<Page>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549

                                   FORM 10-Q

<Table>
<C>        <S>
   /X/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

           FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

                                  OR

   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

            FOR THE TRANSITION PERIOD FROM               TO
</Table>

                        COMMISSION FILE NUMBER 000-51205

                           DISCOVERY HOLDING COMPANY
             (Exact name of Registrant as specified in its charter)

<Table>
<S>                                         <C>
            STATE OF DELAWARE                               20-2471174
     (State or other jurisdiction of           (I.R.S. Employer Identification No.)
      incorporation or organization)

         12300 LIBERTY BOULEVARD
           ENGLEWOOD, COLORADO                                80112
 (Address of principal executive offices)                   (Zip Code)
</Table>

       Registrant's telephone number, including area code: (720) 875-4000

    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes / /  No /X/

    Indicate by check mark whether the Registrant is an accelerated filer as
defined in Rule 12b-2 of the Exchange Act. Yes / /  No /X/

    Indicate by check mark whether the registrant is a shell company as defined
in Rule 12b-2 of the Exchange Act. Yes / /  No /X/

    The number of outstanding shares of Discovery Holding Company's common stock
as of October 31, 2005 was:

                 Series A common stock 268,093,392 shares; and
                    Series B common stock 12,106,093 shares.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<Page>
                           DISCOVERY HOLDING COMPANY

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                  (UNAUDITED)

<Table>
<Caption>
                                                              SEPTEMBER 30,    DECEMBER 31,
                                                                   2005            2004*
                                                              --------------   -------------
                                                                   AMOUNTS IN THOUSANDS
<S>                                                           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................    $  227,503          21,641
  Trade receivables, net....................................       148,510         151,120
  Prepaid expenses and other current assets.................        18,621          26,208
                                                                ----------      ----------
    Total current assets....................................       394,634         198,969
  Investment in Discovery Communications, Inc. ("Discovery")
    (note 7)................................................     3,011,716       2,945,782
  Property, plant, and equipment, net.......................       273,718         258,741
  Goodwill and other intangible assets, net (note 6)........     2,138,071       2,140,355
  Other assets, net.........................................         6,545          20,981
                                                                ----------      ----------
    Total assets............................................    $5,824,684       5,564,828
                                                                ==========      ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................    $   37,223          33,327
  Accrued payroll and related liabilities...................        26,886          23,632
  Other accrued liabilities.................................        24,848          29,606
  Deferred revenue..........................................        15,501          20,858
  Due to Liberty............................................            --           1,104
                                                                ----------      ----------
    Total current liabilities...............................       104,458         108,527
Deferred income tax liabilities.............................     1,128,136       1,083,964
Other liabilities...........................................        25,028          25,058
                                                                ----------      ----------
    Total liabilities.......................................     1,257,622       1,217,549
                                                                ----------      ----------
Commitments and contingencies (note 9)
Stockholders' equity:
  Preferred stock, $.01 par value. Authorized 50,000,000
    shares; no shares issued................................            --              --
  Series A common stock, $.01 par value. Authorized
    600,000,000 shares; issued and outstanding 268,093,392
    shares at September 30, 2005............................         2,681              --
  Series B common stock, $.01 par value. Authorized
    50,000,000 shares; issued and outstanding 12,106,093
    shares at September 30, 2005............................           121              --
  Series C common stock, $.01 par value. Authorized
    600,000,000 shares; no shares issued....................            --              --
  Additional paid-in capital................................     5,711,530              --
  Parent's investment.......................................            --       5,506,066
  Accumulated deficit.......................................    (1,149,056)     (1,171,097)
  Accumulated other comprehensive earnings..................         1,786          12,310
                                                                ----------      ----------
    Total stockholders' equity..............................     4,567,062       4,347,279
                                                                ----------      ----------
    Total liabilities and stockholders' equity..............    $5,824,684       5,564,828
                                                                ==========      ==========
</Table>

------------------------

*   See notes 1 and 2.

     See accompanying notes to condensed consolidated financial statements.

                                      I-1
<Page>
                           DISCOVERY HOLDING COMPANY

   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS
                                     (LOSS)

                                  (UNAUDITED)

<Table>
<Caption>
                                                         THREE MONTHS ENDED     NINE MONTHS ENDED
                                                            SEPTEMBER 30,         SEPTEMBER 30,
                                                         -------------------   -------------------
                                                           2005      2004*       2005      2004*
                                                         --------   --------   --------   --------
                                                                   AMOUNTS IN THOUSANDS
<S>                                                      <C>        <C>        <C>        <C>
Net revenue............................................  $167,934   151,924    520,243    458,344
Cost of services (excluding depreciation shown
  below)...............................................   109,323    91,268    335,767    275,081
                                                         --------   -------    -------    -------
    Gross profit.......................................    58,611    60,656    184,476    183,263
                                                         --------   -------    -------    -------
Operating expenses:
  Selling, general, and administrative.................    42,004    38,343    129,353    113,079
  Stock-based compensation (note 3)....................       126       545      3,743      1,613
  Depreciation and amortization........................    17,884    18,304     54,888     53,530
                                                         --------   -------    -------    -------
                                                           60,014    57,192    187,984    168,222
                                                         --------   -------    -------    -------
  Operating income (loss)..............................    (1,403)    3,464     (3,508)    15,041
Other income (expense):
  Share of earnings of Discovery (note 7)..............    33,233    20,360     71,443     58,370
  Other, net...........................................     1,680      (285)     1,697        (37)
                                                         --------   -------    -------    -------
                                                           34,913    20,075     73,140     58,333
                                                         --------   -------    -------    -------
  Earnings before income taxes.........................    33,510    23,539     69,632     73,374
Income tax expense.....................................   (32,321)   (7,353)   (47,591)   (23,011)
                                                         --------   -------    -------    -------
  Net earnings.........................................  $  1,189    16,186     22,041     50,363
                                                         --------   -------    -------    -------
Other comprehensive loss, net of taxes:
  Unrealized holding gains (losses) arising during the
    period.............................................      (399)     (242)       212       (471)
  Foreign currency translation adjustments.............    (2,714)      (69)   (10,736)    (1,502)
                                                         --------   -------    -------    -------
  Other comprehensive loss.............................    (3,113)     (311)   (10,524)    (1,973)
                                                         --------   -------    -------    -------
Comprehensive earnings (loss)..........................  $ (1,924)   15,875     11,517     48,390
                                                         ========   =======    =======    =======
Pro forma basic and diluted earnings per common share
  (note 4).............................................  $     --       .06        .08        .18
                                                         ========   =======    =======    =======
</Table>

------------------------

*   See notes 1 and 2.

     See accompanying notes to condensed consolidated financial statements.

                                      I-2
<Page>
                           DISCOVERY HOLDING COMPANY

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (UNAUDITED)

<Table>
<Caption>
                                                                NINE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                              ---------------------
                                                                2005        2004*
                                                              ---------   ---------
                                                              AMOUNTS IN THOUSANDS
<S>                                                           <C>         <C>
Cash flows from operating activities:
  Net earnings..............................................  $ 22,041      50,363
  Adjustments to reconcile net earnings to net cash provided
    by operating activities:
    Depreciation and amortization...........................    54,888      53,530
    Stock-based compensation................................     3,743       1,613
    Payments for stock-based compensation...................    (2,139)         --
    Share of earnings of Discovery..........................   (71,443)    (58,370)
    Deferred income tax expense.............................    46,669      22,862
    Other non-cash charges, net.............................       323         753
  Changes in assets and liabilities (net of acquisitions):
    Trade receivables.......................................     2,600     (18,388)
    Prepaid expenses and other current assets...............     7,566     (10,290)
    Payables and other liabilities..........................    (2,412)     21,509
                                                              --------     -------
      Net cash provided by operating activities.............    61,836      63,582
                                                              --------     -------
Cash flows from investing activities:
  Capital expenditures......................................   (74,509)    (33,438)
  Cash paid for acquisitions, net of cash acquired..........        --     (34,057)
  Other investing activities, net...........................    12,498       3,262
                                                              --------     -------
      Net cash used in investing activities.................   (62,011)    (64,233)
                                                              --------     -------
Cash flows from financing activities:
  Net cash transfers from Liberty...........................   206,044      30,999
  Other financing activities, net...........................        (7)         --
                                                              --------     -------
      Net cash provided by financing activities.............   206,037      30,999
                                                              --------     -------
      Net increase in cash and cash equivalents.............   205,862      30,348
Cash and cash equivalents at beginning of period............    21,641       8,599
                                                              --------     -------
Cash and cash equivalents at end of period..................  $227,503      38,947
                                                              ========     =======
</Table>

------------------------

*   See notes 1 and 2.

     See accompanying notes to condensed consolidated financial statements.

