allow them to transmit more channels on theirexisting equipment to highly targeted audiences, reducing the cost of creatingchannels and potentially leading to the division of the television marketplaceinto more specialized niche audiences. More television options increasecompetition for viewers and competitors targeting programming to narrowlydefined audiences may gain an advantage over us for television advertising andsubscription revenues. Such a competitive environment may increase the demandfor programming thereby making it more expensive to acquire new programming orrenew current programming. The ability to anticipate and adapt to changes intechnology on a timely basis and exploit new sources of revenue from thesechanges will affect our ability to continue to grow and increase our revenue.

**Changes in U.S.communications laws or other regulations may have an adverse effect on ourbusiness.**

The television, radio music and Internet industries inthe U.S. are highly regulated by U.S. federal laws and regulations issued andadministered by various federal agencies, including the FCC. The television andradio broadcasting industry is subject to extensive regulation by the FCC underthe Communications Act of 1934, as amended. For example, we are required toobtain licenses from the FCC to operate our radio and television stations withmaximum terms of eight years. We cannot assure you that the FCC will approveour future renewal applications or that the renewals will be for full terms orwill not include conditions or qualifications. The non-renewal, or renewal withsubstantial conditions or modifications, of one or more of our licenses couldhave a material adverse effect on our revenues.

The U.S. Congress and the FCC currently have underconsideration, and may in the future adopt, new laws, regulations and policiesregarding a wide variety of matters that could, directly or indirectly, affectthe operation of each of our business segments and ownership of our radio andtelevision properties. For example, from time to time, proposals have beenadvanced in the U.S. Congress and at the FCC to require radio and televisionbroadcast stations to provide advertising time to political candidates for freeor at a reduced charge. In addition, some policymakers maintain that cableoperators should be required to offer a la carte programming to subscribers ona network by network basis or “family friendly” programming tiers. The FCCrecently issued a report finding that consumers would benefit if cableoperators were required to offer programming on an a la carte basis because ofgreater choice and the opportunity to lower bills. Unbundling packages ofprogram services may increase both competition for carriage on distributionplatforms and marketing expenses, which could adversely affect our cablenetworks’ results of operations.

Changes to the mediaownership and other FCC rules may affect the competitive landscape in waysthat could increase the competition we face. Proposals have also been advancedfrom time to time before the U.S. Congress and the FCC to extend the programaccess rules (currently applicable only to those cable program services asdescribed below) to all cable program services. Our ability to obtain the mostfavorable terms available for our content could be adversely affected shouldsuch an extension be enacted into law.

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**Our failure to reach agreement with cable operators onacceptable “retransmission consent” terms, or new laws or regulations thateliminate or limit the scope of “must carry” rights, could significantly reduceour ability to obtain cable carriage and therefore revenues.**

The Communications Act prohibits cable operators fromretransmitting commercial television and low power television signals withoutfirst obtaining the broadcaster’s consent. This permission is commonly referredto as “retransmission consent” and may involve some compensation from the cablecompany to the broadcaster for the use of the signal. Alternatively, a localtelevision broadcast station may require a cable operator that serves the samemarket as the broadcaster to carry its signal. A demand for carriage iscommonly referred to as “must-carry.” If the broadcast station asserts itsmust-carry rights, the broadcaster cannot demand compensation from the cableoperator.

We have elected retransmission consent with respect tosome cable systems in markets where we own television stations, and must carrywith respect to other cable systems.

In cases where we have elected retransmission consent,we must reach agreement with local cable operators over the terms on which ourstations will be carried, including compensation from the cable operator. Theseagreements are typically renegotiated every three to five years. We have notyet reached agreement with all cable systems with respect to which we havecurrently elected retransmission consent. We cannot predict whether we will beable to reach agreement on acceptable terms with the operators of all cablesystems with respect to which we elected retransmission consent. If we areunable to reach such agreement with a cable operator, we may choose to requirethat operator to cease carriage of our stations. If we are unable to executeretransmission consent agreements with respect to cable operators serving amaterial number of subscribers, it could reduce viewership and result in adiminution of revenues.

To the extent that our full-power television stationsrely on “must carry” rights to obtain cable carriage on specific cable systems,new laws or regulations that eliminate or limit the scope of these cablecarriage rights could significantly reduce our ability to obtain cable carriage.We cannot assure you that must carry rights will continue, especially as theyrelate to the carriage of digital television. New laws or regulations thateliminate or limit the scope of these cable carriage rights could significantlyreduce our ability to obtain cable carriage, which would reduce our ability todistribute our programming and consequently our ability to generate revenuesfrom advertising.

In addition, a number ofentities have commenced operation, or announced plans to commence operation ofInternet protocol video systems, or IPTV, using digital subscriber line, fiberoptic to the home and other distribution technologies. The issue of whetherthose services are subject to the existing cable television regulations,including must carry or retransmission consent obligations, has not beenresolved. If IPTV systems gain a significant share of the video distributionmarketplace, and new laws and regulations fail to provide adequate must carryrights, our ability to distribute our programming to the maximum number ofpotential viewers will be limited and consequently our revenue potential willbe limited.

**Vigorous enforcement or enhancement of FCC indecencyand other program content rules against the broadcast and cable industriescould have an adverse effect on our businesses and results of operations.**

The FCC’s rules prohibitthe broadcast of obscene material at any time and indecent or profane materialon television or radio broadcast stations between the hours of 6 a.m. and10 p.m. Broadcasters risk violating the prohibition against broadcastingindecent material because of the vagueness of the FCC’s definition of indecentmaterial, coupled with the spontaneity of live programming. The FCC hasindicated that it is stepping up its enforcement activities as they apply toindecency, and has threatened to initiate license revocation proceedingsagainst broadcast licensees for “serious” indecency violations. The FCC hasfound on a number of occasions recently that the content of broadcasts hascontained indecent material. In certain such instances, the FCC issued fines tothe offending licensees. Formerly, the maximum permitted fines for adjudicatedviolations of the FCC’s indecency rules were $32,500 per incident and$300,000 for 

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eachcontinuing violation. In June 2006, Congress increased the maximumpermitted fines to $325,000 per incident and $3,000,000 for a continuingviolation. Several appeals of certain of the FCC’s recent enforcement actionsand of the FCC’s underlying indecency standards are pending in the federalcourts. The determination of whether content is indecent is inherentlysubjective and, as such, it can be difficult to predict whether particularcontent could violate indecency standards. Violation of the indecency rules couldlead to sanctions that may adversely affect our businesses and results ofoperations.

**We have a significant amount of goodwill and otherintangible assets and we may never realize the full value of our intangibleassets.**

Goodwill and intangibleassets totaled approximately $6.6 billion at December 31, 2006, primarilyattributable to acquisitions in the past four years. After the pending Merger,our goodwill will increase significantly. At least annually, we test ourgoodwill and non-amortizable 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 assets. Any future determination of impairment of asignificant portion of our goodwill and other intangibles would have an adverseeffect on our financial condition and results of operations.

**The MergerAgreement imposes limitations on our ability to operate our business.**

Until the closing of theMerger, we may not take certain actions with respect to the operation of ourbusiness without the Buyer’s consent. In addition, the pending Merger createsbusiness uncertainty and diverts management’s attention from ongoing businessconcerns. These limitations, uncertainty and diversion of attention may impairour results of operations.

**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 2006 fiscal year and that remain unresolved.

**ITEM 2.**                Properties

At December 31, 2006,the principal buildings owned or leased by the Company and used primarily bythe television and radio segments are described below:

**PrincipalProperties 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   |   |   |
| Los Angeles, CA |       |       | 166,272    |                                                                               |       | Owned                 |       |                        | —     |   |   |
| Houston, TX     |       |       | 107,489    |                                                                               |       | Owned                 |       |                        | —     |   |   |
| New York, NY    |       |       | 92,017     |                                                                               |       | 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, is used by thetelevision and radio businesses.

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The Company is party to a lease for a three-storybuilding with approximately 92,500 square feet for the relocation of its ownedand/or operated television and radio stations and studio facilities in PuertoRico. The building is being constructed and is owned by the landlord, withoccupancy of the premises expected during the latter part of 2007. The term ofthe lease is 50 years. The sum of the lease payments will be approximately $74million over 50 years.

The Miami owned facilities primarily house UnivisionNetwork and TeleFutura Network administration, operations (including uplink facilities),sales, production and news. In addition, Galavisión operations occupy space inUnivision Network’s facilities. The Company’s Miami television stations, WLTVand WAMI, occupy leased facilities. The Company broadcasts its programs to theCompany’s affiliates on three separate satellites from four transponders. Inaddition, 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 PLALitigation*

Televisa and the Company are parties to the PLA, whichprovides our three television networks with a majority of their prime timeprogramming and a substantial portion of their overall programming. The Companycurrently pays a license fee to Televisa for programming, subject to certainupward adjustments. On June 16, 2005, Televisa filed an amended complaintin the United States District Court for the Central District of Californiaalleging breach by the Company of the PLA, including breach for our allegedfailure to pay Televisa royalties attributable to revenues from one ofUnivision’s programs, the Company’s alleged unauthorized editing of certainTelevisa programs and related copyright infringement claims, a claimed breachof the Soccer Agreement (a soccer rights side-letter to the PLA), and a claimthat we 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, declaratoryrelief against the Company’s ability to recover amounts of approximately $5.0million previously paid in royalties to Televisa, and an injunction against ouralteration of Televisa programming without Televisa’s consent. In June 2005,the Company made a payment under protest to Televisa of $1.5 million. On August 15,2005, the Company filed an answer to the amended complaint denying Televisa’sclaims and also filed counterclaims alleging various breaches of contract andcovenants by Televisa. The Company seeks monetary damages and injunctiverelief.

On September 20, 2005, Televisa filed a motion todismiss certain of the Company’s counterclaims. On November 17, 2005, theDistrict Court denied that motion in its entirety. Thereafter, Televisa changedcounsel and on January 31, 2006—after several extensions of time grantedby the Company—Televisa filed its answer to the Company’s counterclaims.Televisa in its answer alleged that its claims rose to the level of a materialbreach of the PLA and delivered a purported notice of material breach on February 16,2006. On March 2, 2006, we responded to Televisa’s purported notice ofmaterial breaches. In our response, we asserted that the notice wasprocedurally defective and that Televisa’s breach claims were not, in anyevent, well-founded. We do not believe that we are in breach of our agreementswith Televisa and certainly not in 

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material breach. On March 15,2006, the Company made a payment under protest of approximately $6 millionrelated to the Televisa litigation and has made additional payments underprotest and other license fee overcharges of approximately $10.9 million in2005 and 2006. At December 31, 2006, the Company had an accrual for $0.5million for expenses that will be paid to Televisa under protest. In 2005 and2006 other license fee overcharges were $2.0 and $1.3 million, respectively. TheCompany seeks recovery of this amount via a counterclaim. On March 31,2006, the Company and Televisa stipulated to the Filing of Televisa’s SecondAmended and Supplemental Complaint in the lawsuit. The new proposed Complaintraises the same allegations of material breach contained in Televisa’s January 31,2006 answer to the Company’s counterclaims and in its February 16, 2006notice of purported material breaches. Among other claims, the new proposedComplaint seeks a declaration that the Company is in material breach of the PLAand that Televisa has the right to suspend or terminate its performance underthe PLA.

On May 5, 2006, the Company filed its Answer tothe Second Amended Complaint, denying Televisa’s principal substantiveallegations, denying liability, and asserting various affirmative defenses. On May 12,2006, the Court reset the discovery cut-off date in the case for December 29,2006, and the trial date for June 19, 2007. On May 22, 2006, theCompany filed its First Amended Counterclaims, which added a claim fordeclaratory relief that the Company was not in material breach of the PLA orthe Soccer Agreement  and that it hadreceived inadequate notice of any alleged breaches. Televisa sent a letter on June 2,2006, notifying the Company that the 90-day cure period had expired forcertain breaches alleged in Televisa’s February 16, 2006, notice ofpurported material breaches under the PLA and the Soccer Agreement. In that June 2,2006 letter, Televisa contended that because the Company had purportedly failedto cure these and other breaches, some of which Televisa asserted were notsusceptible of being cured, Televisa therefore had the right to terminate thePLA, the Soccer Agreement, and a related Guaranty given by Grupo Televisa tothe Company. Televisa indicated, however, that it was not at that timeexercising its purported termination rights and that it was seeking adeclaration of its right to terminate in the litigation between the companies.

On July 19, 2006, Televisa filed a complaint inLos Angeles Superior Court seeking a judicial declaration that on and after December 19,2006, it may, without liability to Univision, transmit or permit others totransmit any programming that is licensed to the Company under the PLA into theUnited States from Mexico over or by means of the Internet. The Company wasserved with the new complaint on July 21, 2006. The Company filed a motionto dismiss or stay this action on August 21, 2006. In response to themotion, Televisa stipulated to stay the Superior Court action, and the Courtentered the stay on January 11, 2007.

On August 18, 2006, the Company filed a motionfor leave to file its Second Amended Counterclaims, which include a newly-addedclaim for a judicial declaration that on and after December 19, 2006,Televisa may not transmit or permit others to transmit any programming that islicensed to the Company under the PLA into the United States over or by meansof the Internet. Televisa opposed the motion. On or about October 5, 2006,the Court granted Univision’s motion for leave to file its Second AmendedCounterclaims.

On or about September 21, 2006, Televisa sent theCompany an additional notice of purported breaches under the PLA. The newnotice alleged breaches relating to our sale of advertising time in connectionwith certain types of programs. The notice also purported to supplementTelevisa’s previous breach claims with respect to our editing of Televisaprogramming.

On November 15, 2006, Televisa filed a motion infederal court seeking a separate trial of the Company’s Internet counterclaim. TheCompany opposed Televisa’s motion, and, on December 6, 2006, the Courtdenied the motion.

Pursuant to a stipulation and order dated November 3,2006, the federal court appointed a Special Master to oversee discovery mattersin the federal case and to make recommendations on certain 

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procedural issues. On December 15,2006, the Special Master recommended that the federal court extend thediscovery completion date to June 29, 2007, and continue the trial date toOctober 2007. The Court has not yet ruled whether it will accept, rejector modify this recommendation.

The Company continues todefend the litigation and pursue its counterclaims vigorously, and it plans totake all action necessary to ensure Televisa’s continued performance under thePLA until its expiration in 2017.

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

No matters were submitted to a vote of stockholdersduring the fourth quarter of the fiscal year covered by this report.

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**PART II**

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

*(a)  *MarketInformation

TheCompany’s Class A Common Stock is listed on the New York Stock Exchangeand is traded under the symbol “UVN”. The table below lists the high and lowsales prices for the Class A Common Stock as reported on the New YorkStock Exchange for each full quarterly period within the two most recent fiscalyears.

| ** **     | ** ** | **Price Range** | ** ** |
|----------------|------------|----------------------|------------|
| ** **     | ** ** | **High**             | ** ** | **Low** | ** ** |
| 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 |   |
| 2006           |       |                 |       |   |   |
| First Quarter  |       | $                    | 35.65      |   | $ | 29.30 |   |
| Second Quarter |       | $                    | 36.67      |   | $ | 31.84 |   |
| Third Quarter  |       | $                    | 35.67      |   | $ | 33.03 |   |
| Fourth Quarter |       | $                    | 35.59      |   | $ | 34.20 |   |

 

*(b)*   Holders

There were approximately409 stockholders of record of Class A Common Stock, 3 stockholders of Class PCommon Stock, 2 stockholders of Class T Common Stock and 2 stockholders ofClass V Common Stock as of January 8, 2007.

*(c)*   CashDividends

The Company has neverdeclared or paid dividends on any class of its common stock. The Company’scurrent credit agreement restricts the payment of cash dividends on commonstock. The Company does not anticipate paying any cash dividends on its commonstock in the foreseeable future. Future dividend policy will depend on theCompany’s earnings, capital requirements, financial condition and other factorsconsidered relevant by the Board of Directors.

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

| **Plan Category**                                      | ** ** | ** ** | ** ** | **Number of securities  to be issued upon  exercise of outstanding  options and restricted  stock awards** | ** ** | **Weighted average  exercise price of  outstanding options   and restricted  stock awards** | ** ** | **Number of  securities  remaining  available for  future issuance** | ** ** |
|-------------------------------------------------------------|------------|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **(a)**    | ** ** | **(b)**                                                                                                                                                      | ** ** | **(c)**                                                                                                                        | ** ** |
| ***Stock  Options Awards:***                                |       |       |       |                                                                                                                                                         |       |                                                                                                                           |       |                                                                                |       |   |   |   |   |
| Equity compensation plans approved by security  holders     |       |       | 21,966,635 |                                                                                                                                                         |       |                                                                                                                           | $          | 32.46                                                                               |       |   |   | — |   |   |
| Equity compensation plans not approved by security  holders |       |       | N/A        |                                                                                                                                                         |       |                                                                                                                           | N/A        |                                                                                |       |   | N/A |   |   |
| ***Restricted  Stock Awards:***                             |       |       |       |                                                                                                                                                         |       |                                                                                                                           |       |                                                                                |       |   |   |   |   |
| Equity compensation plans approved by security  holders     |       |       | 1,729,775  |                                                                                                                                                         |       |                                                                                                                           | $          | 33.66                                                                               |       |   |   | 9,097,575 |   |   |
| Equity compensation plans not approved by security  holders |       |       | N/A        |                                                                                                                                                         |       |                                                                                                                           | N/A        |                                                                                |       |   | N/A |   |   |
| Total                                                       |       |       | 23,696,410 |                                                                                                                                                         |       |                                                                                                                           |       |                                                                                |       |   | 9,097,575 |   |   |

 

*(e)*   IssuerPurchases of Equity Securities

The Company did notrepurchase any of its Class A Common Stock during the three monthsended December 31, 2006 under its $500 million stock repurchase planauthorized by its Board of Directors on November 1, 2005. The plan expiredDecember 31, 2006. No shares have been repurchased to date and the MergerAgreement restricts further repurchases.

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***Stock PerformanceGraph(1)***

The followinggraph compares our cumulative total stockholder return with those of theS&P Broadcasting & Cable TV Index and the S&P 500 Index forthe five fiscal years ending December 31, 2006. The graph assumes that$100 was invested on December 31, 2001 in (1) our Class A CommonStock, (2) the S&P Broadcasting & Cable TV Index, and (3) theS&P 500 Index, including in each case, if applicable, reinvestment ofdividends. Note: We caution that the stock price performance shown in the graphbelow should not be considered indicative of potential future stock priceperformance.

**COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN***

**Among Univision Communications Inc., The S & P500 IndexAnd The S & P Broadcasting & Cable TV Index**

****

*                    $100invested on 12/31/01 in stock or index-including reinvestment of dividends.Fiscal year ending December 31.

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(1)          SECfilings sometimes “incorporate information by reference.” This means theCompany is referring you to information that has previously been filed with theSEC, and that this information should be considered as part of the filing youare reading. Unless the Company specifically states otherwise, this StockPerformance Graph shall not be deemed to be incorporated by reference and shallnot constitute soliciting material or otherwise be considered filed under theSecurities Act or the Securities Exchange Act.

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**ITEM6.**                Selected FinancialData

**FIVE-YEAR SUMMARYOF SELECTED FINANCIAL DATA(In thousands, except share and per-share data)**

| ** **                                                                              | ** ** | **2006(a)** | ** ** | **2005(a)** | ** ** | **2004(a)** | ** ** | **2003(b)** | ** ** | **2002**    | ** ** |
|-----------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| **Income Statement Data (for the years ended  December 31)**                       | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** |
| Net revenues                                                                            |       | $           | 2,166,652  |        | $          | 1,952,531   |       | $           | 1,786,935  |        | $          | 1,311,015 |   | $ | 1,091,293 |   |
| Direct operating  expenses (excluding depreciation and amortization)                    |       | 809,768     |       | 729,973     |       | 663,457     |       | 513,741     |       | 471,395     |       |
| Selling, general  and administrative expenses (excluding depreciation and amortization) |       | 599,719     |       | 559,281     |       | 528,841     |       | 363,674     |       | 287,960     |       |
| Cost reduction  plan                                                                    |       | —      |       | 30,289      | (c)        | —      |       | —      |       | —      |       |
| Depreciation and  amortization                                                          |       | 90,791      |       | 93,223      |       | 101,382     |       | 84,904      |       | 78,818      |       |
| Operating income                                                                        |       | 666,374     |       | 539,765     |       | 493,255     |       | 348,696     |       | 253,120     |       |
| Interest expense,  net                                                                  |       | 88,105      |       | 84,048      |       | 66,061      |       | 71,322      |       | 87,233      |       |
| Loss on  extinguishment of debt                                                         |       | —      |       | —      |       | 467         |       | 4,122       |       | —      |       |
| Amortization of  deferred financing costs                                               |       | 2,553       |       | 3,309       |       | 3,470       |       | 3,832       |       | 3,846       |       |
| Stock dividend                                                                          |       | (1,812      | )          | (1,812      | )          | (6,453      | )          | —      |       | —      |       |
| Equity (income)  loss in unconsolidated subsidiaries and other                          |       | (2,540      | )          | (959        | )          | 1,942       |       | 10,218      |       | 15,907      |       |
| Gain on sales of  Entravision stock                                                     |       | (1,454      | )          | —      |       | —      |       | —      |       | —      |       |
| Gain on change in  Entravision ownership interest                                       |       | —      |       | —      |       | —      |       | (1,611      | )          | (1,898      | )          |
| Nontemporary  decline in fair value of investments                                      |       | 5,200       | (d)        | 81,877      | (d)        | —      |       | —      |       | —      |       |
| Noncontrolling  interest in variable interest entities                                  |       | 912         |       | 4,120       |       | 7,311       |       | —      |       | —      |       |
| Income before  taxes                                                                    |       | 575,410     |       | 369,182     |       | 420,457     |       | 260,813     |       | 148,032     |       |
| Provision for  income taxes                                                             |       | 226,236     |       | 182,003     |       | 164,574     |       | 105,386     |       | 61,504      |       |
| Net income                                                                              |       | 349,174     |       | 187,179     |       | 255,883     |       | 155,427     |       | 86,528      |       |
| Preferred stock  dividends/accretion                                                    |       | —      |       | —      |       | —      |       | —      |       | (25         | )          |
| Net income  available to common stockholders                                            |       | $           | 349,174    |        | $          | 187,179     |       | $           | 255,883    |        | $          | 155,427 |   | $ | 86,503 |   |
| **Earnings Per Share Available to Common  Stockholders**                                |       |        |       |        |       |        |       |        |       |        |       |
| Basic Earnings Per  Share                                                               |       | $           | 1.14       |        | $          | 0.59        |       | $           | 0.79       |        | $          | 0.61 |   | $ | 0.39 |   |
| Weighted average  common shares outstanding                                             |       | 306,377,333 |       | 315,223,555 |       | 322,742,581 |       | 253,853,027 |       | 224,344,335 |       |
| Diluted Earnings Per Share                                                              |       |        |       |        |       |        |       |        |       |        |       |
| Net income                                                                              |       | $           | 1.03       |        | $          | 0.54        |       | $           | 0.72       |        | $          | 0.55 |   | $ | 0.34 |   |
| Weighted average  common shares outstanding                                             |       | 338,865,557 |       | 344,445,842 |       | 353,019,601 |       | 283,838,587 |       | 256,337,046 |       |
| **Balance Sheet Data (at end of year)**                                                 |       |        |       |        |       |        |       |        |       |        |       |
| Current assets                                                                          |       | $           | 663,891    |        | $          | 633,600     |       | $           | 638,489    |        | $          | 520,566 |   | $ | 384,958 |   |
| Total assets                                                                            |       | 8,166,395   |       | 8,128,336   |       | 8,227,126   |       | 7,642,917   |       | 3,402,396   |       |
| Current  liabilities                                                                    |       | 483,708     |       | 909,521     |       | 291,515     |       | 288,633     |       | 223,222     |       |
| Long-term debt,  including capital leases                                               |       | 969,589     |       | 969,299     |       | 1,227,680   |       | 1,368,346   |       | 1,432,233   |       |
| Stockholders’  equity                                                              |       | 5,561,499   |       | 5,090,900   |       | 5,387,704   |       | 5,102,977   |       | 1,558,088   |       |
| **Other Data**                                                                          |       |        |       |        |       |        |       |        |       |        |       |
| Net cash provided  by operating activities                                              |       | $           | 441,172    |        | $          | 409,722     |       | $           | 424,977    |        | $          | 329,777 |   | $ | 155,199 |   |
| Net cash used in  investing activities                                                  |       | (155,988    | )          | (320,081    | )          | (231,114    | )          | (197,360    | )          | (795,281    | )          |
| Net cash (used in)  provided by financing activities                                    |       | (281,062    | )          | (180,109    | )          | (80,672     | )          | (91,391     | )          | 294,904     |       |

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(a)              Includes the Company’s variable interestentities commencing March 31, 2004. See “Notes to Consolidated FinancialStatements—7. Investments and Variable Interest Entities.”

(b)             The Company acquired Hispanic BroadcastingCorporation on September 22, 2003.

(c)              The Company reported a cost reduction plancharge in the fourth quarter of 2005. See “Notes to Consolidated FinancialStatements—8. Accounts Payable and Accrued Liabilities.”

(d)             Charge related to the Company’sinvestments in Entravision and St. Louis/Denver LLC. See “Notes to ConsolidatedFinancial Statements—7. Investments and Variable Interest Entities.” The nontemporarydecline in fair value of investments consists of $5.2 million and $8.8 millionrelated to the St. Louis/Denver LLC investment in 2006 and 2005, respectively,and $73.1 million related to the Entravision investment in 2005. The Companyreported no tax benefit related to these charges related to its investments.See “Notes to Consolidated Financial Statements—15. Income Taxes.”

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**ITEM 7.**                Management’sDiscussion and Analysis of Financial Condition and Results of Operations

**Executive Summary**

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

·       *Television:*   The Company’s principalbusiness segment is television, which consists primarily of the Univision andTeleFutura national broadcast networks, the Company’s owned and/or operatedtelevision stations and the Galavisión cable television network. For the yearended December 31, 2006, the television segment accounted forapproximately 74% of the Company’s net revenues.

·       *Radio:*   Univision Radio isthe largest Spanish-language radio broadcasting company in the United States.For the year ended December 31, 2006, the radio segment accounted forapproximately 17% of the Company’s net revenues.

·       *Music**:*   TheCompany’s music recording and music publishing business, launched in April 2001,includes the Univision, Fonovisa, Disa and La Calle labels. See “Notes toConsolidated Financial Statements—15. Investments and Variable InterestEntities.”  For the year ended December 31,2006, the music segment accounted for approximately 7% of the Company’s netrevenues.

·       *Internet:*   Univision Online, 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, 2006, theInternet segment accounted for approximately 2% of the Company’s net revenues.

**Recent Developments**

***The Merger Agreement***

The Company has enteredinto a Merger Agreement, dated as of June 26, 2006 with Umbrella Holdings,LLC (“Buyer”) and Umbrella Acquisition, Inc., a wholly-owned subsidiary ofBuyer (“Acquisition Sub”), whereby Buyer will acquire the Company, subject tocertain conditions. The transaction is referred to as the “Merger.”  For more information related to the Mergersee “Notes to Consolidated Financial Statements—2. Recent Developments.”

***Change in Control Retention Bonus and Severance Plans***

The Company has established a change in controlretention bonus and severance plan to provide retention incentives for keyemployees of the Company to encourage them to remain as employees of theCompany, to use their best efforts to help the Company achieve its operatingplan and to ensure a successful completion of the change in control.

The change in control severance plan applicableto certain of the Company’s officers has estimated severance benefitspayable to such officers upon termination of employment, withoutcause or for good reason, in connection with a change in control ofapproximately $33 million in cash, and estimated prorated bonuspayments to such officers totaling approximately $1.8 million incash (assuming that the closing date of the Merger occurs on March 26,2007). Such executive officers were also awarded restricted stock units thatwill remain outstanding at the closing of the Merger and will vest and be paid onthe earlier of 90 days following the Merger (if the holder is employed by theBuyer on such date) or the termination date of the executive officer’semployment without cause or resignation for good reason after the Merger. Theestimated value of these restricted stock units is $14.5 million.

Estimated retention bonus payments,which are payable to other employees at the earlier of the Merger closing dateor March 2007 under the change in control employee retention bonus plan, are 

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estimatedto be $4.7 million in cash. This cost is being expensed ratably throughthe expected date of the closing. Certain of these other employees are alsoentitled to a retention bonus on the one year anniversary of the Merger closingdate provided that they are either employed on such date or have a qualifyingtermination of employment prior to such date (and in such latter case, will bepaid on the date of such termination). In addition, upon the closing of theMerger, subject to certain exceptions, each restricted stock unit that remainsoutstanding as of the effective time of the Merger will be paid in cash.

**Factors AffectingOur Results**

***Cost Reduction Plan***

On November 2, 2005,we announced a cost reduction plan that reduced our workforce and abandonedcertain less profitable programming in an effort to eliminate job redundanciesand inefficiencies and achieve sustainable improvement in financialperformance.

***World Cup Rights***

In August 2000, weacquired the Spanish-language television rights in the U.S. to the 2002 and 2006Federation Internationale de Football Association (“FIFA”) World Cup soccergames and other 2000-2006 FIFA events. A series of payments were due overthe term of the agreement. Consistent with past coverage of the World Cupgames, we 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. Rights fees areamortized over the applicable World Cups and other interim FIFA events based onthe flow-of-income method.

***Music Industry Decline***

The music segmentexperienced a significant financial and business downturn during the year endedDecember 31, 2006, which the Company attributes to underperformingreleases, slippage in the release schedule, piracy and a continued highlevel of returns compounded by economic factors and changing immigrationpolicies impacting music sales in the industry.

***Entravision Investment***

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 12.6 million shares of Entravision Class A common stockheld by the Company.

On March 2, 2006, the Company and Entravisioncompleted the repurchase by Entravision of 7 million shares of EntravisionClass U common stock held by the Company, for an aggregate sale price of$51.1 million, or $7.30 per share. This share repurchase transaction, coupledwith the Company’s purchase of Entravision’s radio stations serving the SanFrancisco / San Jose market for approximately 12.6 million shares ofEntravision Class U common stock, reduced the Company’s non-votingownership interest on a fully converted basis in Entravision to approximately14.9%, which was in accordance with the United States Department of Justice’sconsent decree issued in connection with our acquisition of HispanicBroadcasting Corporation. The consent decree prohibits the Company’s currentownership of Entravision stock from exceeding 15% on a fully-converted basisand requires the Company to reduce its ownership to less than 10% on afully-converted basis by March 26, 2009. The Company recognized a gain onthe repurchase transaction of approximately $1.2 million.

Due to Entravision optionterminations during the quarter ended June 30, 2006, the Company’snon-voting ownership interest on a fully converted basis in Entravisionincreased to approximately 15.06% at 

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June 30,2006. On July 10, 2006, the Company sold 200,000 shares of its EntravisionClass U common stock for an aggregate sale price of $1.6 million andrecognized a gain of $0.2 million. This sale reduced the Company’s non-votingownership interest on a fully converted basis in Entravision to approximately14.9%. At December 31, 2006, the Company’s non-voting ownership intereston a fully converted basis in Entravision was approximately 14.8%.

***Televisa PLA Litigation***

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.In June 2005, Televisa filed an amended complaint in the United StatesDistrict Court for the Central District of California alleging breach by us ofour PLA with Televisa. Televisa’s current claims include breach for our allegedfailure to pay Televisa royalties attributable to revenues from one ofUnivision’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 (the “Soccer Agreement”), and a claimthat we 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,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. The Company paid Televisa $3.5 million in 2005 and $14.9 million in2006 for payments under protest and other license fee overcharges. At December 31,2006, the Company had an accrual for $0.5 million for expenses that will bepaid to Televisa under protest. In 2005 and 2006 other license fee overchargeswere $2.0 and $1.3 million, respectively. Televisa is also seeking adeclaration that the Company is in material breach of the PLA and the SoccerAgreement and that Televisa has the right to suspend or terminate itsperformance under such agreements. We do not believe we are in breach of ouragreements with Televisa and certainly not in material breach. The Company hasfiled an answer and also filed counterclaims alleging various breaches ofcontract and covenants by Televisa. The Company seeks monetary damages andinjunctive relief.

Televisa also seeks a declaration that it may transmitor permit others to transmit any television programming into the United Statesfrom Mexico over or by means of the Internet.

Pursuant to a stipulation and order dated November 3,2006, the federal court appointed a Special Master to oversee discovery mattersin the federal case and to make recommendations on certain procedural issues. OnDecember 15, 2006, the Special Master recommended that the federal courtextend the discovery completion date to June 29, 2007, and continue thetrial date to October 2007. The Court has not yet ruled whether it willaccept, reject or modify this recommendation.

The Company continues todefend the litigation and pursue its counterclaims vigorously, and it plans totake all action necessary to ensure Televisa’s continued performance under thePLA until its expiration in 2017.

**Description of KeyLine Items**

***Net Revenues***

Television net revenuesare generated from the sale of network, national and local spot advertisingtime net of agency commissions, music license fees, subscriber fees and salescommissions on national advertising aired on Univision affiliate televisionstations. 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 net of agency commissions. The music 

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businessderives its revenues primarily from the sale of recorded music and the Internetbusiness primarily from online advertising net of agency commissions and othercustomer related direct expenses.

***Direct Operating Expenses***

Direct operating expensesconsist primarily of programming; license fees; payments under protest andother license fee overcharges to Televisa; and news and technical costs.  License fees relate to our PLAs with GrupoTelevisa S.A. and its affiliates (“Televisa”) and affiliates of CorporacionVenezolana del Television, C.A. (VENEVISION) (“Venevision”).

***Selling, General and Administrative Expenses***

Selling, general andadministrative expenses primarily include payroll and other employee-relatedcosts; share-based compensation; Televisa litigation costs; professional fees,including consulting, legal and audit fees; strategic alternative costs;promotions; rent and corporate expenses.

**Critical AccountingPolicies**

Certain of our accounting policies require managementto make estimates and assumptions that affect the reported amounts of assetsand liabilities as of the date of the consolidated financial statements and thereported amounts of revenues and expenses during the reporting period. Theseestimates and assumptions are based on our historical experience, terms ofexisting contracts, our evaluation of trends in the industry, informationprovided by our customers and suppliers and information available from otheroutside sources, as appropriate. However, they are subject to an inherentdegree of uncertainty. As a result, actual results in these areas may differsignificantly from our estimates.

We believe the followingcritical accounting policies affect the more significant judgments andestimates used in the preparation of our financial statements and changes inthese judgments and estimates may impact future results of operations andfinancial condition. For additional disclosure concerning our significantaccounting policies, see “Notes—Consolidated Financial Statements—3. SignificantAccounting Policies” included in this report.

***Program Costs for Television Broadcast***

Program costs pursuant to the PLA are expensed monthlyby the Company as a license fee, which is based principally on a percentage ofthe Company’s television combined net time sales, as defined in the PLA. TheCompany has expensed its payments made under protest to Televisa discussedpreviously in Item 3. “Legal Proceedings.” Depending on the outcome of thelitigation, the Company may recover some or all of these payments. Also, theCompany may be required to pay additional license fees on certain programmingthat is currently being excluded from the license fee calculation.

All other costs incurredin connection with the production of or purchase of rights to programs that areready and available to be broadcast within one year are classified as currentassets, while costs of those programs to be broadcast subsequent to one yearare considered non-current. Program costs are charged to operating expense asthe programs are broadcast. In the case of multi-year sports contracts, programcosts are charged to operating expense based on the flow-of-income method overthe term of the contract. Management estimates the amount of revenue expectedto be realized when programs are aired, as well as the revenue associated withmulti-year sports contracts in applying the flow-of-income method. If therevenue realized associated with the programming is less than estimated, theCompany’s future operating margins will be lower and previously capitalizedprogram costs may be written off.

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***Revenue Recognition***

Net revenues are comprisedof gross revenues from the Company’s television and radio broadcast, cable,music and Internet businesses, including subscriber fees, sales commissions onnational advertising aired on Univision affiliated television stations, lessagency commissions, music license fees paid by television and radio andcompensation costs paid to an affiliated television station. The Company’stelevision and radio gross revenues are recognized when advertising spots areaired and performance guaranties, if any, are achieved. The music businessrecognizes revenues from the sale of recorded music upon delivery of productsto third parties based on terms F.O.B. destination, less an allowance forreturns, cooperative advertising and discounts. The Internet businessrecognizes primarily banner and sponsorship advertisement revenues. Banner andsponsorship revenues are recognized ratably over their contract period or asimpressions are delivered. “Impressions” are defined as the number of timesthat an advertisement appears in pages viewed by users of the Company’sonline properties.

***Accounting forIntangibles and Impairment***

Goodwill and otherintangible assets with indefinite lives, such as broadcast licenses, are notamortized and are tested for impairment annually or more frequently ifcircumstances indicate a possible impairment exists. 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 the FCC.Over the last five years, all television and radio licenses that have been upfor renewal have been renewed and there has been no compelling challenge to thelicense renewal. The technology used in broadcasting is not expected to bereplaced by another technology in the foreseeable future, therefore, thetelevision and radio broadcast licenses and the related cash flows are expectedto continue indefinitely. These indefinite cash flows indicate that thebroadcast licenses have an indefinite useful life. The licenses would not beamortized until their useful life is deemed to no longer be indefinite.

