Exhibit 99.1

HUGHES ELECTRONICS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND

AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(Dollars in Millions)
Revenues
Direct broadcast, leasing and other services	$	2,311.8		$	1,952.8		$	6,579.7		$	5,784.0
Product sales		258.4			241.9			588.5			627.8
Total Revenues		2,570.2			2,194.7			7,168.2			6,411.8
Operating Costs and Expenses, Exclusive of Depreciation and Amortization Expenses Shown Separately Below
Broadcast programming and other costs		1,186.9			965.1			3,323.9			2,950.9
Cost of products sold		234.7			209.5			547.5			567.2
Selling, general and administrative expenses		789.8			750.3			2,228.3			2,307.8
Depreciation and amortization		282.3			253.8			810.1			756.3
Total Operating Costs and Expenses		2,493.7			2,178.7			6,909.8			6,582.2
Operating Profit (Loss)		76.5			16.0			258.4			(170.4	)
Interest income		10.6			5.4			32.5			17.1
Interest expense		(76.3	)		(76.1	)		(241.0	)		(273.8	)
Reorganization expense		(8.2	)		—			(19.2	)		—
Other, net		0.6			78.7			(38.0	)		46.0
Income (Loss) From Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Changes		3.2			24.0			(7.3	)		(381.1	)
Income tax benefit (expense)		44.3			(9.2	)		48.0			144.8
Minority interests in net earnings of subsidiaries		(6.0	)		(4.1	)		(20.8	)		(14.3	)
Income (loss) from continuing operations before cumulative effect of accounting changes		41.5			10.7			19.9			(250.6	)
Income (loss) from discontinued operations, net of taxes		0.1			(24.3	)		(7.6	)		(74.5	)
Income (loss) before cumulative effect of accounting changes		41.6			(13.6	)		12.3			(325.1	)
Cumulative effect of accounting changes, net of taxes		(64.6	)		—			(64.6	)		(681.3	)
Net Loss		(23.0	)		(13.6	)		(52.3	)		(1,006.4	)
Preferred stock dividends		—			—			—			(46.9	)
Loss Used for Computation of Available Separate Consolidated Net Income (Loss)	$	(23.0	)	$	(13.6	)	$	(52.3	)	$	(1,053.3	)
Available Separate Consolidated Net Income (Loss)
Average number of shares of General Motors Class H Common Stock outstanding (in millions) (Numerator)		1,108.4			958.1			1,068.7			906.6
Average Class H dividend base (in millions) (Denominator)		1,382.8			1,381.7			1,382.2			1,330.2
Available Separate Consolidated Net Income (Loss)	$	(18.4	)	$	(9.4	)	$	(40.4	)	$	(717.9	)

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

HUGHES ELECTRONICS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2003			December 31, 2002
	(Dollars in Millions)
ASSETS
Current Assets
Cash and cash equivalents	$	2,627.9		$	1,128.6
Accounts and notes receivable, net of allowances of $122.9 and $102.4		835.6			1,133.9
Contracts in process		127.4			165.9
Inventories		292.5			230.3
Deferred income taxes		6.0			97.7
Prepaid expenses and other		954.6			900.0
Total Current Assets		4,844.0			3,656.4
Satellites, net of accumulated depreciation of $1,672.1 and $1,497.2		4,715.2			4,922.6
Property, net of accumulated depreciation of $2,271.2 and $1,766.0		2,018.6			2,017.4
Goodwill, net		5,779.4			5,775.2
Intangible Assets, net		594.0			644.7
Net Investment in Sales-type Leases		120.9			161.9
Investments and Other Assets		859.8			706.9
Total Assets	$	18,931.9		$	17,885.1
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities
Accounts payable	$	1,040.3		$	1,039.0
Deferred revenues		241.1			166.4
Short-term borrowings and current portion of long-term debt		96.1			727.8
Accrued liabilities and other		948.0			1,269.9
Total Current Liabilities		2,325.5			3,203.1
Long-Term Debt		4,601.7			2,390.0
Other Liabilities and Deferred Credits		1,011.0			1,178.4
Deferred Income Taxes		424.2			581.2
Commitments and Contingencies
Minority Interests		583.9			555.3
Stockholder’s Equity
Common stock and additional paid-in capital		11,106.0			10,151.8
Convertible preferred stock, Series B		—			914.1
Retained earnings (deficit)		(1,079.4	)		(1,027.1	)
Subtotal Stockholder’s Equity		10,026.6			10,038.8
Accumulated Other Comprehensive Loss Minimum pension liability adjustment		(32.3	)		(32.3	)
Accumulated unrealized gains (losses) on securities and derivatives		15.8			(3.3	)
Accumulated foreign currency translation adjustments		(24.5	)		(26.1	)
Accumulated other comprehensive loss		(41.0	)		(61.7	)
Total Stockholder’s Equity		9,985.6			9,977.1
Total Liabilities and Stockholder’s Equity	$	18,931.9		$	17,885.1

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

2

HUGHES ELECTRONICS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2003			2002
	(Dollars in Millions)
Cash Flows From Operating Activities
Net Cash Provided by Operating Activities	$	892.2		$	457.7
Cash Flows From Investing Activities
Investment in companies, net of cash acquired		(18.7	)		(2.0	)
Purchase of short-term investments		(91.1	)		(95.7	)
Expenditures for property		(289.5	)		(389.2	)
Expenditures for satellites		(189.4	)		(594.7	)
Proceeds from sale of investments		67.2			217.3
Proceeds from insurance claims		—			215.0
Other		32.2			1.3
Net Cash Used in Investing Activities		(489.3	)		(648.0	)
Cash Flows From Financing Activities
Net decrease in short-term borrowings		(478.1	)		(889.3	)
Long-term debt borrowings		2,626.5			1,801.1
Repayment of long-term debt		(568.4	)		(183.1	)
Debt issuance costs		(68.4	)		(58.5	)
Stock options exercised		12.9			7.2
Preferred stock dividends paid to General Motors		—			(68.7	)
Payment on Raytheon settlement		—			(134.2	)
Net Cash Provided by Financing Activities		1,524.5			474.5
Net cash provided by continuing operations		1,927.4			284.2
Net cash used in discontinued operations		(428.1	)		(121.1	)
Net increase in cash and cash equivalents		1,499.3			163.1
Cash and cash equivalents at beginning of the period		1,128.6			700.1
Cash and cash equivalents at end of the period	$	2,627.9		$	863.2
Supplemental Cash Flow Information
Cash paid for interest	$	244.0		$	242.0
Cash received for income taxes		22.5			302.4

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

3

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

Hughes Electronics Corporation (“Hughes”) is a wholly-owned subsidiary of General Motors Corporation (“GM”). GM Class H common stock tracks the financial performance of Hughes.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting. In the opinion of management, all adjustments (consisting only of normal recurring items) which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. For further information, refer to the revised consolidated financial statements and footnotes thereto as of December 31, 2002 and 2001 and for the three years ended December 31, 2002 included in Hughes’ Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on July 24, 2003, Hughes’ Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003 and June 30, 2003, filed on May 8, 2003 and August 8, 2003, respectively, and all other Hughes filings, including other Current Reports on Form 8-K, filed with the SEC through the date of this report.

The results of operations and cash flows of DIRECTV Broadband, Inc. (“DIRECTV Broadband”) have been presented herein as discontinued operations as a result of the shut down of that business on February 28, 2003. See Note 10 for additional information.

News Corporation Transactions

On April 9, 2003, GM, Hughes and The News Corporation Limited (“News Corporation”) announced the signing of definitive agreements that provide for, among other things, the split-off of Hughes from GM and the simultaneous sale of GM’s approximately 19.8% retained economic interest in Hughes to News Corporation. GM would receive approximately $3.84 billion, comprised of approximately $3.07 billion in cash and the remainder payable in News Corporation Preferred American Depositary Shares (“News Corporation Preferred ADSs”) and/or cash, at News Corporation’s election. Immediately after the split-off, News Corporation would acquire an additional approximately 14.2% of the outstanding Hughes common stock from the former GM Class H common stockholders through a merger of a wholly-owned subsidiary of News Corporation with and into Hughes, which would provide News Corporation with a total of 34% of the outstanding capital stock of Hughes. In addition, GM would receive a special cash dividend from Hughes of $275 million in connection with the transactions. Hughes expects to pay this dividend using available cash balances.

