<PAGE>   1
                                                                    EXHIBIT 99.1


                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                             Combined Balance Sheets
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                               March 31,       December 31,
                                                                                 2001              2000
                                                                               ---------       ------------
Assets                                                                             amounts in millions
<S>                                                                            <C>                  <C>
Current assets:
   Cash and cash equivalents                                                   $  2,089             1,295
   Short-term investments                                                           444               500
   Trade and other receivables, net                                                 335               307
   Prepaid expenses and program rights                                              682               537
   Deferred income tax assets                                                        86               242
   Other current assets                                                              84                73
                                                                               --------           -------
         Total current assets                                                     3,720             2,954
                                                                               --------           -------

Investments in affiliates, accounted for using the equity method, and
   related receivables (note 4)                                                  19,222            20,464
Investments in available-for-sale securities and others (note 5)                 19,681            19,035

Property and equipment, at cost                                                   1,072               976
   Less accumulated depreciation                                                    161               131
                                                                               --------           -------
                                                                                    911               845
                                                                               --------           -------
Intangible assets:
   Excess cost over acquired net assets                                          11,221            11,146
   Franchise costs                                                                  190               190
                                                                               --------           -------
                                                                                 11,411            11,336
   Less accumulated amortization                                                  1,210             1,048
                                                                               --------           -------
                                                                                 10,201            10,288
                                                                               --------           -------

Other assets, at cost, net of accumulated amortization                              667               682
                                                                               --------           -------
         Total assets                                                          $ 54,402            54,268
                                                                               ========           =======

Liabilities and Combined Attributed Net Assets

Current liabilities:
   Accounts payable and accrued liabilities                                    $    412               473
   Accrued stock compensation                                                       819             1,216
   Program rights payable                                                           227               179
   Current portion of debt                                                        1,416             1,094
                                                                               --------           -------
        Total current liabilities                                                 2,874             2,962
                                                                               --------           -------

Long-term debt (note 7)                                                           4,621             5,269
Call option obligations (note 7)                                                  1,154                --
Deferred income tax liabilities                                                  11,315            11,337
Other liabilities                                                                    62                62
                                                                               --------           -------

        Total liabilities                                                        20,026            19,630
                                                                               --------           -------

Minority interests in equity of attributed subsidiaries                             329               348

Combined attributed net assets (note 8):
   Combined attributed net assets                                                34,651            34,506
   Accumulated other comprehensive loss, net of taxes                              (579)             (397)
                                                                               --------           -------
                                                                                 34,072            34,109
   Due to (from) related parties                                                    (25)              181
                                                                               --------           -------
     Total combined attributed net assets                                        34,047            34,290
                                                                               --------           -------

Commitments and contingencies (note 9)
     Total liabilities and combined attributed net assets                      $ 54,402            54,268
                                                                               ========           =======
</TABLE>


See accompanying notes to combined financial statements.


                                       1
<PAGE>   2
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

       Combined Statements of Operations and Comprehensive Earnings (Loss)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                  Three months ended
                                                                                       March 31,
                                                                               -----------------------
                                                                                 2001            2000
                                                                                 ----            ----
                                                                                  amounts in millions
<S>                                                                            <C>               <C>
Revenue:
   Unaffiliated parties                                                        $   418              183
   Related parties (note 8)                                                         86               52
                                                                               -------           ------
                                                                                   504              235
                                                                               -------           ------
Operating costs and expenses:
   Operating, selling, general and
   administrative                                                                  392              167
   Charges from related parties (note 8)                                             7                7
   Stock compensation                                                               63              (23)
   Depreciation and amortization                                                   249              167
                                                                               -------           ------
                                                                                   711              318
                                                                               -------           ------

        Operating loss                                                            (207)             (83)

Other income (expense):
   Interest expense                                                               (133)            (439)
   Dividend and interest income                                                     57               80
   Share of losses of affiliates, net (note 4)                                  (1,302)            (382)
   Other-than-temporary decline in fair value of investments (note 5)             (304)              --
   Gain on dispositions, net (notes 4 and 5)                                       810            2,444
   Unrealized gains on financial instruments, net (notes 2 and 7)                   44               --
   Other, net                                                                        7                5
                                                                               -------           ------
                                                                                  (821)           1,708
                                                                               -------           ------
        Earnings (loss) before income taxes and minority interest               (1,028)           1,625

Income tax benefit (expense)                                                       302             (675)
Minority interests in losses (earnings) of attributed subsidiaries                  29               (8)
                                                                               -------           ------

        Earnings (loss) before cumulative effect of accounting change             (697)             942

Cumulative effect of accounting change, net of taxes (notes 2 and 7)              545               --
                                                                               -------           ------

        Net earnings (loss)                                                       (152)             942
                                                                               -------           ------

Other comprehensive earnings (loss), net of taxes:
   Foreign currency translation adjustments                                       (149)             (31)
   Recognition of previously unrealized losses (gains) on
     available-for-sale securities, net                                              4           (1,478)
   Unrealized gains on available-for-sale securities                                50            3,259
   Cumulative effect of accounting change (notes 2 and 7)                          (87)              --
                                                                               -------           ------

   Other comprehensive earnings (loss)                                            (182)           1,750
                                                                               -------           ------

Comprehensive earnings (loss)                                                  $  (334)           2,692
                                                                               =======           ======


See accompanying notes to combined financial statements.
</TABLE>


                                       2
<PAGE>   3
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                   Combined Statement of Attributed Net Assets

                        Three months ended March 31, 2001
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                  Accumulated          Due to           Total
                                                               Combined              other             (from)         combined
                                                              attributed         comprehensive         related       attributed
                                                              net assets      loss, net of taxes       parties       net assets
                                                            -------------     -------------------  -------------   ------------
                                                                                     amounts in millions

<S>                                                         <C>               <C>                  <C>             <C>
Balance at January 1, 2001                                  $      34,506                 (397)             181           34,290
   Net loss                                                          (152)                  --               --             (152)
   Issuances of common stock by attributed subsidiaries                 9                   --               --                9
   Exercise of stock options                                          290                   --               --              290
   Utilization of net operating losses of Liberty
     Media Group by AT&T                                               (2)                  --               --               (2)
   Other comprehensive loss                                            --                 (182)              --             (182)
   Other transfers from related parties, net                           --                   --             (206)            (206)
                                                            -------------     ----------------      -----------    -------------

Balance at March 31, 2001                                   $      34,651                 (579)             (25)          34,047
                                                            =============     ================      ===========    =============
</TABLE>


See accompanying notes to combined financial statements.


