EXHIBIT 99

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------
(Dollars in Millions)

Consolidated Statements of Operations Data:
Total revenues.................................. $7,287.6 $5,560.3 $3,480.6
Total operating costs and expenses.............. 7,641.7 5,974.8 3,521.7
-------- -------- --------
Operating loss.................................. (354.1) (414.5) (41.1)
Other expenses, net............................. (461.5) (245.5) (62.1)
Income tax benefit.............................. (406.1) (236.9) (142.3)
Minority interests in net losses of
subsidiaries................................... 54.1 32.0 24.4
-------- -------- --------
Income (loss) from continuing operations before
cumulative effect of accounting change......... (355.4) (391.1) 63.5
Income from discontinued operations, net of
taxes.......................................... 36.1 99.8 196.4
Gain on sale of discontinued operations, net of
taxes.......................................... 1,132.3 -- --
Cumulative effect of accounting change, net of
taxes.......................................... -- -- (9.2)
-------- -------- --------
Net income (loss)............................... 813.0 (291.3) 250.7
Adjustment to exclude the effect of GM purchase
accounting..................................... 16.9 21.0 21.0
Preferred stock dividends....................... (97.0) (50.9) --
-------- -------- --------
Earnings (Loss) Used for Computation of
Available Separate Consolidated Net Income
(Loss)......................................... $ 732.9 $ (321.2) $ 271.7
======== ======== ========

- --------
Certain prior year amounts have been reclassified to conform to the 2000
presentation.

IV-19

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

SELECTED SEGMENT DATA

Years Ended December 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
(Dollars in Millions)

Direct-To-Home Broadcast
Total Revenues................................ $ 5,238.0 $ 3,785.0 $ 1,816.1
Operating Loss................................ (557.9) (289.6) (225.8)
EBITDA(1)..................................... (24.5) 22.4 (123.5)
Depreciation and Amortization................. 533.4 312.0 102.3
Segment Assets................................ 10,473.4 9,056.6 2,190.4
Capital Expenditures.......................... 913.5 516.9 230.8
Satellite Services
Total Revenues................................ $ 1,023.6 $ 810.6 $ 767.3
Operating Profit.............................. 356.6 338.3 318.3
Operating Profit Margin....................... 34.8% 41.7% 41.5%
EBITDA(1)..................................... $ 694.0 $ 618.8 $ 553.3
EBITDA Margin(1).............................. 67.8% 76.3% 72.1%
Depreciation and Amortization................. $ 337.4 $ 280.5 $ 235.0
Segment Assets................................ 6,178.4 5,984.7 5,890.5
Capital Expenditures.......................... 449.5 956.4 921.7
Network Systems
Total Revenues................................ $ 1,409.8 $ 1,384.7 $ 1,076.7
Operating Profit (Loss)....................... (63.5) (234.1) 7.1
EBITDA(1)..................................... 0.1 (156.7) 74.0
Depreciation and Amortization................. 63.6 77.4 66.9
Segment Assets................................ 1,789.9 1,167.3 1,299.0
Capital Expenditures.......................... 369.5 175.0 40.0
Eliminations and Other
Total Revenues................................ $ (383.8) $ (420.0) $ (179.5)
Operating Loss................................ (89.3) (229.1) (140.7)
EBITDA(1)..................................... (75.6) (220.1) (131.8)
Depreciation and Amortization................. 13.7 9.0 8.9
Segment Assets................................ 837.6 2,388.4 3,237.5
Capital Expenditures.......................... (16.4) 17.0 136.3
Total
Total Revenues................................ $ 7,287.6 $ 5,560.3 $ 3,480.6
Operating Loss................................ (354.1) (414.5) (41.1)
EBITDA(1)..................................... 594.0 264.4 372.0
EBITDA Margin(1).............................. 8.2% 4.8% 10.7%
Depreciation and Amortization................. $ 948.1 $ 678.9 $ 413.1
Total Assets.................................. 19,279.3 18,597.0 12,617.4
Capital Expenditures.......................... 1,716.1 1,665.3 1,328.8

- --------
Certain prior year amounts have been reclassified to conform to the 2000
presentation.

(1) EBITDA is defined as operating profit (loss), plus depreciation and
amortization. EBITDA is not presented as an alternative measure of
operating results or cash flow from operations, as determined in accordance
with generally accepted accounting principles. Hughes management believes
it is a meaningful measure of performance and is commonly used by other
communications, entertainment and media service providers. EBITDA does not
give effect to cash used for debt service requirements and thus does not
reflect funds available for investment in the business of Hughes, dividends
or other discretionary uses. EBITDA margin is calculated by dividing EBITDA
by total revenues. EBITDA and EBITDA margin as presented herein may not be
comparable to similarly titled measures reported by other companies.

IV-20

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

The following discussion excludes purchase accounting adjustments related to
General Motors' acquisition of Hughes.
This Annual Report may contain certain statements that Hughes believes are,
or may be considered to be, "forward-looking statements," within the meaning of
various provisions of the Securities Act of 1933 and of the Securities Exchange
Act of 1934. These forward-looking statements generally can be identified by use
of statements that include phrases such as we "believe," "expect," "anticipate,"
"intend," "plan," "foresee" or other similar words or phrases. Similarly,
statements that describe our objectives, plans or goals also are forward-looking
statements. All of these forward-looking statements are subject to certain risks
and uncertainties that could cause Hughes' actual results to differ materially
from those contemplated by the relevant forward- looking statement. The
principal important risk factors which could cause actual performance and future
actions to differ materially from forward- looking statements made herein
include economic conditions, product demand and market acceptance, government
action, local political or economic developments in or affecting countries where
Hughes has operations, ability to obtain export licenses, competition, ability
to achieve cost reductions, ability to timely perform material contracts,
technological risk, limitations on access to distribution channels, the success
and timeliness of satellite launches, in-orbit performance of satellites,
ability of customers to obtain financing, Hughes' ability to access capital to
maintain its financial flexibility and the effects of any strategic transactions
involving Hughes that GM may enter into as noted below.

Additionally, the in-orbit satellites of Hughes and its 81% owned subsidiary,
PanAmSat Corporation, 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. With respect to both in-orbit and launch problems,
insurance carried by Hughes and PanAmSat generally does not compensate for
business interruption or loss of future revenues or customers. Hughes has, in
the past, experienced technical anomalies on some of its satellites. Service
interruptions caused by these 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 other
customers.

Readers are urged to consider these factors carefully in evaluating the
forward-looking statements. The forward-looking statements included in this
Annual Report are made only as of the date of this Annual Report and Hughes
undertakes no obligation to publicly update these forward-looking statements to
reflect subsequent events or circumstances.

Due to rapid consolidation in the media and telecommunications industries,
General Motors Corporation ("GM"), which is the parent company of Hughes, has
announced that it is now considering alternative strategic transactions
involving Hughes and other participants in those industries. Any such
transaction might involve the separation of Hughes from GM. GM's objective in
this effort is to maximize the enterprise value of Hughes for the long-term
benefit of the holders of GM's Class H common stock and GM $1 2/3 par value
common stock through a structure that maintains the financial strength of GM. No
assurance can be given that any transaction will be agreed upon with any party
or that other conditions, including any stockholder or regulatory approvals will
be satisfied.

On June 6, 2000, the GM Board declared a three-for-one stock split of the GM
Class H common stock. The stock split was in the form of a 200% stock dividend,
paid on June 30, 2000 to GM Class H common stockholders of record on June 13,
2000. As a result, the numbers of shares of GM Class H common stock presented
for all periods have been adjusted to reflect the stock split, unless otherwise
noted.

IV-21

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

General

Business Overview

The continuing operations of Hughes are comprised of the following segments:
Direct-To-Home Broadcast, Satellite Services and Network Systems. The satellite
systems manufacturing businesses ("Satellite Businesses"), which Hughes sold to
The Boeing Company ("Boeing") on October 6, 2000, are reported as discontinued
operations for all years presented. This transaction is discussed more fully
below in "Liquidity and Capital Resources--Acquisitions, Investments and
Divestitures."

The Direct-To-Home Broadcast segment consists primarily of the United States
and Latin America DIRECTV businesses, which provide digital multi- channel
entertainment services. The DIRECTV U.S. operations were significantly affected
during 1999 with Hughes' acquisition of the direct broadcast satellite
medium-power business of PRIMESTAR in April 1999 and Hughes' acquisition of
United States Satellite Broadcasting Company, Inc. ("USSB"), a provider of
premium subscription programming services, in May 1999. DIRECTV transitioned a
total of about 1.5 million of the 2.3 million PRIMESTAR subscribers acquired
through the shut-down of the business at September 30, 2000. As a result of the
USSB acquisition, Hughes acquired the rights to distribute 25 channels of video
programming, including premium networks such as HBO(R), Showtime(R), Cinemax(R)
and The Movie Channel(R), which are now being offered to DIRECTV's subscribers.
The results of operations for PRIMESTAR and USSB have been included in Hughes'
financial information since their dates of acquisition. See Note 17 to the
consolidated financial statements and "Liquidity and Capital
Resources--Acquisitions, Investments and Divestitures," below, for further
discussion of these transactions.

In the fourth quarter of 1999, DIRECTV U.S. began providing local broadcast
network services to its subscribers and as of December 31, 2000 was offering
those services in 41 U.S. markets representing over 60 million households or 60%
of television households.

The Latin America DIRECTV businesses are comprised of DIRECTV Latin America,
LLC ("DLA"), Hughes' 77.8% owned subsidiary that provides DIRECTV services in
Latin America and the Caribbean Basin; SurFin Ltd. ("SurFin"), a company 75%
owned by Hughes, that provides financing of subscriber receiver equipment to
certain DLA operating companies; Grupo Galaxy Mexicana, S.R.L. de C.V. ("GGM"),
the exclusive distributor of DIRECTV in Mexico, which was acquired by Hughes in
February 1999; and Galaxy Brasil, Ltda. ("GLB"), the exclusive distributor of
DIRECTV in Brazil, which was acquired by DLA in July 1999. The results of
operations for SurFin, GGM, and GLB have been included in Hughes' financial
information since their dates of acquisition. See Note 17 to the consolidated
financial statements and "Liquidity and Capital Resources-- Acquisitions,
Investments and Divestitures," below, for further discussion of these
transactions.

Also included as part of the non-operating results of the Direct-To-Home
Broadcast segment is DIRECTV Japan Management, Inc., DIRECTV Japan, Inc., and
certain related companies (collectively "DIRECTV Japan"), Hughes affiliates that
provided DIRECTV services in Japan. On March 1, 2000, Hughes announced that
DIRECTV Japan's operations would be discontinued. DIRECTV Japan ceased
broadcasting on September 30, 2000. See Note 17 to the consolidated financial
statements and "Liquidity and Capital Resources--Acquisitions, Investments and
Divestitures," below, for further discussion.

The Satellite Services segment consists of PanAmSat, Hughes' 81% owned
subsidiary. PanAmSat provides satellite services to its customers primarily
through long-term operating lease contracts for the full or partial use of
satellite transponder capacity. During the first quarter of 2000, PanAmSat
introduced NET-36(TM) to provide satellite-based Internet broadcast services.
These services leverage PanAmSat's fleet of satellites to ensure that high-
speed Internet subscribers receive digital and streaming media using PanAmSat
satellites and servers while avoiding Internet congestion that would otherwise
diminish video fidelity. PanAmSat expects to begin generating revenues from the
service in 2001.

IV-22

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

The Network Systems segment consists of Hughes Network Systems ("HNS"), which
is a provider of satellite-based private business networks and broadband
Internet access, and a supplier of DIRECTV(TM) receiving equipment (set-top
boxes and dishes). In the fourth quarter of 2000, HNS added two-way capabilities
to its nationwide high-speed satellite Internet service, DirecPC(R). Offering
"always-on" capability, the new two-way high-speed satellite service allows
consumers, who have purchased the necessary hardware and service, to completely
bypass the dial-up telephone network when accessing the Internet. In January
2000, Hughes announced the discontinuation of its mobile cellular and narrowband
local loop product lines at HNS. As a result of this decision, HNS recorded a
fourth quarter 1999 pre-tax charge to continuing operations of $272.1 million.
The charge represents the write-off of receivables and inventories, licenses,
software and equipment with no alternative use.

Satellite Fleet

Hughes had a fleet of 25 satellites, five owned by DIRECTV and 20 owned and
operated by PanAmSat. Hughes' satellite fleet was expanded in the first quarter
of 2000 with PanAmSat's launch and commencement of service of the Galaxy XR
satellite for Alaska's General Communications, Inc., Disney and other customers.
In the second quarter of 2000, PanAmSat commenced service of the Galaxy XI
satellite, which provides expansion and backup services for PanAmSat's Galaxy(R)
cable neighborhood customers, and successfully launched Galaxy IV-R, a
replacement satellite for Galaxy IV. In the third quarter of 2000, PanAmSat
successfully launched PAS-9, which delivers premium broadcast, Internet and data
services throughout North and South America, the Caribbean and Europe. In the
fourth quarter of 2000, PanAmSat successfully launched PAS-1R, which offers
expanded and enhanced video and data broadcasting as well as broadband Internet
services throughout the Americas, the Caribbean, Europe and Africa. Also during
2000, PanAmSat completed the planned retirement of its SBS-4 and SBS-5
satellites.

PanAmSat expects to add additional satellites as part of its comprehensive
satellite expansion and restoration plan. The additional satellites are intended
to meet the expected demand for additional satellite capacity, replace capacity
affected by satellite anomalies, and provide added backup to existing capacity.
In connection with this plan, five satellites have been successfully launched,
with an additional three satellites now under construction. Two of these
satellites will be launched in 2001 and one in 2002.

DIRECTV U.S.' 4S satellite, a high-power spot-beam satellite, is currently
under construction and is expected to be launched in October 2001. DIRECTV
expects to use DIRECTV 4S to provide additional capacity for new local channel
service or other new services beginning in 2002. Also, the DIRECTV 5 satellite,
a high-power satellite acquired from Tempo Satellite, Inc., is expected to be
launched in mid-2001 as a replacement to DIRECTV 6, which will then serve as a
back-up.

Results of Operations

2000 compared to 1999

Overall

Revenues. Revenues increased 31.1% to $7,287.6 million in 2000 compared with
$5,560.3 million in 1999. The increased revenues resulted primarily from the
Direct-To-Home Broadcast segment, which reported $1,453.0 million of higher
revenues over 1999, and the Satellite Services segment, which reported $213.0
million of additional revenues from 1999. The higher revenues from the
Direct-To-Home Broadcast segment resulted from the addition of about 2.3 million
net new subscribers in the United States and Latin America since December 31,
1999 and added revenues from the PRIMESTAR By DIRECTV and premium channel
services. The higher revenues from the Satellite Services segment resulted
primarily from outright sales and sales-type lease transactions executed during
2000.

IV-23

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Operating Costs and Expenses. Operating costs and expenses increased to
$7,641.7 million in 2000 from $5,974.8 million in 1999. Broadcast programming
and other costs increased by $773.8 million during 2000 due to higher costs at
the Direct-To-Home Broadcast segment, resulting from the increase in subscribers
and added costs for the premium channel services, and costs associated with the
outright sales and sales-type leases at the Satellite Services segment. Costs of
products sold decreased by $146.5 million in 2000 from 1999 mainly due to higher
1999 costs, which included a write-off of $91.5 million of inventory associated
with the discontinuation of certain narrowband wireless product lines and the
completion of several contracts at the Network Systems segment. Selling, general
and administrative expenses increased by $770.4 million in 2000 from 1999 due
primarily to higher marketing costs at the Direct-To-Home Broadcast segment
resulting from increased subscriber growth in both the United States and Latin
America, partially offset by a 1999 charge of $180.6 million at the Network
Systems segment resulting from the write-off of receivables, licenses and
equipment associated with the discontinuation of certain narrowband wireless
product lines. Depreciation and amortization increased by $269.2 million in 2000
over 1999 due primarily to 1999 acquisitions, discussed more fully in "Liquidity
and Capital Resources-- Acquisitions, Investments and Divestitures."

EBITDA. EBITDA is defined as operating profit (loss), plus depreciation and
amortization. EBITDA is not presented as an alternative measure of operating
results or cash flow from operations, as determined in accordance with generally
accepted accounting principles. Hughes management believes it is a meaningful
measure of performance and is commonly used by other communications,
entertainment and media service providers. EBITDA does not give effect to cash
used for debt service requirements and thus does not reflect funds available for
investment in the business of Hughes, dividends or other discretionary uses.
EBITDA margin is calculated by dividing EBITDA by total revenues. EBITDA and
EBITDA margin as presented herein may not be comparable to similarly titled
measures reported by other companies.

EBITDA for 2000 was $594.0 million and EBITDA margin was 8.2%, compared to
EBITDA of $264.4 million and EBITDA margin of 4.8% for 1999. The large change
resulted from the Network Systems segment, which experienced slightly positive
EBITDA in 2000 compared to a large negative EBITDA in 1999 due to the $272.1
million charge in 1999 associated with the discontinuation of certain narrowband
wireless product lines; higher EBITDA at the Satellite Services segment due to
the increased outright sales and sale-type lease activity; partially offset by
the Direct-To-Home Broadcast segment's EBITDA loss in 2000 compared to positive
EBITDA for 1999 that resulted from increased losses at DIRECTV Latin America.
The higher EBITDA margin in 2000 was mainly attributable to the 1999 EBITDA
margin being negatively affected by the charge for the discontinuation of
certain narrowband wireless product lines. The EBITDA margin for 2000 was
negatively affected by increased losses at the Direct-To-Home Broadcast segment
and lower margins associated with the Satellite Service segment's outright sales
and sales-type leases.

Operating Loss. Hughes' operating loss was $354.1 million in 2000, compared
to $414.5 million in 1999. This decrease resulted from the improvement in
EBITDA, which more than offset increased depreciation and amortization expense.

Interest Income and Expense. Interest income increased to $49.3 million in
2000 compared to $27.0 million in 1999 due to an increase in cash and cash
equivalents that resulted from the sale of the Satellite Businesses. Interest
expense increased to $218.2 million in 2000 from $122.7 million in 1999. This
increase primarily resulted from higher average outstanding borrowings and a
full year of interest expense associated with liabilities for above-market
programming contracts assumed in the acquisitions of PRIMESTAR and USSB. Changes
in cash and cash equivalents and debt are discussed in more detail below under
"Liquidity and Capital Resources."