Under the terms of the proposed transactions, holders of GM Class H common stock would first exchange their shares for Hughes common stock on a one-share-for-one-share basis in the split-off, followed immediately by an exchange of approximately 17.7% of the Hughes common stock they receive in the split-off for News Corporation Preferred ADSs and/or cash. The number of News Corporation Preferred ADSs payable to GM and Hughes common stockholders, based on a fixed-price of $14 per Hughes share, will be adjusted within a collar range of 20% above or below the News Corporation Preferred ADS price of $22.40. This mandatory exchange of about 17.7% of the shares of Hughes common stock for News Corporation Preferred ADSs and/or cash will be a taxable transaction for U.S federal income tax purposes. The transactions are structured in a manner that will not result in the recapitalization of GM Class H common stock into GM $1-2/3 par value common stock at a 120% exchange ratio, as currently provided for under certain circumstances in the GM Restated Certificate of Incorporation, as amended.

4

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Hughes will cease to be a member of the GM consolidated group for federal income tax purposes upon the completion of the Hughes split-off. Pursuant to the amended income tax allocation agreement between GM and Hughes, Hughes will carry forward its federal income tax attributes that have not been utilized by the GM consolidated group to the extent permitted by the Internal Revenue Code. Hughes will be compensated by GM for its net operating losses, if any, at a rate of 24%. To the extent Hughes’ federal income tax attributes, including net operating losses, have been utilized by the GM consolidated group, Hughes will be compensated by GM following separation with the maximum compensation from GM limited to approximately $75 million.

If the transactions are completed, Mr. K. Rupert Murdoch, chairman and chief executive of News Corporation, would become chairman of Hughes, and Mr. Chase Carey, who is currently serving as a director of and an advisor to News Corporation, would become president and chief executive officer of Hughes. Mr. Eddy Hartenstein, Hughes’ senior executive vice president, would be named vice chairman of Hughes. Hughes would have 11 directors, the majority of whom would be independent directors.

For Hughes, the transactions represent an exchange of equity interests by investors. As such, Hughes will continue to account for its assets and liabilities at historical cost and will not apply purchase accounting. Hughes will record the $275 million special cash dividend payment to GM as a reduction to additional paid-in capital. Any difference between the Hughes consolidated tax liability or receivable as determined on a separate return basis and the cash payment to or from GM resulting from the amended income tax allocation agreement between GM and Hughes also will be reflected as a reduction or increase in additional paid-in capital. Upon completion of the transactions, Hughes will expense related costs that include investment advisor fees of approximately $50 million and retention and known severance benefits to certain employees of approximately $57 million and approximately $5 million, respectively. In addition, certain employees of Hughes may earn up to $44 million in additional retention benefits during the 12 month period subsequent to the completion of the transactions.

GM received a private-letter ruling from the U.S. Internal Revenue Service confirming that the distribution of Hughes common stock to the holders of GM Class H common stock, in connection with the split-off, would be tax-free to GM and its Class H stockholders for federal income tax purposes. In addition, the transactions have been approved by a majority of each class of GM common stockholders—GM $1-2/3 and GM Class H—voting both as separate classes and together as a single class based on their respective voting power. The transactions remain subject to certain conditions, including, among other things, obtaining U.S. antitrust and Federal Communications Commission (“FCC”) approvals. No assurances can be given that the approvals will be obtained or the transactions will be completed.

As required by the Securities Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, due to the proposed transactions with News Corporation, on July 14, 2003, Hughes and certain of Hughes’ subsidiaries, together with News Corporation, announced that the parties were making an offer to acquire up to 20% of the outstanding shares of Hughes Software Systems Limited, a 55.44% owned subsidiary of Hughes organized under the laws of India. The offer was made in accordance with the provisions of Indian law and closed on September 18, 2003. A total of 825 shares were tendered at a purchase price of 232 rupees per share for a total cost at current exchange rates of approximately $4,200. The parties are currently seeking Indian governmental approvals necessary to conclude the acquisition of tendered shares.

5

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

In response to the announcement of the transactions with News Corporation, the customers and strategic partners of Hughes may delay or defer decisions, which could have a material adverse effect on Hughes’ businesses, regardless of whether the transactions are ultimately completed. Similarly, current and prospective employees of Hughes may experience uncertainty about their future roles with Hughes upon completion of the transactions, which may materially adversely affect Hughes’ ability to attract and retain key management, sales, marketing and technical personnel.

The financial and other information regarding Hughes contained in this Quarterly Report do not give any effect to or make any adjustment for the anticipated completion of the transactions with News Corporation.

For additional information regarding the proposed transactions with News Corporation, refer to Hughes’ Registration Statement on Form S-4 filed with the SEC and declared effective on August 21, 2003.

Note 2. New Accounting Standards

Variable Interest Entities

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities—an interpretation of ARB No. 51” (“FIN 46”). FIN 46 requires the consolidation of a variable interest entity (“VIE”) where an equity investor achieves a controlling financial interest through arrangements other than voting interests, and it is determined that the investor will absorb a majority of the expected losses and/or receive the majority of residual returns of the VIE. In October 2003, the FASB deferred the effective date for the consolidation of VIEs created prior to February 1, 2003 to December 31, 2003 for calendar year-end companies, with earlier application encouraged. Hughes applied this interpretation as of its original effective date of July 1, 2003 for entities created prior to February 1, 2003. Hughes has determined that the partially-owned local operating companies (“LOC’s”) providing DIRECTV^® programming services in Venezuela and Puerto Rico, of which Hughes owns 19.5% and 40.0%, respectively, are VIEs. As a result, on July 1, 2003, Hughes began consolidating the Venezuelan and Puerto Rican LOC’s resulting in an increase in total assets of $55.1 million, which included $29.1 million of cash. The adoption of this interpretation resulted in Hughes recording an after-tax charge of $64.6 million to cumulative effect of accounting changes in the Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss).

Prior to July 1, 2003, Hughes accounted for its investments in the Venezuelan and Puerto Rican LOC’s under the equity method of accounting and, through June 30, 2003, reflected approximately 75.0% of their net income or loss in “Other, net” in Hughes’ consolidated statements of operations due to the accumulation of net losses in excess of other investors’ investments.

Stock-Based Compensation

Beginning in the first quarter of 2003, Hughes adopted the fair value based method of accounting for stock-based employee compensation of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” and the disclosure requirements of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS No. 123.” Hughes elected to follow the prospective method of adoption, which results in the recognition of fair value based compensation cost in the consolidated statements of operations for stock options and

6

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

other stock-based awards granted to employees on or after January 1, 2003. Stock options and other stock-based awards granted prior to January 1, 2003 continue to be accounted for under the intrinsic value method of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” in the consolidated statements of operations.

The following table presents the effect on earnings of recognizing compensation cost as if the fair value based method had been applied to all outstanding and unvested stock options and other stock-based awards:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(Dollars in Millions)
Loss used for computation of available separate consolidated net income (loss), as reported	$	(23.0	)	$	(13.6	)	$	(52.3	)	$	(1,053.3	)
Add: Stock compensation cost (benefit), net of taxes, included above		3.9			(1.1	)		8.5			1.3
Deduct: Total stock compensation cost, net of taxes, under the fair value based method		(19.5	)		(35.8	)		(78.6	)		(139.5	)
Pro forma loss used for computation of available separate consolidated net income (loss)	$	(38.6	)	$	(50.5	)	$	(122.4	)	$	(1,191.5	)

The pro forma amounts for compensation cost are not necessarily indicative of the amounts that would be reported in future periods.

Accounting for Costs Associated with Exit or Disposal Activities

Hughes adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” on January 1, 2003. SFAS No. 146 generally requires the recognition of costs associated with exit or disposal activities when incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 replaces previous accounting guidance provided by Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The adoption of this standard did not have a significant impact on Hughes’ consolidated results of operations or financial position.

