"LIBERTY MEDIA GROUP"
         (a combination of certain assets, as defined in notes 1 and 2)


                             Combined Balance Sheets
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                              New Liberty             Old Liberty
                                                                                          (note 1)
                                                                             September 30,            December 31,
                                                                                 1999                     1998
                                                                             -------------            ------------
Assets                                                                                 amounts in millions
<S>                                                                                <C>                      <C>
Current assets:

   Cash and cash equivalents                                                  $       499                     407

   Marketable securities                                                            2,949                     124

   Trade and other receivables, net                                                   143                     185

   Prepaid expenses and committed program rights                                      407                     263

   Deferred income tax assets                                                         380                     216

   Other current assets                                                                 5                      21
                                                                              -----------             -----------

         Total current assets                                                       4,383                   1,216
                                                                              -----------             -----------

Investments in affiliates, accounted for under the equity method, and
   related receivables (note 5)                                                    15,939                   3,079

Investment in Time Warner, Inc. ("Time Warner") (note 6)
                                                                                    6,968                   7,083

Investment in AT&T Corp. ("AT&T") (note 2)                                             --                   3,556

Investment in Sprint Corporation ("Sprint") (notes 2 and 5)
                                                                                    7,616                   2,446

Other investments and related receivables                                           5,156                   1,298

Property and equipment, at cost                                                       123                     935
   Less accumulated depreciation                                                        7                     350
                                                                              -----------             -----------
                                                                                      116                     585
                                                                              -----------             -----------

Intangible assets                                                                  10,148                   1,139
   Less accumulated amortization                                                      319                     164
                                                                              -----------             -----------
                                                                                    9,829                     975
                                                                              -----------             -----------
Other assets, at cost, net of accumulated amortization
                                                                                      846                     326
                                                                              -----------             -----------

         Total assets                                                         $    50,853                  20,564
                                                                              ===========             ===========
</TABLE>
                                   (continued)
<PAGE>

                       Combined Balance Sheets, continued
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                              New Liberty         Old Liberty
                                                                                          (note 1)
                                                                             September 30,        December 31,
                                                                                 1999                 1998
                                                                             -------------        ------------
Liabilities and Combined Equity                                                       amounts in millions
<S>                                                                               <C>                     <C>
Current liabilities:

   Accounts payable and accrued liabilities                                 $         192                 416

   Accrued stock compensation                                                       1,119                 126

   Program rights payable                                                             170                 156

   Current portion of debt                                                            474                 578
                                                                            -------------       -------------

        Total current liabilities                                                   1,955               1,276
                                                                            -------------       -------------

Long-term debt (note 8)                                                             1,720               2,318

Deferred income taxes (note 9)                                                     11,635               4,674

Other liabilities                                                                      23                 423
                                                                            -------------       -------------

        Total liabilities                                                          15,333               8,691
                                                                            -------------       -------------

Minority interests in equity of attributed subsidiaries
                                                                                        1                 545

Obligation to redeem common stock                                                      --                  17

Combined equity (note 10):
   Combined equity                                                                 33,025               6,896
   Accumulated other comprehensive earnings, net of taxes
                                                                                    2,408               3,718
                                                                            -------------       -------------
                                                                                   35,433              10,614
   Due to related parties                                                              86                 697
                                                                            -------------       -------------
     Total combined equity                                                         35,519              11,311
                                                                            -------------       -------------

Commitments and contingencies (note 11)

        Total liabilities and combined equity                               $      50,853              20,564
                                                                            =============       =============
</TABLE>

See accompanying notes to combined financial statements.

<PAGE>

          Combined Statements of Operations and Comprehensive Earnings
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                               New Liberty             Old Liberty
                                                                                           (note 1)
                                                                                      Three months ended
                                                                                         September 30,
                                                                                  1999                    1998
                                                                                     amounts in millions,
<S>                                                                                <C>                     <C>
Revenue                                                                     $         214                     412

Operating costs and expenses:
   Operating, selling, general and administrative                                     168                     339
   Stock compensation                                                                 (23)                     (2)
   Depreciation and amortization                                                      164                      62
                                                                            -------------          --------------
                                                                                      309                     399
                                                                            -------------          --------------

        Operating income (loss)                                                       (95)                     13

Other income (expense):
   Interest expense                                                                   (41)                    (37)
   Dividend and interest income                                                        66                      32
   Share of losses of affiliates, net (note 5)                                       (238)                   (307)
   Minority interests in losses of attributed subsidiaries
                                                                                        3                      20
   Gain on dispositions (note 7)                                                       12                   2,305
   Gains on issuance of equity by affiliates and
      subsidiaries (notes 5 and 7)
                                                                                       --                      75
   Other, net                                                                          (4)                     (2)
                                                                            -------------          --------------
                                                                                     (202)                  2,086
                                                                            -------------          --------------

        Earnings (loss) before income taxes                                          (297)                  2,099

Income tax benefit (expense)                                                           80                    (814)
                                                                            -------------          --------------

        Net earnings (loss)                                                 $        (217)                  1,285
                                                                            =============          ==============

Other comprehensive earnings, net of taxes:
   Foreign currency translation adjustments                                           131                      11
   Unrealized holding gains arising during the period, net of
      reclassification adjustments                                                    308                      32
                                                                            -------------          --------------
   Other comprehensive earnings                                                       439                      43
                                                                            -------------          --------------

Comprehensive earnings                                                      $         222                   1,328
                                                                            =============          ==============
</TABLE>
                                   (continued)
<PAGE>

          Combined Statements of Operations and Comprehensive Earnings
                                   (unaudited)
<TABLE>
<CAPTION>
                                                               New Liberty                              Old Liberty
                                                                (note 1)                                 (note 1)
                                                              Seven months                Two months                  Nine months
                                                                 ended                      ended                       ended
                                                              September 30,              February 28,                September 30,
                                                                  1999                       1999                        1998
                                                                                      amounts in millions
<S>                                                                 <C>                            <C>                      <C>
Revenue                                                      $        506                           282                     1,137

Operating costs and expenses:
   Operating, selling, general and administrative
                                                                      408                           227                       975
   Stock compensation                                                 432                           183                       263
   Depreciation and amortization                                      394                            47                       173
                                                             ------------                  ------------              ------------
                                                                    1,234                           457                     1,411
                                                             ------------                  ------------              ------------

        Operating loss                                               (728)                         (175)                     (274)

Other income (expense):
   Interest expense                                                   (87)                          (28)                      (81)
   Dividend and interest income                                       172                            12                        66
   Share of losses of affiliates, net (note 5)                       (597)                          (66)                     (861)
   Minority interests in losses of attributed subsidiaries             15                             4                        42
   Gain on dispositions, net (notes 6 and 7)                           10                            14                     2,862
   Gains on issuance of equity by affiliates and
      subsidiaries (notes 5 and 7)                                     --                           389                       314
   Other, net                                                          (8)                           --                        (2)
                                                             ------------                  ------------              ------------
                                                                     (495)                          325                     2,340
                                                             ------------                  ------------              ------------

        Earnings (loss) before income taxes                        (1,223)                          150                     2,066

Income tax benefit (expense)                                          405                          (209)                     (828)
                                                             ------------                  ------------              ------------

        Net earnings (loss)                                  $       (818)                          (59)                    1,238
                                                             ============                  ============              ============

Other comprehensive earnings, net of taxes:
   Foreign currency translation adjustments                            88                           (15)                        7
   Unrealized holding gains arising during the period, net
      of reclassification adjustments                               2,320                           971                       887
                                                             ------------                  ------------              ------------

   Other comprehensive earnings                                     2,408                           956                       894
                                                             ------------                  ------------              ------------

Comprehensive earnings                                       $      1,590                           897                     2,132
                                                             ============                  ============              ============
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>

                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets, as defined in notes 1 and 2)

                          Combined Statement of Equity

                      Nine months ended September 30, 1999
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                 Accumulated
                                                                                    other             Due to
                                                                                comprehensive          (from)          Total
                                                              Combined            earnings,           related        combined
                                                               equity           net of taxes          parties         equity
                                                                                    amounts in millions
<S>                                                               <C>                   <C>               <C>            <C>
Balance at January 1, 1999                                         6,896                3,718              697           11,311
   Net loss                                                          (59)                  --               --              (59)
   Foreign currency translation adjustments                           --                  (15)              --              (15)
   Unrealized gains on available-for-sale securities                  --                  971               --              971
   Reversal of reclassification of redemption amount of
     common stock subject to put obligation                            8                   --               --                8
   Transfer of net liabilities to related party, net of taxes         99                   --               --               99
   Excess paid on settlement of preferred stock conversion           (18)                  --               --              (18)
   Other transfers to  related parties, net                           --                   --              (24)             (24)
                                                                 -------              -------          -------          -------