Goodwill is allocated tovarious reporting units, which are the operating segments. For purposes ofperforming the impairment test of goodwill, we established the followingreporting units: television, radio, music and Internet. The Company comparesthe fair value of the reporting unit to its carrying amount on an annual basisto determine if there is potential goodwill impairment. If the fair value ofthe reporting unit is less than its carrying value, an impairment loss isrecorded to the extent that the fair value of the goodwill within the reportingunit is less than its carrying value. The Company also compares the fair valueof indefinite-lived intangible assets to their carrying amount. If the carryingamount of an indefinite-lived intangible asset exceeds its fair value, animpairment loss is recognized.

The television segmentanalyzes broadcast licenses for impairment at the Univision and TeleFuturanetwork levels. Television stations, which broadcast a format other than theUnivision and TeleFutura networks are analyzed for impairment on a stand-alonebasis. The radio segment analyzes broadcast licenses at the market level. Fairvalue for broadcast licenses, other indefinite-lived intangible assets andgoodwill are determined based on discounted cash flows, market multiples orappraised values, as appropriate. In the future, the Company may incurimpairment charges under SFAS No. 142, “Goodwill and Other Intangible Assets”if market values decline and the Company does not achieve expected cash flow growthrates. The Company uses the direct value method to value intangible assetsother than goodwill acquired in business combinations and for purposes ofimpairment testing.

***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 

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otherthan temporary. If the actual value realized on sale of investments is lessthan previously estimated, the Company may recognize an impairment loss.

***Related Party Transactions***

Televisa and Venevision,which are our current principal stockholders, have PLAs with us that provideour three television networks with a substantial amount of programming. TheCompany currently pays an aggregate license fee of approximately 15% oftelevision net revenues to Televisa and Venevision collectively for theirprogramming, subject to certain upward adjustments. The Company believes thatthe PLAs and all other agreements with Televisa and Venevision have beennegotiated as arms-length transactions. If the license fee ultimately paid ismore than the amount estimated by management, additional license fee expensewill be recognized.

***Share-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. 123R requires all share-based payments to employees, includinggrants of employee stock options and restricted stock, to be recognized in thefinancial statements based on their fair values (i.e., footnote disclosure isno longer an alternative to financial statement recognition). Prior to theadoption of SFAS No. 123R, the Company accounted for employee stock-basedcompensation using the intrinsic-value method prescribed in AccountingPrinciples Board Opinion No. 25, *Accounting for StockIssued to Employees* and related interpretations (“APB No. 25”).

The Company elected themodified prospective method for reporting purposes and therefore, prior periodswere not restated. Under the modified prospective method, this statement wasapplied 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.

In years prior to 2006,historical volatility was used to estimate the expected volatility of the shareprice, whereas in January 2006 implied volatility is used. Managementbelieves the implied volatility factor reflects the market’s expectations offuture volatility. Market prices of traded options and shares were analyzedaround the time of the January 2006 stock option grant along with theanalysis of other factors to estimate the implied volatility of the stockoptions granted in 2006.

On September 14,2005, the Compensation Committee of the Board of Directors of the Companyapproved the acceleration of vesting of substantially all unvested stockoptions outstanding whose exercise price was above the then current market priceof $25.56. The Compensation Committee’s decision to accelerate the vesting ofthe affected stock options was based upon the issuance of SFAS No. 123R,which requires the Company to treat unvested stock options as compensationexpense effective January 1, 2006. Because the Company accounted for stockbased compensation using the intrinsic value method prescribed in APB No. 25,and because these options were priced above current market on that date, theacceleration of vesting of these options did not result in a charge in theCompany’s financial statements. The acceleration of the vesting increased proforma share-based compensation expense under the provisions of SFAS No. 123by approximately $59 million before income tax.

The Company granted1,207,100 stock options and 818,400 restricted stock unit awards on January 13,2006 under the 2004 Performance Award Plan (the “Plan”) and also granted933,025 restricted stock unit awards on December 29, 2006 under the Plan. Theseawards vest 25% each year over a four-year vesting period. Total compensationcost related to nonvested awards not yet recognized at December 31, 2006is approximately $66 million and the weighted period over which it is expectedto be recognized is approximately 3.5 years. If the Merger closes in 2007, theunrecognized compensation cost related to vested stock options and restrictedstock unit awards at that time will be expensed. If the value of equity awardsexceeds management’s estimates, additional compensation expense will berecognized.

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**Recent AccountingPronouncements**

In September 2006, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting StandardsNo. 157, “Fair Value Measurements*”* (“SFASNo. 157”). SFAS No. 157 defines fair value, the methods used tomeasure fair value, and expands disclosures about fair value measurements. ThisStatement applies to accounting pronouncements that require or permit fairvalue measurements. The adoption of SFAS No. 157 will be effective forfinancial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years. The Company does notexpect that the adoption of SFAS No. 157 will a have a material impact onthe financial statements of the Company.

In June 2006, the FASBissued Financial Accounting Standards Board Interpretation No. 48,“Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation ofFASB Statement of Financial Accounting Standards No. 109 “Accounting forIncome Taxes”**(“SFAS No. 109”). FIN 48clarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with SFAS No. 109. Theinterpretation prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax provision taken orexpected to be taken in a tax return. Also, the interpretation providesguidance on derecognition, classification, interest and penalties, accountingin interim periods, disclosure, and transition. The adoption of FIN 48 will beeffective for fiscal periods beginning after December 15, 2006. TheCompany does not expect that the adoption of FIN 48 will a have a materialimpact on the financial statements of the Company.

**Year Ended December31, 2006 Compared to Year Ended December 31, 2005**

**Overview**

In comparing ourresults of operations for the years ended December 31, 2006 and 2005, thefollowing should be noted:

·       Forthe year ended December 31, 2006, the Company incurred strategicalternative costs of $13,307,000. The costs are primarily related to legal,banking and consulting incurred in connection with the Merger.

·       Forthe year ended December 31, 2006, the Company recorded selling, generaland administrative expenses of $9,353,000 for Televisa litigation costsregarding its PLA and direct operating expenses of $9,367,000 for payments madeunder protest and other license fee overcharges to Televisa. In 2006, the otherlicense fee overcharges were $1,300,000. For the year ended December 31,2005, the Company recorded selling, general and administrative expenses of$1,209,000 for Televisa litigation costs regarding its PLA and direct operatingexpenses of $9,590,000 for payments made under protest and other license feeovercharges to Televisa. In 2005, the other license fee overcharges were$2,000,000.

·       On January 1, 2006,the Company adopted SFAS No. 123R. SFAS No. 123R requires allshare-based payments to employees, including grants of employee stock optionsand restricted stock, to be recognized in the financial statements based ontheir fair values. Prior to the adoption of SFAS No. 123R, theCompany accounted for employee share-based compensation using theintrinsic-value method prescribed in APB No. 25.

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TheCompany’s direct operating expenses include share-based compensation costs of$1,482,000 for the year ended December 31, 2006. The Company’s selling,general and administrative expenses include share-based compensation costs of$11,196,000 for the year ended December 31, 2006. See “Notes to CondensedConsolidated Financial Statements—13. Performance Award and Incentive Plans.”

·       Duringthe second and third quarters of 2006, the Company’s television segment airedthe 2006 World Cup games, which generated revenues and expenses that did notexist in 2005. During the year ended December 31, 2006, the 2006 FIFAWorld Cup directly contributed an estimated $113.6 million of incremental netrevenue and an estimated $5.3 million of incremental operating income beforedepreciation and amortization.

·       OnMarch 2, 2006, the Company and Entravision completed the repurchase byEntravision of 7 million shares of Entravision Class U common stock heldby the Company, for an aggregate sale price of $51.1 million, or $7.30 pershare. The Company recognized a gain on the repurchase transaction ofapproximately $1.2 million.

·       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—8. 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 in the fourth quarter of 2005 and 2006 of $8,800,000 and$5,200,000, respectively, in connection with its Denver and St. Louis LLCinvestment. The Company did not record a tax benefit related to thesetransactions in 2005 or 2006. See “Notes to Consolidated Financial Statements—7.Investments and Variable Interest Entities.”

·       In2006, the Company recorded an asset impairment charge of $1,618,000 related to aloan receivable, which was recorded to selling, general and administrativeexpenses.

***Net Revenues.******  ***Net revenueswere $2,166,652,000 in 2006 compared to $1,952,531,000 in 2005, an increase of$214,121,000 or 11%. The Company’s television segment net revenues were$1,605,720,000 in 2006 compared to $1,360,694,000 in 2005, an increase of$245,026,000 or 18%. The growth was attributable to strong viewership andhigher rates for advertising spots across the Company’s three televisionnetworks, an increase in advertising revenues due to the 2006 World Cup gamesand an increase in subscriber fees including a favorable adjustment of$5,866,000 related to programming services provided to a cable operator, notpreviously recognized. The owned-and-operated stations also had increased netrevenues which benefited from the 2006 World Cup games, primarily in the LosAngeles, Phoenix, Miami, Houston and Chicago markets. The Company’s radiosegment had net revenues of $381,547,000 in 2006 compared to $359,107,000 in2005, an increase of $22,440,000 or 6.2%. The growth was attributable primarilyto increased revenues at the stations in the Los Angeles, Miami, Chicago,Phoenix and San Antonio markets. The Company’s music segment generated netrevenues of $141,065,000 in 2006 compared to $206,444,000 in 2005, a decreaseof $65,379,000 or 31.7%. The Company attributes the decrease in the musicsegment to underperforming releases, slippage in the release schedule,piracy and a continued high level of returns compounded by economic factors andchanging immigration policies impacting music sales in the industry. TheCompany’s Internet segment had net revenues of $38,320,000 in 2006 compared to$26,286,000 in 2005, an increase of $12,034,000 or 45.8%, primarily related toan increase in advertisers and increased spending from existing advertisers.

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***Direct OperatingExpenses.******  ***Direct operating expenses (excludingdepreciation and amortization) increased to $809,768,000 in 2006 from$729,973,000 in 2005, an increase of $79,795,000 or 10.9%. The Company’stelevision segment direct operating expenses were $633,431,000 in 2006 comparedto $536,209,000 in 2005, an increase of $97,222,000 or 18.1%. The increase isdue primarily to 2006 World Cup costs of $108,258,000 and increased license feeexpense of $20,329,000 paid under our PLAs, offset by a decrease in otheroperating costs of $31,365,000. The decrease in other operating costs was dueto the benefits resulting from the Company’s cost reduction plan implemented inthe fourth quarter of 2005 which eliminated job redundancies and inefficienciesand abandonment of certain less profitable programming, and a reimbursement of$4.5 million for production costs that Televisa overbilled the Company relatedto the show “100 Mejicanos Dijeron” ($4,100,000 of which relates to costs paidby us prior to 2006). The Company’s radio segment had direct operating expensesof $72,702,000 in 2006 compared to $65,772,000 in 2005, an increase of$6,930,000 or 10.5%. The increase is due to increased programming costs of$6,562,000, primarily related to talent, and technical costs of $368,000. Thedirect operating expenses of the Company’s music segment were $89,844,000 in2006 compared to $115,364,000 in 2005, a decrease of $25,520,000 or 22.1%. Thedecrease was primarily attributable to decreased production costs resultingfrom lower revenues. The Company’s Internet segment had direct operatingexpenses of $13,791,000 in 2006 compared to $12,628,000 in 2005, an increase of$1,163,000 or 9.2%. The Company’s direct operating expenses include share-basedcompensation costs of $1,482,000. As a percentage of net revenues, the Company’sdirect operating expenses were 37.4% in 2005 and 2006.

***Selling, Generaland Administrative Expenses.***   Selling,general and administrative expenses (excluding depreciation and amortization)increased to $599,719,000 in 2006 from $559,281,000 in 2005, an increase of$40,438,000 or 7.2%. The increase in selling, general and administrativeexpenses includes share-based compensation costs of $11,196,000, Televisalitigation costs of $8,144,000, and strategic alternative costs of $13,307,000.The Company’s television segment selling, general and administrative expenseswere $371,242,000 in 2006 compared to $335,215,000 in 2005, an increase of$36,027,000, or 10.7%. The increase is due primarily to strategic alternativecosts of $13,156,000, Televisa litigation costs of $8,144,000, increasedgeneral and administrative compensation costs of $11,484,000, share-basedcompensation costs in general and administrative expenses of $5,255,000 offsetin part by a decrease in certain insurance costs of $3,903,000. The Company’sradio segment had selling, general and administrative expenses of $165,020,000in 2006 compared to $151,985,000 in 2005, an increase of $13,035,000 or 8.6%.The increase is due primarily to an asset impairment charge of $1,618,000,share-based compensation costs in general and administrative expenses of$2,332,000, increased promotion costs of $1,843,000, increased selling costs of$2,673,000 and an increase in bad debt expense of $1,838,000. The Company’smusic segment had selling, general and administrative expenses of $48,408,000in 2006 compared to $59,595,000 in 2005, a decrease of $11,187,000 or 18.8%.The decrease is due primarily to a decrease in compensation costs due to lowerrevenues. The Company’s Internet segment had selling, general andadministrative expenses of $15,049,000 in 2006 compared to $12,486,000 in 2005,an increase of $2,563,000 or 20.5%. As a percentage of net revenues, theCompany’s selling, general and administrative expenses decreased from 28.6% in2005 to 27.7% in 2006.

***Cost Reduction Plan.******  ***The cost reduction planincluded reducing approximately 5.6% of the workforce by eliminating jobredundancies and inefficiencies. The Company incurred a pre-tax charge ofapproximately $30,289,000 in the fourth quarter of 2005 consisting of employeeterminations of $17,761,000 and abandonment of programming and other costs of$12,528,000.

***Depreciation andAmortization.******  ***Depreciationand amortization decreased to $90,791,000 in 2006 from $93,223,000 in 2005, adecrease of $2,432,000 or 2.6%. The Company’s depreciation expense increased to$81,641,000 in 2006 from $79,095,000 in 2005, an increase of $2,546,000primarily related to capital expenditures. The Company had amortization ofintangible assets of $9,150,000 and $14,128,000 in 2006 

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and 2005, respectively, adecrease of $4,978,000 which is due primarily to certain music intangibleassets being fully amortized.

Depreciation and amortization expense for thetelevision segment increased by $1,508,000 to $68,435,000 in 2006 from$66,927,000 in 2005 due to depreciation expense related to capitalexpenditures. Depreciation and amortization expense for the radio segment increasedby $643,000 to $12,292,000 in 2006 from $11,649,000 in 2005. Depreciation andamortization expense for the music segment decreased by $4,957,000 to$7,920,000 in 2006 from $12,877,000 in 2005, related primarily to certainintangible assets being fully amortized. Depreciation and amortization expensefor the Internet segment increased by $374,000 to $2,144,000 in 2006 from$1,770,000 in 2005.

***Operating Income.****  *As a result of the above factors, operating incomeincreased to $666,374,000 in 2006 from $539,765,000 in 2005, an increase of$126,609,000 or 23.5%. The Company’s television segment had operating income of$532,612,000 in 2006 and $392,350,000 in 2005, an increase of $140,262,000 or35.7%. The Company’s radio segment had operating income of $131,533,000 in 2006compared to $129,628,000 in 2005, an increase of $1,905,000 or 1.5%. TheCompany’s music segment had an operating loss of $5,107,000 in 2006 compared tooperating income of $18,575,000 in 2005, a decrease of $23,682,000. The Company’sInternet segment had operating income of $7,336,000 in 2006 compared to anoperating loss of $788,000 in 2005, an improvement of $8,124,000. The Company’soperating income as a percentage of net revenue was 30.8% and 27.6% in 2006 and2005, respectively.

***Interest Expense,Net.****  *Interestexpense, net increased to $88,105,000 in 2006 from $84,048,000 in 2005, anincrease of $4,057,000 or 4.8%. The increase is due to higher interest ratesand borrowings from the revolving credit facility to fund the 2005 stockrepurchase plan and the acquisitions of WLII in 2005 and Disa in 2006. See “Liquidityand Capital Resources—Debt Instruments.”

***Stock Dividend.******  ***Equity Broadcasting Corporation stockdividend income was $1,812,000 in 2006 and 2005. The Series A convertiblepreferred stock has a mandatory redemption date of June 8, 2008.

***Equity Income inUnconsolidated Subsidiaries and Other.******  ***Equity income inunconsolidated subsidiaries increased by $1,581,000 to $2,540,000 in 2006 from$959,000 in 2005, due primarily to higher income related to the Company’sequity method investments.

***NontemporaryDecline in Fair Value of Investment.******  ***In 2006, the Company recordeda charge for a nontemporary decline in the fair value of its investment in St.Louis/Denver LLC of $5,200,000. In 2005, the Company recorded a charge for anontemporary decline in the fair value of its investments in Entravision of$73,077,000 and St. Louis/Denver LLC of $8,800,000. See “Notes to ConsolidatedFinancial Statements—7. Investments and Variable Interest Entities.”

***Gain on Sales ofEntravision Stock.******  ***OnMarch 2, 2006, the Company and Entravision Communications Corporationcompleted the repurchase by Entravision of 7 million shares of Entravision Class Ucommon stock held by the Company, for an aggregate sale price of $51.1 million,or $7.30 per share. The Company recognized a gain on the repurchase transactionof approximately $1,260,000 in the first quarter of 2006. In the third quarterof 2006, the Company sold 0.2 million additional shares of Entravision Class Ucommon stock and recognized a gain of $194,000.

***NoncontrollingInterest in Variable Interest Entities.******  ***Under the guidelines of FinancialAccounting Standards Board Interpretation No. 46, “Consolidation of VariableInterest Entities,” (“FIN 46”), the Company is required to consolidate theoperating results of Disa, which, until October 26, 2006 was owned 50% bythe Company and 50% by the Chavez family. The Company recorded a noncontrollinginterest loss of $912,000 in 2006, related to the Chavez family’s 50% ownershipof Disa. The Company consolidated WLII for the six months ended June 30,2005 when it was owned 100% by Raycom. On June 30, 2005, the Companyacquired WLII for approximately $190,000,000, excluding acquisition costs. In2005, the Company recorded a noncontrolling interest loss of $4,120,000 relatedto its variable interest entities. By 

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recording thenoncontrolling interest (the portion not owned by the Company), the results ofoperations of the VIEs, variable interest entities, do not have an impact onour net income. WLII’s net income has no impact on our net income through June 30,2005 since Raycom owned 100% of WLII.

***Provision forIncome Taxes.******  ***In2006, the Company reported an income tax provision of $226,236,000,representing $162,258,000 of current tax expense and $63,978,000 of deferredtax expense. In 2005, the Company reported an income tax provision of$182,003,000, representing $125,482,000 of current tax expense and $56,521,000of deferred tax expense. The effective tax rate was 39.3% in 2006 and 49.3% in2005. The Company’s effective tax rate of 39.3% for 2006 is lower than the49.3% for 2005 due primarily to a charge in 2005 for a nontemporary decline inthe fair value of the Entravision investment, for which no tax benefit wasrecorded. Also, in 2006 a tax benefit of $5,697,000 was recorded due to theresolution of various federal and state income tax audits.

***Net Income.******  ***As a result of the abovefactors, the Company reported net income in 2006 of $349,174,000 compared tonet income of $187,179,000 in 2005, an increase of $161,995,000 or 86.5%. As apercentage of net revenues, the Company’s net income increased from 9.6% in2005 to 16.1% in 2006.

***Operating IncomeBefore Depreciation and Amortization.******  ***Operating income beforedepreciation and amortization increased to $757,165,000 in 2006 from$632,988,000 in 2005, an increase of $124,177,000 or 19.6%. As a percentage ofnet revenues, the Company’s operating income before depreciation andamortization increased from 32.4% in 2005 to 34.9% in 2006.

The Company uses the key indicator of “operatingincome before depreciation and amortization” primarily to evaluate the Company’soperating performance and for planning and forecasting future businessoperations. In addition, this key indicator is commonly used as a measure ofperformance for broadcast companies, is used by investors to measure a company’sability to service debt and other cash needs, and provides investors theopportunity to evaluate the Company’s performance as it is viewed bymanagement.

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Operatingincome before depreciation and amortization is not, and should not be used as,an indicator of or an alternative to operating income, net income or cash flowas reflected in the consolidated financial statements, is not a measure offinancial performance under generally accepted accounting principles (“GAAP”)and should not be considered in isolation or as a substitute for measures ofperformance prepared in accordance with GAAP. Since the definition of operatingincome before depreciation and amortization may vary among companies andindustries it should not be used as a measure of performance among companies.In accordance with SEC guidelines, the Company is providing on a consolidatedbasis a reconciliation of the non-GAAP term operating income beforedepreciation and amortization to net income, which is the most directlycomparable GAAP financial measure, and to operating income for the segments forthe years ended December 31, 2006 and 2005:

| ** **                                                     | ** ** | **Year Ended December 31,** | ** ** |
|----------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                     | ** ** | **2006**                                   | ** ** | **2005** | ** ** |
| ** **                                                     | ** ** | **(unaudited)**                            | ** ** | **(unaudited)** | ** ** |
| ** **                                                     | ** ** | **(In thousands)**                    | ** ** |
| Operating income  before depreciation and amortization         |       |                                       | $          | 757,165 |   |   |   | $ | 632,988 | (a) |   |
| Depreciation and  amortization                                 |       |                                       | 90,791     |   |   |   | 93,223 |   |   |
| Operating income                                               |       |                                       | 666,374    |   |   |   | 539,765 |   |   |
| Other expense (income):                                        |       |                                       |       |   |   |   |   |   |   |
| Interest expense, net                                          |       |                                       | 88,105     |   |   |   | 84,048 |   |   |
| Gain on sales of Entravision stock                             |       |                                       | (1,454     | ) |   |   | — |   |   |
| Amortization of deferred financing costs                       |       |                                       | 2,553      |   |   |   | 3,309 |   |   |
| Stock dividend                                                 |       |                                       | (1,812     | ) |   |   | (1,812 | ) |   |
| Equity (income) loss in unconsolidated subsidiaries  and other |       |                                       | (2,540     | ) |   |   | (959 | ) |   |
| Nontemporary decline in fair value of investments              |       |                                       | 5,200      |   |   |   | 81,877 |   |   |
| Noncontrolling interest of variable interest  entities         |       |                                       | 912        |   |   |   | 4,120 |   |   |
| Provision for income taxes                                     |       |                                       | 226,236    |   |   |   | 182,003 |   |   |
| Net income                                                     |       |                                       | $          | 349,174 |   |   |   | $ | 187,179 |   |   |

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(a)           Includesa cost reduction plan charge of $30.3 million.

| ** **                                                       | ** ** | **Year Ended December 31, 2006** | ** ** |
|------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                       | ** ** | **Consolidated**                                     | ** ** | **Television** | ** ** | **Radio** | ** ** | **Music** | ** ** | **Internet** | ** ** |
| ** **                                                       | ** ** | **(unaudited)**(In thousands)                   | ** ** |
| Operating income  before depreciation and amortization |       |                                                 | $          | 757,165 |   |   | $ | 601,047 |   | $ | 143,825 |   | $ | 2,813 |   |   | $ | 9,480 |   |   |
| Depreciation and  amortization                                   |       |                                                 | 90,791     |   |   | 68,435 |   | 12,292 |   | 7,920 |   |   | 2,144 |   |   |
| Operating income (loss)                                          |       |                                                 | $          | 666,374 |   |   | $ | 532,612 |   | $ | 131,533 |   | $ | (5,107 | ) |   | $ | 7,336 |   |   |

 

| ** **                                                         | ** ** | **Year Ended December 31, 2005** | ** ** |
|--------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                         | ** ** | **Consolidated**                                     | ** ** | **Television** | ** ** | **Radio** | ** ** | **Music** | ** ** | **Internet** | ** ** |
| ** **                                                         | ** ** | **(unaudited)**(In thousands)                   | ** ** |
| Operating income  (loss) before depreciation and amortization |       |                                                 | $          | 632,988 | (a) |   | $ | 459,277 |   | $ | 141,277 |   | $ | 31,452 |   |   | $ | 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 | ) |   |

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(a)           Consolidated VIE operatingincome before depreciation and amortization totaled $21,768,000, the televisionand music VIEs contributed income of $2,430,000 and $19,338,000 to the total,respectively. For comparison purposes, WLII, which was a variable interestentity until June 30, 2005, had operating income before depreciationand amortization of$9,907,000 for the six-months ended December 31, 2005.

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**Year Ended December 31,2005 Compared to Year Ended December 31, 2004**

**Overview**

In comparing ourresults of operations for the years ended December 31, 2005 and 2004, thefollowing 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 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. See “Notes to Consolidated Financial Statements—8. 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—7. 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 year ended December 31, 2005. On June 30,2005, the Company acquired WLII for $190,000,000, excluding direct acquisitioncosts. Also see “Notes to Consolidated Financial Statements—7. Investments andVariable Interest Entities.”

·       Forthe year ended December 31, 2005, the Company recorded selling, generaland administrative expenses of $1,209,000 for Televisa litigation costsregarding its PLA and direct operating expenses of $9,590,000 for payments madeunder protest and other license fee overcharges to Televisa. In 2005, the other license fee overchargeswere $2,000,000.

·       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.

·       Inthe first quarter of 2004, the Company recorded stock dividend income of$4,641,000 ($4,100,000 net of tax) related to the periods June 8, 2001 to December 31,2003 in connection with its investment in Equity Broadcasting Corporation.

***Net 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 

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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 variable interest 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 increase in the music segment was dueprimarily to the success of several album releases in 2005. The Company’sInternet segment had revenues of $26,286,000 in 2005 compared to $18,143,000 in2004, an increase of $8,143,000 or 44.9%, primarily related to new advertisersand increased spending from existing advertisers.

***Direct OperatingExpenses.*****  **Directoperating expenses (excluding depreciation and amortization) increased to$729,973,000 in 2005 from $663,457,000 in 2004, an increase of $66,516,000 or10%. Existing operations accounted for 6.7% of the increase, while 3.3% wasattributable to the variable interest entities. The Company’s televisionsegment direct operating 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 was dueto increased license fee expense of $16,479,000 paid under our PLAs, 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 was 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 0.4%. As apercentage of net revenues, the Company’s direct operating expenses increasedfrom 37.1% in 2004 to 37.4% in 2005.

***Selling, Generaland Administrative Expenses.***   Selling,general and administrative expenses (excluding depreciation and amortization)increased to $559,281,000 in 2005 from $528,841,000 in 2004, an increase of$30,440,000 or 5.8%. Existing operations accounted for 4.7% of the increase,while 1.1% was attributable to the variable interest entities. The Company’stelevision segment selling, general and administrative expenses were$335,215,000 in 2005 compared to $311,916,000 in 2004, an increase of$23,299,000 or 7.5%. The increase was due to increased selling costs of$10,225,000 reflecting higher sales in 2005, increased general andadministrative compensation costs of $7,005,000, increased research costs of$6,703,000 offset by a decrease in various other costs of $634,000. The Company’sradio segment had selling, general and administrative expenses of $151,985,000in 2005 compared to $151,690,000 in 2004, an increase of $295,000. The increasewas due in part to increased selling costs of $5,853,000 reflecting highersales in 2005 offset in part by decreases in compensation related costs of$1,341,000, legal fees of $1,131,000, rent expense of $1,117,000, insurancecosts of $571,000 and various other costs savings of $1,398,000. The Company’smusic segment had selling, general and administrative expenses of $59,595,000in 2005 compared to $52,964,000 in 2004, an increase of $6,631,000. Theincrease was due to variable interest entity costs related to Disa of$4,178,000 and various other cost increases of $2,453,000. The Company’sInternet segment had selling, general and administrative 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’s selling, general andadministrative expenses decreased from 29.6% in 2004 to 28.6% 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.

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***Depreciation andAmortization.******  ***Depreciationand amortization decreased to $93,223,000 in 2005 from $101,382,000 in 2004, adecrease of $8,159,000 or 8%. Existing operations accounted for a decrease of9.5%, while the variable interest entities accounted for an increase of 1.5%.The Company’s depreciation expense decreased to $79,095,000 in 2005 from$82,157,000 in 2004, a decrease of $3,062,000 primarily related to the disposaland acceleration of depreciation expense of certain assets. The Company hadamortization of intangible assets of $14,128,000 and $19,225,000 in 2005 and2004, respectively, a decrease of $5,097,000, which was due primarily toelimination of amortization of radio intangible assets related to advertisingcontracts and a reduction of music intangible assets being amortized, primarilyartist contracts. 

Depreciation and amortization expense for thetelevision segment increased by $898,000 to $66,927,000 in 2005 from$66,029,000 in 2004 due to increased depreciation expense of $213,000 andamortization expense of $685,000, primarily related to WLII. Depreciation andamortization expense for the radio segment decreased by $4,414,000 to$11,649,000 in 2005 from $16,063,000 in 2004 due to a decrease in amortizationof intangibles of $2,861,000 resulting primarily from the elimination of radiointangible assets related to advertising contracts and a decrease indepreciation expense of $1,553,000. Advertiser contracts were being amortizedover a nine-month period that expired in June 2004. Depreciation andamortization expense for the music segment decreased by $2,566,000 to$12,877,000 in 2005 from $15,443,000 in 2004, primarily related to a reductionof intangible assets being amortized related to artist contracts. The contractsacquired from Fonovisa are being amortized over 10 years but most will be fullyamortized by the end of 2005. Depreciation and amortization expense for theInternet segment decreased by $2,077,000 to $1,770,000 in 2005 from $3,847,000in 2004, which was primarily related to a decrease in depreciation expenserelated to equipment fully depreciated in 2004.

***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 0.8%. The Company’s radiosegment had operating income of $129,628,000 in 2005 compared 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.****  *Interestexpense, net increased to $84,048,000 in 2005 from $66,061,000 in 2004, anincrease of $17,987,000 or 27.2%. The increase was due to higher interest ratesand borrowings related to the Company’s stock repurchase plan and acquisitionof WLII. See “Liquidity and Capital Resources—Debt Instruments.”

***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.

***NoncontrollingInterest of Variable Interest Entities.***   Underthe guidelines of FIN 46, the Company was required to consolidate the operatingresults of Disa, which was owned 50% by the Company and 50% by the Chavezfamily until October 2006, and was required to consolidate WLII, which hadbeen owned 100% by Raycom until the Company’s June 30, 2005 acquisition ofWLII. On June 30, 2005, the Company acquired WLII for approximately$190,000,000, excluding acquisition costs, see “Notes to Consolidated FinancialStatements—7. Investments and Variable Interest Entities.” The Company recordeda noncontrolling interest loss of $4,120,000 in 2005, which consisted of acharge of $5,975,000 related to the 

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Chavez family’s 50%ownership of Disa and income of $1,855,000 related to Raycom’s 100% ownershipof WLII. In 2004, the Company recorded a noncontrolling interest loss of$7,311,000 related to its variable interest entities. By recordingnoncontrolling interest (the portion not owned by the Company), the results ofoperations of the VIEs do not have an impact on our net income. The use of theequity method of accounting prior to March 31, 2004 and the consolidationof Disa since April 1, 2004 have the same effect on the Company’s netincome. WLII’s net income has no impact on our net income through June 30,2005 since Raycom owned 100% of WLII. Beginning July 1, 2005, WLII’s netincome is included in the Company’s consolidated net income.

***Equity (Income)Loss in Unconsolidated Subsidiaries and Other.******  ***Equity (income) loss inunconsolidated subsidiaries and other improved by $2,901,000 to income of$959,000 in 2005 from a loss of $1,942,000 in 2004, due primarily to lowerlosses on equity method investments of $1,873,000 and a decrease in otherlosses of $1,028,000.

***NontemporaryDecline in Fair Value of Investment.******  ***The Company recorded a charge for a nontemporarydecline 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 “Notesto Consolidated Financial Statements—7. Investments and Variable InterestEntities.”

***Provision forIncome Taxes.******  ***In2005, the Company reported an income tax provision of $182,003,000,representing $125,482,000 of current tax expense and $56,521,000 of deferredtax expense. In 2004, the Company reported an income tax provision of$164,574,000, representing $98,703,000 of current tax expense and $65,871,000of deferred tax expense. The total effective tax rate was 49.3% in 2005 and39.1% in 2004. The Company’s effective tax rate of 49.3% for 2005 was higherthan the 39.1% for 2004 due primarily to the charges for the nontemporarydecline in the fair value of the Entravision and St. Louis/Denver LLCinvestments, for which no tax benefit was recorded, and a tax benefit recordedin the second quarter of 2004 of $4,737,000, resulting from the resolution ofvarious federal and state income tax audits.

***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%. Followingthe adoption of FIN 46 on March 31, 2004, the Company’s inclusion of thevariable interest entity, Disa, and WLII while it was a VIE, in the Company’sresults of operations did not have an impact on our net income. The equitymethod of accounting and the VIE consolidation of Disa have the same effect onthe Company’s net income. While WLII was a VIE, WLII’s net income had no impacton our net income since Raycom owned 100% of WLII. As a percentage of netrevenues, the Company’s net income decreased from 14.3% in 2004 to 9.6% in2005.

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***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 incomebefore depreciation and amortization includes a cost reduction plan charge of$30,289,000. Existing operations accounted for 4.5% of the increase, while 1.9%was attributable to the variable interest entities. As a percentage of netrevenues, the Company’s operating income before depreciation and amortizationdecreased from 33.3% in 2004 to 32.4% in 2005. For a description of the reasonsthe Company 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 see “Notes to ConsolidatedFinancial Statements—17. Business Segments.”

| ** **                                                     | ** ** | **Year 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 $30.3 million.

| ** **                                                  | ** ** | **Year Ended December 31, 2005** | ** ** |
|-------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                  | ** ** | **Consolidated**                                     | ** ** | **Television** | ** ** | **Radio** | ** ** | **Music** | ** ** | **Internet** | ** ** |
| ** **                                                  | ** ** | ** **                                           | ** ** | ** ** | ** ** | **(unaudited)** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                  | ** ** | ** **                                           | ** ** | ** ** | ** (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 | ) |

 

| ** **                                                    | ** ** | **Year Ended  December 31, 2004** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                    | ** ** | **Consolidated**                  | ** ** | **Television** | ** ** | **Radio** | ** ** | **Music** | ** ** | **Internet** | ** ** |
| ** **                                                    | ** ** | ** **                        | ** ** | ** ** | ** ** | **(unaudited)** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                    | ** ** | ** **                        | ** ** | ** ** | ** (In thousands)** | ** ** | ** ** | ** ** | ** ** |
| 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 operating income before depreciation and amortization of $9,907,000 for thesix-months ended December 31, 2005.

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(b)          Consolidated VIE operatingincome before depreciation and amortization totaled $20,312,000. The televisionand music VIEs contributed $10,518,000 and $9,794,000 to the total,respectively.

**Liquidity andCapital Resources**

The Company’s primary source of cash flow is itstelevision and radio operations. Funds for debt service, capital expendituresand operations historically have been, and we expect will continue to be,provided by funds from operations and by borrowings.

Cash and cash equivalents were $103,522,000 atDecember 31, 2006, and $99,400,000 at December 31, 2005. The increaseof $4,122,000 was attributable to net cash provided from operating activitiesof $441,172,000 and proceeds from the issuance of long-term debt of$550,000,000, proceeds and tax benefits from stock options exercises of$123,683,000, and the sale of Entravision stock of $52,718,000 offset by debt repaymentsof $938,845,000, the acquisition of Disa for $105,000,000, capital expendituresof $80,464,000 and other uses of funds of $39,142,000.

We will incur a substantial amount of indebtedness inconnection with the Merger. As of December 31, 2006, after giving effectto the Merger, we would have had approximately $10 billion of long-termdebt outstanding.

The new seniorsecured credit facilities that we expect to enter into in connection with theMerger will consist of:

·  a 7-year revolving credit facility of upto $750.0 million in revolving credit loans and letters of credit, up to $200.0million of which may be drawn concurrently with the consummation of the Merger.Any revolving term loan balance at closing will accrue interest at a floatingrate, which can be either a Eurodollar rate plus an applicable margin or, atthe borrower’s option, an alternative base rate (defined as the higher of(x) the Deutsche Bank AG New York Branch prime rate and (y) thefederal funds effective rate, plus one half percent (.50%) per annum) plus anapplicable margin. The applicable margin for Eurodollar loans and alternativebase loans will be finalized upon the consummation of the Merger. The Companydoes not expect to draw down any amounts on this facility upon the consummationof the Merger;

·       a7.5 year, senior term loan facility totaling $7 billion will accrue interest ata floating rate, which can be either a Eurodollar rate plus an applicablemargin or, at the borrower’s option, an alternative base rate (defined as thehigher of (x) the Deutsche Bank AG New York Branch prime rate and(y) the federal funds effective rate, plus one half percent (0.50%) perannum) plus an applicable margin. The applicable margin for Eurodollar loansand alternative base loans will be finalized upon the consummation of theMerger. The entire $7 billion facility is expected to be drawn concurrentlywith the consummation of the Merger;

·       senior notes with an 8 yearmaturity totaling $1.5 billion will bear interest at an estimated rate of8.75%, payable semi-annually of each year. We may instead pay all accruedinterest, 50% of such accrued interest and increasing the principal amount ofthe note for the other 50% of such accrued interest at an estimated rate of9.5%, or by increasing the principal amount of the outstanding senior notes forthe entire amount of accrued interest at an estimated rate of 9.50%. The entire$1.5 billion of notes are expected to be issued concurrently with theconsummation of the Merger;

·       a2 year, second-lien term loan facility totaling $500 million will accrueinterest at a floating rate, which can be either a Eurodollar rate plus anapplicable margin or, at the borrower’s option, an alternative base rate(defined as the higher of (x) the Deutsche Bank AG New York Branch primerate and (y) the federal funds effective rate, plus one half percent(0.50%) per annum) plus an applicable margin. The applicable margin forEurodollar loans and alternative base loans will be finalized upon theconsummation of the Merger and will be repaid with asset sale proceeds. The 

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entire $500 millionfacility is expected to be drawn concurrently with the consummation of theMerger; and

·       a7.5 year delayed draw term loan facility of up to $450.0 million, none of whichis expected to be drawn upon the consummation of the Merger. We intend to usethe delayed draw term loans to refinance the 3.5% Senior Notes due 2007 and the3.875% Senior Notes due 2008 when they mature.