Goodwill and Other Intangible Assets

Hughes adopted SFAS No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. SFAS No. 142 required that Hughes perform step one of a two-part transitional impairment test to compare the fair value of each reportable unit with its respective carrying value, including goodwill. If the carrying value exceeded the fair value, step two of the transitional impairment test was required to measure the amount of the impairment loss, if any. SFAS No. 142 also required that intangible assets be reviewed as of the date of adoption to determine if they continue to qualify as intangible assets under the criteria established under SFAS No. 141, “Business Combinations,” and to the extent previously recorded intangible assets do not meet the criteria that they be reclassified to goodwill.

In the first quarter of 2002, Hughes completed the required transitional impairment test for intangible assets with indefinite lives, which consisted of FCC licenses for direct-to-home broadcasting frequencies (“Orbital Slots”), and determined that no impairment existed because the fair value of these assets exceeded the carrying value as of January 1, 2002.

7

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

In the second quarter of 2002, with the assistance of an independent valuation firm, Hughes completed step one of the transitional impairment test to determine whether a potential impairment existed for goodwill recorded at January 1, 2002. Primarily based on the present value of expected future cash flows, it was determined that the carrying values of the DIRECTV Latin America businesses (“DLA”) and DIRECTV Broadband exceeded their fair values, therefore requiring performance of step two of the impairment test.

Hughes completed step two of the impairment test for DLA and DIRECTV Broadband in the fourth quarter of 2002 as required by SFAS No. 142. Step two of the transitional test required the comparison of the fair value of the reporting unit goodwill with the carrying value of that goodwill. As a result of completing step two, Hughes determined that the carrying value of reporting unit goodwill exceeded the fair value of that goodwill and that all of the goodwill recorded at DLA and DIRECTV Broadband, $631.8 million and $107.9 million, respectively, was impaired. Hughes also recorded a $16.0 million charge representing its share of the goodwill impairment of an equity method investee. Therefore, Hughes recorded a charge to cumulative effect of accounting changes, net of taxes, of $681.3 million ($755.7 million pre-tax) as of January 1, 2002 in the Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss).

Other

In November 2002, the EITF reached a consensus on Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” EITF Issue No. 00-21 requires the allocation of revenues into separate units of accounting for transactions that involve more than one deliverable and contain more than one unit of accounting. Hughes elected to apply the accounting required by EITF Issue No. 00-21 prospectively to transactions entered into after June 30, 2003. The adoption of this standard did not materially affect Hughes’ consolidated results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that certain financial instruments be classified as liabilities that were previously considered equity. The adoption of this standard on July 1, 2003, as required, had no impact on Hughes’ consolidated results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except for hedging relationships designated after June 30, 2003. The adoption of this standard on July 1, 2003, as required, had no impact on Hughes’ consolidated results of operations or financial position.

Hughes adopted SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections,” on January 1, 2003. SFAS No. 145 eliminates the requirement to present gains and losses on the early extinguishment of debt as an extraordinary

8

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

item, and resolves accounting inconsistencies for certain lease modifications. The adoption of this standard had no impact on Hughes’ consolidated results of operations or financial position.

Note 3. Inventories

Major Classes of Inventories

	September 30, 2003			December 31, 2002
	(Dollars in Millions)
Productive material and supplies	$	66.3		$	34.7
Work in process		94.6			70.0
Finished goods		162.7			160.1
Provision for excess or obsolete inventory		(31.1	)		(34.5	)
Total	$	292.5		$	230.3

Note 4. Goodwill and Intangible Assets

The changes in the carrying amounts of goodwill by reporting unit for the nine months ended September 30, 2003 were as follows:

	Direct-To- Home Broadcast		Satellite Services		Network Systems		Total
	(Dollars in Millions)
Balance as of December 31, 2002	$	3,029.1	$	2,743.7	$	2.4	$	5,775.2
Additions		2.6		1.6		—		4.2
Balance as of September 30, 2003	$	3,031.7	$	2,745.3	$	2.4	$	5,779.4

The following table sets forth the amounts recorded for intangible assets at September 30, 2003:

	Estimated Useful Lives (years)	Gross Amount		Accumulated Amortization		Net Amount
	(Dollars in Millions)
Orbital Slots	Indefinite	$	463.0	$	30.6	$	432.4
Subscriber Base and Customer List	2-5		224.9		182.0		42.9
Dealer Network	12		130.0		32.3		97.7
Intangible Pension Asset	—		21.0		—		21.0
Total Intangible Assets		$	838.9	$	244.9	$	594.0

The following table sets forth the amounts recorded for the amortization of intangible assets:

	Three Months Ended September 30,			Nine Months Ended September 30,
	2003		2002	2003		2002
	(Dollars in Millions)
Subscriber Base and Customer List	$	16.3	—	$	48.7	—
Dealer Network		2.3	—		6.9	—
Total Amortization of Intangible Assets	$	18.6	—	$	55.6	—

The increase in amortization expense for the three months and nine months ended September 30, 2003 compared to the same periods in 2002 is due to the reinstatement in the fourth quarter of 2002 of subscriber base and dealer network intangible asset amortization at the Direct-To-Home Broadcast

9

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

segment as a result of the issuance of EITF Issue No. 02-17, “Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination.” Prior to the issuance of EITF No. 02-17 in October 2002, Hughes had reclassified its subscriber base and dealer network intangible assets to goodwill as part of the 2002 implementation of SFAS No. 142 and therefore no amortization expense was recorded in the first three quarters of 2002 for these assets.

In accordance with SFAS No. 142, no amortization expense is recorded for goodwill and intangible assets with indefinite lives. Estimated amortization expense for intangible assets in each of the next five years is as follows: $18.7 million in the remainder of 2003; $32.1 million in 2004; $10.2 million in 2005; $10.2 million in 2006; $10.2 million in 2007; and $59.2 million thereafter.

Note 5. Short-Term Borrowings and Long-Term Debt

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

	Interest Rates at September 30, 2003	September 30, 2003		December 31, 2002
		(Dollars in Millions)
Short-term borrowings	2.67%—13.00%	$	51.2	$	21.5
Current portion of long-term debt	3.87%—5.07%		44.9		706.3
Total short-term borrowings and current portion of long-term debt		$	96.1	$	727.8

Long-Term Debt

	Interest Rates at September 30, 2003	September 30, 2003		December 31, 2002
		(Dollars in Millions)
Notes payable	6.13%—8.50%	$	2,750.0	$	1,550.0
Credit facilities	3.87%—5.07%		1,875.0		1,506.3
Other debt	3.31%—12.10%		21.6		40.0
Total debt			4,646.6		3,096.3
Less current portion			44.9		706.3
Total long-term debt		$	4,601.7	$	2,390.0

Notes Payable.    On February 28, 2003, DIRECTV Holdings LLC (“DIRECTV”), a wholly-owned subsidiary of Hughes, issued $1.4 billion in senior notes due in 2013 in a private placement transaction. In September 2003, all of the senior notes were exchanged for notes registered under the Securities Act of 1933 with substantially identical terms. The ten-year registered notes are unsecured indebtedness guaranteed by all of DIRECTV’s domestic subsidiaries and bear interest at 8.375%. Principal is payable upon maturity, while interest is payable semi-annually, beginning with the payment made on September 15, 2003.

In February 2002, PanAmSat Corporation (“PanAmSat”), an approximately 81% owned subsidiary of Hughes, completed an $800.0 million Rule 144A private placement notes offering, which notes were exchanged for registered notes with substantially identical terms in November 2002. These unsecured notes bear interest at an annual rate of 8.5%, payable semi-annually, and mature in 2012.

10

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling $750.0 million in January 1998. The $200.0 million five-year notes were repaid in January 2003. The outstanding principal balances and interest rates for the seven, ten, and thirty-year notes as of September 30, 2003 were $275.0 million at 6.125%, $150.0 million at 6.375% and $125.0 million at 6.875%, respectively. Principal is payable at maturity, while interest is payable semi-annually. In connection with a secured bank facility entered into by PanAmSat in February 2002, described below, these notes were ratably secured with the bank facility by substantially all of PanAmSat’s assets, including its satellites.