Balance at February 28, 1999                                     $ 6,926                4,674              673           12,273
                                                                 =======              =======          =======          =======



Balance at March 1, 1999                                          33,515                   --              213           33,728
   Net loss                                                         (818)                  --               --             (818)
   Foreign currency translation adjustments                           --                   88               --               88
   Unrealized gains on available-for-sale securities                  --                2,320               --            2,320
   AT&T Liberty Media Group Tracking Stock issued for
     conversion of debentures                                        354                   --               --              354
   Reversal of reclassification of redemption amount of
     common stock subject to put obligation                            9                   --               --                9
   Gain in connection with the issuance of common stock of
     attributed subsidiary                                            50                   --               --               50
   Utilization of net operating losses of Liberty Media Group
     by AT&T (note 9)                                                (85)                  --               --              (85)
   Other transfers to related parties, net                            --                   --             (127)            (127)
                                                                 -------              -------          -------          -------
Balance at September 30, 1999                                    $33,025                2,408               86           35,519
                                                                 =======              =======          =======          =======
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>

                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets, as defined in notes 1 and 2)

                        Combined Statements of Cash Flows
                                   (unaudited)
<TABLE>
<CAPTION>
                                                               New Liberty                              Old Liberty
                                                                (note 1)                                 (note 1)
                                                              Seven months                Two months                  Nine months
                                                                  ended                      ended                       ended
                                                              September 30,              February 28,                September 30,
                                                                  1999                       1999                        1998
                                                                                      amounts in millions
                                                                                          (see note 4)
<S>                                                                   <C>                          <C>                      <C>
Cash flows from operating activities:
   Net earnings (loss)                                       $        (818)                         (59)                     1,238
   Adjustments to reconcile net earnings (loss) to net cash
     provided (used) by operating activities:
        Depreciation and amortization                                  394                           47                        173
        Stock compensation                                             432                          183                        263
        Payments of stock compensation                                 (42)                        (126)                       (76)
        Share of losses of affiliates, net                             597                           66                        861
        Deferred income tax (benefit) expense                         (356)                         205                        804
        Intergroup tax allocation                                      (49)                          --                          1
        Cash payment from AT&T pursuant to tax sharing
          agreement, net                                                19                           --                         --
        Minority interests in losses of attributed subsidiaries        (15)                          (4)                       (42)
        Gains on issuance of equity by affiliates and
          subsidiaries                                                  --                         (389)                      (314)
        Gain on dispositions, net                                      (10)                         (14)                    (2,862)
        Other noncash charges                                            6                            9                          4
        Changes  in  current  assets  and  liabilities,
          net of the effect of acquisitions and dispositions:
             Change in receivables                                      (3)                         (19)                       (32)
             Change in prepaid expenses and committed
               program rights                                         (120)                         (10)                       (14)
             Change in payables and accruals                            70                            4                         (1)
                                                                 ---------                    ---------                  ---------

                 Net cash provided (used) by operating
                    activities                                         105                         (107)                         3
                                                                 ---------                    ---------                  ---------

Cash flows from investing activities:
   Capital expended for property and equipment                         (28)                         (21)                      (105)
   Investments in and loans to affiliates and others                (1,952)                         (45)                    (1,243)
   Purchases of marketable securities                               (6,894)                        (132)                        --
   Sales and maturities of marketable securities                     3,923                           34                         --
   Cash paid for acquisitions                                           (3)                          --                        (83)
   Cash proceeds from dispositions                                      90                           43                        343
   Cash balances of deconsolidated subsidiaries                         --                          (53)                        --
   Other, net                                                            1                           (9)                        (9)
                                                                 ---------                    ---------                  ---------

                 Net cash used in investing activities              (4,863)                        (183)                    (1,097)
                                                                 ---------                    ---------                  ---------
</TABLE>
                                   (continued)
<PAGE>


                  Combined Statements of Cash Flows, continued
                                   (unaudited)
<TABLE>
<CAPTION>
                                                               New Liberty                              Old Liberty
                                                                (note 1)                                 (note 1)
                                                              Seven months                Two months                  Nine months
                                                                  ended                      ended                       ended
                                                              September 30,              February 28,                September 30,
                                                                  1999                       1999                        1998
                                                                                      amounts in millions
                                                                                          (see note 4)
<S>                                                                 <C>                            <C>                       <C>
Cash flows from financing activities:
   Borrowings of debt                                                2,216                          156                      2,061
   Repayments of debt                                               (2,166)                        (148)                      (488)
   Cash transfers (to) from related parties                           (156)                         132                       (191)
   Net proceeds from issuance of stock by subsidiaries                  27                           --                         92
   Repurchase of stock of subsidiary                                    --                          (45)                       (15)
   Repurchase of common stock                                           --                           --                        (30)
   Payments for call agreements                                         --                           --                       (140)
   Other, net                                                           17                           (1)                       (16)
                                                                  --------                     --------                   --------

                 Net cash (used) provided by financing
                    activities                                         (62)                          94                      1,273
                                                                  --------                     --------                   --------

                    Net (decrease) increase in cash and
                        cash equivalents                            (4,820)                        (196)                       179

                    Cash and cash equivalents at beginning
                        of period                                    5,319                          407                        224
                                                                  --------                    ---------                   --------

                    Cash and cash equivalents at end of
                        period                                    $    499                          211                        403
                                                                  ========                    =========                   ========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>

                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets, as defined in notes 1 and 2)

                     Notes to Combined Financial Statements

                               September 30, 1999
                                   (unaudited)

(1)      Basis of Presentation

         The accompanying  combined financial statements include the accounts of
         the subsidiaries and assets of  Tele-Communications,  Inc. ("TCI") that
         are attributed to Liberty Media Group,  as defined  below.  On March 9,
         1999,  AT&T acquired TCI in a merger  transaction  (the "AT&T Merger").
         See note 2. The AT&T Merger has been  accounted  for using the purchase
         method. Accordingly,  Liberty Media Group's assets and liabilities have
         been recorded at their respective fair market values therefore creating
         a new cost basis. For financial  reporting purposes the AT&T Merger and
         related  restructuring  transactions  described in note 2 are deemed to
         have occurred on March 1, 1999. Accordingly, for periods prior to March
         1, 1999 the assets and  liabilities  attributed  to Liberty Media Group
         and the related combined financial statements are sometimes referred to
         herein as "Old  Liberty",  and for periods  subsequent  to February 28,
         1999 the assets and  liabilities  attributed to Liberty Media Group and
         the related  combined  financial  statements are sometimes  referred to
         herein as "New Liberty".  The "Company" and "Liberty Media Group" refer
         to both New Liberty and Old Liberty.

         The following table represents the summary balance sheet of Old Liberty
         at February 28, 1999 prior to the  restructuring  transactions  and the
         consummation  of the AT&T Merger and the opening  summary balance sheet
         of New Liberty  subsequent to the  restructuring  transactions  and the
         consummation  of  the  AT&T  Merger.  Certain  pre-merger  transactions
         occurring  between  March 1, 1999 and March 9, 1999 that  affected  Old
         Liberty's equity, gains on issuance of equity by subsidiaries and stock
         compensation have been reflected in the two-month period ended February
         28, 1999.


<PAGE>


<TABLE>
<CAPTION>
                                             Old Liberty         New Liberty
                                                  (amounts in millions)
        <S>                                   <C>                 <C>
         Assets
             Cash and cash equivalents        $    211               5,319

             Other current assets                  648                 447

             Investments in affiliates           3,971              17,116

             Investment in Time Warner           7,361               7,832

             Investment in Sprint                3,381               3,681

             Investment in AT&T                  3,856                  --

             Other investments                   1,257               1,586

             Property and equipment, net           532                 125

             Intangibles and other assets          817              11,228
                                              ---------           ---------
                                              $ 22,034              47,334
                                              =========           =========

         Liabilities and Equity
             Current liabilities              $  1,446               1,741

             Debt                                2,319               1,845

             Deferred income taxes               5,369               9,953
             Other liabilities                     168                  19
                                              ---------           ---------
                  Total liabilities              9,302              13,558
                                              ---------           ---------

             Minority interests in equity
                of attributed subsidiaries         450                  39

             Obligation to redeem common stock       9                   9

             Equity                             12,273              33,728
                                              ---------           ---------
                                              $ 22,034              47,334
                                              =========           =========
</TABLE>
                                   (continued)
<PAGE>


         The following  table reflects the  recapitalization  resulting from the
AT&T Merger (amounts in millions):

             Total combined equity
               of Old Liberty                                 $        12,273
             Net contribution resulting
               from the restructuring transactions                      2,334
             Purchase accounting adjustments                           19,121

             Initial total combined equity of
               New Liberty subsequent to the AT&T Merger      $        33,728
                                                              ===============

         The following  unaudited  condensed  results of operations for the nine
         months ended  September  30, 1999 and 1998 were  prepared  assuming the
         AT&T Merger  occurred on January 1, 1998.  These pro forma  amounts are
         not  necessarily  indicative  of  operating  results  that  would  have
         occurred if the AT&T Merger had occurred on January 1, 1998.