Other, Net. Other, net increased to a net expense of $292.6 million in 2000
from a net expense of $149.8 million in 1999. The net expense in 2000 included
$164.2 million of equity method losses and $128.4 million of costs related to
the exit of the DIRECTV Japan business, which is discussed below in

IV-24

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

"Liquidity and Capital Resources--Acquisitions, Investments and Divestitures."
The net expense for 1999 included $189.2 million of equity method losses offset
by a gain of $39.4 million from the sale of Hughes Software Systems Private
Limited ("HSS") securities. The change in equity method losses in 2000 compared
to 1999 resulted from lower losses at DIRECTV Japan due to the shutdown of the
business at September 30, 2000.

Income Taxes. Hughes recognized a tax benefit of $406.1 million in 2000
compared to $236.9 million in 1999. The 2000 tax benefit reflects the tax
benefit associated with the write-off of Hughes' historical investment in
DIRECTV Japan and the higher pre-tax losses compared to 1999.

Loss from Continuing Operations. Hughes reported a loss from continuing
operations of $355.4 million in 2000, compared to $391.1 million in 1999.

Discontinued Operations. Revenues for the Satellite Businesses decreased to
$1,669.3 million in 2000 from $2,240.7 million in 1999. Revenues, excluding
intercompany transactions, were $1,260.1 million in 2000 compared to $1,780.4
million in 1999. The 1999 results include a full year of revenues, while 2000
only includes revenues through October 6, 2000, the date of sale.

The Satellite Businesses reported operating profit of $87.6 million in 2000
compared to $152.5 million in 1999. Operating profit, excluding intercompany
transactions, amounted to $59.3 million in 2000 compared to $142.7 million in
1999. The 1999 results included a one-time pre-tax charge of $178.0 million
before intercompany transactions and $125.0 million after intercompany
transactions that resulted from increased development costs and schedule delays
on several new product lines, a one-time pre-tax charge of $81.0 million
resulting from the termination of a customer contract and decreased activity
associated with ICO Global Communications (Operations) Ltd. ("ICO"), partially
offset by a $154.6 million pre-tax gain related to the settlement of a patent
infringement case. Additionally, the 1999 results include a full year of
operating results, while 2000 only includes operating results through October 6,
2000, the date of sale.

Income from discontinued operations, net of taxes, was $36.1 million in 2000
compared to $99.8 million in 1999.

Accounting Change. In September 1999, the Financial Accounting Standards
Board ("FASB") issued Emerging Issues Task Force Issue 99-10 ("EITF 99-10"),
Percentage Used to Determine the Amount of Equity Method Losses. EITF 99-10
addresses the percentage of ownership that should be used to compute equity
method losses when the investment has been reduced to zero and the investor
holds other securities of the investee. EITF 99-10 requires that equity method
losses should not be recognized solely on the percentage of common stock owned;
rather, an entity-wide approach should be adopted. Under such an approach,
equity method losses must be recognized based on the ownership level that
includes other equity securities (e.g., preferred stock) and loans/advances to
the investee or based on the change in the investor's claim on the investee's
book value. Hughes adopted EITF 99-10 during the third quarter of 1999 which
resulted in Hughes recording a higher percentage of DIRECTV Japan's losses
subsequent to the effective date of September 23, 1999. The unfavorable impact
of adopting EITF 99-10 was $39.0 million after-tax.

Direct-To-Home Broadcast Segment

Direct-To-Home Broadcast segment revenues increased 38.4% to $5,238.0 million
in 2000 from $3,785.0 million in 1999. The Direct-To-Home Broadcast segment had
negative EBITDA of $24.5 million in 2000 compared with positive EBITDA of $22.4
million in 1999. The operating loss for the segment increased to $557.9 million
in 2000 from $289.6 million in 1999.

United States. The DIRECTV U.S. businesses were the biggest contributors to
the segment's revenue growth with revenues of $4,694 million in 2000, a 38%
increase over 1999 revenues of $3,405 million. The large increase in revenues
resulted primarily from an increased number of DIRECTV subscribers and added
revenues from PRIMESTAR By DIRECTV and premium channel services. As of
December 31, 2000, high-power

IV-25

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

DIRECTV subscribers totaled approximately 9.5 million compared to about 6.7
million at December 31, 1999. In addition to the high-power subscribers, there
were also 1.3 million PRIMESTAR By DIRECTV medium-power subscribers at December
31, 1999. The large increase in high-power subscribers resulted from the
addition of about 1.8 million net new subscribers to the DIRECTV service in
2000, a 14% growth rate over the 1.6 million net new subscribers added in 1999,
and the conversion of about 1 million PRIMESTAR By DIRECTV medium-power
subscribers to the high-power DIRECTV service in 2000. DIRECTV shut down the
PRIMESTAR By DIRECTV medium-power service on September 30, 2000. Average monthly
programming revenue per subscriber for the high-power business was $59 and $58
at December 31, 2000 and 1999, respectively.

EBITDA was $151 million in 2000 compared to $150 million in 1999. The
operating loss in 2000 for the DIRECTV U.S. businesses was $244 million compared
to $99 million in 1999. The slight increase in EBITDA was due to the increased
revenues discussed above offset by increased subscriber acquisition and
programming costs associated with the record subscriber growth. The increased
operating loss was principally due to increased amortization of goodwill and
intangibles that resulted from the PRIMESTAR and USSB acquisitions.

Latin America. Revenues for the Latin America DIRECTV businesses increased
72% to $541 million in 2000 from $315 million in 1999. The increase in revenues
reflects an increase in subscribers and the consolidation of the GLB business.
Subscribers grew to 1.3 million at December 31, 2000 compared to 0.8 million in
1999. Latin America DIRECTV added 501,000 net new subscribers in 2000, a 56.6%
increase over the 320,000 net new subscribers added in 1999. Average monthly
programming revenue per subscriber was $36 for 2000 and 1999.

EBITDA was a negative $171 million in 2000 compared to negative EDITDA of
$106 million in 1999. The change in EBITDA resulted primarily from a full year
of GLB losses in 2000 and higher marketing costs associated with the record
subscriber growth, partially offset by the increased revenues discussed above.
The Latin America DIRECTV businesses incurred an operating loss of $309 million
in 2000 compared to an operating loss of $169 million in 1999. The increased
operating loss resulted from the decline in EBITDA and higher depreciation of
fixed assets and a full year of goodwill amortization that resulted from the GLB
transaction.

Satellite Services Segment

Revenues for the Satellite Services segment in 2000 increased 26.3% to
$1,023.6 million from $810.6 million in 1999. This increase was primarily due to
increased revenues associated with outright sales and sales-type lease
transactions executed during 2000. Revenues associated with outright sales and
sales-type leases of transponders were $243.3 million for 2000 as compared to
$23.1 million for 1999. Revenues from operating leases of transponders,
satellite services and other were 76.2% of total 2000 revenues and decreased by
0.9% to $780.3 million from $787.5 million in 1999.

EBITDA in 2000 was $694.0 million, a 12.2% increase over EBITDA of $618.8
million in 1999. The higher EBITDA was due to the increased revenues discussed
above, partially offset by an increase in direct operating and selling, general
and administrative expenses that resulted from the continued satellite fleet
expansion and costs associated with the NET-36 initiative. EBITDA margin for
2000 was 67.8% compared to 76.3% in 1999. The decline in EBITDA margin was due
to lower margins associated with the increased outright sales and sales- type
lease transactions and the higher direct operating and selling, general and
administrative expenses. Excluding the outright sales and sales-type lease
transactions, EBITDA for 2000 was $536.5 million or 68.8% of corresponding
revenues. Operating profit was $356.6 million for 2000, an increase of $18.3
million over 1999. The higher operating profit resulted from the increase in
EBITDA partially offset by higher depreciation expense related to additional
satellites placed into service since 1999.

Backlog for the Satellite Services segment, which consists primarily of
operating leases on satellite transponders, was about $6.0 billion in 2000
compared to about $6.1 billion in 1999.

IV-26

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Network Systems Segment

Revenues for the Network Systems segment increased 1.8% to $1,409.8 million
in 2000 from $1,384.7 million in 1999. The increase in revenues primarily
resulted from greater shipments of DIRECTV receiver equipment, which totaled
about 3.0 million units in 2000, compared to about 2.1 million units in 1999.
This increase in revenues was partially offset by lower revenues from the
discontinuation of certain narrowband wireless product lines and lower
manufacturing subsidies on DIRECTV receiver equipment.

The Network Systems segment reported EBITDA of $0.1 million for 2000 compared
to negative EBITDA of $156.7 million in 1999. The Network Systems segment had an
operating loss of $63.5 million in 2000 compared to $234.1 million in 1999. The
1999 results included a $272.1 million charge for the discontinuation of certain
narrowband wireless product lines. Excluding this charge, the Network Systems
segment recorded 1999 EBITDA of $115.4 million and operating profit of $38.0
million. The change in EBITDA and operating results in 2000 from 1999, excluding
the $272.1 million charge, resulted from the lower manufacturing subsidies and
increased costs associated with the upcoming launch of new DirecPC services,
including AOL Plus Powered by DirecPC.

Backlog for the Network Systems segment, which consists primarily of private
business networks and satellite-based mobile telephony equipment orders, was
about $1.2 billion in 2000 compared to about $1.0 billion in 1999.

Eliminations and Other

The elimination of revenues decreased to $383.8 million in 2000 from $420.0
million in 1999 due primarily to the termination of manufacturing subsidies paid
by DIRECTV to HNS during the third quarter of 2000 and decreased intercompany
revenues due to the sale of Hughes' Satellite Businesses.

Operating losses from "eliminations and other" decreased to $89.3 million in
2000 from $229.1 million in 1999 due primarily to decreased corporate
expenditures, primarily for employee benefits, and lower margins on intercompany
sales.

1999 compared to 1998

Overall

Revenues. Revenues increased 59.8% to $5,560.3 million in 1999 from $3,480.6
million in 1998. The Direct-To-Home Broadcast segment was the primary
contributor to the increase in revenues resulting from record subscriber growth
in both the U.S. and Latin America DIRECTV businesses and from additional
revenues for the U.S. DIRECTV businesses from the PRIMESTAR and USSB
acquisitions. Also contributing to the increase in revenues were increased sales
of DIRECTV receiver equipment at the Network Systems segment.

Operating Costs and Expenses. Operating costs and expenses increased to
$5,974.8 million in 1999 from $3,521.7 million in 1998. Broadcast programming
and other costs increased $827.6 million during 1999 due primarily to the added
costs for the PRIMESTAR By DIRECTV and premium channel services. Cost of
products sold increased $343.6 million in 1999 from 1998 due to the increased
sales of DIRECTV receiver equipment discussed above and the write-off of $91.5
million of inventory associated with the discontinued wireless product lines at
the Network Systems segment. Selling, general and administrative expenses
increased by $1,016.1 million in 1999 from 1998 due primarily to increased costs
at the Direct-To-Home Broadcast segment for subscriber acquisition costs and
added costs for the PRIMESTAR By DIRECTV business and a charge of $180.6 million
at the Network Systems segment resulting from the write-off of receivables,
licenses and equipment associated with the discontinued wireless product lines.
Depreciation and amortization increased $265.8 million in 1999 over 1998

IV-27

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

due primarily to added goodwill, intangibles and property, plant and equipment
resulting from acquisitions and additions to PanAmSat's satellite fleet.

EBITDA decreased to $264.4 million in 1999 from $372.0 million in 1998. The
decrease was attributable to charges incurred at the Network Systems segment
which included the $272.1 million charge related to the discontinued wireless
product lines and a provision of $34.5 million for estimated losses associated
with the bankruptcy filings of two Network Systems segment customers. These
declines were offset by an increase in EBITDA of $145.9 million at the Direct-
To-Home Broadcast segment and $65.5 million at the Satellite Services segment.

Operating Loss. Hughes' operating loss was $414.5 million in 1999 compared to
$41.1 million in 1998. The increased operating loss resulted from the decrease
in EBITDA, discussed above, and higher depreciation and amortization at the
Direct-To-Home Broadcast segment resulting primarily from goodwill from recent
acquisitions.

Interest Income and Expense. Interest income decreased to $27.0 million in
1999 compared to $112.3 million in 1998. This change resulted from a decline in
cash and cash equivalents. Interest expense increased to $122.7 million in 1999
from $17.5 million in 1998. The increase in interest expense resulted from an
increase in debt and interest associated with liabilities for above- market
programming contracts assumed in the acquisitions of PRIMESTAR and USSB. The
changes in cash and cash equivalents and debt are discussed in more detail below
under "Liquidity and Capital Resources."

Other, Net. Other, net declined to a net expense of $149.8 million in 1999
from a net expense of $156.9 million in 1998. Other, net for 1999 included
losses from equity method investments of $189.2 million of which $134.9 million
related to DIRECTV Japan, offset by the gain of $39.4 million from the sale of
securities in the HSS initial public offering. Other, net for 1998 included
losses from equity method investments of $128.3 million, of which $83.2 million
related to DIRECTV Japan, and a write-down of about $35.7 million for
investments in two companies that filed for bankruptcy.

Income Taxes. Hughes recognized an income tax benefit of $236.9 million in
1999 compared to $142.3 million in 1998. The higher tax benefit in 1999 resulted
primarily from higher losses from continuing operations. The income tax benefit
in 1998 included a favorable adjustment relating to an agreement with the
Internal Revenue Service regarding the treatment of research and experimentation
credits for the years 1983 through 1995.

Income (Loss) From Continuing Operations. Hughes reported a loss from
continuing operations in 1999 of $391.1 million compared with 1998 income from
continuing operations of $63.5 million.

Discontinued Operations. Revenues for the Satellite Businesses decreased to
$2,240.7 million for 1999 from revenues of $2,820.4 million for 1998. Revenues,
excluding intercompany transactions, were $1,780.4 million for 1999 and $2,483.3
million for 1998. The decrease in revenues was principally due to contract
revenue adjustments and delayed revenue recognition that resulted from increased
development costs and schedule delays on several new product lines and decreased
activity associated with the contract with ICO.

The Satellite Businesses reported an operating profit of $152.5 million for
1999 compared to operating profit of $285.0 million for 1998. The reported
operating profit, excluding intercompany transactions, amounted to $142.7
million for 1999 compared to operating profit of $294.0 million for 1998. The
1999 operating profit included a pre-tax charge of $125.0 million, after
intercompany transactions, that resulted from increased development costs and
schedule delays on several new product lines, a one-time pre-tax charge of $81.0
million resulting from the termination of a customer contract and decreased
activity associated with a contract with ICO, partially offset by a $154.6
million pre-tax gain related to the settlement of a patent infringement case.

IV-28

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Hughes had maintained a lawsuit against the U.S. government since September
1973 regarding the U.S. government's infringement and use of a Hughes patent
covering "Velocity Control and Orientation of a Spin Stabilized Body,"
principally satellites (the "Williams patent"). On April 7, 1998, the U.S. Court
of Appeals for the Federal Circuit reaffirmed earlier decisions in the Williams
patent case, including an award of $114.0 million in damages, plus interest. In
March 1999, Hughes received a payment from the U.S. government as a final
settlement of the suit and as a result, recognized as income from discontinued
operations a pre-tax gain of $154.6 million.

Accounting Change. In 1998, Hughes adopted American Institute of Certified
Public Accountants Statement of Position ("SOP") 98-5, Reporting on the Costs of
Start-Up Activities. SOP 98-5 required that all start-up costs previously
capitalized be written off and recognized as a cumulative effect of accounting
change, net of taxes, as of the beginning of the year of adoption. On a
prospective basis, these types of costs are required to be expensed as incurred.
The unfavorable cumulative effect of this accounting change at January 1, 1998
was $9.2 million after-tax.

Direct-To-Home Broadcast Segment

Revenues for the Direct-To-Home Broadcast segment more than doubled to
$3,785.0 million in 1999 from $1,816.1 million in 1998. Operating losses
increased to $289.6 million in 1999 from $225.8 million in 1998 while EBITDA
increased to $22.4 million in 1999 from negative $123.5 million in 1998.

United States. The DIRECTV U.S. businesses reported revenues of $3,405
million in 1999, more than twice the reported revenues of $1,604 million in
1998. The increase in revenues resulted from an increase in subscribers for the
high-power business and added revenues from PRIMESTAR By DIRECTV and premium
channel services. Subscribers for the high-power DIRECTV business increased by
2.2 million subscribers (1.6 million excluding PRIMESTAR conversions and
incremental subscribers from USSB) during 1999 to 6.7 million subscribers at the
end of 1999. Including PRIMESTAR By DIRECTV subscribers there were over 8
million subscribers at the end of 1999. Average monthly revenue per subscriber
for the high-power business increased to $58 at December 31, 1999 from $46 at
December 31, 1998. This increase resulted primarily from the addition of the
premium channel services in April 1999.

EBITDA was $150 million in 1999 compared to negative $18 million in 1998. The
change in EBITDA resulted from the increased revenues that were partially offset
by increased subscriber acquisition costs and added operating costs from the
PRIMESTAR By DIRECTV and premium channel services. The DIRECTV U.S. businesses
reported an operating loss of $99 million in 1999 compared to $100 million in
1998. The decreased operating loss resulted from increased EBITDA which was
generally offset by increased depreciation and amortization that resulted from
the PRIMESTAR and USSB acquisitions.

Latin America. Revenues for the Latin America DIRECTV businesses increased
82% to $315 million in 1999 from $173 million in 1998. The increase in revenues
reflects an increase in subscribers and the consolidation of the GGM, GLB and
SurFin businesses. Subscribers grew to 0.8 million at the end of 1999 from 0.5
million at the end of 1998. Average monthly revenue per subscriber decreased to
$36 in 1999 from $41 in 1998. The decline in average revenue per subscriber
resulted from currency devaluations in Brazil.

EBITDA was negative $106 million in 1999 compared to negative $93 million in
1998. The change in EBITDA resulted primarily from additional losses from the
consolidation of GGM and GLB. The Latin America DIRECTV businesses incurred an
operating loss of $169 million in 1999 compared to $113 million in 1998. The
increased operating loss resulted from the decline in EBITDA and higher
depreciation and amortization that resulted from the GGM, GLB and SurFin
transactions.