Credit Facilities.    On March 6, 2003, DIRECTV entered into a $1,675.0 million senior secured credit facility, comprised of a $375.0 million Term Loan A, of which $175.0 million was drawn, a $1,050.0 million Term Loan B, which was fully drawn, and a $250.0 million revolving credit facility, which was undrawn. Borrowings under the Term Loan A and the revolving credit facility bear interest at the London Interbank Offered Rate (“LIBOR”) plus 3.50%. Borrowings under the Term Loan B bore interest at LIBOR plus 3.50% until it was replaced in August 2003 by the Term Loan B-1. DIRECTV distributed to Hughes the $2.56 billion of proceeds, net of debt issuance costs, from the initial borrowings under the senior secured credit facility and the sale of senior notes, described above. This distribution enabled Hughes to repay the $506.3 million outstanding principal balance and accrued interest under a prior credit agreement, which was then terminated.

In August 2003, DIRECTV amended the senior secured credit facility to replace the $1,050.0 million Term Loan B with a new $1,225.0 million Term Loan B-1 and to reduce the size of the Term Loan A from $375.0 million to $200.0 million, repaying the $175.0 million that was previously outstanding under the Term Loan A with additional borrowings from the Term Loan B-1. Borrowings under the Term Loan B-1 bear interest at a rate equal to LIBOR plus 2.75%, which may be increased or decreased under certain conditions. The revolving credit facility was not affected by the amendment. DIRECTV is required to pay a commitment fee of 0.50% and 1.25% per year on the unused commitments under the revolving credit facility and Term Loan A, respectively. The revolving credit facility and the Term Loan A each have terms of five years and the Term Loan B-1 matures in 2010. Principal payments under the Term Loan A are due in varying amounts from 2004 to 2008. Principal payments under the Term Loan B-1 are due primarily in 2008 to 2010. As of September 30, 2003, the Term Loan A and the revolving credit facility were undrawn and the Term Loan B-1 was fully drawn. The Term Loan A may be drawn by DIRECTV until December 2003 and those proceeds may be distributed to Hughes. The revolving portion of the senior secured credit facility is available to DIRECTV to fund working capital and other requirements. The senior secured credit facility is secured by substantially all of DIRECTV’s assets and is fully and unconditionally guaranteed, jointly and severally, by all of DIRECTV’s domestic subsidiaries.

In February 2002, PanAmSat entered into a bank facility in the amount of $1,250.0 million. The bank facility is comprised of a $250.0 million revolving credit facility, which was undrawn as of September 30, 2003, a $300.0 million Tranche A Term Loan and a $700.0 million Tranche B Term Loan. This bank facility replaced a previously existing and undrawn $500.0 million unsecured multi-year revolving credit facility. The new revolving credit facility and the Tranche A Term Loan bear interest at LIBOR plus 2.75%. PanAmSat is required to pay a commitment fee of 0.50% per year on the unused commitments under the revolving credit facility. The Tranche B Term Loan bears interest at LIBOR plus 3.50%. The revolving credit facility and Tranche A Term Loan interest rates may be increased or decreased based upon changes in PanAmSat’s total leverage ratio, as defined by the credit agreement. The revolving credit facility and the Tranche A Term Loan terminate in 2007 and the Tranche B Term Loan matures in 2008. Principal payments under the Tranche A Term Loan are due in varying amounts from 2004 to 2007. Principal payments under the Tranche B Term Loan are due

11

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

primarily at maturity. The facilities are secured ratably with the fixed rate notes described above by substantially all of PanAmSat’s assets, including its satellites. PanAmSat repaid a $1,725.0 million intercompany loan from Hughes in February 2002, using proceeds from the bank facility and the registered notes described above.

On June 18, 2003, PanAmSat and its lenders amended the bank facility to allow for the completion of the News Corporation transactions without causing an event of default under the facility.

On July 14, 2003, PanAmSat made an optional prepayment of $350.0 million under its $1,250.0 million bank facility from available cash on hand. The prepayment was applied pro rata against PanAmSat’s Tranche A Term Loan and Tranche B Term Loan. As of September 30, 2003, outstanding amounts under the Tranche A Term Loan and Tranche B Term Loan were $195.0 million and $455.0 million, respectively.

On October 1, 2001, Hughes entered into a $2.0 billion revolving credit facility with General Motors Acceptance Corporation (“GMAC”). The facility was subsequently amended in February and November 2002, and March 2003. The amendments reduced the size of the facility to $1,500.0 million and provided for a commitment through March 31, 2004. On June 18, 2003, Hughes voluntarily prepaid amounts owed thereunder and terminated the facility. The facility was comprised of a $1,500.0 million tranche secured by a $1,500.0 million Hughes cash deposit. Borrowings under the facility bore interest at GMAC’s cost of funds plus 0.125%, and the $1,500.0 million cash deposit earned interest at a rate equivalent to GMAC’s cost of funds. Hughes had the legal right of setoff with respect to the $1,500.0 million GMAC cash deposit, and accordingly offset it against amounts borrowed from GMAC under the $1,500.0 million tranche in the consolidated statement of financial position.

Other.    $72.8 million in other short-term and long-term debt, related primarily to DLA and Hughes Network Systems, Inc.’s (“HNS”) international subsidiaries, was outstanding at September 30, 2003. Principal on these borrowings is due in varying amounts through 2008.

Hughes’ notes payable and credit facilities mature as follows: $51.2 million in the remainder of 2003; $55.8 million in 2004; $343.0 million in 2005; $66.3 million in 2006; $93.2 million in 2007; and $4,088.3 million thereafter.

DIRECTV and PanAmSat are required to maintain certain financial covenants and are also subject to restrictive covenants under their borrowings. These covenants limit the ability of DIRECTV, PanAmSat and their respective subsidiaries to, among other things: incur or guarantee additional indebtedness; make restricted payments, including dividends; create or permit to exist certain liens; enter into business combinations and asset sale transactions; make investments; enter into transactions with affiliates; and enter into new businesses. If DIRECTV or PanAmSat fails to comply with their respective covenants, all or a portion of their respective borrowings could become immediately payable. At September 30, 2003, DIRECTV and PanAmSat were in compliance with all such covenants.

As of September 30, 2003, restricted cash of $91.2 million was included as part of “Prepaid expenses and other” on the Consolidated Balance Sheets. This cash was deposited to secure certain letters of credit and obligations of Hughes and Hughes’ majority-owned foreign subsidiaries. Restrictions on the cash will be removed as the letters of credit expire and the foreign subsidiaries’ obligations are satisfied or terminated.

12

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Note 6. Comprehensive Loss

Hughes’ total comprehensive loss was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(Dollars in Millions)
Net loss	$	(23.0	)	$	(13.6	)	$	(52.3	)	$	(1,006.4	)
Other comprehensive income (loss):
Foreign currency translation adjustments		0.9			(1.7	)		1.6			3.6
Less: reclassification adjustment for net losses recognized during the period		—			20.9			—			20.9
Unrealized gains (losses) on securities and derivatives:
Unrealized holding gains (losses)		7.8			(47.3	)		19.1			(170.3	)
Less: reclassification adjustment for net gains recognized during the period		—			(93.9	)		—			(93.9	)
Other comprehensive income (loss)		8.7			(122.0	)		20.7			(239.7	)
Total comprehensive loss	$	(14.3	)	$	(135.6	)	$	(31.6	)	$	(1,246.1	)

Note 7. Available Separate Consolidated Net Income (Loss)

GM Class H common stock is a “tracking stock” of GM designed to provide holders with financial returns based on the financial performance of Hughes. Holders of GM Class H common stock have no direct rights in the equity or assets of Hughes, but rather have rights in the equity and assets of GM (which includes 100% of the stock of Hughes).