                                               Nine months ended
                                                 September 30,
                                         1999                    1998
                                             (amounts in millions)

             Revenue                  $   742                   1,022
             Net loss                 $(1,041)                   (955)

         At September 30, 1999, Liberty Media Group consisted principally of the
         following:  (i) 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,
         (ii) AT&T's  assets and  businesses  engaged in  electronic  retailing,
         direct marketing,  advertising sales relating to programming  services,
         infomercials and transaction processing, (iii) certain of AT&T's assets
         and  businesses   engaged  in   international   cable,   telephony  and
         programming  businesses  and (iv)  AT&T's  holdings  in a new  class of
         tracking stock of Sprint (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 combined financial statements and notes thereto contained in AT&T's
         Current Report on Form 8-K filed on March 22, 1999.

                                   (continued)
<PAGE>


         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.

         Effective June 11, 1999, AT&T issued stock dividends to holders of AT&T
         Liberty Media Group Tracking Stock (the "1999 Liberty Stock Dividend").
         The 1999 Liberty Stock Dividend  consisted of one share of AT&T Liberty
         Media Group  Tracking  Stock for every one share of AT&T Liberty  Media
         Group  Tracking  Stock owned.  The 1999 Liberty Stock Dividend has been
         treated  as a stock  split,  and  accordingly,  all share and per share
         amounts have been restated to reflect the 1999 Liberty Stock Dividend.

         Certain prior period amounts have been  reclassified for  comparability
         with the 1999 presentation.

(2)      Merger with AT&T

         As a  result  of the AT&T  Merger,  holders  of  shares  of TCI's  then
         outstanding  Liberty Media Group  Tracking Stock and TCI Ventures Group
         Tracking  Stock were issued  separate  shares of new targeted  stock of
         AT&T. Each share of TCI's then outstanding Liberty Media Group Series A
         Tracking  Stock was converted into 2 shares of a newly created class of
         AT&T common stock, the AT&T Liberty Media Group Class A Tracking Stock,
         each share of TCI's  then  outstanding  Liberty  Media  Group  Series B
         Tracking  Stock was converted into 2 shares of a newly created class of
         AT&T common stock, the AT&T Liberty Media Group Class B Tracking Stock,
         each  share of TCI's  then  outstanding  TCI  Ventures  Group  Series A
         Tracking  Stock was  converted  into 1.04 shares of AT&T Liberty  Media
         Group Class A Tracking  Stock and each share of TCI's then  outstanding
         TCI Ventures  Group  Series B Tracking  Stock was  converted  into 1.04
         shares of AT&T Liberty Media Group Class B Tracking Stock.

         Effective  with  the AT&T  Merger,  each  share  of  TCI's  Convertible
         Preferred  Stock Series  C-Liberty Media Group was converted into 112.5
         shares of AT&T  Liberty  Media  Group  Class A Tracking  Stock and each
         share of TCI's  Redeemable  Convertible  Liberty Media Group  Preferred
         Stock, Series H was converted into 1.18125 shares of AT&T Liberty Media
         Group Class A Tracking Stock. In general, the holders of shares of AT&T
         Liberty Media Group Class A Tracking Stock and the holders of shares of
         AT&T Liberty Media Group Class B Tracking Stock will vote together as a
         single  class with the  holders of shares of AT&T  Common  Stock on all
         matters presented to such stockholders, with the holders being entitled
         to  three-fortieths  (3/40th) of a vote for each share of AT&T  Liberty
         Media Group Class A Tracking Stock held, three-fourths (3/4th) vote per
         share of AT&T  Liberty  Media Group  Class B Tracking  Stock held and 1
         vote per share of AT&T Common Stock held.

                                   (continued)

<PAGE>

         The shares of AT&T  Liberty  Media Group  Tracking  Stock issued in the
         AT&T Merger are  intended to reflect the  separate  performance  of the
         businesses  and assets  attributed to Liberty Media Group.  Immediately
         prior to the AT&T Merger,  certain assets previously  attributed to Old
         Liberty  (including,  among  others,  the shares of AT&T  Common  Stock
         received in the merger of AT&T and Teleport  Communications Group, Inc.
         ("Teleport")  (see  note  7),  Old  Liberty's   interests  in  At  Home
         Corporation  ("@Home"),  the National Digital Television  Center,  Inc.
         ("NDTC") and Western Tele-Communications, Inc.) were attributed to "TCI
         Group" (a group of TCI's assets,  which,  prior to the AT&T Merger, was
         comprised   primarily  of  TCI's  domestic  cable  and   communications
         business)  in  exchange  for  approximately  $5.5  billion in cash (the
         "Asset Transfers"). Also, upon consummation of the AT&T Merger, through
         a new tax sharing  agreement  between the Company and AT&T, the Company
         is entitled to the benefit of approximately $2 billion in net operating
         loss  carryforwards   available  to  the  entities  included  in  TCI's
         consolidated  income tax return as of the date of the AT&T Merger. Such
         net  operating  loss  carryforwards  are subject to  adjustment  by the
         Internal  Revenue  Service  ("IRS") and are subject to  limitations  on
         usage  which may affect the  ultimate  amount  utilized.  Additionally,
         certain warrants to purchase shares of General Instruments  Corporation
         ("GI Warrants")  previously  attributed to TCI Group were attributed to
         the Company in exchange for approximately $176 million in cash. Certain
         agreements  entered into at the time of the AT&T Merger provide,  among
         other things,  for  preferred  vendor status to the Company for digital
         basic  distribution  on  AT&T's  systems  of new  programming  services
         created  by the  Company  and for a  renewal  of  existing  affiliation
         agreements.  Pursuant to amended corporate governance documents for the
         entities  included in Liberty Media Group and certain  agreements among
         AT&T and TCI, the business of Liberty  Media Group will  continue to be
         managed by certain persons who were members of TCI's  management  prior
         to the AT&T Merger.

         Pursuant to a proposed final judgment (the "Final  Judgment") agreed to
         by TCI, 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 (the "Sprint  Securities") of Sprint to a
         trustee (the "Trustee")  prior to the AT&T Merger.  The Final Judgment,
         if entered by the United  States  District  Court for the  District  of
         Columbia,  would  require the Trustee,  on or before May 23,  2002,  to
         dispose  of a portion  of the  Sprint  Securities  sufficient  to cause
         Liberty  Media  Group  to  beneficially  own no  more  than  10% of the
         outstanding  Series 1 PCS Stock of Sprint on a fully  diluted  basis on
         such date.  On or before May 23,  2004,  the  Trustee  must  divest the
         remainder of the Sprint Securities  beneficially owned by Liberty Media
         Group.

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

                                   (continued)

<PAGE>

(3)      Loss Per Common Share

         Basic  earnings or loss per share  ("EPS") is measured as the income or
         loss  attributable  to  common  stockholders  divided  by the  weighted
         average  outstanding  common  shares  for the  period.  Diluted  EPS is
         similar to basic EPS but presents  the  dilutive  effect on a per share
         basis of potential  common shares as if they had been  converted at the
         beginning of the periods  presented.  Potential common shares that have
         an anti-dilutive effect are excluded from diluted EPS.

         The basic and diluted loss  attributable  to Liberty Media Group common
         stockholders  per  common  share for the three and seven  months  ended
         September  30, 1999 was computed by dividing the net loss  attributable
         to Liberty  Media Group common  stockholders  by the  weighted  average
         number  of  common  shares  outstanding  of AT&T  Liberty  Media  Group
         Tracking  Stock during each period.  Potential  common  shares were not
         included in the  computations  of weighted  average shares  outstanding
         because their inclusion would be anti-dilutive.

         At September 30, 1999,  there were 52 million  potential  common shares
         consisting of fixed and nonvested performance awards, stock options and
         convertible   securities  that  could  potentially  dilute  future  EPS
         calculations  in periods of net  earnings.  No material  changes in the
         weighted average outstanding shares or potential common shares occurred
         after September 30, 1999.