IV-29

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Satellite Services Segment

Revenues for the Satellite Services segment increased to $810.6 million in
1999 from $767.3 million in 1998. This increase was primarily due to increased
operating lease revenues, partially offset by a decrease in sales and sales-
type lease revenues. Operating lease revenues, which reflect long-term satellite
service agreements from which PanAmSat derives revenues over the duration of the
contract, were 97.2% of total 1999 revenues and increased by 6.9% to $787.5
million from $736.7 million in 1998. Total sales and sales-type lease revenues
were $23.1 million for 1999 compared to $30.6 million for 1998.

EBITDA was $618.8 million in 1999 compared to $553.3 million in 1998. The
increase was principally due to higher revenue that resulted from the
commencement of new service agreements on additional satellites placed into
service in 1999 and lower leaseback expense resulting from the exercise of
certain early buy-out opportunities under sale-leaseback agreements during 1999.
Operating profit was $338.3 million in 1999, an increase of $20.0 million over
1998. The increase resulted from the higher EBITDA in 1999 offset by increased
depreciation expense resulting from increased capital from additions to the
satellite fleet.

Backlog for the Satellite Services segment, which consists primarily of
operating leases on satellite transponders, was about $6.1 billion in 1999
compared to about $6.3 billion in 1998.

Network Systems Segment

Revenues for the Network Systems segment increased 28.6% to $1,384.7 million
in 1999 from $1,076.7 million in 1998. The higher revenues resulted from greater
shipments of DIRECTV receiver equipment. Shipments of DIRECTV receiver equipment
totaled about 2.1 million units in 1999 compared to about 0.7 million units in
1998.

The Network Systems segment reported negative EBITDA of $156.7 million in
1999 compared to EBITDA of $74.0 million in 1998. The Network Systems segment
incurred an operating loss of $234.1 million in 1999 compared to operating
profit of $7.1 million in 1998. The decline in EBITDA and operating profit
resulted from the $272.1 million charge related to the discontinuation of the
wireless product lines, offset in part by the increased sales of DIRECTV
receiver equipment.

Backlog for the Network Systems segment, which consists primarily of private
business networks and satellite-based mobile telephony equipment orders, was
about $1.0 billion in 1999 compared to about $1.3 billion in 1998.

Eliminations and Other

The elimination of revenues increased to $420.0 million in 1999 from $179.5
million in 1998 due primarily to increased manufacturing subsidies received by
the Network Systems segment from the DIRECTV businesses which resulted from the
increased DIRECTV receiver equipment shipments.

Operating losses for "eliminations and other" increased to $229.1 million in
1999 from $140.7 million in 1998. The increase was primarily due to increases in
eliminations of intercompany profit and corporate expenditures. The increased
intercompany profit elimination resulted from the increased intercompany sales
noted above and increased corporate expenditures resulted primarily from higher
pension and other employee costs.

Liquidity and Capital Resources

Cash and cash equivalents were $1,508.1 million at December 31, 2000 compared
to $238.2 million at December 31, 1999. The increase in cash resulted primarily
from cash proceeds received from the sale of the Satellite Businesses, partially
offset by cash used for capital expenditures and the repayment of debt.

IV-30

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Cash provided by operating activities was $1,090.7 million in 2000 compared
to $379.5 million in 1999 and $612.1 million in 1998. The change in 2000
compared from 1999 resulted from $552.7 million of lower cash requirements for
the change in operating assets and liabilities and a $158.5 million of higher
income from continuing operations excluding non-cash adjustments, such as
depreciation and amortization, equity losses on unconsolidated subsidiaries and
the loss resulting from the discontinuation of the wireless product lines. The
change in 1999 from 1998 resulted primarily from increased cash requirements for
working capital, offset by increased income from continuing operations excluding
non-cash adjustments.

Cash provided by (used in) investing activities was $2,210.8 million in 2000
compared to $(3,941.8) million in 1999 and $(2,128.5) million in 1998. The
increase in 2000 from 1999 reflects the proceeds received from the sale of the
Satellite Businesses and a decrease in investment in companies, compared to
1999. The decrease in 1999 from 1998 reflects the higher investment in companies
primarily related to the acquisitions of PRIMESTAR and the related Tempo
Satellite assets, USSB, SurFin, GGM and GLB. The 1999 decrease is also due to
investments in DIRECTV Japan convertible bonds, the early buy-out of satellite
sale-leasebacks at PanAmSat and increased expenditures for property, compared to
1998.

Cash provided by (used in) financing activities was $(849.6) million in 2000
compared to $2,577.5 million in 1999 and $(63.6) million in 1998. Financing
activities in 2000 reflect the repayment of debt and payment of preferred stock
dividends to GM. Financing activities in 1999 reflect increased borrowings and
proceeds from the issuance of preferred stock. Financing activities in 1998
include the payment to GM for the post-closing price adjustment stemming from
the transfer of Delco Electronics Corporation to GM in 1997, offset by net
long-term borrowings.

Cash provided by (used in) discontinued operations was $(1,182.0) million in
2000 compared to $(119.0) million in 1999 and $138.3 million in 1998. The
increase in cash used in 2000 from 1999 was primarily due to $1.1 billion of
taxes associated with the sale of the Satellite Businesses. The decrease in 1999
from 1998 was due to increased working capital requirements, increased
development costs, the termination of a customer contract and decreased activity
associated with the ICO contract.

Liquidity Measurement. As a measure of liquidity, the current ratio (ratio of
current assets to current liabilities) at December 31, 2000 and 1999 was 1.54
and 1.46, respectively. Working capital increased by $246.9 million to $1,462.8
million at December 31, 2000 from $1,215.9 million at December 31, 1999. The
change in working capital resulted primarily from about $2.8 billion of
after-tax proceeds received from the sale of the Satellite Businesses, partially
offset by the repayment of about $0.8 billion of net borrowings and $1.7 billion
of capital expenditures for property and satellites.

Property and Satellites. Property, net of accumulated depreciation, increased
$484.8 million to $1,707.8 million in 2000 from $1,223.0 million in 1999. The
increase in property resulted primarily from capital expenditures of about
$939.0 million, partially offset by depreciation. The increase in capital
expenditures for property of $432.6 million in 2000 over 1999 was primarily due
to an increase in subscriber leased DIRECTV receiver equipment used for the
conversion of PRIMESTAR subscribers and to support subscriber growth in Latin
America. Satellites, net of accumulated depreciation, increased $322.7 million
to $4,230.0 million in 2000 from $3,907.3 million in 1999. The increase in
satellites resulted primarily from capital expenditures of $777.1 million for
the construction of satellites, mostly offset by depreciation of $299.3 million
and a write-off of $128.3 million resulting from the failure of PanAmSat's
Galaxy VII satellite, which was fully insured. Satellite capital expenditures in
1999 included $789.4 million for the construction of satellites and $369.5
million for the early buy-out of satellite sale-leasebacks. Total capital
expenditures increased to $1,716.1 million in 2000 from $1,665.3 million in
1999.

IV-31

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Common Stock Dividend Policy and Use of Cash. Dividends may be paid on the GM
Class H common stock only when, as, and if declared by GM's Board of Directors
in its sole discretion. As of December 31, 2000, the amount available for the
payment of dividends by GM to holders of GM Class H common stock was $19.7
billion.

The GM Board has not paid, and does not currently intend to pay in the
foreseeable future, cash dividends on its Class H common stock. Similarly,
Hughes has not paid dividends on its common stock to GM and does not currently
intend to do so in the foreseeable future. Future Hughes earnings, if any, are
expected to be retained for the development of the businesses of Hughes. Hughes
expects to have cash requirements in 2001 of about $2.6 billion primarily due to
capital expenditures for satellites and property and planned increases in
subscriber acquisition costs for the Direct-To-Home businesses. In addition,
Hughes expects to increase its investment in affiliated companies. These cash
requirements are expected to be funded from a combination of existing cash
balances, cash provided from operations, amounts available under credit
facilities, and additional borrowings and equity offerings, as needed.

Debt and Credit Facilities, General. Hughes utilized a portion of the
proceeds from the sale of its Satellite Businesses to repay about $1.8 billion
of outstanding debt in the fourth quarter of 2000. The outstanding debt balances
that were repaid consisted of $250.0 million under Hughes' 364-day facility,
$339.4 million in commercial paper, $750.0 million under Hughes' multi-year
facility and $500.0 million of floating rate notes.

Notes Payable. In October 1999, Hughes issued $500.0 million of floating rate
notes to a group of institutional investors in a private placement. The notes
were repaid on October 23, 2000.

PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling
$750.0 million in January 1998. The outstanding principal balances and interest
rates for these notes as of December 31, 2000 were $200 million at 6.0%, $275
million at 6.125%, $150 million at 6.375% and $125 million at $6.875%,
respectively. Principal on the notes is payable at maturity, while interest is
payable semi-annually.

In July 1999, in connection with the early buy-out of satellite sale-
leasebacks, PanAmSat assumed $124.1 million of variable rate notes of which
$67.7 million was outstanding at December 31, 2000. The weighted average
interest rate on the notes was 7.06% at December 31, 2000. The notes mature on
various dates through January 2, 2002.

Revolving Credit Facilities. As of December 31, 2000, Hughes had a $750.0
million multi-year unsecured revolving credit facility. Borrowings under the
facility bear interest based on a spread to the then-prevailing London Interbank
Offer Rate ("LIBOR"). The multi-year credit facility provides for a commitment
of $750.0 million through December 5, 2002. The facility also provides backup
capacity for Hughes' $1.0 billion commercial paper program. Commercial paper
outstanding under the program bears interest at various rates, based on market
rates prevailing at the time each commercial paper instrument is placed. No
amounts were outstanding under the multi-year credit facility or commercial
paper program at December 31, 2000.

Throughout 2000 Hughes also had outstanding borrowings under a $350.0 million
364-day facility, which expired on November 22, 2000. Borrowings under the
facility bore interest at various rates, based on a spread to then- prevailing
LIBOR. In October 2000, Hughes repaid the outstanding borrowings under this
facility. During 2000, Hughes had available a $500.0 million bridge facility
that provided additional backup capacity for Hughes $1.0 billion commercial
paper program. There were no outstanding borrowings on the bridge facility
during 2000. In October 2000, Hughes elected to terminate the bridge facility,
as provided for under the terms of the agreement.

IV-32

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Borrowings under the credit facility and commercial paper program are
limited to $500.0 million in the aggregate. No amounts were outstanding
under either the multi-year revolving credit facility or the commercial paper
program at December 31, 2000.

At December 31, 2000, SurFin, had a total of $464.9 million outstanding under
unsecured revolving credit facilities of $400.0 million and $150.0 million that
expire in June 2002 and September 2003, respectively. Borrowings under the
credit facilities bear interest at various rates based on LIBOR plus an
indicated spread. The weighted average interest rate on these borrowings was
7.58% at December 31, 2000.

Other short-term and long-term debt outstanding at December 31, 2000 included
$19.4 million of notes bearing fixed rates of interest of 9.61% to 11.11% and
$14.6 million of variable rate notes, bearing a weighted average interest rate
of 11.87%. Principal on the fixed rate notes is payable in varying amounts at
maturity from November 2001 to April 2007. Principal on the variable rate notes
is payable in varying amounts at maturity in April and May 2002.

On January 5, 2001, DLA entered into a $500 million revolving credit
facility. This facility provides for a commitment through the earlier of
eighteen months or the date of receipt of the cash proceeds from the issuance of
any debt or equity security of DLA. Borrowings under the credit facility bear
interest at a rate based on LIBOR plus an indicated spread. As of March 5, 2001,
DLA had $333 million outstanding under the revolving credit facility.

Hughes has filed a shelf registration statement with the Securities and
Exchange Commission with respect to an issuance of up to $2.0 billion of debt
securities from time to time. No amounts have been issued as of December 31,
2000.

Acquisitions, Investments and Divestitures. Acquisitions and Investments. On
January 1, 2001, DLA acquired from Bavaria S.A. an additional 14.2% ownership
interest in Galaxy Entretenimiento de Colombia ("GEC"), a DLA local operating
company located in Colombia. As a result of the transaction, Hughes' ownership
interest in GEC increased from 44.2% to 55.2%. The purchase price consisted of
prior capital contributions of $4.4 million made by DLA during 2000 on behalf of
Bavaria S.A. The increased ownership in GEC will result in its consolidation
from January 1, 2001.

On December 21, 2000, Hughes entered into an agreement and plan of merger
with Telocity Delaware, Inc. ("Telocity") under which Hughes has agreed to
acquire all outstanding shares of Telocity at a price of $2.15 per share in cash
for a total purchase price of $177 million, and has agreed to provide Telocity
with up to $20 million of interim financing. The transaction is expected to be
completed during the second quarter of 2001.

In April 2000, DLA acquired a 37.5% ownership interest in GEC from Carvajal
S.A. that increased Hughes' ownership interest from 15% to 44.2%. The purchase
price consisted of $6.7 million in cash and notes payable.

On July 28, 1999, DLA acquired GLB, the exclusive distributor of DIRECTV
services in Brazil, from Tevecap S.A. for approximately $114.0 million plus the
assumption of debt. In connection with the transaction, Tevecap also sold its
10% equity interest in DLA to Hughes and Darlene Investments, LLC, which
increased Hughes' ownership interest in DLA to 77.8%. As part of the
transaction, Hughes also increased its ownership interest in SurFin from 59.1%
to 75%. The total consideration paid in the transactions amounted to
approximately $101.1 million.

On May 20, 1999, Hughes acquired by merger all of the outstanding capital
stock of USSB, a provider of premium subscription television programming via the
digital broadcasting system that it shared with DIRECTV. The total consideration
of approximately $1.6 billion paid in July 1999, consisted of approximately $0.4
billion in cash and 22.6 million shares of GM Class H common stock (prior to
giving effect to the stock split during 2000).

IV-33

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

PRIMESTAR, Hughes also purchased the high-power satellite assets, which
consisted of an in-orbit satellite and a satellite that had not yet been
launched, and related orbital frequencies of Tempo Satellite Inc., a wholly-
owned subsidiary of TCI Satellite Entertainment Inc., for $500 million in cash.

Hughes agreed, in connection with its acquisition of PRIMESTAR, to exit the
medium-power business prior to May 1, 2001. Hughes formulated a detailed exit
plan during the second quarter of 1999 and immediately began to migrate the
medium-power customers to DIRECTV's high-power platform. Accordingly, Hughes
accrued exit costs of $150 million in determining the purchase price allocated
to the net assets acquired. The principal components of such exit costs include
penalties to terminate assumed contracts and costs to remove medium- power
equipment from customer premises. Since DIRECTV's acquisition of PRIMESTAR,
DIRECTV converted a total of approximately 1.5 million customers to its high
power service. The PRIMESTAR By DIRECTV service ceased operations, as planned,
on September 30, 2000. The amount of accrued exit costs remaining at December
31, 2000 and 1999 was $25.9 million and $123.9 million, respectively, which
primarily represents the remaining obligation on certain contracts.

In February 1999, Hughes acquired an additional ownership interest in GGM, a
Latin America local operating company which is the exclusive distributor of
DIRECTV in Mexico, from Grupo MVS, S.R.L. de C.V. ("Grupo MVS"). As a result,
Hughes' equity ownership represents 49% of the voting equity and all of the
non-voting equity of GGM. In October 1998, Hughes acquired from Grupo MVS an
additional 10% interest in DLA, increasing Hughes' ownership interest to 70%.
Hughes also acquired an additional 19.8% interest in SurFin, a company providing
financing of subscriber receiver equipment for certain local operating companies
located in Latin America and Mexico, increasing Hughes' ownership percentage
from 39.3% to 59.1%. The aggregate purchase price for these transactions was
$197.0 million in cash.

The financial information included herein reflect the acquisitions discussed
above from their respective dates of acquisition. The acquisitions were
accounted for by the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets acquired and the liabilities
assumed based on the estimated fair values at the date of acquisition. The
excess of the purchase price over the estimated fair values of the net assets
acquired has been recorded as goodwill, resulting in a goodwill addition of
$3,612.4 million for the year ended December 31, 1999.

Divestitures. On October 6, 2000, Hughes completed the sale of its Satellite
Businesses for $3.75 billion in cash, plus the estimated book value of the
closing net assets of the businesses sold in excess of a target amount. The
transaction resulted in the recognition of a pre-tax gain of $2,036.0 million,
or $1,132.3 million after-tax. The purchase price is subject to adjustment based
upon the final closing net assets and is discussed in Note 20 to the
consolidated financial statements.

In a separate, but related transaction, Hughes also sold to Boeing its 50%
interest in HRL Laboratories LLC ("HRL") for $38.5 million, which represented
the net book value of HRL at October 6, 2000.

During September 2000, Hughes Tele.com (India) Limited sold new common shares
in a public offering in India. As a result of this transaction, Hughes' equity
interest was reduced from 44.7% to 29.2%. Due to the nature of the transaction,
Hughes recorded a $23.3 million increase in capital stock and additional paid-in
capital.

On March 1, 2000, Hughes announced that the operations of DIRECTV Japan would
be discontinued. Pursuant to an agreement with Japan Digital Broadcasting
Services Inc. (now named Sky Perfect Communications, Inc. or "Sky Perfect"),
qualified subscribers to the DIRECTV Japan service were offered the opportunity
to migrate to the Sky Perfect service, for which DIRECTV Japan was paid a
commission for each subscriber who actually migrated and Hughes acquired a 6.6%
interest in Sky Perfect. As a result, Hughes wrote-off its net investment in
DIRECTV Japan of $164.6 million and accrued exit costs of $403.7 million and

IV-34

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

involuntary termination benefits of $14.5 million. Accrued exit costs consist of
claims arising out of contracts with dealers, manufacturers, programmers and
others, satellite transponder and facility and equipment leases, subscriber
migration and termination costs, and professional service fees and other. The
write-off and accrual were partially offset by the difference between the cost
of the Sky Perfect shares acquired and the estimated fair value of the shares
($428.8 million), as determined by an independent appraisal, and by $40.2
million for anticipated contributions from other DIRECTV Japan shareholders. The
net effect of the transaction was a charge to "other, net" of $170.6 million at
March 31, 2000.