Amounts available for the payment of dividends on GM Class H common stock are based on the Available Separate Consolidated Net Income (Loss) (“ASCNI”) of Hughes. The ASCNI of Hughes is determined quarterly and is equal to the net income (loss) of Hughes, excluding the effects of the GM purchase accounting adjustment arising from GM’s acquisition of Hughes and reduced by the effects of preferred stock dividends paid to GM (earnings (loss) used for computation of ASCNI), multiplied by a fraction, the numerator of which is equal to the weighted-average number of shares of GM Class H common stock outstanding during the period and the denominator of which is a number equal to the weighted-average number of shares of GM Class H common stock which, if issued and outstanding, would represent 100% of the tracking stock interest in the earnings of Hughes (Average Class H dividend base).

In addition, the denominator used in determining the ASCNI of Hughes may be adjusted from time to time as deemed appropriate by the GM Board of Directors (“GM Board”) under the GM Restated Certificate of Incorporation, as amended, to reflect the following: (i) subdivisions and combinations of the GM Class H common stock and stock dividends payable in shares of GM Class H common stock to holders of GM Class H common stock; (ii) the fair market value of contributions of cash or property by GM to Hughes, or of cash or property of GM to or for the benefit of employees of Hughes for employee benefit plans or arrangements of GM, Hughes or other GM subsidiaries; (iii) the contribution of shares of capital stock of GM to or for the benefit of employees of Hughes or its subsidiaries for benefit plans or arrangements of GM, Hughes or other GM subsidiaries; (iv) payments made by Hughes to GM of amounts applied to the repurchase by GM of shares of GM Class H common stock, so long as the GM

13

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Board has approved the repurchase and GM applied the payment to the repurchase; and (v) the repurchase by Hughes of shares of GM Class H common stock that are no longer outstanding, so long as the GM Board approved the repurchase.

Shares of Class H common stock delivered by GM in connection with the award of such shares to employees and the exercise of stock options by employees of Hughes increase the numerator and denominator of the fraction referred to above. From time to time, in anticipation of exercises of stock options, Hughes may purchase Class H common stock on the open market. Upon purchase, these shares are retired and therefore decrease the numerator and denominator of the fraction referred to above.

On March 12, 2003, GM contributed 149.2 million shares of GM Class H common stock to certain of its U.S. employee benefit plans, increasing the number of shares of GM Class H common stock outstanding. The contribution increased the amount of GM Class H common stock held by GM’s employee benefit plans to approximately 331 million shares, and reduced GM’s retained economic interest in Hughes to approximately 19.9% from 30.7%.

The following table sets forth comparative information regarding GM Class H common stock and the GM Class H dividend base for the nine months ended September 30:

	2003	2002
	(Shares in Millions)
GM Class H Common Stock Outstanding
Shares at January 1	958.3	877.5
Shares issued for mandatory redemption of GM Series H preference stock	—	80.1
Shares issued for stock options exercised	1.2	0.5
Shares contributed by GM to certain of its U.S. employee benefit plans	149.2	—
Shares at September 30	1,108.7	958.1
Weighted average number of shares of GM Class H common stock outstanding (Numerator)	1,068.7	906.6
GM Class H Dividend Base
GM Class H dividend base at January 1	1,381.9	1,301.1
Increase for mandatory redemption of GM Series H preference stock	—	80.1
Increase for stock options exercised	1.2	0.5
GM Class H dividend base at September 30	1,383.1	1,381.7
Weighted average GM Class H dividend base (Denominator)	1,382.2	1,330.2

Note 8. Stockholder’s Equity Recapitalization

During April 2003, the Hughes Board of Directors approved the reclassification of the outstanding Hughes Series B convertible preferred stock into Hughes Class B common stock of equivalent value, and a subsequent stock split of Hughes common stock and Hughes Class B common stock through dividends of additional shares. GM, in its capacity as the holder of all outstanding Hughes capital stock, approved the reclassification. Shortly thereafter, GM converted some of its Hughes common stock into an equivalent number of shares of Hughes Class B common stock. As a result of these transactions,

14

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Hughes currently has issued and outstanding 1,207,518,237 shares of Hughes common stock and 274,373,316 shares of Hughes Class B common stock, all of which are owned by GM. The terms of the Hughes common stock and Hughes Class B common stock are identical in all respects (with the exception of provisions regarding stock-on-stock dividends) and, at the option of the holder, the Hughes common stock may be converted at any time into Hughes Class B common stock and vice versa. These transactions had no impact on the outstanding number of shares of GM Class H common stock or the Class H dividend base. In connection with the News Corporation transactions, GM Class H common stock will be exchanged for Hughes common stock, and the Hughes Class B common stock will be sold by GM to a wholly-owned subsidiary of News Corporation. Immediately after the completion of the News Corporation transactions, all of the shares of Hughes Class B common stock held by the News Corporation subsidiary will be converted into Hughes common stock.

Note 9. DLA LLC Reorganization

On March 18, 2003, DIRECTV Latin America, LLC (“DLA LLC”) filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”). The filing did not include any of DLA LLC’s operating companies in Latin America and the Caribbean, which are expected to continue regular operations. DLA LLC continues to manage its business as a debtor-in-possession (“DIP”). Under Chapter 11 of the Bankruptcy Code, management is authorized to operate the business but may not engage in transactions outside the ordinary course of business without Bankruptcy Court approval. Subsequent to the filing of its Chapter 11 petition, DLA LLC obtained Bankruptcy Court orders that, among other things, authorized DLA LLC to pay certain pre-petition obligations related to employee wages and benefits and to take certain actions where such payments or actions will benefit its estate or preserve the going concern value of the business enterprise, thereby enhancing the prospects of reorganization.

Under bankruptcy law, actions by creditors to collect pre-petition indebtedness owed by DLA LLC at the filing date are stayed and other pre-petition contractual obligations may not be enforced against DLA LLC. In addition, DLA LLC has the right, subject to Bankruptcy Court approval and other conditions, to assume or reject any pre-petition executory contracts and unexpired leases. Parties to rejected executory contracts may file claims with the Bankruptcy Court. The Bankruptcy Court has approved DLA LLC’s rejection of certain future commitments under programming contracts with estimated remaining minimum payments totaling $767.8 million at the time of rejection. DLA LLC no longer broadcasts the programming related to rejected contracts.

On June 3, 2003, the Bankruptcy Court approved DLA LLC’s senior secured DIP financing facility provided by Hughes in an amount up to $300 million and with a term ending in February 2004. This funding is required to supplement DLA LLC’s existing cash flow and help ensure that vendors, programmers, employees and other parties receive payment for services provided after the filing of DLA LLC’s Chapter 11 petition. The DIP financing facility also includes funding of up to $2 million to be used by a statutory creditors’ committee appointed in the Chapter 11 proceedings to investigate and possibly initiate certain claims against Hughes and certain of its affiliates.

DLA LLC has indicated that additional funding is likely to be required following the conclusion of the bankruptcy process until it can reach the number of subscribers required to achieve cash flow breakeven. DLA LLC currently projects that this will be achieved in 2005.

15

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Due to material uncertainties, it is not possible to predict the length of time DLA LLC will operate under Chapter 11 protection, the outcome of the proceedings in general, whether DLA LLC will continue to operate under its current organizational structure, the effect of the proceedings on DLA LLC’s business and the Chapter 11 recovery by creditors and equity holders of DLA LLC, or whether any additional claims will be asserted against Hughes and its affiliates and, if asserted, the nature and outcome of such claims.

In connection with certain rights granted in a transaction between DLA LLC and Grupo Clarín S.A. (“Clarin”) that occurred prior to the bankruptcy filing, Raven Media (“Raven”), an affiliate of Clarin, has asserted in the bankruptcy proceeding that DLA LLC was contractually obligated to repurchase Raven’s 3.98% interest in DLA LLC for $195 million in November 2003. Raven has asserted that under the terms of the agreement, DLA LLC’s decision to initiate discussions to address DLA LLC’s financial and operational challenges caused DLA LLC to be responsible immediately to purchase Raven’s equity interest in DLA LLC. DLA LLC filed a motion with the Bankruptcy Court to reject its obligation under this contract as part of its reorganization proceedings and to subordinate the claims resulting from such rejection to the claims of DLA LLC’s other creditors under the mandatory subordination provisions of Section 510(b) of the Bankruptcy Code. On August 6, 2003, the Bankruptcy Court granted DLA LLC’s motion and determined that these claims should be subordinated. This ruling by the Bankruptcy Court is currently being appealed by Raven.