                                        Three months             Seven months
                                            ended                    ended
                                        September 30,            September 30,
                                             1999                     1999
                                                 amounts in millions,
                                               except per share amounts
         Basic and diluted EPS:
               Loss attributable to
                 common stockholders    $    (217)                    (818)
                                        ==========               ==========

               Weighted average
                 common shares              1,265                    1,257
                                        ==========               ==========
               Basic and diluted loss
                 per share attributable
                 to common stockholders $   (0.17)                   (0.65)
                                        ==========               ==========

                                   (continued)

<PAGE>

(4)      Supplemental Disclosures to Combined Statements of Cash Flows

         Cash paid for interest was $75 million for the seven month period ended
         September 30, 1999, $32 million for the two month period ended February
         28, 1999 and $79 million for the nine months ended  September 30, 1998.
         Cash paid for income taxes for the seven month  period ended  September
         30,  1999 and the two month  period  ended  February  28,  1999 was not
         material.  Cash  paid  for  income  taxes  for the  nine  months  ended
         September 30, 1998 was $19 million.
<TABLE>
<CAPTION>
                                                            New Liberty                  Old Liberty
                                                            Seven months        Two months         Nine months
                                                                ended              ended              ended
                                                            September 30,      February 28,       September 30,
                                                                1999               1999               1998
                                                                           amounts in millions
        <S>                                                      <C>               <C>                <C>
        Cash paid for acquisitions:
           Fair value of assets acquired                      $     5                --                136
           Net liabilities assumed                                 (2)               --                (25)
           Debt issued                                             --                --                (65)
           Minority interest in equity of acquired
              subsidiary                                           --                --                 39
           Gain in connection with the issuance of
              shares by subsidiary                                 --                --                 (2)
                                                              -------           -------           --------
                Cash paid for acquisitions                    $     3                --                 83
                                                              =======           =======           ========
</TABLE>
         During July 1999,  attributed  subsidiaries of Liberty Media Group were
         exchanged for a limited partnership interest having a fair value at the
         time of the transaction of $150 million.

         Liberty  ceased to include TV Guide,  Inc. ("TV Guide") in its combined
         financial  results  and began to account  for TV Guide using the equity
         method of accounting, effective March 1, 1999 (see note 7). The effects
         of  changing  the  method  of  accounting  for  Liberty  Media  Group's
         ownership  interests in TV Guide from the  consolidation  method to the
         equity method are summarized below (amounts in millions):

           Assets (other than cash and cash equivalents)
               reclassified to investments in affiliates           $      (572)
           Liabilities reclassified to investments in
               affiliates                                                  190
           Minority interests in equity of subsidiaries
               reclassified to investments in affiliates                    63
           Gain on issuance of equity by subsidiary                        372

           Decrease in cash and cash equivalents                   $        53
                                                                   ===========

                                   (continued)
<PAGE>

         The following  table  reflects the change in cash and cash  equivalents
         resulting from the AT&T Merger and related  restructuring  transactions
         (amounts in millions):


             Cash and cash equivalents prior to the AT&T Merger     $       211
                   Cash received in the Asset Transfers, net of
                      cash balances transferred                           5,284
                   Cash paid to TCI Group for GI Warrants                  (176)
             Cash and cash equivalents subsequent to the AT&T
                Merger                                              $     5,319

(5)      Investments in Affiliates Accounted for Under the Equity Method

         Liberty  Media Group has various  investments  accounted  for under the
         equity  method.  The  following  table  includes  Liberty Media Group's
         carrying  amount of the more  significant  investments at September 30,
         1999 and December 31, 1998:
<TABLE>
<CAPTION>
                                                                         New Liberty               Old Liberty
                                                                        September 30,             December 31,
                                                                            1999                      1998
                                                                                  amounts in millions
        <S>                                                                 <C>                      <C>
        USA Networks, Inc. ("USAI") and related investments                $ 2,710                    1,042
        Telewest Communications plc ("Telewest")                             1,961                      515
        Discovery Communications, Inc. ("Discovery")                         3,546                       49
        TV Guide                                                             1,756                       --
        QVC, Inc. ("QVC")                                                    2,505                      197
        Flextech plc ("Flextech")                                              757                      320
        Other foreign investments (other than Telewest and
             Flextech)                                                       1,504                      346
        Other                                                                1,200                      610
                                                                           -------                  -------
                                                                            15,939                    3,079
                                                                           =======                  =======
</TABLE>
                                   (continued)
<PAGE>

         The following  table  reflects  Liberty Media Group's share of earnings
(losses) of affiliates:
<TABLE>
<CAPTION>
                                                        New Liberty                     Old Liberty
                                                       Seven months          Two months           Nine months
                                                           ended                ended                ended
                                                       September 30,        February 28,         September 30,
                                                           1999                 1999                 1998
                                                                          amounts in millions
                 <S>                                        <C>                      <C>                  <C>
                 USAI and related investments
                                                           $ (13)                     10                    11
                 Telewest                                   (154)                    (38)                  (90)
                 Discovery                                  (154)                     (8)                  (41)
                 Fox/Liberty Networks LLC ("Fox
                     Sports")                                (48)                     (1)                  (76)
                 TV Guide                                    (24)                     --                    --
                 QVC                                         (17)                     13                    38
                 Flextech                                    (27)                     (5)                  (13)
                 Other foreign investments
                                                             (96)                    (22)                  (80)
                 PCS Ventures                                 --                      --                  (510)
                 Teleport (note 7)                            --                      --                   (32)
                 Other                                       (64)                    (15)                  (68)
                                                           -----                   -----                 -----
                                                           $(597)                    (66)                 (861)
                                                           =====                   =====                 =====
</TABLE>
         Summarized  unaudited combined financial  information for affiliates is
as follows:
<TABLE>
<CAPTION>
                                                        New Liberty                     Old Liberty
                                                       Seven months          Two months           Nine months
                                                           ended                ended                ended
                                                       September 30,        February 28,         September 30,
                                                           1999                 1999                 1998
                                                                          amounts in millions
                    <S>                           <C>    <C>    <C>    <C>    <C>    <C>
                    Combined Operations

                    Revenue                              $ 6,947                   2,341                10,103
                    Operating expenses                    (5,901)                 (1,894)               (9,548)
                    Depreciation and amortization           (929)                   (353)               (1,891)
                                                         -------                 -------               -------

                     Operating income (loss)                 117                      94                (1,336)

                    Interest expense                        (558)                   (281)               (1,278)
                    Other, net                              (322)                   (127)                  (83)
                                                         -------                 -------               -------
                     Net loss                            $  (763)                   (314)               (2,697)
                                                         =======                 =======               =======
</TABLE>
                                   (continued)

<PAGE>

         USAI owns and operates businesses in network and television production,
         television  broadcasting,  electronic retailing,  ticketing operations,
         and internet  services.  At September  30,  1999,  Liberty  Media Group
         directly  and  indirectly  held 33.3  million  shares of USAI's  common
         stock.  Liberty  Media  Group  also held  shares  directly  in  certain
         subsidiaries of USAI which are exchangeable into 39.5 million shares of
         USAI common stock.  Liberty Media Group's  direct  ownership of USAI is
         currently  restricted by FCC regulations.  The exchange of these shares
         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 Liberty Media Group's shares of such  subsidiary  stock, as
         well as certain securities owned by Universal Studios, Inc. and certain
         of its  affiliates,  into USAI common stock were completed at September
         30,  1999,  Liberty  Media  Group  would  own 72.8  million  shares  or
         approximately  21% of the then  outstanding  USAI common stock.  USAI's
         common  stock  had a  closing  market  price of  $38-3/4  per  share on
         September 30, 1999. Liberty Media Group accounts for its investments in
         USAI and  related  subsidiaries  on a combined  basis  under the equity
         method.

         In  February  1998,  USAI paid  cash and issued  shares  and one of its
         subsidiaries  issued  shares  in  connection  with the  acquisition  of
         certain   assets  from   Universal   Studios,   Inc.  (the   "Universal
         Transaction").   Liberty  Media  Group  recorded  an  increase  to  its
         investment in USAI of $54 million and an increase to combined equity of
         $33 million (after deducting a deferred income taxes of $21 million) as
         a result of this share issuance. No gain was recognized in the combined
         statement of operations  and  comprehensive  earnings for the Universal
         Transaction  due primarily to Liberty  Media Group's  intention at such
         time to purchase  additional  equity  interests in USAI.  In connection
         with the  Universal  Transaction,  Liberty  Media  Group was granted an
         antidilutive  right with respect to any future  issuance of USAI common
         stock, subject to certain limitations,  that enables it to maintain its
         percentage ownership interests in USAI.

         Effective September 1, 1998, Telewest and General Cable PLC consummated
         a  merger.  In  connection  with  the  merger,  Liberty  Media  Group's
         ownership interest in Telewest decreased to 22%. In connection with the
         increase in  Telewest's  equity,  net of the dilution of Liberty  Media
         Group's  interest in Telewest,  that resulted from the merger,  Liberty
         Media Group recorded a non-cash gain of $58 million  (before  deducting
         deferred income tax expense of $20 million) during the third quarter of
         1998.