The term loan facility and delayed draw term loanfacility will be subject to amortization in equal quarterly installments ofprincipal in an aggregate annual amount equal to (a) in the fourth andfifth years following the closing date of the Merger, 2.5% of the originalprincipal amount of the term loans and the original principal amount of thedelayed draw term loans at the time of the incurrance thereof and (b) inthe case of the sixth and seventh years following the closing date of theMerger, 1.0% of the original principal balance of the term loans, with theremaining balance payable at maturity. The second-lien term loan facility willnot be subject to amortization and will be payable in full on the date which istwo years following the closing date of the Merger (as such maturity date maybe extended from time to time).

The Investors have advised the Company that theyintend to divest certain non-core assets subsequent to the Merger, includingour music recording and publishing businesses and a portfolio of non-core radiostations. These businesses contributed approximately $15 million of operatingincome before depreciation and amortization for the year ended 2006. We willuse the proceeds from the sale of these assets to repay our new second-lien termloan facility.

Voluntary prepayments of principal amounts outstandingunder the senior secured credit facilities will be permitted at any time (otherthan with respect to the second-lien term loan facility, which will only bevoluntarily prepayable on a limited basis), however, if a prepayment ofprincipal is made with respect to a Eurodollar loan on a date other than thelast day of the applicable interest period, the lenders will requirecompensation for any funding losses and expenses incurred as a result of theprepayment.

Our liquidity requirements will be significant,primarily due to debt service requirements and financing costs relating to theindebtedness in connection with the Merger.

On June 27, 2006,Moody’s downgraded our senior unsecured debt rating to Baa3 from Baa2 and, onSeptember 28, 2006, downgraded our ratings again to Ba3. Additionally, onJune 29, 2006, Standard & Poor’s lowered our senior unsecureddebt rating to BB- from BBB-. The downgrades were related to concerns over thedebt we contemplate to incur in connection with the Merger.

***Capital Expenditures***

Capital expenditurestotaled $80,464,000 for the year ended December 31, 2006. The Company’scapital expenditures exclude the capitalized lease obligations of the Company.In 2007, the Company expects capital expenditures to be approximately$92,000,000, which are expected to consist of $18,000,000 for stationfacilities primarily in Puerto Rico; $14,000,000 for Univision Network upgradesand facilities expansion; $14,000,000 primarily for radio station facilityupgrades; and approximately $46,000,000 primarily for normal capitalexpenditures.

***Debt Instruments***

The Company’s 7.85% senior notes due 2011 have a facevalue of $500 million, a book value of $497.4 million and a fair value ofapproximately $503.8 million at December 31, 2006. These senior notes bearsimple interest at the rate of 7.85% per annum payable in cash onJanuary 15 and July 15 of each year.

On October 15, 2003, the Company issued $200 million aggregateprincipal amount of senior notes due 2007 and $250 million aggregate principalamount of senior notes due 2008. The senior notes due 2007 

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bear interest at the rate of 3.5% per annumand the senior notes due 2008 bear interest at the rate of 3.875% per annum.The interest is payable on both series of senior notes in cash on April 15and October 15 of each year. When the Company issued these senior notes,it entered into a fixed-to-floating interest rate swap that results in a fairvalue hedge that is perfectly effective. At December 31, 2006, the Companyhad a swap liability with a fair value of $7.1 million reported in other long-termliabilities related to this transaction. The $450 million face value seniornotes are carried at fair value of $442.3 million at December 31, 2006.

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 indebtedness, are senior in right of payment to anyof the Company’s future subordinated indebtedness, are effectively subordinatedto senior secured indebtedness, and are fully and unconditionally guaranteed byall of the Company’s subsidiaries that guarantee the senior secured creditfacilities. The Company has the option to redeem all or a portion of the seniornotes at any time at the redemption prices set forth in the note indenture. Theindenture does not contain any provisions that would require us to repurchaseor redeem or otherwise modify the terms of the senior notes upon a change ofcontrol. The indenture does not limit our ability to incur indebtedness orrequire the maintenance of financial ratios or specified levels of net worth orliquidity. The Company’s existing notes will remain outstanding, subject to ourintention to refinance the notes with the delayed draw term loan facility(other than the second-lien term loan facility), and be fully secured followingcompletion of the Merger.

On March 17,2006, the Company entered into a new revolving credit facility that will matureon March 17, 2011 with a syndicate of commercial lenders. The aggregateamount of the commitments under the new revolving credit facility is $1billion, which includes a $100 million sublimit for the issuance of standbyletters of credit. The Company has the right, subject to certain conditions, toincrease the commitment amount up to an additional $500 million. No lender isobligated to participate in any such increase. At December 31, 2006, theCompany had bank borrowings outstanding under its revolving credit facility of$180 million resulting primarily from the Company’s repurchases of its Class ACommon Stock in 2005. The Company’s existing revolving credit facility willterminate upon completion of the Merger. The Company has approximately $23million of letters of credit outstanding under the credit facility, whichprimarily includes $15 million related to the FIFA World Cup Agreement.

On August 24, 2006, the Company amended itsrevolving credit facility to convert the basis for assessing the LIBOR interestrate cost margin on its bank loans from a debt rating measure to a leverageratio measure, which is basically a total debt to operating income beforedepreciation and amortization ratio. Depending on the Company’s leverage ratio,the LIBOR interest rate margin on the Company’s revolving credit facilityranges from 0.22% to 0.475% per annum. The Company’s LIBOR interest rate marginapplicable to the revolving credit facility was 0.22% as of December 31,2006.

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 Bank of America or 0.50% per annum over the federal fundsrate. 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 31, 2006, the Company’s effectiveinterest rate, excluding deferred financing costs, on its bank debt and seniornotes was approximately 6.5%.

The credit agreement contains customary covenants,including restrictions on liens and financial covenants relating to interestcoverage and leverage ratios. The credit agreement also restricts investmentsand cash dividends if a default exists or would result therefrom. Under thecredit agreement, the Company is also limited in the amount of secured debt andsubsidiary debt it can incur and in its ability to sell assets, engage inmergers and engage in material lines of business substantially different frombusiness generally 

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considered to be in themedia and communications industry. At December 31, 2006, the Company wasin compliance 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. The guarantees ofthe obligations under the revolving credit facility and the senior notes willbe released if our senior unsecured debt is rated BBB or better by Standard &Poor’s Rating Services and Baa2 or better by Moody’s Investor Service, Inc.The guarantees of such subsidiary will be reinstated if such ratings fall belowBBB- by Standard & Poor’s or Baa3 by Moody’s.

***Change in ControlRetention Bonus and Severance Plans***

The change in control severance plan applicableto the Company’s executive officers has estimated severance benefitspayable in connection with a change in control of approximately $33 million incash, and estimated prorated bonus payments to such officerstotaling approximately $1.8 million in cash (assuming that the closing date ofthe Merger occurs on March 26, 2007). The executive officers (other thanA. Jerrold Perenchio) were also awarded restricted stock units that will remainoutstanding at the closing of the Merger and will vest on the earlier of 90days following the Merger (if the holder is employed by the Buyer on such date)or the termination date of the executive officer’s employment without cause orresignation for good reason after the Merger. The estimated value of theserestricted stock units is $14.5 million.

Estimated retention bonus payments,which are payable to other employees at the earlier of the Merger closingdate or March 2007 under the change incontrol employee retention bonus plan, are estimated to be $4.7 millionin cash. This cost is being expensed ratably through the expected date of theclosing of the Merger. Certain of these other employees are also entitled to aretention bonus on the one year anniversary of the Merger closing date providedthat they are either employed on such date or have a qualifying termination ofemployment prior to such date (and in such latter case, will be paid on thedate of such termination). In addition, upon the closing of the Merger, subjectto certain exceptions, each restricted stock unit that remains outstanding asof the effective time of the Merger will be paid in cash.

***Contractual Obligations***

*The MergerAgreement*

The Company has enteredinto a Merger Agreement, dated as of June 26, 2006 with Buyer andAcquisition Sub whereby Buyer will acquire the Company. See “Notes toConsolidated Financial Statements—2. Recent Developments.”

*Puerto Rico Lease*

The Company is party to 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 term of the lease is 50 years. The sum of the lease payments willbe approximately $74 million over 50 years.

*Univision MusicGroup*

Diara Inc., which iswholly-owned by José Behar, President and Chief Executive Officer of UnivisionMusic Group, had a put right and the Company had a call right that required theCompany to purchase a portion of Diara’s interest in Univision Music LLC in2006 at an amount capped at $8 million. OnMay 12, 

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2006, the Company made a payment of $8 million toDiara Inc. in accordance with this agreement. In 2009, Diara has a putright and the Company has a call right that, if exercised, would require theCompany to purchase the remainder of Diara’s interest in Univision Music LLCbased on the estimated fair value of Univision Music LLC, less the amount ofcash generated by Univision Music LLC. No amount was payable related to the putright at December 31, 2006.

*World Cup Rights*

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 paymentsand 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 games. The funds for these payments areexpected to come from income from operations and/or borrowings from the Company’sbank credit facility. As the Company makes each payment, the next scheduledpayment under the contract will be supported by a letter of credit.

In August 2000, the Company acquired theSpanish-language television rights in the U.S. to the 2002 and 2006 FIFA WorldCup soccer games and other 2000-2006 FIFA events. The Company madepayments totaling $150 million over the term of the agreement, including $33million in the third quarter of 2006. At December 31, 2006, no furtherpayments are due related to the 2000-2006 FIFA events.

The funds for any paymentsdiscussed above are expected to come from cash from operations and/orborrowings from the Company’s revolving credit facility.

*EntravisionInvestment*

As part of the consentdecree pursuant to which the United States Department of Justice (“DOJ”)approved our acquisition of Hispanic Broadcasting Corporation, the Companyexchanged all of its Entravision voting common stock for 36,926,600 shares of Class Ucommon stock. The Entravision Class U common stock has limited votingrights and does not include the right to elect directors. Also, as part of theconsent decree with the DOJ, we are required to sell enough of our Entravisionstock so that our ownership of Entravision on a fully converted basis, whichincludes full conversion of employee options and all convertible securities,does not exceed 10% by March 26, 2009.

*Liquidity*

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 available borrowings under thecurrent bank credit facility will be adequate to meet liquidity needs in thenear future for the current capital structure of the Company. The Company alsobelieves that there will be sufficient liquidity in the near term under theproposed capital structure after the pending Merger. For more informationrelated to the Merger, see “Notes to Consolidated Financial Statements—2.Recent Developments.”

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

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Belowis a summary of the Company’s major contractual payment obligations as of December 31,2006:

**Major ContractualObligations**As of December 31, 2006

| ** **                         | ** ** | **Payments Due By Period** | ** ** |
|------------------------------------|------------|-------------------------------------------|------------|
| ** **                         | ** ** | **2007**                                  | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **Thereafter** | ** ** | **TOTAL** | ** ** |
| ** **                         | ** ** | **(In thousands)**                   | ** ** |
| Senior notes  principal            |       | $                                         | 200,000    |   | $ | 250,000 |   | $ | — |   | $ | — |   | $ | 500,000 |   |   | $ | — |   |   | $ | 950,000 |   |
| Senior notes  interest-fixed       |       | 39,250                                    |       | 39,250 |   | 39,250 |   | 39,250 |   | 39,250 |   |   | — |   |   | 196,250 |   |
| Senior notes  interest-variable(a) |       | 23,901                                    |       | 13,306 |   | — |   | — |   | — |   |   | — |   |   | 37,207 |   |
| Bank debt(b)                       |       | —                                    |       | — |   | — |   | — |   | 180,000 |   |   | — |   |   | 180,000 |   |
| Operating leases                   |       | 33,279                                    |       | 31,390 |   | 29,136 |   | 27,847 |   | 24,655 |   |   | 118,529 |   |   | 264,836 |   |
| Capital leases                     |       | 7,260                                     |       | 8,277 |   | 8,277 |   | 8,277 |   | 8,277 |   |   | 99,807 |   |   | 140,175 |   |
| Spanish  programming(c)            |       | 65,173                                    |       | 42,735 |   | 51,414 |   | 87,698 |   | 17,240 |   |   | 153,574 |   |   | 417,834 |   |
| English  programming(d)            |       | 1,632                                     |       | 1,298 |   | 991 |   | 181 |   | — |   |   | — |   |   | 4,102 |   |
| Nielsen                            |       | 36,184                                    |       | 26,581 |   | 21,356 |   | 21,038 |   | 22,352 |   |   | 3,763 |   |   | 131,274 |   |
| Music License Fees                 |       | 12,267                                    |       | 8,562 |   | 5,362 |   | — |   | — |   |   | — |   |   | 26,191 |   |
| Other                              |       | 2,465                                     |       | 2,694 |   | 1,921 |   | 1,250 |   | 176 |   |   | 3,342 |   |   | 11,848 |   |
|                               |       | $                                         | 421,411    |   | $ | 424,093 |   | $ | 157,707 |   | $ | 185,541 |   | $ | 791,950 |   |   | $ | 379,015 |   |   | $ | 2,359,717 |   |

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(a)           Interest expense is based on the LIBOR rate at December 31,2006.

(b)           The bank debt obligation is due in 2011; however, theCompany expects to pay it in 2007 in connection with the Merger.

(c)            Amounts exclude the license fees that will be paid in accordancewith the PLA, which is based primarily on 15% of Combined Net Time Sales. Amountsinclude broadcast rights’ costs for the 2010 and 2014 World Cup and other FIFAevents.

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

**Below are items notincluded in the summary table above:**

Theamounts in the table above do not reflect any contractual obligations relatedto the potential Merger, including any potential severance or bonus payments.

***Off-Balance Sheet Arrangements***

We donot have any off-balance sheet transactions, arrangements or obligations(including contingent obligations) that would have a material effect on ourfinancial results.

**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 $450 million and its bank loans outstanding of $180 million at December 31,2006, a change of 10% in interest rates would have an impact of approximately$3.4 million 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 four- andfive-year senior notes due 2007 and 2008 with a face value of $450 million. TheCompany’s 3.5% and 3.875% senior notes have a face value of $200 and $250million, respectively. The senior notes pay simple interest on April 15and October 15 of each year. As part of the transaction the Companyentered into a fixed-to-floating interest rate swap that results in a 

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fair value hedge that isperfectly effective. At December 31, 2006, the Company had a swapliability of $7.1 million reported in other long-term liabilities related tothis 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-50

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

Not applicable.

**Item 9A.**        Controlsand Procedures

**Conclusion Regarding the Effectiveness ofDisclosure Control and Procedures**

Disclosure controls and procedures are designed toensure that information required to be disclosed in our periodic reports filedor submitted under the Securities Exchange Act of 1934 is recorded, processed,summarized and reported within the required time periods. As of December 31,2006, the end of the period covered by this report, the Company carried out an evaluationunder the supervision and with the participation of our Chief Executive Officerand Chief Financial Officer of the effectiveness of our disclosure controls andprocedures. Based on that evaluation, our Chief Executive Officer and ChiefFinancial Officer have concluded that our disclosure controls and procedureswere effective. The Company reviews its disclosure controls and procedures, onan ongoing basis, and may from time to time make changes aimed at enhancingtheir effectiveness and 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, 2006 that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

**Management’s Reporton Internal Control Over Financial Reporting**

Our management is responsible for establishing and maintainingadequate internal control over financial reporting. Our internal control overfinancial reporting is a process designed under the supervision of our ChiefExecutive Officer and Chief Financial Officer to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of ourfinancial statements for external reporting purposes in accordance withU.S. generally accepted accounting principles.

As of the end of our 2006 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, 2006 waseffective.

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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 assuranceregarding prevention 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.

**Item 9B.**       OtherInformation

On January 1, 2007, Messrs. Cahill, Hobson,Kranwinkle and Rodriguez entered into amended employment agreements with usthat extended the date of expiration of such agreements to December 31,2009 and increased their annual base salaries for 2007 through 2009 to thefollowing amounts: for Cahill $825,000; for Hobson $935,000; for Kranwinkle$770,000; and for Rodriguez $1,100,000. All other terms of each executiveofficer’s employment agreement remain the same. For a description of theemployment agreements, as amended, see “Item 11. Executive Compensation” in Part IIIof this report.

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**PART III**

**ITEM 10.**         Directors,Executive Officers and Corporate Governance.

**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, 2006 were as follows:

| **Name**              | ** ** | ** ** | ** ** | **Age**                                                                                | ** ** | **Position** |
|-----------------------|------------|------------|------------|----------------------------------------------------------------------------------------|------------|--------------|
| A. Jerrold Perenchio  |       | 76         |       | Chairman of the Board  and Chief Executive Officer                                     |
| Robert V. Cahill      |       | 75         |       | Vice Chairman and  Corporate Secretary                                                 |
| Andrew W. Hobson      |       | 45         |       | Senior Executive Vice  President, Chief Strategic Officer, and Chief Financial Officer |
| C. Douglas Kranwinkle |       | 66         |       | Executive Vice President  and General Counsel                                          |
| Ray Rodriguez         |       | 55         |       | President and Chief Operating Officer                                                  |

 

Mr. Perenchio has been Chairman of the Board andChief Executive 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 Secretaryof the Company since May 2001. From December 1992 until May 2001,Mr. Cahill was Secretary and Vice President of the Company. Mr. Cahillwas Executive Vice President and General Counsel of Chartwell Partners, anaffiliate of Mr. Perenchio, from 1985 to June 30, 2004.

Mr. Hobson has been Senior Executive VicePresident and 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 Presidentand General Counsel of the Company since September 2000. From January 1989until September 2000, Mr. Kranwinkle was a partner of O’Melveny &Myers LLP, 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 hasbeen President and Chief Operating Officer of the Company since February 2005.He was President of the Univision Network from December 1992 through February2005 and President of TeleFutura Network and of the Galavisión Network fromAugust 2001 through February 2005.

**Directors**

The holders of the Class A Common Stock and Class PCommon Stock have the right to elect the Class A/P directors. The holdersof the Class T Common Stock have the right to elect one Class TDirector and one Class T Alternate Director, and the holders of the Class VCommon Stock have the right to elect one Class V Director and one Class VAlternate Director. Currently, the Company has one Class V AlternateDirector and no Class T Alternate Director.

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An alternate director mayact in the place of the director for whom he is an alternate if the director isabsent from a Board meeting. While so acting, the alternate director has all ofthe rights, duties, privileges and powers of the director for whom he is actingas an alternate (including the right to vote at such meeting) and is counted indetermining whether a quorum is present. Except when acting as an alternate, noalternate director is entitled to vote at a Board meeting and is not counted asa member of our Board in determining a quorum.

***Class A/P Directors***

**A. JerroldPerenchio**

*Director since 1992*

Mr. A. JerroldPerenchio, age 76, has been Chairman of the Board and Chief Executive Officerof Univision since December 1992. From December 1992 through January 1997,he was also Univision’s President. Mr. Perenchio has owned and been activein Chartwell Partners LLC (an investment firm that is active in the media andcommunications industry) since it was formed in 1983. A. Jerrold Perenchio isJohn G. Perenchio’s father.

**Anthony Cassara**

*Director since 2005*

Mr. Cassara, age 62,has been with Chartwell Partners LLC, an affiliate of Mr. Perenchio, sinceAugust 2000. He is Executive Vice President. Before that, Mr. Cassaraserved as President of Paramount Stations Group from 1993 until June 2000.

**Harold Gaba**

*Director since 1996*

Mr. Gaba, age 61, hasbeen President and CEO of Act III Communications Holdings, L.P. (a multi-mediacommunications company with interests in broadcasting and recorded music) sinceAugust 1990, and Chairman of the Board of Concord Records since September 1999.From 1992 through 1997, he served as CEO and a director of Act III Theatres, Inc.,and from 1992 through 1996 as CEO and a director of Act III Broadcasting, Inc.Also, since November 2005, Mr. Gaba has served as co-chairman ofVillage RoadShow Pictures, a motion picture production company.

**Alan F. Horn**

*Director since 1992*

Mr. Horn, age 63, hasbeen President and Chief Operating Officer of Warner Bros. since October 1999.He was Chairman and Chief Executive Officer of Castle Rock Entertainment from January 1987to October 1999. Before that, Mr. Horn was President and ChiefOperating Officer of 20th Century Fox Film Corporation and prior to that, hewas Chief Executive Officer of Embassy Communications.

**Michael O. Johnson**

*Director since 2005*

Mr. Johnson, age 52, has been theChief Executive Officer of Herbalife Ltd. since April 2003. He joinedHerbalife after 17 years with The Walt Disney Company, where he mostrecently served as President of Walt Disney International from 1999 to 2003. Mr. Johnsonalso served as President of Asia Pacific for The Walt Disney Company andPresident of Buena Vista Home Entertainment. Mr. Johnson 

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has alsopreviously served as a publisher of *AudioTimes*magazine, and has directed the regional sales efforts ofWarner Amex Satellite Entertainment Company for three of its televisionchannels, including MTV, Nickelodeon and The Movie Channel.

**John G. Perenchio**

*Director since 1992*

Mr. Perenchio, age 51,is an owner and principal in the following businesses: Fearless Records, LLC (arecord company); Ultimatum Music, LLC (a record company); and Smartpunk, LLC(an internet retail music and merchandise website). Mr. Perenchio is alsoa director of Deckers Outdoor Corporation. Mr. Perenchio is, or has been,an executive of various entities that are A. Jerrold Perenchio’s affiliates,some of which transact business with us or hold shares of our Class PCommon Stock. John G. Perenchio is the son of A. Jerrold Perenchio.

**Ray Rodriguez**

*Director since 1996*

Mr. Rodriguez, age56, has been President and Chief Operating Officer of the Company since February 2005.He was the President of the Univision Network from December 1992 through February 2005and President of the TeleFutura Network and of the Galavisión Network from August 2001through February 2005.

**McHenry T. Tichenor, Jr.**

*Director since 2003*

Mr. Tichenor, age 51,was President of Univision Radio from the completion of our acquisition ofHispanic Broadcasting Corporation on September 22, 2003 through December 31,2004. Mr. Tichenor is currently a private investor. Mr. Tichenor wasthe Chairman of the Board, President, Chief Executive Officer and a director ofHispanic Broadcasting Corporation from February 1997 until its acquisitionby Univision. From 1981 until February 1997, Mr. Tichenor was thePresident, Chief Executive Officer and a director of Tichenor Media System, Inc.

***Class T Director***

**Ricardo Maldonado Yañez**

*Class T Director since 2006*

Mr. Maldonado Yañez, age 39, is theSecretaria del Consejo de Administración (Secretary of the Counsel ofAdministration) of Televisa and a member of the law firm of Mijares, Angoitia,Cortes & Fuentes SC. Mr. Maldonado Yañez was elected to fill avacancy as a Class T Director of the Company by the holders of the Class TCommon Stock as provided in our charter documents.

***Class V Director and Class V AlternateDirector***

**Gustavo Cisneros**

*Director since 2003*

Mr. Cisneros, age 61,is Chairman and Chief Executive Officer of the Cisneros Group of Companies, aprivately-held media, entertainment, technology and consumer productsorganization of affiliated entities. Since 1975, Mr. Cisneros has overseenthe management and operations of the Cisneros Group of Companies. Mr. Cisnerosis a director of Pueblo International LLC (formerly known as Pueblo Xtra 

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International, Inc.)and Barrick Gold Corporation. Mr. Cisneros is a founding member of theinternational advisory board of the Council on Foreign Relations, a member ofthe chairman’s international advisory council of The Americas Society, anadvisory committee member of Harvard University’s David Rockefeller Center forLatin American Studies, an advisory board member of Columbia University, amember of the board of overseers of Babson College and an advisor toRockefeller University. Mr. Cisneros previously served as the Class VDirector on our Board from 1996 until 2000.

**Alejandro Rivera**

*Class VAlternate Director since 2003*

Mr. Rivera, age 63,has served in executive positions with companies in the Cisneros Group since1976. Since May 1988, Mr. Rivera has been the Managing Director andVice President of Venevision International LLC (formerly known as VenevisionInternational, Inc.) and, since September 1996, has also been theDirector and President of Venevision International Corporation. Mr. Riverawas the Class V Alternate Director from 1996 through 2000 and was the Class VDirector from 2000 until December 2003.

**Board Committees**

We have an Audit Committeeand a Compensation Committee. Because the holders of Class P Common Stockcontrol approximately 56.3% of the voting power of our common stock, Univisionis a controlled company under New York Stock Exchange (“NYSE”) listingstandards and thus not required to have an independent compensation committee.Univision is also not required to have, and does not have, a majority ofindependent directors or a nominating committee and, therefore, does not have anominating charter or a formal nominating policy. Each class of directorselected by Class A/P, Class T and Class V Stock, respectively,participate in the consideration of director nominees for their respectiveclasses. Nominees (including nominees recommended bystockholders) are identified and evaluated through review of a resume or othersummary of experience, personal interviews and submission of such supplementalinformation as may be reasonably requested.

*Audit Committee*

Univision’s AuditCommittee currently has three members: Messrs. Gaba, Horn and Johnson. TheAudit Committee monitors the integrity of Univision’s financial statements, aswell as Univision’s compliance with legal and regulatory requirements, engagesthe independent auditors, reviews with the independent auditors the plans andresults of the audit engagement, reviews the independence of the independentauditors and pre-approves and considers the range of all audit and non-auditservices. The Board believes that each Audit Committee member meets theindependence requirements of SEC regulations and NYSE listing standards. Inaddition, the Board has determined that Mr. Gaba, the Chair of the AuditCommittee, is qualified as an auditcommittee financial expert under SEC regulations and has accounting and relatedfinancial management expertise within the meaning of NYSE listing standards.The Audit Committee met six times in 2006. The Audit Committee charter isavailable on the Company’s website at www.univision.net.

*CompensationCommittee*

Univision’s CompensationCommittee currently has two members: Messrs. Gaba and Horn. TheCompensation Committee makes recommendations to the Board concerning compensationof our Named Officers (defined in Item 11. Executive Compensation) andadministers the 1996 and 2004 Performance Award Plans (referred to individuallyas the “1996 Plan” and the “2004 Plan”) and the Hispanic BroadcastingCorporation Long-Term Incentive Plan (the “HBC Plan”) that Univision assumed aspart of its acquisition of Hispanic Broadcasting Corporation (the “HBC Merger”)as well as the Company’s other 

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incentivecompensation plans. Mr. Horn is the Chair of the Compensation Committee.The Compensation Committee met three times in 2006. The Compensation Committeecharter is available on the Company’s website at *www.univision.net.*

**Directors’Compensation**

See the informationpresented under “Director Compensation” under Item 11 below.

**Board of DirectorsMeetings**

The Board held ninemeetings in 2006. Each director as of the date of this Annual Report on Form 10-Kwho was then a director attended our annual stockholders meeting in Los Angelesin May 2006, and each director attended more than 75% of the aggregatenumber of Board meetings and meetings of committees on which he served in 2006.Under our *Corporate Governance Guidelines*adopted in February 2004*,*which can be found on our website at *www.univision.net*,each director is expected to dedicate sufficient time, energy and attention toensure the diligent performance of his or her duties and to make everyreasonable effort to attend each meeting of the Board and any committee ofwhich the director is a member. Non-management directors shall also meet inexecutive sessions without management. The Chair of the Audit Committee acts asthe “Lead Director” to facilitate and lead these sessions.

**Code of Ethics**

The Company has a *Code of Conduct, Ethical Standards and BusinessPractices*, which applies to all employees, officers and directors ofthe Company, as well as a separate *Code ofEthics for Senior Financial Officers*, which applies to the Chairmanand Chief Executive Officer, the Vice Chairman, the Chief Financial Officer,the Chief Accounting Officer and any person who performs a similar function.Both the *Code of Conduct, Ethical Standardsand Business Practices* and the *Codeof Ethics for Senior Financial Officers* can be found on the Company’swebsite at *www.univision.net* and*,* the Company will disclose on its websitewhen there have been amendments to such codes. Waivers of the *Code of Conduct, Ethical Standards and Business Practices*for Named Officers and directors and waivers of the *Code ofEthics for Senior Financial Officers* will also be posted on theCompany’s website.

**Section 16(a) BeneficialOwnership Reporting Compliance**

Section 16(a) of the Securities Exchange Actrequires our officers, directors and persons who own more than 10% of aregistered class of our equity securities to file reports of ownership andchanges in ownership with the SEC and the NYSE. These persons are required byregulation of the SEC to furnish us with copies of all Section 16(a) formsthey file.

Based solely on a review of the copies ofsuch forms we received, or written representations from certain reportingpersons that no forms were required for those persons, we believe that during2006 all filing requirements applicable to our officers and directors were met,with the exception of Mr. Cisneros and Mr. Johnson, each of whomfiled one late report on Form 4, and Mr. Maldonado Yañez, who filedone late report on Form 3.

**ITEM 11.**         ExecutiveCompensation.

**CompensationDiscussion & Analysis**

This section contains a discussion of the materialelements of compensation awarded to, earned by or paid to the principalexecutive and principal financial officers of Univision, and the other threemost highly compensated executive officers of Univision. These individuals arereferred to as the “Named Officers” in this Annual Report on Form 10-K.

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Our current executivecompensation programs are determined and approved by our Compensation Committee.None of the Named Officers are members of the Compensation Committee.

***Executive Compensation Program Objectives and Overview***

Univision’s current executive compensation programsare intended to achieve three fundamental objectives: (1) attract andretain qualified executives; (2) motivate performance to achieve specificstrategic and operating objectives of Univision; and (3) align executives’interests with the long-term interests of Univision’s stockholders. Asdescribed in more detail below, the material elements of our current executivecompensation program for Named Officers include a base salary, an annual bonusopportunity, perquisites, a long-term equity incentive opportunity, retirementbenefits, severance protection for certain actual or constructive terminationsof the Named Officers’ employment, and other post-termination benefits payableupon retirement, death or disability.

Webelieve that each element of our executive compensation program helps us toachieve one or more of our compensation objectives. The table below lists eachmaterial element of our executive compensation program and the compensationobjective or objectives that it is designed to achieve.

| **Compensation Element**                                           | ** ** | ** **                                                                                                                                                                                                                                                   | ** ** | **Compensation Objectives Attempted to be  Achieved** |
|--------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|
| Base Salary                                                        |       | ·  Attract and retain qualified executives                                                                                                                                                                                                         |
| Bonus Compensation                                                 |       | ·  Motivate performance to achieve specific  strategies and operating objectives 

·  Attract and retain qualified executives                                                                                                            |
| Perquisites and Personal Benefits                                  |       | ·  Attract and retain qualified executives                                                                                                                                                                                                         |
| Equity-Based Compensation (stock options; restricted  stock units) |       | ·  Align Named Officers’ long-term interests  with stockholders’ long-term interests 

·  Motivate performance to achieve specific  strategies and operating objectives 

·  Attract and retain qualified executives |
| Retirement  Benefits (e.g., 401(k))                                |       | ·  Attract and retain qualified executives                                                                                                                                                                                                         |
| Severance and  Other Benefits Upon Termination of Employment       |       | ·  Attract and retain qualified executives 

·  Motivate performance to achieve specific  strategies and operating objectives                                                                                                            |

 

As illustrated by the table above, base salaries,perquisites and personal benefits, retirement benefits and severance and othertermination benefits are all primarily intended to attract and retain qualifiedexecutives. These are the elements of our current executive compensationprogram where the value of the benefit in any given year is not dependent onperformance (although base salary amounts and benefits determined by referenceto base salary will increase from year to year depending on performance, amongother things). We believe that in order to attract and retain top-caliberexecutives, we need to provide executives with predictable benefit amounts thatreward the executive’s continued service. Some of the elements, such as basesalaries and perquisites and personal benefits, are generally paid out on ashort-term or current basis. The other elements are generally paid out on alonger-term basis, such as upon retirement or other termination of employment. Webelieve that this mix of longer-term and short-term elements allows us toachieve our dual goals of attracting and retaining executives (with thelonger-term benefits geared toward retention and the short-term awards focusedon recruitment).

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Our annual bonus opportunity is primarily intended tomotivate Named Officers’ performance to achieve specific strategies andoperating objectives, although we also believe it helps us attract and retainexecutives. Our equity-based compensation is primarily intended to align NamedOfficers’ long-term interests with stockholders’ long-term interests, althoughwe also believe they help motivate performance and help us attract and retainexecutives. These are the elements of our current executive compensationprogram that are designed to reward performance and the creation of stockholdervalue, and therefore the value of these benefits is dependent on performance.Each Named Officer’s annual bonus opportunity is paid out on an annualshort-term basis and is designed to reward performance for that period.Equity-based compensation is generally paid out or earned on a longer-termbasis and is designed to reward performance over several years.

The Compensation Committee’s general philosophy is that bonus and equitycompensation should fluctuate with the Company’s success in achieving financialand other goals, and that Univision should continue to use long-termcompensation such as stock options and restricted stock units to alignstockholder and executives’ interests. The Compensation Committee andUnivision’s Chairman believe in reserving significant amounts for results-basedincentive compensation and thus setting fixed-amount base salaries nearthe median of peer companies.

The Company retains Frederic W.Cook & Co., Inc., an outside executive compensation consultingfirm (which provides no other services to the Company) to provide generalcompensation expertise, explore alternative incentive programs and analyzecomparative compensation information for the Compensation Committee. Incarrying out its responsibilities in 2006, the Committee sought the consultingfirm’s advice regarding compensation levels within the industry and theadvisability of adopting alternative or additional performance incentives. Inaddition, the consulting firm provided valuable information to the Committee bybenchmarking the Committee’s planned executive compensation program againstthose of a peer group of comparable large media companies, which was suggestedby the consulting firm and which included such companies as MGM Mirage, TheInterpublic Group of Companies, Inc., The New York Times Company, TheMcGraw-Hill Companies, Inc., Omnicom Group, Inc., Tribune Company,The E.W. Scripps Company, Gannett Co., Inc.,Knight-Ridder, Inc., Lamar Advertising Company and Clear ChannelCommunications, Inc. This benchmarking was performed for comparativepurposes. The Committee then determined the target value of our executivecompensation program using, among other factors, the information provided to itby the consulting firm. Because we generally determine the target valueof our executive compensation program, in part, by using such benchmarkedinformation, we do not generally factor in amounts realized from priorcompensation paid to the Named Officers.

***Current Executive Compensation Program Elements***

***Base Salaries***

Like most companies,Univision’s policy is to pay Named Officers’ base salaries in cash. Thesignificant exception is that Mr. Perenchio serves as Chairman of theBoard and Chief Executive Officer without compensation. Messrs. Cahill,Hobson, Kranwinkle and Rodriguez have employment agreements to receive fixedbase salaries. As of January 1, 2007, Messrs. Cahill, Hobson,Kranwinkle and Rodriguez entered into amended employment agreements with usthat extended the date of expiration of such agreements to December 31,2009. Pursuant to the new agreements, the executives’ annual base salaries for2007 through 2009 were increased 10% to the following levels: for Cahill$825,000, for Hobson $935,000, for Kranwinkle $770,000 and for Rodriguez$1,100,000. In approving the executives’ salary increases, ourChairman and the Committee took into account, among other things, the greaterresponsibility of Mr. Hobson’s and Mr. Rodriquez’s new positions,peer group comparisons provided by the Committee’s outside consulting firm, andthe executives’ individual experience and increased responsibilities. Thebase salary that was paid to each Named Officer in 2006 is the amount reportedfor such officer in Column (c) of the Summary Compensation Table on page 67.

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***Annual Bonuses***

Univision’s policy is topay any discretionary annual bonuses to the Named Officers in cash. TheCompensation Committee, based upon Mr. Perenchio’s recommendation and inaccordance with the compensation philosophy outlined above, approved cashbonuses for 2006 for the four Named Officers as shown in column (d) of the SummaryCompensation Table on page 67. In 2006, each of our Named Officers received acash bonus award equivalent to 85% of base salary, which was determined usingan earnings before interest, taxes, depreciation and amortization performancegoal set at the beginning of 2006. In addition, during 2006 each of our NamedOfficers received discretionary bonuses equivalent to 100% of base salary,based on the performance of such Named Officer in 2006. In considering thesubjective portion of the bonuses, the Committee took into account theexecutive’s responsibilities, his performance, and other factors such as Companyprofitability, market share and industry position. For 2006, the Named Officers’salaries and bonuses represented the following percentages of their respectivetotal compensation: Mr. Cahill—84%, Mr. Hobson—81%, Mr. Kranwinkle—81%,and Mr. Rodriguez—79%. According to the Company’s outside compensationconsulting firm, the Company’s executive compensation is in line with averageexecutive compensation among peer companies.

***Perquisites***

In addition to base salaries and annual bonusopportunities, Univision provides the Named Officers with certain perquisitesand personal benefits, including automobile-related expenses. We believe thatperquisites and personal benefits are often a tax-advantaged way to provide theNamed Officers with additional annual compensation that supplements their basesalaries and bonus opportunities. When determining each Named Officer’s basesalary, we take the value of each Named Officer’s perquisites and personalbenefits into consideration.