During 2000, $193.9 million and $8.3 million were paid related to accrued
exit costs and involuntary termination benefits, respectively. During the second
quarter of 2000, $62.4 million of payments were received from the other DIRECTV
Japan shareholders, resulting in a credit adjustment of $22.2 million to "other,
net". In the fourth quarter of 2000, $106.6 million of accrued exit costs were
reversed and $0.6 million of involuntary termination benefits were added,
resulting in a net credit adjustment to "other, net" of $106.0 million. The
adjustments made to the exit cost accrual were primarily attributable to earlier
than anticipated cessation of the DIRECTV Japan broadcasting service, greater
than anticipated commission payments for subscriber migration and settlements of
various contracts and claims. The amounts remaining for accrued exit costs and
involuntary termination benefits were $103.2 million and $6.8 million,
respectively, at December 31, 2000.

DIRECTV Japan employed approximately 290 personnel as of March 31, 2000, of
which 244 were terminated during the year. The remaining employees at December
31, 2000 will be terminated during the first half of 2001.

In the fourth quarter of 2000, Sky Perfect completed an initial public
offering, at which date the fair value of Hughes' interest (diluted by the
public offering to approximately 5.3%) in Sky Perfect was approximately $343
million. At December 31, 2000, the market value of Hughes' investment further
declined to $159 million. Based on analysis of recent investment research
regarding Sky Perfect, Hughes determined that a portion of the decline was
"other than temporary," resulting in a charge to "other, net" and a write down
of the investment of $86.0 million. The portion of the decline not considered
"other than temporary," which amounted to $183.4 million, pre-tax, was recorded
as a mark-to-market adjustment to other comprehensive income for the year ended
December 31, 2000.

On January 13, 2000, Hughes announced the discontinuation of its mobile
cellular and narrowband local loop product lines at HNS. As a result of this
decision, Hughes recorded a fourth quarter 1999 pre-tax charge to continuing
operations of $272.1 million. The charge represents the write-off of receivables
and inventories, licenses, software and equipment with no alternative use.

New Accounting Standard. Statement of Financial Accounting Standards ("SFAS")
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended by SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities, is effective for the Company as of January 1, 2001.
SFAS No. 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as a hedge and the type of transaction.
Adoption of these new accounting standards will result in an unfavorable
cumulative effect of accounting change of approximately $8.7 million after-tax
charge on January 1, 2001. This standard will have no impact on Hughes'
consolidated cash flows.

IV-35

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Commitments and Contingencies

In connection with the sale by Hughes of the Satellite Businesses to Boeing,
it is possible that Hughes may be required to make a cash payment to Boeing as
an adjustment to the purchase price based upon the terms of the stock purchase
agreement. Although Hughes believes it has adequately provided for such an
adjustment, the total amount of any such adjustment cannot be determined at this
time. Additionally, as part of the sale, Hughes retained limited liability for
certain possible fines and penalties and the financial consequences of debarment
associated with potential criminal violations of U.S. export control laws, which
are currently being investigated, related to the businesses now owned by Boeing,
should such sanctions be imposed by either the Department of Justice or State
Department against the Satellite Businesses. Hughes does not expect any
sanctions imposed to have a material adverse effect on Hughes' operations or
financial position.

Hughes may be required to make a cash payment to, or may receive a cash
payment from, Raytheon in connection with the merger of the defense electronics
business of Hughes with Raytheon in 1997. The amount of any such cash payment to
or from Raytheon, if any, is not determinable at this time.

Hughes purchases in-orbit and launch insurance for its satellite fleet to
mitigate the potential financial impact of in-orbit and launch failures. The
insurance generally does not compensate for business interruption or loss of
future revenues or customers. Certain of Hughes' insurance policies contain
exclusions related to known anomalies and Hughes is self-insured for certain
other satellites. The portion of the book value of satellites that were self-
insured or with coverage exclusions amounted to $519.5 million at December 31,
2000.

At December 31, 2000, minimum future commitments under noncancelable
operating leases having lease terms in excess of one year are primarily for real
property and aggregated $106.6 million, payable as follows: $29.9 million in
2001, $23.7 million in 2002, $17.8 million in 2003, $13.6 million in 2004, $16.4
million in 2005 and $5.2 million thereafter. Certain of these leases contain
escalation clauses and renewal or purchase options. Rental expenses under
operating leases, net of sublease rental income, were $55.9 million in 2000,
$58.5 million in 1999 and $82.7 million in 1998.

Hughes is contingently liable under standby letters of credit and bonds in
the amount of $59.1 million at December 31, 2000. In Hughes' past experience, no
material claims have been made against these financial instruments. In addition,
at December 31, 2000, Hughes has guaranteed up to $340.7 million of bank debt,
including $85.0 million related to Motient Corporation. Of the bank debt
guaranteed, $85.0 million matures in March 2003 and $55.4 million matures in
September 2007. The remaining $200.3 million is related to DIRECTV Latin America
and SurFin guarantees of non-consolidated local operating company debt and is
due in variable amounts over the next five years.

In connection with the direct-to-home broadcast businesses, Hughes has
commitments related to certain programming agreements which are variable based
upon the number of underlying subscribers and market penetration rates. Minimum
payments over the terms of applicable contracts are anticipated to be
approximately $1.3 billion.

As part of a marketing agreement entered into with America Online, Inc.
("AOL") on June 21, 1999, Hughes committed to increase its sales and marketing
expenditures over the next three years by approximately $1.5 billion relating to
DirecPC(R)/AOL-Plus, DIRECTV(R), DIRECTV(TM)/AOL TV and DirecDuo(TM). At
December 31, 2000, Hughes' remaining commitment under this agreement was
approximately $1.1 billion.

See Note 20 to the consolidated financial statements for further discussion
of the above matters and various legal proceedings and claims that could be
material, individually or in the aggregate, to Hughes' continuing operations or
financial position.

IV-36

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)

Security Ratings

Hughes' current long-term credit ratings are Baa2 and BBB-, with its short-
term credit and commercial paper ratings at P-2 and A-3, as rated by Moody's
Investor Services and Standard and Poor's Rating Services, respectively. On
September 21, 2000, subsequent to the announcement that GM was exploring
strategic alternatives involving Hughes, S&P re-affirmed its BBB- and A-3 debt
ratings for Hughes and revised its outlook from positive to developing.
Previously, in January 2000, subsequent to the announced sale of Hughes'
Satellite Businesses, Moody's and S&P each affirmed their respective debt
ratings for Hughes. At that time, Moody's maintained its negative outlook but
ended its review for possible downgrade while S&P revised its outlook to
positive from negative.

Debt ratings by the various rating agencies reflect each agency's opinion of
the ability of issuers to repay debt obligations as they come due. With respect
to Moody's, the Baa2 rating for senior debt indicates adequate likelihood of
interest and principal payment and principal security. The P-2 short-term
rating, the second highest rating available, indicates that the issuer has a
strong ability for repayment relative to other issuers. For S&P, the BBB- rating
indicates the issuer has adequate capacity to pay interest and repay principal.
In general, lower ratings result in higher borrowing costs. A security rating is
not a recommendation to buy, sell, or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating organization. Each
rating should be evaluated independently of any other rating.

Market Risk Disclosure

The following discussion and the estimated amounts generated from the
sensitivity analyses referred to below include forward-looking statements of
market risk which assume for analytical purposes that certain adverse market
conditions may occur. Actual future market conditions may differ materially from
such assumptions because the amounts noted below are the result of analyses used
for the purpose of assessing possible risks and the mitigation thereof.
Accordingly, the forward-looking statements should not be considered projections
by Hughes of future events or losses.

General

Hughes' cash flows and earnings are subject to fluctuations resulting from
changes in foreign currency exchange rates, interest rates and changes in the
market value of its equity investments. Hughes manages its exposure to these
market risks through internally established policies and procedures and, when
deemed appropriate, through the use of derivative financial instruments. Hughes'
policy is to not enter into speculative derivative instruments for profit or
execute derivative instrument contracts for which there are no underlying
exposures. Hughes does not use financial instruments for trading purposes and is
not a party to any leveraged derivatives.

Foreign Currency Risk

Hughes generally conducts its business in U.S. dollars with some business
conducted in a variety of foreign currencies and therefore is exposed to
fluctuations in foreign currency exchange rates. Hughes' objective in managing
its exposure to foreign currency changes is to reduce earnings and cash flow
volatility associated with foreign exchange rate fluctuations. Accordingly,
Hughes enters into foreign exchange contracts to mitigate risks associated with
future foreign currency firm commitments. Foreign exchange contracts are legal
agreements between two parties to purchase and sell a foreign currency, for a
price specified at the contract date, with delivery and settlement in the
future. The impact of a hypothetical 10% adverse change in exchange rates on the
fair values of foreign exchange contracts and foreign currency denominated
assets and liabilities would be less than $3.5 million, net of taxes at both
December 31, 2000 and December 31, 1999.

IV-37

HUGHES ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS (concluded)

Investments

Hughes maintains investments in publicly-traded common stock of unaffiliated
companies and is therefore subject to equity price risk. These investments are
classified as available-for-sale and, consequently, are reflected in Hughes'
consolidated balance sheets at fair value with unrealized gains or losses, net
of taxes, recorded as part of accumulated other comprehensive income (loss), a
separate component of stockholder's equity. Declines in market value that are
judged to be "other than temporary" are charged to "other, net" in the
Consolidated Statements of Operations and Available Separate Consolidated Net
Income (Loss). At December 31, 2000, the fair values of the investments in such
common stock were $973.9 million compared to $976.0 million at December 31,
1999. The investments were valued at the market closing prices at December 31,
2000. No actions have been taken by Hughes to hedge this market risk exposure. A
10% decline in the market price of these investments would cause the fair value
of the investments in common stock to decrease by $97.4 million and $97.6
million at December 31, 2000 and 1999, respectively.

Interest Rate Risk

Hughes is subject to interest rate risk related to its outstanding debt of
$1.3 billion at December 31, 2000 and $2.1 billion at December 31, 1999. As of
December 31, 2000, debt consisted of PanAmSat's fixed-rate borrowings of $750.0
million, SurFin's variable rate borrowings of $464.9 million and various other
floating and fixed rate borrowings. Hughes is subject to fluctuating interest
rates which may adversely impact its results of operations and cash flows for
its variable rate bank borrowings. Fluctuations in interest rates may also
adversely effect the market value of Hughes' fixed- rate borrowings. At December
31, 2000, outstanding borrowings bore interest at rates ranging from 6.00% to
11.87%. The potential fair value loss resulting from a hypothetical 10% decrease
in interest rates related to Hughes' outstanding debt would be approximately
$25.4 million and $29.0 million at December 31, 2000 and 1999, respectively.

Credit Risk

Hughes is exposed to credit risk in the event of non-performance by the
counterparties to its foreign exchange contracts. While Hughes believes this
risk is remote, credit risk is managed through the periodic monitoring and
approval of financially sound counterparties.

IV-38

HUGHES ELECTRONICS CORPORATION

RESPONSIBILITIES FOR FINANCIAL STATEMENTS

The following consolidated financial statements of Hughes Electronics
Corporation were prepared by management, which is responsible for their
integrity and objectivity. The statements have been prepared in conformity with
accounting principles generally accepted in the United States of America and, as
such, include amounts based on judgments of management.

Management is further responsible for maintaining internal control designed
to provide reasonable assurance that the books and records reflect the
transactions of the company and that established policies and procedures are
carefully followed. Perhaps the most important feature in internal control is
that it is continually reviewed for effectiveness and is augmented by written
policies and guidelines, the careful selection and training of qualified
personnel and a strong program of internal audit.

Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the
consolidated financial statements of Hughes Electronics Corporation and issue
reports thereon. The audit is conducted in accordance with auditing standards
generally accepted in the United States of America that comprehend the
consideration of internal control and tests of transactions to the extent
necessary to form an independent opinion on the consolidated financial
statements prepared by management. The Independent Auditors' Report appears on
page IV-40.

The Board of Directors, through its Audit Committee, is responsible for
assuring that management fulfills its responsibilities in the preparation of the
consolidated financial statements and engaging the independent auditors. The
Audit Committee reviews the scope of the audits and the accounting principles
being applied in financial reporting. The independent auditors, representatives
of management, and the internal auditors meet regularly (separately and jointly)
with the Audit Committee to review the activities of each, to ensure that each
is properly discharging its responsibilities and to assess the effectiveness of
internal control. It is management's conclusion that internal control at
December 31, 2000 provides reasonable assurance that the books and records
reflect the transactions of the company and that established policies and
procedures are complied with. To ensure complete independence, Deloitte & Touche
LLP has full and free access to meet with the Audit Committee, without
management representatives present, to discuss the results of the audit, the
adequacy of internal control, and the quality of financial reporting.

/s/ Michael T. Smith /s/ Roxanne S. Austin
Michael T. Smith Roxanne S. Austin
Chairman of the Board and Chief Senior Vice President and Chief
Executive Officer Financial Officer

IV-39

HUGHES ELECTRONICS CORPORATION

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Hughes Electronics Corporation:

We have audited the accompanying Consolidated Balance Sheets of Hughes
Electronics Corporation as of December 31, 2000 and 1999, and the related
Consolidated Statements of Operations and Available Separate Consolidated Net
Income (Loss), Consolidated Statements of Changes in Stockholder's Equity and
Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
Hughes Electronics Corporation's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Hughes Electronics Corporation at December
31, 2000 and 1999, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the accompanying financial statements, effective
January 1, 1998, Hughes Electronics Corporation changed its method of accounting
for costs of start-up activities by adopting American Institute of Certified
Public Accountants Statement of Position 98-5, Reporting on the Costs of
Start-Up Activities.

/s/ Deloitte & Touche LLP
- -------------------------------------
DELOITTE & TOUCHE LLP

Los Angeles, California
January 16, 2001

IV-40

HUGHES ELECTRONICS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTATY DATA

CONSOLIDATED STATEMENTS OF OPERATIONS AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)

Years Ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------
(Dollars in Millions)

Revenues
Direct broadcast, leasing and other services.. $6,262.2 $4,550.8 $2,640.2
Product sales................................. 1,025.4 1,009.5 840.4
-------- -------- --------
Total Revenues.............................. 7,287.6 5,560.3 3,480.6
-------- -------- --------
Operating Costs and Expenses
Broadcast programming and other costs......... 2,812.8 2,039.0 1,211.4
Cost of products sold......................... 815.1 961.6 618.0
Selling, general and administrative expenses.. 3,065.7 2,295.3 1,279.2
Depreciation and amortization................. 948.1 678.9 413.1
-------- -------- --------
Total Operating Costs and Expenses.......... 7,641.7 5,974.8 3,521.7
-------- -------- --------
Operating Loss.................................. (354.1) (414.5) (41.1)
Interest income................................. 49.3 27.0 112.3
Interest expense................................ (218.2) (122.7) (17.5)
Other, net...................................... (292.6) (149.8) (156.9)
-------- -------- --------
Loss From Continuing Operations Before Income
Taxes, Minority Interests and Cumulative Effect
of Accounting Change........................... (815.6) (660.0) (103.2)
Income tax benefit.............................. (406.1) (236.9) (142.3)
Minority interests in net losses of
subsidiaries................................... 54.1 32.0 24.4
-------- -------- --------
Income (Loss) from continuing operations before
cumulative effect of accounting change......... (355.4) (391.1) 63.5
Income from discontinued operations, net of
taxes.......................................... 36.1 99.8 196.4
Gain on sale of discontinued operations, net of
taxes.......................................... 1,132.3 -- --
-------- -------- --------
Income (Loss) before cumulative effect of
accounting change.............................. 813.0 (291.3) 259.9
Cumulative effect of accounting change, net of
taxes.......................................... -- -- (9.2)
-------- -------- --------
Net Income (Loss)............................... 813.0 (291.3) 250.7
Adjustment to exclude the effect of GM purchase
accounting .................................... 16.9 21.0 21.0
-------- -------- --------
Earnings (Loss) excluding the effect of GM
purchase accounting adjustment................. 829.9 (270.3) 271.7
Preferred stock dividends....................... (97.0) (50.9) --
-------- -------- --------
Earnings (Loss) Used for Computation of
Available Separate Consolidated Net Income
(Loss)......................................... $ 732.9 $ (321.2) $ 271.7
======== ======== ========
Available Separate Consolidated Net Income
(Loss).........................................
Average number of shares of General Motors Class
H Common Stock outstanding (in millions)
(Numerator).................................... 681.2 374.1 315.9
Average Class H dividend base (in millions)
(Denominator).................................. 1,297.0 1,255.5 1,199.7
Available Separate Consolidated Net Income
(Loss)......................................... $ 384.9 $ (95.7) $ 71.5
======== ======== ========

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

IV-41

HUGHES ELECTRONICS CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31,
--------------------
2000 1999
--------- ---------
(Dollars in
Millions)

ASSETS
------

Current Assets
Cash and cash equivalents.............................. $ 1,508.1 $ 238.2
Accounts and notes receivable, net of allowances of
$88.3 and $92.9....................................... 1,253.0 960.9
Contracts in process................................... 186.0 155.8
Inventories............................................ 338.0 236.1
Net assets of discontinued operations.................. -- 1,224.6
Deferred income taxes.................................. 89.9 254.3
Prepaid expenses and other............................. 778.7 788.1
--------- ---------
Total Current Assets............................... 4,153.7 3,858.0
Satellites, net.......................................... 4,230.0 3,907.3
Property, net............................................ 1,707.8 1,223.0
Net Investment in Sales-type Leases...................... 221.1 146.1
Intangible Assets, net................................... 7,151.3 7,406.0
Investments and Other Assets............................. 1,815.4 2,056.6
--------- ---------
Total Assets....................................... $19,279.3 $18,597.0
========= =========

LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------

Current Liabilities
Accounts payable....................................... $ 1,224.2 $ 1,062.2
Deferred revenues...................................... 137.6 130.5
Short-term borrowings and current portion of long-term
debt.................................................. 24.6 555.4
Accrued liabilities and other.......................... 1,304.5 894.0
--------- ---------
Total Current Liabilities.......................... 2,690.9 2,642.1
--------- ---------
Long-Term Debt........................................... 1,292.0 1,586.0
Other Liabilities and Deferred Credits................... 1,647.3 1,454.2
Deferred Income Taxes.................................... 769.3 689.1
Commitments and Contingencies
Minority Interests....................................... 553.7 544.3
Stockholder's Equity
Capital stock and additional paid-in capital........... 9,973.8 9,809.5
Preferred stock........................................ 1,495.7 1,487.5
Retained earnings (deficit)............................ 631.6 (84.4)
--------- ---------
Subtotal Stockholder's Equity............................ 12,101.1 11,212.6
--------- ---------
Accumulated Other Comprehensive Income (Loss)
Minimum pension liability adjustment................. (16.1) (7.3)
Accumulated unrealized gains on securities........... 257.0 466.0
Accumulated foreign currency translation
adjustments......................................... (15.9) 10.0
--------- ---------
Accumulated other comprehensive income............... 225.0 468.7
--------- ---------
Total Stockholder's Equity......................... 12,326.1 11,681.3
--------- ---------
Total Liabilities and Stockholder's Equity......... $19,279.3 $18,597.0
========= =========