                                       3
<PAGE>   4
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                        Combined Statements of Cash Flows
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                       Three months ended
                                                                                            March 31,
                                                                                    ------------------------
                                                                                      2001             2000
                                                                                    -------           ------
                                                                                      amounts in millions
                                                                                         (see note 3)
<S>                                                                                 <C>                  <C>
Cash flows from operating activities:
   Net earnings (loss)                                                              $  (152)             942
   Adjustments to reconcile net earnings (loss) to net cash used by
     operating activities:
        Cumulative effect of accounting change, net of taxes                           (545)              --
        Depreciation and amortization                                                   249              167
        Stock compensation                                                               63              (23)
        Payments of stock compensation                                                 (202)            (183)
        Share of losses of affiliates, net                                            1,302              382
        Deferred income tax expense (benefit)                                          (121)             721
        Intergroup tax allocation                                                      (181)             (46)
        Cash payment from (to) AT&T pursuant to tax sharing agreement                   (25)              33
        Minority interests in earnings (losses) of attributed subsidiaries              (29)               8
        Gain on disposition of assets, net                                             (810)          (2,444)
        Other-than-temporary decline in fair value of investments                       304               --
        Noncash interest                                                                  6              364
        Unrealized gains on financial instruments                                       (44)              --
        Changes in operating assets and liabilities, net of the effect of
          acquisitions and dispositions:
             Change in receivables                                                      (10)              15
             Change in prepaid expenses and program rights                             (145)             (88)
             Change in payables and accruals                                            (21)               7
                                                                                    -------           ------

               Net cash used by operating activities                                   (361)            (145)
                                                                                    -------           ------

Cash flows from investing activities:
   Cash paid for acquisitions                                                          (109)            (342)
   Capital expended for property and equipment                                          (77)             (12)
   Investments in and loans to affiliates and others                                   (310)            (808)
   Purchases of marketable securities                                                  (431)            (337)
   Sales and maturities of marketable securities                                        229              511
   Cash proceeds from dispositions                                                       52                8
   Other, net                                                                             3               15
                                                                                    -------           ------

               Net cash used by investing activities                                   (643)            (965)
                                                                                    -------           ------

Cash flows from financing activities:
   Borrowings of debt                                                                 1,429            1,820
   Increase in call option obligations due to issuance of senior
     exchangeable debentures                                                          1,028              590
   Repayments of debt                                                                  (662)            (772)
   Cash transfers from (to) related parties                                              29              (41)
   Other, net                                                                           (26)             (24)
                                                                                    -------           ------

               Net cash provided by financing activities                              1,798            1,573
                                                                                    -------           ------

               Net increase in cash and cash equivalents                                794              463

               Cash and cash equivalents at beginning of period                       1,295            1,714
                                                                                    -------           ------

               Cash and cash equivalents at end of period                           $ 2,089            2,177
                                                                                    =======           ======
</TABLE>


See accompanying notes to combined financial statements.


                                       4
<PAGE>   5
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                     Notes to Combined Financial Statements

                                 March 31, 2001
                                   (unaudited)

(1)      Basis of Presentation

         The accompanying combined financial statements include the accounts of
         the subsidiaries and assets of AT&T Corp. ("AT&T") that are attributed
         to Liberty Media Group, as defined below. For convenience of
         discussion, assets and properties acquired, owned, or disposed of by
         subsidiaries of AT&T that are attributed to Liberty Media Group are
         referred to herein as being acquired, owned or disposed of by Liberty
         Media Group.

         At March 31, 2001, Liberty Media Group, or the Company, consisted
         principally of the following:

         -        AT&T's assets and businesses which provide programming
                  services including production, acquisition and distribution,
                  through all available formats and media, of branded
                  entertainment, educational and informational programming and
                  software, including multimedia products;

         -        AT&T's assets and businesses engaged in electronic retailing,
                  direct marketing, advertising sales relating to programming
                  services, infomercials and transaction processing;

         -        certain of AT&T's interests in technology and Internet
                  businesses;

         -        certain of AT&T's assets and businesses engaged in
                  international cable, telephony and programming businesses;
                  and,

         -        AT&T's holdings in a class of tracking stock of Sprint
                  Corporation (the "Sprint PCS Group Stock").

         All significant intercompany accounts and transactions have been
         eliminated. The combined financial statements of Liberty Media Group
         are presented for purposes of additional analysis of the consolidated
         financial statements of AT&T and should be read in conjunction with
         such consolidated financial statements.

         The accompanying interim combined 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 combined financial statements should be read in conjunction with
         the Company's combined financial statements and notes thereto included
         as an exhibit to AT&T's Annual Report on Form 10-K for the year ended
         December 31, 2000.

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities at the date of the financial statements and the reported
         amounts of revenue and expenses during the reporting period. Actual
         results could differ from those estimates.

         Certain prior period amounts have been reclassified for comparability
         with the 2001 presentation.