The perquisites andpersonal benefits paid to each Named Officer in 2006 are reported in Column (i)of the Summary Compensation Table below, and are further described in footnotes(2), (3), (4) and (5) to the Summary Compensation Table.

***Equity-Based Compensation***

Univision’s policy is that the Named Officers’long-term compensation should be directly linked to the value provided tostockholders of Univision common stock. Accordingly, the Compensation Committeegrants equity awards under the 2004 Plan designed to link an increase instockholder value to compensation. Forty-eight percent of the NamedOfficer’s equity-based compensation opportunity for 2006 was awarded in theform of Univision nonqualified stock options. In addition to stock option grants, basedupon recommendations of the outside consulting firm, the Committee alsoapproved grants of restricted stock units to the Named Officers asapproximately 15% of 2006 aggregate equity compensation. The CompensationCommittee believes that these awards encourage executives to continue to usetheir best professional skills and to remain in Univision’s employ. Options andrestricted stock units granted by Univision under the 2004 Plan generally vestand become exercisable in annual 25% increments over a four-year period aftergrant. See “Change in Control Retention Bonus Plan” below for the vesting ofcertain one-time retention grants made to Named Officers during 2006. Whenconsidering the equity grants, the Compensation Committee considers each NamedOfficer’s responsibilities, his or her performance during the prior year, hisor her expected future contribution to Univision’s performance, competitivedata on grant values at comparable companies, and the recommendation of Mr. Perenchioand other senior executives.

Univision has traditionally awarded annual stockincentives to employees (including the Named Officers) in December each year.However, Univision made its annual grants in January 2006 rather than inDecember 2005 in order to coordinate those grants with the Company’s adoptionof FAS No. 123R (see 

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Note 3—“SignificantAccounting Policies—Share-Based Compensation”). In December 2006, the Companyreturned to its traditional December annual grant schedule. No Named Officerswere awarded grants in December 2006. Other than grants made in connection withthe hiring or promotion of employees or other special circumstances, theCommittee generally does not grant equity awards at any other time during theyear.

The aggregate amount asdetermined under FAS No. 123R recognized for purposes of Univision’s financialstatements for 2006 with respect to outstanding options and restricted stockunit awards granted to the Named Officers is shown in the “Summary CompensationTable” below. The grant date value of the options and restricted stock unitsawarded to the Named Officers in 2006 as determined under FAS No. 123Rfor purposes of Univision’s financial statements is shown in the “Grants ofPlan-Based Awards Table” below. The “Grants of Plan-Based Awards” table and relatednarrative “Description of Plan-Based Awards” section below provide additionaldetail regarding the restricted stock units and options granted to the NamedOfficers in 2006, including the vesting and other terms that apply to therestricted stock units and options.

***Retirement Benefits and Deferred CompensationOpportunities***

Deferred compensation is a tax-advantaged means ofproviding the Named Officers with additional compensation that supplementstheir base salaries and bonus opportunities. One such Named Officer, RayRodriguez, began participating in our Univision Key Senior Management DeferredCompensation Plan in 1992, however, he has not received any credits under theterms of the plan since 1994. No other Named Officer participated in the UnivisionKey Senior Management Deferred Compensation Plan.

Please see the “Non-QualifiedDeferred Compensation” table and related narrative section “Non-QualifiedDeferred Compensation Plans” below for a description of Univision’s deferredcompensation plans and the benefits thereunder.

***Severance and Other Benefits Upon Termination ofEmployment***

In connection with the Merger, the Company adopted aChange in Control Severance Plan and a Change in Control Retention Bonus Planin May 2006 to provide rewards to the Named Officers for hard work andvalue creation, as well as incentives for each of the Named Officers to stay atthe job during a period of uncertainty at the end of which such Named Officersmay not have been retained. Based on a review of what comparable companies weredoing in connection with similar changes in control, it was determined thatsuch awards should typically equal roughly three times normal compensation andannual bonus, and should require a double trigger—a change in control of thecompany and a “termination event,” such as a change in status orresponsibilities. It was also determined that the vesting of equity incentivesshould accelerate upon the closing of the Merger, and that the total aggregateseverance amount paid out in connection with the change in control transactionshould be approximately 1% of the overall transaction amount.

Please see the “PotentialPayments Upon Termination or Change in Control” section below for a descriptionof the potential payments that may be made to the Named Officers in connectionwith their termination of employment or a change in control.

***Stock Ownership Guidelines***

The Company does not haveformal guidelines for the level of officer and director Univision stockownership.

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***Section 162(m) Policy***

Section 162(m) of the Internal Revenue Code limits thedeductibility by Univision of cash compensation in excess of $1 million paid tothe Chief Executive Officer and the four highest compensated executive officersduring any taxable year, unless such compensation meets certain requirements.Other than approximately $2.6 million, base compensation and the subjectiveportion of the cash bonuses paid to executive officers for 2006 were within the$1 million Section 162(m) threshold and should, therefore, also bedeductible by Univision. The Compensation Committee has considered and willcontinue to consider deductibility in structuring compensation arrangements. However,the Committee retains discretion to provide compensation arrangements that itbelieves are consistent with the goals described above and in the bestinterests of Univision and its stockholders, even if those arrangement are notfully deductible under Section 162(m).

Stock options and restricted stock unitsunder Univision’s existing plans, as well as the formulaic portion of the cashbonus, are intended to comply with the rules under Section 162(m) fortreatment as performance based compensation. Therefore, Univision should beallowed to deduct compensation related to options and restricted stock unitsgranted under each of these plans and the formula portion of the cash bonuses.

**CompensationCommittee’s Report on Executive Compensation(1)**

Univision’s Compensation Committee has certain dutiesand powers as described in its charter. The Compensation Committee is currentlycomposed of the two non-employee Directors named at the end of this report eachof whom is independent as defined by the New York Stock Exchange listingstandards.

TheCompensation Committee has reviewed and discussed with management thedisclosures contained in the Compensation Discussion and Analysis section ofthis Item 11. Based upon this review and our discussions, the UnivisionCompensation Committee recommended to its Board of Directors that theCompensation Discussion and Analysis section be included in this Annual Reporton Form 10-K.

**CompensationCommittee ofthe Board of Directors**

**Alan F. Horn (Chair)**HaroldGaba

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(1)          SECfilings sometimes “incorporate information by reference.” This means theCompany is referring you to information that has previously been filed with theSEC, and that this information should be considered as part of the filing youare reading. Unless the Company specifically states otherwise, thisCompensation Committee Report shall not be deemed to be incorporated byreference and shall not constitute soliciting material or otherwise beconsidered filed under the Securities Act or the Securities Exchange Act.

**CompensationCommittee’s Interlocks and Insider Participation**

The Compensation Committeemembers whose names appear above were committee members during all of 2006. Nomember of the Compensation Committee is or has been a former or current NamedOfficer of the Company or had any relationships requiring disclosure by theCompany under the SEC’s rules requiring disclosure of certainrelationships and related-party transactions. None of the Company’s NamedOfficers served as a director or a member of a compensation committee (or othercommittee serving an equivalent function) of any other entity, the NamedOfficers of which served as a director or member of the Compensation Committeeduring the fiscal year ended December 31, 2006.

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**SummaryCompensation Table**

| Name and Principal Position                                                | ** ** | ** ** | ** ** | **Year**   | ** ** | **Salary  ($)** | ** ** | **Bonus  ($)** | ** ** | **Stock  Awards  ($)(8)** | ** ** | **Option  Awards  ($)(8)** | ** ** | **Non-Equity  Incentive Plan  Compensation  ($)** | ** ** | **All  Other  Compensation  ($)** | ** ** | **Total  ($)(7)** | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|-----------------|------------|----------------|------------|---------------------------|------------|----------------------------|------------|--------------------------------------------------------|------------|-----------------------------------|------------|-------------------|------------|
| **(a)**                                                                                   | ** ** | ** ** | **(b)**    | ** ** | **(c)**    | ** **      | **(d)**    | ** **     | **(e)**    | ** **                | **(f)**    | ** **                 | **(g)**    | ** **                                             | **(i)**    | ** **                        | **(j)**    | ** **        |
| **A. Jerrold Perenchio(1)**                                                               |       |       | 2006       |       |       | None            |       | None           |       | None                      |       | None                       |       |                                                   | N/A        |                              |       |              | None       |   |   | None |   |
| *Chairman of the Board  and Chief Executive Officer*                            |       |       |       |       |       |            |       |           |       |                      |       |                       |       |                                                   |       |                              |       |              |       |   |   |   |   |
| **Robert V. Cahill**                                                                      |       |       | 2006       |       |       | 750,000         |       | 1,390,400      |       | 127,465                   |       | 290,180                    |       |                                                   | N/A        |                              |       |              | 5,280      | (3) |   | 2,563,325 |   |
| *Vice Chairman and Corporate Secretary*                                                   |       |       |       |       |       |            |       |           |       |                      |       |                       |       |                                                   |       |                              |       |              |       |   |   |   |   |
| **Andrew W. Hobson,**                                                                     |       |       | 2006       |       |       | 850,000         |       | 1,575,800      |       | 170,208                   |       | 386,810                    |       |                                                   | N/A        |                              |       |              | 29,924     | (2)(3)(4) |   | 3,012,742 |   |
| *Senior Executive Vice  President, Chief Financial Officer and Chief Strategic   Officer* |       |       |       |       |       |            |       |           |       |                      |       |                       |       |                                                   |       |                              |       |              |       |   |   |   |   |
| **C. Douglas Kranwinkle,**                                                                |       |       | 2006       |       |       | 700,000         |       | 1,297,700      |       | 127,465                   |       | 290,180                    |       |                                                   | N/A        |                              |       |              | 45,618     | (2)(3)(4) |   | 2,460,963 |   |
| *Executive Vice President and General Counsel*                                       |       |       |       |       |       |            |       |           |       |                      |       |                       |       |                                                   |       |                              |       |              |       |   |   |   |   |
| **Ray Rodriguez,**                                                                        |       |       | 2006       |       |       | 1,000,000       |       | 1,853,800      |       | 322,860                   |       | 386,810                    |       |                                                   | 1,398      | (6)                               |       |              | 52,325     | (2)(3)(4)(5) |   | 3,617,193 |   |
| *President and Chief Operating  Officer*                                                  |       |       |       |       |       |            |       |           |       |                      |       |                       |       |                                                   |       |                              |       |              |       |   |   |   |   |

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(1)                Mr. Perenchio’s services were provided pursuant tothe informal arrangement described in “Employment Agreements and Arrangements.”Mr. Perenchio has not been compensated for his services in any employmentcapacity with Univision since 1997.

(2)                Includes the Company’s payment of annual life insurancepremiums for Messrs. Hobson, Kranwinkle and Rodriguez under the company’sexecutive life insurance program. For 2006, the Company paid annual term lifeinsurance premiums in the following amounts: $19,311 for Mr. Kranwinkle,and $24,090 for Mr. Rodriguez. For 2006, the Company paid annual variablelife insurance premiums for Mr. Hobson in the amount of $8,610. Theamounts in this column also include the Company’s payment of annual premiumsfor long-term disability insurance coverage for Messrs. Hobson, Kranwinkleand Rodriguez. For 2006, the Company paid annual disability insurance premiumsin the following amounts: $6,134 for Mr. Hobson; $10,227 for Mr. Kranwinkle;and $5,505 for Mr. Rodriguez.

(3)                Includes auto related expenses paid by the Company inthe amounts of $5,280 for Mr. Cahill, $9,480 for Mr. Kranwinkle,$8,580 for Mr. Hobson and $7,200 for Mr. Rodriguez.

(4)                Includes matching contribution pursuant to the 401(k) Planfor 2006 in the amount of $6,600 for each of Messrs. Hobson, Kranwinkleand Rodriguez.

(5)                Includes payment of annual club dues for 2006 for Mr. Rodriguezin the amount of $8,929.

(6)                Amount represents deferred compensation interest incomeearned under the Univision Key Senior Management Deferred Compensation Planthat is above market rates as determined under the SEC’s proxy rules. Refer toFootnote (1) of the “Nonqualified Deferred Compensation” table thatappears later in this Item 11.

(7)                Total compensation does not include the severancebenefits and estimated bonus payments payable to each of the Named Officersupon completion of change of control under the Change in Control RetentionBonus Plan or the Change in Control Severance Plan, as the case may be.

(8)                Represents compensation expense recognizedin 2006 under FAS No. 123R.

**Compensation ofNamed Officers**

The Summary Compensation Table should be read inconnection with the tables and narrative descriptions that follow. The Grantsof Plan-Based Awards table, and the description of the material terms of thenonqualified options and restricted stock units granted in 2006 that followsit, provides information regarding the long-term equity incentives awarded toNamed Officers in 2006 that are reported in the Summary Compensation Table. TheOutstanding Equity Awards at Fiscal Year End and Option Exercises and StockVested tables provide further information on the Named Officers’ potentialrealizable value and actual value realized with respect to their equity awards.

The Non-Qualified Deferred Compensation table andrelated description of the material terms of our non-qualified deferredcompensation plans provides context to the deferred compensation earningslisted in the table above, and also provides a more complete picture of thepotential future payments due to one of our Named Officers. The discussion ofthe potential payments due upon a termination of employment or change incontrol is intended to further explain the potential future payments that are,or may become, payable to our Named Officers.

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Univision hastraditionally awarded annual stock incentives to employees (including the NamedOfficers) in December each year. However, Univision made its annual grants inJanuary 2006 rather than in December 2005 in order to coordinate those grantswith the Company’s adoption of FAS No. 123R (see Note 3—“Significant AccountingPolicies—Share-Based Compensation”). In December 2006, the Company returned toits traditional December annual grant schedule. No Named Officers were awardedgrants in December 2006. The January 2006 grants to the Named Officers arereported in the table below as are the grants made in May 2006 under the Changein Control Retention Bonus Plan.

**Grantsof Plan-Based Awards**

| Name                   | ** ** | ** **            | ** ** | **Grant Date** | ** ** | **All Other  Stock Awards:  Number of  Shares of  Stock or Units** | ** ** | **All Other  Option Awards:  Number of  Securities  Underlying  Options** | ** ** | **Exercise or Base  Price of Stock  Awards ($/Sh)** | ** ** | **Grant Date Fair  Value of Stock and  Option Awards** | ** ** |
|------------------------|------------|-----------------------|------------|---------------------|------------|--------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| Robert V.  Cahill      |       | January 13, 2006 |       |                |       |                                                                                             |       |                                                                                     | 100,000    |                                                                         |       |                                                                                 | $          | 31.59 |   |   |   | $ | 1,201,000 | (2) |   |
|                        |       | January 13, 2006 |       |                | 16,700     |                                                                                             |       |                                                                                     |       |                                                                         |       |                                                                                 | $          | 31.59 |   |   |   | $ | 527,553 |   |   |
|                        |       | May 23, 2006     |       |                | 50,000     | (1)                                                                                              |       |                                                                                     |       |                                                                         |       |                                                                                 | $          | 36.25 |   |   |   | $ | 1,812,500 |   |   |
| Andrew W. Hobson       |       | January 13, 2006 |       |                |       |                                                                                             |       |                                                                                     | 133,300    |                                                                         |       |                                                                                 | $          | 31.59 |   |   |   | $ | 1,600,933 | (2) |   |
|                   |       | January 13, 2006 |       |                | 22,300     |                                                                                             |       |                                                                                     |       |                                                                         |       |                                                                                 | $          | 31.59 |   |   |   | $ | 704,457 |   |   |
|                   |       | May 23, 2006     |       |                | 150,000    | (1)                                                                                              |       |                                                                                     |       |                                                                         |       |                                                                                 | $          | 36.25 |   |   |   | $ | 5,437,500 |   |   |
| C.  Douglas Kranwinkle |       | January 13, 2006 |       |                |       |                                                                                             |       |                                                                                     | 100,000    |                                                                         |       |                                                                                 | $          | 31.59 |   |   |   | $ | 1,201,000 | (2) |   |
|                        |       | January 13, 2006 |       |                | 16,700     |                                                                                             |       |                                                                                     |       |                                                                         |       |                                                                                 | $          | 31.59 |   |   |   | $ | 527,553 |   |   |
|                        |       | May 23, 2006     |       |                | 50,000     | (1)                                                                                              |       |                                                                                     |       |                                                                         |       |                                                                                 | $          | 36.25 |   |   |   | $ | 1,812,500 |   |   |
| Ray Rodriguez          |       | January 13, 2006 |       |                |       |                                                                                             |       |                                                                                     | 133,300    |                                                                         |       |                                                                                 | $          | 31.59 |   |   |   | $ | 1,600,933 | (2) |   |
|                   |       | January 13, 2006 |       |                | 42,300     |                                                                                             |       |                                                                                     |       |                                                                         |       |                                                                                 | $          | 31.59 |   |   |   | $ | 1,336,257 |   |   |
|                   |       | May 23, 2006     |       |                | 150,000    | (1)                                                                                              |       |                                                                                     |       |                                                                         |       |                                                                                 | $          | 36.25 |   |   |   | $ | 5,437,500 |   |   |

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(1)          Amounts represent therestricted stock units granted under the Change in Control Retention Bonus Plan.For further details on these grants, please see the “Potential Payments UponTermination Or Change In Control” section.

(2)          The fair value price ofthese options is $12.01 per share based on the Black-Scholes option-pricingmodel.

NamedOfficers are not separately entitled to receive dividend equivalent rights withrespect to each stock option and restricted stock unit awarded.

Eachnonqualified stock option award described in the “Grants of Plan-Based Awards”****table above expires on the tenth anniversary of itsassociated grant date, vests in equal installments over the course of fouryears, and is generally subject to accelerated vesting upon a change in controlof the Company or a termination of the executive without “cause.”

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Fora description of the material terms related to each restricted stock unit awarddescribed in the “Grants of Plan-Based Awards”****tableabove, please see “Potential Payments Upon Termination Or Change In Control—Changein Control Retention Bonus Plan” below.

**OutstandingEquity Awards At Fiscal Year-End**

| ** **            | ** ** | **Option Awards** | ** ** | **Stock Awards**                                                              | ** ** |
|-----------------------|------------|------------------------|------------|------------------------------------------------------------------------------------|------------|
| Name                  | ** ** | ** **             | ** ** | **Number of  Securities  Underlying  Unexercised  Options  (#)  Exercisable** | ** ** | **Number of  Securities  Underlying  Unexercised  Unearned  Options  (#)  Unexercisable** | ** ** | **Option  Exercise  Price  ($)** | ** ** | **Option  Expiration  Date** | ** ** | **Number  of Shares, or  Units of Stock  That Have Not  Vested  (#)** | ** ** | **Market Value  of Shares, or  Units of Stock  That Have Not  Vested  ($)** | ** ** |
| **(a)**               | ** ** | ** **             | ** ** | **(b)**                                                                            | ** ** | **(d)** | ** ** | **(e)** | ** ** | **(f)** | ** ** | **(i)** | ** ** | **(j)** | ** ** |
| A. Jerrold Perenchio  |       |                   | None       |                                                                               |       |   | None |   |   | None |   |   | None |   |   |   | None |   |   |   | None |   |   |
| Robert V. Cahill      |       |                   | 150,000    |                                                                               |       |   | — | (1) |   | 43.6250 |   |   | 12/05/09 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   | 150,000    |                                                                               |       |   | — | (1) |   | 35.7500 |   |   | 11/30/10 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   | 150,000    |                                                                               |       |   | — | (1) |   | 35.0000 |   |   | 11/28/11 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   | 30,000     |                                                                               |       |   | — | (1) |   | 27.3900 |   |   | 12/03/12 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   | 100,000    |                                                                               |       |   | — | (1) |   | 35.8500 |   |   | 11/30/13 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   | 150,000    |                                                                               |       |   | — | (1) |   | 28.5500 |   |   | 12/06/14 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   |       |                                                                               |       |   | 100,000 | (2) |   | 31.5900 |   |   | 01/12/16 |   |   |   | 66,700 | (2) |   |   | $ | 2,362,514 |   |   |
| Andrew W. Hobson      |       |                   | 150,000    |                                                                               |       |   | — | (1) |   | 43.6250 |   |   | 12/05/09 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 150,000    |                                                                               |       |   | — | (1) |   | 35.7500 |   |   | 11/30/10 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 150,000    |                                                                               |       |   | — | (1) |   | 35.0000 |   |   | 11/28/11 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 75,000     |                                                                               |       |   | — | (1) |   | 27.3900 |   |   | 12/03/12 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 100,000    |                                                                               |       |   | — | (1) |   | 35.8500 |   |   | 11/30/13 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 200,000    |                                                                               |       |   | — | (1) |   | 28.5500 |   |   | 12/06/14 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   |       |                                                                               |       |   | 133,300 | (2) |   | 31.5900 |   |   | 01/12/16 |   |   |   | 172,300 | (2) |   |   | $ | 6,102,866 |   |   |
| C. Douglas Kranwinkle |       |                   | 100,000    |                                                                               |       |   | — | (1) |   | 45.4375 |   |   | 08/31/10 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   | 20,000     |                                                                               |       |   | — | (1) |   | 35.7500 |   |   | 11/30/10 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   | 150,000    |                                                                               |       |   | — | (1) |   | 35.0000 |   |   | 11/28/11 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   | 100,000    |                                                                               |       |   | — | (1) |   | 35.8500 |   |   | 11/30/13 |   |   |   | — |   |   |   | — |   |   |
|                  |       |                   |       |                                                                               |       |   | 100,000 | (2) |   | 31.5900 |   |   | 01/12/16 |   |   |   | 66,700 | (2) |   |   | $ | 2,362,514 |   |   |
| Ray Rodriguez         |       |                   | 200,000    |                                                                               |       |   | — | (1) |   | 43.6250 |   |   | 12/05/09 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 200,000    |                                                                               |       |   | — | (1) |   | 35.7500 |   |   | 11/30/10 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 200,000    |                                                                               |       |   | — | (1) |   | 35.0000 |   |   | 11/28/11 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 100,000    |                                                                               |       |   | — | (1) |   | 35.8500 |   |   | 11/30/13 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   | 185,000    |                                                                               |       |   | — | (1) |   | 28.5500 |   |   | 12/06/14 |   |   |   | — |   |   |   | — |   |   |
|                       |       |                   |       |                                                                               |       |   | 133,300 | (2) |   | 31.5900 |   |   | 01/12/16 |   |   |   | 192,300 | (2) |   |   | $ | 6,811,266 |   |   |

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(1)          On September 14,2005, the Company accelerated the vesting of substantially all unvested stockoptions outstanding whose exercise price was above the then current marketprice of $25.56.

(2)          These awards generallywill vest 25% on January 13, 2007, January 13, 2008, January 13,2009, and January 13, 2010. The restricted stock units granted under theChange in Control Retention Bonus Plan on May 23, 2006 that are includedas part of the amounts described in column (i), however, do not vest on suchdates, but instead vest on 90 days following a “Change in Control,” as definedin such Change in Control Retention Bonus Plan.

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Thefollowing table presents information regarding the exercise of stock options byNamed Officers during 2006.

**OptionExercises And Stock Vested**

| **Name**               | ** ** | ** ** | ** ** | **Option Awards  Number of Shares  Acquired on  Exercise  (#)** | ** ** | **Value  Realized on  Exercise  ($)** | ** ** |
|------------------------|------------|------------|------------|-------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| **(a)**                | ** ** | ** ** | ** ** | **(b)**                                                                             | ** ** | **(c)**                                    | ** ** |
| A. Jerrold  Perenchio  |       |       | None       |                                                                                |       |                                       |       |
| Robert V. Cahill       |       |       | 295,000    |                                                                                |       | $                                          | 5,136,678  |   |
| Andrew W. Hobson       |       |       | 800,000    |                                                                                |       | $                                          | 19,257,492 |   |
| C. Douglas  Kranwinkle |       |       | 250,000    |                                                                                |       | $                                          | 1,818,924  |   |
| Ray Rodriguez          |       |       | 665,000    |                                                                                |       | $                                          | 12,847,073 |   |

 

The Univision Key Senior Management DeferredCompensation Plan was initiated in 1990 to provide selected key executives ofthe Company with incentives linked to the increase in the Company’s marketvalue. Participants in the plan would receive credits to their deferredaccounts annually based upon the percentage increase in the Company’s cash flowfor 1990 and each calendar year thereafter, over the cash flow for the prioryear. Awards would vest annually, and earn interest at the rate of 6% per year.In the event of termination of employment due to death, disability orretirement at or after age 65, a participant in the plan would receive paymentof his deferred amount. Upon termination of employment for any other reason, aparticipant would receive an amount equal to his or her vested portion of hisor her account.

The following tablepresents information regarding the amount of nonqualified deferred compensationearned by Named Officers under the Univision Key Senior Management DeferredCompensation Plan.

**NonqualifiedDeferred Compensation**

| **Name**               | ** ** | ** ** | ** ** | **Aggregate  Earnings in  Last FY  ($)** | ** ** | **Aggregate  Balance at  Last FYE  ($)** | ** ** |
|------------------------|------------|------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|
| **(a)**                | ** ** | ** ** | ** ** | **(d)**                                            | ** ** | **(f)**                                            | ** ** |
| A. Jerrold Perenchio   |       |       | —     |                                               |       | —                                             |       |
| Robert V. Cahill       |       |       | —     |                                               |       | —                                             |       |
| Andrew W. Hobson       |       |       | —     |                                               |       | —                                             |       |
| C. Douglas  Kranwinkle |       |       | —     |                                               |       | —                                             |       |
| Ray Rodriguez(1)       |       |       | $          | 76,241                                             |       |                                               | $          | 1,346,918 |   |
|                        |            |            |            |                                                    |            |                                                    |            |  |  |  |  |

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(1)          Onlythe portion of earnings on deferred compensation that is considered to be atabove-market rates under SEC rules, $1,398, is included as compensation foreach Named Officer in Column (g) of the Summary Compensation Table.

**Potential PaymentsUpon Termination Or Change In Control**

***Severance Provisions ofEmployment Agreements***

Theemployment agreements for Messrs. Cahill, Hobson, Kranwinkle and Rodriguezreferred to above may be terminated by the Company for cause, upon death ordisability or without cause. If the executive’s employment is terminated by theCompany without cause, the executive will, subject to certain conditionsregarding confidentiality, trade secrets and competitive activities, beentitled to receive his base 

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salary for the remainder of his employment agreement. Iftermination had occurred for each of our Named Officers on December 31,2006, then the payments required to be made to Messrs. Cahill, Hobson,Kranwinkle and Rodriguez during 2006 would have been $1,500,000, $1,700,000,$1,400,000 and $2,000,000, respectively.

***Change in Control Severance Plan***

The Company has adopted aChange in Control Severance Plan in which its Named Officers (other thanA. Jerrold Perenchio) participate. Pursuant to this plan, followingtermination of employment without cause or for good reason in connection with achange in control of the Company, such Named Officer would be entitled to thegreater of (a) the amount to which the officer is entitled to receiveunder a written employment agreement with the Company and (b) three timesthe sum of (1) his annual base salary plus (2) his “Maximum AnnualBonus” (which is equal to two times his annual base salary). In addition, suchNamed Officer would be entitled to accelerated vesting of his outstanding andunvested options and other equity-based awards that were granted to him priorto the Effective Time and which remain outstanding at the time of histermination of employment, continuation of benefits for up to three years, apro rata annual bonus, and outplacement services and legal fees. The NamedOfficer would be entitled to a gross-up payment from the Company in certaincircumstances if his benefits in connection with a change in control would be “excessparachute payments” as defined by Section 280G of the U.S. InternalRevenue Code of 1986, as amended (the “Code”) subject to the excise tax imposedunder Section 4999 of the Code. For purposes of the Change in ControlSeverance Plan, our Named Officers have “good reason” to terminate employmentif there is a material adverse alteration in the nature or status of theexecutive’s responsibilities with the Company, there is a reduction in theNamed Officer’s salary or target bonus opportunity, the Named Officer’s commuteto work is increased by at least 50 miles, or the executive is no longeremployed in the same position with a New York Stock Exchange publicly tradedcompany that has publicly traded equity float in excess of $5 billion.

***Change in Control Retention Bonus Plan***

The Company has adopted aChange in Control Retention Bonus Plan in which certain employees and certainnon-executive officers participate. In addition, the Named Officers (other thanA. Jerrold Perenchio) were awarded restricted stock units that will remainoutstanding at the closing of the Merger and that will vest upon the earlier of(1) 90 days following the Merger (if such Named Officer is employed by theBuyer on such date) or (2) the termination date of such Named Officer’semployment without cause, or resignation for good reason, following the Merger.The estimated value of the restricted stock units is $14.5 million.

***Rabbi Trust***

The Board of Directors hasadopted and funded a “rabbi” trust to satisfy the Company’s obligations to ourNamed Officers under the Change of Control Severance Plan and each of therestricted stock unit agreements entered into with the Named Officers inconnection with the Company’s Change in Control Retention Bonus Plan.

***Estimation of Benefits***

Set forth below is anestimation of the benefits payable to each of the Named Officers (other thanA. Jerrold Perenchio, who will not receive any such benefits) assuming thatsuch officer’s employment were terminated under the circumstances describedabove in connection with a change in control of the Company and that the eventtriggering such payment occurred on March 31, 2007.

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**SeveranceBenefits—Change in Control**

| **Name**              | ** ** | ** ** | ** ** | **Estimated  Total Value of  Cash Payments  (Base Salary  and Annual  Bonus Amounts)** | ** ** | **Estimated  Total Value  of Benefits  Coverage  Continuation(1)** | ** ** | **Make  Whole  Payment(2)** | ** ** | **Estimated  Total Value  of Equity  Acceleration(3)** | ** ** | **Estimated  Total  Value of  Excise Tax  “Gross-Up”** | ** ** |
|-----------------------|------------|------------|------------|----------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|
| A. Jerrold  Perenchio |       |       | N/A        |                                                                                                                 |       |                                                                         | N/A        |                        |       |                                                             | N/A        |                                                                       |       |   | N/A |   |   |   |   |
| Robert Cahill         |       |       | $          | 7,837,500                                                                                                            |       |                                                                         |       | $                           | 29,283     |                                                             |       |                                                                       | $          | 265,147 |   |   |   | $ | 2,883,875 |   |   |   |   |
| Andrew Hobson         |       |       | $          | 8,882,500                                                                                                            |       |                                                                         |       | $                           | 94,678     |                                                             |       |                                                                       | $          | 359,717 |   |   |   | $ | 6,867,053 |   |   |   |   |
| Douglas  Kranwinkle   |       |       | $          | 7,315,000                                                                                                            |       |                                                                         |       | $                           | 172,308    |                                                             |       |                                                                       | $          | 222,076 |   |   |   | $ | 2,883,875 |   |   | $ | 4,442,028 |   |
| Ray Rodriguez         |       |       | $          | 10,450,000                                                                                                           |       |                                                                         |       | $                           | 150,760    |                                                             |       |                                                                       | $          | 446,000 |   |   |   | $ | 7,592,053 |   |   |   |   |
|                       |            |            |            |                                                                                                                      |            |                                                                              |            |                             |            |                                                                  |            |                                                                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          In accordance withSection 2.6 of the Change in Control Severance Plan, filed asExhibit 10.1.4 to Univision’s Quarterly Report on Form 10Q for theperiod ended June 30, 2006, each Eligible Employee who incurs a severanceduring the Change in Control Protection Period will be provided all Company-paidbenefits under any health, dental, disability and life insurance plans for aperiod continuing for thirty-six months.

(2)          Payment to be made uponclosing of the Merger by Acquisition Sub to the listed Named Officers thatrepresents the difference between $36.25 (the purchase price under the terms ofthe Merger) and the market price at the time of exercise multiplied by thenumber of options exercised by certain Named Officers in December 2006.

(3)          Representsthe total value of currently unvested stock options and restricted stock unitsthat will accelerate and fully vest upon the consummation of the pendingMerger, which for the purposes of this “Potential Payments Upon Termination OrChange In Control” section is deemed to occur on December 31, 2006. Theamounts in this column were calculated using a per share price of $36.25,rather than the market price at December 31, 2006, since the $36.25 amountrepresents the purchase price per share that is being used in connection withthe pending Merger.

**DirectorCompensation**

Each non-employee directorand alternate director who owns less than 5% of Univision’s common stock andwho is not affiliated with A. Jerrold Perenchio, Televisa or Venevision is paid$100,000 for each year of service. In addition, each non-employee director,other than A. Jerrold Perenchio and John G. Perenchio, and each alternatedirector may be granted options to purchase our Class A Common Stock.Univision made its annual grants of options in January 2006, at which timeeach of Messrs. Gaba, Horn, Cassara, Tichenor, Johnson, Rivera andCisneros received 25,000 non-qualified stock options that vest ratably over 4years.

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**2006Director Compensation**

| **Name(2)**                    | ** ** | ** ** | ** ** | **Fees Earned  or Paid  in Cash($)** | ** ** | **Option  Awards($)(1)** | ** ** | **Total($)** | ** ** |
|--------------------------------|------------|------------|------------|-----------------------------------------------------|------------|--------------------------|------------|--------------|------------|
| **(a)**                        | ** ** | ** ** | ** ** | **(b)**                                             | ** ** | **(d)**                  | ** ** | **(h)**      | ** ** |
| A. Jerrold Perenchio           |       |       | None       |                                                |       |                     | None       |         |       | None |   |
| Anthony Cassara                |       |       | None       |                                                |       |                     | 72,545     |         |       | 72,545 |   |
| Harold Gaba                    |       |       | 100,000    |                                                |       |                     | 72,545     |         |       | 172,545 |   |
| Alan F. Horn                   |       |       | 100,000    |                                                |       |                     | 72,545     |         |       | 172,545 |   |
| Michael O. Johnson             |       |       | 100,000    |                                                |       |                     | 72,545     |         |       | 172,545 |   |
| John G. Perenchio              |       |       | None       |                                                |       |                     | None       |         |       | None |   |
| McHenry T.  Tichenor, Jr. |       |       | 100,000    |                                                |       |                     | 72,545     |         |       | 172,545 |   |
| Gustavo Cisneros               |       |       | None       |                                                |       |                     | 72,545     |         |       | 72,545 |   |
| Alejandro Rivera               |       |       | None       |                                                |       |                     | 72,545     |         |       | 72,545 |   |
| Ricardo Maldonado Yañez   |       |       | None       |                                                |       |                     | None       |         |       | None |   |
|                                |            |            |            |                                                     |            |                          |            |              |            |  |  |  |  |  |  |

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(1)          Eachnamed Director with an amount in this column was granted 25,000 stock optionswith a calculated fair value of $12.01, representing a total grant date fairvalue of $300,250, of which $72,545 vested and is reported as compensation for2006. For a complete discussion of the assumptions and methodologies used tovalue the option awards listed in Column (d) above, please see thediscussion of stock options and stock awards granted during 2006 contained in “Note12. Performance Award and Incentive Plans” to Univision’s Financial Statements,included as part of this Annual Report on Form 10-K and incorporatedherein by reference.

(2)          Mr. Rodriguez serves asa member of the Board of Directors of our Company. See “Outstanding EquityAwards at Fiscal year end.’’

As of December 31,2006, the following number of non-qualified stock options were outstanding andheld by each Director.

**2006Director Stock Options**

| **Director(1)**                | ** ** | ** ** | ** ** | **Number of  Options  Outstanding** | ** ** |
|--------------------------------|------------|------------|------------|------------------------------------------|------------|
| A. Jerrold Perenchio           |       |       | None       |                                     |       |
| Anthony Cassara                |       |       | 100,000    |                                     |       |
| Harold Gaba                    |       |       | 330,000    |                                     |       |
| Alan F. Horn                   |       |       | 330,000    |                                     |       |
| Michael O. Johnson             |       |       | 25,000     |                                     |       |
| John G. Perenchio              |       |       | None       |                                     |       |
| McHenry T.  Tichenor, Jr. |       |       | 691,350    |                                     |       |
| Gustavo Cisneros               |       |       | 50,000     |                                     |       |
| Alejandro Rivera               |       |       | 290,000    |                                     |       |
| Ricardo Maldonado Yañez   |       |       | None       |                                     |       |

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(1)          Mr.Rodriguez serves as a member of the Board of Directors of the Company. See“Outstanding Equity Awards at Fiscal year end.”

**ITEM12.**         Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters.

**BeneficialOwnership Table**

The following table setsforth certain information regarding beneficial ownership of Univision’s votingsecurities as of December 31, 2006 by (1) each person who we knowbeneficially owns 5% or more of the outstanding shares of any class ofUnivision’s voting securities, (2) each director and nominee and the NamedOfficers, and (3) all directors and alternate directors and the NamedOfficers as a group. Except as 

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indicatedin the footnotes to the table, each person named in the table as sole votingand investment power with respect to all shares of securities shown asbeneficially owned by them, subject to community property laws whereapplicable.