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

IV-42

HUGHES ELECTRONICS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

Capital Stock
and Accumulated
Additional Retained Other Total
Paid-In Preferred Earnings Comprehensive Stockholder's Comprehensive
Capital Stock (Deficit) Income (Loss) Equity Income (Loss)
------------- --------- --------- ------------- ------------- -------------
(Dollars in Millions)

Balance at December 31,
1997................... $8,322.8 $ 7.1 $ 10.3 $ 8,340.2
Net Income.............. 250.7 250.7 $ 250.7
Delco post-closing price
adjustment............. (199.7) (199.7)
Tax benefit from
exercise of GM Class H
common stock options... 23.0 23.0
Minimum pension
liability adjustment... (0.5) (0.5) (0.5)
Foreign currency
translation
adjustments............ 3.8 3.8 3.8
Unrealized gains on
securities:
Unrealized holding
gains................. 1.8 1.8 1.8
Less: reclassification
adjustment for gains
included in net
income................ (7.1) (7.1) (7.1)
-------
Comprehensive income.... $ 248.7
-------- -------- ------- ------- --------- =======
Balance at December 31,
1998................... 8,146.1 257.8 8.3 8,412.2
Net Loss................ (291.3) (291.3) $(291.3)
Preferred stock......... $1,487.5 (2.5) 1,485.0
Preferred stock
dividends.............. (48.4) (48.4)
GM Class H common stock
acquired by Hughes and
retired by GM.......... (11.1) (11.1)
Stock options
exercised.............. 114.4 114.4
Shares issued in
connection with
acquisitions........... 1,506.7 1,506.7
Tax benefit from
exercise of GM Class H
common stock options... 53.4 53.4
Minimum pension
liability adjustment... (0.5) (0.5) (0.5)
Foreign currency
translation
adjustments............ 11.0 11.0 11.0
Unrealized gains on
securities............. 449.9 449.9 449.9
-------
Comprehensive income.... $ 169.1
-------- -------- ------- ------- --------- =======
Balance at December 31,
1999................... 9,809.5 1,487.5 (84.4) 468.7 11,681.3
Net Income.............. 813.0 813.0 $ 813.0
Preferred stock......... 8.2 (3.2) 5.0
Preferred stock
dividends.............. (93.8) (93.8)
Stock options
exercised.............. 78.4 78.4
Tax benefit from
exercise of GM Class H
common stock options... 62.3 62.3
Other................... 23.6 23.6
Minimum pension
liability adjustment... (8.8) (8.8) (8.8)
Foreign currency
translation
adjustments............ (25.9) (25.9) (25.9)
Unrealized loss on
securities............. (209.0) (209.0) (209.0)
-------
Comprehensive income.... $ 569.3
-------- -------- ------- ------- --------- =======
Balance at December 31,
2000................... $9,973.8 $1,495.7 $ 631.6 $ 225.0 $12,326.1
======== ======== ======= ======= =========

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

IV-43

HUGHES ELECTRONICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
(Dollars in Millions)

Cash Flows from Operating Activities
Income (Loss) from continuing operations
before cumulative effect of accounting
change...................................... $ (355.4) $ (391.1) $ 63.5
Adjustments to reconcile income (loss) from
continuing operations before cumulative
effect of accounting change to net cash
provided by operating activities
Depreciation and amortization.............. 948.1 678.9 413.1
Equity losses from unconsolidated
affiliates................................ 164.2 189.2 128.3
Amortization of gains on sale-leasebacks... -- (10.8) (36.2)
Net gain on sale of investments and
businesses sold........................... -- (30.0) (13.7)
Net loss on discontinuation of wireless
product lines............................. -- 272.1 --
Net loss on discontinuation of DIRECTV
Japan business and write down of Sky
Perfect investment........................ 128.4 -- --
Gross profit on sales and sales-type
leases.................................... (136.4) -- --
Net (gain) loss on disposal of assets...... 14.6 2.7 --
Deferred income taxes and other............ 377.1 271.1 99.6
Change in other operating assets and
liabilities
Accounts and notes receivable............ (164.4) 35.0 (49.4)
Inventories.............................. (101.9) (38.7) 12.9
Prepaid expenses and other............... 5.3 (494.0) (91.6)
Accounts payable......................... 162.0 101.4 224.0
Accrued liabilities and other............ (132.1) 59.6 (19.0)
Other.................................... 181.2 (265.9) (119.4)
--------- --------- ---------
Net Cash Provided by Operating
Activities............................ 1,090.7 379.5 612.1
--------- --------- ---------
Cash Flows from Investing Activities
Investment in companies, net of cash
acquired.................................... (181.2) (2,443.7) (1,231.0)
Investment in convertible bonds.............. -- (244.7) --
Expenditures for property.................... (939.0) (506.4) (243.9)
Increase in satellites....................... (777.1) (789.4) (929.4)
Early buy-out of satellites under sale and
leaseback................................... -- (245.4) (155.5)
Proceeds from disposal of property........... 31.6 15.8 20.0
Proceeds from sale of subsidiaries and
investments................................. 4,040.3 -- 12.4
Proceeds from insurance claims............... 36.2 272.0 398.9
--------- --------- ---------
Net Cash Provided by (Used in)
Investing Activities.................. 2,210.8 (3,941.8) (2,128.5)
--------- --------- ---------
Cash Flows from Financing Activities
Net increase (decrease) in notes and loans
payable..................................... (496.6) 343.0 --
Long-term debt borrowings.................... 5,262.2 8,165.6 1,165.2
Repayment of long-term debt.................. (5,591.5) (7,494.4) (1,024.1)
Net proceeds from issuance of preferred
stock....................................... -- 1,485.0 --
Stock options exercised...................... 70.1 114.4 --
Purchase and retirement of GM Class H common
stock....................................... -- (11.1) --
Preferred stock dividends paid to General
Motors...................................... (93.8) (25.0) --
Payment to General Motors for Delco post-
closing price adjustment.................... -- -- (204.7)
--------- --------- ---------
Net Cash Provided by (Used in)
Financing Activities.................. (849.6) 2,577.5 (63.6)
--------- --------- ---------
Net cash provided by (used in) continuing
operations.................................. 2,451.9 (984.8) (1,580.0)
Net cash provided by (used in) discontinued
operations.................................. (1,182.0) (119.0) 138.3
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................. 1,269.9 (1,103.8) (1,441.7)
Cash and cash equivalents at beginning
of the year........................... 238.2 1,342.0 2,783.7
--------- --------- ---------
Cash and cash equivalents at end of the
year.................................. $ 1,508.1 $ 238.2 $ 1,342.0
========= ========= =========

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

IV-44

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS

Note 1: Basis of Presentation and Description of Business

Hughes Electronics Corporation ("Hughes Electronics" or "Hughes") is a wholly
owned subsidiary of General Motors Corporation ("GM"). The GM Class H common
stock tracks the financial performance of Hughes, consisting principally of its
direct-to-home broadcast, satellite services, network systems and the satellite
systems manufacturing businesses ("Satellite Businesses").

Hughes is a leading provider of digital entertainment, information and
communication services and satellite-based private business networks. Hughes is
the world's leading digital multi-channel entertainment service provider with
its programming distribution service known as DIRECTV(R), which was introduced
in the U.S. in 1994 and was the first high-powered, all digital, direct-to-home
television distribution service in North America. DIRECTV began service in Latin
America in 1996. Hughes is also the owner and operator of the largest commercial
satellite fleet in the world through its 81% owned subsidiary, PanAmSat. Hughes
is also a leading provider of broadband services and products, including
satellite wireless communications ground equipment and business communications
services. Hughes' equipment and services are applied in, among other things,
data, video and audio transmission, cable and network television distribution,
private business networks, digital cellular communications and direct-to-home
satellite broadcast distribution of television programming.

Revenues, operating costs and expenses, and other non-operating results for
the discontinued operations of the Satellite Businesses which were sold to The
Boeing Company ("Boeing") on October 6, 2000 are excluded from Hughes' results
from continuing operations for all periods presented herein. Alternatively, the
financial results are presented in Hughes' Consolidated Statements of Operations
and Available Separate Consolidated Net Income (Loss) in a single line item
entitled "Income from discontinued operations, net of taxes," the related assets
and liabilities are presented in the Consolidated Balance Sheets at December 31,
1999 in a single line item entitled "Net assets of discontinued operations" and
the net cash flows are presented in the Consolidated Statements of Cash Flows as
"Net cash provided by (used in) discontinued operations." See further discussion
in Note 17.

The accompanying consolidated financial statements include the applicable
portion of intangible assets, including goodwill, and related amortization
resulting from purchase accounting adjustments associated with GM's purchase of
Hughes in 1985, with certain amounts allocated to the Satellite Businesses.

Note 2: Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying financial statements are presented on a consolidated basis
and include the accounts of Hughes and its domestic and foreign subsidiaries
that are more than 50% owned or controlled by Hughes.

Use of Estimates in the Preparation of the Consolidated Financial Statements

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may be based upon amounts which differ from those estimates.

Revenue Recognition

Revenues are generated from sales of direct-to-home broadcast subscriptions,
and the sale of transponder capacity and related services through outright
sales, sales-type leases and operating lease contracts, and sales of
communications equipment and services.

IV-45

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Sales are generally recognized as products are shipped or services are
rendered. Direct-to-home subscription revenues and pay-per-view services are
recognized when programming is viewed by subscribers. Programming payments
received from subscribers in advance of viewing are recorded as deferred
revenues until earned.

Satellite transponder lease contracts qualifying for capital lease treatment
(typically based on the term of the lease) are accounted for as sales-type
leases, with revenues recognized equal to the net present value of the future
minimum lease payments. Upon entering into a sales-type lease, the cost basis of
the transponder is charged to cost of products sold. The portion of each
periodic lease payment deemed to be attributable to interest income is
recognized in each respective period. Contracts for sales of transponders
typically include telemetry, tracking and control ("TT&C") service agreements.
Revenues related to TT&C service agreements are recognized as the services are
performed.

Transponder and other lease contracts that do not qualify as sales-type
leases are accounted for as operating leases. Operating lease revenues are
recognized on a straight-line basis over the respective lease term. Differences
between operating lease payments received and revenues recognized are deferred
and included in accounts and notes receivable or investments and other assets.

A small percentage of revenues are derived from long-term contracts for the
sale of large wireless communications systems. Sales under long-term contracts
are recognized primarily using the percentage-of-completion (cost-to-cost)
method of accounting. Under this method, sales are recorded equivalent to costs
incurred plus a portion of the profit expected to be realized, determined based
on the ratio of costs incurred to estimated total costs at completion. Profits
expected to be realized on long-term contracts are based on estimates of total
sales value and costs at completion. These estimates are reviewed and revised
periodically throughout the lives of the contracts, and adjustments to profits
resulting from such revisions are recorded in the accounting period in which the
revisions are made. Estimated losses on contracts are recorded in the period in
which they are identified.

Hughes has from time to time entered into agreements for the sale and
leaseback of certain of its satellite transponders. However, as a result of
early buy-out transactions described in Note 4, no obligations under sale-
leaseback agreements remain at December 31, 2000. Prior to the completion of the
early buy-out transactions, the leasebacks were classified as operating leases
and, therefore, the capitalized cost and associated depreciation related to
satellite transponders sold were not included in the accompanying consolidated
financial statements. Gains resulting from the sale and leaseback transactions
were deferred and amortized over the leaseback period. Leaseback expense was
recorded using the straight-line method over the term of the lease, net of
amortization of the deferred gains. Differences between operating leaseback
payments made and expense recognized were deferred and included in other
liabilities and deferred credits.

Cash Flows

Cash equivalents consist of highly liquid investments purchased with original
maturities of three months or less.

Net cash from operating activities includes cash payments made for interest
of $312.9 million, $174.6 million and $53.2 million in 2000, 1999 and 1998,
respectively. Net cash refunds received by Hughes for prior year income taxes
amounted to $290.5 million, $197.2 million and $59.9 million in 2000, 1999 and
1998, respectively.

Contracts in Process

Contracts in process are stated at costs incurred plus estimated profit, less
amounts billed to customers and advances and progress payments applied.
Engineering, tooling, manufacturing, and applicable overhead costs, including
administrative, research and development and selling expenses, are charged to
costs and expenses when incurred. Amounts billed under retainage provisions

IV-46

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

of contracts are not significant, and substantially all amounts are
collectible within one year. Advances offset against contract related
receivables amounted to $93.0 million and $114.5 million at December 31, 2000
and 1999, respectively.

Inventories

Inventories are stated at the lower of cost or market principally using the
average cost method.

Major Classes of Inventories 2000 1999
---------------------------- ---------- ----------
(Dollars in Millions)

Productive material and supplies...................... $ 89.5 $ 59.1
Work in process....................................... 128.3 67.0
Finished goods........................................ 120.2 110.0
---------- ----------
Total............................................... $ 338.0 $ 236.1
========== ==========

Property, Satellites and Depreciation

Property and satellites are carried at cost. Satellite costs include
construction costs, launch costs, launch insurance and capitalized interest.
Capitalized satellite costs represent the costs of successful satellite
launches. The proportionate cost of a satellite, net of depreciation and
insurance proceeds, is written off in the period a full or partial loss of the
satellite occurs. Depreciation is computed generally using the straight-line
method over the estimated useful lives of the assets. Leasehold improvements are
amortized over the lesser of the life of the asset or term of the lease.

Intangible Assets

Goodwill, which represents the excess of the cost over the net tangible and
identifiable intangible assets of acquired businesses, and intangible assets are
amortized using the straight-line method over periods not exceeding 40 years.

Software Development Costs

Other assets include certain software development costs capitalized in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed. Capitalized software development costs at December 31, 2000 and 1999,
net of accumulated amortization of $125.2 million and $98.7 million,
respectively, totaled $74.5 million and $70.4 million. The software is amortized
using the greater of the units of revenue method or the straight- line method
over its estimated useful life, not in excess of five years. Software program
reviews are conducted to ensure that capitalized software development costs are
properly treated and costs associated with programs that are not generating
revenues are appropriately written off.

Valuation of Long-Lived Assets

Hughes periodically evaluates the carrying value of long-lived assets to be
held and used, including goodwill and other intangible assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair value of the long-lived asset. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on long-lived assets to be disposed of are determined in a similar
manner, except that fair values are reduced for the cost of disposal.

IV-47

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Foreign Currency

Some of Hughes' foreign operations have determined the local currency to be
their functional currency. Accordingly, these foreign entities translate assets
and liabilities from their local currencies to U.S. dollars using year- end
exchange rates while income and expense accounts are translated at the average
rates in effect during the year. The resulting translation adjustment is
recorded as part of accumulated other comprehensive income (loss), a separate
component of stockholder's equity. Gains and losses resulting from remeasurement
into the functional currency of transactions denominated in non- functional
currencies are recognized in earnings. Net foreign currency transaction gains
and losses included in operations were not material for all years presented.

Financial Instruments and Investments

Hughes maintains investments in equity securities of unaffiliated companies.
Marketable equity securities are considered available-for-sale and carried at
current fair value with unrealized gains or losses, net of taxes, reported as
part of accumulated other comprehensive income (loss), a separate component of
stockholder's equity. Declines in market value that are judged to be "other than
temporary" are charged to "other, net." Fair value is determined by market
quotes, when available, or by management estimate. Non- marketable equity
securities are carried at cost. Investments in which Hughes owns at least 20% of
the voting securities or has significant influence are accounted for under the
equity method of accounting. Equity method investments are recorded at cost and
adjusted for the appropriate share of the net earnings or losses of the
investee. Investee losses are recorded up to the amount of the investment plus
advances and loans made to the investee, and financial guarantees made on behalf
of the investee.

Market values of financial instruments, other than debt and derivative
instruments, are based upon management estimates. Market values of debt and
derivative instruments are determined by quotes from financial institutions.

The carrying value of cash and cash equivalents, accounts and notes
receivable, investments and other assets, accounts payable, amounts included in
accrued liabilities and other meeting the definition of a financial instrument
and debt approximated fair value at December 31, 2000 and 1999.

Hughes' derivative contracts primarily consist of foreign exchange contracts.
Hughes enters into these contracts to reduce its exposure to fluctuations in
foreign exchange rates. Foreign exchange contracts are accounted for as hedges
to the extent they are designated as, and are effective as, hedges of firm
foreign currency commitments. Gains and losses on foreign exchange contracts
designated as hedges of firm foreign currency commitments are recognized in
income in the same period as gains and losses on the underlying transactions are
recognized.

Stock Compensation

Hughes issues stock options to employees with grant prices equal to the fair
value of the underlying security at the date of grant. No compensation cost has
been recognized for options in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees. See Note 12 for information regarding the pro forma effect on
earnings of recognizing compensation cost based on the estimated fair value of
the stock options granted, as required by SFAS No. 123, Accounting for
Stock-Based Compensation.

Compensation related to stock awards is recognized ratably over the vesting
period and, where required, periodically adjusted to reflect changes in the
stock price of the underlying security.

Product and Service Related Expenses

Advertising and research and development costs are expensed as incurred.
Advertising expenses were $108.3 million in 2000, $115.8 million in 1999 and
$130.0 million in 1998. Expenditures for research and development were $129.3
million in 2000, $98.8 million in 1999 and $92.6 million in 1998.

IV-48

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Market Concentrations and Credit Risk

Hughes provides services and extends credit to a number of wireless
communications equipment customers and to a large number of direct-to-home
consumers. Management monitors its exposure to credit losses and maintains
allowances for anticipated losses.