                                      I-3
<Page>
                           DISCOVERY HOLDING COMPANY

            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                      NINE MONTHS ENDED SEPTEMBER 30, 2005

                                  (UNAUDITED)
<Table>
<Caption>

                                                     COMMON STOCK              ADDITIONAL
                               PREFERRED   ---------------------------------    PAID-IN      PARENT'S    ACCUMULATED
                                 STOCK     SERIES A    SERIES B    SERIES C     CAPITAL     INVESTMENT     DEFICIT
                               ---------   ---------   ---------   ---------   ----------   ----------   -----------
                                                               AMOUNTS IN THOUSANDS
<S>                            <C>         <C>         <C>         <C>         <C>          <C>          <C>
Balance at January 1, 2005...  $    --          --         --           --            --     5,506,066   (1,171,097)
  Net earnings...............       --          --         --           --            --            --       22,041
  Other comprehensive loss...       --          --         --           --            --            --           --
  Net cash transfers from
    Liberty..................       --          --         --           --            --       206,044           --
  Stock-based compensation...       --          --         --           --            --         2,222           --
  Change in capitalization in
    connection with Spin Off
    (note 2).................       --       2,681        121           --     5,711,530    (5,714,332)          --
                               ---------     -----        ---      ---------   ---------    ----------   ----------
Balance at September 30,
  2005.......................  $    --       2,681        121           --     5,711,530            --   (1,149,056)
                               =========     =====        ===      =========   =========    ==========   ==========

<Caption>
                                ACCUMULATED
                                   OTHER
                               COMPREHENSIVE
                                  INCOME         TOTAL
                               -------------   ---------
                                 AMOUNTS IN THOUSANDS
<S>                            <C>             <C>
Balance at January 1, 2005...      12,310      4,347,279
  Net earnings...............          --         22,041
  Other comprehensive loss...     (10,524)       (10,524)
  Net cash transfers from
    Liberty..................          --        206,044
  Stock-based compensation...          --          2,222
  Change in capitalization in
    connection with Spin Off
    (note 2).................          --             --
                                  -------      ---------
Balance at September 30,
  2005.......................       1,786      4,567,062
                                  =======      =========
</Table>

     See accompanying notes to condensed consolidated financial statements.

                                      I-4
<Page>
                           DISCOVERY HOLDING COMPANY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

(1) BASIS OF PRESENTATION

    The accompanying condensed consolidated financial statements of Discovery
Holding Company ("DHC" or the "Company") represent a combination of the
historical financial information of (1) Ascent Media Group, LLC (formerly known
as Ascent Media Group, Inc., "Ascent Media"), a wholly-owned subsidiary of
Liberty Media Corporation ("Liberty"), and Liberty's 50% ownership interest in
Discovery for periods prior to the July 21, 2005 consummation of the spin off
transaction (the "Spin Off") described in note 2 and (2) DHC and its
consolidated subsidiaries for the period following such date. The Spin Off has
been accounted for at historical cost due to the pro rata nature of the
distribution. Accordingly, DHC's historical financial statements are presented
in a manner similar to a pooling of interest.

    Ascent Media is comprised of three operating divisions or groups. Ascent
Media's Creative Services group provides services necessary to complete the
creation of original content, including feature films, mini-series, television
shows, television commercials, music videos, promotional and identity campaigns,
and corporate communications programming. The group manipulates or enhances
original visual images or audio captured in principal photography or creates new
three dimensional images, animation sequences, or sound effects. The Media
Management Services group provides owners of content libraries with an entire
complement of facilities and services necessary to optimize, archive, manage,
and repurpose media assets for global distribution via freight, satellite,
fiber, and the Internet. The Networks Services group provides the facilities and
services necessary to assemble and distribute programming content for cable and
broadcast networks via fiber, satellite, and the Internet to viewers in North
America, Europe, and Asia. Additionally, the Networks Services group provides
systems integration, design, consulting, engineering and project management
services.

    Discovery is a global media and entertainment company that provides original
and purchased cable and satellite television programming in the United States
and over 160 other countries. Discovery also develops and sells branded commerce
and educational product lines in the United States.

    The accompanying interim condensed consolidated financial statements are
unaudited but, in the opinion of management, reflect all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation of the results
for such periods. The results of operations for any interim period are not
necessarily indicative of results for the full year. These condensed
consolidated financial statements should be read in conjunction with the LMC
Discovery Group December 31, 2004 combined financial statements and notes
thereto included in the Company's Information Statement, which was filed as
Exhibit 99.1 to Amendment No. 3 to the Company's Registration Statement on
Form 10, as filed with the Securities and Exchange Commission on July 7, 2005
(the "Information Statement").

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the reported amounts of
revenue and expenses for each reporting period. The significant estimates made
in preparation of the Company's consolidated financial statements primarily
relate to valuation of goodwill, other intangible assets, long-lived assets,
deferred tax assets, and the amount of the allowance for doubtful accounts.
Actual results could differ from the estimates upon which the carrying values
were based.

                                      I-5
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

(2) SPIN OFF TRANSACTION

    During the first quarter of 2005, the Board of Directors of Liberty approved
a resolution to spin off the capital stock of DHC to the holders of Liberty
Series A and Series B common stock. The Spin Off was completed on July 21, 2005
(the "Spin Off Date") and was effected as a dividend by Liberty to holders of
its Series A and Series B common stock of shares of DHC Series A and Series B
common stock, respectively. Holders of Liberty common stock on July 15, 2005
(the "Record Date") received 0.10 of a share of DHC Series A common stock for
each share of Liberty Series A common stock owned and 0.10 of a share of DHC
Series B common stock for each share of Liberty Series B common stock owned.
Approximately 268.1 million shares of DHC Series A common stock and
12.1 million shares of DHC Series B common stock were issued in the Spin Off.
The Spin Off did not involve the payment of any consideration by the holders of
Liberty common stock and is intended to qualify as a tax-free transaction.

    In addition to Ascent Media and its investment in Discovery, Liberty
transferred $200 million in cash to a subsidiary of DHC prior to the Spin Off.

    Following the Spin Off, the Company and Liberty operate independently, and
neither has any stock ownership, beneficial or otherwise, in the other. In
connection with the Spin Off, the Company and Liberty entered into certain
agreements in order to govern certain of the ongoing relationships between the
Company and Liberty after the Spin Off and to provide for an orderly transition.
These agreements include a Reorganization Agreement, a Services Agreement and a
Tax Sharing Agreement.

    The Reorganization Agreement provides for, among other things, the principal
corporate transactions required to effect the Spin Off and cross indemnities.
Pursuant to the Services Agreement, Liberty will provide the Company with office
space and certain general and administrative services including legal, tax,
accounting, treasury and investor relations support. The Company will reimburse
Liberty for direct, out-of-pocket expenses incurred by Liberty in providing
these services and for the Company's allocable portion of facilities costs and
costs associated with any shared services or personnel. Liberty and DHC have
agreed that they will review cost allocations every six months and adjust such
charges, if appropriate.

    Under the Tax Sharing Agreement, Liberty will generally be responsible for
U.S. federal, state, local and foreign income taxes reported on a consolidated,
combined or unitary return that includes the Company or one of its subsidiaries
and Liberty or one of its subsidiaries. The Company will be responsible for all
other taxes that are attributable to the Company or one of its subsidiaries,
whether accruing before, on or after the Spin Off. The Tax Sharing Agreement
requires that the Company will not take, or fail to take, any action where such
action, or failure to act, would be inconsistent with or prohibit the Spin Off
from qualifying as a tax-free transaction. Moreover, the Company has indemnified
Liberty for any loss resulting from (i) such action or failure to act or
(ii) any agreement, understanding, arrangement or substantial negotiations
entered into by DHC prior to the day after the first anniversary of the Spin Off
Date, with respect to any transaction pursuant to which any of the other
shareholders in Discovery would acquire shares of, or other interests in DHC's
capital stock, in each case relating to the qualification of the Spin Off as a
tax-free transaction.

                                      I-6
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

(3) STOCK-BASED COMPENSATION

    As a result of the Spin Off and related adjustments to Liberty's stock
incentive awards, options to acquire an aggregate of approximately 2.0 million
shares of DHC Series A common stock and 3.0 million shares of DHC Series B
common stock were issued to employees of Liberty. In addition, employees of
Ascent Media who held stock options to acquire shares of Liberty common stock
prior to the Spin Off continue to hold such options. Pursuant to the
Reorganization Agreement, DHC is responsible for all stock options related to
DHC common stock, and Liberty is responsible for all incentive awards related to
Liberty common stock. Notwithstanding the foregoing, the Company records
stock-based compensation for all stock incentive awards held by DHC's and its
subsidiaries' employees regardless of whether such awards relate to DHC common
stock or Liberty common stock. Any stock-based compensation recorded by DHC with
respect to Liberty stock incentive awards is treated as a capital transaction
with the offset to stock-based compensation expense reflected as an adjustment
of additional paid-in capital.