Pleasesee the footnotes below for the disclosure required by the Securities ExchangeAct of 1934, for each of the parties listed below. Because the Class P, Class Tand Class V Common Stock can be converted to Class A Common Stock atany time, we are presenting the information below based on such conversions. Weobtained the information presented below for stockholders other than officers,directors and nominees from Schedule 13Ds and 13Gs and amendments thereto,which reflect beneficial ownership as of December 31, 2006.

| Name and Address(a)                                                                                   | ** ** | ** **                                   | ** ** | **Title of Class  of Common Stock** | ** ** | **Number of   Shares of  Class A   Common Stock  Beneficially   Owned(b)(c)** | ** ** | **Percent of   Class A  Common Stock  Beneficially  Owned(c)** | ** ** | **Percent of   Class A  Common Stock  Beneficially  Owned Assuming  Warrants  are Exercised(d)** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|---------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------|------------|
| A. Jerrold Perenchio                                                                                            |       | Class A and Class P                |       |                                                    | 35,283,384 | (e)                                                                                                              |       |                                                                               | 11.4       | %                                                                                                                              |       |   | 10.1 | % |   |
| Televisa                                                                                                        |       | Class A and  Class T               |       |                                                    | 30,187,534 | (f)                                                                                                              |       |                                                                               | 9.8        | %                                                                                                                              |       |   | 11.3 | % |   |
| Av. Vasco de  Quiroga No. 2000, Edificio A, Piso 4 Colonia Santa Fe 01210,  Mexico, DF |       |                                         |       |                                                    |       |                                                                                                             |       |                                                                               |       |                                                                                                                           |       |   |   |   |   |
| Venevision                                                                                                      |       | Class A and  Class V               |       |                                                    | 10,954,706 | (f)(g)                                                                                                           |       |                                                                               | 3.6        | %                                                                                                                              |       |   | 11.8 | % |   |
| c/o Finser Corporation   550 Biltmore Way, Suite 900 Coral Gables, Florida 33134                           |       |                                         |       |                                                    |       |                                                                                                             |       |                                                                               |       |                                                                                                                           |       |   |   |   |   |
| Farallon Capital Management, L.L.C                                                                              |       | Class A                                 |       |                                                    | 12,546,000 | (h)                                                                                                              |       |                                                                               | 5.2        | %                                                                                                                              |       |   | 3.6 | % |   |
| One Maritime Plaza, Suite 1325 San Francisco, California 94111                                             |       |                                         |       |                                                    |       |                                                                                                             |       |                                                                               |       |                                                                                                                           |       |   |   |   |   |
| Robert V. Cahill                                                                                                |       | Class A                                 |       |                                                    | 755,000    | (i)                                                                                                              |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| Anthony B. Cassara                                                                                              |       | Class A                                 |       |                                                    | 81,250     | (i)                                                                                                              |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| Harold Gaba                                                                                                     |       | Class A                                 |       |                                                    | 437,250    | (i)                                                                                                              |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| Andrew W. Hobson                                                                                                |       | Class A                                 |       |                                                    | 862,033    | (i)                                                                                                              |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| Alan F. Horn                                                                                                    |       | Class A                                 |       |                                                    | 471,250    | (i)                                                                                                              |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| Michael O. Johnson                                                                                              |       | Class A                                 |       |                                                    | 7,250      |                                                                                                             |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| C. Douglas Kranwinkle                                                                                           |       | Class A                                 |       |                                                    | 402,550    | (i)                                                                                                              |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| John G. Perenchio                                                                                               |       | Class A                                 |       |                                                    | 0          |                                                                                                             |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| Ray Rodriguez                                                                                                   |       | Class A                                 |       |                                                    | 919,065    | (i)(j)                                                                                                           |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| McHenry T.  Tichenor, Jr.                                                                             |       | Class A                                 |       |                                                    | 3,041,954  | (i)                                                                                                              |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| Gustavo Cisneros                                                                                                |       | Class A and  Class V               |       |                                                    | 10,985,956 | (f)(g)(i)                                                                                                        |       |                                                                               | 3.6        | %                                                                                                                              |       |   | 11.8 | % |   |
| Alejandro Rivera                                                                                                |       | Class A                                 |       |                                                    | 271,250    | (i)                                                                                                              |       |                                                                               | *          |                                                                                                                           |       |   | * |   |   |
| c/o Finser Corporation   550 Biltmore Way, Suite 900 Coral Gables, Florida 33134                           |       |                                         |       |                                                    |       |                                                                                                             |       |                                                                               |       |                                                                                                                           |       |   |   |   |   |
| All directors and executive  officers as a group (15 persons)                                              |       | Class A, Class P, and Class V |       |                                                    | 48,914,942 | (f)                                                                                                              |       |                                                                               | 17.0       | %                                                                                                                              |       |   | 26.3 | % |   |

 

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(a)           Unless otherwiseindicated, the address of each executive officer, director and nominee is 1999Avenue of the Stars, Suite 3050, Los Angeles, California 90067.

(b)          A. Jerrold Perenchio andhis affiliates beneficially own 100% of the Class P Common Stock, Televisabeneficially owns 100% of the Class T Common Stock, and Venevisionbeneficially owns 100% of the Class V Common Stock.

(c)           Assumes that the Class P,Class T and Class V Common Stock outstanding are converted into Class ACommon Stock on a share for share basis since this may be done at any time inaccordance with their respective terms. Excludes the shares issuable uponexercise of the 39,339,700 warrants that are outstanding (see footnote (f) below).

(d)          Assumes that the Class P,Class T and Class V Common Stock outstanding are converted into Class ACommon Stock on a share for share basis since this may be done at any time inaccordance with their respective terms. Assumes exercise of all warrants;however, these warrants to purchase Class A, Class T or Class VCommon Stock are subject to certain exercise restrictions because they may beexercised by the holder only if the aggregate shares owned by Televisa,Venevision and all non-U.S. aliens represent no more than 25% of theoutstanding stock.

(e)           Such shares are ownedby A. Jerrold Perenchio or his affiliates. Includes 885,740 shares of Class PCommon Stock beneficially owned by Margaret Perenchio, Mr. Perenchio’swife. Mr. Perenchio has the sole power to vote such shares pursuant to aproxy, but Mrs. Perenchio has sole power to dispose of or direct thedisposition of such shares. All but 124,994 shares owned directly or indirectlyby Mr. Perenchio are shares of Class P Common Stock. Each share of Class PCommon Stock is convertible at any time into a share of Class A CommonStock.

(f)             Excludes 9,102,000shares of Class A Common Stock or Class T Common Stock and 30,237,700shares of Class A Common Stock or Class V Common Stock issuable uponexercise of warrants held by Televisa and Venevision, respectively.

(g)           A trust principally forthe benefit of the family of Gustavo Cisneros and a trust principally for the benefitof the family of Ricardo Cisneros, or foundations or entities establishedprimarily for the benefit of any one or more of the foregoing persons, eachowns a 50% indirect beneficial ownership interest in the equity of Venevision,which owns these shares. These trusts have shared voting and dispositive powersover these shares. Gustavo Cisneros and Ricardo Cisneros disclaim beneficialownership of such shares.

(h)          Based on a report onSchedule 13D dated December 28, 2006, Noonday Asset Management, L.P.,a separate business unit of Farallon Capital Management, L.L.C., had sharedvoting and dispositive power over all 12,546,000 of such shares. Based on suchSchedule 13D, Noonday Asset Management, L.P. beneficially owned 5.2% ofthe Class A Common Stock outstanding as of December 31, 2006.

(i)             Includes, asapplicable, the following employee or director stock awards granted byUnivision that are fully exercisable or will vest and become exercisable within60 days of December 31, 2006: Mr. Cahill—755,000; Mr. Cassara—56,250;Mr. Cisneros—31,250; Mr. Gaba—311,250; Mr. Hobson—858,325; Mr. Horn—311,250;Mr. Kranwinkle—395,000; Mr. Rivera—271,250; Mr. Rodriguez—918,325;Mr. Tichenor—664,100; and Mr. Johnson—6,250.

(j)              Includes 200 shares of Class A CommonStock held in a UTMA account for Mr. Rodriguez’s daughter and 540 sharesin an UTMA account for Mr. Rodriguez’s son. Mr. Rodriguez disclaimsbeneficial ownership of such shares.

*                    Representsless than one percent.

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**ITEM 13.**         CertainRelationships and Related Transactions, and Director Independence.

Univision’s Code ofConduct (adopted in 2003) guides the Board of Directors in itsactions and deliberations with respect to related party transactions. Underthe Code, conflicts of interest, including any involving the directors orany Named Officers, are prohibited except under any guidelines approved bythe Board of Directors or the Audit Committee. Activities or positionsapproved in advance by the Audit Committee will not be deemed a conflict ofinterest under the Code of Conduct. Only the Board of Directors, or theAudit Committee, may waive a provision of the Code of Conduct for a director ora Named Officer, and only then in compliance with all applicable laws and rules andregulations. In 2006, the Company did not enter into any new related partytransactions. Our Board or Audit Committee has approved each of thetransactions listed below.

The following is a briefsummary of any transactions since January 1, 2006 in which we and (1) eachperson who we know beneficially owns 5% or more of the outstanding shares ofany class of Univision’s voting securities, (2) each director and NamedOfficer and (3) immediate family members of anyone described in (1) or(2) above. All of the agreements have been filed or incorporated byreference as exhibits to this Annual Report on Form 10-K for theyear ended December 31, 2006. The information set forth below does notpurport to be and is not a complete summary of all such agreements andarrangements.

***Program License Agreements***

GrupoTelevisa S.A. and its affiliates (“Televisa”) andaffiliates of Corporacion Venezolana de Television, C.A. (VENEVISION) (“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.

Our program license agreements (the “Program LicenseAgreements”) with each of Televisa and affiliates of Venevision extend until December 2017.Under these agreements, we have the exclusive right to air in the United Statesall Spanish-language programming (with certain exceptions) produced by orfor Televisa and Venevision. Under the Program License Agreements, we pay 15%of Combined Net Time Sales (time sales from broadcasting, including barter,trade, and television subscription revenues, less advertising commissions,certain special event revenues, music license fees, outside affiliatecompensation, time sales relating to advertising sold to Televisa or providedto Venevision and taxes other than withholding taxes) for the Univision andGalavisión networks and affiliated owned-and-operated stations plus forTelevisa, 3% of incremental sales over the 2001 base amount for 2002 andsubsequent years and for Venevision, up to 3%of incremental sales over the 2001 base amount for 2002 and subsequent years ifVenevision programs contribute 30% or more of Univision’s and Galavisión’sratings. For the TeleFutura Network and affiliated owned and operated stations,we pay Televisa 12% of TeleFutura net time sales (calculated in a mannersimilar to Combined Net Time Sales) less certain of TeleFutura’s otherprogramming costs and we pay Venevision royalties based on the ratingsdelivered by the Venevision programs broadcast on TeleFutura. Under theagreements, the Company incurred an aggregate net royalty expense ofapproximately $203.4, $186.6 and $170.1 million in 2006, 2005 and 2004,respectively. The Company has accrued license fees payable to Televisa andVenevision of $17.9 and $20.5 million at December 31,2006 and 2005, respectively. The obligations of their respective affiliateshave been guaranteed by, in the case of Televisa, Grupo Televisa S.A.and, in the case of Venevision, Corporacion Venezolana de Television, C.A.(VENEVISION). Televisa and Venevision programming represented approximately 42%and 19% in 2006 and 39% and 15% in 2005, respectively, of Univision Network’snon-repeat broadcast hours. Televisa and Venevision programmingrepresented approximately 19% and 

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6% in 2006 and 23% and 7%in 2005, of TeleFutura Network’s non-repeat broadcast hours. See “Notesto Consolidated Financial Statements—11. 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 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 129,000, 93,000 and 23,000 ofpreemptable and non-preemptable 30-second commercial advertisements in2006, 2005 and 2004, respectively. Venevision received approximately 55,000,84,000 and 83,000 of preemptable and non-preemptable 30-second commercialadvertisements in 2006, 2005 and 2004, respectively.

We have program licenseagreements for Puerto Rico where our rights are exclusive in a manner similarto the overall Program License Agreements pursuant to which 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 required payments in 2006 were approximately$7.0 million to Televisa and $3.6 million to Venevision.

***International Program 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 applicableProgram License Agreement terminates. For other programs, Televisa or Venevision’srights revert back to us when that entity owns less than 30% of the Companysecurities that it owned on the date of our initial public offering (other thanon account of a merger or similartransaction). We have also granted Televisa and Venevision certain rights offirst offer for Mexico and Venezuela, respectively, to license programsproduced by us or our subsidiaries for TeleFutura or other future networks thatwe may own. See “Notes to Consolidated Financial Statements—11. Contingencies.”

***Distribution Agreement—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 Galavisión 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$424,000, $350,000 and $278,000 in 2006, 2005 and 2004, respectively.

 

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***Distribution Agreement—Televisa***

On September 1, 2003,the Company entered into an agreement with Televisa that grants Televisa thesole and exclusive right during the term to distribute Univision Network,TeleFutura Network and Galavisión produced Spanish-language programs throughoutMexico. As compensation for its distribution services, Televisa will pay theCompany approximately 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 $309,000,$346,000 and $99,000 in 2006, 2005 and 2004, respectively.

***Televisa Soccer Agreement***

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 2006, 2005 and 2004, the Company incurred costs related to Mexican leaguesoccer of $15.6, $14.8 and $16.5 million, respectively.

***Participation Agreement***

Pursuant to aparticipation agreement, Mr. Perenchio, Televisa and Venevision haveagreed that none of them or their affiliates will enter into certaintransactions involving Spanish-language television broadcasting or aSpanish-language television network in the U.S. without first offering theCompany the opportunity to acquire a 50% economic interest. The ParticipationAgreement provides that if the Company elects to participate in any of thesetransactions, the offeror will have substantial control over management of suchtransaction. Upon closing of the Merger, the agreement will apply only toTelevisa and Ricardo and Gustavo Cisneros and their respective affiliates withrespect to transactions that Televisa and Venevision had the intent to engagein at the time of the closing and also with respect to direct broadcastsatellite or direct to home satellite to the U.S. market until such party’sprogram license agreement terminates.

***Warrants***

In December 1992, Televisa and Venevision wereissued warrants to purchase Common Stock, of which Televisa and Venevisionretain 2,000 and 27,437,700, respectively. Also, in December 2001, theCompany issued additional warrants to purchase 9,000,000 shares of Common Stockto Televisa and 2,800,000 shares of Common Stock to Venevision. The 1992warrants are exercisable for Class T and Class V Common Stock at anexercise price of $0.0322 per share. The 2001 warrants are exercisable for6,274,864 and 74,864 shares of Class A Common Stock for Televisa andVenevision, respectively, and 2,725,136shares of Class T and Class V Common Stock for Televisa andVenevision, respectively. The exercise price for the 2001 warrants is$38.261 per share.  In October 2006,Venevision assigned 4,153,115 of its Class V warrants, which converted toClass A warrants, to a third party. 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, theClass T and Class V Warrants are exercisable for Class A CommonStock.

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”). 

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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, 2006, if allwarrants discussed above were fully exercised and all voting securities wereconverted to Class A Common Stock (not including options), Venevisionwould own approximately 12% of our Common Stock and Televisa would ownapproximately 11% 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 Rights Agreement***

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 1, 2007, Mr. Perenchiohad the right to demand three registration statements, Venevision had the right to demand two and Televisahad the right to demand one. In addition, we gave these stockholdersvarious piggyback registration rights. In general, we will pay all fees, costsand expenses of any such registration 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 1, 2007, the Tichenor familymembers had the right to demand two registration statements. The agreement alsoprovides the Tichenor family members with various piggyback registrationrights. 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. Tichenoris incapacitated or ceases to be a Class A/P Director, the resultingvacancy would be filled according to Univision’s Certificate of Incorporation. IfMr. Tichenor’s other designee is incapacitated or ceases to be a Class A/PDirector, Mr. Tichenor (or, if Mr. Tichenor is incapacitated, thenother members of the Tichenor family) may again designate someone independentof Univision to fill the resulting vacancy, subject to Mr. Perenchio’sreasonable approval. 

Mr.  Perenchio’s obligation to vote for Mr. Tichenor and Mr. Tichenor’sother designee terminates when Mr. Tichenor and members of the Tichenorfamily cease to own at least 60% of their originally issued Univision shares. Thevoting agreement also terminates upon the earliest to occur of the conversionof all Class P Common Stock, the incapacitation of Mr. Perenchio, thedate that Mr. Perenchio and Mr. Tichenor agree to terminate thevoting agreement, the death of Mr. Tichenor, or September 23, 2008.

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***Reimbursement Arrangements at Cost with No Mark-Up***

Chartwell Services, Inc.and Chartwell Partners LLC are affiliates of Mr. Perenchio (collectively, “Chartwell”).All arrangements between the Company and Chartwell were at cost and Chartwellrealized no profit from any of the reimbursements. Pursuant to an agreementbetween the Company and Chartwell, services continued to be provided through December 2006,subject to automatic one-year extensions. Cash reimbursements to Chartwelltotaled $672,675, $762,008 and $1.3 million in 2006, 2005 and 2004,respectively. 

***Pay Television Venture***

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 million over thefirst three years of the venture. In 2006 and 2005, the Company received adistribution of $3.0 and $1.5 million from TuTv LLC, respectively.

***Co-production Agreement***

In December 2003, theCompany and Televisa entered into an agreement whereby Televisa would producethe show “100 Mexicanos Dijeron”, which is based on the “Family Feud” formatand the Company would pay Televisa approximately half of the costs per episode.Under the terms of the agreement, the Company made payments of $4.7 million in2005 to Televisa in connection with the production of the show. No paymentswere made in 2006. In the third quarter of 2006, the Company received areimbursement of $4.5 million for production costs, which were over billed byTelevisa, related to this show. The Agreement with Televisa was not renewed.

***Fonovisa Music Group***

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 ofUnivision Music Group. The purchase agreement for the acquisition includedcertain working capital adjustments. 

In August 2004, theCompany and Televisa finalized working capital adjustments related to theCompany’s acquisition of Fonovisa. The Company received approximately $16.5million in 2004, which has been accounted for as an adjustment to the Fonovisapurchase price resulting in a reduction to goodwill and minor adjustments tocertain current assets and liabilities.

***Employment Agreement***

We entered into anemployment agreement with Mr. Tichenor, effective upon completion of theHBC Merger on September 22, 2003, pursuant to which he served as thePresident of Univision Radio. The term of Mr. Tichenor’s employmentagreement was for three years. The agreement was terminable earlier, amongother reasons, upon Mr. Tichenor’s election for certain specified reasons.On December 31, 2004, Mr. Tichenor elected to resign as President.However, Mr. Tichenor remained as a consultant to the Company, for whichhe continued to receive his annual base salary of $600,000 under the employmentagreement through December 31, 2006. The agreement contains standard termsand conditions regarding ownership of works, confidentiality andnon-solicitation of our customers and employees.

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**DirectorIndependence**

The Board has adopted director independence standardsthat meet and in some areas exceed the listing standards set by the NYSE. TheNYSE listing standards set forth five tests and require that a director whofails any of the tests be deemed not independent. Moreover, the NYSE listingstandards provide that a director is not independent unless the Boardaffirmatively determines that the director has no “material relationship” withthe Company. In 2006, the Board affirmatively determined that Messrs. Gaba,Horn and Johnson are independent, and that Messrs. A. Perenchio, Cassara,J. Perenchio, Tichenor, Cisneros, Rodriguez and Rivera are not independent. Inaddition, each member of each of the Audit Committee and the CompensationCommittee are independent.

The Company’s director independence standards are asfollows:

It is the policy ofthe Board of Directors that the Board include directors independent of theCompany and of the Company’s management. For a director to be deemed “independent,”the Board shall affirmatively determine that the director has no materialrelationship with the Company or its affiliates or any member of the seniormanagement of the Company or his or her affiliates. In making thisdetermination, the Board shall apply, at a minimum and in addition to any otherstandards for independence established under applicable statutes andregulations, the following standards, which it may amend or supplement fromtime to time:

·       Adirector who is, or has been within the last three years, an employee of theCompany, or whose immediate family member is, or has been within the last threeyears a Named Officer, of the Company must not be deemed independent.Employment as an interim Chairman or Chief Executive Officer will notdisqualify a director from being considered independent following thatemployment.

·       Adirector who has received, or who has an immediate family member who hasreceived, during any twelve-month period within the last three years, more than$100,000 in direct compensation from the Company, other than director andcommittee fees and pension or other forms of deferred compensation for priorservice (provided such compensation is not contingent in any way on continuedservice), must not be deemed independent. Compensation received by a directorfor former service as an interim Chairman or Chief Executive Officer andcompensation received by an immediate family member for service as anon-executive employee of the Company will not be considered in determiningindependence under this test.

·       Adirector who (A) is, or whose immediate family member is, a currentpartner of a firm that is the Company’s external auditor; (B) is a currentemployee of such a firm; (C) has an immediate family member who is acurrent employee of such a firm and who participates in the firm’s audit,assurance or tax compliance (but not tax planning) practice; or (D) was,or whose immediate family member was, within the last three years (but is nolonger) a partner or employee of such a firm and personally worked on theCompany’s audit within that time must not be deemed independent.

·       Adirector who is, or whose immediate family member is, or has been within thelast three years, employed as an executive officer of another company where anyof the Company’s present Named Officers at the time serves or served on thatcompany’s compensation committee must not be deemed independent.

·       Adirector who is a current employee or general partner, or whose immediatefamily member is a current executive officer or general partner, of an entitythat has made payments to, or received payments from, the Company for propertyor services in an amount which, in any of the last three fiscal years, exceedsthe greater of $1 million or 2% of such other entity’s consolidated grossrevenues, must not be deemed independent.

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·       Furtherto the provision above that applies to property and services generally, adirector who is, or whose immediate family member is, an executive officer,general partner or significant equity holder (i.e., in excess of 10%) of anentity that engages in transactions (such as advertising, the purchase of goodsand services, financing, and the purchase or sale of assets) with the Company,any of its affiliates, any Named Officer or any affiliate of a Named Officer,will not be deemed to have a material relationship and therefore will be deemedindependent if (i) they occurred more than three years prior todetermination of materiality or (ii) if they occur in the ordinary courseof business and are consistent with other transactions in which the Company hasengaged with third parties, unless (a) the director serves as an executiveofficer, employee, or substantial owner, or an immediate family member (asdefined in the New York Stock Exchange’s rules) is an executive officer, of theother entity and (b) such transactions represent more than 5% of theCompany’s consolidated gross revenues for the prior fiscal year or 2% of theother entity’s gross revenues for the prior fiscal year.

·       Adirector who is, or whose immediate family member is, affiliated with oremployed by a tax-exempt entity that received significant contributions (i.e.,more than 2% of the annual contributions received by the entity or more than$200,000 in a single fiscal year, whichever amount is lower) from the Company,any of its affiliates, any Named Officer or any affiliate of a Named Officerwithin the preceding twelve-month period must not be deemed independent, unlessthe contribution was approved in advance by the Board of Directors.

For purposes of theindependence standards set forth above, the terms:

·       “affiliate”means any consolidated subsidiary of the Company and any other Company orentity that controls, is controlled by or is under common control with theCompany;

·       “executiveofficer” means an “officer” within the meaning of Rule 16a-1(f) underthe Securities Exchange Act of 1934, as amended (“Securities Exchange Act”);and

·       “immediatefamily” means spouse, parents, children, siblings, mothers- and fathers-in-law,sons- and daughters-in-law, brothers- and sisters-in-law and anyone (other thanemployees) sharing a person’s home, but excluding any person who is no longeran immediate family member as a result of legal separation or divorce, or deathor incapacitation.

The Board shall undertake an annual review of theindependence of all non-employee directors. In advance of the meeting at whichthis review occurs, each non-employee director shall be asked to provide theBoard with full information regarding the director’s business and otherrelationships with the Company and its affiliates and with senior managementand their affiliates to enable the Board to evaluate the director’sindependence.

Directors have anaffirmative obligation to inform the Board of any material changes in theircircumstances or relationships that may impact their designation by the Boardas “independent.” This obligation includes all business relationships between,on the one hand Directors or members of their immediate family, and, on the otherhand, the Company and its affiliates or members of senior management and theiraffiliates, whether or not such business relationships are subject to any otherapproval requirements of the Company.

**ITEM 14.**         Principal Accountant Fees and Services.

**Appointment ofErnst & Young LLP**

The Audit Committeeappointed Ernst & Young LLP as our independent auditors for 2006.

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**Auditors’ Fees**

In connection with the audit of the 2006 financial statements, the Companyentered into an engagement agreement with Ernst & Young LLP which setforth the terms by which Ernst & Young LLP will perform audit servicesfor the Company. That agreement is subject to alternative dispute resolutionprocedures and an exclusion of punitive damages.

The aggregate feesthat our independent auditors billed for professional services rendered in 2005and 2006 were:

·       *Audit Fees*: Ernst & Young LLP’sfees for audit services totaled approximately $2,039,000 in 2005 and $2,086,000in 2006.

·       *Audit-Related Fees*: Ernst &Young LLP’s fees for audit-related services totaled approximately $91,000in 2005 and $158,000 in 2006. Audit-related services principally includedthe audit of our employee benefit plan, accounting consultations and review ofvarious SEC filings.

·       *Tax Fees*: Ernst & Young LLP’sfees for tax consulting services totaled approximately $18,000 in 2005 and 2006.

·       *All Other Fees*: Univision did not pay anyother fees to Ernst & Young LLP in either 2005 or 2006.

The Audit Committeepre-approves annually of certain specific services in the defined categories ofaudit services, audit-related services, and tax services up to specifiedannual budget amounts, and sets requirements for specific case-by-case pre-approvalof discrete projects, such as those which may have a material effect on ouroperations or services, over certain amounts. Pre-approval may be given as partof the Audit Committee’s approval of the scope of the engagement of ourindependent auditors or on an individual basis. The pre-approval of servicesmay be delegated to one or more of the Audit Committee’s members, but thedecision must be presented to the full Audit Committee at its next scheduledmeeting. All non-audit services provided in 2006 were pre-approved by our AuditCommittee. Our Audit Committee determined that Ernst & Young LLP’sprovision of services for all non-audit fees in 2006 is compatible withmaintaining its independence.

**PART IV**

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

**(a)**          Exhibits

See Index to Exhibitsafter signature pages to this report.

**(b)**          FinancialStatement Schedules

Schedule II—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.

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized on February 9, 2007.
|        | UNIVISION  COMMUNICATIONS 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 been signedby the following persons in the capacities and on the dates so indicated.

Eachperson whose signature appears below appoints each of Robert V. Cahill, C.Andrew Hobson, 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 Annual Reporton Form 10-K for the fiscal year ended December 31, 2006;granting unto said attorney-in-fact and agent, full power and authority to doand perform each and every act and thing requisite and necessary to be done, asfully for all intents and purposes as he might or could do in person, herebyratifying and confirming all that said attorney-in-fact and agent, or hissubstitute or substitutes, shall lawfully do or cause to be done by virtuehereof.
| /s/ A. JERROLD PERENCHIO      |   | Chairman  of the Board         |   | February 9, 2007 |
|-------------------------------|--------|--------------------------------|--------|-----------------------|
| A. Jerrold Perenchio          |   | and  Chief Executive Officer   |   |                  |
|                          |   | (Principal  Executive Officer) |   |                  |
| /s/ ANDREW W. HOBSON          |   | Chief Financial Officer        |   | February 9, 2007 |
| Andrew W. Hobson              |   |                           |   |                  |
| /s/ PETER H. LORI             |   | Corporate Controller and       |   | February 9, 2007 |
| Peter H. Lori                 |   | Chief  Accounting Officer      |   |                  |
| /s/ ANTHONY CASSARA           |   | Director                       |   | February 9, 2007 |
| Anthony Cassara               |   |                           |   |                  |
| /s/ GUSTAVO A. CISNEROS       |   | Director                       |   | February 9, 2007 |
| Gustavo A. Cisneros           |   |                           |   |                  |
| /s/ HAROLD GABA               |   | Director                       |   | February 9, 2007 |
| Harold Gaba                   |   |                           |   |                  |
| /s/ ALAN F. HORN              |   | Director                       |   | February 9, 2007 |
| Alan F. Horn                  |   |                           |   |                  |
| /s/ MICHAEL O. JOHNSON        |   | Director                       |   | February 9, 2007 |
| Michael O. Johnson            |   |                           |   |                  |
| /s/ JOHN G. PERENCHIO         |   | Director                       |   | February 9, 2007 |
| John G. Perenchio             |   |                           |   |                  |
| /s/ RAY RODRIGUEZ             |   | Director                       |   | February 9, 2007 |
| Ray Rodriguez                 |   |                           |   |                  |
| /s/ MCHENRY T. TICHENOR, JR.  |   | Director                       |   | February 9, 2007 |
| McHenry T. Tichenor, Jr. |   |                           |   |                  |
|                          |   | Director                       |   | February 9, 2007 |
| Ricardo Maldonado Yañez  |   |                           |   |                  |

 

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**INDEXTO EXHIBITS**
| Exhibit   Number | ** ** | ** **                                                                                                                                                                                                       | ** ** | **Description** |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
| 2.1(9)           |       | Agreement and  Plan of Reorganization, dated June 11, 2002, by and among Univision  Communications Inc., Hispanic Broadcasting Corporation, and Univision  Acquisition Corporation                          |
| 2.2(20)          |       | Agreement and  Plan of Merger, dated June 26, 2006, by and among Umbrella Holdings,  LLC., Umbrella Acquisition, Inc., and Univision Communications Inc.                                               |
| 3.1(8)           |       | Restated  Certificate of Incorporation of the Company                                                                                                                                                            |
| 3.2(11)          |       | Certificate of  Amendment of Restated Certificate of Incorporation of the Company                                                                                                                                |
| 3.3(17)          |       | Amended and  Restated Bylaws of the Company                                                                                                                                                                      |
| 4.1(2)           |       | Form of  specimen stock certificate                                                                                                                                                                         |
| 4.2(6)           |       | Indenture dated  as of July 18, 2001, between Univision Communications Inc. and The Bank  of New York as Trustee                                                                                            |
| 4.3(6)           |       | 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(12)          |       | Officer’s  Certificate dated July 18, 2001 relating to the Company’s 7.85% Notes  due 2011                                                                                                        |
| 4.5(13)          |       | Form of  Officer’s Certificate for the Company’s 2006, 2007 and 2008 Senior Notes                                                                                                                 |
| 4.6(13)          |       | Form of  Supplemental Indenture for the Company’s Senior Notes Due 2006, 2007 and 2008                                                                                                                 |
| 4.7(13)          |       | Form of  3.500% Senior Notes Due 2007                                                                                                                                                                       |
| 4.8(13)          |       | Form of  Guarantee to Senior Notes Due 2007                                                                                                                                                                 |
| 4.9(13)          |       | Form of  3.875% Senior Notes Due 2008                                                                                                                                                                       |
| 4.10(13)         |       | Form of  Guarantee to Senior Notes Due 2008                                                                                                                                                                 |
| 10.1(14)         |       | Form of  Indemnification Agreement between the Company and each of its executive  officers and directors                                                                                                    |
| 10.1.1(20)       |       | Voting and Proxy  Agreement related to the Agreement and Plan of Merger, dated June 26,  2006, by and among Umbrella Holdings, LLC., Umbrella Acquisition, Inc.  and Univision Communications Inc.     |
| 10.1.2(20)       |       | Form of  Limited Guarantee related to the Agreement and Plan of Merger, dated  June 26, 2006, by and among Umbrella Holdings, LLC., Umbrella  Acquisition, Inc. and Univision Communications Inc. |
| 10.1.3(21)       |       | Univision  Communications Inc. Change in Control Retention Bonus Plan                                                                                                                                            |
| 10.1.4(21)       |       | Univision  Communications Inc. Change in Control Severance Plan                                                                                                                                                  |
| 10.2.1(2)        |       | Registration  Rights Agreement dated as of October 2, 1996                                                                                                                                                  |
| 10.2.2(10)       |       | 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(15)       |       | 2004 Performance  Award Plan                                                                                                                                                                                     |
| 10.3.3(18)       |       | Form of  employee restricted stock unit agreement                                                                                                                                                           |

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| 10.3.4(21)  |   | Form of  employee restricted stock unit agreement under the Change in Control  Retention Bonus Plan                                                                                                                                                                                                                                |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3.5(18)  |   | Form of  director stock option agreement                                                                                                                                                                                                                                                                                           |
| 10.3.6(18)  |   | Form of  employee stock option agreement form                                                                                                                                                                                                                                                                                      |
| 10.3.7(18)  |   | Summary of  director compensation                                                                                                                                                                                                                                                                                                       |
| 10.4.1(7)   |   | 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(7)   |   | 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(7)     |   | 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(7)   |   | Amended and Restated  Warrant issued to Televisa Internacional, S.A. de C.V. dated as of  December 19, 2001                                                                                                                                                                                                                        |
| 10.7.3(7)   |   | Warrants issued  to Grupo Televisa, S.A. dated as of December 19, 2001                                                                                                                                                                                                                                                             |
| 10.7.4(7)   |   | Warrants issued  to VVI Investments Corporation dated as of December 19, 2001                                                                                                                                                                                                                                                      |
| 10.7.5(7)   |   | Warrants issued  to Venevision Investments LLC dated as of December 19, 2001                                                                                                                                                                                                                                                       |
| 10.7.6(11)  |   | Warrant issued to  Television Holdings USA, LLC dated April 12, 2002                                                                                                                                                                                                                                                               |
| 10.8(19)    |   | Credit Agreement  dated as of March 17, 2006 among Univision Communications Inc., a  Delaware corporation, Univision of Puerto Rico Inc., a Delaware corporation,  the lenders from time to time party hereto, the Bank of America, N.A., as  Administrative Agent, and Citigroup Global Markets, Inc., as Syndication  Agent |
| 10.9(22)    |   | First amendment  to credit agreement entered into as of August 24, 2006 among Univision  Communications Inc., a Delaware corporation, Univision of Puerto Rico Inc., a  Delaware corporation, the Guarantors, the Lenders and Bank of America, N.A.,  as Administrative Agent                                                      |
| 10.10(10)   |   | 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(18) |   | Amendment to  Employment Agreement effective as of December 31, 2005 between The  Univision Network Limited Partnership and Ray Rodriguez                                                                                                                                                                                          |
| 10.12.3     |   | Amendment to  Employment Agreement effective as of January 1, 2007 between The  Univision Network Limited Partnership and Ray Rodriguez                                                                                                                                                                                            |
| 10.13.1(7)  |   | Employment  Agreement dated as of January 1, 1996 between The Univision Network  Limited Partnership and Andrew Hobson                                                                                                                                                                                                             |

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| 10.13.2(18) |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and Andrew Hobson         |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
| 10.13.3     |   | Amendment to  Employment Agreement effective as of January 1, 2007 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(18) |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and C. Douglas Kranwinkle |
| 10.14.3     |   | Amendment to  Employment Agreement effective as of January 1, 2007 between Univision  Management Company and C. Douglas Kranwinkle   |
| 10.16.1(16) |   | Employment  Agreement dated as of July 1, 2004 between the Univision Communications  Inc. and Robert V. Cahill                       |
| 10.16.2(18) |   | Amendment to  Employment Agreement effective as of December 31, 2005 between Univision  Management Company and Robert V. Cahill      |
| 10.16.3     |   | Amendment to  Employment Agreement effective as of January 1, 2007 between Univision  Management Company and Robert V. Cahill        |
| 10.17(3)    |   | Reimbursement  Agreement between the Company and Chartwell Services Inc.                                                                  |
| 10.18(22)   |   | Indemnification  Letter among Univision Communications Inc., John G. Perenchio and Robert  Cahill dated August 7, 2006               |
| 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.’s 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.’s 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 Registration Statement on Form S-4(File No. 333-71426-01)

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

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

87

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(9)          Previously filed as anexhibit to Univision Communications Inc.’s Report on Form 8-K filed June 13,2002

(10)Previously filed as an exhibit to Univision Communications Inc.’sRegistration Statement on Form S-4 filed on August 30, 2002(File No. 333-99037)

(11)Previously filed as an exhibit to Univision Communications Inc.’sAnnual Report on Form 10-K for the year ended December 31, 2002

(12)Previously filed as an exhibit to Univision Communications Inc.’sRegistration Statement on Form S-3 filed on September 30, 2003(File No. 333-105933)

(13)Previously filed as an exhibit to Univision Communications Inc.’sReport on Form 8-K filed October 15, 2003

(14)Previously filed as an exhibit to Univision Communications Inc.’sAnnual Report on Form 10-K for the year ended December 31, 2003

(15)Previously filed as an exhibit to Univision Communications Inc.’sDefinitive Proxy Statement on March 19, 2004

(16)Previously filed as an exhibit to Univision Communications Inc.’sAnnual Report on Form 10-K forthe year ended December 31, 2004

(17)Previously filed as an exhibit to Univision Communications Inc.’sAnnual Report on Form 10-Q for the period ended September 30, 2005

(18)Previously filed as an exhibit to Univision Communications Inc.’sAnnual Report on Form 10-K for the year ended December 31, 2005

(19)Previously filed as an exhibit to Univision Communications Inc.’sReport on Form 8-K filed March 22, 2006

(20)Previously filed as an exhibit to Univision Communications Inc.’sReport on Form 8-K filed June 28, 2006

(21)Previously filed as an exhibit to Univision Communications Inc.’sReport on Form 10-Q for the period ended June 30, 2006

(22)Previously filed as an exhibit to Univision Communications Inc.’sReport on Form 10-Q for the period ended September 30, 2006

88

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**SCHEDULE II**

**UNIVISIONCOMMUNICATIONS INC. AND SUBSIDIARIESVALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2006, 2005 and 2004(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, 2006** | ** ** |       | ** ** | ** **                                     |       |                                          | ** ** | ** **                           |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   | ** ** | ** ** |
| Allowance for  doubtful accounts               |       |       | $          | 13,133                                         | ** ** |                                          |       | $                                    | 6,118      |   |   |   | $ | — |   |   |   | $ | 4,690 | (2) |   | $ | 14,561 |   |
| Allowance for  returns                         |       |       | 10,018     | ** **                                     |       |                                          | (1,300     | )                                    |       |   | — |   |   |   | (232 | ) |   | 8,950 |   |
| Allowance for  doubtful accounts and returns   |       |       | $          | 23,151                                         | ** ** |                                          |       | $                                    | 4,818      |   |   |   | $ | — |   |   |   | $ | 4,458 |   |   | $ | 23,511 |   |
| **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 |   |
| **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 |   |
|                                                |            |            |            |                                                |            |                                               |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

(1)          Acquisition relatedadjustments.