On April 17, 2003, DLA LLC filed with the Bankruptcy Court schedules setting forth DLA LLC’s assets and liabilities as of the date of the petition as reflected in DLA LLC’s records. Creditors, except those that are parties to executory contracts that have not been rejected or assumed, were required to file a proof of claim against the estate by September 2, 2003. Approximately 120 claims were filed by the creditors in the total asserted amount of approximately $1.1 billion, excluding claims filed by Hughes of $1.4 billion and Raven of approximately $195 million. DLA LLC currently is in the process of reviewing the claims and may file objections to certain of such claims challenging, among other things, the asserted amounts thereof.

On October 14, 2003, DLA LLC, the creditors’ committee and Hughes filed a joint motion with the Bankruptcy Court seeking an extension of the exclusive periods during which DLA LLC may file a plan of reorganization to November 12, 2003 and an extension of the period during which acceptance of the plan may be solicited to January 12, 2004. Although the motion will be considered by the court on November 12, 2003, pursuant to the local rules of the Bankruptcy Court, by filing the motion, DLA LLC’s exclusive right to file a plan, which was to expire on October 15, 2003, was automatically extended to November 12, 2003.

As of September 30, 2003, DLA LLC had approximately $833.2 million in assets, consisting principally of accounts receivable of $700.3 million principally from LOC’s, net fixed assets of $47.6 million and cash of $3.1 million. Liabilities subject to compromise are DLA LLC’s unsecured liabilities incurred prior to the filing for reorganization under Chapter 11 of the Bankruptcy Code. As of September 30, 2003, DLA LLC liabilities subject to compromise totaled $1,540.2 million, which includes $1,381.3 million of unsecured debt obligations owed to Hughes.

Hughes’ Consolidated Balance Sheet as of September 30, 2003 includes liabilities subject to compromise of DLA LLC of approximately $158.9 million. Additional liabilities subject to compromise may arise subsequent to the filing date of the Chapter 11 petition resulting from, among other things, rejection of executory contracts, including certain programming contracts, and allowance by the Bankruptcy Court of contingent claims and other disputed amounts.

16

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Reorganization expense shown in Hughes’ consolidated statements of operations includes the costs incurred to file the bankruptcy petition, ongoing related legal and consulting costs, and other charges related to the reorganization. Any claims allowed in the Chapter 11 proceeding for amounts not previously recognized as liabilities subject to compromise will be accrued as reorganization expense in accordance with SFAS No. 5, “Accounting for Contingencies.” Such expense could be material in amount. Because of the inherent uncertainty of the bankruptcy process, the timing of the recording of such claims cannot be determined. Adjustments of liabilities, as determined by creditors and DLA LLC or the Bankruptcy Court, will also be reflected in reorganization expense. Hughes expects to retain control of DLA LLC upon emergence from Chapter 11 and therefore expects to continue to consolidate DLA LLC.

For the nine months ended September 30, 2003, DLA LLC had revenues of $280.9 million and a net loss of $261.2 million. The net loss includes reorganization expense of $15.5 million incurred by DLA LLC.

Note 10. Discontinued Operations

DIRECTV Broadband

On February 28, 2003, DIRECTV Broadband completed the transition of its customers to alternative service providers and shut down its high-speed Internet service business. In the fourth quarter of 2002, Hughes recorded a charge of $92.8 million related to accruals for employee severance benefits, contract termination payments and the write-off of customer premise equipment. Included in the $92.8 million charge were accruals for employee severance benefits of $21.3 million and contract termination payments of $18.6 million. During the first nine months of 2003, there were payments and adjustments of $20.2 million and $15.9 million related to employee severance benefits and contract termination payments, respectively. As of September 30, 2003, $1.1 million related to accruals for employee severance benefits and $2.7 million related to contract termination payments were remaining.

Revenues, operating costs and expenses, and other non-operating results for the discontinued operations of DIRECTV Broadband have been excluded from Hughes’ results from continuing operations for all periods presented herein. The financial results for DIRECTV Broadband are presented in Hughes’ Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss) in a single line item entitled “Income (loss) from discontinued operations, net of taxes” and the net cash flows are presented in the Condensed Consolidated Statements of Cash Flows as “Net cash used in discontinued operations.”

Summarized financial information for DIRECTV Broadband is as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2003		2002			2003		2002
	(Dollars in Millions)
Revenues		—	$	20.1		$	6.5	$	51.4
Income (loss) from discontinued operations, net of income tax benefit of $0, $15.0, $0 and $45.7	$	0.1		(24.3	)		0.1		(74.5	)

17

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Satellite Systems Manufacturing Businesses

Pursuant to the settlement agreement discussed in Note 12 related to the purchase price adjustment dispute arising from the 2000 sale by Hughes of its satellite systems manufacturing businesses to The Boeing Company (“Boeing”), Hughes recorded an after-tax charge of $7.7 million to discontinued operations during the second quarter of 2003. On July 18, 2003, Hughes paid the $360 million settlement amount to Boeing, which is included in “Net cash used in discontinued operations” in the Condensed Consolidated Statements of Cash Flows.

Note 11. Segment Reporting

Hughes’ segments, which are differentiated by their products and services, include Direct-To-Home Broadcast, Satellite Services and Network Systems. Direct-To-Home Broadcast is engaged in acquiring, promoting, selling and/or distributing digital entertainment programming via satellite to residential and commercial customers. Satellite Services is engaged in the selling, leasing and operating of satellite transponders and providing services for cable television systems, news companies, Internet service providers and private business networks. The Network Systems segment is a provider of satellite-based private business networks and broadband Internet access, and a supplier of DIRECTV^® receiving equipment (set-top boxes and dishes). Other includes the corporate office and other entities.

Beginning in the first quarter of 2003, Hughes no longer allocates general corporate expenses to its subsidiaries. Prior period segment information has been reclassified to conform to the current period presentation.

18

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Selected information for Hughes’ operating segments are reported as follows:

	Direct- To-Home Broadcast			Satellite Services		Network Systems			Other			Eliminations			Total
	(Dollars in Millions)
For the Three Months Ended:
September 30, 2003
External Revenues	$	2,077.4		$	179.1	$	313.6		$	0.1			—		$	2,570.2
Intersegment Revenues		9.8			31.0		39.1			—		$	(79.9	)		—
Total Revenues	$	2,087.2		$	210.1	$	352.7			0.1		$	(79.9	)	$	2,570.2
Operating Profit (Loss)	$	42.1		$	66.5	$	(10.1	)	$	(26.1	)	$	4.1		$	76.5
Add: Depreciation and amortization		179.7			85.0		18.7			0.7			(1.8	)		282.3
Operating Profit (Loss) Before Depreciation and Amortization (1)	$	221.8		$	151.5	$	8.6		$	(25.4	)	$	2.3		$	358.8
September 30, 2002
External Revenues	$	1,754.3		$	157.5	$	271.0		$	11.9			—		$	2,194.7
Intersegment Revenues		7.2			41.6		29.2			—		$	(78.0	)		—
Total Revenues	$	1,761.5		$	199.1	$	300.2		$	11.9		$	(78.0	)	$	2,194.7
Operating Profit (Loss)	$	20.8		$	66.4	$	(42.9	)	$	(26.0	)	$	(2.3	)	$	16.0
Add: Depreciation and amortization		156.3			79.0		20.0			0.8			(2.3	)		253.8
Operating Profit (Loss) Before Depreciation and Amortization (1)	$	177.1		$	145.4	$	(22.9	)	$	(25.2	)	$	(4.6	)	$	269.8
For the Nine Months Ended:
September 30, 2003
External Revenues	$	5,852.8		$	516.9	$	783.2		$	15.3			—		$	7,168.2
Intersegment Revenues		25.4			96.5		116.5			—		$	(238.4	)		—
Total Revenues	$	5,878.2		$	613.4	$	899.7		$	15.3		$	(238.4	)	$	7,168.2
Operating Profit (Loss)	$	210.3		$	217.2	$	(79.7	)	$	(93.8	)	$	4.4		$	258.4
Add: Depreciation and amortization		522.2			232.2		56.9			2.3			(3.5	)		810.1
Operating Profit (Loss) Before Depreciation and Amortization (1)	$	732.5		$	449.4	$	(22.8	)	$	(91.5	)	$	0.9		$	1,068.5
September 30, 2002
External Revenues	$	5,153.2		$	487.8	$	738.5		$	32.3			—		$	6,411.8
Intersegment Revenues		15.0			127.7		58.9			—		$	(201.6	)		—
Total Revenues	$	5,168.2		$	615.5	$	797.4		$	32.3		$	(201.6	)	$	6,411.8
Operating Profit (Loss)	$	(228.4	)	$	184.5	$	(135.0	)	$	8.6		$	(0.1	)	$	(170.4	)
Add: Depreciation and amortization		445.1			262.7		54.6			2.7			(8.8	)		756.3
Operating Profit (Loss) Before Depreciation and Amortization (1)	$	216.7		$	447.2	$	(80.4	)	$	11.3		$	(8.9	)	$	585.9