    The Company applies the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES, and related interpretations including FASB
Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK
COMPENSATION, AN INTERPRETATION OF APB OPINION NO. 25, to account for its
fixed-plan stock options. Under this method, compensation expense is recorded on
the date of grant only if the current market price of the underlying stock
exceeds the exercise price and is recognized on a straight-line basis over the
vesting period. Statement of Financial Accounting Standards No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION ("SFAS No. 123"), established accounting and
disclosure requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. As allowed by SFAS No. 123, the Company
has elected to continue to apply the intrinsic-value-based method of accounting
described above and has adopted only the disclosure requirements of SFAS
No. 123.

                                      I-7
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

    The following table illustrates the effect on net earnings as if the
fair-value-based method had been applied to all outstanding and unvested awards
in each period.

<Table>
<Caption>
                                                THREE MONTHS           NINE MONTHS
                                                    ENDED                 ENDED
                                                SEPTEMBER 30,         SEPTEMBER 30,
                                             -------------------   -------------------
                                               2005       2004       2005       2004
                                             --------   --------   --------   --------
                                                       AMOUNTS IN THOUSANDS
<S>                                          <C>        <C>        <C>        <C>
Net earnings, as reported..................  $ 1,189     16,186     22,041     50,363
Add:
  Stock-based employee compensation expense
    included in reported net earnings......      119        562      2,222      1,724
Deduct:
  Stock-based employee compensation expense
    determined under fair value based
    method for all awards..................   (1,574)    (1,466)    (8,890)    (4,325)
                                             -------     ------     ------     ------
    Pro forma net earnings (loss)..........  $  (266)    15,282     15,373     47,762
                                             =======     ======     ======     ======
Pro forma basic and diluted earnings per
  share:
  As reported..............................  $    --        .06        .08        .18
                                             =======     ======     ======     ======
  Pro forma for fair value stock
    compensation...........................  $    --        .05        .05        .17
                                             =======     ======     ======     ======
</Table>

    On May 24, 2005, Liberty commenced an offer to purchase certain stock
options and stock appreciation rights ("SARs") held by eligible employees of
Ascent Media. The offer to purchase related to 1,173,028 options and SARs, and
the aggregate offering price for such options and SARs was approximately
$2.15 million. The offer to purchase expired at 9:00 p.m., Pacific time, on
June 21, 2005. Eligible employees tendered options with respect to 1,121,673
shares of Liberty Series A common stock, and Liberty purchased such options for
aggregate cash payments of approximately $2.14 million. In connection with these
purchases, Ascent Media recorded compensation expense of $3,205,000, which
included (1) the amount of the cash payments less any previously accrued
compensation for the SARs and (2) the previously unamortized in-the-money value
related to certain of the Ascent options. Such amount is included in net
earnings for the nine months ended September 30, 2005.

    In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (revised 2004), "SHARE-BASED PAYMENTS"
("Statement 123R"). Statement 123R, which is a revision of SFAS No. 123 and
supersedes APB Opinion No. 25, establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services, primarily focusing on transactions in which an entity obtains employee
services. Statement 123R generally requires companies to measure the cost of
employee services received in exchange for an award of equity instruments (such
as stock options and restricted stock) based on the grant-date fair value of the
award, and to recognize that cost over the period during which the employee is
required to provide service (usually the vesting period of the award).
Statement 123R also requires companies to measure the cost of employee services
received in exchange for an award of liability instruments (such as stock
appreciation rights) based on the current fair value of the award, and to
remeasure the fair value of the award at each reporting date.

                                      I-8
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

    Public companies are required to adopt Statement 123R as of the beginning of
a registrant's next fiscal year, or January 1, 2006 for calendar-year companies,
such as DHC. The provisions of Statement 123R will affect the accounting for all
awards granted, modified, repurchased or cancelled after December 31, 2005. The
accounting for awards granted, but not vested, prior to January 1, 2006 will
also be impacted. The provisions of Statement 123R allow companies to adopt the
standard on a prospective basis or to restate all periods for which Statement
123 was effective. The Company expects to adopt Statement 123R on a prospective
basis, and will include in its financial statements for periods that begin after
December 31, 2005 pro forma information as though the standard had been adopted
for all periods presented.

    While the Company has not yet quantified the impact of adopting
Statement 123R, it believes that such adoption could have a significant impact
on its operating income and net earnings in the future.

(4) PRO FORMA EARNINGS PER COMMON SHARE

    Pro forma basic earnings per common share ("EPS") is computed by dividing
net earnings by the pro forma number of common shares outstanding for the
period. The pro forma number of shares outstanding for periods prior to the Spin
Off Date is 280,199,000 shares, which is the number of shares that were issued
on the Spin Off Date. Dilutive EPS presents the dilutive effect on a per shares
basis of potential common shares as if they had been converted at the beginning
of the periods presented. Due to the relative insignificance of the dilutive
securities in 2005 and 2004, their inclusion does not impact the EPS amount as
reported in the accompanying condensed consolidated statements of operations.

(5) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<Table>
<Caption>
                                                             NINE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                            --------------------
                                                              2005        2004
                                                            ---------   --------
                                                                 AMOUNTS IN
                                                                 THOUSANDS
<S>                                                         <C>         <C>
Cash paid for acquisitions:
  Fair value of assets acquired...........................  $     --     50,262
  Net liabilities assumed.................................        --    (16,205)
                                                            ---------   -------
    Cash paid for acquisitions, net of cash acquired......  $     --     34,057
                                                            =========   =======
</Table>

                                      I-9
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

(6) GOODWILL AND OTHER INTANGIBLE ASSETS

    Goodwill and other intangible assets are comprised of the following:

<Table>
<Caption>
                                                      SEPTEMBER 30,    DECEMBER 31,
                                                           2005            2004
                                                      --------------   -------------
                                                           AMOUNTS IN THOUSANDS
<S>                                                   <C>              <C>
Goodwill
  Creative Services Group...........................    $  106,599         107,377
  Media Management Services Group...................        93,369          93,350
  Network Services Group............................       163,086         163,719
  Discovery.........................................     1,771,000       1,771,000
                                                        ----------       ---------
    Total goodwill..................................     2,134,054       2,135,446
Trademarks..........................................         2,440           2,440
Other intangible assets.............................         1,577           2,469
                                                        ----------       ---------
    Total goodwill and other intangibles............    $2,138,071       2,140,355
                                                        ==========       =========
</Table>

    GAAP requires companies to allocate enterprise-level goodwill to all
reporting units, including equity method investments. Accordingly, the Company
has allocated $1,771,000,000 of enterprise-level goodwill to its investment in
Discovery. This allocation is performed for goodwill impairment testing purposes
only and does not change the reported carrying value of the investment. However,
to the extent the investment is disposed of in the future, the allocated
goodwill will be relieved and included in the calculation of the gain or loss on
disposal.

(7) INVESTMENT IN DISCOVERY

    The Company has a 50% ownership interest in Discovery and accounts for its
investment using the equity method of accounting. Discovery is a global media
and entertainment company, that provides original and purchased video
programming in the United States and over 160 other countries. Discovery also
develops and sells branded commerce and educational product lines in the United
States.

    DHC's carrying value for Discovery was $3,011,716,000 at September 30, 2005.
In addition, as described in note 6, enterprise-level goodwill of $1,771,000,000
has been allocated to the investment in Discovery.

                                      I-10
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

    Summarized financial information for Discovery is as follows:

    CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                      SEPTEMBER 30,    DECEMBER 31,
                                                           2005            2004
                                                      --------------   -------------
                                                           AMOUNTS IN THOUSANDS
<S>                                                   <C>              <C>
Current assets......................................    $  854,466         835,450
Property and equipment, net.........................       396,804         380,290
Goodwill and intangible assets......................       410,179         445,221
Programming rights, long term.......................     1,129,819       1,027,379
Other assets........................................       345,587         547,346
                                                        ----------       ---------
  Total assets......................................    $3,136,855       3,235,686
                                                        ==========       =========
Current liabilities.................................    $  867,473         885,353
Long term debt......................................     2,413,431       2,498,287
Other liabilities...................................       100,025         160,405
Mandatorily redeemable equity in subsidiaries.......       252,169         319,567
Stockholders' deficit...............................      (496,243)       (627,926)
                                                        ----------       ---------
  Total liabilities and stockholders' deficit.......    $3,136,855       3,235,686
                                                        ==========       =========
</Table>

    CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                          NINE MONTHS ENDED
                                                            SEPTEMBER 30,
                                                        ----------------------
                                                           2005        2004
                                                        ----------   ---------
                                                         AMOUNTS IN THOUSANDS
<S>                                                     <C>          <C>
Revenue...............................................  $1,900,549   1,672,483
Cost of revenue.......................................    (659,861)   (575,405)
Selling, general and administrative...................    (737,843)   (615,770)
Equity-based compensation.............................     (18,786)    (80,857)
Depreciation and amortization.........................     (90,579)    (97,706)
Gain on sale of patents...............................          --      22,007
                                                        ----------   ---------
  Operating income....................................     393,480     324,752
Interest expense......................................    (130,212)   (124,008)
Other income (expense)................................       9,388       6,795
Income tax expense....................................    (129,770)    (90,798)
                                                        ----------   ---------
  Net earnings........................................  $  142,886     116,741
                                                        ==========   =========
</Table>

(8) ACQUISITIONS

    LONDON PLAYOUT CENTRE.