(2)          Write-off of accountsreceivable.

(3)          Reductions to theallowance for returns.

89

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                            | ** ** | Page |
|----------------------------------------------------------------------------------------------------------------------------|------------|------|
| Reports of Independent Registered Public Accounting  Firm                                                                  |       | F-2  |
| Consolidated  Balance Sheets at December 31, 2006 and 2005                                                            |       | F-4  |
| Consolidated Statements of Income for the Years Ended  December 31, 2006, 2005 and 2004                               |       | F-5  |
| Consolidated Statements of Changes in Stockholders’  Equity for the Years Ended December 31, 2004, 2005 and 2006 |       | F-6  |
| Consolidated Statements of Cash Flows for the Years  Ended December 31, 2006, 2005 and 2004                           |       | F-7  |
| Notes to Consolidated Financial Statements                                                                                 |       | F-8  |

 

F-1

----

**FINANCIAL STATEMENT 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 31,2006 and 2005 and the related consolidated statements of income, stockholders’equity, and cash flows for each of the three years in the period ended December 31,2006. Our audits also included the financial statement schedule 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). Thosestandards 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 31,2006 and 2005 and the consolidated results of their operations and their cashflows for each of the three years in the period ended December 31, 2006 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.

As discussed in Note 3 to the consolidated financialstatements, Univision Communications Inc. and Subsidiaries adopted FinancialAccounting Standards Board Statement No. 123R, “Share-Based Payment.”

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 31,2006, based on criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commissionand our report dated February 9, 2007 expressed an unqualified opinionthereon.
|                        | /s/  Ernst &Young LLP |
|------------------------|--------------------------------|
| New York, New  York    |
| February 9,  2007 |

 

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 Management’s Report on Internal Control Over FinancialReporting, included in Item 9A. “Controls and Procedures” of this Annual Reporton Form 10-K, that Univision Communications Inc. maintainedeffective internal control over financial reporting as of December 31,2006, based on criteria established inInternal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (the COSO criteria). UnivisionCommunications Inc.’s management is responsible for maintaining effectiveinternal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting. Our responsibilityis to express an opinion on management’s assessment and an opinion on theeffectiveness of the company’s internal control over financial reporting basedon 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, evaluating management’sassessment, testing and evaluating the design and operating effectiveness ofinternal control, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonablebasis 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 and dispositionsof the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, andthat receipts and expenditures of the company are being made only in accordancewith authorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have amaterial 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, 2006, 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, 2006, based on theCOSO criteria.

We also have audited, in accordance with the standardsof the Public Company Accounting Oversight Board (United States), theconsolidated balance sheets of Univision Communications Inc. and subsidiariesas of December 31, 2006 and 2005 and the related consolidated statementsof income, stockholders’ equity, and cash flows for each of the three years inthe period ended December 31, 2006 and our report dated February 9,2007 expressed an unqualified opinion thereon.
|  | /s/Ernst &  Young LLP |
|--|--------------------------------|

 

New York, New YorkFebruary 9, 2007

F-3

----

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

| ** **                                                                                                                                                                            | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                            | ** ** | **2006**              | ** ** | **2005** | ** ** |
| **ASSETS**                                                                                                                                                                            |       |                  |       |   |   |
| Current assets:                                                                                                                                                                       |       |                  |       |   |   |
| Cash and cash equivalents                                                                                                                                                             |       | $                     | 103,522    |   | $ | 99,400 |   |
| Accounts receivable, less allowance for doubtful  accounts and returns of $23,511 in 2006 and $23,151 in 2005                                                                         |       | 454,060               |       | 395,508 |   |
| Program rights                                                                                                                                                                        |       | 27,342                |       | 29,878 |   |
| Income taxes                                                                                                                                                                          |       | —                |       | 3,194 |   |
| Deferred tax assets                                                                                                                                                                   |       | 25,345                |       | 23,150 |   |
| Prepaid expenses and other                                                                                                                                                            |       | 53,622                |       | 82,470 |   |
| Total current assets                                                                                                                                                                  |       | 663,891               |       | 633,600 |   |
| Property and equipment, net, less accumulated  depreciation of $452,480 in 2006 and $389,838 in  2005                                                                                 |       | 593,838               |       | 563,958 |   |
| Intangible assets, net                                                                                                                                                                |       | 4,337,410             |       | 4,271,584 |   |
| Goodwill                                                                                                                                                                              |       | 2,308,079             |       | 2,231,238 |   |
| Deferred financing costs, net, less accumulated  amortization of $13,870 in 2006 and $11,742 in 2005                                                                                  |       | 5,494                 |       | 7,123 |   |
| Program rights                                                                                                                                                                        |       | 17,449                |       | 25,960 |   |
| Investments in equity method investees                                                                                                                                                |       | 50,206                |       | 55,051 |   |
| Investments in cost method investees                                                                                                                                                  |       | 161,411               |       | 300,389 |   |
| Other assets                                                                                                                                                                          |       | 28,617                |       | 39,433 |   |
| Total assets                                                                                                                                                                          |       | $                     | 8,166,395  |   | $ | 8,128,336 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                         |       |                  |       |   |   |
| Current  liabilities:                                                                                                                                                                 |       |                  |       |   |   |
| Accounts payable and accrued liabilities                                                                                                                                              |       | $                     | 216,680    |   | $ | 283,509 |   |
| Income taxes                                                                                                                                                                          |       | 8,800                 |       | — |   |
| Accrued interest                                                                                                                                                                      |       | 22,435                |       | 25,639 |   |
| Accrued license fees                                                                                                                                                                  |       | 17,874                |       | 20,548 |   |
| Program rights obligations                                                                                                                                                            |       | 15,658                |       | 15,809 |   |
| Current portion of long-term debt and capital lease  obligations                                                                                                                      |       | 202,261               |       | 564,016 |   |
| Total current liabilities                                                                                                                                                             |       | 483,708               |       | 909,521 |   |
| Long-term debt                                                                                                                                                                        |       | 922,169               |       | 935,493 |   |
| Capital lease obligations                                                                                                                                                             |       | 47,420                |       | 33,806 |   |
| Program rights obligations                                                                                                                                                            |       | 13,876                |       | 20,948 |   |
| Deferred tax liabilities                                                                                                                                                              |       | 1,083,113             |       | 1,019,803 |   |
| Other long-term liabilities                                                                                                                                                           |       | 54,610                |       | 59,976 |   |
| Total liabilities                                                                                                                                                                     |       | 2,604,896             |       | 2,979,547 |   |
| Noncontrolling interest of variable interest entities                                                                                                                                 |       | —                |       | 57,889 |   |
| Commitments and  contingencies (see notes 10 and 11)                                                                                                                                  |       |                  |       |   |   |
| Stockholders’ equity:                                                                                                                                                            |       |                  |       |   |   |
| Preferred stock, $0.01 par value; 10,000,000 shares  authorized; no shares issued or outstanding                                                                                      |       | —                |       | — |   |
| Common stock, $0.01 par value; 1,040,000,000 shares  authorized; 309,943,277 shares issued and 309,533,633 outstanding in 2006 and  304,982,531 shares issued and outstanding in 2005 |       | 3,099                 |       | 3,049 |   |
| Paid-in-capital                                                                                                                                                                       |       | 4,268,867             |       | 4,133,889 |   |
| Deferred compensation                                                                                                                                                                 |       | —                |       | (1,333 | ) |
| Retained earnings                                                                                                                                                                     |       | 1,305,674             |       | 956,500 |   |
| Accumulated other comprehensive losses                                                                                                                                                |       | (1,657                | )          | (1,205 | ) |
|                                                                                                                                                                                  |       | 5,575,983             |       | 5,090,900 |   |
| Treasury stock, at cost, 409,644 shares at  December 31, 2006                                                                                                                    |       | (14,484               | )          | — |   |
| Total stockholders’ equity                                                                                                                                                       |       | 5,561,499             |       | 5,090,900 |   |
| Total liabilities  and stockholders’ equity                                                                                                                                      |       | $                     | 8,166,395  |   | $ | 8,128,336 |   |

 

See Notes to Consolidated Financial Statements

F-4

----

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

| ** **                                                                              | ** ** | **2006**    | ** ** | **2005**    | ** ** | **2004**    | ** ** |
|-----------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
| Net revenues:                                                                           | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** |
| Television, radio and Internet services                                                 |       | $           | 2,025,587  |        | $          | 1,746,087   |       | $ | 1,608,375 |   |
| Music products and publishing                                                           |       | 141,065     |       | 206,444     |       | 178,560     |       |
| Total net  revenues                                                                     |       | 2,166,652   |       | 1,952,531   |       | 1,786,935   |       |
| Direct operating  expenses of television, radio and Internet services                   |       | 719,924     |       | 614,609     |       | 561,141     |       |
| Direct operating  expenses of music products and publishing                             |       | 89,844      |       | 115,364     |       | 102,316     |       |
| Total direct  operating expenses (excluding depreciation and amortization)              |       | 809,768     |       | 729,973     |       | 663,457     |       |
| Selling, general  and administrative expenses (excluding depreciation and amortization) |       | 599,719     |       | 559,281     |       | 528,841     |       |
| Cost reduction  plan                                                                    |       | —      |       | 30,289      |       | —      |       |
| Depreciation and  amortization                                                          |       | 90,791      |       | 93,223      |       | 101,382     |       |
| Operating  expenses                                                                     |       | 1,500,278   |       | 1,412,766   |       | 1,293,680   |       |
| Operating income                                                                        |       | 666,374     |       | 539,765     |       | 493,255     |       |
| Other expense (income):                                                                 |       |        |       |        |       |        |       |
| Interest expense, net                                                                   |       | 88,105      |       | 84,048      |       | 66,061      |       |
| Loss on extinguishment of debt                                                          |       | —      |       | —      |       | 467         |       |
| Amortization of deferred financing costs                                                |       | 2,553       |       | 3,309       |       | 3,470       |       |
| Stock dividend                                                                          |       | (1,812      | )          | (1,812      | )          | (6,453      | )          |
| Equity (income) loss in unconsolidated subsidiaries  and other                          |       | (2,540      | )          | (959        | )          | 1,942       |       |
| Gain on sales of Entravision stock                                                      |       | (1,454      | )          | —      |       | —      |       |
| Nontemporary decline in fair value of investments                                       |       | 5,200       |       | 81,877      |       | —      |       |
| Noncontrolling interest of variable interest  entities                                  |       | 912         |       | 4,120       |       | 7,311       |       |
| Income before  taxes                                                                    |       | 575,410     |       | 369,182     |       | 420,457     |       |
| Provision for  income taxes                                                             |       | 226,236     |       | 182,003     |       | 164,574     |       |
| Net income                                                                              |       | $           | 349,174    |        | $          | 187,179     |       | $ | 255,883 |   |
| Net income per  common share:                                                           |       |        |       |        |       |        |       |
| Basic                                                                                   |       | $           | 1.14       |        | $          | 0.59        |       | $ | 0.79 |   |
| Diluted                                                                                 |       | $           | 1.03       |        | $          | 0.54        |       | $ | 0.72 |   |
| Weighted average  common shares outstanding:                                            |       |        |       |        |       |        |       |
| Basic                                                                                   |       | 306,377,333 |       | 315,223,555 |       | 322,742,581 |       |
| Diluted                                                                                 |       | 338,865,557 |       | 344,445,842 |       | 353,019,601 |       |

 

See Notes to Consolidated Financial Statements

F-5

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFor the Years Ended December 31, 2004, 2005 and 2006(In thousands)**

| ** **                                                  | ** ** | **Common  Stock** | ** ** | **Paid-in-  Capital** | ** ** | **Deferred  Compensation** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income (loss)** | ** ** | **Treasury  Stock** | ** ** | **Total** | ** ** |
|-------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|----------------------------|------------|------------------------|------------|-----------------------------------------------------------|------------|---------------------|------------|-----------|------------|
| Balance, January 1,  2004                              |       |              | $          | 3,232                 |       |                       | $          | 4,611,048              |       |                                                      | $          | (2,410              | )          |      | $          | 513,438 |   |   | $ | (138 | ) |   | $ | (22,193 | ) | $ | 5,102,977 |   |
| Components  of comprehensive income:                   |       |              |       |                  |       |                       |       |                   |       |                                                      |       |                |       |      |       |   |   |   |   |   |   |
| Net income for the  year                                    |       |              | —     |                  |       | —                     |       |                   | —     |                                                      |       | 255,883             |       |      | —     |   |   | — |   | 255,883 |   |
| Currency  translation adjustment loss                       |       |              | —     |                  |       | —                     |       |                   | —     |                                                      |       | —              |       |      | (1,236     | ) |   | — |   | (1,236 | ) |
| Total  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 |   |
| Components  of comprehensive income:                   |       |              |       |                  |       |                       |       |                   |       |                                                      |       |                |       |      |       |   |   |   |   |   |   |
| Net income for the  year                                    |       |              | —     |                  |       | —                     |       |                   | —     |                                                      |       | 187,179             |       |      | —     |   |   | — |   | 187,179 |   |
| Currency  translation adjustment loss                       |       |              | —     |                  |       | —                     |       |                   | —     |                                                      |       | —              |       |      | 169        |   |   | — |   | 169 |   |
| Total  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 |   |
| Components of comprehensive income:                    |       |              |       |                  |       |                       |       |                   |       |                                                      |       |                |       |      |       |   |   |   |   |   |   |
| Net income for the  year                                    |       |              | —     |                  |       | —                     |       |                   | —     |                                                      |       | 349,174             |       |      | —     |   |   | — |   | 349,174 |   |
| Currency  translation adjustment loss                       |       |              | —     |                  |       | —                     |       |                   | —     |                                                      |       | —              |       |      | (452       | ) |   | — |   | (452 | ) |
| Total  comprehensive income                                 |       |              | —     |                  |       | —                     |       |                   | —     |                                                      |       | —              |       |      | —     |   |   | — |   | 348,722 |   |
| Treasury stock  acquired                                    |       |              | —     |                  |       | —                     |       |                   | —     |                                                      |       | —              |       |      | —     |   |   | (14,484 | ) | (14,484 | ) |
| Reclassification  of deferred compensation                  |       |              | —     |                  |       | (1,333                     | )          |                   | 1,333      |                                                      |       | —              |       |      | —     |   |   | — |   | — |   |
| Stock compensation  costs                                   |       |              | —     |                  |       | 12,678                     |       |                   | —     |                                                      |       | —              |       |      | —     |   |   | — |   | 12,678 |   |
| Exercise of stock  options, including related tax  benefits |       |              | 50         |                  |       | 123,633                    |       |                   | —     |                                                      |       | —              |       |      | —     |   |   | — |   | 123,683 |   |
| Balance,  December 31, 2006                            |       |              | $          | 3,099                 |       |                       | $          | 4,268,867              |       |                                                      | $          | —              |       |      | $          | 1,305,674 |   |   | $ | (1,657 | ) |   | $ | (14,484 | ) | $ | 5,561,499 |   |

 

See Notes to Consolidated Financial Statements

F-6

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

| ** **                                                                                    | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash flows from operating activities:                                                         |       |     |       |     |       |     |       |
| Net income                                                                                    |       | $        | 349,174    |     | $          | 187,179  |       | $ | 255,883 |   |
| Adjustments to reconcile net income to net cash from  operating activities:                   |       |     |       |     |       |     |       |
| Depreciation                                                                                  |       | 81,641   |       | 79,095   |       | 82,157   |       |
| Amortization of  intangible assets and deferred financing costs                               |       | 11,704   |       | 17,438   |       | 22,695   |       |
| Deferred income  taxes                                                                        |       | 63,979   |       | 56,521   |       | 65,878   |       |
| Stock dividend                                                                                |       | (1,812   | )          | (1,812   | )          | (6,453   | )          |
| Noncontrolling  interest of variable interest entities                                        |       | 912      |       | 4,120    |       | 7,311    |       |
| Equity (income)  loss in unconsolidated subsidiaries                                          |       | (2,277   | )          | (945     | )          | 928      |       |
| Nontemporary  decline in fair value of investments                                            |       | 5,200    |       | 81,877   |       | —   |       |
| (Gain) loss on  sale of property and equipment                                                |       | 624      |       | (1,467   | )          | 717      |       |
| Gain on sales of  Entravision stock                                                           |       | (1,454   | )          | —   |       | —   |       |
| Share-based  compensation                                                                     |       | 12,678   |       | —   |       | —   |       |
| Earnings  distribution from equity investments                                                |       | 393      |       | (5,537   | )          | —   |       |
| Other non-cash items                                                                          |       | 1,245    |       | 1,469    |       | 735      |       |
| Changes in operating assets and liabilities, net of  assets acquired and liabilities assumed: |       |     |       |     |       |     |       |
| Accounts  receivable, net                                                                     |       | (57,579  | )          | (63,408  | )          | (7,319   | )          |
| Program rights                                                                                |       | 11,047   |       | 15,475   |       | 7,344    |       |
| Income taxes  receivable                                                                      |       | 3,194    |       | —   |       | (4,596   | )          |
| Deferred tax  assets                                                                          |       | (6,015   | )          | —   |       | —   |       |
| Prepaid expenses  and other                                                                   |       | 32,543   |       | (3,297   | )          | (3,370   | )          |
| Accounts payable  and accrued liabilities                                                     |       | (56,052  | )          | 37,370   |       | 9,107    |       |
| Income taxes  payable                                                                         |       | 13,032   |       | 1,632    |       | —   |       |
| Income tax benefit  from share-based awards                                                   |       | —   |       | 4,236    |       | 5,026    |       |
| Accrued interest                                                                              |       | (3,204   | )          | 2,529    |       | (114     | )          |
| Accrued license  fees                                                                         |       | (2,674   | )          | 6,925    |       | 296      |       |
| Program rights  obligations                                                                   |       | (7,223   | )          | (12,447  | )          | (3,399   | )          |
| Other, net                                                                                    |       | (7,904   | )          | 2,769    |       | (7,849   | )          |
| Net cash provided  by operating activities                                                    |       | 441,172  |       | 409,722  |       | 424,977  |       |
| Cash flows from investing activities:                                                         |       |     |       |     |       |     |       |
| Acquisitions, net  of acquired cash                                                           |       | (123,432 | )          | (221,754 | )          | (128,704 | )          |
| Proceeds from  sales of Entravision stock                                                     |       | 52,718   |       | —   |       | —   |       |
| Capital  expenditures                                                                         |       | (80,464  | )          | (102,553 | )          | (120,144 | )          |
| (Distributions to)  contributions from Disa partner                                           |       | (4,775   | )          | (1,061   | )          | 543      |       |
| Cash of variable  interest entities                                                           |       | —   |       | —   |       | 12,196   |       |
| Proceeds from sale  of property and equipment                                                 |       | 58       |       | 5,158    |       | 6,414    |       |
| Other, net                                                                                    |       | (93      | )          | 129      |       | (1,419   | )          |
| Net cash used in  investing activities                                                        |       | (155,988 | )          | (320,081 | )          | (231,114 | )          |
| Cash flows from financing activities:                                                         |       |     |       |     |       |     |       |
| Proceeds from  issuance of long-term debt                                                     |       | 550,000  |       | 492,000  |       | 170,000  |       |
| Repayment of  long-term debt                                                                  |       | (938,845 | )          | (182,740 | )          | (274,897 | )          |
| Purchases of  treasury shares                                                                 |       | (14,484  | )          | (499,994 | )          | —   |       |
| Proceeds from  issuance of common stock                                                       |       | —   |       | —   |       | 599,426  |       |
| Repurchase of  common stock                                                                   |       | —   |       | —   |       | (599,426 | )          |
| Proceeds from  stock options exercised                                                        |       | 91,577   |       | 10,625   |       | 24,548   |       |
| Payment of  offering costs                                                                    |       | —   |       | —   |       | (57      | )          |
| Income tax benefit  from share-based awards                                                   |       | 32,106   |       | —   |       | —   |       |
| Deferred financing  costs                                                                     |       | (1,416   | )          | —   |       | (266     | )          |
| Net cash used in  financing activities                                                        |       | (281,062 | )          | (180,109 | )          | (80,672  | )          |
| Net increase  (decrease) in cash                                                              |       | 4,122    |       | (90,468  | )          | 113,191  |       |
| Cash and cash  equivalents, beginning of year                                                 |       | 99,400   |       | 189,868  |       | 76,677   |       |
| Cash and cash  equivalents, end of year                                                       |       | $        | 103,522    |     | $          | 99,400   |       | $ | 189,868 |   |
| Supplemental disclosure of cash flow information:                                             |       |     |       |     |       |     |       |
| Interest paid                                                                                 |       | $        | 79,372     |     | $          | 71,452   |       | $ | 70,779 |   |
| Income taxes paid                                                                             |       | $        | 120,650    |     | $          | 117,041  |       | $ | 81,429 |   |

 

See Notes to Consolidated Financial Statements

F-7

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**1. Organization of the Company**

Univision CommunicationsInc., together with the subsidiaries through which its businesses are conducted(the “Company,” “Univision,” “we,” “us” and “our”), is the leadingSpanish-language media company in the United States and operates in fourbusiness segments: television, radio, music and Internet. The Company’stelevision operations include the Univision and TeleFutura networks, theCompany’s owned and operated television stations and Galavisión, the Company’scable television network. Univision Radio, Inc. (“Univision Radio”)operates the Company’s radio business, which includes its owned and operatedradio stations and radio network. The Company’s music operations include theUnivision Records, Fonovisa Records and La Calle labels and Disa Records, S.A.de C.V. (“Disa”). Univision Online, Inc. (“Univision Online”) operates theCompany’s Internet portal, *Univision.com*.See note “7. Investments and Variable Interest Entities” for a discussionof Disa. See note “2. Recent Developments” for information related to theMerger.

**2. RecentDevelopments**

On February 8, 2006,the Company announced that its Board of Directors had decided to begin aprocess to explore strategic alternatives to enhance shareholder value,including but not limited to the raising of capital through the sale ofsecurities or assets of the Company, strategic acquisitions, and thecombination, sale or merger of the Company with another entity. On June 26,2006, the Company announced that it had entered into a merger agreement with aninvestment consortium consisting of Madison Dearborn Capital Partners IV, L.P.,Providence Equity Partners V L.P. and related entities, SCG Investments II,LLC, TPG Partners V, L.P. and Thomas H. Lee Equity Fund VI, L.P.

*Stockholder Merger Approval*

A special meeting ofstockholders was held on September 27, 2006, and the stockholders voted infavor of the adoption of the Agreement and Plan of Merger (“Merger Agreement”),dated as of June 26, 2006, by and among the Company, Umbrella Holdings,LLC, a Delaware limited liability company (the “Buyer”), and UmbrellaAcquisition, Inc., a Delaware corporation and a wholly-owned subsidiary ofthe Buyer (the “Acquisition Sub”). The transaction described in the MergerAgreement is referred to as the “Merger.”

*The Merger Agreement*

As a result of the Merger,the separate corporate existence of Acquisition Sub will cease and Univisionwill continue as the surviving corporation in the Merger as a subsidiary ofBuyer. At the effective time of the Merger, each issued and outstanding shareof common stock (other than shares that were held in treasury or owned byAcquisition Sub or Buyer immediately prior to the Merger and shares held bystockholders who properly demand their appraisal rights), will be paid $36.25in cash, without interest, plus any additional consideration payable under theterms of the Merger Agreement. Under the terms of the Merger Agreement, if theMerger becomes effective after April 26, 2007, each holder of issued andoutstanding common stock will also receive an amount equal to the pro rataportion, based upon the number of days elapsed subsequent to April 26,2007, of $36.25 multiplied by 8% per annum, so long as certain conditions forclosing the Merger have been satisfied or waived as of that date.

F-8

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**2. RecentDevelopments (Continued)**

Each stock optionoutstanding and unexercised at the effective time of the Merger, whether vestedor unvested, with an exercise price less than the Merger consideration of$36.25 will be paid in cash for the difference between the exercise price and$36.25 multiplied by the number of shares underlying the option.

Each warrant outstandingat the effective time of the Merger with an exercise price less than the Mergerconsideration of $36.25 will be cancelled and paid in cash for the differencebetween the exercise price and $36.25 multiplied by the number of sharesunderlying the warrant. Subject to certain exceptions, each restricted stockunit that remains outstanding as of the effective time of the Merger, will bepaid in cash.

Buyer and Acquisition Subare entities owned by an investment consortium consisting of Madison DearbornCapital Partners IV, L.P., Madison Dearborn Capital Partners V-A, L.P.,Providence Equity Partners V L.P. and related entities, SCG Investments II,LLC, TPG Partners V, L.P. and Thomas H. Lee Equity Fund VI, L.P. (together, the“Investors”). Investors will assume or repay approximately $1.1 billion in debtof the Company, which in conjunction with estimated fees and expenses inconnection with the Merger and the payments specified above represents atransaction value of approximately $14.0 billion.

The Merger is subject toregulatory approval by the Federal Communications Commission (“FCC”). TheCompany has already obtained clearance under the Hart-Scott-Rodino AntitrustImprovements Act of 1976. The Merger is expected to close in March 2007.

The Merger Agreementcontains certain termination rights and provides that, upon termination of theMerger Agreement under certain specified circumstances, including, among otherthings, if the Company’s board of directors (1) changes its recommendationto its stockholders to approve and adopt the Merger Agreement, or (2) determinesin good faith that it has received an unsolicited bona fide Superior Proposal,(as such term is defined in the Merger Agreement),and, after considering any revised proposal, the Buyer may make concurrentlywith the termination of the Merger Agreement, enters into a definitiveagreement with respect to such Superior Proposal, then the Company will berequired to pay Buyer a termination fee of $300 million.

If the Company terminatesthe Merger Agreement due to Buyer’s failure to receive the requisite regulatoryapprovals prior to a specified date and the Company has satisfied all of itsconditions for the closing on that date, then Buyer is required to pay theCompany a termination fee equal to $500 million. Alternatively, if the Companyterminates the Merger Agreement due to Buyer’s failure to effect the closingbecause of a failure to receive adequate proceeds from one or more of thefinancings contemplated by the financing commitments, then Buyer is required topay the Company a termination fee equal to $300 million. Neither the Buyer northe Acquisition Sub will have any liability in excess of $300 million indamages less any termination fee previously paid in respect of the Company’stermination of the Merger Agreement for intentional breach of the MergerAgreement.

*Merger Debt and Equity Financing*

AtDecember 31, 2006, the Company and Buyer estimate that the total amount offunds necessary to complete the Merger and the related transactions isanticipated to be approximately $14.0 billion, which includes approximately$12.4 billion to be paid out to the Company’s stockholders and holders ofequity-based interests in the Company, $1.0 billion related to the assumptionby Buyer of the Company’s 

F-9

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**2. Recent Developments (Continued)**

financingarrangements and related transactions (excluding the refinancing the Company’sexisting bank credit facility) and $500 million estimated to pay fees andexpenses in connection with the Merger. These payments are expected to befunded by the Buyer and the Acquisition Sub in a combination of equitycontributions by the Investors, debt financing and, to the extent available,cash of the Company. The Buyer and the Acquisition Sub have obtained equity anddebt financing commitments, described below, in connection with thetransactions contemplated by the Merger Agreement.

The Buyer has informed theCompany that it intends to keep the Company’s existing senior notes outstandingafter completion of the Merger. The Company’s existing revolving creditfacility will terminate upon completion of the Merger.

The Investors havecollectively agreed to contribute up to approximately $4.0 billion of cash tothe Buyer, which will constitute the equity portion of the Merger financing. MadisonDearborn Capital Partners V-A, L.P., Providence Equity Partners V, L.P. andrelated entities, TPG Partners V, L.P. and Thomas H. Lee Equity Fund VI, L.P.have each delivered an equity commitment letter for approximately $914 millionto the Buyer and SCG Investments II, LLC has delivered an equity commitmentletter for $300 million to the Buyer.

In connection with theexecution and delivery of the Merger Agreement, the Acquisition Sub hasobtained debt commitment letters from various lenders which, subject to certainconditions, provide for $10.25 billion in debt financing (not all of which isexpected to be drawn at closing) consisting of (1) a senior secured termloan facility, a senior bridge loan facility and a senior subordinated bridgeloan facility in an aggregate principal amount of up to $9.05 billion tofinance the payment of the aggregate Merger consideration and to pay, in part,fees and expenses in connection therewith, (2) a senior secured delayeddraw term loan facility in an aggregate principal amount of up to $450 million,which is available for a limited time to repay or prepay the Company’s existingsenior notes, and (3) a senior secured revolving credit facility in anaggregate amount of up to $750 million to pay fees and expenses in connectionwith the Merger and for working capital and other general corporate purposes.The senior bridge loan facility and the senior subordinated bridge loanfacility are expected to be utilized to theextent the Acquisition Sub is not able to complete on or prior to the effectivetime of the Merger one or more offerings of notes or other financings in anaggregate amount equal to commitments under those facilities, estimated to beapproximately $2 billion.

*Change in Control Retention Bonus and Severance Plans*

The Company hasestablished a change in control retention bonus and severance plan toprovide retention incentives for key employees of the Company to encourage themto remain as employees of the Company, to use their best efforts to help theCompany achieve its operating plan and to ensure a successful completion of thechange in control.

The change incontrol severance plan applicable to the Company’s executive officersother than A. Jerrold Perenchio, has estimated severancebenefits payable to such officers upon termination ofemployment, without cause or for good reason, in connection with a change incontrol of approximately $33 million in cash, and estimated proratedbonus payments to such officers totaling approximately $1.8 millionin cash (assuming that the closing date of the Merger occurs on March 26,2007). The executive 

F-10

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**2. Recent Developments (Continued)**

officers(other than A. Jerrold Perenchio) were also awarded restricted stock units thatwill remain outstanding at the closing of the Merger and will vest on theearlier of 90 days following the Merger (if the holder is employed by the Buyeron such date) or the termination date of the executive officer’s employmentwithout cause or resignation for good reason after the Merger. The estimatedvalue of these restricted stock units is $14.5 million.

Estimated retention bonus payments,which are payable to other employees at the earlier of the Merger closingdate or March 2007 under the change incontrol employee retention bonus plan, are estimated to be $4.7 millionin cash. This cost is being expensed ratably through the expected date of theclosing. Certain of these other employees are also entitled to a retentionbonus on the one year anniversary of the Merger closing date provided that theyare either employed on such date or have a qualifying termination of employmentprior to such date (and in such latter case, will be paid on the date of suchtermination). In addition, upon the closing of the Merger, subject to certainexceptions, each restricted stock unit that remains outstanding as of theeffective time of the Merger will be paid in cash.

**3. SignificantAccounting Policies**

*Principles of Consolidation*

The consolidated financialstatements include the accounts and operations of the Company and its majorityowned subsidiaries. Our consolidated financial statements also include theaccounts of variable interest entities (“VIEs”), which are entities that amongother things, lack sufficient equity to finance their activities withoutadditional support from other parties. With regard to the VIEs, the Company isconsidered the primary beneficiary of the risks and rewards of these entities,regardless of our ownership interest, see note “7. Investments and VariableInterest Entities.” All significant intercompany accounts and transactions havebeen eliminated. The operating results of acquired companies are included inthe consolidated income statement of the Company from the date of acquisition.

For investments in whichthe Company owns 20% to 50% of the voting shares and has significant influenceover the operating and financial policies, the equity method of accounting isused. Accordingly, the Company’s share of the earnings and losses of thesecompanies are included in the equity loss in unconsolidated subsidiaries in theaccompanying consolidated statements of income of the Company. For investmentsin which the Company owns non-voting shares and does not have significantinfluence over operating and financial policies of the investees, the costmethod of accounting is used. For investments in which the Company owns lessthan 20% of the voting shares and does not have significant influence, the costmethod of accounting is used. Under the cost method of accounting, the Companydoes not record its share in the earnings and losses of the companies in whichit has an investment.

*Reclassifications*

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

F-11

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**3. Significant AccountingPolicies (Continued)**

*Use of Estimates*

The preparation offinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, disclosure of contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenue and expenses during the reporting period. Actual resultscould differ from those estimates.

*Cash and Cash Equivalents*

Cash and cash equivalentsinclude all highly liquid investments with maturities of less than 90 days.

*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 paid by television and compensation costs paid to an affiliatedtelevision station. The amounts deducted from gross revenues, principallyrepresenting agency commissions, aggregate to $345.8, $302.5 and $273.5 millionin 2006, 2005 and 2004, respectively. The Company’s television and radio grossrevenues are recognized when advertising spots are aired and performanceguaranties, if any, are achieved. The music business recognizes revenues fromthe sale of recorded music upon delivery of products to third parties based onterms F.O.B. destination, less an allowance for returns, cooperative advertisingand discounts. The Internet business recognizes primarily banner andsponsorship advertisement revenues. Banner revenues are recognized as “impressions” are delivered and sponsorship revenues arerecognized ratably over their contract period. Banner and sponsorshiprevenues are recognized ratably over their contract period or as impressionsare delivered. “Impressions” are defined as the number of times that anadvertisement appears in pages viewed by users of the Company’s onlineproperties. All revenues are recognized only when collection of the resultingreceivable 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 “9. Debt” for the fair value of the Company’s debt and hedgecontracts. Also see note “7. Investments and Variable Interest Entities” withregards to our Entravision Investment.

*Concentration of CreditRisk*

Financial instruments that potentially subject theCompany to concentrations of risk include primarily cash, trade receivables andfinancial instruments used in hedging activities. The Company places cash withhigh-quality-credit institutions and limits the amount of credit exposure withany one financial institution. The Company sells its products and services to alarge number of diverse customers in a number of different industries, thusspreading the trade credit risk. No one customer represented more than 10% of 

F-12

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**3. SignificantAccounting Policies (Continued)**

grossrevenues of the Company in 2006, 2005 or 2004. The Company extends credit based on an evaluation of thecustomers’ financial condition, generally without requiring collateral. TheCompany monitors its exposure for credit losses and maintains allowances foranticipated 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 and when it believes any investmenthas experienced a decline that is other than temporary.

*Accounting forGoodwill, Intangible and Long-Lived Assets*

Goodwill and other intangible assets with indefinitelives, such as broadcast licenses, are not amortized and are tested forimpairment annually or more frequently if circumstances indicate a possibleimpairment exists. The television and radio broadcast licenses have an indefinitelife because the Company expectsto renew them and renewals are routinely granted with little cost, providedthat the licensee has complied with the applicable rules and regulationsof the FCC. Over the last five years, all the television and radio licensesthat have been up for renewal have been renewed and there has been nocompelling 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 licenses will not be amortizeduntil their useful life is deemed to no longer be indefinite.

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 1,2006 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 

F-13

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**3. SignificantAccounting Policies (Continued)**

growth rates. The Companyuses the direct value method to value intangible assets other than goodwillacquired in business combinations and for purposes of impairment testing.

The Company has various intangible assets that arebeing amortized over the respective contract periods. The Nielsen contract isbeing amortized through December 2012, the Fonovisa contracts are beingamortized through June 2012, the Disa contracts are being amortizedthrough December 2011, a broadcast agreement is being amortized through January 2015,advertiser related intangibles are being amortized through June 2008 andother amortizable intangibles have various amortization periods. The Nielsencontract, broadcast agreement, advertiser related intangibles and a majority ofthe other amortizable intangibles are 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.

In accordance with SFAS No. 144“Accounting for Impairment of Disposal of Long-Lived Assets,” long-livedassets, such as property, plant and equipment and purchased intangibles subjectto amortization, are reviewed for impairment wherever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an assetto its estimated undiscounted future cash flows expected to be generated by theasset. If the carrying amount of an asset exceeds its estimated future cashflows, an impairment charge is recognized by the amount by which the carryingamount of the asset exceeds the fair value of the asset. Intangible assets withdefinite lives are amortized over their useful lives.

*Trade Accounts Receivable*

Trade accounts receivableare 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 andreturns in the Company’s existing accounts receivable. The Company determinesthe allowance based on historical write-off and returns experience. The Companyreviews its allowance for doubtful accounts monthly. Past due balances are reviewed individually for collectibility. Accountbalances are charged off against the allowance after all means ofcollection have been exhausted and potential for recovery is considered remote.The Company does not have any off-balance-sheet exposure related to itscustomers.

*Share-BasedCompensation*

On January 1, 2006, the Company adopted SFAS No. 123R“Share-Based Payment,” which requires compensation expense relating toshare-based payments to be recognized in net income using a fair-valuemeasurement method. The Company has electedto use the straight-line attribution method of recognizing compensation expenseover the vesting period. The fair value of each new stock option awardwill be estimated on the date of grant using the Black-Scholes-Mertonoption-pricing model, which is the same model that was used by the Companyprior to the adoption of SFAS No. 123R. The Company elected themodified prospective method and therefore, prior periods were not restated.Under the modified prospective method, this statement was applied to new awardsgranted after the time of adoption, as well as to the unvested portion ofpreviously granted equity-based awards for which the requisite service had notbeen rendered as of January 1, 2006.