         Telewest   currently  operates  and  constructs  cable  television  and
         telephone  systems in the UK. At September 30, 1999 Liberty Media Group
         indirectly  owned 463  million of the issued and  outstanding  Telewest
         ordinary  shares.  The  reported  closing  price  on the  London  Stock
         Exchange of Telewest ordinary shares was (pound)2.23  ($3.67) per share
         at September 30, 1999.

                                   (continued)

<PAGE>

         Liberty Media Group and The News  Corporation  Limited  ("News  Corp.")
         each held 50% of Fox Sports which operates national and regional sports
         networks.  Prior to the first quarter of 1998,  Liberty Media Group had
         no obligation,  nor intention, to fund Fox Sports. During 1998, Liberty
         Media  Group made the  determination  to provide  funding to Fox Sports
         based on specific transactions consummated by Fox Sports. Consequently,
         Liberty Media Group's share of losses of Fox Sports for the nine months
         ended September 30, 1998 included previously unrecognized losses of Fox
         Sports of  approximately  $64  million.  Losses for Fox Sports were not
         recognized  in prior periods due to the fact that Liberty Media Group's
         investment in Fox Sports was less than zero.

         On July 15, 1999 News Corp. acquired Liberty Media Group's 50% interest
         in Fox  Sports  in  exchange  for  51.8  million  News  Corp.  American
         Depository  Receipts  ("ADRs")  representing  preferred  limited voting
         ordinary  shares of News Corp. Of the 51.8 million ADRs  received,  3.6
         million  were  placed in an escrow  (the  "Escrow  Shares")  pending an
         independent  third party valuation,  as of the third anniversary of the
         transaction.  The  remainder  of the 51.8 million  ADRs  received  (the
         "Restricted  Shares") are subject to a two-year  lockup which restricts
         any transfer of the  securities for a period of two years from the date
         of the  transaction.  Liberty  Media  Group  recorded  the ADRs at fair
         value,  which  included a discount from market value for the Restricted
         Shares due to the two-year restriction on transfer,  resulting in a $13
         million  gain on the  transaction.  In a related  transaction,  Liberty
         Media Group  acquired  from News Corp.  28.1  million  additional  ADRs
         representing preferred limited voting ordinary shares of News Corp. for
         approximately  $695  million.  Liberty  Media  Group  accounts  for its
         investment in News Corp. as an  available-for-sale  security,  with the
         exception of the Restricted Shares and the Escrow Shares.

         The class A common stock of TV Guide is publicly  traded.  At September
         30, 1999,  Liberty Media Group held 29 million shares of TV Guide Class
         A common stock and 37 million  shares of TV Guide Class B common stock.
         See  note  7.  The TV  Guide  Class  B  common  stock  is  convertible,
         one-for-one,  into TV Guide Class A common stock. The closing price for
         TV Guide Class A common  stock was $39-1/8 per share on  September  30,
         1999.

         Flextech develops and sells a variety of television  programming in the
         UK. At September  30, 1999,  Liberty  Media Group  indirectly  owned 58
         million  Flextech  ordinary  shares.  The reported closing price on the
         London Stock Exchange of the Flextech  ordinary  shares was (pound)9.45
         ($15.56) per share at September 30, 1999.

         The PCS Ventures  included Sprint Spectrum Holding  Company,  L. P. and
         MinorCo, L.P. (collectively, "Sprint PCS") and PhillieCo Partnership I,
         L.P. ("PhillieCo"). The partners of each of the Sprint PCS partnerships
         were  subsidiaries  of Sprint,  Comcast  Corporation  ("Comcast"),  Cox
         Communications,  Inc.  ("Cox") and Liberty Media Group. The partners of
         PhillieCo  were  subsidiaries  of Sprint,  Cox and Liberty Media Group.
         Liberty  Media  Group  had a 30%  partnership  interest  in each of the
         Sprint PCS partnerships and a 35% partnership interest in PhillieCo.

                                   (continued)

<PAGE>

         On November 23, 1998, Liberty Media Group,  Comcast,  and Cox exchanged
         their  respective  interests  in  Sprint  PCS and  PhillieCo  (the "PCS
         Exchange")  for  shares of Sprint  PCS Group  Stock  which  tracks  the
         performance of Sprint's newly created PCS Group  (consisting  initially
         of the PCS  Ventures  and certain PCS  licenses  which were  separately
         owned by Sprint). The Sprint PCS Group Stock collectively represents an
         approximate  17%  voting  interest  in  Sprint.  As a result of the PCS
         Exchange,  Liberty  Media  Group  holds  the  Sprint  Securities  which
         consists  of shares  of Sprint  PCS  Group  Stock,  as well as  certain
         additional  securities of Sprint  exercisable  for or convertible  into
         such securities,  representing approximately 24% of the equity value of
         Sprint  attributable  to its PCS Group  and less than 1% of the  voting
         interest in Sprint.  Through  November  23, 1998,  Liberty  Media Group
         accounted for its interest in the PCS Ventures  using the equity method
         of  accounting,  however,  as a result of the PCS  Exchange and Liberty
         Media  Group's less than 1% voting  interest in Sprint,  Liberty  Media
         Group no longer  exercises  significant  influence  with respect to its
         investment  in the  PCS  Ventures.  Accordingly,  Liberty  Media  Group
         accounts  for its  investment  in the  Sprint  PCS  Group  Stock  as an
         available-for-sale security.

         In  September  1999,  Liberty  entered  into a four and  one-half  year
         "cashless  collar"  with a financial  institution  with respect to 17.5
         million  shares  of Sprint  PCS Group  common  stock,  secured  by 17.5
         million shares of such stock.  This cashless  collar  provides  Liberty
         Media  Group with a put option  that gives it the right to require  its
         counterparty  to buy 17.5 million  Sprint PCS Group shares from Liberty
         Media Group in  approximately  four and  one-half  years for a weighted
         average price of $55.24 per share.  Liberty Media Group  simultaneously
         sold a call option  giving the  counterparty  the right to buy the same
         number  of  Sprint  PCS  Group  shares  from  Liberty  Media  Group  in
         approximately  four and one-half years for a weighted  average price of
         $114.84 per share.

         The $14 billion  aggregate  excess of Liberty Media  Group's  aggregate
         carrying   amount  in  its   affiliates   over  Liberty  Media  Group's
         proportionate  share of its  affiliates'  net assets is being amortized
         over an estimated useful life of 20 years.

         Certain of Liberty Media Group's  affiliates  are general  partnerships
         and  subsidiaries  of Liberty Media Group that are general  partners in
         such  partnerships,  are 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.

(6)      Investment in Time Warner

         Liberty  Media Group holds shares of a series of Time  Warner's  series
         common stock with limited voting rights (the "TW Exchange  Stock") that
         are convertible  into an aggregate of 114 million shares of Time Warner
         common stock.

                                   (continued)

<PAGE>

         On June 24, 1997  Liberty  Media Group  granted  Time Warner an option,
         expiring  October  10,  2002,  to  acquire  the  business  of  Southern
         Satellite  Systems,  Inc.  ("Southern") and certain of its subsidiaries
         (together with Southern, the "Southern Business") through a purchase of
         assets (the "Southern Option").  Liberty Media Group received shares of
         TW Exchange  Stock which are  convertible  into 12.8 million  shares of
         Time Warner  common stock valued at $306 million in  consideration  for
         the grant.  In  September  1997,  Time Warner  exercised  the  Southern
         Option.  Pursuant to the  Southern  Option,  Time Warner  acquired  the
         Southern Business, effective January 1, 1998, for $213 million in cash.
         Liberty  Media  Group   recognized  a  $515  million  pre-tax  gain  in
         connection with such transactions in the first quarter of 1998.

         In March 1999, Liberty Media Group entered into a seven-year  "cashless
         collar" with a financial  institution with respect to 15 million shares
         of Time Warner  common  stock,  secured by 15 million  shares of its TW
         Exchange Stock.  This cashless collar provides Liberty Media Group with
         a put option that gives it the right to require its counterparty to buy
         15 million Time Warner shares from Liberty Media Group in approximately
         seven years for $67.45 per share.  Liberty  Media Group  simultaneously
         sold a call option  giving the  counterparty  the right to buy the same
         number of Time Warner shares from Liberty Media Group in  approximately
         seven years for $158.33 per share.

         As these  cashless  collars are  designated to 15 million  shares of TW
         Exchange Stock and 17.5 million shares of Sprint PCS Group common stock
         (together the "Underlying  Securities") held by Liberty Media Group and
         the changes in the fair value of the  cashless  collars are  correlated
         with  changes  in the fair  value  of the  Underlying  Securities,  the
         cashless collars function as hedges.  Accordingly,  changes in the fair
         value  of  the  cashless   collars  are  reported  as  a  component  of
         comprehensive  earnings (in unrealized gains) along with the changes in
         the fair value of the Underlying Securities.