Accounting Changes

In September 1999, the Financial Accounting Standards Board ("FASB") issued
Emerging Issues Task Force Issue 99-10 ("EITF 99-10"), Percentage Used to
Determine the Amount of Equity Method Losses. EITF 99-10 addresses the
percentage of ownership that should be used to compute equity method losses when
the investment has been reduced to zero and the investor holds other securities
of the investee. EITF 99-10 requires that equity method losses should not be
recognized solely on the percentage of common stock owned; rather, an
entity-wide approach should be adopted. Under such an approach, equity method
losses must be recognized based on the ownership level that includes other
equity securities (e.g., preferred stock) and loans/advances to the investee or
based on the change in the investor's claim on the investee's book value. Hughes
adopted EITF 99-10 during the third quarter of 1999 which resulted in Hughes
recording a higher percentage of DIRECTV Japan's losses subsequent to the
effective date of September 23, 1999. The unfavorable impact of adopting EITF
99-10 was $39.0 million after-tax.

In 1998, Hughes adopted American Institute of Certified Public Accountants
Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up
Activities. SOP 98-5 required that all start-up costs previously capitalized be
written off and recognized as a cumulative effect of accounting change, net of
taxes, as of the beginning of the year of adoption. On a prospective basis,
these types of costs are required to be expensed as incurred. The unfavorable
cumulative effect of this accounting change at January 1, 1998 was $9.2 million
after-tax.

New Accounting Standard

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities, is effective for the Company as of January 1, 2001.
SFAS No. 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as a hedge and the type of transaction.
Adoption of these new accounting standards will result in an unfavorable
cumulative effect of accounting change of approximately $8.7 million after-tax
on January 1, 2001.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2000
presentation.

IV-49

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Note 3: Property and Satellites, Net

Estimated
Useful Lives
(years) 2000 1999
------------ -------- --------
(Dollars in
Millions)

Land and improvements........................ 7-25 $ 45.5 $ 51.4
Buildings and leasehold improvements......... 2-30 189.1 197.0
Machinery and equipment...................... 3-10 1,105.4 795.2
Customer leased set-top boxes................ 4-7 778.3 333.1
Furniture, fixtures and office machines...... 3-13 109.7 92.3
Construction in progress..................... -- 386.0 363.4
-------- --------
Total........................................ 2,614.0 1,832.4
Less accumulated depreciation................ 906.2 609.4
-------- --------
Property, net................................ $1,707.8 $1,223.0
======== ========
Satellites................................... 12-16 $5,263.8 $4,683.1
Less accumulated depreciation................ 1,033.8 775.8
-------- --------
Satellites, net.............................. $4,230.0 $3,907.3
======== ========

Hughes capitalized interest of $82.4 million, $65.1 million and $55.3 million
during 2000, 1999 and 1998, respectively, as part of the cost of its satellites
under construction.

Note 4: Leasing Activities

Future minimum payments due from customers under sales-type leases and
related service agreements, and noncancelable satellite transponder operating
leases as of December 31, 2000 are as follows:

Sales-Type Leases
------------------
Minimum Service
Lease Agreement Operating
Payments Payments Leases
-------- --------- ---------
(Dollars in Millions)

2001............................................ $ 48.0 $ 4.6 $ 618.4
2002............................................ 48.2 4.6 579.6
2003............................................ 48.2 4.6 544.4
2004............................................ 45.9 4.3 504.7
2005............................................ 37.5 3.4 450.4
Thereafter...................................... 154.8 6.4 2,048.7
------ ----- --------
Total......................................... $382.6 $27.9 $4,746.2
====== ===== ========

The components of the net investment in sales-type leases are as follows:

2000 1999
---------- ----------
(Dollars in Millions)

Total minimum lease payments......................... $ 382.6 $ 249.0
Less unearned interest income and allowance for
doubtful accounts................................... 136.5 81.1
---------- ----------
Total net investment in sales-type leases............ 246.1 167.9
Less current portion................................. 25.0 21.8
---------- ----------
Total.............................................. $ 221.1 $ 146.1
========== ==========

IV-50

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

In 1996 and 1992, Hughes entered into sale-leaseback agreements for certain
satellite transponders with other companies, including General Motors Acceptance
Corporation ("GMAC"), a subsidiary of GM. Deferred gains from these
sale-leaseback agreements are amortized over the expected term of the leaseback
period. In 1998, PanAmSat exercised certain early buy-out options and
repurchased a portion of the leased transponders for a total payment of $155.5
million. In 1999, PanAmSat exercised early buy-out options for the remaining
transponders for $245.4 million in cash and $124.1 million of assumed debt. As a
result of the above transactions, no deferred amounts remain outstanding.

Note 5: Intangible Assets

At December 31, 2000 and 1999, Hughes had $6,443.9 million and $6,642.3
million, respectively, of goodwill, net of accumulated amortization. Goodwill is
amortized over 10 to 40 years. Hughes also had, net of accumulated amortization,
$707.4 million and $763.7 million of intangible assets at December 31, 2000 and
1999, respectively, which are amortized over 2 to 40 years. Intangible assets
consist mainly of Federal Communications Commission licenses, customer lists and
dealer networks.

Note 6: Investments

Investments in marketable equity securities stated at current fair value and
classified as available-for-sale totaled $973.9 million and $976.0 million at
December 31, 2000 and 1999, respectively. Accumulated unrealized holding gains,
net of taxes, recorded as part of accumulated other comprehensive income (loss),
a separate component of stockholder's equity, were $257.0 million and $466.0
million as of December 31, 2000 and 1999, respectively.

Aggregate investments in affiliated companies, including advances and loans,
accounted for under the equity method at December 31, 2000 and 1999, amounted to
$121.1 million and $317.4 million, respectively.

Note 7: Accrued Liabilities and Other

2000 1999
-------- ------
(Dollars in
Millions)

Payroll and other compensation............................. $ 231.0 $157.2
Provision for consumer finance and rebate programs......... 125.6 107.3
Exit costs and other liabilities related to discontinued
businesses................................................ 386.5 123.9
Programming contract liabilities........................... 90.7 82.6
Other...................................................... 470.7 423.0
-------- ------
Total.................................................... $1,304.5 $894.0
======== ======

Included in other liabilities and deferred credits are long-term programming
contract liabilities which totaled $536.6 million and $627.1 million at December
31, 2000 and December 31, 1999, respectively.

IV-51

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Note 8: Short-Term Borrowings and Long-Term Debt

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

Interest
Rates at
December 31,
2000 2000 1999
------------ ---------- -----------
(Dollars in Millions)

Floating rate notes, net of unamortized
discount............................... $ 498.9
Other short-term borrowings............. 10.00% $ 3.4 --
Current portion of long-term debt....... 7.06% 21.2 56.5
---------- -----------
Total short-term borrowings and
current portion of long-term debt.... $ 24.6 $ 555.4
========== ===========

Long-Term Debt

Interest Rates at
December 31, 2000 2000 1999
----------------- -------- --------
(Dollars in
Millions)

Notes payable........................... 6.00%- 7.06% $ 817.7 $ 874.1
Revolving credit facilities............. 7.45%- 9.50% 464.9 727.9
Other debt.............................. 9.61%- 11.87% 30.6 40.5
-------- --------
Total debt.............................. 1,313.2 1,642.5
Less current portion.................... 21.2 56.5
-------- --------
Total long-term debt.................. $1,292.0 $1,586.0
======== ========

Notes Payable. In October 1999, Hughes issued $500.0 million of floating rate
notes to a group of institutional investors in a private placement. The notes
were repaid on October 23, 2000.

PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling
$750.0 million in January 1998. The outstanding principal balances for these
notes as of December 31, 2000 were $200 million, $275 million, $150 million and
$125 million, respectively. Principal on the notes is payable at maturity, while
interest is payable semi-annually.

In July 1999, in connection with the early buy-out of satellite sale-
leasebacks, PanAmSat assumed $124.1 million of variable rate notes of which
$67.7 million was outstanding at December 31, 2000. The notes mature on various
dates through January 2, 2002.

IV-52

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Hughes' $750.0 million multi-year unsecured revolving credit facility
contains covenants that Hughes must comply with. The covenants require Hughes to
maintain a minimum level of consolidated net worth and not exceed certain
specified ratios. At December 31, 2000, Hughes was in compliance with all such
covenants.

PanAmSat maintains a $500.0 million multi-year revolving credit facility that
provides for short-term and long-term borrowings and a $500.0 million commercial
paper program. Borrowings under the credit facility bear interest at a rate
equal to LIBOR plus a spread based on PanAmSat's credit rating. The multi-year
revolving credit facility provides for a commitment through December 24, 2002.
Borrowings under the credit facility and commercial paper program are limited to
$500.0 million in the aggregate. No amounts were outstanding under either the
multi-year revolving credit facility or the commercial paper program at December
31, 2000.

At December 31, 2000, Hughes' 75% owned subsidiary, SurFin Ltd. ("SurFin"), a
company that provides financing of subscriber receiver equipment to certain
DIRECTV Latin America operating companies, had a total of $464.9 million
outstanding under unsecured revolving credit facilities of $400.0 million and
$150.0 million that expire in June 2002 and September 2003, respectively.
Borrowings under the credit facilities bear interest at various rates of
interest based on the LIBOR plus an indicated spread.

Other. Other short-term and long-term debt outstanding at December 31, 2000
included $19.4 million of notes bearing fixed rates of interest and $14.6
million of variable rate notes. Principal on the fixed rate notes is payable in
varying amounts at maturity from November 2001 to April 2007. Principal on the
variable rate notes is payable in varying amounts at maturity in April and May
2002.

The aggregate maturities of long-term debt for the five years subsequent to
December 31, 2000 are $21.2 million in 2001, $399.8 million in 2002, $326.2
million in 2003, none in 2004, $275.0 million in 2005 and $291.0 in 2006 and
thereafter.

Note 9: Income Taxes

The income tax benefit is based on reported loss from continuing operations
before income taxes, minority interests and cumulative effect of accounting
change. Deferred income tax assets and liabilities reflect the impact of
temporary differences between the amounts of assets and liabilities recognized
for financial reporting purposes and such amounts recognized for tax purposes,
as measured by applying currently enacted tax laws.

Hughes and its domestic subsidiaries join with GM in filing a consolidated
U.S. federal income tax return. The portion of the consolidated income tax
liability or receivable recorded by Hughes is generally equivalent to the amount
that would have been recorded on a separate return basis.

IV-53

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

The income tax benefit consisted of the following:

2000 1999 1998
------- ------- -------
(Dollars in Millions)

Taxes currently payable (refundable):
U.S. federal................................... $(757.9) $(406.5) $(201.9)
Foreign........................................ 31.6 30.1 15.9
State and local................................ (52.0) (24.2) (36.5)
------- ------- -------
Total........................................ (778.3) (400.6) (222.5)
------- ------- -------
Deferred tax liabilities (assets):
U.S. federal................................... 361.0 185.0 50.8
State and local................................ 11.2 (21.3) 29.4
------- ------- -------
Total........................................ 372.2 163.7 80.2
------- ------- -------
Total income tax benefit..................... $(406.1) $(236.9) $(142.3)
======= ======= =======

Loss from continuing operations before income taxes, minority interests and
cumulative effect of accounting change included the following components:

2000 1999 1998
------- ------- -------
(Dollars in Millions)

U.S. loss......................................... $(752.2) $(519.0) $ (10.2)
Foreign loss...................................... (63.4) (141.0) (93.0)
------- ------- -------
Total......................................... $(815.6) $(660.0) $(103.2)
======= ======= =======

The combined income tax benefit was different than the amount computed using
the U.S. federal statutory income tax rate for the reasons set forth in the
following table:

2000 1999 1998
------- ------- -------
(Dollars in Millions)

Expected refund at U.S. federal statutory income
tax rate....................................... $(285.4) $(231.0) $ (36.1)
Research and experimentation tax benefits and
resolution of tax contingencies................ (80.9) (78.9) (172.9)
Foreign sales corporation tax benefit........... (32.8) (13.6) (15.6)
U.S. state and local income taxes............... (26.6) (29.5) (4.6)
DIRECTV Japan and other equity method
investees...................................... (81.2) 60.3 36.7
Minority interests in losses of partnership..... 27.8 19.0 19.3
Non-deductible goodwill amortization............ 40.3 31.0 20.0
Foreign taxes, net of credits................... 31.6 2.8 2.0
Other........................................... 1.1 3.0 8.9
------- ------- -------
Total income tax benefit...................... $(406.1) $(236.9) $(142.3)
======= ======= =======

IV-54

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

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

2000 1999
--------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
(Dollars in Millions)

Accruals and advances............. $ 233.3 $ 106.1
Customer deposits, rebates and
commissions...................... 137.9 $ 185.1 44.1 $ 114.1
State taxes....................... 29.4 -- 27.9 --
Gain on PanAmSat merger........... -- 181.2 -- 186.3
Satellite launch insurance costs.. -- 148.3 -- 121.3
Depreciation and amortization..... -- 834.3 -- 560.5
Net operating loss and tax credit
carryforwards.................... 244.7 -- 287.3 --
Programming contract liabilities.. 251.0 -- 285.0 --
Unrealized gains on securities.... -- 176.6 -- 318.6
Write-off related to wireless
product lines.................... -- -- 95.9 --
Other............................. 145.7 97.0 204.4 100.7
-------- -------- -------- --------
Subtotal.......................... 1,042.0 1,622.5 1,050.7 1,401.5
Valuation allowance............... (98.9) -- (84.0) --
-------- -------- -------- --------
Total deferred taxes............ $ 943.1 $1,622.5 $ 966.7 $1,401.5
======== ======== ======== ========

No income tax provision has been made for the portion of undistributed
earnings of foreign subsidiaries deemed permanently reinvested that amounted to
approximately $56.8 million and $29.7 million at December 31, 2000 and 1999,
respectively. Repatriation of all accumulated earnings would have resulted in
tax liabilities of $19.9 million in 2000 and $10.4 million in 1999.

At December 31, 2000, Hughes has $98.9 million of deferred tax assets
relating to foreign operating loss carryforwards expiring in varying amounts
between 2001 and 2005. A valuation allowance was provided for all foreign
operating loss carryforwards. At December 31, 2000, Hughes has $24.2 million of
foreign tax credits which will expire in 2006. At December 31, 2000, a Hughes
subsidiary has $46.0 million of alternative minimum tax credits generated in
separate filing years, which can be carried forward indefinitely. At December
31, 2000, Hughes' subsidiaries have $75.6 million of deferred tax assets
relating to federal net operating loss carryforwards which will expire in
varying amounts between 2009 and 2018.

Hughes has an agreement with Raytheon Company ("Raytheon") which governs
Hughes' rights and obligations with respect to U.S. federal and state income
taxes for all periods prior to the spin-off and merger of Hughes' defense
electronics business with Raytheon in 1997. Hughes is responsible for any income
taxes pertaining to those periods prior to the merger, including any additional
income taxes resulting from U.S. federal and state tax audits, and is entitled
to any U.S. federal and state income tax refunds relating to those years.

Hughes also has an agreement with Boeing which governs Hughes' rights and
obligations with respect to U.S. federal and state income taxes for all periods
prior to the sale of Hughes' Satellite Businesses. Hughes is responsible for any
income taxes pertaining to those periods prior to the sale, including any
additional income taxes resulting from U.S. federal and state tax audits, and is
entitled to any U.S. federal and state income tax refunds relating to those
years.

The U.S. federal income tax returns of Hughes have been examined through
1994. All years prior to 1986 are closed. Issues relating to the years 1986
through 1994 are being contested through various stages of administrative
appeal. The Internal Revenue Service ("IRS") is currently examining Hughes'
U.S. federal tax returns for years 1995 through 1997. Management believes

IV-55

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

that adequate provision has been made for any adjustment which might be assessed
for open years.

Hughes reached an agreement with the IRS regarding a claim for refund of U.S.
federal income taxes related to the treatment of research and experimentation
costs for the years 1983 through 1995. Hughes recorded a total of $172.9 million
of research and experimentation tax benefits during 1998, a substantial portion
of which related to the above noted agreement with the IRS and covered prior
years.

Taxes receivable from GM at December 31, 2000 and 1999 , respectively, were
approximately $175.0 million and $610.6 million of which $100.0 million and
$290.8 million, respectively, are included in prepaid expenses and other in the
consolidated balance sheets.

Note 10: Retirement Programs and Other Postretirement Benefits

Substantially all of Hughes' employees participate in Hughes' contributory
and non-contributory defined benefit retirement plans. Benefits are based on
years of service and compensation earned during a specified period of time
before retirement. Additionally, an unfunded, nonqualified pension plan covers
certain employees. Hughes also maintains a program for eligible retirees to
participate in health care and life insurance benefits generally until they
reach age 65. Qualified employees who elected to participate in the Hughes
contributory defined benefit pension plans may become eligible for these health
care and life insurance benefits if they retire from Hughes between the ages of
55 and 65.

IV-56

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

The components of the pension benefit obligation and the other postretirement
benefit obligation, as well as the net benefit obligation recognized in the
consolidated balance sheets, are shown below:

Other
Pension Postretirement
Benefits Benefits
-------------- ----------------
2000 1999 2000 1999
------ ------ ------- -------
(Dollars in Millions)

Change in Benefit Obligation
Net benefit obligation at beginning of year.. $317.7 $341.8 $ 22.8 $ 24.7
Service cost................................. 14.7 14.5 0.6 0.6
Interest cost................................ 30.4 23.9 2.7 1.5
Plan participants' contributions............. 2.3 3.0 -- --
Actuarial (gain) loss........................ 61.2 (31.3) 8.1 (2.7)
Benefits paid................................ (22.8) (34.2) (4.0) (1.3)
------ ------ ------- -------
Net benefit obligation at end of year........ 403.5 317.7 30.2 22.8
------ ------ ------- -------
Change in Plan Assets
Fair value of plan assets at beginning of
year........................................ 390.1 346.6 -- --
Actual return on plan assets................. 99.8 69.6 -- --
Employer contributions....................... 8.0 3.0 4.0 1.3
Plan participants' contributions............. 2.3 3.0 -- --
Benefits paid................................ (22.8) (34.2) (4.0) (1.3)
Transfers.................................... 0.1 2.1 -- --
------ ------ ------- -------
Fair value of plan assets at end of year..... 477.5 390.1 -- --
------ ------ ------- -------
Funded status at end of year................. 74.0 72.4 (30.2) (22.8)
Unamortized amount resulting from changes
in plan provisions........................ 0.9 (0.4) -- --
Unamortized net amount resulting from
changes in plan experience and actuarial
assumptions............................... (62.1) (38.7) (4.5) (1.4)
------ ------ ------- -------
Net amount recognized at end of year..... $ 12.8 $ 33.3 $ (34.7) $ (24.2)
====== ====== ======= =======
Amounts recognized in the consolidated balance sheets consist of:
Prepaid benefit cost....................... $ 29.4 $ 43.0
Accrued benefit cost....................... (46.7) (24.6) $ (34.7) $ (24.2)
Intangible asset........................... 3.0 2.6 -- --
Deferred tax assets........................ 11.0 5.0 -- --
Accumulated other comprehensive loss....... 16.1 7.3 -- --
------ ------ ------- -------
Net amount recognized at end of year..... $ 12.8 $ 33.3 $ (34.7) $ (24.2)
====== ====== ======= =======

Included in the pension plan assets at December 31, 2000 and 1999 is GM Class
H common stock of $0.5 million and $0.6 million, respectively. Included at
December 31, 1999 are GM $1 2/3 common stock of $0.3 million and GMAC bonds of
$0.5 million.