    On March 12, 2004, pursuant to an Agreement for the Sale and Purchase (the
"Purchase Agreement"), Ascent Media acquired all of the issued share capital of
London Playout Centre Limited

                                      I-11
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

("LPC") from an independent third party (the "Seller") for a purchase price of
$36,573,000 paid at closing. In addition, in the event certain existing LPC
contracts, which were to expire in 2005 through 2007, were renewed on terms
similar to existing terms, Ascent Media would have been required to pay up to an
additional L5,000,000. As of September 30, 2005, all contracts subject to this
contingency had expired or been terminated, and no contingent purchase price was
owed by Ascent Media. LPC is a UK-based television channel origination facility.
The purchase was funded, in part, by proceeds from Liberty.

    The following unaudited pro forma information for the nine months ended
September 30, 2004 was prepared assuming the acquisition of LPC occurred on
January 1, 2004. However, these pro forma amounts are not necessarily indicative
of operating results that would have occurred if the LPC acquisition had
occurred on January 1, 2004 (amounts in thousands):

<Table>
<S>                                                           <C>
Revenue.....................................................  $466,847
Net earnings................................................  $ 49,413
Pro forma earnings per common share.........................  $    .18
</Table>

(9) COMMITMENTS AND CONTINGENCIES

    The Company is involved in litigation and similar claims incidental to the
conduct of its business. In management's opinion, none of the pending actions is
likely to have a material adverse impact on the Company's financial position or
results of operations.

    The Company and its subsidiaries lease offices, satellite transponders and
certain equipment under lease arrangements.

(10) RELATED PARTY TRANSACTIONS

    Certain third-party general and administrative and spin off related costs
were paid by Liberty on behalf of the Company prior to the Spin Off and
reflected as expenses in the accompanying condensed consolidated statements of
operations. In addition, certain general and administrative expenses are charged
by Liberty to DHC pursuant to the Services Agreement. Such expenses aggregated
$4,655,000 for the nine months ended September 30, 2005.

    Since October 1, 2002, Ascent Media has provided uplink and satellite
transport services to On Command Corporation ("On Command"), a wholly owned
subsidiary of Liberty, pursuant to the terms of a short-term services agreement
and a content preparation and distribution services agreement, which continues
through March 31, 2008. The content preparation and distribution services
agreement also provides that Ascent Media may supply content preparation
services. During the period from April 2003 to October 2004, Ascent Media also
installed satellite equipment at On Command's downlink sites at hotels pursuant
to a separate services agreement. All agreements were entered into in the
ordinary course of business on arm's-length terms. Ascent Media has provided
$312,000 and $337,000 in services to On Command for the nine months ended
September 30, 2005 and 2004, respectively.

                                      I-12
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

    Ascent Media provides services such as satellite uplink, systems
integration, origination, and post-production to Discovery. Revenue recorded by
Ascent Media for these services for the nine months ended September 30, 2005 and
2004 aggregated $25,223,000 and $21,544,000, respectively.

(11) INFORMATION ABOUT OPERATING SEGMENTS

    The Company's business units have been aggregated into four reportable
segments: the Creative Services Group, the Media Management Services Group, and
the Network Services Group, which are all operating segments of Ascent Media,
and Discovery, which is an equity affiliate. Corporate related items and
unallocated income and expenses are reflected in the Corporate and Other column
listed below.

    The Creative Services Group provides post-production services, which are
comprised of services necessary to complete the creation of original content
including feature films, television shows, movies of the week/mini series,
television commercials, music videos, promotional and identity campaigns and
corporate communications programming. The Media Management Services Group
provides (i) content storage services, which are comprised of facilities and
services necessary to optimize, archive, manage and repurpose media assets for
global distribution via freight, satellite, fiber and the Internet; (ii) access
to all forms of content, duplication and formatting services; (iii) language
conversions and laybacks; (iv) restoration and preservation of old or damaged
content; (v) mastering from motion picture film to high resolution or data
formats; (vi) digital audio and video encoding services; and (vii) digital media
management services for global home video, broadcast, pay-per-view and emerging
new media distribution channels. The Network Services Group provides broadcast
services, which are comprised of services necessary to assemble and distribute
programming for cable and broadcast networks via fiber and satellite to viewers
in North America, Europe and Asia. Additionally, the Networks Services Group
provides systems integration, design, consulting, engineering and project
management services.

    The Company's chief operating decision maker, or his designee (the "CODM"),
has identified the Company's reportable segments based on (i) financial
information reviewed by the CODM and (ii) those operating segments that
represent more than 10% of the Company's consolidated revenue or earnings before
taxes. In addition, those equity investments whose share of earnings represent
more than 10% of the Company's earnings before taxes are considered reportable
segments.

    The accounting policies of the segments that are consolidated subsidiaries
are the same as those described in the summary of significant accounting
policies and are consistent with GAAP.

    The Company evaluates the performance of these operating segments based on
financial measures such as revenue and operating cash flow. The Company defines
operating cash flow as revenue less operating expenses and selling, general and
administrative expense (excluding stock and other equity-based compensation).
The Company believes this is an important indicator of the operational strength
and performance of its businesses, including the ability to service debt and
capital expenditures. In addition, this measure allows management to view
operating results and perform analytical comparisons and identify strategies to
improve performance. This measure of performance excludes depreciation and
amortization and stock and other equity-based compensation that are included in
the measurement of operating income pursuant to GAAP. Accordingly, operating
cash flow should be considered in addition

                                      I-13
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

to, but not as a substitute for, operating income, cash flow provided by
operating activities and other measures of financial performance prepared in
accordance with GAAP.

    The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
segment requires different technologies, distribution channels and marketing
strategies.

    Summarized financial information concerning the Company's reportable
segments is presented in the following tables:

<Table>
<Caption>
                                            MEDIA                              CORPORATE
                               CREATIVE   MANAGEMENT   NETWORK                 AND OTHER
                               SERVICES    SERVICES    SERVICES                   AND
                                GROUP       GROUP      GROUP(1)   DISCOVERY   ELIMINATIONS     TOTAL
                               --------   ----------   --------   ---------   ------------   ---------
                                                        AMOUNTS IN THOUSANDS
<S>                            <C>        <C>          <C>        <C>         <C>            <C>
Nine months ended
  September 30, 2005
  Revenue from external
    customers................  $225,008     87,778     207,457    1,900,549    (1,900,549)     520,243
  Operating cash flow........  $ 39,946      9,739      41,101      502,845      (538,508)      55,123
  Capital expenditures.......  $ 19,678     19,605      31,440       77,609       (73,823)      74,509
  Total assets...............  $297,132    170,737     292,868           --     5,063,947    5,824,684

Nine months ended
  September 30, 2004
  Revenue from external
    customers................  $219,746     79,058     159,540    1,672,483    (1,672,483)     458,344
  Operating cash flow........  $ 40,690     13,175      44,750      481,308      (509,739)      70,184
  Capital expenditures.......  $ 14,095      3,456      14,219       44,665       (42,997)      33,438
</Table>

------------------------

(1) Included in Network Services Group revenue is broadcast services revenue of
    $110,436,000 and $97,462,000 and systems integration revenue of $97,021,000
    and $62,078,000 for the nine months ended September 30, 2005 and 2004,
    respectively.

                                      I-14
<Page>
                           DISCOVERY HOLDING COMPANY

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 2005

                                  (UNAUDITED)

<Table>
<Caption>
                                                MEDIA                              CORPORATE
                                   CREATIVE   MANAGEMENT   NETWORK                 AND OTHER
                                   SERVICES    SERVICES    SERVICES                   AND
                                    GROUP       GROUP      GROUP(1)   DISCOVERY   ELIMINATIONS    TOTAL
                                   --------   ----------   --------   ---------   ------------   --------
                                                            AMOUNTS IN THOUSANDS
<S>                                <C>        <C>          <C>        <C>         <C>            <C>
Three months ended September 30,
  2005
  Revenue from external
    customers....................  $73,215      27,730      66,989     639,182      (639,182)    167,934
  Operating cash flow............  $12,187       1,291      14,327     170,580      (181,778)     16,607
  Capital expenditures...........  $ 9,481       7,728       4,990      16,980       (15,823)     23,356

Three months ended September 30,
  2004
  Revenue from external
    customers....................  $68,940      26,896      56,088     557,830      (557,830)    151,924
  Operating cash flow............  $12,364       4,094      15,437     161,028      (170,610)     22,313
  Capital expenditures...........  $ 5,103       1,472      11,080      20,148       (18,670)     19,133
</Table>

------------------------

(1) Included in Network Services Group revenue is broadcast services revenue of
    $38,781,000 and $36,802,000 and systems integration revenue of $28,208,000
    and $19,286,000 for the three months ended September 30, 2005 and 2004,
    respectively.