(1) Operating Profit (Loss) Before Depreciation and Amortization, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), can be calculated by adding amounts under the caption “Depreciation and amortization” to “Operating Profit (Loss),” as presented in the Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss). This measure should be used in conjunction with GAAP financial measures and is not presented as an alternative measure

19

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

of operating results, as determined in accordance with GAAP. Hughes’ management and its Board of Directors use Operating Profit Before Depreciation and Amortization to evaluate the operating performance of Hughes and its business segments and to allocate resources and capital to business segments. This metric is also used as a measure of performance for incentive compensation purposes and to measure income generated from operations that could be used to fund capital expenditures, service debt or pay taxes. Depreciation and amortization expense primarily represents an allocation to current expense of the cost of historical capital expenditures and for intangible assets resulting from prior business acquisitions. To compensate for the exclusion of depreciation and amortization from operating profit, Hughes’ management and Board of Directors separately measure and budget for capital expenditures and business acquisitions.

Hughes believes this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net income), to compare Hughes’ operating performance to other communications, entertainment and media service providers. Hughes believes that investors use current and projected Operating Profit Before Depreciation and Amortization and similar measures to estimate Hughes’ current or prospective enterprise value and make investment decisions. This metric provides investors with a means to compare operating results exclusive of depreciation and amortization. Hughes’ management believes this is useful given the significant variation in depreciation and amortization expense that can result from the timing of capital expenditures, the capitalization of intangible assets in purchase accounting, potential variations in expected useful lives when compared to other companies and periodic changes to estimated useful lives.

The following represents a reconciliation of Operating Profit Before Depreciation and Amortization to reported Net Loss on the Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(Dollars in Millions)
Operating Profit Before Depreciation and Amortization	$	358.8		$	269.8		$	1,068.5		$	585.9
Depreciation and amortization		282.3			253.8			810.1			756.3
Operating Profit (Loss)		76.5			16.0			258.4			(170.4	)
Interest income		10.6			5.4			32.5			17.1
Interest expense		(76.3	)		(76.1	)		(241.0	)		(273.8	)
Reorganization expense		(8.2	)		—			(19.2	)		—
Other, net		0.6			78.7			(38.0	)		46.0
Income (Loss) From Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Changes		3.2			24.0			(7.3	)		(381.1	)
Income tax benefit (expense)		44.3			(9.2	)		48.0			144.8
Minority interest in net earnings of subsidiaries		(6.0	)		(4.1	)		(20.8	)		(14.3	)
Income (loss) from continuing operations before cumulative effect of accounting changes		41.5			10.7			19.9			(250.6	)
Income (loss) from discontinued operations, net of taxes		0.1			(24.3	)		(7.6	)		(74.5	)
Income (loss) before cumulative effect of accounting changes		41.6			(13.6	)		12.3			(325.1	)
Cumulative effect of accounting changes, net of taxes		(64.6	)		—			(64.6	)		(681.3	)
Net Loss	$	(23.0	)	$	(13.6	)	$	(52.3	)	$	(1,006.4	)

20

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Note 12. Contingencies

Litigation

In connection with the 2000 sale by Hughes of its satellite systems manufacturing businesses to Boeing, the stock purchase agreement provided for a potential adjustment to the purchase price based upon the financial statements of the satellite systems manufacturing businesses as of the closing date of the sale. Based upon the final closing date financial statements, Hughes calculated that Boeing was owed a purchase price adjustment of $164 million plus interest accruing at a rate of 9.5% from the date of sale pursuant to the stock purchase agreement. Boeing subsequently submitted additional proposed adjustments which became the subject of a dispute resolution process. Pursuant to a settlement agreement executed on July 15, 2003, Hughes and Boeing settled all outstanding purchase price adjustment disputes and Hughes paid an aggregate of $360 million in cash on July 18, 2003 in satisfaction of both the disputed and undisputed portions of the purchase price adjustment. Boeing also was released from its commitment to pay Hughes $4.4 million over the next seven years in connection with Boeing’s participation in the settlement with the U.S. Department of State on China launch issues of the mid-1990s. Also in connection with the settlement, HNS agreed to extend the scheduled launch date for the first Boeing built SPACEWAY satellite from the fourth quarter of 2003 until February 2004 and agreed to re-assume responsibility for obtaining the related satellite in-orbit and launch insurance. Boeing paid $54 million to HNS on July 23, 2003, which was a repayment of the cumulative insurance progress payments made by HNS to Boeing. This cash receipt was recorded as a reduction to capital expenditures. As a result of the settlement of the purchase price adjustment dispute, Hughes recorded an after-tax charge of $7.7 million to discontinued operations during the quarter ended June 30, 2003. Subsequent to the settlement discussed above, Boeing has advised Hughes that the launch of the first SPACEWAY satellite is likely to be delayed until late in the second quarter of 2004.

Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, claims and proceedings are pending against Hughes arising in the ordinary course of business. Hughes has established loss provisions for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or treble damage claims, or sanctions, that if granted, could require Hughes to pay damages or make other expenditures in amounts that could not be estimated at September 30, 2003. After discussion with counsel representing Hughes in those actions, it is the opinion of management that such liability is not expected to have a material adverse effect on Hughes’ consolidated results of operations and financial position.

Other Contingencies

The in-orbit satellites of Hughes and its subsidiaries are subject to the risk of failing prematurely due to, among other things, mechanical failure, collision with objects in space or an inability to maintain proper orbit. Satellites are subject to the risk of launch delay and failure, destruction and damage while on the ground or during launch and failure to become fully operational once launched. Delays in the production or launch of a satellite or the complete or partial loss of a satellite, in-orbit or during launch, could have a material adverse impact on the operation of Hughes’ businesses. Hughes has, in the past, experienced technical anomalies on some of its satellites. Service interruptions caused by anomalies, depending on their severity, could result in claims by affected customers for termination of their transponder agreements, cancellation of other service contracts or the loss of customers.

21

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

Hughes uses in-orbit and launch insurance to mitigate the potential financial impact of satellite fleet in-orbit and launch failures unless the premium costs are considered uneconomic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites and does not compensate for business interruption or loss of future revenues or customers. Hughes relies on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the effects of satellite failure on its ability to provide service. Where insurance costs related to satellite components or systems that have suffered anomalies in the past are prohibitive, Hughes’ insurance policies contain coverage exclusions and Hughes is not insured for certain other satellites. The book value of satellites that were insured with coverage exclusions amounted to $617.5 million and the book value of the satellites that were not insured was $1,270.5 million at September 30, 2003. The uninsured amount includes the value of five PanAmSat satellites for which policies were not renewed in May 2003.