                                       5
<PAGE>   6
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued

(2)      Accounting Change

         Effective January 1, 2001, Liberty Media Group adopted Statement of
         Financial Accounting Standards No. 133, "Accounting for Derivative
         Instruments and Hedging Activities" ("Statement 133"), which
         establishes accounting and reporting standards for derivative
         instruments, including certain derivative instruments embedded in other
         contracts, and for hedging activities. All derivatives, whether
         designated in hedging relationships or not, are required to be recorded
         on the balance sheet at fair value. If the derivative is designated as
         a fair value hedge, the changes in the fair value of the derivative and
         of the hedged item attributable to the hedged risk are recognized in
         earnings. If the derivative is designated as a cash flow hedge, the
         effective portions of changes in the fair value of the derivative are
         recorded in other comprehensive earnings and are recognized in the
         statement of operations when the hedged item affects earnings.
         Ineffective portions of changes in the fair value of cash flow hedges
         are recognized in earnings. If the derivative is not designated as a
         hedge, changes in the fair value of the derivative are recognized in
         earnings. Derivative gains and losses included in other comprehensive
         earnings are reclassified into earnings at the time the sale of the
         hedged item or transaction is recognized.

         The adoption of Statement 133 on January 1, 2001, resulted in a
         cumulative increase in net earnings of $545 million (after tax expense
         of $356 million) and an increase in other comprehensive loss of $87
         million. The increase in net earnings was mostly attributable to
         separately recording the embedded call option obligations associated
         with the Company's senior exchangeable debentures. The increase in
         other comprehensive loss relates primarily to changes in the fair value
         of the Company's warrants and options to purchase certain
         available-for-sale securities.

         The Company uses various derivative instruments including equity
         collars, put spread collars, interest rate swaps and forward foreign
         exchange contracts to manage fair value risk associated with certain
         investments, interest rate risk on certain indebtedness, and foreign
         exchange rate risk. Derivative instruments are generally not used for
         speculative purposes. The derivative instruments may involve elements
         of credit and market risk in excess of amounts recognized in the
         financial statements. The Company monitors its positions and the credit
         quality of counter-parties, consisting primarily of major financial
         institutions, and does not anticipate nonperformance by any
         counter-party.

         For derivatives designed either as fair value or cash flow hedges,
         changes in the time value of the derivatives are excluded from the
         assessment of hedge effectiveness and are recognized in earnings. Hedge
         ineffectiveness, determined in accordance with Statement 133, had no
         impact on earnings for the three months ended March 31, 2001. No fair
         value hedges or cash flow hedges were derecognized or discontinued
         during the three months ended March 31, 2001.

         For the three months ended March 31, 2001, unrealized gains on
         financial instruments included a $333 million gain related to call
         option obligations, a $258 million net loss for changes in the fair
         value of derivative instruments related to available-for-sale
         securities and other derivatives not designated as hedging instruments,
         and a $31 million net loss for changes in the time value of options for
         fair value hedges.


                                       6
<PAGE>   7
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


(3)      Supplemental Disclosures to Combined Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                           Three months ended
                                                                                                 March 31,
                                                                                          ----------------------
                                                                                           2001            2000
                                                                                          -----           ------
                                                                                            amounts in millions
<S>                                                                                       <C>             <C>
         Cash paid for acquisitions:
                Fair value of assets acquired                                             $ 117            2,510
                Net liabilities assumed                                                      (8)            (743)
                Deferred tax liability recorded                                              --             (362)
                Minority interests in equity of acquired attributed subsidiaries             --             (285)
                AT&T Class A Liberty Media Group common stock issued                         --             (778)
                                                                                          -----           ------
                   Cash paid for acquisitions                                             $ 109              342
                                                                                          =====           ======

         Cash paid for interest                                                           $ 156               70
                                                                                          =====           ======
</TABLE>

(4)      Investments in Affiliates Accounted for Using the Equity Method

         Liberty Media Group has various investments accounted for using the
         equity method. The following table includes Liberty Media Group's
         carrying amount of the more significant investments in affiliates:

<TABLE>
<CAPTION>
                                                                        March 31,     December 31,
                                                                          2001            2000
                                                                        ---------     ------------
                                                                           amounts in millions
<S>                                                                     <C>              <C>
         Gemstar-TV Guide International, Inc. ("Gemstar")               $ 4,958           5,855
         Discovery Communications, Inc. ("Discovery")                     3,068           3,133
         Telewest Communications plc ("Telewest")                         2,424           2,712
         USA Networks, Inc. ("USAI") and related investments              2,809           2,824
         QVC Inc. ("QVC")                                                 2,510           2,508
         Other                                                            3,453           3,432
                                                                        -------          ------
                                                                        $19,222          20,464
                                                                        =======          ======
</TABLE>


                                       7
<PAGE>   8
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         The following table reflects Liberty Media Group's share of earnings
(losses) of affiliates:

<TABLE>
<CAPTION>
                                                                    Three months ended
                                                                         March 31,
                                                                  ----------------------
                                                                    2001            2000
                                                                  -------           ----
                                                                    amounts in millions
<S>                                                               <C>
               Gemstar                                            $  (897)            --
               Discovery                                              (65)           (63)
               Telewest                                              (131)           (87)
               USAI and related investments                           (13)            (7)
               QVC                                                      2             (1)
               UnitedGlobalCom, Inc. ("UnitedGlobalCom")              (45)           (50)
               Teligent, Inc.                                         (85)           (71)
               Other                                                  (68)          (103)
                                                                  -------           ----
                                                                  $(1,302)          (382)
                                                                  =======           ====
</TABLE>

         At March 31, 2001, the aggregate carrying amount of Liberty Media
         Group's investments in its affiliates exceeded Liberty Media Group's
         proportionate share of its affiliates' net assets by $14 billion. Such
         excess is being amortized over estimated useful lives ranging from 2 to
         20 years. Amortization aggregating $349 million and $184 million for
         the three months ended March 31, 2001 and 2000, respectively, is
         included in share of losses of affiliates.

         Certain of Liberty Media Group's affiliates are general partnerships
         and, as such, Liberty Media Group is liable as a matter of partnership
         law for all debts (other than non-recourse debts) of that partnership
         in the event liabilities of that partnership were to exceed its assets.