    The following table provides a reconciliation of segment operating cash flow
to earnings before income taxes.

<Table>
<Caption>
                                                             NINE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                           ---------------------
                                                             2005        2004
                                                           ---------   ---------
                                                           AMOUNTS IN THOUSANDS
<S>                                                        <C>         <C>
Segment operating cash flow..............................  $ 55,123      70,184
Stock-based compensation.................................    (3,743)     (1,613)
Depreciation and amortization............................   (54,888)    (53,530)
Share of earnings of Discovery...........................    71,443      58,370
Other, net...............................................     1,697         (37)
                                                           --------     -------
Earnings before income taxes.............................  $ 69,632      73,374
                                                           ========     =======
</Table>

    Information as to the Company's operations in different geographic areas is
as follows:

<Table>
<Caption>
                                                             NINE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                           ---------------------
                                                             2005        2004
                                                           ---------   ---------
                                                           AMOUNTS IN THOUSANDS
<S>                                                        <C>         <C>
Revenue
  United States..........................................  $392,562     334,231
  United Kingdom.........................................   113,537     106,259
  Other countries........................................    14,144      17,854
                                                           --------     -------
                                                           $520,243     458,344
                                                           ========     =======
</Table>

                                      I-15
<Page>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

    Certain statements in this Quarterly Report on Form 10-Q constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. To the extent that such statements are not
recitations of historical fact, such statements constitute forward-looking
statements which, by definition, involve risks and uncertainties. Where, in any
forward-looking statement, we express an expectation or belief as to future
results or events, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or accomplished.
The following include some but not all of the factors that could cause actual
results or events to differ materially from those anticipated:

    - general economic and business conditions and industry trends including the
      timing of, and spending on, feature film and television production;

    - spending on domestic and foreign television advertising and spending on
      domestic and foreign first-run and existing content libraries;

    - the regulatory and competitive environment of the industries in which we,
      and the entities in which we have interests, operate;

    - continued consolidation of the broadband distribution and movie studio
      industries;

    - fluctuations in foreign currency exchange rates and political unrest in
      international markets;

    - uncertainties inherent in the development and integration of new business
      lines, acquired businesses and business strategies;

    - uncertainties associated with product and service development and market
      acceptance, including the development and provision of programming for new
      television and telecommunications technologies;

    - changes in distribution and viewing of television programming, including
      the expanded deployment of personal video recorders, video on demand and
      IP television and their impact on television advertising revenue;

    - rapid technological changes;

    - future financial performance, including availability, terms and deployment
      of capital;

    - the ability of suppliers and vendors to deliver products, equipment,
      software and services;

    - the outcome of any pending or threatened litigation;

    - availability of qualified personnel;

    - the possibility of an industry-wide strike or other job action by or
      affecting a major entertainment industry union;

    - changes in, or failure or inability to comply with, government
      regulations, including, without limitation, regulations of the Federal
      Communications Commission, and adverse outcomes from regulatory
      proceedings;

    - changes in the nature of key strategic relationships with partners and
      joint venturers;

    - competitor responses to our products and services, and the products and
      services of the entities in which we have interests; and

    - threatened terrorists attacks and ongoing military action in the Middle
      East and other parts of the world.

                                      I-16
<Page>
    These forward-looking statements and such risks, uncertainties and other
factors speak only as of the date of this Quarterly Report, and we expressly
disclaim any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein, to reflect any change in its
expectations with regard thereto, or any other change in events, conditions or
circumstances on which any such statement is based.

    The following discussion and analysis provides information concerning our
results of operations and financial condition. This discussion should be read in
conjunction with our accompanying condensed consolidated financial statements
and the notes thereto; and our "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the combined financial
statements of LMC Discovery Group for the year ended December 31, 2004 included
in our Information Statement.

OVERVIEW

    We are a holding company and our businesses and assets include Ascent Media,
which we consolidate, and a 50% ownership interest in Discovery, which we
account for using the equity method of accounting. Accordingly, as described
below, Discovery's revenue is not reflected in the revenue we report in our
financial statements. In addition to the foregoing assets, immediately prior to
the Spin Off, Liberty transferred to a subsidiary of our company $200 million in
cash. The Spin Off was effected on July 21, 2005 as a distribution by Liberty to
holders of its Series A and Series B common stock of shares of our Series A and
Series B common stock, respectively. The Spin Off did not involve the payment of
any consideration by the holders of Liberty common stock and is intended to
qualify as a tax-free spinoff. The Spin Off has been accounted for at historical
cost due to the pro rata nature of the distribution.

    Following the Spin Off, we and Liberty operate independently, and neither
has any stock ownership, beneficial or otherwise, in the other.

    Ascent Media provides creative, media management and network services to the
media and entertainment industries. Ascent Media's clients include major motion
picture studios, independent producers, broadcast networks, cable programming
networks, advertising agencies and other companies that produce, own and/or
distribute entertainment, news, sports, corporate, educational, industrial and
advertising content. Ascent Media's operations are organized into the following
four groups: creative services, media management services, network services and
corporate and other. Ascent Media has few long-term or exclusive agreements with
its creative services and media management services customers.

    In 2005, Ascent Media's focus is on leveraging its broad array of media
services and to market itself as a full service provider to new and existing
customers within the feature film and television production industry. With
facilities in the U.S., the United Kingdom and Asia, Ascent Media also hopes to
increase its services to multinational companies. The challenges that Ascent
Media faces include (i) differentiating its products and services to help
maintain or increase operating margins and (ii) financing capital expenditures
for equipment and other items to satisfy customers' desire for services using
the latest technology.

    Our most significant asset is Discovery, in which we do not have a
controlling financial interest. Discovery is a global media and entertainment
company that provides original and purchased video programming in the U.S. and
over 160 other countries. Discovery also develops and sells branded commerce and
educational product lines in the United States. We account for our interest in
Discovery using the equity method of accounting. Accordingly, our share of the
results of operations of Discovery is reflected in our consolidated results as
earnings or losses of Discovery. To assist the reader in better understanding
and analyzing our business, we have included a separate discussion and analysis
of Discovery's results of operations and liquidity below.

                                      I-17
<Page>
ACQUISITIONS

    LONDON PLAYOUT CENTRE.  On March 12, 2004, Ascent Media acquired the entire
issued share capital of London Playout Centre Limited which we refer to as LPC,
a UK-based television channel origination facility. LPC is included in Ascent
Media's network services group.

    CINETECH.  On October 20, 2004, Ascent Media acquired substantially all of
the assets of Cinetech, Inc., a film laboratory and still image preservation and
restoration company, for $10,000,000 in cash plus contingent compensation of up
to $1,500,000 to be paid based on the satisfaction of certain contingencies as
set forth in the purchase agreement. Cinetech is included in Ascent Media's
media management services group.

OPERATING CASH FLOW

    We evaluate the performance of our operating segments based on financial
measures such as revenue and operating cash flow. We define operating cash flow
as revenue less cost of services and selling, general and administrative expense
(excluding stock and other equity-based compensation). We believe this is an
important indicator of the operational strength and performance of our
businesses, including the ability to invest in ongoing capital expenditures and
service of any debt. In addition, this measure allows management to view
operating results and perform analytical comparisons and identify strategies to
improve performance. This measure of performance excludes depreciation and
amortization and stock and other equity-based compensation, that are included in
the measurement of operating income pursuant to U.S. generally accepted
accounting principles or GAAP. Accordingly, operating cash flow should be
considered in addition to, but not as a substitute for, operating income, cash
flow provided by operating activities and other measures of financial
performance prepared in accordance with GAAP. See note 11 to the accompanying
condensed consolidated financial statements for a reconciliation of operating
cash flow to earnings before income taxes.

RESULTS OF OPERATIONS

    Our consolidated results of operations include general and administrative
expenses incurred at the DHC corporate level, 100% of Ascent Media's results and
our 50% share of earnings of Discovery.

    Ascent Media's creative services group revenue is primarily generated from
fees for video and audio post production, special effects and editorial services
for the television, feature film and advertising industries. Generally, these
services pertain to the completion of feature films, television programs and
advertisements. These projects normally span from a few days to three months or
more in length, and fees for these projects typically range from $10,000 to
$1,000,000 per project. The media management services group provides owners of
film libraries a broad range of restoration, preservation, archiving,
professional mastering and duplication services. The scope of media management
services vary in duration from one day to several months depending on the nature
of the service, and fees typically range from less than $1,000 to $100,000 per
project. Additionally, the media management services group includes Ascent
Media's digital media center which is developing new products and businesses in
areas such as digital imaging, digital media and interactive media. The network
services group's revenue consists of fees relating to facilities and services
necessary to assemble and transport programming for cable and broadcast networks
across the world via freight, fiber, satellite and the Internet. Additionally,
the group earns revenue by providing systems integration and field support
services, technology consulting services, design and implementation of advanced
video systems, engineering project management, technical help desk and field
service. Approximately 60% of the network services group's revenue relates to
systems integration and engineering services that are provided on a project
basis over terms generally ranging from three to twelve months. Approximately
40% of the network services group's revenue relates to broadcast services,
satellite operations and fiber services that are earned monthly under long-term
contracts ranging generally from one to seven years.