(7)      Acquisitions and Dispositions

         Effective  February  1, 1998,  Turner-Vision,  Inc.  ("Turner  Vision")
         contributed the assets, obligations and operations of its retail C-band
         satellite business to  Superstar/Netlink  Group LLC ("SNG") in exchange
         for  an  approximate   20%  interest  in  SNG.  As  a  result  of  such
         transaction,  Liberty Media Group's direct and indirect (through United
         Video  Satellite  Group,  Inc.  ("UVSG"))  ownership  interest  in SNG,
         decreased  to  approximately  80%. In  connection  with the increase in
         SNG's equity,  net of the dilution of Liberty  Media Group's  ownership
         interest in SNG,  that resulted  from such  transaction,  Liberty Media
         Group  recognized  a gain of $38  million  (before  deducting  deferred
         income tax expense of $15 million). Turner Vision's contribution to SNG
         was  accounted  for as a  purchase  and the $61  million  excess of the
         purchase  price  over the fair  value of the net  assets  acquired  was
         recorded as excess cost and is being amortized over five years.

         On April 22, 1998,  Teleport  completed a merger  transaction  with ACC
         Corp.  As a result,  Liberty  Media  Group's  interest in Teleport  was
         reduced to  approximately  26%.  In  connection  with the  increase  in
         Teleport's  equity,  net of  the  dilution  of  Liberty  Media  Group's
         interest in Teleport,  that  resulted  from the merger,  Liberty  Media
         Group  recorded  a  non-cash  gain of $201  million  (before  deducting
         deferred income tax expense of $71 million).

                                   (continued)

<PAGE>

         On July 24, 1998, Teleport was acquired by AT&T and Liberty Media Group
         received in exchange for all of its interest in Teleport, approximately
         70.4  million  shares  of  AT&T  common  stock.   Liberty  Media  Group
         recognized a $2.3 billion gain  (excluding  related tax expense of $883
         million) on such transaction  during the third quarter of 1998 based on
         the  difference  between the carrying  value of Liberty  Media  Group's
         interest  in  Teleport  and the fair  value of the  AT&T  common  stock
         received.

         During  the  third  quarter  of  1998,  At Home  Corporation  ("@Home")
         completed a public  offering  in which  Liberty  Media Group  purchased
         additional  shares of @Home  common  stock and  Liberty  Media  Group's
         economic   interest  in  @Home  decreased  to  approximately   39%.  In
         connection with the increase in @Home's equity,  net of the dilution of
         Liberty  Media  Group's  interest in @Home that  resulted  from @Home's
         public  offering,  Liberty  Media Group  recorded a gain of $17 million
         during the third quarter of 1998.

         On March 1, 1999, UVSG and News Corp.  completed a transaction  whereby
         UVSG  acquired  News  Corp.'s  TV Guide  properties  creating a broader
         platform  for  offering  television  guide  services to  consumers  and
         advertisers  and UVSG was renamed TV Guide.  News Corp.  received total
         consideration  of $1.9 billion  including  $800  million in cash,  22.5
         million  shares of UVSG's Class A common stock and 37.5 million  shares
         of UVSG's  Class B common  stock  valued at an  average  of $18.65  per
         share.  In addition,  News Corp.  purchased  approximately  6.5 million
         additional  shares of UVSG  Class A common  stock for $129  million  in
         order to equalize its ownership with that of Liberty Media Group.  As a
         result of these transactions,  and another transaction completed on the
         same date,  News  Corp.,  Liberty  Media  Group and TV  Guide's  public
         stockholders own on an economic basis  approximately  44%, 44% and 12%,
         respectively, of TV Guide. Following such transactions,  News Corp. and
         Liberty Media Group each have  approximately 49% of the voting power of
         TV Guide's  outstanding  stock.  In connection  with the increase in TV
         Guide's equity,  net of the dilution of Liberty Media Group's ownership
         interest in TV Guide,  Liberty  Media Group  recognized  a gain of $372
         million (before deducting deferred income tax expense of $147 million).
         Upon  consummation,  Liberty  Media  Group  began  accounting  for  its
         interest in TV Guide under the equity method of accounting.

                                   (continued)

<PAGE>

(8)      Long-Term Debt

         Debt is summarized as follows:
<TABLE>
<CAPTION>
                                                   New Liberty      Old Liberty
                                                  September 30,     December 31,
                                                      1999              1998
                                                        amounts in millions
             <S>                                     <C>                <C>
             Bank credit facilities                  $  926             2,029
             Senior Notes, net of unamortized
               discount of $9 million                   741                --
             Senior Debentures, net of unamortized
               discount of $6 million                   494                --
             Convertible Subordinated Debentures         --               229
             4-1/2% Convertible Subordinated
               Debentures                                --               345
             Other                                       33               293
                                                     ------            ------
                                                      2,194             2,896
             Less current maturities                    474               578
                                                     ------            ------
                      Total long-term debt           $1,720             2,318
                                                     ======            ======
</TABLE>
         On April 8, 1999,  Liberty Media Group redeemed all of its  outstanding
         4-1/2% Convertible  Subordinated  Debentures due February 15, 2005. See
         note 10.

         On July 7, 1999,  Liberty  Media Group  received  net cash  proceeds of
         approximately $741 million and $494 million from the issuance of 7-7/8%
         Senior Notes due 2009 (the "Senior Notes") and 8-1/2% Senior Debentures
         due 2029 (the "Senior Debentures"), respectively. The Senior Notes have
         an aggregate principal amount of $750 million and the Senior Debentures
         have an aggregate  principal  amount of $500  million.  Interest on the
         Senior  Notes and the  Senior  Debentures  is payable on January 15 and
         July 15 of each  year.  The  proceeds  were  used to repay  outstanding
         borrowings  under certain of Liberty Media Group's  credit  facilities,
         which were subsequently canceled.

         At  September  30, 1999,  Liberty  Media Group had  approximately  $133
         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  and  encumbrances,   acquisitions,  dispositions,
         guarantees and dividends.  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 its bank credit
         facilities.

         With the exception of the Senior Notes and the Senior  Debentures which
         had fair values of $754  million  and $504  million,  respectively,  at
         September  30, 1999,  Liberty  Media Group  believes  that the carrying
         value of Liberty  Media  Group's  debt  approximated  its fair value at
         September 30, 1999.

                                   (continued)

<PAGE>

(9)      Income Taxes

         Subsequent  to the AT&T Merger,  Liberty Media Group is included in the
         consolidated  federal  income  tax  return  of AT&T and  party to a tax
         sharing agreement with AT&T (the "AT&T Tax Sharing Agreement"). Liberty
         Media Group  calculates  its  respective  tax  liability  on a separate
         return  basis.  The income tax  provision  for  Liberty  Media Group is
         calculated  based on the  increase or decrease in the tax  liability of
         the AT&T consolidated group resulting from the inclusion of those items
         in the  consolidated  tax  return  of AT&T  which are  attributable  to
         Liberty Media Group.

         Under the AT&T Tax Sharing Agreement,  Liberty Media Group will receive
         a cash payment from AT&T in periods  when it generates  taxable  losses
         and such taxable losses are utilized by AT&T to reduce the consolidated
         income  tax  liability.  This  utilization  of taxable  losses  will be
         accounted for by Liberty Media Group as a current federal  intercompany
         income tax benefit. To the extent such losses are not utilized by AT&T,
         such  amounts  will be  available  to  reduce  federal  taxable  income
         generated by Liberty  Media Group in future  periods,  similar to a net
         operating  loss  carryforward  and will be accounted  for as a deferred
         federal income tax benefit.

         In periods when Liberty Media Group  generates  federal taxable income,
         AT&T has agreed to satisfy such tax  liability on Liberty Media Group's
         behalf up to a certain  amount.  The  reduction  of such  computed  tax
         liabilities will be accounted for by Liberty Media Group as a credit to
         combined equity.  The total amount of future federal tax liabilities of
         Liberty  Media Group which AT&T will satisfy under the AT&T Tax Sharing
         Agreement is  approximately  $512  million,  which  represents  the tax
         effect of the net operating loss carryforward  reflected in TCI's final
         federal  income tax  return,  subject to IRS  adjustments.  Thereafter,
         Liberty  Media  Group is  required  to make cash  payments  to AT&T for
         federal tax liabilities of Liberty Media Group.

         To the extent AT&T utilizes  existing net operating  losses of entities
         attributed to Liberty  Media Group,  such amounts will be accounted for
         by Liberty  Media Group as a reduction of combined  equity.  During the
         seven month  period  ending  September  30,  1999,  AT&T  utilized  net
         operating  losses of Liberty  Media Group with a tax effected  carrying
         value of $85 million.

         Liberty Media Group will  generally  make cash payments to AT&T related
         to states where it generates  taxable  income and receive cash payments
         from AT&T in states where it generates taxable losses.