         Summarized unaudited combined financial information for affiliates is
         as follows:

<TABLE>
<CAPTION>
                                                            Three months ended
                                                                March 31,
                                                     -----------------------------
                                                       2001                  2000
                                                     -------                ------
                                                          amounts in millions
<S>                                                  <C>                     <C>
         Revenue                                     $ 4,451                 3,610
         Operating expenses                           (3,980)               (3,333)
         Depreciation and amortization                (1,109)                 (641)
                                                     -------                ------
             Operating loss                             (638)                 (364)
         Interest expense                               (645)                 (465)
         Other, net                                      103                    (4)
                                                     -------                ------
             Net loss                                $(1,180)                 (833)
                                                     =======                ======
</TABLE>

         Gemstar

         Gemstar is a global technology and media company focused on consumer
         entertainment. The common stock of Gemstar is publicly traded. At March
         31, 2001, Liberty Media Group held 87.5 million shares of Gemstar
         common stock. Gemstar's stock reported a closing price of $28.75 per
         share on March 31, 2001.

         On July 12, 2000, Gemstar acquired TV Guide, Inc. ("TV Guide"). TV
         Guide shareholders received .6573 shares of Gemstar common stock in
         exchange for each share of TV Guide. As a result of this transaction,
         133 million shares of TV Guide held by Liberty Media Group were
         exchanged for 87.5 million shares of Gemstar common stock. At March 31,
         2000, Liberty Media Group owned approximately 21% of Gemstar. Liberty
         Media Group recognized a $4.4 billion gain


                                       8
<PAGE>   9
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         (before deferred tax expense of $1.7 billion) on such transaction
         during the third quarter of 2000 based on the difference between the
         carrying value of Liberty Media Group's interest in TV Guide and the
         fair value of the Gemstar securities received.

         On May 2, 2001, Liberty Media Group entered into a transaction
         ("Exchange Transaction") with The News Corporation Limited ("News
         Corp.") to exchange 70.7 million shares of Gemstar held by Liberty
         Media Group for 121.5 million News Corp. American Depository Shares
         ("ADSs") representing preferred, limited voting, ordinary shares of
         News Corp. The fair value of the securities received by Liberty Media
         Group is less than the expected carrying value of the Gemstar shares on
         the date of the Exchange Transaction. As a result of the inherent loss
         on the Exchange Transaction, Liberty Media Group recorded an other than
         temporary decline in value adjustment on all of its Gemstar interests
         in the first quarter of 2001. Such adjustment ($764 million) is
         included in share of losses of Gemstar in the combined statements of
         operations.

         Telewest

         Telewest currently operates and constructs cable television and
         telephone systems in the UK. Flextech p.l.c. ("Flextech") develops and
         sells a variety of television programming in the UK. In April 2000,
         Telewest acquired Flextech in a merger transaction. As a result, each
         share of Flextech was exchanged for 3.78 new Telewest shares. Prior to
         the acquisition, Liberty Media Group owned an approximate 37% equity
         interest in Flextech and a 22% equity interest in Telewest. As a result
         of the acquisition, Liberty Media Group has an approximate 24.6% equity
         interest in Telewest. Liberty Media Group recognized a $649 million
         gain (before deferred tax expense of $227 million) on the acquisition
         during the second quarter of 2000 based on the difference between the
         carrying value of Liberty Media Group's interest in Flextech and the
         fair value of the Telewest shares received. At March 31, 2001, Liberty
         Media Group indirectly owned 724 million of the issued and outstanding
         Telewest ordinary shares. Telewest's ordinary shares reported a closing
         price of $1.69 per share on March 31, 2001.

         USAI

         USAI owns and operates businesses in network and television production,
         television broadcasting, electronic retailing, ticketing operations,
         and internet services. At March 31, 2001, Liberty Media Group directly
         and indirectly held 74.4 million shares of USAI's common stock. Liberty
         Media Group also held shares directly in certain subsidiaries of USAI
         which are exchangeable into 79 million shares of USAI common stock.
         Liberty Media Group's direct ownership of USAI is currently restricted
         by Federal Communications Commission ("FCC") regulations. The exchange
         of the shares in subsidiaries of USAI can be accomplished only if there
         is a change to existing regulations or if Liberty Media Group obtains
         permission from the FCC. If the exchange of subsidiary stock into USAI
         common stock was completed at March 31, 2001, Liberty Media Group would
         own 153.4 million shares or approximately 21% (on a fully-diluted
         basis) of USAI common stock. USAI's common stock reported a closing
         price of $23.94 per share on March 31, 2001.

         UnitedGlobalCom

         UnitedGlobalCom is a global broadband communications provider of video,
         voice and data services with operations in over 20 countries throughout
         the world. At March 31, 2001, Liberty Media Group owned an approximate
         11.3% economic ownership interest representing an approximate 36.9%
         voting interest in UnitedGlobalCom. Liberty Media Group owns 9.9
         million shares of UnitedGlobalCom Class B common stock and 1.2 million
         shares of UnitedGlobalCom Class A common stock. The UnitedGlobalCom
         Class B common stock is convertible, on a one - for-one basis, into
         UnitedGlobalCom Class A common stock. UnitedGlobalCom's Class A common
         stock reported a closing price of $13.13 per share on March 31, 2001.


                                       9
<PAGE>   10
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


(5)      Investments in Available-for-sale Securities and Others

         Investments in available-for-sale securities and others are summarized
         as follows:

<TABLE>
<CAPTION>
                                                                        March 31,        December 31,
                                                                          2001              2000
                                                                        ---------        ------------
                                                                            amounts in millions

<S>                                                                     <C>              <C>
         Sprint Corporation ("Sprint PCS")                              $ 5,007             5,192
         AOL Time Warner Inc. ("AOL Time Warner")                         7,112             6,325
         News Corp.                                                       2,179             2,342
         Motorola, Inc. ("Motorola")                                      1,570             1,982
         Other available-for-sale securities                              3,797             2,989
         Other investments, at cost, and related receivables                460               705
                                                                        -------            ------
                                                                         20,125            19,535
             Less short-term investments                                    444               500
                                                                        -------            ------
                                                                        $19,681            19,035
                                                                        =======            ======
</TABLE>

         Sprint PCS

         Liberty Media Group and certain of its consolidated subsidiaries
         collectively are the beneficial owners of approximately 197 million
         shares of Sprint PCS Group Stock and certain other instruments
         convertible into such securities (the "Sprint Securities"). The Sprint
         PCS Group Stock is a tracking stock intended to reflect the performance
         of Sprint's domestic wireless PCS operations. Liberty Media Group
         accounts for its investment in the Sprint Securities as an
         available-for-sale security.