                                      I-18
<Page>
Cost of services and operating expenses consists primarily of production wages,
facility costs and other direct costs and selling, general and administrative
expenses. Corporate related items and expenses are reflected in Corporate and
Other, below.

<Table>
<Caption>
                                         THREE MONTHS ENDED     NINE MONTHS ENDED
                                            SEPTEMBER 30,         SEPTEMBER 30,
                                         -------------------   -------------------
                                           2005       2004       2005       2004
                                         --------   --------   --------   --------
                                                   AMOUNTS IN THOUSANDS
<S>                                      <C>        <C>        <C>        <C>
SEGMENT REVENUE
Creative services group................  $ 73,215    68,940    225,008    219,746
Media management services group........    27,730    26,896     87,778     79,058
Network services group.................    66,989    56,088    207,457    159,540
Corporate and other....................        --        --         --         --
                                         --------   -------    -------    -------
                                         $167,934   151,924    520,243    458,344
                                         ========   =======    =======    =======
SEGMENT OPERATING CASH FLOW
Creative services group................  $ 12,187    12,364     39,946     40,690
Media management services group........     1,291     4,094      9,739     13,175
Network services group.................    14,327    15,437     41,101     44,750
Corporate and other....................   (11,198)   (9,582)   (35,663)   (28,431)
                                         --------   -------    -------    -------
                                         $ 16,607    22,313     55,123     70,184
                                         ========   =======    =======    =======
</Table>

    REVENUE.  Total revenue increased 10.5% and 13.5% for the three and
nine months ended September 30, 2005, respectively, as compared to the
corresponding prior year periods. The creative services group revenue increased
$4,275,000 and $5,262,000 for the three and nine month periods, respectively.
The increase for the three month period is due to more commercial advertising
production and feature film projects for both post production and sound services
in the U.S. partially offset by continued weakness in commercial and feature
film services provided in the U.K. The increase for the nine month period is due
to higher commercial revenue and strong feature film business in the U.S.,
partially offset by reduced sound services and continued weakness in commercial
and feature film activity in the U.K. The media management services group
revenue increased $834,000 and $8,720,000 for the three and nine month periods,
respectively. The increase in revenue for the three month period was a result of
higher lab revenue of $2,735,000 primarily driven by the acquisition of Cinetech
partially offset by lower revenue for traditional media services both in the
U.S. and U.K. The increase in revenue for the nine month period was a result of
higher lab revenue of $9,175,000 primarily driven by the acquisition of
Cinetech, higher revenues in DVD services driven by the studios in the U.S. and
an increase in new digital services offset by declines in the U.K. in
traditional services and subtitling. The network services group revenue
increased $10,901,000 and $47,917,000 for the three and nine month periods,
respectively. These increases reflect higher number of large engineering and
systems integration projects partially offset by lower renewal rates on certain
ongoing broadcast services contracts. The nine-month increase also includes
$9,423,000 of revenue related to the LPC acquisition.

    COST OF SERVICES.  Cost of services increased 19.8% and 22.1% for the three
and nine months ended September 30, 2005, respectively, as compared to the
corresponding prior year periods. These increases are partially attributable to
the 2004 acquisitions discussed above, which contributed $1,241,000 and
$11,656,000 in cost of services for the three and nine month periods,
respectively. As a percent of revenue, cost of services increased from 60.1% to
65.1% for the three month periods and from 60.0% to 64.5% for the nine month
periods. These increases are due primarily to the network services and media
management groups. In the network services group, the mix of revenue has shifted
to a higher percentage of systems engineering and integration projects, which
have higher production and engineering labor and production material and
equipment costs, than broadcast services and satellite operations. In addition,
competitive pressures have contributed to lower rates as contracts are

                                      I-19
<Page>
renewed and new business is acquired. Media management services group cost of
services have increased at a faster rate than revenue as the group has increased
spending on development of digital technologies and new services. Additionally,
media management's projects have become increasingly more integrated, with
complex work flows requiring higher levels of production labor and project
management. This increase in labor costs, combined with investment in new
technologies, has resulted in higher cost of services and decreasing operating
cash flow margin.

    SELLING, GENERAL AND ADMINISTRATIVE.  Ascent Media's selling, general and
administrative expenses increased 6.0% and 10.3% for the three and nine months
ended September 30, 2005, respectively, as compared to the corresponding prior
year periods. These increases are primarily attributable to the impact of the
2004 acquisitions and the growth in the revenue driving higher labor, support,
facility and selling costs.

    Corporate and Other operating cash flow (which includes DHC corporate
general and administrative expenses of $1,422,000 and $4,655,000 for the three
and nine months ended September 30, 2005, respectively) decreased $1,616,000 and
$7,232,000 in 2005 primarily due to higher DHC corporate expenses and higher
Ascent Media corporate expenses in the U.K. as a result of higher labor,
facility and professional services costs. The DHC corporate expenses primarily
relate to expenses incurred in connection with the Spin Off.

    DEPRECIATION AND AMORTIZATION.  The changes in depreciation and amortization
expense for the three and nine months ended September 30, 2005 are due to a
combination of capital expenditures, acquisitions and assets becoming fully
depreciated.

    STOCK-BASED COMPENSATION.  In 2001, Ascent Media granted to certain of its
officers and employees stock options (the "Ascent Media Options") with exercise
prices that were less than the market price of Ascent Media common stock on the
date of grant. The Ascent Media Options became exercisable for Liberty shares in
connection with Liberty's 2003 acquisition of the Ascent Media outstanding
common stock that it did not already own. Ascent Media is amortizing the
"in-the-money" value of these options over the 5-year vesting period. Certain
Ascent Media employees also hold options and stock appreciation rights granted
by companies acquired by Ascent Media in the past several years and exchanged
for Liberty options and SARs. Ascent Media records compensation expense for the
SARs based on the underlying stock price and vesting of such awards.

    On May 24, 2005, Liberty commenced an offer to purchase certain stock
options and SARs held by eligible employees of Ascent Media. The offer to
purchase related to 1,173,028 options and SARs, and the aggregate offering price
for such options and SARs was approximately $2.15 million. The offer to purchase
expired at 9:00 p.m., Pacific time, on June 21, 2005. Eligible employees
tendered options with respect to 1,121,673 shares of Liberty Series A common
stock, and Liberty purchased such options for aggregate cash payments of
approximately $2.14 million. In connection with these purchases, Ascent Media
recorded compensation expense of $3,205,000, which included (1) the amount of
the cash payments less any previously accrued compensation for the SARs and
(2) the previously unamortized in-the-money value related to the Ascent Media
Options.

    SHARE OF EARNINGS OF DISCOVERY.  Our share of earnings of Discovery
increased 63.2% and 22.4% for the three and nine months ended September 30,
2005, respectively. These increases are due to increases in Discovery's revenue
and operating income, partially offset by an increase in minority interest for
the three month period and a decrease in gains from derivatives for the nine
month period.

    We have provided a more detailed discussion of Discovery's results of
operations below.

    INCOME TAXES.  Our effective tax rate was 68.3% and 31.4% for the
nine months ended September 30, 2005 and 2004, respectively. Subsequent to the
Spin Off, we assessed our historical weighted average state tax rate and
determined to increase such rate. This increase resulted in

                                      I-20
<Page>
additional tax expense in the third quarter of 2005 in the amount of
$13,507,000. In addition, our income tax expense was higher than the federal
income tax rate of 35% in 2005 due to state and foreign tax expense. Our
effective tax rate was lower than the federal income tax rate in 2004 due to a
reduction in our valuation allowance and foreign taxes which are incurred at a
lower rate than the federal rate partially offset by state income tax expense.

LIQUIDITY AND CAPITAL RESOURCES

    Prior to the Spin Off, our primary sources of funds were cash flows from
operating activities and capital contributions from Liberty. During the
nine months ended September 30, 2005, our primary use of cash was for capital
expenditures ($74,509,000), which we primarily funded with our available cash
and cash generated by operating activities ($61,836,000). Of the foregoing 2005
capital expenditures, $30,905,000 relates to the buildout of Ascent Media's
existing facilities for specific customer contracts and the construction of
Ascent Media's Digital Media Center in Burbank, California. The remainder of
Ascent Media's capital expenditures relates to purchases of new equipment and
the upgrade of existing facilities and equipment. Ascent Media currently expects
to spend an additional $14,000,000 for capital expenditures in 2005. Prior to
the Spin Off, Liberty transferred to one of our subsidiaries $200 million in
cash. Subsequent to the Spin Off, Liberty will no longer be a long-term source
of liquidity for us. For the foreseeable future, we expect to have sufficient
available cash balances and net cash from operating activities to meet our
working capital needs and capital expenditure requirements. We intend to seek
external equity or debt financing in the event new investment opportunities,
additional capital expenditures or increased operations require additional
funds, but there can be no assurance that we will be able to obtain equity or
debt financing on terms that are acceptable to us.