         Liberty  Media  Group's  obligation  under  the  1995  TCI Tax  Sharing
         Agreement of approximately $139 million (subject to adjustment),  which
         is included in "due to related  parties," shall be paid at the time, if
         ever, that Liberty Media Group  deconsolidates from the AT&T income tax
         return. Liberty Media Group's receivable under the 1997 TCI Tax Sharing
         Agreement  of  approximately  $220 million was forgiven in the AT&T Tax
         Sharing  Agreement and recorded as an adjustment to combined  equity by
         Liberty Media Group in connection with the AT&T Merger.

                                   (continued)

<PAGE>

(10)     Combined Equity

         Stock Repurchase and Issuances

         On April 8, 1999,  Liberty Media Group redeemed all of its  outstanding
         4-1/2% Convertible  Subordinated  Debentures due February 15, 2005. The
         debentures  were  convertible  into shares of AT&T Liberty  Media Group
         Class A Tracking Stock at a conversion price of $23.54, or 42.48 shares
         per $1,000  principal  amount.  Certain  holders of the  debentures had
         exercised  their rights to convert  their  debentures  and 14.6 million
         shares of AT&T Liberty Media Group  Tracking  Stock were issued to such
         holders.  In connection  with such issuance of AT&T Liberty Media Group
         Tracking Stock, Liberty Media Group recorded a $354 million increase to
         combined equity.

         During the nine months ended  September  30, 1998,  pursuant to a stock
         repurchase  program,  Liberty Media Group repurchased 239,450 shares of
         TCI's then  outstanding  TCI Ventures Group Stock and 766,783 shares of
         TCI's then  outstanding  Liberty Media Group Stock at an aggregate cost
         of approximately $30 million. Such amount is reflected as a decrease to
         combined equity in the accompanying combined financial statements.

         In conjunction with a stock repurchase program or similar  transaction,
         the  issuer  may elect to sell put  options  on its own  common  stock.
         Proceeds from any sales of puts with respect to TCI's then  outstanding
         TCI Ventures Group Tracking  Stock and TCI's then  outstanding  Liberty
         Media  Group  Tracking  Stock have been  reflected  as an  increase  to
         combined equity,  and an amount equal to the maximum  redemption amount
         under  unexpired put options with respect to such  tracking  stocks was
         reflected as an "obligation to redeem common stock" in the accompanying
         combined  balance  sheets.  At  September  30,  1999  no  amounts  were
         outstanding under such arrangements.

         Stock Issuances by Subsidiary

         On  September  9, 1999,  Liberty  Media  Group and TCI  Music,  renamed
         Liberty Digital, Inc. ("Liberty Digital"), completed a transaction (the
         "Liberty  Digital  Transaction")  pursuant to which Liberty Media Group
         contributed to Liberty Digital  substantially  all of its directly held
         internet  content  and  interactive  television  assets,  its rights to
         provide  interactive video services on AT&T's cable television  systems
         and a combination of cash and notes  receivable  equal to $150 million.
         Liberty Digital issued common stock and convertible  preferred stock to
         Liberty Media Group.

         As a result of the transaction and assuming conversion of the preferred
         stock,  Liberty Media Group holds  approximately  12 million  shares of
         Liberty Digital Series A common stock and  approximately  197.7 million
         shares of Series B common stock resulting in approximately 94.5% equity
         interest and 99% voting interest in Liberty Digital.

                                   (continued)

<PAGE>

         Prior  to the  Liberty  Digital  Transaction,  Liberty  Digital  issued
         approximately 4.8 million shares of common stock in connection with the
         conversion of its preferred stock and  approximately 0.5 million shares
         of common stock in  connection  with the  exercise of certain  employee
         stock options.  As a result,  Liberty Media Group's interest in Liberty
         Digital was reduced to 86%. Following the Liberty Digital  Transaction,
         Liberty  Media  Group's  interest in Liberty  Digital was  increased to
         94.5%.  During the month of September,  1999,  Liberty  Digital  issued
         approximately 0.5 million shares of common stock in connection with the
         exercise of certain employee stock options. As a result,  Liberty Media
         Group's interest in Liberty Digital was reduced to 94.3%. In connection
         with the increase in Liberty Digital's  equity,  net of the dilution of
         Liberty Media Group's interest in Liberty  Digital,  that resulted from
         such stock  issuances,  Liberty  Media  Group  recorded  a $50  million
         increase to combined  equity.  No gain was  recognized  in the combined
         statement of operations and comprehensive earnings due to Liberty Media
         Group's  continuing  involvement  in  capital  transactions  of Liberty
         Digital.

         Transactions with AT&T (formerly TCI) and Other Related Parties

         Certain  subsidiaries  attributed to Liberty Media Group produce and/or
         distribute  sports and other  programming  and other  services to cable
         distribution operators (including AT&T) and others. Charges to AT&T are
         based upon  customary  rates  charged to others.  Amounts  included  in
         revenue for services  provided to AT&T were $125  million,  $43 million
         and $199 million for the seven month period ending  September 30, 1999,
         the two month period ending February 28, 1999 and the nine months ended
         September 30, 1998, respectively.

         Certain AT&T corporate general and administrative  costs are charged to
         Liberty  Media  Group  and  included  in  operating   expenses  in  the
         accompanying   combined  statements  of  operations  and  comprehensive
         earnings.  During the seven month period ended  September 30, 1999, the
         two month  period  ended  February  28, 1999 and the nine months  ended
         September  30, 1998,  Liberty  Media Group was  allocated  less than $1
         million, $2 million and $12 million, respectively, in corporate general
         and administrative costs by AT&T.

         Entities  included in Liberty Media Group lease  satellite  transponder
         facilities  from NDTC. In connection  with the AT&T Merger,  NDTC is no
         longer  included in the  combined  financial  results of Liberty  Media
         Group.  Charges  by  NDTC  for  such  arrangements  and  other  related
         operating  expenses  for the seven  months  ended  September  30,  1999
         aggregated  $14 million and are included in  operating  expenses in the
         accompanying   combined  statements  of  operations  and  comprehensive
         earnings.

                                   (continued)

<PAGE>

         In connection with the AT&T Merger, warrants to buy 3 million shares of
         common  stock of CSG Systems  International,  Inc.  ("CSG") and related
         registration  rights were  transferred to Liberty Media Group. On April
         13, 1999, AT&T purchased these warrants from Liberty Media Group for an
         aggregate  purchase  price  of  $75  million  along  with  the  related
         registration  rights.  The vesting of the CSG warrants is contingent on
         AT&T meeting certain subscriber  commitments to CSG. If any warrants do
         not vest,  Liberty Media Group must  repurchase  the unvested  warrants
         from  AT&T,  with  interest  at 6% from  April 12,  1999.  Accordingly,
         Liberty  Media Group has recorded the unvested CSG warrants as deferred
         income until such time as the CSG warrants vest.

         A  subsidiary  of  Liberty  Media  Group  issued   preferred  stock  in
         connection  with a previous  acquisition  which was  convertible at the
         option of the holders  into  1,084,056  of TCI's then  outstanding  TCI
         Group Series A Common Stock. In July 1998,  Liberty Media Group entered
         into an equity swap  transaction with a commercial bank, which provided
         Liberty  Media Group with the right but not the  obligation  to acquire
         1,084,056 shares of TCI's then outstanding TCI Group Series A Stock for
         approximately  $45 million on or before April 19, 1999.  Liberty  Media
         Group  exercised its right under this equity swap  transaction and used
         the TCI Group  Series A Stock to satisfy the exchange  requirements  of
         the aforementioned preferred stock during the two months ended February
         28, 1999.  In  connection  with such  transaction,  Liberty Media Group
         recorded an $18 million  decrease to combined equity for the difference
         between the exercise price of the right and the carrying  amount of the
         preferred stock.

         Prior to the AT&T Merger, a limited liability company owned by Dr. John
         C. Malone  (Liberty  Media  Group's  Chairman)  acquired,  from certain
         subsidiaries  of Liberty Media Group,  for $17 million,  working cattle
         ranches  located in  Wyoming.  No gain or loss was  recognized  on such
         acquisition.  The  purchase  price was paid by such  limited  liability
         company  in the form of a 12-month  note in the  amount of $17  million
         having an interest rate of 7%. Such note is payable at any time without
         penalty and is personally guaranteed by Dr. Malone.

         In  connection  with the AT&T  Merger,  Liberty  Media  Group  paid two
         directors of Liberty Media  Corporation and one other  individual,  all
         three of whom are  directors  of TCI, an  aggregate  of $12 million for
         services  rendered in connection  with the AT&T Merger.  Such amount is
         included in operating, selling, general and administrative expenses for
         the two months  ended  February 28, 1999 in the  accompanying  combined
         statements of operations and comprehensive earnings.