         Pursuant to a final judgment (the "Final Judgment") agreed to by
         Liberty Media Corporation, AT&T and the United States Department of
         Justice (the "DOJ") on December 31, 1998, Liberty Media Group
         transferred all of its beneficially owned securities of Sprint PCS (the
         "Sprint PCS Securities") to a trustee (the "Trustee") prior to the AT&T
         Merger. The Final Judgment, which was entered by the United States
         District Court for the District of Columbia on August 23, 1999,
         requires the Trustee, on or before May 23, 2002, to dispose of a
         portion of the Sprint PCS Securities sufficient to cause Liberty Media
         Group to beneficially own no more than 10% of the outstanding Series 1
         PCS Stock of Sprint PCS on a fully diluted basis on such date. On or
         before May 23, 2004, the Trustee must divest the remainder of the
         Sprint PCS Securities beneficially owned by Liberty Media Group.

         The Final Judgment requires that the Trustee vote the Sprint PCS
         Securities beneficially owned by Liberty Media Group in the same
         proportion as other holders of Sprint's PCS Group Stock so long as such
         securities are held by the trust. The Final Judgment also prohibits the
         acquisition by Liberty Media Group of additional Sprint PCS Securities,
         with certain exceptions, without the prior written consent of the DOJ.

         AOL Time Warner

         On January 11, 2001, American Online, Inc. completed its merger with
         Time Warner Inc. ("Time Warner") to form AOL Time Warner. In connection
         with the merger, each share of Time Warner common stock held by Liberty
         Media Group was converted into 1.5 shares of an identical series of AOL
         Time Warner stock. Upon completion of this transaction, Liberty holds a
         total of 171 million shares in AOL Time Warner. Liberty Media Group
         recognized a $253 million gain (before deferred tax expense of $100
         million) based upon the difference between the carrying value of
         Liberty


                                       10
<PAGE>   11
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         Media Group's interest in Time Warner and the fair value of the AOL
         Time Warner securities received.

         News Corp.

         Subsequent to the Exchange Transaction, Liberty Media Group owns 203
         million ADSs or 18% of the outstanding equity of News Corp.

         Motorola

         On January 5, 2000, Motorola completed the acquisition of General
         Instrument Corporation ("General Instrument") through a merger of
         General Instrument with a wholly owned subsidiary of Motorola. In
         connection with the merger Liberty Media Group received 54 million
         shares and warrants to purchase 37 million shares of Motorola common
         stock in exchange for its holdings in General Instrument. Liberty Media
         Group recognized a $2.2 billion gain (before deferred tax expense of
         $883 million) on such transaction during the first quarter of 2000
         based on the difference between the carrying value of Liberty Media
         Group's interest in General Instrument and the fair value of the
         Motorola securities received. During 2000, Liberty Media Group
         exercised a warrant to purchase approximately 9 million shares of
         Motorola common stock at an exercise price of $8.26 per share.

         Viacom, Inc.

         On January 23, 2001, BET Holdings II, Inc. ("BET") was acquired by
         Viacom, Inc. ("Viacom") in exchange for shares of Class B common stock
         of Viacom pursuant to an Agreement and Plan of Merger among Liberty
         Media Group, BET, Viacom, Robert L. Johnson and the Johnson Children's
         Insurance Trust and certain of their respective affiliates. As a result
         of the merger, Liberty Media Group received approximately 15.2 million
         shares of Viacom's Class B common stock (less than 1% of Viacom's
         common equity) in exchange for its 35% interest in BET, which
         investment had been accounted for using the equity method. Liberty
         Media Group accounts for its investment in Viacom as an
         available-for-sale security. Liberty Media Group recognized a gain of
         $570 million (before deferred tax expense of $225 million) in the first
         quarter of 2001 based upon the difference between the carrying value of
         Liberty Media Group's interest in BET and the value of the Viacom
         securities received.

         Other-Than-Temporary Decline in Fair Value of Investments

         During the first quarter of 2001, Liberty Media Group determined that
         certain of its other investments experienced other than temporary
         declines in value. As a result, the carrying amounts of these
         investments were adjusted to their respective fair values at March 31,
         2001. These adjustments, which included a $127 million adjustment to
         Liberty Media Group's investment in Antec Corporation, resulted in a
         total charge of $304 million, before deducting a deferred income tax
         benefit of $120 million.


                                       11
<PAGE>   12
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         Investments in available-for-sale securities are summarized as follows:

<TABLE>
<CAPTION>
                                                       March 31,           December 31,
                                                          2001                 2000
                                                        --------             -------
                                                            amounts in millions
<S>                                                     <C>                   <C>
         Equity securities:
             Cost basis                                 $ 18,279              17,736
             Gross unrealized holding gains                1,531               1,868
             Gross unrealized holding losses              (2,043)             (2,517)
                                                        --------             -------
             Fair value                                 $ 17,767              17,087
                                                        ========             =======
         Debt securities:
             Cost basis                                 $  1,734               1,533
             Gross unrealized holding gains                   80                  86
             Gross unrealized holding losses                 (64)                (64)
                                                        --------             -------
             Fair value                                 $  1,750               1,555
                                                        ========             =======
</TABLE>


         Management estimates the fair market value of all of its investments in
         available-for-sale securities and others aggregated $20.2 billion and
         $19.7 billion at March 31, 2001 and December 31, 2000, respectively.
         Management calculates market values using a variety of approaches
         including multiple of cash flow, per subscriber value, a value of
         comparable public or private businesses or publicly quoted market
         prices. No independent appraisals were conducted for those assets.