    We do not have access to the cash Discovery generates from its operations,
unless Discovery pays a dividend on its capital stock or otherwise distributes
cash to its stockholders. Historically, Discovery has not paid any dividends on
its capital stock, and we do not have sufficient voting control to cause
Discovery to pay dividends or make other payments or advances to us.

DISCOVERY

    We hold a 50% ownership interest in Discovery and account for this
investment using the equity method of accounting. Accordingly, in our financial
statements we record our share of Discovery's net income or loss available to
common shareholders and reflect this activity in one line item in our statement
of operations as "Share of earnings of Discovery." The following financial
information of Discovery for the nine months ended September 30, 2005 and
September 30, 2004 and related discussion is presented to provide the reader
with additional analysis of the operating results and financial position of
Discovery. Because we do not control the decision-making process or business
management practices of Discovery, we rely on Discovery to provide us with
financial information prepared in accordance with GAAP that we use in the
application of the equity method. The following discussion and analysis of
Discovery's operations and financial position has been prepared based on
information that we receive from Discovery and represents our views and
understanding of their operating performance and financial position based on
such information. Discovery is not a separately traded public company, and we do
not have the ability to cause Discovery's management to prepare their own
management's discussion and analysis for our purposes. Accordingly, we note that
the material presented in this section might be different if Discovery's
management had prepared it.

    The following discussion of Discovery's results of operations is presented
on a consolidated basis. In order to provide a better understanding of
Discovery's operations, we have also included a summarized presentation of
revenue and operating cash flow of Discovery's three operating groups: Discovery
networks U.S., or U.S. networks, Discovery networks international, or
international networks, and Discovery commerce, education and other.

                                      I-21
<Page>
    The U.S. networks is Discovery's largest division which owns and operates 12
cable and satellite channels and provides distribution and advertising sales
services for BBC America. International networks manages a portfolio of
channels, led by the Discovery Channel and Animal Planet brands, that are
distributed in virtually every pay-television market in the world via an
infrastructure that includes major operational centers in London, Singapore, New
Delhi and Miami. Discovery commerce, education and other includes Discovery's
retail chain store operations and other direct consumer marketing activities, as
well as Discovery education, which was recently formed to manage Discovery's
distribution of education content.

CONSOLIDATED RESULTS

<Table>
<Caption>
                                                          NINE MONTHS ENDED
                                                            SEPTEMBER 30,
                                                        ----------------------
                                                           2005        2004
                                                        ----------   ---------
                                                         AMOUNTS IN THOUSANDS
<S>                                                     <C>          <C>
REVENUE
Advertising...........................................  $  875,565     825,281
Subscriber fees.......................................     879,428     721,906
Other.................................................     145,556     125,296
                                                        ----------   ---------
  Total revenue.......................................   1,900,549   1,672,483
                                                        ----------   ---------
EXPENSES
Cost of revenue.......................................    (659,861)   (575,405)
Selling, general and administrative ("SG&A")
  expense.............................................    (737,843)   (615,770)
                                                        ----------   ---------
  Operating cash flow.................................     502,845     481,308
Expenses arising from long-term incentive plans.......     (18,786)    (80,857)
Depreciation and amortization.........................     (90,579)    (97,706)
Gain on sale of patents...............................          --      22,007
                                                        ----------   ---------
  Operating income....................................     393,480     324,752
OTHER INCOME (EXPENSE)
Interest expense, net.................................    (130,212)   (124,008)
Unrealized gains from derivative instruments, net.....      16,018      33,188
Minority interests in consolidated subsidiaries.......     (23,754)    (25,393)
Other.................................................      17,124      (1,000)
                                                        ----------   ---------
  Income before income taxes..........................     272,656     207,539
Income tax expense....................................    (129,770)    (90,798)
                                                        ----------   ---------
  Net income..........................................  $  142,886     116,741
                                                        ==========   =========
</Table>

                                      I-22
<Page>
BUSINESS SEGMENT RESULTS

<Table>
<Caption>
                                                          NINE MONTHS ENDED
                                                            SEPTEMBER 30,
                                                        ----------------------
                                                           2005        2004
                                                        ----------   ---------
                                                         AMOUNTS IN THOUSANDS
<S>                                                     <C>          <C>
REVENUE
U.S. networks.........................................  $1,299,389   1,186,778
International networks................................     517,129     417,340
Discovery commerce, education and other...............      84,031      68,365
                                                        ----------   ---------
  Total revenue.......................................  $1,900,549   1,672,483
                                                        ==========   =========
OPERATING CASH FLOW
U.S. networks.........................................  $  494,583     458,699
International networks................................      76,239      72,590
Discovery commerce, education and other...............     (67,977)    (49,981)
                                                        ----------   ---------
  Total operating cash flow...........................  $  502,845     481,308
                                                        ==========   =========
</Table>

------------------------

NOTE: Discovery commerce, education and other includes intercompany
eliminations.

    REVENUE.  Discovery's consolidated revenue increased 14% for the
nine months ended September 30, 2005, as compared to the corresponding prior
year period. Increased revenue was primarily due to 22% increase in subscriber
fee revenue. Advertising revenue increased 6% during the same period. Other
revenue increased 16% due to increased store and licensing revenue within
Discovery's commerce business, combined with growth in Discovery's education
business.

    Subscriber fee revenue grew 21% at the U.S. networks and 23% at the
international networks. The increase in subscriber fees at the U.S. networks is
due to a 12% increase in paying subscription units combined with contractual
rate increases at most networks. Free viewing periods related to a number of
U.S. networks, principally networks that are carried on the digital tier, began
expiring in 2004 and Discovery is now recognizing subscriber fees for those
networks. U.S. networks subscriber fee increases were also helped by reduced
launch fee amortization, a contra-revenue item, as a result of extensions of
certain affiliation agreements. Launch amortization at the U.S. networks
declined from $69,238,000 during the nine months ended September 30, 2004 to
$51,595,000 in 2005 primarily due to these extensions. Increases in subscriber
fees at the international networks were driven principally by increases in
paying subscription units in Europe and Asia, as well as the international joint
venture channels combined with contractual rate increases in certain markets.

    The increase in advertising revenue, which includes revenue from paid
programming, was primarily due to a 29% increase at the international networks.
More than half of the international networks' advertising revenue is generated
by its operations in the United Kingdom and Europe. The increase in
international networks advertising revenue was due primarily to higher
viewership in the U.K. and an increased subscriber base in the U.K. and Europe.
Advertising revenue at the U.S. networks increased 2% as higher advertising
sell-out rates were partially offset by lower audience delivery at certain
networks. Paid programming, where Discovery sells blocks of time primarily for
infomercials that are aired during the overnight hours on certain networks,
represented 6% and 7% of total advertising revenue for the nine months ended
September 30, 2005 and 2004, respectively.

    The increase in other revenue was primarily due to an increase in education
revenue due to growth in the business and acquisitions combined with a 5%
increase in store revenue. The increase in store revenue was due to a 11%
increase in same store sales offset by a 7% decrease in the average

                                      I-23
<Page>
number of stores. Discovery began an initiative in 2003 to close stores that
were not profitable which has resulted in a reduction of the total number of
store locations.

    COST OF REVENUE.  Cost of revenue increased 15% for the nine months ended
September 30, 2005 as compared to the corresponding prior year period. As a
percent of revenue, cost of revenue was 35% and 34% for the nine months ended
September 30, 2005 and 2004, respectively. This increase primarily resulted from
higher programming expense due to continued investment across all U.S. networks
in original productions and high profile specials. At the international
networks, continued investment in the lifestyles category, particularly in
Europe, has resulted in increased programming costs. These increases were offset
partially by an aggregate benefit of approximately $9 million related to certain
nonrecurring items, including a change in estimate for the international music
rights accrual.

    SG&A EXPENSES.  SG&A expenses increased 20% for the nine months ended
September 30, 2005, as compared to the corresponding prior year period. Within
the different groups, SG&A expenses increased 3%, 43% and 51% at the U.S.
networks, international networks and Discovery commerce, education and other,
respectively. The increase at the international networks was caused by increases
in personnel expense resulting from adding headcount as the business expands
particularly in the U.K. and Europe combined with higher marketing expense
associated with branding and awareness efforts, particularly in Europe, in
association with the lifestyles category initiative. The increase in SG&A
expenses of 51% or $41,944,000 at Discovery commerce, education and other is
primarily due to acquisitions and organic growth in Discovery's education
business.