Other
Pension Postretirement
Benefits Benefits
---------- ----------------
2000 1999 2000 1999
---- ---- ------- -------

Weighted-average assumptions as of December 31
Discount rate.................................... 7.75% 7.75% 7.50% 7.50%
Expected return on plan assets................... 9.50% 9.50% N/A N/A
Rate of compensation increase.................... 5.00% 5.00% N/A N/A

For measurement purposes, an 8.5% annual rate of increase per capita cost of
covered health care benefits was assumed for 2001. The rate was assumed to
decrease gradually 0.5% per year to 6.0% in 2006.

IV-57

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Other
Postretirement
Pension Benefits Benefits
---------------------- ---------------
2000 1999 1998 2000 1999 1998
------ ------ ------ ---- ---- -----
(Dollars in Millions)

Components of net periodic benefit
cost
Benefits earned during the year....... $ 14.7 $ 14.5 $ 13.6 $0.6 $0.6 $ 0.5
Interest accrued on benefits earned in
prior years.......................... 30.4 23.9 22.5 2.7 1.5 1.2
Expected return on assets............. (37.9) (28.5) (26.3) -- -- --
Amortization components
Asset at date of adoption........... -- -- (2.7) -- -- --
Amount resulting from changes in
plan provisions.................... 0.1 0.4 0.4 -- -- --
Net amount resulting from changes in
plan experience and actuarial
assumptions........................ 3.6 4.7 2.7 0.8 -- (0.1)
------ ------ ------ ---- ---- -----
Net periodic benefit cost......... $ 10.9 $ 15.0 $ 10.2 $4.1 $2.1 $ 1.6
====== ====== ====== ==== ==== =====

The projected benefit obligation and accumulated benefit obligation for the
pension plans with accumulated benefit obligations in excess of plan assets were
$57.2 million and $46.7 million, respectively, as of December 31, 2000 and $52.9
million and $42.4 million, respectively, as of December 31, 1999. The pension
plans with accumulated benefit obligations in excess of plan assets do not have
any underlying assets.

A one-percentage point change in assumed health care cost trend rates would
have the following effects:

1-Percentage 1-Percentage
Point Increase Point Decrease
-------------- --------------
(Dollars in Millions)

Effect on total of service and interest cost
components................................. $1.1 $(1.0)
Effect on postretirement benefit
obligation................................. 2.3 (2.1)

Hughes maintains 401(k) plans for qualified employees. A portion of employee
contributions are matched by Hughes and amounted to $15.1 million, $12.5 million
and $10.6 million in 2000, 1999 and 1998, respectively.

Hughes has disclosed certain amounts associated with estimated future
postretirement benefits other than pensions and characterized such amounts as
"other postretirement benefit obligation." Notwithstanding the recording of such
amounts and the use of these terms, Hughes does not admit or otherwise
acknowledge that such amounts or existing postretirement benefit plans of Hughes
(other than pensions) represent legally enforceable liabilities of Hughes.

Note 11: Stockholder's Equity

GM holds all of the outstanding common stock of Hughes, which consists of 200
shares of $0.01 par value common stock.

IV-58

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

The following represents changes in the components of accumulated other
comprehensive income (loss), net of taxes, as of December 31:

2000 1999 1998
-------------------------- ----------------------- -----------------------
Tax Pre- Tax Pre- Tax
Pre-tax (Credit) Net tax (Credit) Net tax (Credit) Net
Amount Expense Amount Amount Expense Amount Amount Expense Amount
------- -------- ------- ------ -------- ------ ------ -------- ------
(Dollars in Millions)

Minimum pension
liability adjustments.. $ (14.8) $ (6.0) $ (8.8) $ (0.8) $ (0.3) $ (0.5) $ (0.8) $(0.3) $(0.5)
Foreign currency
translation
adjustments............ $ (25.9) -- $ (25.9) $ 11.0 -- $ 11.0 $ 3.8 -- $ 3.8
Unrealized gains
(losses) on
securities............. $(351.0) $(142.0) $(209.0) $767.3 $317.4 $449.9 $ 3.0 $ 1.2 $ 1.8
Reclassification
adjustment for gains
included in net
income................. -- -- -- -- -- -- $(11.8) $(4.7) $(7.1)

Note 12: Incentive Plans

Under the Hughes Electronics Corporation Incentive Plan ("the Plan"), as
approved by the GM Board of Directors in 1999, shares, rights or options to
acquire up to 233 million shares of GM Class H common stock on a cumulative
basis were authorized for grant, of which 107 million shares were available at
December 31, 2000 subject to GM Executive Compensation Committee approval.

The GM Executive Compensation Committee may grant options and other rights to
acquire shares of GM Class H common stock under the provisions of the Plan. The
option price is equal to 100% of the fair market value of GM Class H common
stock on the date the options are granted. These nonqualified options generally
vest over two to five years, expire ten years from date of grant and are subject
to earlier termination under certain conditions.

Changes in the status of outstanding options were as follows:

Shares
Under Weighted-Average
Option Exercise Price
----------- ----------------

GM Class H Common Stock
Outstanding at December 31, 1997............... 41,884,845 $ 9.69
Granted........................................ 12,541,575 17.01
Exercised...................................... (4,518,723) 7.74
Terminated..................................... (2,811,537) 10.60
----------- ------
Outstanding at December 31, 1998............... 47,096,160 $11.77
Granted........................................ 15,012,825 16.08
Exercised...................................... (10,308,171) 9.95
Terminated..................................... (4,294,746) 13.49
----------- ------
Outstanding at December 31, 1999............... 47,506,068 $13.28
Granted........................................ 35,538,026 37.06
Exercised...................................... (5,718,726) 11.88
Terminated..................................... (10,976,113) 31.47
----------- ------
Outstanding at December 31, 2000............... 66,349,255 $23.04
=========== ======

IV-59

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

The following table summarizes information about the Plan stock options
outstanding at December 31, 2000:

Options Outstanding Options Exercisable
--------------------------------- ---------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Average
Number Life Exercise Number Exercise
Range of Exercise Prices Outstanding (years) Price Exercisable Price
------------------------ ----------- ----------- --------- ----------- ---------

$ 3.00 to $ 8.99........ 1,993,734 3.6 $ 6.95 1,993,734 $ 6.95
9.00 to 16.99........ 29,315,599 6.9 12.53 20,064,718 12.06
17.00 to 24.99........ 6,686,826 7.5 18.41 6,050,526 18.27
25.00 to 32.99........ 2,600,900 9.7 31.12 9,500 28.57
33.00 to 41.99........ 25,752,196 9.3 36.98 93,000 41.06
---------- ----------
$ 3.00 to $41.99........ 66,349,255 7.9 $23.04 28,211,478 $13.07
========== ==========

On May 5, 1997, PanAmSat adopted a stock option incentive plan with terms
similar to the Plan. As of December 31, 2000, PanAmSat had 4,123,070 options
outstanding to purchase its common stock with exercise prices ranging from
$29.00 per share to $63.25 per share. The options vest ratably over three to
four years and have a remaining life ranging from six years to ten years. At
December 31, 2000, 1,086,915 options were exercisable at a weighted average
exercise price of $35.08. The PanAmSat options have been considered in the
following pro forma analysis.

The following table presents pro forma information as if Hughes recorded
compensation cost using the fair value of issued options on their grant date, as
required by SFAS No. 123, Accounting for Stock Based Compensation:

2000 1999 1998
------ ------- ------
(Dollars in Millions)

Earnings (loss) used for computation of available
separate consolidated net income (loss)
as reported...................................... $732.9 $(321.2) $271.7
pro forma........................................ 585.3 (384.9) 186.7

The pro forma amounts for compensation cost are not indicative of the effects
on operating results for future periods.

The following table presents the estimated weighted-average fair value of
options granted under the Plan using the Black-Scholes valuation model and the
assumptions used in the calculations (for 1998, stock volatility was estimated
based upon a three-year average derived from a study of a Hughes determined peer
group):

2000 1999 1998
------ ------ ------

Estimated fair value per option granted.............. $20.39 $ 8.01 $ 7.59
Average exercise price per option granted............ 37.06 16.08 17.01
Expected stock volatility............................ 42.1% 38.0% 32.8%
Risk-free interest rate.............................. 6.5% 5.2% 5.6%
Expected option life (in years)...................... 6.9 7.0 6.2

IV-60

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Note 13: Other Income and Expenses

2000 1999 1998
------- ------- -------
(Dollars in Millions)

Equity losses from unconsolidated affiliates..... $(164.2) $(189.2) $(128.3)
Net loss on discontinuation of DIRECTV Japan
business and write down of Sky Perfect
investment...................................... (128.4) -- --
Gain from sale of common stock of an affiliate... -- 39.4 --
Other............................................ -- -- (28.6)
------- ------- -------
Total other, net............................... $(292.6) $(149.8) $(156.9)
======= ======= =======

Equity losses from unconsolidated affiliates at December 31, 2000 are
primarily comprised of losses at DIRECTV Japan, Hughes Ispat Limited, of which
Hughes owns 45%, and Galaxy Entertainment de Venezuela, C.A., of which Hughes
owns 20%.

Note 14: Related-Party Transactions

In the ordinary course of its operations, Hughes provides telecommunications
services and sells electronic components to, and purchases sub-components from,
related parties.

The following table summarizes significant related-party transactions:

2000 1999 1998
----- ----- -----
(Dollars in
Millions)

Revenues................................................... $33.4 $46.5 $40.5
Costs and expenses......................................... 27.0 35.2 29.0

Note 15: 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
available separate consolidated 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 and/or
payable 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 (681.2 million,
374.1 million and 315.9 million during 2000, 1999 and 1998, respectively) 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). The Average Class H dividend base was 1,297.0 million
during 2000, 1,255.5 million during 1999 and 1,199.7 million during 1998.

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 to reflect
subdivisions or combinations of the GM Class H common stock, certain transfers
of capital to or from Hughes, the contribution of shares of capital stock of GM
to or for the benefit of Hughes employees and the retirement of GM Class H
common stock purchased by Hughes. The GM Board's discretion to make such
adjustments is limited by criteria set forth in GM's Restated Certificate of
Incorporation.

IV-61

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

During the second quarter of 2000, GM completed an exchange offer in which GM
repurchased 86 million shares of GM $1 2/3 par value common stock and issued 92
million shares (prior to giving effect to the stock split during 2000) of GM
Class H common stock. In addition, on June 12, 2000, GM contributed
approximately 54 million shares (prior to giving effect to the stock split
during 2000) and approximately 7 million shares (prior to the stock split during
2000) of GM Class H common stock to its U.S. Hourly-Rate Employees Pension Plan
and VEBA trust, respectively.

Effective January 1, 1999, shares of Class H common stock delivered by GM in
connection with the award of such shares to and the exercise of stock options by
employees of Hughes increases the numerator and denominator of the fraction
referred to above. Prior to January 1, 1999, the exercise of stock options did
not affect the GM Class H dividend base (denominator). From time to time, in
anticipation of exercises of stock options, Hughes purchases 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.

Note 16: Hughes Series A Preferred Stock

On June 24, 1999, as part of a strategic alliance with Hughes, America
Online, Inc. ("AOL") invested $1.5 billion in shares of GM Series H preference
stock. The GM Series H preference stock will automatically convert on June 24,
2002 into GM Class H common stock based upon a variable conversion factor linked
to the GM Class H common stock price at the time of conversion, and accrues
quarterly dividends at a rate of 6.25% per year. It may be converted earlier in
certain limited circumstances. GM immediately invested the $1.5 billion received
from AOL in shares of Hughes Series A Preferred Stock designed to correspond to
the financial terms of the GM Series H preference stock. Dividends on the Hughes
Series A Preferred Stock are payable to GM quarterly at an annual rate of 6.25%.
The underwriting discount on the Hughes Series A Preferred Stock is amortized
over three years. Upon conversion of the GM Series H preference stock into GM
Class H common stock, Hughes will redeem the Hughes Series A Preferred Stock
through a cash payment to GM equal to the fair market value of the GM Class H
common stock issuable upon the conversion. Simultaneous with GM's receipt of the
cash redemption proceeds, GM will make a capital contribution to Hughes of the
same amount.

Note 17: Acquisitions, Investments and Divestitures

Acquisitions and Investments

On January 1, 2001, DIRECTV Latin America, LLC ("DLA"), which operates the
Latin America DIRECTV business, acquired from Bavaria S.A. an additional 14.2%
ownership interest in Galaxy Entretenimiento de Colombia ("GEC"), a DLA local
operating company located in Colombia. As a result of the transaction, Hughes'
ownership interest in GEC increased from 44.2% to 55.2%. The purchase price
consisted of prior capital contributions of $4.4 million made by DLA during 2000
on behalf of Bavaria S.A. The increased ownership in GEC will result in its
consolidation from January 1, 2001.

IV-62

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

On July 28, 1999, DLA, acquired Galaxy Brasil, Ltda. ("GLB"), the exclusive
distributor of DIRECTV services in Brazil, from Tevecap S.A. for approximately
$114.0 million plus the assumption of debt. In connection with the transaction,
Tevecap also sold its 10% equity interest in DLA to Hughes and Darlene
Investments, LLC, which increased Hughes' ownership interest in DLA to 77.8%. As
part of the transaction, Hughes also increased its ownership interest in SurFin
from 59.1% to 75%. The total consideration paid in the transactions amounted to
approximately $101.1 million.

On May 20, 1999, Hughes acquired by merger all of the outstanding capital
stock of United States Satellite Broadcasting Company, Inc. ("USSB"), a provider
of premium subscription television programming. The total consideration of
approximately $1.6 billion paid in July 1999, consisted of approximately $0.4
billion in cash and 22.6 million shares of GM Class H common stock (prior to
giving effect to the stock split during 2000).

On April 28, 1999, Hughes completed the acquisition of PRIMESTAR's 2.3
million subscriber medium-power direct-to-home satellite business. The purchase
price consisted of $1.1 billion in cash and 4.9 million shares of GM Class H
common stock (prior to giving effect to the stock split during 2000), for a
total purchase price of $1.3 billion. As part of the acquisition of PRIMESTAR,
Hughes also purchased the high-power satellite assets, which consisted of an
in-orbit satellite and a satellite that had not yet been launched, and related
orbital frequencies of Tempo Satellite Inc., a wholly owned subsidiary of TCI
Satellite Entertainment Inc, for $500 million in cash.

In February 1999, Hughes acquired an additional ownership interest in GGM, a
Latin America local operating company which is the exclusive distributor of
DIRECTV in Mexico, from Grupo MVS, S.R.L. de C.V. ("Grupo MVS"). As a result,
Hughes' equity ownership represents 49% of the voting equity and all of the
non-voting equity of GGM. In October 1998, Hughes acquired from Grupo MVS an
additional 10% interest in DLA, increasing Hughes' ownership interest to 70%.
Hughes also acquired an additional 19.8% interest in SurFin, increasing Hughes'
ownership percentage from 39.3% to 59.1%. The aggregate purchase price for these
transactions was $197.0 million in cash.

In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat for
$851.4 million in cash, increasing its ownership interest in PanAmSat to 81.0%.

The financial information included herein reflect acquisitions from their
respective dates of acquisition. The acquisitions were accounted for by the
purchase method of accounting and, accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed based on the
estimated fair values at the date of acquisition. The excess of the purchase
price over the estimated fair values of the net assets acquired has been
recorded as goodwill, resulting in a goodwill addition of $3,612.4 million for
the year ended December 31, 1999.

The following selected unaudited pro forma information is being provided to
present a summary of the combined results of Hughes and USSB and PRIMESTAR for
1999 and 1998 as if the acquisitions had occurred as of the beginning of the
respective periods, giving effect to purchase accounting adjustments. The pro

IV-63

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

forma data presents only significant transactions, is presented for
informational purposes only and may not necessarily reflect the results of
operations of Hughes had these companies operated as part of Hughes for each of
the periods presented, nor are they necessarily indicative of the results of
future operations. The pro forma information excludes the effect of
non-recurring charges.

1999 1998
-------- --------
(Dollars in
Millions)

Total revenues.......................................... $6,350.3 $5,318.6
Income (loss) before cumulative effect of accounting
change................................................. (297.1) 160.0
Net income (loss)....................................... (297.1) 150.8
Pro forma available separate consolidated net income
(loss)................................................. (103.1) 53.4

Divestitures

On October 6, 2000, Hughes completed the sale of its Satellite Businesses for
$3.75 billion in cash, plus the estimated book value of the closing net assets
of the businesses sold in excess of a target amount. The transaction resulted in
the recognition of a pre-tax gain of $2,036.0 million, or $1,132.3 million
after-tax. Included in this gain is a net after-tax curtailment loss of $42
million related to pension and other postretirement benefit plan assets and
liabilities associated with the Satellite Businesses. The purchase price is
subject to adjustment based upon the final closing net assets as discussed in
Note 20.

Summarized financial information for the discontinued operations follows:

2000 1999 1998
-------- -------- --------
(Dollars in Millions)

Revenues (excluding intercompany
transactions)................................. $1,260.1 $1,780.4 $2,483.3
Income tax provision........................... 23.2 42.9 97.6
Net income..................................... 36.1 99.8 196.4

In a separate, but related transaction, Hughes also sold to Boeing its 50%
interest in HRL Laboratories LLC ("HRL") for $38.5 million, which represented
the net book value of HRL at October 6, 2000.