         Liberty Media Group enters into equity collars and put spread collars
         to manage market risk associated with its investments in certain
         marketable securities. These instruments are recorded at fair value
         based on option pricing models using the historical volatility of the
         underlying security. Equity collars generally have high correlation
         between changes in the fair value of the instrument and changes in the
         fair value of the underlying security, and therefore, qualify as fair
         value hedges. Conversely, put spread collars generally do not have high
         correlation, and therefore do not qualify as fair value hedges. The
         following table illustrates the fair value of the Liberty Media Group's
         equity collars and put spread collars which are included as part of the
         investment balance:

<TABLE>
<CAPTION>
                                               March 31,       December 31,
                                                 2001             2000
                                               ---------       ------------
                  Type of Derivative               amounts in millions
<S>                                             <C>            <C>
                  Equity collars                $1,713            1,293
                  Put spread collars               148              188
</TABLE>

(6)      Acquisitions

         Ascent Entertainment Group, Inc. ("Ascent")

         On March 28, 2000, Liberty Media Group announced that it had completed
         its cash tender offer for the outstanding common stock of Ascent at a
         price of $15.25 per share. Approximately 85% of the outstanding shares
         of common stock of Ascent were tendered in the offer and Liberty Media
         Group paid $385 million. On June 8, 2000, Liberty Media Group completed
         its acquisition of 100% of Ascent for an additional $67 million. The
         total purchase price for the acquisition was $452 million. Such
         transaction was accounted for as a purchase and the $228 million excess
         of the purchase price over the fair value of the net assets acquired is
         being amortized over 5 years.


                                       12
<PAGE>   13
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         Liberty Livewire Corporation ("Liberty Livewire")

         On April 10, 2000, Liberty Media Group acquired all of the outstanding
         common stock of Four Media Company ("Four Media") for total
         consideration of $462 million comprised of $123 million in cash, $194
         million of assumed debt, 6.4 million shares of AT&T Class A Liberty
         Media Group common stock and a warrant to purchase approximately
         700,000 shares of AT&T Class A Liberty Media Group common stock at an
         exercise price of $23 per share. Four Media provides technical and
         creative services to owners, producers and distributors of television
         programming, feature films and other entertainment products both
         domestically and internationally.

         On June 9, 2000, Liberty Media Group acquired a controlling interest in
         The Todd-AO Corporation ("Todd-AO") in exchange for approximately 5.4
         million shares of AT&T Class A Liberty Media Group common stock valued
         at $106 million. Todd-AO provides sound, video and ancillary post
         production and distribution services to the motion picture and
         television industries in the United States and Europe. Immediately
         following the closing of such transaction, Liberty Media Group
         contributed to Todd-AO 100% of the capital stock of Four Media, and
         Todd-AO changed its name to Liberty Livewire.

         On July 19, 2000, Liberty Media Group purchased all of the assets
         relating to the post production, content and sound editorial businesses
         of Soundelux Entertainment Group for $90 million in cash, and
         contributed such assets to Liberty Livewire. Following this
         contribution, Liberty Media Group's ownership in Liberty Livewire
         increased to approximately 88% of the equity and approximately 99% of
         the voting power of Liberty Livewire outstanding immediately following
         the contribution.

         Each of the foregoing acquisitions was accounted for as a purchase. In
         connection therewith, Liberty Media Group recorded an aggregate
         increase to combined attributed net assets of $251 million. The
         aggregate $452 million excess purchase price over the fair value of the
         net assets acquired is being amortized over 20 years.

         Pro-Forma Information

         The following unaudited pro forma revenue and net earnings for the
         three months ended March 31, 2000 were prepared assuming the 2000
         acquisitions discussed above occurred on January 1, 2000. These pro
         forma amounts are not necessarily indicative of operating results that
         would have occurred if the acquisitions discussed above had occurred on
         January 1, 2000. (amounts in millions)

<TABLE>
<S>                                                        <C>
                  Revenue                                  $ 467
                  Net earnings                             $ 885
</TABLE>


                                       13
<PAGE>   14
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


(7)      Long-Term Debt

         Debt is summarized as follows:

<TABLE>
<CAPTION>
                                                           March 31,       December 31,
                                                             2001             2000
                                                           ---------       ------------
                                                              amounts in millions
<S>                                                        <C>             <C>
              Parent company debt:
                  Senior notes                              $  742              742
                  Senior debentures                          1,486            1,486
                  Senior exchangeable debentures               854            1,679
                  Securities lending agreement                 315              338
                  Bank credit facilities                       675              475
                  Other debt                                   276              242
                                                            ------            -----
                                                             4,348            4,962
                                                            ------            -----
              Debt of subsidiaries:
                  Bank credit facilities                     1,292            1,129
                  Senior notes                                 185              179
                  Other debt                                   212               93
                                                            ------            -----
                                                             1,689            1,401
                                                            ------            -----
                  Total debt                                 6,037            6,363
              Less current maturities                        1,416            1,094
                                                            ------            -----
                Total long-term debt                        $4,621            5,269
                                                            ======            =====
</TABLE>

         Senior Notes and Debentures

         On July 7, 1999, Liberty Media Group issued $750 million of 7-7/8%
         Senior Notes due 2009 and issued $500 million of 8-1/2% Senior
         Debentures due 2029 for aggregate cash proceeds of $741 million and
         $494 million, respectively. Interest on both issuances is payable on
         January 15 and July 15 of each year.

         On February 2, 2000, Liberty Media Group issued $1 billion of 8-1/4%
         Senior Debentures due 2030 for aggregate cash proceeds of $983 million.
         Interest on these debentures is payable on February 1 and August 1 of
         each year.