    EXPENSES ARISING FROM LONG-TERM INCENTIVE PLANS.  Expenses arising from
long-term incentive plans are related to Discovery's unit-based, long-term
incentive plan, or LTIP, for its employees who meet certain eligibility
criteria. Units are awarded to eligible employees and generally vest at a rate
of 25% per year. Upon exercise, participants receive a cash payment for the
increase in value of the units from the unit value on the date of issuance. Unit
value is determined by the year over year change in Discovery's aggregate equity
value as estimated by an external investment firm, using a consistent
methodology. The appreciation in unit value of LTIP awards outstanding is
recorded as compensation expense over the vesting periods. The 77% or
$62,071,000 decrease in LTIP expense in 2005 is the result of an increase in
units exercised during the year, partially offset by additional expenses related
to the termination of one of Discovery's long-term incentive plans and current
year vesting under the remaining plan. Discovery made aggregate cash payments of
$265,072,000 to participants who exercised units during the nine months ended
September 30, 2005. The cash-out value of the units exercised was based on the
plan valuation at the end of 2004, resulting in lower expense for the current
period, as compared to the same period in 2004. Discovery established a new
long-term incentive plan in October 2005 (the "2005 LTIP Plan") where
participants in Discovery's existing plan may elect to (1) stay in such plan or
(2) exercise vested units and convert unvested units to the 2005 LTIP Plan. If
the remaining vested LTIP awards at September 30, 2005 were exercised, the
aggregate cash payments by Discovery would be approximately $58 million. The
aggregate number of units that are currently authorized to be granted under the
2005 LTIP plan approximates a 5% sharing in the change in Discovery's equity
value.

    DEPRECIATION AND AMORTIZATION.  The decrease in depreciation and
amortization for the nine months ended September 30, 2005 is due to intangibles
becoming fully amortized and a decrease in the depreciable asset base resulting
from a reduction in the number of retail stores, offset by new assets placed in
service during 2005.

OTHER INCOME AND EXPENSE

    INTEREST EXPENSE.  The increase in interest expense for the nine months
ended September 30, 2005 is primarily due to an increase in interest rates
during 2005.

                                      I-24
<Page>
    UNREALIZED GAINS FROM DERIVATIVE INSTRUMENTS, NET.  Unrealized gains from
derivative transactions relate primarily to Discovery's use of derivative
instruments to modify its exposure to interest rate fluctuations on its debt.
These instrument contracts include a combination of swaps, caps, collars and
other structured instruments. As a result of unrealized mark to market
adjustments, Discovery recognized $16,018,000 and $33,188,000 in unrealized
gains on these instruments during the nine months ended September 30, 2005 and
2004, respectively. The foreign exchange hedging instruments used by Discovery
are spot, forward and option contracts. Additionally, Discovery enters into
non-designated forward contracts to hedge non-dollar denominated cash flows and
foreign currency balances.

    MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES.  Minority interest
represents increases and decreases in the estimated redemption value of
mandatory redeemable interests in subsidiaries which are initially recorded at
fair value.

    INCOME TAXES.  Discovery's effective tax rate was 48% and 44% for the nine
months ended September 30, 2005 and 2004, respectively. Discovery's effective
tax rate differed from the federal income tax rate of 35% primarily due to
foreign and state taxes.

LIQUIDITY AND CAPITAL RESOURCES

    Discovery used $24,680,000 and $41,982,000 of cash from operations during
the nine months ended September 30, 2005 and 2004, respectively. The company's
use of cash from operations during the nine months ended September 30, 2005 was
its operating cash flow offset by payments associated with the company's
long-term incentive plan in the amount of $265,072,000, interest expense of
$130,212,000 and working capital fluctuations. During the nine months ended
September 30, 2004, the company's use of cash from operations resulted from
operating cash flow less interest expense of $124,008,000, payments associated
with the company's long-term incentive plan in the amount of $238,337,000 and
working capital changes.

    During the nine months ended September 30, 2005, Discovery paid $92,874,000
to acquire mandatorily redeemable securities related to minority interests in
certain consolidated subsidiaries. Discovery also spent $77,609,000 on capital
expenditures during the period. During the nine months ended September 30, 2004,
Discovery paid $148,880,000 to acquire mandatorily redeemable securities related
to minority interests in certain subsidiaries and spent $44,665,000 on capital
expenditures.

    In addition to cash provided by operations, Discovery funds its activities
with proceeds borrowed under various debt facilities, including a term loan, a
revolving loan facility and various senior notes payable. During the
nine months ended September 30, 2005 and 2004, net borrowings under debt
facilities were $217,000,000 and $269,000,000, respectively. Total commitments
of these facilities were $3,490,000,000 at September 30, 2005. Debt outstanding
on these facilities aggregated $2,695,000,000 at September 30, 2005, providing
excess debt availability of $795,000,000. Subsequent to September 30, 2005,
Discovery refinanced certain of its debt facilities and increased its total
commitments by $55 million. Discovery's ability to borrow the unused capacity is
dependent on its continuing compliance with its covenants at the time of, and
after giving effect to, a requested borrowing.

    All term and revolving loans and senior notes are unsecured. They contain
covenants that require Discovery to meet certain financial ratios and place
restrictions on the payment of dividends, sale of assets, additional borrowings,
mergers, and purchases of capital stock, assets and investments. Discovery was
in compliance with all debt covenants at September 30, 2005.

    During 2005, including amounts discussed above, Discovery expects to spend
approximately $120,000,000 for capital expenditures, $184,000,000 for interest
expense, and a minimum of $300,000,000 for LTIP obligations. Discovery believes
that its cash flow from operations and borrowings

                                      I-25
<Page>
available under its credit facilities will be sufficient to fund its working
capital requirements, including LTIP obligations.

    Discovery has agreements covering leases of satellite transponders,
facilities and equipment. These agreements expire at various dates through 2019.
Discovery is obligated to license programming under agreements with content
suppliers that expire over various dates. Discovery also has other contractual
commitments arising in the ordinary course of business.

    In connection with the execution of long-term distribution agreements for
certain of its European cable networks, Discovery is committed to pay a
distributor a percentage increase in the value of these networks, if any, at the
termination of the contract on December 31, 2006. Discovery adjusts its recorded
liability for changes in the value of these networks each period. However,
Discovery is currently unable to predict the likelihood or the terms and
conditions of any renewal or extension of the distribution agreements. Discovery
will record the effect of a renewed or extended distribution agreement when such
terms are in place. The effect of a renewed or extended agreement could result
in a payment for an amount significantly greater than the amount currently
accrued.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

    We continually monitor our economic exposure to changes in foreign exchange
rates and may enter into foreign exchange agreements where and when appropriate.
Substantially all of our foreign transactions are denominated in foreign
currencies, including the liabilities of our foreign subsidiaries. Although our
foreign transactions are not generally subject to significant foreign exchange
transaction gains or losses, the financial statements of our foreign
subsidiaries are translated into United States dollars as part of our
consolidated financial reporting. As a result, fluctuations in exchange rates
affect our financial position and results of operations.

ITEM 4. CONTROLS AND PROCEDURES

    In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried
out an evaluation, under the supervision and with the participation of
management, including its chief executive officer, principal accounting officer
and principal financial officer (the "Executives"), of the effectiveness of its
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, the Executives concluded that the Company's
disclosure controls and procedures were effective as of September 30, 2005 to
provide reasonable assurance that information required to be disclosed in its
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.

    There has been no change in the Company's internal controls over financial
reporting that occurred during the three months ended September 30, 2005 that
has materially affected, or is reasonably likely to materially affect, its
internal controls over financial reporting.

                                      I-26
<Page>
                           DISCOVERY HOLDING COMPANY

PART II--OTHER INFORMATION

ITEM 6. EXHIBITS

    (a) Exhibits

<Table>
<S>   <C>
31.1  Rule 13a-14(a)/15d-14(a) Certification.

31.2  Rule 13a-14(a)/15d-14(a) Certification.

31.3  Rule 13a-14(a)/15d-14(a) Certification.

32    Section 1350 Certification
</Table>

                                      II-1
<Page>
                                   SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

<Table>
<S>                                                    <C>  <C>
                                                       DISCOVERY HOLDING COMPANY

Date: November 9, 2005                                 By:  /s/ CHARLES Y. TANABE
                                                            -----------------------------------------
                                                            Charles Y. Tanabe
                                                            Senior Vice President and General Counsel

Date: November 9, 2005                                 By:  /s/ DAVID J.A. FLOWERS
                                                            -----------------------------------------
                                                            David J.A. Flowers
                                                            Senior Vice President and Treasurer
                                                            (Principal Financial Officer)

Date: November 9, 2005                                 By:  /s/ CHRISTOPHER W. SHEAN
                                                            -----------------------------------------
                                                            Christopher W. Shean
                                                            Senior Vice President and Controller
                                                            (Principal Accounting Officer)
</Table>

                                      II-2
<Page>
                                 EXHIBIT INDEX

    Listed below are the exhibits which are filed as a part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):

<Table>
<S>   <C>
31.1  Rule 13a-14(a)/15d-14(a) Certification.

31.2  Rule 13a-14(a)/15d-14(a) Certification.

31.3  Rule 13a-14(a)/15d-14(a) Certification.

32    Section 1350 Certification
</Table>