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**3. SignificantAccounting Policies (Continued)**

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 of SFAS No. 123R, which requires the Company to treatunvested stock options as compensation expense effective January 1, 2006. Becausethe Company accounted for stock based compensation using the intrinsic valuemethod prescribed in APB No. 25 “Accounting for Stock Issued to Employees”(“APB No. 25”) at the time of the acceleration, and because these optionswere priced above current market on that date, the acceleration of vesting ofthese options did not result in a charge in the Company’s financial statements.The acceleration of the vesting increased pro forma share-based compensationexpense under the provisions of SFAS No. 123 by approximately $59million before income tax.

The Company granted 1,207,100 stock options and 818,400restricted stock awards on January 13, 2006 under the 2004 PerformanceAward Plan (the “Plan”) and also granted 933,025 restricted stock awards on December 29,2006 under the Plan. These awards vest 25% each year over a four year vestingperiod.

Share-basedcompensation expense reduced the Company’s results of operations as follows:

| ** **                                             | ** ** | **Year Ended  December 31, 2006**                   | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                             | ** ** | **(In thousands, except per share data)** | ** ** |
| Income from  continuing operations before income taxes |       |                                                               | $          | 12,678 |   |   |
| Net income                                             |       |                                                               | 7,607      |   |   |
| Net income per  common share:                          |       |                                                               |       |   |   |
| Basic                                                  |       |                                                               | $          | 0.02 |   |   |
| Diluted                                                |       |                                                               | $          | 0.02 |   |   |

 

For the year ended December 31, 2006, share-basedcompensation is net of an adjustment for forfeitures (before tax) of $46.

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**3. SignificantAccounting Policies (Continued)**

Prior to January 1,2006, the Company accounted for share-based employee compensation under theprovisions of SFAS No. 123 using the intrinsic value method prescribed byAPB No. 25 and related interpretations. Under the intrinsic value method,no compensation expense was recognized for stock options, as the exercise priceof employee stock options equaled the market value of the Company’s stock onthe date of grant. The following pro-forma net income and earnings per share informationhas been determined as if the Company had accounted for its share-basedcompensation awards issued using the fair value method. Prior to January 1,2006, the Company used the accelerated attribution method, which recognizes agreater amount of compensation expense in the earlier vesting years. In 2005,the Compensation Committee of the Board of Directors of the Company approvedthe acceleration of vesting of substantially all unvested stock optionsoutstanding whose exercise price was above the then current market price of$25.56. This vesting acceleration increased pro forma share-based employeecompensation, before tax, by approximately $59 million.

| ** **                                                    | ** ** | **Year Ended December 31,**                         | ** ** |
|---------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                    | ** ** | **2005**                                                           | ** ** | **2004** | ** ** |
| ** **                                                    | ** ** | **(In thousands, except per share data)** | ** ** |
| Net Income—as  reported                                  |       |       $ 187,179                 |       |       $ 255,883 |   |
| Share-based  compensation expense, net of tax—actual     |       | 3,201                                                              |       | 2,962 |   |
| Share-based  employee compensation, net of tax—pro forma |       | (71,116                                                            | )          | (40,275 | ) |
| Net income—pro  forma                                    |       |       $119,264                       |       |       $218,570 |   |
| Net income per  common share:                                 |       |                                                               |       |   |   |
| Basic—as reported                                        |       | $      0.59                          |       | $      0.79 |   |
| Basic—pro forma                                          |       | $      0.38                          |       | $      0.68 |   |
| Diluted—as reported                                      |       | $      0.54                          |       | $      0.72 |   |
| Diluted—pro forma                                        |       | $      0.35                          |       | $      0.62 |   |

 

The fair value of each option grant is estimated onthe date of grant using the Black-Scholes-Merton option-pricing model with thefollowing weighted-average assumptions used for stock options granted in 2006,2005 and 2004, respectively: dividend yield of 0%, expected volatility of 29.29%,45.589%, and 46.546%,risk-free interest rate of 4.31%, 4.08%, and 3.72% and expected life ofapproximately six years. The Black-Scholes-Merton option-pricing model wasdeveloped for use in estimating the value of traded options that have novesting restrictions and are fully transferable. In addition, option-pricingmodels require the input of highly subjective assumptions, including theexpected stock price volatility and expected life.

In years prior to 2006, historical volatility was usedto estimate the expected volatility of the share price, whereas in 2006 impliedvolatility is used. Management believes the implied volatility factor reflectsthe market’s expectations of future volatility. Market prices of traded optionsand shares were analyzed around the time of the 2006 stock option grant alongwith the analysis of other factors to estimate the implied volatility of thestock options granted in 2006. Restricted stock units vest 25% on each of thefirst, second, third and fourth anniversaries of the award date. The fair valueof all restricted stock units is based on the market value of the Company’sstock on the date of grant. The restricted stock awards granted on 

F-16

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**3. SignificantAccounting Policies (Continued)**

January 13,2006 had a fair value of $31.59 per share. During the three months ended June 30, 2006, the Companyissued 400,000 restricted stock units to certain executive officers, which willvest upon change in control under the Company’s change in control retentionbonus plan. The value of the 400,000 restricted stock units will be expensedupon consummation of the Merger.

*Consolidation ofVariable 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 controlledthe entity through voting interests. FIN No. 46 requires a variable interestentity (“VIE”) to be consolidated by a company if that company is the “primarybeneficiary” of that entity. An entity is a VIE if, among other things, it hasequity investors that do not absorb the expected losses or receive the expectedreturns of the entity. The primary beneficiary is subject to a majority of therisk of loss from the VIE’s activities or is entitled to receive a majority ofthe VIE’s residual returns, or both. See note “7. Investments and VariableInterest Entities” for a discussion of the Company’s variable interestentities.

*DerivativeInstruments 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 four- and five-year senior notes due 2007 and 2008 with a facevalue of $450 million. See note “9. 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 fair value of the interest rate swap are expected toperfectly offset the changes in the fair value of the senior notes. On aquarterly basis, the Company adjusts the carrying amount of the swap to itsfair value and adjusts the carrying amount of the senior notes by the sameamount to reflect its change in its fair value attributable to the hedged risk.There is no hedge ineffectiveness to be recorded to earnings. TheCompany monitors the credit ratings of the counter party and obtains fair value swap valuationsfrom the counter parties and third parties on a quarterly basis.

*Earnings per Share*

The Company is required to calculate basic earningsper share, which is computed by dividing income available to common stockholders(the numerator) by the weighted-average number of common shares outstanding(the denominator) during the period. Income available to common stockholders iscomputed by deducting both the dividends declared in the period on preferredstock (whether or not paid) and dividends accumulated for the period oncumulative preferred stock (whether or not earned) from net 

F-17

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

income.The Company is also required to compute diluted earnings per share, which issimilar to basic earnings per share, except that the denominator is increasedto include the number of additional common shares that would have beenoutstanding if the dilutive potential common shares had been issued.

*Property and Equipment 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 over3 to 7 years. Leasehold improvements and transponder equipment, which are capitalized,are amortized over the shorter of their useful life or the remaining life ofthe lease. Repairs and maintenance costs are expensed by the Company.

*Deferred Financing Costs*

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 for Television 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 were 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“15. Income Taxes.”

*Recent Accounting Pronouncements*

In September 2006,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards No. 157, “Fair Value Measurements*”*(“SFAS No. 157”). SFAS No. 157 defines fair value, the methods usedto measure fair value, and expands disclosures about fair value measurements.This Statement applies to accounting pronouncements that require or permit fairvalue measurements. The adoption of SFAS No. 157 will be effective forfinancial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years. The Company does notexpect that the adoption of SFAS No. 157 will a have a material impact onthe financial statements of the Company.

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**3. Significant AccountingPolicies (Continued)**

In June 2006, theFASB issued Financial Accounting Standards Board Interpretation No. 48, “Accountingfor Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASBStatement of Financial Accounting Standards No. 109 “Accounting for IncomeTaxes”**(“SFAS No. 109”). FIN 48 clarifiesthe accounting for uncertainty in income taxes recognized in an enterprise’sfinancial statements in accordance with SFAS No. 109. The interpretationprescribes a recognition threshold and measurement attribute for the financialstatement recognition and measurement of a tax provision taken or expected tobe taken in a tax return. Also, the interpretation provides guidance onderecognition, classification, interest and penalties, accounting in interimperiods, disclosure and transition. The adoption of FIN 48 will be effectivefor fiscal periods beginning after December 15, 2006. The Company does notexpect that the adoption of FIN 48 will a have a material impact on the financialstatements of the Company.

**4. Related PartyTransactions**

*Program LicenseAgreements*

Televisa and Venevision, which are principalstockholders of the Company, have program license agreements (“PLAs”) with usthat provide our three television networks with a substantial amount ofprogramming. The Company currently pays a license fee of approximately 15% oftelevision net revenues to Televisa and Venevision for their programming,subject to certain upward adjustments. The Company believes that the program licenseagreements and all other agreements with Televisa and Venevision have beennegotiated as arms-length transactions.

Our Program License Agreements with each of Televisaand affiliates of Venevision extend until December 2017. Under theseagreements, we have the exclusive right to air in the United States all Spanish-languageprogramming (with certain exceptions) produced by or for Televisa andVenevision. Under the Program License Agreements, we pay 15% of Combined NetTime Sales (time sales from broadcasting, including barter, trade, andtelevision subscription revenues, less advertising commissions, certain specialevent revenues, music license fees, outside affiliate compensation, time salesrelating to advertising sold to Televisa or provided to Venevision and taxesother than withholding taxes) for the Univision and Galavisión networks andaffiliated owned-and-operated stations plus for Televisa, 3% of incrementalsales over the 2001 base amount for 2002 and subsequent years and for Venevision, up to 3% of incremental sales over the2001 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 expense of approximately $203.4, $186.6 and $170.1million in 2006, 2005 and 2004, respectively. The Company has accrued licensefees payable to Televisa and Venevision of $17.9 and $20.5 million at December 31, 2006 and 2005, respectively. Theobligations of their respective affiliates have been guaranteed by, inthe case of Televisa, Grupo Televisa S.A. and, in the case of Venevision,Corporacion Venezolana de Television, C.A. (VENEVISION). Televisa andVenevision programming represented approximately 42% and 19% in 2006 

F-19

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**4. RelatedParty Transactions (Continued)**

and 39% and 15% in 2005,respectively, of Univision Network’s non-repeat broadcast hours. Televisaand Venevision programming represented approximately 19% and 6% in 2006 and 23%and 7% in 2005, of TeleFutura Network’s non-repeat broadcast hours. Seenote “11. 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 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 129,000, 93,000 and 23,000 ofpreemptable and non-preemptable 30-second commercial advertisements in2006, 2005 and 2004, respectively. Venevision received approximately 55,000,84,000 and 83,000 of preemptable and non-preemptable 30-second commercialadvertisements in 2006, 2005 and 2004, respectively.

We have program licenseagreements for Puerto Rico where our rights are exclusive in a manner similarto the overall Program License Agreements pursuant to which 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 required payments in 2006 wereapproximately $7.0 million to Televisa and $3.6 million 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. For GrandfatheredPrograms, the rights described above will revert back to us from Televisa or Venevision when the applicable PLA terminates. Forother programs, Televisa or Venevision’s rights revert back to us whenthat entity owns less than 30% of the Company securities that it owned on thedate of our initial public offering (other than on account of a merger or similar transaction). We have alsogranted Televisa and Venevision certain rights of first offer for Mexicoand Venezuela, respectively, to license programs produced by us or oursubsidiaries for TeleFutura or other future networks that we may own. See note “11.Contingencies.”

*DistributionAgreement—Venevision*

On March 28, 2003, the Company entered into anagreement with Venevision that grants Venevision the sole and exclusive rightduring the term to distribute Univision Network, TeleFutura Network andGalavisión produced Spanish-language programs throughout Venezuela. Ascompensation for its distribution services, Venevision paid the Company approximately85% of gross receipts less certain 

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**4. RelatedParty Transactions (Continued)**

expenses.Although the agreement expired on March 27, 2004, the Company andVenevision have agreed to extend the contract on a monthly basis. The Companyreceived $424, $350 and $278 in 2006, 2005 and 2004, respectively.

*DistributionAgreement—Televisa*

On September 1, 2003,the Company entered into an agreement with Televisa that grants Televisa thesole and exclusive right during the term to distribute Univision Network,TeleFutura Network and Galavisión produced Spanish-language programs throughoutMexico. As compensation for its distribution services, Televisa will pay theCompany approximately 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 $309, $346 and$99 in 2006, 2005 and 2004, respectively.

*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. In2006, 2005 and 2004, the Company incurred costs related to Mexican leaguesoccer of $15.6, $14.8 and $16.5 million, respectively.

*ParticipationAgreement*

Pursuant to aparticipation agreement, Mr. Perenchio, Televisa and Venevision haveagreed that none of them or their affiliates will enter into certaintransactions involving Spanish-language television broadcasting or aSpanish-language television network in the U.S. without first offering theCompany the opportunity to acquire a 50% economic interest. The ParticipationAgreement provides that if the Company elects to participate in any of thesetransactions, the offeror will have substantial control over management of suchtransaction. Upon closing of the Merger, the agreement will apply only toTelevisa and Ricardo and Gustavo Cisneros and their respective affiliates withrespect to transactions that Televisa and Venevision had the intent to engagein at the time of the closing and also with respect to direct broadcastsatellite or direct to home satellite to the U.S. market until such party’s PLAterminates.

*Warrants*

In December 1992, Televisa and Venevision wereissued warrants to purchase Common Stock, of which Televisa and Venevisionretain 2,000 and 27,437,700, respectively. Also, in December 2001, theCompany issued additional warrants to purchase 9,000,000 shares of Common Stockto Televisa and 2,800,000 shares of Common Stock to Venevision. The 1992warrants are exercisable for Class T and Class V Common Stock at anexercise price of $0.0322 per share. The 2001 warrants are exercisable for 

F-21

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**4. RelatedParty Transactions (Continued)**

6,274,864 and 74,864shares of Class A Common Stock for Televisa and Venevision, respectively,and 2,725,136 shares of Class T and Class VCommon Stock for Televisa and Venevision, respectively. The exerciseprice for the 2001 warrants is $38.261 per share. In October 2006, Venevision assigned4,153,115 of its Class V warrants which converted to Class A warrants,to a third party. At the option of Televisa or Venevision, as the case may be,or if the warrants are not held by Televisa or Venevision or their permittedtransferees at the time of exercise, the Class T and Class V Warrantsare 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”).

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, 2006, if allwarrants discussed above were fully exercised and all voting securities wereconverted to Class A Common Stock (not including options), Venevisionwould own approximately 12% of our Common Stock and Televisa would ownapproximately 11% 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 1, 2007, Mr. Perenchiohad the right to demand three registration statements, Venevision had the right to demand two and Televisahad the right to demand one. In addition, we gave these stockholdersvarious piggyback registration rights. In general, we will pay all fees, costsand expenses of any such registration 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 an underwrittenoffering and to file registration statements covering the sale of our Class ACommon Stock. As of February 1, 2007, the Tichenor family members had theright to demand two registration statements. The agreement also provides theTichenor family members with various piggyback registration rights. All ofthese rights are subject to customary terms, conditions, procedures andrestrictions.

*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 

F-22

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**4. RelatedParty Transactions (Continued)**

terms of the agreement, Mr. Perenchioalso agreed to vote against any transaction in which the stock rights, or the pershare consideration, to be received by the Class P common stockholderswould differ from those to be received by the Class A common stockholders,unless approved by the holders of a majority of the outstanding shares of Class ACommon Stock other 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.

Mr. Perenchio’s obligationto vote for Mr. Tichenor and Mr. Tichenor’s other designee terminateswhen Mr. Tichenor and members of the Tichenor family cease to own at least60% of their originally issued Univision shares. The voting agreement alsoterminates 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.

*ReimbursementArrangements at Cost*

Chartwell Services, Inc.and Chartwell Partners LLC are affiliates of Mr. Perenchio (collectively, “Chartwell”).All arrangements between the Company and Chartwell were at cost and Chartwellrealized no profit from any of the reimbursements. Pursuant to an agreementbetween the Company and Chartwell, services continued to be provided through December 2006,subject to automatic one-year extensions. Cash reimbursements to Chartwelltotaled $0.7, $0.8 and $1.3 million in 2006, 2005 and 2004, respectively.

*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 million over thefirst three years of the venture. In 2006 and 2005, the Company received adistribution of $3.0 and $1.5 million from TuTv LLC, respectively.

*Co-productionAgreement*

In December 2003, the Company and Televisaentered into an agreement whereby Televisa would produce the show “100Mexicanos Dijeron”, which is based on the “Family Feud” format and the Companywould pay Televisa approximately half of the costs per episode. Under the termsof the agreement, the Company made payments of $4.7 million in 2005 to Televisain connection with the production of the show. No payments were made in 2006. Inthe third quarter of 2006, the Company 

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**4. RelatedParty Transactions (Continued)**

receiveda reimbursement of $4.5 million for production costs, which were over billed byTelevisa, related to this show. The Agreement with Televisa was not renewed.

*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 ofUnivision Music Group. The purchase agreement for the acquisition includedcertain working capital adjustments.

In August 2004, theCompany and Televisa finalized working capital adjustments related to theCompany’s acquisition of Fonovisa. The Company received approximately $16.5million in 2004, which has been accounted for as an adjustment to the Fonovisapurchase price resulting in a reduction to goodwill and minor adjustments tocertain current assets and liabilities.

**5. Property and Equipment**

Propertyand equipment consists of the following as of December 31, 2006 and 2005:

| ** **                                 | ** ** | **2006**                | ** ** | **2005** | ** ** |
|--------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                 | ** ** | **(In thousands)** | ** ** |
| Land and  improvements                     |       | $                       | 89,807     |     | $          | 64,917 |   |
| Building and  improvements                 |       | 296,094                 |       | 273,241  |       |
| Broadcast  equipment                       |       | 491,927                 |       | 450,491  |       |
| Furniture,  computer and other equipment   |       | 116,097                 |       | 102,855  |       |
| Capital leases—transponder  equipment |       | 52,393                  |       | 62,292   |       |
|                                       |       | 1,046,318               |       | 953,796  |       |
| Accumulated  depreciation                  |       | (452,480                | )          | (389,838 | )          |
|                                       |       | $                       | 593,838    |     | $          | 563,958 |   |

 

Accumulated depreciationrelated to capital leases for the transponder equipment for 2006 and 2005 is$24.2 and $31.2 million, respectively. Depreciation expense on propertyand equipment was $81.6, $79.1 and $82.2 million in 2006, 2005 and 2004,respectively.

F-24

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**6. Intangible Assets andGoodwill**

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 2007 through 2011:

| ** **                                                     | ** ** | **As of December 31, 2006** | ** ** |
|----------------------------------------------------------------|------------|-------------------------------------------------|------------|
| **Intangible Assets Being Amortized**           | ** ** | ** **                                      | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net Carrying  Amount** | ** ** |
| ** **                                                     | ** ** | **(In thousands)**                         | ** ** |
| Nielsen contract                                               |       |                                            | $          | 20,700 |   |   |   | $ | 14,533 |   |   |   | $ | 6,167 |   |   |
| Fonovisa contracts, primarily artist contracts                 |       |                                            | 44,580     |   |   |   | 38,640 |   |   |   | 5,940 |   |   |
| Disa contracts, primarily artist contracts                     |       |                                            | 74,428     |   |   |   | 62,949 |   |   |   | 11,479 |   |   |
| Broadcast agreement                                            |       |                                            | 9,892      |   |   |   | 3,143 |   |   |   | 6,749 |   |   |
| Advertiser related intangibles, primarily advertiser contracts |       |                                            | 5,059      |   |   |   | 5,013 |   |   |   | 46 |   |   |
| Other amortizable intangibles                                  |       |                                            | 5,449      |   |   |   | 3,175 |   |   |   | 2,274 |   |   |
| Total                                                          |       |                                            | $          | 160,108 |   |   |   | $ | 127,453 |   |   |   | $ | 32,655 |   |   |
|                                                                |            |                                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| **Intangible Assets Not Being Amortized** | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------|------------|
| Broadcast licenses                                            |       | 4,281,289  |       |
| Goodwill                                                      |       | 2,308,079  |       |
| Music trademarks                                              |       | 20,950     |       |
| Other intangible assets                                       |       | 2,516      |       |
| Total                                                         |       | 6,612,834  |       |
| **Total Net  Intangible Assets**                              |       | $          | 6,645,489  |       |
|                                                               |            |            |            |            |            |  |

 

 

F-25

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

| ** **                                                      | ** ** | **As of December 31, 2005** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------------|------------|
| **Intangible Assets Being Amortized**            | ** ** | ** **                                      | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  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      |       |
| Total                                                         |       | 6,469,373  |       |
| **Total Net  Intangible Assets**                              |       | $          | 6,502,822  |       |
|                                                               |            |            |            |            |            |  |

 

The Company has various intangible assets that arebeing amortized. The Nielsen contract is being amortized through December 2012,the Fonovisa contracts are being amortized through June 2012, the Disacontracts are being amortized through December 2016, the broadcastagreement is being amortized through January 2015, advertiser relatedintangibles are being amortized through December 2008 and otheramortizable intangibles have various amortization periods. The Nielsen contract,broadcast agreement, advertiser related intangibles and a majority of the otheramortizable intangibles are being amortized on a straight-line basis. TheFonovisa and Disa contracts are being amortized based on a revenue allocationof the artist and songwriter contracts. The Company incurred amortizationexpense of $9.1, $14.1 and $19.2 million in 2006, 2005 and 2004, respectively.

F-26

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

Thechanges in goodwill are as follows:

| ** **                             | ** ** | **Segments with Goodwill** | ** ** |
|----------------------------------------|------------|--------------------------------------|------------|
| ** **                             | ** ** | **Television**                       | ** ** | **Radio** | ** ** | **Music** | ** ** | **Total** | ** ** |
| ** **                             | ** ** | **(In thousands)**              | ** ** |
| Goodwill  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  acquisition adjustment          |       | —                               |       | (7,596 | ) | — |   | (7,596 | ) |
| Fonovisa  acquisition adjustment       |       | —                               |       | — |   | (200 | ) | (200 | ) |
| WLII  acquisition adjustment           |       | 38,225                               |       | — |   | — |   | 38,225 |   |
| Goodwill  as of December 31, 2005 |       | 448,706                              |       | 1,520,338 |   | 262,194 |   | 2,231,238 |   |
| WLII  acquisition adjustment           |       | 1,137                                |       | — |   | — |   | 1,137 |   |
| KBRG  (FM) and KLOK (AM) acquisitions  |       | —                               |       | 33,952 |   | — |   | 33,952 |   |
| Radio  acquisition adjustment          |       | —                               |       | (1,334 | ) | — |   | (1,334 | ) |
| Disa  Acquisition                      |       | —                               |       | — |   | 43,086 |   | 43,086 |   |
| Goodwill as of  December 31, 2006 |       | $                                    | 449,843    |   | $ | 1,552,956 |   | $ | 305,280 |   | $ | 2,308,079 |   |

 

Estimated amortizationexpense for the five years subsequent to December 31, 2006 are as follows:

| **Year**   | ** ** | ** **              | ** ** | **Amount** | ** ** |
|------------|------------|-------------------------|------------|------------|------------|
| ** ** | ** ** | **(In thousands)** | ** ** |
| 2007       |       |                    | $          | 8,900      |       |   |
| 2008       |       |                    | $          | 7,000      |       |   |
| 2009       |       |                    | $          | 5,100      |       |   |
| 2010       |       |                    | $          | 3,900      |       |   |
| 2011       |       |                    | $          | 3,200      |       |   |

 

**7. Investments and VariableInterest Entities**

Investmentsconsist of the following as of December 31, 2006 and 2005:

| ** **                                   | ** ** | **2006**                | ** ** | **2005** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                                   | ** ** | **(In thousands)** | ** ** |
| **Investments  in equity method investees:** |       |                    |       |     |       |
| St. Louis/Denver LLC                         |       | $                       | 47,108     |     | $          | 52,165 |   |
| TuTV LLC                                     |       | 2,552                   |       | 2,479    |       |
| Other investments                            |       | 546                     |       | 407      |       |
|                                         |       | $                       | 50,206     |     | $          | 55,051 |   |
| **Investments in cost method investees:**    |       |                    |       |     |       |
| Entravision Communications Corporation       |       | $                       | 122,128    |     | $          | 262,918 |   |
| Equity Broadcasting Corporation              |       | 38,669                  |       | 36,857   |       |
| Other investment                             |       | 614                     |       | 614      |       |
|                                         |       | $                       | 161,411    |     | $          | 300,389 |   |

 

F-27

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**7. Investments andVariable Interest Entities (Continued)**

*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’s cost basis in its investment inEntravision stock is $7.12 per share. Entravision’s stock price on December 31,2006 was $8.22. Any gain or loss on future transactions involving Entravisionstock will be measured by comparing the cost basis of $7.12 per share to thefair value of the Entravision stock at the transaction date. The Companymonitors the Entravision stock price, its operating results, the performanceand outlook for the media sector in general and other information available todetermine if the value of our investment becomes other than temporarilyimpaired in subsequent reporting periods. The future sale of the stock willhave no impact on the Company’s existing television station affiliationagreements with Entravision.

In 2005, the Company recorded a charge for a nontemporarydecline in the fair value of its Entravision investment of $73,077. The Companydid not record a tax benefit related to the charge. The Company recorded adeferred tax asset of $28.5 million related to its capital loss that was offsetby a valuation allowance for the same amount since, based on the weight ofavailable evidence, it is more likely than not that the deferred tax assetrecorded will not be realized.

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.

On March 2, 2006, the Company and Entravisioncompleted the repurchase by Entravision of 7 million shares of EntravisionClass U common stock held by the Company, for an aggregate sale price of$51.1 million, or $7.30 per share. This share repurchase transaction, coupled withthe Company’s purchase of Entravision’s radio stations serving the SanFrancisco/San Jose market for approximately 12.6 million shares of Entravision Class Ucommon stock, reduced the Company’s non-voting ownership interest on a fullyconverted basis in Entravision to approximately 14.9%. The Company recognized again on the repurchase transaction of approximately $1.2 million.

Due to Entravision option terminations during thequarter ended June 30, 2006, the Company’s non-voting ownership intereston a fully converted basis in Entravision increased to approximately 15.06% at June 30,2006. On July 10, 2006, the Company sold 200,000 shares of its EntravisionClass U common stock for an aggregate sale price of $1.6 million, whichreduced the Company’s non-voting ownership interest on a fully converted basisin Entravision to approximately 14.9%, and recognized a gain of $0.2 million. AtDecember 31, 2006, the Company’s non-voting ownership interest on a fullyconverted basis in Entravision is approximately 14.8%.

F-28

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

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/DenverLLC (the “LLC”). In 2002, TeleFutura contributed $26 million and in 2003contributed its minority interests in the St. Louis and Denver stations ofapproximately $34 million 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 and 2006, the Company performed its annual impairmenttesting analysis and obtained an appraised value of the Denver and St. LouisFCC licenses, which are the primary assets of the LLC. Based in part on theseappraisals, 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 2005 and $5.2 million in 2006.

In June 2001, the Company purchased for $26million an approximate 20% non-voting preferred stock equity interest in EquityBroadcasting 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 $2.5million. The Company currently owns approximately 6% of Equity Broadcasting’svoting common stock. This investment is accounted for under the cost method.

On April 10, 2006, Coconut Palm Acquisition Corp.(“CPAC”) announced that it had entered into an Agreement and Plan of Mergerwith Equity Broadcasting Corporation (“EBC”). At December 31, 2006, theCompany had an investment in EBC of approximately $38 million. Upon completionof the acquisition, EBC will merge with and into CPAC, with CPAC remaining asthe surviving corporation. Following closing of the acquisition, CPAC will seekto change its name to Equity Media Group to reflect its new status as adiversified media services company serving Spanish-language markets and applyfor listing on the NASDAQ Stock Market. Under terms of the Agreement and Planof Merger, the Company expects to fully realize its investment in EBC,consideration will equal or exceed the carrying value of the investment. Thistransaction is expected to close by the end of the first quarter of 2007.

In January 2004, the Company, EBC and othersagreed to amend EBC’s Articles of Incorporation to allow shares of Series Aconvertible preferred stock of EBC to receive a stock dividend of 7% of theoriginal issue price commencing on the date of the initial issuance, which was June 8,2001. The dividend is paid in preference to all other junior stock as and whendeclared or on liquidation, is added to amounts received on redemption and isto be converted on conversion into common stock. Since the Company was notentitled to the dividend prior to January 2004, the Company recorded astock dividend of $5.1 million in the first quarter of 2004 based on theCompany’s initial investment of approximately $26 million made in June 2001.The Series A convertible preferred stock has a mandatory redemption dateof June 8, 2008. The stock dividend income for the twelve months ended December 31,2006 was $1.8 million. The EBC stockholders 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 “4.Related Party Transactions.”

F-29

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

*Variable InterestEntities*

Under the guidelines of FIN 46, since March 31,2004, the Company had been required to consolidate the assets, liabilities andoperating results of Disa Records, which is a Mexico-based music recording andpublishing company, owned 50% by the Company and 50% by the Chavez family. TheCompany had a call right and the Chavez family had a put right, beginning in June 2006,which required the Company to purchase the remaining 50% of Disa Records for aminimum of $75 million, subject to certain upward adjustments. As a result ofDisa’s put right, the Company had themajority of expected losses that could arise from the variability of the fairvalue of Disa Records. On October 26, 2006, the Company acquiredthe remaining 50% interest in Disa for approximately $105 million.

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 million, 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.

**8. Accounts Payable andAccrued Liabilities**

Accountspayable and accrued liabilities consist of the following as of December 31,2006 and 2005:

| ** **                            | ** ** | **2006**                | ** ** | **2005** | ** ** |
|---------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                            | ** ** | **(In thousands)** | ** ** |
| Trade accounts  payable and accruals  |       | $                       | 91,458     |     | $          | 118,344 |   |
| Music copyright  and artist royalties |       | 53,054                  |       | 62,810   |       |
| Accrued  compensation                 |       | 50,013                  |       | 65,618   |       |
| Accrued insurance                     |       | 12,196                  |       | 12,062   |       |
| Cost reduction  plan liability        |       | 3,341                   |       | 11,309   |       |
| Deferred revenue                      |       | 6,618                   |       | 13,366   |       |
|                                  |       | $                       | 216,680    |     | $          | 283,509 |   |

 

F-30

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**8. AccountsPayable and Accrued Liabilities (Continued)**

*Cost Reduction Plan*

On November 2,2005, the Company announced a cost reduction plan that reduced its workforceand abandoned 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. The unpaid portion of the cost reductionplan as of December 31, 2006 is as follows:

| ** **                              | ** ** | **Employee  Terminations** | ** ** | **Abandonment of  Programming  Costs** | ** ** | **Other  Costs** | ** ** | **Total** | ** ** |
|-----------------------------------------|------------|----------------------------|------------|---------------------------------------------|------------|------------------|------------|-----------|------------|
| ** **                              | ** ** | **(In thousands)**    | ** ** |
| Liability as of  December 31, 2005 |       |                       | $          | 9,783                                       |       |             |       | $         | 1,453      |   |   |   | $ | 73 |   |   | $ | 11,309 |   |
| Cash paid in 2006                       |       |                       | 7,613      |                                        |       |             | 282        |      |       |   | 73 |   |   | 7,968 |   |
| Liability as of  December 31, 2006 |       |                       | $          | 2,170                                       |       |             |       | $         | 1,171      |   |   |   | $ | — |   |   | $ | 3,341 |   |

 

The cost reduction chargewas $29,993, $73, $33 and $190 for the television, radio, music and Internetsegments, respectively.

**9. Debt**

Long-termdebt consists of the following as of December 31, 2006 and 2005:

| ** **                                     | ** ** | **2006**                | ** ** | **2005**  | ** ** |
|------------------------------------------------|------------|-------------------------|------------|-----------|------------|
| ** **                                     | ** ** | **(In thousands)** | ** ** |
| Revolving Credit  Facility                     |       | $                       | 180,000    |      | $          | 314,000 |   |
| Senior notes  payable—7.85% due 7/18/11   |       | 497,439                 |       | 496,989   |       |
| Senior notes  payable—2.875% due 10/15/06 |       | —                  |       | 246,516   |       |
| Senior notes  payable—3.5% due 10/15/07   |       | 197,541                 |       | 195,400   |       |
| Senior notes  payable—3.875% due 10/15/08 |       | 244,730                 |       | 243,104   |       |
|                                           |       | 1,119,710               |       | 1,496,009 |       |
| Less current  portion                          |       | 197,541                 |       | 560,516   |       |
| Long-term debt                                 |       | $                       | 922,169    |      | $          | 935,493 |   |

 

The Company’s 7.85% seniornotes due 2011 have a face value of $500 million and bear simple interest at7.85%. These senior notes pay interest on January 15 and July 15 ofeach year and have a fair value of approximately $503.8 million at December 31,2006.

On October 15, 2003, the Company issued four- andfive-year senior notes due 2007 and 2008 with a face value of $450 million.These senior notes have a face value of $200 and $250 million, respectively.These senior notes pay simple interest on April 15 and October 15 ofeach year. As part of the $700 million note transaction the Company enteredinto a fixed-to-floating interest rate swap that results in a fair value hedgethat is perfectly effective. At December 31, 2006, the Company had a swapliability with a fair value 

F-31

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**9. Debt(Continued)**

of $7.1million reported in other long-term liabilities related to this transaction.The $450 million senior notes are carried at fair value at December 31,2006.

The Company’s senior notesare the Company’s senior unsecured obligations, are equal in right of paymentwith all of the Company’s existing and future senior unsecured indebtedness,are senior in right of payment to any of the Company’s future subordinatedindebtedness and are fully and unconditionally guaranteed by all of theCompany’s guarantors. The Company has the option to redeem all or a portion ofthe senior notes at any time at the redemption prices set forth in the noteindenture. The indenture does not contain any provisions that would require usto repurchase or redeem or otherwise modify the terms of the senior notes upona change of control. The indenture does not limit our ability to incurindebtedness or require the maintenance of financial ratios or specified levelsof net worth or liquidity.

On March 17, 2006,the Company entered into a new revolving credit facility that will mature onMarch 17, 2011 with a syndicate of commercial lenders. The aggregateamount of the commitments under the new revolving credit facility is $1billion, which includes a $100 million sublimit for the issuance of standbyletters of credit. The Company has the right, subject to certain conditions, toincrease the commitment amount up to $500 million. No lender is obligated toparticipate in any such increase. At December 31, 2006, the Company hadbank borrowings outstanding under its revolving credit facility of $180 millionresulting primarily from the Company’s repurchases of its Class A CommonStock in 2005. The Company’s existing revolving credit facility will terminateupon completion of the Merger. At December 31, 2006, the Company has approximately$23 million of letters of credit outstanding under the credit facility, whichprimarily includes $15 million related to the FIFA World Cup Agreement.

On August 24, 2006, the Company amended itsrevolving credit facility to convert the basis for assessing the LIBOR interestrate cost margin on its bank loans from a debt rating measure to a leverageratio measure, which is basically a total debt to operating income beforedepreciation and amortization ratio. Depending on the Company’s leverage ratio,the LIBOR interest rate margin on the Company’s revolving credit facilityranges from 0.22% to 0.475% per annum. The Company’s LIBOR interest rate marginapplicable to the revolving credit facility was 0.22% as of December 31,2006.

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 Bank of America or 0.50% per annum over the federal fundsrate. 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 31, 2006, the Company’s effectiveinterest rate, excluding deferred financing costs, on its bank debt and seniornotes was approximately 6.5%.

The credit agreement contains customary covenants,including restrictions on liens and financial covenants relating to interestcoverage and leverage ratios. The credit agreement also restricts investments andcash dividends if a default exists or would result therefrom. Under the creditagreement, the Company is also limited in the amount of secured debt andsubsidiary debt it can incur and in its ability to sell assets, engage inmergers and engage in material lines of business substantially different frombusiness generally considered to be in the media and communications industry.At December 31, 2006, the Company was in compliance with its covenants.

F-32

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**9. Debt (Continued)**

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 wholly-owneddomestic 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 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.

On June 29, 2006, Standard & Poor’slowered the Company’s senior unsecured debt rating to BB- from BBB-. On June 27,2006, Moody’s downgraded the Company’s senior unsecured debt rating to Baa3from Baa2 and, on September 28, 2006, downgraded our ratings again to Ba3.The downgrades were related to concerns over the debt the Company may incur inconnection with the planned Merger. See note “2. Recent Developments”.