         The senior notes and debentures are stated net of an aggregate
         unamortized discount of $22 million at March 31, 2001 and December 31,
         2000, which is being amortized to interest expense in the combined
         statements of operations.

         Senior Exchangeable Debentures

         On November 16, 1999, Liberty Media Group issued $869 million of 4%
         Senior Exchangeable Debentures due 2030. Interest is payable on May 15
         and November 15 of each year. Each $1,000 debenture is exchangeable at
         the holder's option for the value of 22.9486 shares of Sprint PCS Group
         Stock. After the later of December 31, 2001 and the date Liberty Media
         Group's ownership level of Sprint PCS Group Stock falls below a
         specified level, Liberty Media Group may, at its election, pay the
         exchange value in cash, Sprint PCS Group Stock or a combination
         thereof. Prior to such time, the exchange value must be paid in cash.

         On February 10, 2000, Liberty Media Group issued $750 million of 3-3/4%
         Senior Exchangeable Debentures due 2030. On March 8, 2000, Liberty
         Media Group issued an additional $60 million of 3-3/4% Senior
         Exchangeable Debentures. Interest is payable on February 15 and August
         15 of each year. Each $1,000 debenture is exchangeable at the holder's
         option for the value of


                                       14
<PAGE>   15
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         16.7764 shares of Sprint PCS Group Stock. After the later of February
         15, 2002 and the date Liberty Media Group's ownership level of Sprint
         PCS Group Stock falls below a specified level, Liberty Media Group may,
         at its election, pay the exchange value in cash, Sprint PCS Group Stock
         or a combination thereof. Prior to such time, the exchange value must
         be paid in cash.

         On January 11, 2001, Liberty Media Group issued $550 million of 3-1/2%
         Senior Exchangeable Debentures due 2031 for aggregate cash proceeds of
         $539 million. On January 17, 2001, Liberty Media Group issued an
         additional $50 million of 3-1/2% Senior Exchangeable Debentures due
         2031. Interest is payable on January 15 and July 15 of each year. Each
         $1,000 debenture is exchangeable at the holder's option for the value
         of 36.8189 shares of Motorola common stock. Such exchange value is
         payable, at Liberty Media Group's option, in cash, Motorola stock or a
         combination thereof. On or after January 15, 2006, Liberty Media Group,
         at its option, may redeem the debentures for cash.

         On March 8, 2001, Liberty Media Group issued $817.7 million of 3-1/4%
         Senior Exchangeable Debentures due 2031. Interest is payable on March
         15 and September 15 of each year. Each $1,000 debenture is exchangeable
         at the holder's option for the value of 18.5666 shares of Viacom Class
         B common stock. After January 23, 2003, such exchange value is payable
         at Liberty Media Group's option in cash, Viacom stock or a combination
         thereof. Prior to such date, the exchange value must be paid in cash.
         On or after March 15, 2006, Liberty Media Group, at its option, may
         redeem the debentures for cash.

         Prior to the adoption of Statement 133, the carrying amount of the
         senior exchangeable debentures was adjusted based on the fair value of
         the underlying security. Increases or decreases in the value of the
         underlying security above the principal amount of the senior
         exchangeable debentures were recorded as an adjustment to interest
         expense in the combined statements of operations and comprehensive
         earnings. If the value of the underlying security decreased below the
         principal amount of the senior exchangeable debentures there was no
         effect on the principal amount of the debentures.

         Upon adoption of Statement 133, the call option feature of the
         exchangeable debentures is reported separately in the combined balance
         sheet at fair value. Accordingly, at January 1, 2001, Liberty Media
         Group recorded a transition adjustment to reflect the call option
         obligations at fair value ($459 million) and to recognize in net
         earnings the difference between the fair value of the call option
         obligations at issuance and the fair value of the call option
         obligations at January 1, 2001. Such adjustment to net earnings
         aggregated $757 million (before tax expense of $299 million) and is
         included in cumulative effect of accounting change. Changes in the fair
         value of the call option obligations subsequent to January 1, 2001 are
         recognized as unrealized gain (losses) on financial instruments in
         Liberty Media Group's combined statements of operations. During the
         three months ended March 31, 2001, Liberty Media Group recorded
         unrealized gains of $333 million related to the call option
         obligations.

         Under Statement 133, the reported amount of the long-term debt portion
         of the exchangeable debentures is calculated as the difference between
         the face amount of the debentures and the fair value of the call option
         feature on the date of issuance. The fair value of the call option
         obligations related to the $1,418 million of exchangeable debentures
         issued during the three months ended March 31, 2001, aggregated $1,028
         million on the date of issuance. Accordingly, the long-term debt
         portion was recorded at $390 million. The long-term debt is accreted to
         its face amount over the term of the debenture using the effective
         interest method. The transition adjustment noted above resulted in a
         decrease in the carrying value of the long-term debt portion of the
         senior exchangeable debentures of $1,216 million on January 1, 2001.


                                       15
<PAGE>   16
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         Securities Lending Agreement

         On January 7, 2000, a trust, which holds Liberty Media Group's
         investment in Sprint Corporation, entered into agreements to loan 18
         million shares of Sprint PCS Group Stock to a third party, as Agent.
         The obligation to return those shares is secured by cash collateral
         equal to 100% of the market value of that stock, which was $315 million
         at March 31, 2001. During the period of the loan, which is terminable
         by either party at any time, the cash collateral is to be
         marked-to-market daily. The trust, for the benefit of Liberty Media
         Group, has the use of 80% of the cash collateral plus any interest
         earned thereon during the term of the loan, and is required to pay a
         rebate fee equal to the Federal funds rate less 30 basis points to the
         borrower of the loaned shares. Interest earned on the cash collateral
         aggregated $23 million as of March 31, 2001, and Liberty Media Group
         had utilized $256 million of the cash collateral and interest income as
         of such date. Unutilized cash collateral of $59 million at March 31,
         2001, which represents restricted cash, is included in other current
         assets in the combined balance sheets.