On February 19, 2003, PanAmSat filed proofs of loss under the insurance policies for two of its Boeing model 702 spacecraft, Galaxy 11 and PAS-1R, for constructive total losses based on degradation of the solar panels. Service to existing customers has not been affected, and PanAmSat expects that both of these satellites will continue to serve these existing customers until PanAmSat replaces or supplements them with new satellites. PanAmSat has not determined when these satellites will be replaced or supplemented but does not currently expect to begin construction on replacement satellites before the second half of 2004. The insurance policies for Galaxy 11 and PAS-1R are in the amounts of approximately $289 million and $345 million, respectively, and both include a salvage provision for PanAmSat to share 10% of future revenues from these satellites with the insurers if the respective proof of loss is accepted. PanAmSat cannot provide assurance that these proofs of loss will be accepted by the insurers or, if accepted, how much PanAmSat will receive. PanAmSat is working with the satellite manufacturer to determine the long-term implications to the satellites of this degradation and will continue to assess the operational impact. At this time, based upon all information currently available to PanAmSat, as well as planned modifications to the operation of the satellites in order to maximize revenue generation, PanAmSat currently expects to operate these satellites for the duration of their estimated useful lives, although a portion of the transponder capacity on these satellites will not be useable during such time. Hughes also currently believes that the net book values of these satellites are fully recoverable and does not expect a material impact on 2003 revenues as a result of the difficulties with these two satellites.

PanAmSat and Boeing have determined that the secondary xenon ion propulsion systems (“XIPS”) on two of PanAmSat’s seven Boeing model 601 HP spacecraft, Galaxy 4R and PAS-6B, are no longer available as a result of failures experienced during June and July 2003, respectively. The primary XIPS on each of these satellites had previously ceased working, and both satellites are operating as designed on their completely independent backup bi-propellant propulsion systems. These satellites are backed up by in-orbit satellites with immediately available capacity. The remaining useful lives on Galaxy 4R and PAS-6B are now estimated to be approximately 3.5 years and 4.9 years, respectively, from the date of each satellites’ anomaly, based on the bi-propellant fuel on-board. Accordingly, PanAmSat accelerated depreciation of these satellites beginning in the third quarter of 2003 to coincide with their revised estimated useful lives. The additional depreciation expense resulting from this change in estimated useful lives was $9.2 million in the third quarter of 2003.

PanAmSat has determined that the net book value and its investments in sales-type leases on these two satellites are fully recoverable. On July 31, 2003, PanAmSat filed a proof of loss under the insurance policy for Galaxy 4R in the amount of $169 million, subject to a salvage provision providing

22

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)

for PanAmSat to share a portion of the revenues with the insurers. As of September 30, 2003, PanAmSat reached an agreement with all but one of the insurers representing, in the aggregate, approximately 83% of the insurance coverage on the satellite. As a result, PanAmSat recorded an insurance claim receivable of $102.6 million, related to the 83% settlement, reflecting the insurance policy amount for these insurers less a negotiated settlement for salvage. PanAmSat received these proceeds during the fourth quarter of 2003. In October 2003, PanAmSat commenced arbitration proceedings against the last insurance provider over a disputed portion of the remaining claim. PanAmSat cannot provide assurance that it will be successful in these proceedings or, if successful, how much will be received. PanAmSat is developing plans to replace Galaxy 4R prior to the end of its useful life using anticipated insurance proceeds and a spare launch service contract that was purchased previously. Once a settlement is reached with the final insurance provider, PanAmSat anticipates that future depreciation on Galaxy 4R will be approximately equal to the depreciation on this satellite before the anomaly occurred. The insurance policy on PAS-6B has an exclusion for XIPS-related anomalies and, accordingly, this was not an insured loss. PanAmSat is working with the customers on PAS-6B to provide a long-term solution for their needs.

The availability and use of any proceeds from the Galaxy 11, PAS-1R and Galaxy 4R insurance claims are restricted by the agreements governing PanAmSat’s debt obligations.

PanAmSat believes that the XIPS problem will not affect revenues over the revised estimated remaining useful lives of Galaxy 4R and PAS-6B. Prior to the end of the useful lives of these two satellites, PanAmSat plans to transition the affected customers to new or existing in-orbit back up satellites with immediately available capacity. As a result of the XIPS failure on PAS-6B, PanAmSat reduced its total backlog by approximately $360 million, as the customers on this satellite are not contractually obligated to use a new or replacement satellite once it is no longer in service.

Two of PanAmSat’s remaining five Boeing model 601 HP satellites have no book value and are no longer in primary customer service. The other three Boeing model 601 HP satellites that PanAmSat operates continue to have XIPS as their primary propulsion system. However, no assurance can be given that PanAmSat will not have further XIPS failures that result in shortened satellite lives or that such failures will be insured if they occur. For these remaining three satellites, the available bi-propellant life ranges from at least 3.6 years to as much as 7.4 years. In addition, PanAmSat has recently launched Galaxy 13, a Boeing model 601 HP satellite undergoing final in-orbit testing which is not yet in operation.

In the first quarter of 2003, PanAmSat and the manufacturer of the Galaxy 8-iR satellite terminated the Galaxy 8-iR satellite construction contract by mutual agreement. In connection with the termination of the construction contract, as of September 30, 2003, PanAmSat had a receivable due from the satellite manufacturer of $69.5 million. Based upon the terms of the agreement with the manufacturer, this receivable is scheduled to be paid in full in December 2003. In addition, PanAmSat has agreed with the Galaxy 8-iR launch vehicle provider to defer the use of the launch to a future satellite. PanAmSat expects to use this launch in early 2006 to replace Galaxy 4R.

Hughes is contingently liable under letters of credit and bonds in the aggregate amount of $65.9 million which were undrawn at September 30, 2003, and DLA LLC has guaranteed $3.0 million of bank debt related to non-consolidated LOC’s, which is due in varying amounts through 2005. Additionally, Raven has claimed that DLA LLC was contractually obligated to repurchase Raven’s 3.98% interest in DLA LLC for $195 million in November 2003. DLA LLC filed a motion with the Bankruptcy Court to

23

HUGHES ELECTRONICS CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (concluded)

reject its obligation under this contract as part of its reorganization proceedings and to subordinate the claims resulting from such rejection to the claims of DLA LLC’s other creditors under the mandatory subordination provisions of Section 510(b) of the Bankruptcy Code. On August 6, 2003, the Bankruptcy Court granted DLA LLC’s motion and determined that these claims should be subordinated. This ruling by the Bankruptcy Court is being appealed by Raven. See Note 9 for additional information regarding DLA LLC’s reorganization.

The Hughes Board of Directors has approved several benefit plans and agreements which contain change-in-control provisions that are designed to provide benefits for the retention of approximately 212 key employees and also to provide benefits in the event of employee lay-offs. Generally, these benefits are only available if a qualified change-in-control of Hughes occurs and, with respect to severance benefits, if an employee subsequently experiences a qualifying termination of employment. In the event of a change-in-control, the retention benefits will be accrued and expensed when earned and the severance benefits will be accrued and expensed when an employee is terminated. A total of up to approximately $105 million for retention benefits will be paid by Hughes, with approximately $57 million paid and expensed at the time of a change-in-control and approximately $44 million paid up to 12 months following the date of a change-in-control. Approximately $4 million in retention benefits were paid on October 3, 2003 pursuant to the underlying benefit plans and agreements. The approximately $44 million paid following the date of a change-in-control will be expensed as earned. In addition, approximately $5 million of known severance payments will be made at the time of closing of the News Corporation transactions. Additional severance benefits to be paid by Hughes to employees will be based upon the decision to layoff such employees, if any, following the date of a change-in-control. In addition, approximately 12.0 million employee stock options (including approximately 2.1 million options held by executive officers and directors of Hughes) will vest upon a qualifying change-in-control and up to an additional 3.7 million employee stock options could vest if employees are laid off within one year following a change-in-control. For purposes of the above benefits and stock options, and under certain other Hughes benefit plans, a successful completion of the News Corporation transactions would qualify as a change-in-control.

Note 13. Subsequent Event

On October 29, 2003, PanAmSat amended its bank facility to provide for the refinancing of its Tranche A Term Loan and Tranche B Term Loan under a new Term Loan B-1 facility with an interest rate of LIBOR plus 2.5% and scheduled annual maturities of principal in varying amounts from 2004 through 2010. As a result of this amendment, the amount of the revolving credit facility, its termination date and the provisions relating to the commitment fee remain unchanged. This amendment also adjusted certain operating covenants under the bank facility to provide greater operational flexibility to PanAmSat.

* * *

24