Maturities of long-termdebt for the five years subsequent to December 31, 2006 are as follows:

| **Year**   | ** ** | ** **              | ** ** | **Amount** | ** ** |
|------------|------------|-------------------------|------------|------------|------------|
| ** ** | ** ** | **(In thousands)** | ** ** |
| 2008       |       |                    | $          | 244,730    |       |   |
| Thereafter |       |                    | 677,439    |       |       |
| Total      |       |                    | $          | 922,169    |       |   |

 

F-33

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**10. Commitments**

TheCompany has long-term operating leases expiring on various dates foroffice, studio, automobile and tower rentals. The Company’s operating leases,which are primarily related to buildings and tower properties, have variousrenewal terms and escalation clauses. The Company also has long-term capitallease obligations for its transponders that are used to transmit and receiveour network signals. In 2004, the Company entered into a new transpondercapital lease of $23.4 million. The following is a schedule by year of futureminimum rental payments under noncancelable operating and capital leases as ofDecember 31, 2006:

| **Year**                                        | ** ** | ** **              | ** ** | **Operating  Leases** | ** ** | **Capital  Leases** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|---------------------|------------|
| ** **                                      | ** ** | **(In thousands)** | ** ** |
| 2007                                            |       | $                       | 33,279     |                  | $          | 7,564               |       |
| 2008                                            |       | 31,390                  |       | 7,563                 |       |
| 2009                                            |       | 29,136                  |       | 7,561                 |       |
| 2010                                            |       | 27,847                  |       | 7,555                 |       |
| 2011                                            |       | 24,655                  |       | 7,483                 |       |
| Thereafter                                      |       | 118,529                 |       | 29,893                |       |
| Total minimum lease payments                    |       | $                       | 264,836    |                  | 67,619     |                |
| Interest                                        |       |                    |       | (15,479               | )          |
| Total present  value of minimum lease payments  |       |                    |       | 52,140                |       |
| Current portion                                 |       |                    |       | (4,720                | )          |
| Capital lease  obligation, less current portion |       |                    |       | $                     | 47,420     |                |

 

Rent expense totaled $46.2, $44.6 and $42.6 million in2006, 2005 and 2004, respectively.

The Company is party to a lease for a three-storybuilding with approximately 92,500 square feet for the relocation of its ownedand/or operated television and radio stations and studio facilities in PuertoRico. The building is to be constructed and owned by the landlord, withoccupancy of the premises expected during the latter part of 2007. The term ofthe lease is 50 years. The sum of the lease payments will be approximately $74million over 50 years.

In 2003, the Company entered into a transponder leaseagreement for TeleFutura Network that was capitalized in May 2004 forapproximately $17 million. Also, in 2003, the Company entered into atransponder lease agreement for Univision Network that was capitalized in thefirst quarter 2006 for approximately $17 million. 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 in December 2012.When and if the Company decides to transmit a high definition signal, it willbe required to negotiate new transponder leases.

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**10. Commitments(Continued)**

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 $132million. The aggregate payment remaining under the agreement, at December 31,2006, is approximately $103 million, which will be paid through February 2012.

In February 2002, the Company entered into afive-year contract with Nielsen for TeleFutura owned and operated stations,which have remaining payments of approximately $0.3 million payable through January 31,2007. In the first quarter of 2006, Univision Network and TeleFutura Networkbecame available on Nielsen’s national ratings service, Nielsen TelevisionIndex (NTI), which provides television ratings for all of the major U.S.networks. The total cost associated with these subscriptions is approximately$5 million, with payments ending in August 2007. The Company has otheragreements with Nielsen, one of which expired in 2006.

In January 2001, Univision Network entered into aProgram License Agreement with Coral International Television Corp. (theexclusive distributing agent for Radio Caracas Television) to acquireapproximately 780 hours of new novelas per year through January 2011. Theaggregate payment under the contract is approximately $72.2 million, with anaggregate payment remaining under the contract of approximately $39.1 millionat December 31, 2006.

In June 2001, Univision Network entered into aProgram License Agreements with RCN to acquire approximately 300 hours of newnovelas per year through June 2007. The aggregate payment under thecontract is approximately $28.9 million with a payment remaining under thecontract of approximately $0.3 million at December 31, 2006.

In 2002, 2003 and 2004, the Company entered intoseveral Program License Agreements to acquire approximately 2,000 movies. Theagreements commenced in January 2002 and expire on various dates through March 2016.The remaining payments under the agreements are approximately $13.3, $7.8, $4.9and $1.5 million for the years 2007, 2008, 2009 and the period January 2010through March 2016, respectively.

In the third quarter of 2006, the Company entered intoa new four-year contract with Arbitron to provide ratings services for ourRadio business. At December 31, 2006, the Company had commitments withArbitron of approximately $17 million.

The Company has various music license agreements forits television and radio businesses. These contracts grant the Company alicense to broadcast musical compositions. The remaining payments under thesecontracts are approximately $12.3, $8.6 and $5.4 million in 2007, 2008 and2009.

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 $325million is due over the term of the agreement, with approximately $317 millionremaining as of December 31, 2006. In addition to these payments, andconsistent with past coverage of the World Cup games, the Company will beresponsible for 

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**10. Commitments(Continued)**

allcosts associated with advertising, promotion and broadcast of the World Cupgames, as well as the production of certain television programming related tothe World Cup games.

*Univision MusicGroup*

Univision Music Group consists of the businesses underits subsidiary, Univision Music, Inc. The primary business under UnivisionMusic, Inc. is Univision Music LLC, which owns and operates the UnivisionRecords, Fonovisa Records and La Calle labels and whose membership units areowned 90% by the Company and 10% by Diara, Inc. (“Diara”), which is byJosé 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 record labels. Also, Diara hasbeen given a new class of securities, designated “B-2 Units” (and itsexisting units have been designated “B-1 Units”). Through May 12,2006, Diara had a put right and the Company had a call right that required theCompany to purchase all of Diara’s B-1 Units for a purchase price equalto 20% of ten times the average earnings before interest, taxes, depreciationand amortization of Univision Music’s business as it existed prior to theamendment, subject to a cap of $8 million. On May 12, 2006, the Companymade a payment of $8 million to José Behar in accordance with this agreement. Additionally,Diara has a put right and the Company has a call right on Diara’s B-2Units in 2009. To the extent the fair market value of Univision Music LLC atthe put or call date exceeds the fair value at the grant date, which isdecreased each year by the amount of cash generated by Univision Music LLC, in December 2003,the purchase price of these units will be equal to 20% of the first $100million of such excess, 10% of the next $100 million of such excess and 1% ofany excess amount thereafter. This amount will be reduced by the amount paid bythe Company for the B-1 Units. The put and call rights may be acceleratedin the 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 2006, 2005 and 2004, the Company recordedapproximately $0.4, $1.6 and $4.3 million, respectively, of compensationexpense on the B-1 Units. In 2005 the Company recorded a charge of $4.2million of compensation expense on the B-2 units. This charge wasreversed in 2006. At December 31, 2006, the Company has no accrual relatedto the B-1 or B-2 units.

The amended employmentagreement with Mr. Behar was extended through March 31, 2009. As of December 31,2006, he owes approximately $600 in principal to the Company related to a note,which bears interest at 3.5%.

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**11. Contingencies**

*Televisa PLALitigation*

Televisa, S.A. de C.V. (“Televisa”) and the Companyare parties to a PLA (“PLA”) that provides our three television networks with amajority of its prime time programming and a substantial portion of its overallprogramming. The Company currently pays a license fee to Televisa forprogramming, subject to certain upward adjustments. On June 16, 2005,Televisa filed an amended complaint in the United States District Court for theCentral District of California alleging breach by us of our PLA with Televisa,including breach for our alleged failure to pay Televisa royalties attributableto revenues from one of Univision’s programs, the Company’s allegedunauthorized editing of certain Televisa programs and related copyrightinfringement claims, a claimed breach of the Soccer Agreement (a soccer rightsside-letter to the PLA), and a claim that we have not been properly carryingout a provision of the PLA that gives Televisa the secondary right to use ourunsold advertising inventory. Televisa seeks monetary relief in an amount notless than $1.5 million for breach, declaratory relief against the Company’sability to recover amounts of approximately $5.0 million previously paid inroyalties to Televisa, and an injunction against our alteration of Televisaprogramming without Televisa’s consent. In June 2005, the Company made apayment under protest to Televisa of $1.5 million. On August 15, 2005, theCompany filed an answer to the amended complaint denying Televisa’s claims andalso filed counterclaims alleging various breaches of contract and covenants byTelevisa. The Company seeks monetary damages and injunctive relief.

On September 20, 2005, Televisa filed a motion todismiss certain of the Company’s counterclaims. On November 17, 2005, theDistrict Court denied that motion in its entirety. Thereafter, Televisa changedcounsel and on January 31, 2006—after several extensions of time grantedby the Company—Televisa filed its answer to the Company’s counterclaims.Televisa in its answer alleged that its claims rose to the level of a materialbreach of the PLA and delivered a purported notice of material breach on February 16,2006. On March 2, 2006, we responded to Televisa’s purported notice ofmaterial breaches. In our response, we asserted that the notice wasprocedurally defective and that Televisa’s breach claims were not, in anyevent, well-founded. We do not believe that we are in breach of our agreementswith Televisa and certainly not in material breach. On March 15, 2006, theCompany made a payment under protest of approximately $6 million related to theTelevisa litigation and has made additional payments under protest and otherlicense fee overcharges of approximately $10.9 million in 2005 and 2006. At December 31,2006, the Company had an accrual for $0.5 million for expenses that will bepaid to Televisa under protest. In 2005 and 2006 other license fee overchargeswere $2.0 and $1.3 million, respectively. The Company seeks recovery of this amount via a counterclaim. On March 31,2006, the Company and Televisa stipulated to the Filing of Televisa’sSecond Amended and Supplemental Complaint in the lawsuit. The new proposedComplaint raises the same allegations of material breach contained in Televisa’sJanuary 31 answer to the Company’s counterclaims and in its February 16,2006 notice of purported material breaches. Among other claims, the newproposed Complaint seeks a declaration that the Company is in material breachof the PLA and that Televisa has the right to suspend or terminate itsperformance under the PLA.

On May 5, 2006, the Company filed its Answer tothe Second Amended Complaint, denying Televisa’s principal substantiveallegations, denying liability, and asserting various affirmative defenses. On May 12,2006, the Court reset the discovery cut-off date in the case for December 29,2006, and the trial date for June 19, 2007. On May 22, 2006, theCompany filed its First Amended Counterclaims, which added a claim 

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**11. Contingencies(Continued)**

for declaratory reliefthat the Company was not in material breach of the PLA or the Soccer Agreementand that it had received inadequate notice of any alleged breaches. Televisasent a letter on June 2, 2006, notifying the Company that the 90-day cureperiod had expired for certain breaches alleged in Televisa’s February 16, 2006, notice of purported material breachesunder the PLA and the Soccer Agreement. In that June 2, 2006 letter,Televisa contended that because the Company had purportedly failed to cure these and other breaches, some of whichTelevisa asserted were not susceptible of being cured, Televisatherefore had the right to terminate the PLA, the Soccer Agreement, and arelated Guaranty given by Grupo Televisa to the Company. Televisa indicated,however, that it was not at that time exercising its purported terminationrights and that it was seeking a declaration of its right to terminate in thelitigation between the companies.

On July 19, 2006, Televisa filed a complaint inLos Angeles Superior Court seeking a judicial declaration that on and after December 19,2006, it may, without liability to Univision, transmit or permit others totransmit any television programming into the United States from Mexico over orby means of the Internet. The Company was served with the new complaint on July 21,2006. The Company filed a motion to dismiss or stay this action on August 21,2006. In response to the motion, Televisa stipulated to stay the Superior Courtaction, and the Court entered the stay on January 11, 2007.

On August 18, 2006, the Company filed a motionfor leave to file its Second Amended Counterclaims, which include a newly-addedclaim for a judicial declaration that on and after December 19, 2006,Televisa may not transmit or permit others to transmit any televisionprogramming into the United States over or by means of the Internet. Televisaopposed the motion. On or about October 5, 2006, the Court grantedUnivision’s motion for leave to file its Second Amended Counterclaims.

On or about September 21, 2006, Televisa sent theCompany an additional notice of purported breaches under the PLA. The newnotice alleged breaches relating to our sale of advertising time in connectionwith certain types of programs. The notice also purported to supplementTelevisa’s previous breach claims with respect to our editing of Televisaprogramming.

On November 15, 2006, Televisa filed a motion infederal court seeking a separate trial of the Company’s Internet Counterclaim. TheCompany opposed Televisa’s motion, and, on December 6, 2006, the Courtdenied the motion.

Pursuant to a stipulation and order dated November 3,2006, the federal court appointed a Special Master to oversee discovery mattersin the federal case and to make recommendations on certain procedural issues. OnDecember 15, 2006, the Special Master recommended that the federal courtextend the discovery completion date to Friday, June 29, 2007, andcontinue the trial date to October of 2007. The Court has not yet ruledwhether it will accept, reject, or modify this recommendation.

The Company continues to defend the litigation andpursue its counterclaims vigorously, and it plans to take all action necessaryto ensure Televisa’s continued performance under the PLA until its expirationin 2017.

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**11. Contingencies(Continued)**

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.

*Other Contingencies*

The Company maintainsinsurance coverage for various risks, where deemed appropriate by management,at rates and terms that management considers reasonable. The Company self-insuresits employee medical benefits and its media errors and omissions exposures. TheCompany also has deductibles for various risks, including those associated withwindstorm and earthquake damage. In management’s opinion, the potentialexposure in future periods, if uninsured losses were to be incurred, should notbe material to the consolidated financial position or results of operations.

**12. 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 not traded. Allclasses of common stock have substantially the same rights, with the exception of Class P shares, which generallyhave ten votes per share on all matters on which shareholders are entitled tovote and Class T and V, which each have the right to elect one member ofthe Company’s board of directors. At December 31, 2006, there were 250,112,253shares of Class A Common Stock issued and 249,702,609 outstanding,35,283,284 shares of Class P Common Stock issued and outstanding,13,593,034 shares of Class T Common Stock issued and outstanding and 10,954,706of Class V Common Stock issued and outstanding. The Company’s Class ACommon Stock outstanding increased during 2006 by 13,112,666 shares from236,589,943 to 249,702,609 due to an increase of 4,960,746 resulting fromexercise of options, an increase of 1,679,106 due to the conversion ofClass P shares to Class A shares, an increase of 6,882,458 due to theconversion of Class V shares to Class A shares and a decrease of 409,644representing treasury shares resulting from 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 repurchase plan expired onDecember 31, 2006. No shares were repurchased under such plan and theMerger Agreement restricts further repurchases.

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. At December 31, 2006, theCompany held 409,644 shares in treasury.

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

The Company had 10,000,000 shares of preferred stock,$.01 par value, authorized at December 31, 2006 and 2005. 

At December 31, 2006, 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. In October 2006, Venevision assigned 4,153,155 of its ClassV warrants, which converted to Class A warrants, to a third party.

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 11%for Televisa and 12% for Venevision. 

On January 12, 2004,the Company offered 15,815,999 shares of Class A common stock to thepublic for $599.4 million and used the net proceeds to repurchase an equalamount of shares held by Clear Channel Communications Inc. The sharesrepurchased by the Company were cancelled immediately and there was no dilutionto earnings per share. 

**13. Performance Award andIncentive Plans**

The Company has a 1996 and 2004 Performance Award Plan(the “Plans”). The 2004 Performance Award Plan (the “Plan”) reserves shares of Class ACommon Stock for issuance to Company officers, key employees and other eligiblepersons as determined by the Board of Directors or Plan Committee (as appointedby the Board). The Company no longer issues new awards under its 1996Performance Award Plan (“1996 Plan”) but the plan continues to have grantsoutstanding.

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. As of December 31,2006, 9,097,575 shares remain available for award under the original shareauthorization of the 2004 Plan. 

The maximum number of shares that may be granted toany individual during any calendar year is 3,000,000. The maximum number ofshares that may be granted during any calendar year is 5,000,000 (not includingthose shares, if any, that have been cancelled during the same year they weregranted) unless the Plan Committee gives itsunanimous consent. The Plan provides that shares granted come from the Company’sauthorized but unissued Class A Common Stock and any shares of the Company’sClass A Common Stock held as treasury shares. Grants may be in the form ofeither nonqualified stock options, 

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

incentive stock options,stock appreciation rights, restricted stock awards, restricted stock unitawards, performance share awards, stock bonuses or cash bonus awards. 

The price of the options granted pursuant to the Plansmay not be less than 100% of the fair market value of the shares on the date ofgrant (110% in the case of an incentive stock option granted to any person owningmore than 10% of the Company’s total combined voting power). No award will beexercisable after ten years from the date granted. Unless approved by the PlanCommittee, no award may vest at a rate greater than 25% per year, other than inthe case of awards granted in lieu of cash bonuses, which may vest at the rateof 50% per year.

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 of SFAS No. 123R, which requires the Company to treatunvested stock options as compensation expense effective January 1, 2006.Because the Company accounted for stock based compensation using the intrinsicvalue method prescribed in APB No. 25, and because these options werepriced above current market on that date, the acceleration of vesting of theseoptions did not result in a charge in the Company’s financial statements. Theacceleration of the vesting increased pro forma share-based compensationexpense under the provisions of SFAS No. 123 by approximately $59 millionbefore income tax.

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 thisplan upon and following the acquisition. The maximum term of eachassumed option is ten years from the original grant date, subject to earliertermination in connection with the recipient’s termination of employment withor service to the Company. The assumed options vest in accordance with the HBCLong-Term Incentive Plan and the acquisition agreement.

On January 1, 2006, the Company adopted SFAS No. 123R,which requires compensation expense relating to share-based payments to berecognized in net income using a fair-value measurement method. Under the fairvalue method, the estimated fair value of awards is charged to income on astraight-line basis over the requisite service period, which is generally thevesting period. The Company elected the modified prospective method andtherefore, prior periods were not restated. Under the modified prospectivemethod, this statement was applied to new awards granted after the time ofadoption, as well as to the unvested portion of previously granted equity-basedawards for which the requisite service had not been rendered as of January 1,2006. 

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

The fair value of eachoption grant is estimated on the date of grant using the Black-Scholes-Mertonoption-pricing model with the below weighted-average assumptions used forgrants in 2006, 2005 and 2004. The Black-Scholes-Merton option-pricing modelwas developed for use in estimating the value of traded options that have novesting restrictions and are fully transferable. In addition, option-pricingmodels require the input of highly subjective assumptions, including theexpected stock price volatility and expected life. 

| ** **              | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------|------------|----------|------------|----------|------------|----------|------------|
| Volatility              |       | 29.29    | %          | 45.59    | %          | 46.55    | %          |
| Dividends               |       | 0.00     | %          | 0.00     | %          | 0.00     | %          |
| Expected Term           |       | 6        |       | 6        |       | 6        |       |
| Risk-free interest rate |       | 4.31     | %          | 4.08     | %          | 3.72     | %          |

 

In years prior to 2006, historical volatility was usedto estimate the expected volatility of the share price, whereas in 2006 impliedvolatility is used. Management feels the implied volatility factor reflects themarket’s expectations of future volatility. Market prices of traded options andshares were analyzed around the time of the 2006 stock option grant along withthe analysis of other factors to estimate the implied volatility of the stockoptions granted in 2006.

Asummary of activity under the 2004 Plan as of December 31, 2006, andchanges during the year then ended is presented below:

| ** **                             | ** ** | **Stock Options** | ** ** | **Weighted  Average  Conversion  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term (years)** | ** ** | **Aggregate  Intrinsic Value** | ** ** |
|----------------------------------------|------------|------------------------|------------|------------------------------------------|------------|------------------------------------------------------------------|------------|-------------------------------------|------------|
| Balance at  December 31, 2005     |       |                   | 29,569,296 |                                     |       |                                                             | $          | 29.76                               |       |   |   |   |   |   |   |   |   |   |
| Granted                                |       |                   | 1,207,100  |                                     |       |                                                             | $          | 31.59                               |       |   |   |   |   |   |   |   |   |   |
| Exercised                              |       |                   | 4,939,246  |                                     |       |                                                             | $          | 18.51                               |       |   |   |   |   |   |   |   |   |   |
| Forfeited,  canceled, or expired       |       |                   | 383,498    |                                     |       |                                                             | $          | 36.22                               |       |   |   |   |   |   |   |   |   |   |
| Outstanding at  December 31, 2006 |       |                   | 25,453,652 |                                     |       |                                                             | $          | 31.93                               |       |   |   | 5.16 |   |   |   | $ | 88,883 |   |   |
| Exercisable at December 31,  2006 |       |                   | 24,012,562 |                                     |       |                                                             | $          | 31.97                               |       |   |   | 4.95 |   |   |   | $ | 82,843 |   |   |

 

The weighted-average grant-date fair value of optionsgranted during the years 2006, 2005, and 2004 was $12.01, $13.22, and $14.25per share. 

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

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

Cash received from theexercise of stock options in 2006, 2005 and 2004 was $91,577, $10,625 and$24,548, respectively. The actual tax benefit realized for tax deductions fromstock options exercised during the years 2006, 2005 and 2004 was $32,106,$4,236 and $5,026, respectively. The total intrinsic value of stock optionsexercised during the years 2006, 2005 and 2004 was $80,384, $11,004 and $12,636,respectively.

| ** **                             | ** ** | **Restricted  Stock Units** | ** ** | **Weighted  Average  Grant Price** | ** ** |
|----------------------------------------|------------|----------------------------------|------------|-----------------------------------------|------------|
| Balance at  December 31, 2005     |       |                             | —     |                                    |       |   | $ | — |   |   |
| Granted                                |       |                             | 1,752,925  |                                    |       |   | $ | 33.63 |   |   |
| Converted                              |       |                             | 9,600      |                                    |       |   | $ | 31.59 |   |   |
| Forfeited,  canceled, or expired       |       |                             | 13,550     |                                    |       |   | $ | 31.59 |   |   |
| Outstanding at  December 31, 2006 |       |                             | 1,729,775  |                                    |       |   | $ | 33.66 |   |   |

 

The weighted-average grant-date fair value ofrestricted stock units granted during 2006 was $33.63 per share. The Companydid not grant restricted stock unit awards prior to 2006.

Total compensation costrelated to nonvested awards not yet recognized at December 31, 2006 isapproximately $66 million and the weighted period over which it is expected tobe recognized is approximately 3.5 years.

**14. Employee Benefits**

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 all years presented, the Companymatches 100% of the first 3% of eligible employee compensation that wascontributed to the plan. For the years ended December 31, 2006, 2005 and2004, the Company made matching cash contributions to the 401(k) Plantotaling $6.7, $6.2 and $6.0 million, respectively.

F-43

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**15. Income Taxes**

TheCompany files a consolidated federal income tax return. The income taxprovision for the years ended December 31, 2006, 2005 and 2004 comprisedthe following charges:

| ** ** | ** ** | **2006**                | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** ** | ** ** | **(In thousands)** | ** ** |
| Current:   |       |                    |       |     |       |     |       |
| Federal    |       | $                       | 144,504    |     | $          | 112,324  |       | $ | 88,833 |   |
| State      |       | 17,753                  |       | 13,158   |       | 9,870    |       |
| Deferred:  |       |                    |       |     |       |     |       |
| Federal    |       | 56,978                  |       | 50,595   |       | 58,964   |       |
| State      |       | 7,001                   |       | 5,926    |       | 6,907    |       |
| Total      |       | $                       | 226,236    |     | $          | 182,003  |       | $ | 164,574 |   |

 

TheCompany accounts for income taxes under the liability method pursuant to SFAS No. 109“Accounting for Income Taxes.” Deferred income taxes reflect the net taxeffects of temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used for incometax purposes. Significant components of the Company’s deferred tax assets andliabilities as of December 31, 2006 and 2005 are as follows: 

| ** **                         | ** ** | **2006**                | ** ** | **2005** | ** ** |
|------------------------------------|------------|-------------------------|------------|----------|------------|
| ** **                         | ** ** | **(In thousands)** | ** ** |
| Current deferred tax  assets:      |       |                    |       |     |       |
| Accrued severance and litigation   |       | $                       | 3,143      |     | $          | 3,280 |   |
| Accrued vacation                   |       | 4,550                   |       | 4,025    |       |
| Allowances                         |       | 8,531                   |       | 8,110    |       |
| Accrued facility-related costs     |       | 1,255                   |       | 1,355    |       |
| Accrued insurance                  |       | 5,008                   |       | 5,110    |       |
| Other assets, net                  |       | 2,858                   |       | 1,270    |       |
| Total current  deferred tax assets |       | 25,345                  |       | 23,150   |       |
|                                    |            |                         |            |          |            |  |  |

 

F-44

----

**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**15. Income Taxes (Continued)**

| ** **                                 | ** ** | **2006**                | ** ** | **2005**  | ** ** |
|--------------------------------------------|------------|-------------------------|------------|-----------|------------|
| ** **                                 | ** ** | **(In thousands)** | ** ** |
| Long-term deferred tax  assets:            |       |                    |       |      |       |
| Equity loss in unconsolidated subsidiaries |       | 9,898                   |       | 10,776    |       |
| Deferred compensation                      |       | 6,669                   |       | 2,840     |       |
| Foreign and state loss carryforwards       |       | 6,124                   |       | 933       |       |
| Nontemporary decline in investments        |       | 34,057                  |       | 32,014    |       |
| Other assets, net                          |       | 1,131                   |       | 1,105     |       |
| Long-term  deferred tax assets             |       | 57,879                  |       | 47,668    |       |
| Less: valuation  allowance                 |       | (31,869                 | )          | (32,014   | )          |
| Total net  long-term deferred tax assets   |       | 26,010                  |       | 15,654    |       |
| Long-term  deferred tax liabilities:       |       |                    |       |      |       |
| Property and equipment, net                |       | 40,290                  |       | 50,594    |       |
| Intangible assets, net                     |       | 1,068,833               |       | 984,863   |       |
| Total long-term  deferred tax liabilities  |       | 1,109,123               |       | 1,035,457 |       |
| Net long-term deferred  tax liabilities    |       | $                       | 1,083,113  |      | $          | 1,019,803 |   |
|                                            |            |                         |            |           |            |  |  |

 

The Company has a deferred tax asset of $34.1 millionrelating to the nontemporary decline in the value of its investments inEntravision and the St. Louis/Denver joint venture. This asset is offset by avaluation allowance of $31.9 million because, based on the weight of allavailable evidence, it is more likely than not that this portion of thedeferred tax asset recorded 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.

Forthe years ended December 31, 2006, 2005 and 2004, a reconciliation of thefederal statutory tax rate to the Company’s effective tax rate is as follows:

| ** **                                                | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Federal statutory  tax rate                               |       | 35.0     | %          | 35.0     | %          | 35.0     | %          |
| State and local  income taxes, net of federal tax benefit |       | 4.3      |       | 4.1      |       | 4.1      |       |
| Wages and  benefits                                       |       | 0.0      |       | 0.8      |       | 0.5      |       |
| Credits and state  refunds                                |       | (0.7     | )          | (0.1     | )          | (1.2     | )          |
| Valuation  allowance                                      |       | 0.0      |       | 9.5      |       | 0.0      |       |
| Other                                                     |       | 0.7      |       | 0.0      |       | 0.7      |       |
| Total effective  tax rate                                 |       | 39.3     | %          | 49.3     | %          | 39.1     | %          |

 

F-45

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**16. 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**                                                  | ** ** |
|---------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|
| ** **                                  | ** ** | **2006**                                                                               | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                  | ** ** | **(In thousands, except share and per share data)** | ** ** |
| Numerator:                                  |       |                                                                                   |       |   |   |   |   |
| Net income                                  |       | $                                                                                      | 349,174    |   | $ | 187,179 |   | $ | 255,883 |   |
| Denominator:                                |       |                                                                                   |       |   |   |   |   |
| Denominator for basic earnings per share    |       | 306,377,333                                                                            |       | 315,223,555 |   | 322,742,581 |   |
| Effect of dilutive  securities:             |       |                                                                                   |       |   |   |   |   |
| Warrants                                    |       | 27,413,872                                                                             |       | 27,407,437 |   | 27,412,547 |   |
| Stock options                               |       | 5,074,352                                                                              |       | 1,814,850 |   | 2,864,473 |   |
| Denominator for diluted  earnings per share |       | 338,865,557                                                                            |       | 344,445,842 |   | 353,019,601 |   |
|                                             |            |                                                                                        |            |  |  |  |  |  |  |  |

 

Warrants and stock options, which were excluded fromthe computation of diluted earnings per share due to their antidilutive effect,amounted to 23,842,890, 28,600,326 and 20,971,125 shares for the years ended December 31,2006, 2005 and 2004, respectively.

On January 13 and December 29,2006 the Company granted 818,400 restricted stock unit awards and 1,207,100stock options at the market price of $31.59 and 933,025 restricted stock unitawards at a market price of $35.42, respectively.

F-46

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**17. 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, whichwas acquired by the Company on June 30, 2005. The operating segmentsreported below are the segments of the Company for which separate financialinformation is available and for which segment results are evaluated regularlyby management in deciding how to allocate resources and in assessingperformance. The Company’s corporate expenses are included in its televisionsegment. Presented below is segment information pertaining to the Company’stelevision, radio, music and Internet businesses.

| ** **                                                                               | ** ** | **Year Ended December 31,** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                               | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                               | ** ** | **(In thousands)**                    | ** ** |
| Net  revenue:                                                                            |       |                                       |       |   |   |   |   |
| Television                                                                               |       | $                                          | 1,605,720  |   | $ | 1,360,694 |   | $ | 1,261,840 |   |
| Radio                                                                                    |       | 381,547                                    |       | 359,107 |   | 328,392 |   |
| Music                                                                                    |       | 141,065                                    |       | 206,444 |   | 178,560 |   |
| Internet                                                                                 |       | 38,320                                     |       | 26,286 |   | 18,143 |   |
| Consolidated                                                                             |       | 2,166,652                                  |       | 1,952,531 |   | 1,786,935 |   |
| Direct expenses (excluding  depreciation  and amortization):                             |       |                                       |       |   |   |   |   |
| Television                                                                               |       | 633,431                                    |       | 536,209 |   | 488,446 |   |
| Radio                                                                                    |       | 72,702                                     |       | 65,772 |   | 60,121 |   |
| Music                                                                                    |       | 89,844                                     |       | 115,364 |   | 102,316 |   |
| Internet                                                                                 |       | 13,791                                     |       | 12,628 |   | 12,574 |   |
| Consolidated                                                                             |       | 809,768                                    |       | 729,973 |   | 663,457 |   |
| Selling, general and administrative expenses  (excluding depreciation and amortization): |       |                                       |       |   |   |   |   |
| Television                                                                               |       | 371,242                                    |       | 335,215 |   | 311,916 |   |
| Radio                                                                                    |       | 165,020                                    |       | 151,985 |   | 151,690 |   |
| Music                                                                                    |       | 48,408                                     |       | 59,595 |   | 52,964 |   |
| Internet                                                                                 |       | 15,049                                     |       | 12,486 |   | 12,271 |   |
| Consolidated                                                                             |       | 599,719                                    |       | 559,281 |   | 528,841 |   |
| Cost reduction plan:                                                                     |       |                                       |       |   |   |   |   |
| Television                                                                               |       | —                                     |       | 29,993 |   | — |   |
| Radio                                                                                    |       | —                                     |       | 73 |   | — |   |
| Music                                                                                    |       | —                                     |       | 33 |   | — |   |
| Internet                                                                                 |       | —                                     |       | 190 |   | — |   |
| Consolidated                                                                             |       | —                                     |       | 30,289 |   | — |   |
|                                                                                          |            |                                            |            |  |  |  |  |  |  |  |

** **

F-47

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**17. Business Segments (Continued)**

| ** **                                                       | ** ** | **Year Ended December 31,** | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                       | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                       | ** ** | **(In thousands)**                    | ** ** |
| Operating  income (loss) before depreciation  and  amortization: |       |                                       |       |   |   |   |   |
| Television                                                       |       | 601,047                                    |       | 459,277 |   | 461,478 |   |
| Radio                                                            |       | 143,825                                    |       | 141,277 |   | 116,581 |   |
| Music                                                            |       | 2,813                                      |       | 31,452 |   | 23,280 |   |
| Internet                                                         |       | 9,480                                      |       | 982 |   | (6,702 | ) |
| Consolidated                                                     |       | 757,165                                    |       | 632,988 |   | 594,637 |   |
| Depreciation  and amortization:                                  |       |                                       |       |   |   |   |   |
| Television                                                       |       | 68,435                                     |       | 66,927 |   | 66,029 |   |
| Radio                                                            |       | 12,292                                     |       | 11,649 |   | 16,063 |   |
| Music                                                            |       | 7,920                                      |       | 12,877 |   | 15,443 |   |
| Internet                                                         |       | 2,144                                      |       | 1,770 |   | 3,847 |   |
| Consolidated                                                     |       | 90,791                                     |       | 93,223 |   | 101,382 |   |
| Operating  income (loss):                                        |       |                                       |       |   |   |   |   |
| Television                                                       |       | 532,612                                    |       | 392,350 |   | 395,449 |   |
| Radio                                                            |       | 131,533                                    |       | 129,628 |   | 100,518 |   |
| Music                                                            |       | (5,107                                     | )          | 18,575 |   | 7,837 |   |
| Internet                                                         |       | 7,336                                      |       | (788 | ) | (10,549 | ) |
| Consolidated                                                     |       | $                                          | 666,374    |   | $ | 539,765 |   | $ | 493,255 |   |
| Capital  expenditures:                                           |       |                                       |       |   |   |   |   |
| Television                                                       |       | $                                          | 66,133     |   | $ | 85,505 |   | $ | 105,462 |   |
| Radio                                                            |       | 12,458                                     |       | 14,700 |   | 13,074 |   |
| Music                                                            |       | 219                                        |       | 340 |   | 681 |   |
| Internet                                                         |       | 1,654                                      |       | 2,008 |   | 927 |   |
| Consolidated                                                     |       | $                                          | 80,464     |   | $ | 102,553 |   | $ | 120,144 |   |
| Total  assets:                                                   |       |                                       |       |   |   |   |   |
| Television                                                       |       | $                                          | 3,327,653  |   | $ | 3,447,159 |   | $ | 3,552,158 |   |
| Radio                                                            |       | 4,412,597                                  |       | 4,299,197 |   | 4,291,074 |   |
| Music                                                            |       | 407,430                                    |       | 371,030 |   | 374,330 |   |
| Internet                                                         |       | 18,715                                     |       | 10,950 |   | 9,564 |   |
| Consolidated                                                     |       | $                                          | 8,166,395  |   | $ | 8,128,336 |   | $ | 8,227,126 |   |

 

F-48

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**17. BusinessSegments (Continued)**

The Company uses the keyindicator of “operating income before depreciation and amortization” primarilyto 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 ofperformance 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, for the year ended December 31,2006, 2005 and 2004:

| ** **                                             | ** ** | **Year Ended December 31,** | ** ** |     |
|--------------------------------------------------------|------------|--------------------------------------------|------------|----------|
| ** **                                             | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |   |
| ** **                                             | ** ** | **(unaudited)**                            | ** ** |     |
| ** **                                             | ** ** | **(In thousands)**                    | ** ** |     |
| Operating income  before depreciation and amortization |       | $                                          | 757,165    |     | $  | 632,988 | (a) |   | $ | 594,637 |   |   |
| Depreciation and  amortization                         |       | 90,791                                     |       | 93,223   |   |   | 101,382 |   |   |
| Operating income                                       |       | 666,374                                    |       | 539,765  |   |   | 493,255 |   |   |
| Other expense  (income):                               |       |                                       |       |     |   |   |   |   |   |
| Interest expense,  net                                 |       | 88,105                                     |       | 84,048   |   |   | 66,061 |   |   |
| Loss on  extinguishment of debt                        |       | —                                     |       | —   |   |   | 467 |   |   |
| Amortization of  deferred financing costs              |       | 2,553                                      |       | 3,309    |   |   | 3,470 |   |   |
| Stock dividend                                         |       | (1,812                                     | )          | (1,812   | ) |   | (6,453 | ) |   |
| Equity loss in  unconsolidated subsidiaries and other  |       | (2,540                                     | )          | (959     | ) |   | 1,942 |   |   |
| Gain on sale of  Entravision stock                     |       | (1,454                                     | )          | —   |   |   | — |   |   |
| Nontemporary  decline in fair value of investments     |       | 5,200                                      |       | 81,877   |   |   | — |   |   |
| Noncontrolling  interest of variable interest entities |       | 912                                        |       | 4,120    |   |   | 7,311 |   |   |
| Provision for  income taxes                            |       | 226,236                                    |       | 182,003  |   |   | 164,574 |   |   |
| Net income                                             |       | $                                          | 349,174    |     | $ | 187,179 |   |   | $ | 255,883 |   |   |
|                                                        |            |                                            |            |          |  |  |  |  |  |  |  |  |  |  |  |  |

----

(a)           Includesa cost reduction plan charge of $30.3 million.

F-49

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**UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2006 (Dollars in thousands, except share and per-share data, unless otherwise indicated)**

**18. QuarterlyFinancial Information (unaudited)**

| ** **                    | ** ** | **1st**                                                                           | ** ** | **2nd**     | ** ** | **3rd**     | ** ** | **4th**     | ** ** | **Total** | ** ** |
|-------------------------------|------------|-----------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-----------|------------|
| ** **                    | ** ** | **Quarter**                                                                       | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Quarter** | ** ** | **Year**  | ** ** |
| ** **                    | ** ** | **(In thousands, except share and per-share data)** | ** ** |
| ***2006***                    |       |                                                                              |       |        |       |        |       |        |       |      |       |
| Net revenues                  |       | $                                                                                 | 449,786    |        | $          | 633,949     |       | $           | 536,055    |      | $          | 546,862 |   | $ | 2,166,652 |   |
| Net income                    |       | $                                                                                 | 53,903     |        | $          | 107,420     |       | $           | 88,139     |      | $          | 99,712 |   | $ | 349,174 |   |
| Net income per common  share: |       |                                                                              |       |        |       |        |       |        |       |      |       |
| Basic                         |       | $                                                                                 | 0.18       |        | $          | 0.35        |       | $           | 0.29       |      | $          | 0.32 |   | $ | 1.14 |   |
| Diluted                       |       | $                                                                                 | 0.16       |        | $          | 0.32        |       | $           | 0.26       |      | $          | 0.29 |   | $ | 1.03 |   |
| ***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 |   |

 

F-50

----