         Bank Credit Facilities

         At March 31, 2001, Liberty Media Group had approximately $199 million
         in unused lines of credit under its bank credit facilities. The bank
         credit facilities of Liberty Media Group generally contain restrictive
         covenants which require, among other things, the maintenance of certain
         financial ratios, and include limitations on indebtedness, liens,
         encumbrances, acquisitions, dispositions, guarantees and dividends.
         Liberty Media Group was in compliance with its debt covenants at March
         31, 2001. Additionally, Liberty Media Group pays fees ranging from .15%
         to .375% per annum on the average unborrowed portions of the total
         amounts available for borrowings under bank credit facilities.

         Based on quoted market prices, the fair value of Liberty Media Group's
         debt at March 31, 2001 is as follows (amounts in millions):

<TABLE>
<S>                                                                          <C>
                 Senior notes of parent company                              $  738
                 Senior debentures of parent company                          1,364
                 Senior exchangeable debentures of parent company             1,244
                 Senior notes of attributed subsidiary                          192
</TABLE>

         Liberty Media Group believes that the carrying amount of the remainder
         of its debt approximated its fair value at March 31, 2001.

(8)      Combined Attributed Net Assets

         Stock Issuances of Subsidiaries

         During the three months ended March 31, 2001, consolidated subsidiaries
         attributed to Liberty Media Group issued shares of common stock in
         connection with certain acquisitions and the exercise of certain
         employee stock options. In connection with the increase in the issuers'
         equity, net of the dilution of Liberty Media Group's ownership
         interest, that resulted from such stock issuances, Liberty Media Group
         recorded a $9 million increase to combined attributed net assets.

         Transactions with AT&T

         Certain subsidiaries attributed to Liberty Media Group produce and/or
         distribute programming and other services to cable distribution
         operators (including AT&T) and others pursuant to long term affiliation
         agreements. Charges to AT&T are based upon customary rates charged to
         others. Amounts included in revenue for services provided to AT&T were
         $86 million and $52 million for the three months ended March 31, 2001
         and 2000, respectively.


                                       16
<PAGE>   17
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         AT&T allocates certain corporate general and administrative costs to
         Liberty Media Group pursuant to an intergroup agreement for services
         provided. Management believes such allocation methods are reasonable
         and materially approximate the amount that Liberty Media Group would
         have incurred on a stand-alone basis. In addition, there are
         arrangements between subsidiaries attributed to Liberty Media Group and
         AT&T and its other subsidiaries for satellite transponder services,
         marketing support, programming, and hosting services. These expenses
         aggregated $7 million during each of the three month periods ended
         March 31, 2001 and 2000.

         Due to (from) Related Parties

         The amounts included in "Due to (from) related parties" represent a
         non-interest bearing intercompany account with AT&T which includes
         income tax allocations that are to be settled at some future date. All
         other amounts included in the intercompany account are generally repaid
         within thirty days.

(9)      Commitments and Contingencies

         Starz Encore Group LLC ("Starz Encore Group"), a subsidiary that is
         attributed to the Liberty Media Group, provides premium programming
         distributed by cable, direct-to-home satellite and other distribution
         media throughout the United States. Starz Encore Group is obligated to
         pay fees for the rights to exhibit certain films that are released by
         various producers through 2017 (the "Film Licensing Obligations").
         Based on customer levels at March 31, 2001, these agreements require
         minimum payments aggregating approximately $1.2 billion. The aggregate
         amount of the Film Licensing Obligations under these license agreements
         is not currently estimable because such amount is dependent upon the
         number of qualifying films released theatrically by certain motion
         picture studios as well as the domestic theatrical exhibition receipts
         upon the release of such qualifying films. Nevertheless, required
         aggregate payments under the Film Licensing Obligations could prove to
         be significant.

         Liberty Media Group has guaranteed various loans, notes payable,
         letters of credit and other obligations (the "Guaranteed Obligations")
         of certain affiliates. At March 31, 2001, the Guaranteed Obligations
         aggregated approximately $461 million. Currently, Liberty Media Group
         is not certain of the likelihood of being required to perform under
         such guarantees.

         Liberty Media Group leases business offices, has entered into pole
         rental and transponder lease agreements and uses certain equipment
         under lease arrangements.

         Liberty Media Group has contingent liabilities related to legal
         proceedings and other matters arising in the ordinary course of
         business. Although it is reasonably possible Liberty Media Group may
         incur losses upon conclusion of such matters, an estimate of any loss
         or range of loss cannot be made. In the opinion of management, it is
         expected that amounts, if any, which may be required to satisfy such
         contingencies will not be material in relation to the accompanying
         combined financial statements.

(10)     Proposed Split Off Transaction

         AT&T currently owns all the outstanding shares of Class A Common Stock,
         Class B Common Stock and Class C Common Stock of Liberty Media
         Corporation. Subsequent to December 31, 2000, AT&T initiated a process
         for effecting the split off of Liberty Media Corporation from AT&T by
         means of a redemption of AT&T Liberty Media Group tracking stock (the
         "Split Off Transaction"). Prior to the Split Off Transaction, Liberty
         will increase its authorized capital stock, and the Liberty Class A and
         Class B Common Stock will be reclassified as Series A Liberty Media
         Corporation common stock ("Series A common stock") and the Class C
         Common Stock will be


                                       17
<PAGE>   18
                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)

                Notes to Combined Financial Statements, continued


         reclassified as Series B Liberty Media Corporation common stock
         ("Series B common stock"). In the Split Off Transaction, each share of
         Class A and Class B Liberty Media Group Common Stock will be exchanged
         for a like share of Series A common stock and Series B common stock,
         respectively. Upon completion of the Split Off Transaction, Liberty
         Media Corporation will no longer be a subsidiary of AT&T and no shares
         of AT&T Liberty Media Group tracking stock will remain outstanding. The
         Split Off Transaction will be accounted for at historical cost. There
         can be no assurance that the Split Off Transaction will be effected.


                                       18