                                   (continued)

<PAGE>

         On February 9, 1998, in connection with the settlement of certain legal
         proceedings  relative  to the  Estate  of  Bob  Magness  (the  "Magness
         Estate"), the late founder and former Chairman of the Board of TCI, TCI
         entered into a call  agreement  with Dr.  Malone and Dr.  Malone's wife
         (together with Dr. Malone,  the  "Malones"),  and a call agreement with
         the Estate of Bob Magness,  the Estate of Betsy  Magness,  Gary Magness
         (individually and in certain representative capacities) and Kim Magness
         (individually and in certain representative  capacities) (collectively,
         the "Magness Group"). Under these call agreements,  each of the Magness
         Group and the  Malones  granted to TCI the right to acquire  all of the
         shares of TCI's common stock owned by them ("High Voting  Shares") that
         entitle  the  holder  to  cast  more  than  one  vote  per  share  (the
         "High-Voting  Stock") upon Dr.  Malone's  death or upon a  contemplated
         sale of the  High-Voting  Shares (other than a minimal amount) to third
         parties. In either such event, TCI had the right to acquire such shares
         at a price  equal to the then  market  price of shares of TCI's  common
         stock of the  corresponding  series that entitled the holder to cast no
         more  than one vote per  share  (the  "Low-Voting  Stock"),  plus a 10%
         premium,  or in the case of a sale,  the  lesser of such  price and the
         price  offered by the third  party.  In addition,  each call  agreement
         provides  that if TCI were ever to be sold to a third  party,  then the
         maximum premium that the Magness Group or the Malones would receive for
         their  High-Voting  Shares  would be the price  paid for  shares of the
         relevant  series of  Low-Voting  Stock by the third  party,  plus a 10%
         premium.  Each call  agreement also prohibits any member of the Magness
         Group or the Malones from disposing of their High-Voting Shares, except
         for certain exempt  transfers  (such as transfers to related parties or
         to the other group or public sales of up to an aggregate of 5% of their
         High-Voting  Shares  after  conversion  to  the  respective  series  of
         Low-Voting  Stock) and except for a transfer  made in  compliance  with
         TCI's  purchase  right  described  above.  TCI paid $150 million to the
         Malones and $124 million to the Magness Group in consideration of their
         entering  into the call  agreements,  of  which  an  aggregate  of $140
         million was allocated to and paid by Liberty Media Group.

         Also in February 1998,  TCI, the Magness Group and the Malones  entered
         into a shareholders'  agreement which provides for, among other things,
         certain  participation  rights by the  Magness  Group  with  respect to
         transactions by Dr. Malone, and certain  "tag-along" rights in favor of
         the  Magness  Group  and  certain  "drag-along"  rights in favor of the
         Malones,  with respect to transactions in the High-Voting  Stock.  Such
         agreement  also  provides  that a  representative  of Dr.  Malone and a
         representative of the Magness Group will consult with each other on all
         matters to be brought to a vote of TCI's shareholders,  but if a mutual
         agreement  on how to vote cannot be reached,  Dr.  Malone will vote the
         High-Voting Stock owned by the Magness Group pursuant to an irrevocable
         proxy granted by the Magness Group.

         In connection with the AT&T merger, Liberty Media Group became entitled
         to exercise  TCI's rights and became subject to its  obligations  under
         the call agreement and the shareholders'  agreement with respect to the
         Liberty Media Group Class B tracking  stock acquired by the Malones and
         the  Magness  Group as a result of the AT&T  merger.  If Liberty  Media
         Group were to exercise its call right under the call agreement with the
         Malones or the  Magness  Group,  it may also be  required  to  purchase
         High-Voting  Shares  of the other  group if such  group  exercises  its
         "tag-along" rights under the shareholders' agreement.

                                   (continued)

<PAGE>

         Due to Related Parties

         The components of "Due to related parties" are as follows:
<TABLE>
<CAPTION>
                                              New Liberty       Old Liberty
                                             September 30,      December 31,
                                                 1999               1998
                                                   amounts in millions
         <S>                                    <C>                <C>
         Note payable to TCI, including
           accrued interest                     $  --                141
         Intercompany account                      86                556
                                                -----              -----
                                                $  86                697
                                                =====              =====
</TABLE>
         The non-interest  bearing  intercompany  account includes certain stock
         compensation  allocations  (in Old Liberty) and income tax  allocations
         that  are  to be  settled  at  some  future  date.  Stock  compensation
         liabilities  of New Liberty are  classified as a separate  component in
         current  liabilities.  All other amounts  included in the  intercompany
         account are to be settled within thirty days following notification.

(11)     Commitments and Contingencies

         Encore Media Group,  a wholly owned  subsidiary of Liberty Media 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 September 30, 1999,  these
         agreements  require minimum  payments  aggregating  approximately  $887
         million.  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.

         Flextech has undertaken to finance the working capital  requirements of
         a joint  venture,  (the  "Principal  Joint  Venture")  formed  with BBC
         Worldwide and is obligated to provide the Principal  Joint Venture with
         a primary  credit  facility of  (pound)88  million  ($145  million) and
         subject to certain restrictions, a standby credit facility of (pound)30
         million ($49 million).  As of September 30, 1999,  the Principal  Joint
         Venture had borrowed  (pound)45 million ($74 million) under the primary
         credit facility.  If Flextech defaults on its funding obligation to the
         Principal  Joint Venture and fails to cure within 42 days after receipt
         of notice from BBC  Worldwide,  BBC  Worldwide is entitled,  within the
         following 90 days,  to require  that Liberty  Media Group assume all of
         Flextech's funding obligations to the Principal Joint Venture.

         Liberty  Media  Group has  guaranteed  various  loans,  notes  payable,
         letters of credit and other obligations (the "Guaranteed  Obligations")
         of  certain   affiliates.   At  September  30,  1999,   the  Guaranteed
         Obligations aggregated approximately $496 million.  Currently,  Liberty
         Media  Group is not  certain of the  likelihood  of being  required  to
         perform under such guarantees.

                                   (continued)

<PAGE>

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

         On September 21, 1998,  Hurricane Georges struck Puerto Rico and caused
         considerable property damage to the area in general,  including Liberty
         Media Group's Puerto Rico  subsidiary's  cable television  systems (the
         "Puerto  Rico   Subsidiary").   The  Puerto  Rico  Subsidiary's   cable
         television  systems  represent  $31  million of Liberty  Media  Group's
         revenue for the nine months ended September 30, 1999.

         As of  September  30,  1999,  approximately  99%  of  the  Puerto  Rico
         Subsidiary's   pre-hurricane   basic  customers  were  receiving  cable
         television  services.  The loss of  revenue  from  September  21,  1998
         through   September   30,  1999  was  $13  million.   The  Puerto  Rico
         Subsidiary's  business  interruption  insurance  covered  the  first $3
         million in lost revenue.

         The Puerto Rico  Subsidiary  has also  claimed  coverage  for  business
         interruption under a secondary  insurance carrier.  Such policy,  which
         covers the Puerto  Rico  Subsidiary's  parent  company's  subsidiaries,
         carries a deductible of $2.5 million.  This insurance  claim is subject
         to approval by such insurance carrier and accordingly, no assurance can
         be given that amounts claimed will be paid in their entirety.  However,
         in the event  such  claims are  collected  the  overall  impact in lost
         revenues  for the  Puerto  Rico  Subsidiary  as a result  of  Hurricane
         Georges will not exceed $2.5 million.

         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.

         During the nine months ended  September 30, 1999,  Liberty Media Group,
         in conjunction with AT&T, continued its enterprise-wide,  comprehensive
         efforts  to assess and  remediate  its  computer  systems  and  related
         software and equipment to ensure such  systems,  software and equipment
         recognize,   process  and  store  information  in  the  year  2000  and
         thereafter.  AT&T's year 2000 remediation efforts include an assessment
         of  Liberty  Media  Group's  most  critical  systems,   equipment,  and
         facilities.  AT&T also  continued  its  efforts to verify the year 2000
         readiness of Liberty  Media Group's  significant  suppliers and vendors
         and continued to communicate  with  significant  business  partners and
         affiliates to assess such partners and affiliates' year 2000 status.

         Failure to achieve year 2000  compliance  by Liberty  Media Group,  its
         significant  business  partners  and  affiliates  with  which  it has a
         relationship  could negatively  affect Liberty Media Group's ability to
         conduct business for an extended period. There can be no assurance that
         all of Liberty Media Group's computer systems and related software will
         be fully year 2000  compliant;  in addition,  other  companies on which
         Liberty  Media  Group's  computer  systems  and  related  software  and
         operations  rely may or may not be fully  compliant on a timely  basis,
         and any such failure  could have a material  adverse  effect on Liberty
         Media Group's financial position, results of operation or liquidity.