On March 1, 2000, Hughes announced that the operations of DIRECTV Japan
Management, Inc., DIRECTV Japan, Inc., and certain related companies
(collectively "DIRECTV Japan") would be discontinued. Pursuant to an agreement
with Japan Digital Broadcasting Services Inc. (now named Sky Perfect
Communications, Inc. or "Sky Perfect"), qualified subscribers to the DIRECTV
Japan service were offered the opportunity to migrate to the Sky Perfect
service, for which DIRECTV Japan was paid a commission for each subscriber who
actually migrated and Hughes acquired a 6.6% interest in Sky Perfect. As a
result, Hughes wrote-off its net investment in DIRECTV Japan of $164.6 million
and accrued exit costs of $403.7 million and involuntary termination benefits of
$14.5 million. Accrued exit costs consist of claims arising out of contracts
with dealers, manufacturers, programmers and others, satellite transponder and
facility and equipment leases, subscriber migration and termination costs, and
professional service fees and other. The write-off and accrual were partially
offset by the difference between the cost of the Sky Perfect shares acquired and
the estimated fair value of the shares ($428.8 million), as determined by an
independent appraisal, and by $40.2 million for anticipated contributions from
other DIRECTV Japan shareholders. The net effect of the transaction was a charge
to "other, net" of $170.6 million at March 31, 2000.

IV-64

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

In the fourth quarter of 2000, Sky Perfect completed an initial public
offering, at which date the fair value of Hughes' interest (diluted by the
public offering to approximately 5.3%) in Sky Perfect was approximately $343
million. At December 31, 2000, the market value of Hughes' investment further
declined to $159 million. Based on analysis of recent investment research
regarding Sky Perfect, Hughes determined that a portion of the decline was
"other than temporary", resulting in a charge to "other, net" and a write down
of the investment of $86.0 million. The portion of the decline not considered
"other than temporary", which amounted to $183.4 million, pre-tax, was recorded
as a mark-to-market adjustment to other comprehensive income for the year ended
December 31, 2000.

On January 13, 2000, Hughes announced the discontinuation of its mobile
cellular and narrowband local loop product lines at Hughes Network Systems. As a
result of this decision, Hughes recorded a fourth quarter 1999 pre-tax charge to
continuing operations of $272.1 million. The charge represents the write-off of
receivables and inventories, licenses, software and equipment with no
alternative use.

Note 18: Derivative Financial Instruments and Risk Management

In the normal course of business, Hughes enters into transactions that expose
it to risks associated with foreign exchange rates. Hughes utilizes derivative
instruments in an effort to mitigate these risks. Hughes' policy is to not enter
into speculative derivative instruments for profit or execute derivative
instrument contracts for which there are no underlying exposures. Instruments
used as hedges must be effective at reducing the risk associated with the
exposure being hedged and designated as a hedge at the inception of the
contract. Accordingly, changes in market values of hedge instruments are highly
correlated with changes in market values of the underlying transactions, both at
the inception of the hedge and over the life of the hedge contract.

Hughes primarily uses foreign exchange contracts to hedge firm commitments
denominated in foreign currencies. Foreign exchange contracts are legal
agreements between two parties to purchase and sell a foreign currency, for a
price specified at the contract date, with delivery and settlement in the
future. The total notional amounts of contracts afforded hedge accounting
treatment at December 31, 2000 and 1999 were not significant.

IV-65

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

Note 19: 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.

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

Direct-
To-Home Satellite Network
Broadcast Services Systems Other Eliminations Total
--------- --------- -------- -------- ------------ ---------
(Dollars in Millions)

2000
External Revenues....... $ 5,208.6 $ 880.2 $1,176.7 $ 22.1 -- $ 7,287.6
Intersegment Revenues... 29.4 143.4 233.1 5.2 $ (411.1) --
--------- -------- -------- -------- --------- ---------
Total Revenues.......... $ 5,238.0 $1,023.6 $1,409.8 $ 27.3 $ (411.1) $ 7,287.6
--------- -------- -------- -------- --------- ---------
Operating Profit
(Loss)................. $ (557.9) $ 356.6 $ (63.5) $ (67.9) $ (21.4) $ (354.1)
Depreciation and
Amortization........... 533.4 337.4 63.6 21.2 (7.5) 948.1
Intangibles, net........ 4,139.9 2,303.6 41.6 666.2 -- 7,151.3
Segment Assets.......... 10,473.4 6,178.4 1,789.9 8,990.5 (8,152.9) 19,279.3
Capital Expenditures.... 913.5 449.5 369.5 0.6 (17.0) 1,716.1
--------- -------- -------- -------- --------- ---------
1999
External Revenues....... $ 3,781.7 $ 673.6 $1,091.7 $ 13.3 -- $ 5,560.3
Intersegment Revenues... 3.3 137.0 293.0 2.5 $ (435.8) --
--------- -------- -------- -------- --------- ---------
Total Revenues.......... $ 3,785.0 $ 810.6 $1,384.7 $ 15.8 $ (435.8) $ 5,560.3
--------- -------- -------- -------- --------- ---------
Operating Profit
(Loss)................. $ (289.6) $ 338.3 $ (234.1) $ (126.0) $ (103.1) $ (414.5)
Depreciation and
Amortization........... 312.0 280.5 77.4 20.8 (11.8) 678.9
Intangibles, net........ 4,308.5 2,368.6 46.9 682.0 -- 7,406.0
Segment Assets.......... 9,056.6 5,984.7 1,167.3 2,765.9 (377.5) 18,597.0
Capital Expenditures.... 516.9 956.4 175.0 30.0 (13.0) 1,665.3
--------- -------- -------- -------- --------- ---------
1998
External Revenues....... $ 1,813.7 $ 643.8 $1,000.6 $ 22.5 -- $ 3,480.6
Intersegment Revenues... 2.4 123.5 76.1 1.4 $ (203.4) --
--------- -------- -------- -------- --------- ---------
Total Revenues.......... $ 1,816.1 $ 767.3 $1,076.7 $ 23.9 $ (203.4) $ 3,480.6
--------- -------- -------- -------- --------- ---------
Operating Profit
(Loss)................. $ (225.8) $ 318.3 $ 7.1 $ (107.6) $ (33.1) $ (41.1)
Depreciation and
Amortization........... 102.3 235.0 66.9 13.9 (5.0) 413.1
Intangibles, net........ -- 2,433.5 53.6 698.8 -- 3,185.9
Segment Assets.......... 2,190.4 5,890.5 1,299.0 3,470.6 (233.1) 12,617.4
Capital Expenditures.... 230.8 921.7 40.0 3.3 133.0 1,328.8
--------- -------- -------- -------- --------- ---------

IV-66

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

The following table presents revenues earned from customers located in
different geographic areas. Property is grouped by its physical location. All
satellites are reported as United States assets.

2000 1999 1998
------------------- ------------------- -------------------
Net Net Net
Total Property & Total Property & Total Property &
Revenues Satellites Revenues Satellites Revenues Satellites
-------- ---------- -------- ---------- -------- ----------
(Dollars in Millions)

North America
United States......... $6,008.2 $5,577.3 $4,407.9 $4,891.8 $2,645.6 $3,830.6
Canada and Mexico..... 198.8 89.3 114.6 51.8 56.9 2.0
-------- -------- -------- -------- -------- --------
Total North
America............ 6,207.0 5,666.6 4,522.5 4,943.6 2,702.5 3,832.6
-------- -------- -------- -------- -------- --------
Europe
United Kingdom........ 114.7 5.6 175.2 10.5 111.3 14.1
Other................. 19.7 0.4 47.6 0.2 61.2 0.3
-------- -------- -------- -------- -------- --------
Total Europe........ 134.4 6.0 222.8 10.7 172.5 14.4
-------- -------- -------- -------- -------- --------
South America and the
Caribbean
Brazil................ 285.4 234.3 157.7 151.1 150.9 4.6
Other................. 282.3 12.1 245.3 9.8 104.2 11.1
-------- -------- -------- -------- -------- --------
Total South America
and the Caribbean.. 567.7 246.4 403.0 160.9 255.1 15.7
-------- -------- -------- -------- -------- --------
Asia
Japan................. 34.5 0.6 103.6 0.7 67.5 0.5
India................. 81.1 16.4 85.1 12.4 79.9 14.7
China................. 35.1 0.7 27.7 1.2 63.4 1.7
Other................. 139.4 0.9 108.5 0.5 65.5 0.6
-------- -------- -------- -------- -------- --------
Total Asia.......... 290.1 18.6 324.9 14.8 276.3 17.5
-------- -------- -------- -------- -------- --------
Total Middle East....... 14.0 -- 11.9 -- 20.0 --
Total Africa............ 74.4 0.2 75.2 0.3 54.2 0.3
-------- -------- -------- -------- -------- --------
Total............... $7,287.6 $5,937.8 $5,560.3 $5,130.3 $3,480.6 $3,880.5
======== ======== ======== ======== ======== ========

Note 20: Commitments and Contingencies

In connection with the sale by Hughes of the Satellite Businesses to Boeing,
the terms of the stock purchase agreement provide for an adjustment to the
purchase price based upon the final closing net assets of the Satellite
Businesses compared to the estimated closing net assets. The stock purchase
agreement also provides a process for resolving any disputes that might arise in
connection with the final determination of the final closing net assets.

Boeing recently submitted proposed changes to the closing net assets, which
Hughes is currently reviewing. It is possible that the ultimate resolution of
these proposed changes may result in Hughes making a cash payment to Boeing that
would be material to Hughes. Although Hughes believes it has adequately provided
for an adjustment to the purchase price, the total amount of any such adjustment
cannot be determined at this time.

Additionally, as part of the sale of the Satellite Businesses, Hughes
retained limited liability for certain possible fines and penalties and the
financial consequences of debarment associated with potential criminal
violations of U.S. export control laws, which are currently being investigated,
related to the businesses now owned by Boeing, should such sanctions be imposed
by either the Department of Justice or State Department against the Satellite
Businesses. Hughes does not expect any sanctions imposed to have a material
adverse effect on its consolidated financial statements.

IV-67

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (continued)

In connection with the 1997 spin-off of Hughes defense electronics business
and the subsequent merger of that business with Raytheon, the terms of the
merger agreement provided processes for resolving disputes that might arise in
connection with post-closing financial adjustments that were also called for by
the terms of the merger agreement. These financial adjustments might require a
cash payment from Raytheon to Hughes or vice versa.

A dispute currently exists regarding the post-closing adjustments which
Hughes and Raytheon have proposed to one another and related issues regarding
the adequacy of disclosures made by Hughes to Raytheon in the period prior to
consummation of the merger. Hughes and Raytheon are proceeding with the dispute
resolution process. It is possible that the ultimate resolution of the
post-closing financial adjustment and of related disclosure issues may result in
Hughes making a payment to Raytheon that would be material to Hughes. However,
the amount of any payment that either party might be required to make to the
other cannot be determined at this time. Hughes intends to vigorously pursue
resolution of the disputes through the arbitration processes, opposing the
adjustments proposed by Raytheon, and seeking the payment from Raytheon that
Hughes has proposed.

General Electric Capital Corporation ("GECC") and DIRECTV entered into a
contract on July 31, 1995, in which GECC agreed to establish and manage a
private label consumer credit program for consumer purchases of hardware and
related DIRECTV programming. Under the contract, GECC also agreed to provide
certain related services to DIRECTV, including credit risk scoring, billing and
collections services. DIRECTV agreed to act as a surety for loans complying with
the terms of the contract. Hughes guaranteed DIRECTV's performance under the
contract. A complaint and counterclaim were filed by the parties in the U.S.
District Court for the District of Connecticut concerning GECC's performance and
DIRECTV's obligation to act as a surety. A trial commenced on June 12, 2000 with
GECC presenting evidence to the jury for damages of $157 million. DIRECTV sought
damages from GECC of $45 million. On July 21, 2000, the jury returned a verdict
in favor of GECC and awarded contract damages in the amount of $133.0 million.
The trial judge issued an order granting GECC $48.5 million in interest under
Connecticut's offer-of- judgment statute. With this order, the total judgment
entered in GECC's favor was $181.5 million. Hughes and DIRECTV filed a notice of
appeal on December 29, 2000. Hughes and DIRECTV believe that it is reasonably
possible that the jury verdict will be overturned and a new trial granted.
Although it is not possible to predict the result of any eventual appeal in this
case, Hughes does not believe that the litigation will ultimately have a
material adverse impact on Hughes' consolidated financial statements.

Hughes Communications Galaxy, Inc. ("HCGI") filed a lawsuit on March 22, 1991
against the U.S. Government based upon the National Aeronautics and Space
Administration's breach of contract to launch ten satellites on the Space
Shuttle. The U.S. Court of Federal Claims granted HCGI's motion for summary
judgment on the issue of liability on November 30, 1995. A trial was held on May
1, 1998 on the issue of damages. On June 30, 2000, a final judgment was entered
in favor of HCGI in the amount of $103 million. On July 13, 2000, HCGI filed a
notice to appeal the judgment with the U.S. Court of Appeals for the Federal
Circuit and is requesting a greater amount than was previously awarded to HCGI.
On August 4, 2000, the Government filed its cross appeal. As a result of the
uncertainty regarding the outcome of this matter, no amount has been recorded in
the consolidated financial statements to reflect the award. Final resolution of
this issue could result in a gain that would be material to Hughes.

Litigation is subject to uncertainties and the outcome of individual
litigated matters is not predictable with assurance. In addition to the above
items, various legal actions, claims, and proceedings are pending against
Hughes, including those arising out of alleged breaches of contractual
relationships; antitrust and patent infringement matters; and other items
arising in the ordinary course of business. Hughes has established reserves for
matters in which losses are probable and can be reasonably estimated. Some of
the matters may involve compensatory, punitive, or other 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 December 31, 2000. After
discussion with counsel, it is the opinion of management that such liability is
not expected to have a material adverse effect on Hughes' consolidated financial
statements.

IV-68

HUGHES ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (concluded)

At December 31, 2000, minimum future commitments under noncancelable
operating leases having lease terms in excess of one year are primarily for real
property and aggregated $141.0 million, payable as follows: $31.2 million in
2001, $26.0 million in 2002, $20.2 million in 2003, $15.9 million in 2004, $19.1
million in 2005 and $28.6 million thereafter. Certain of these leases contain
escalation clauses and renewal or purchase options. Rental expenses under
operating leases, net of sublease rental income, were $55.9 million in 2000,
$58.5 million in 1999 and $82.7 million in 1998.

In connection with the Direct-To-Home Broadcast businesses, Hughes has
commitments related to certain programming agreements which are variable based
upon the number of underlying subscribers and market penetration rates. Minimum
payments over the terms of applicable contracts are anticipated to be
approximately $1.3 billion.

As part of a marketing agreement entered into with AOL on June 21, 1999,
Hughes committed to increase its sales and marketing expenditures over the next
three years by approximately $1.5 billion relating to DirecPC(R)/AOL- Plus,
DIRECTV(R), DIRECTV(TM)/AOL TV and DirecDuo(TM). At December 31, 2000, Hughes'
remaining commitment under this agreement was approximately $1.1 billion.

* * *

IV-69

HUGHES ELECTRONICS CORPORATION

SUPPLEMENTAL INFORMATION

Selected Quarterly Data (Unaudited) 1st 2nd 3rd 4th
- ----------------------------------- -------- -------- -------- --------
(Dollars in Millions Except Per
Share Amounts)

2000 Quarters
Revenues............................... $1,703.1 $1,837.0 $1,688.5 $2,059.0
-------- -------- -------- --------
Loss from continuing operations before
income taxes and minority interests... $ (337.7) $ (141.8) $ (201.7) $ (134.4)
Income tax benefit..................... (221.8) (54.8) (77.8) (51.7)
Minority interests in net losses of
subsidiaries.......................... 7.6 4.5 19.6 22.4
Income (loss) from discontinued
operations............................ 26.4 13.4 10.5 (14.2)
Gain on sale of discontinued
operations, net of taxes.............. -- -- -- 1,132.3
-------- -------- -------- --------
Net income (loss)...................... (81.9) (69.1) (93.8) 1,057.8
Earnings (loss) used for computation of
available separate consolidated net
income (loss)......................... $ (101.3) $ (87.9) $ (112.6) $1,034.7
======== ======== ======== ========
Average number of shares of General
Motors Class H common stock
outstanding (in millions)
(Numerator)........................... 413.4 562.7 873.9 874.9
Average Class H dividend base (in
millions) (Denominator)............... 1,294.5 1,297.0 1,297.8 1,298.7
Available separate consolidated net
income (loss)......................... $ (32.4) $ (38.1) $ (75.8) $ 697.1
Stock price range of General Motors
Class H common stock
High................................. $ 47.00 $ 41.58 $ 37.61 $ 38.00
Low.................................. $ 30.50 $ 27.33 $ 24.63 $ 21.33
1999 Quarters
Revenues............................... $ 918.4 $1,316.1 $1,627.8 $1,698.0
-------- -------- -------- --------
Loss from continuing operations before
income taxes and minority interests... $ (31.0) $ (70.8) $ (87.4) $ (470.8)
Income tax benefit..................... (13.4) (9.5) (36.8) (177.2)
Minority interests in net losses of
subsidiaries.......................... 6.5 6.8 8.8 9.9
Income (loss) from discontinued
operations............................ 84.1 (43.1) 6.9 51.9
-------- -------- -------- --------
Net income (loss)...................... 73.0 (97.6) (34.9) (231.8)
Earnings (loss) used for computation of
available separate consolidated net
income (loss)......................... $ 78.3 $ (93.9) $ (54.3) $ (251.3)
======== ======== ======== ========
Average number of shares of General
Motors Class H common stock
outstanding (in millions)
(Numerator)........................... 318.9 363.0 405.3 408.9
Average Class H dividend base (in
millions) (Denominator)............... 1,200.6 1,244.7 1,286.7 1,290.3
Available separate consolidated net
income (loss)......................... $ 20.8 $ (27.4) $ (17.1) $ (79.6)
Stock price range of General Motors
Class H common stock
High................................. $ 17.67 $ 21.29 $ 20.81 $ 32.54
Low.................................. $ 12.83 $ 16.31 $ 16.25 $ 18.65

IV-70

* * * * * *