<PAGE>

                                                              Exhibit 99

                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholder
Liberty Media Corporation:


We have audited the accompanying consolidated balance sheets of Liberty Media
Corporation and subsidiaries ("New Liberty" or "Successor") as of December 31,
2001 and 2000, and the related consolidated statements of operations,
comprehensive earnings, stockholders' equity, and cash flows for the years ended
December 31, 2001 and 2000 and the period from March 1, 1999 to December 31,
1999 (Successor periods) and from January 1, 1999 to February 28, 1999
(Predecessor period). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the aforementioned Successor consolidated financial statements
present fairly, in all material respects, the financial position of New Liberty
as of December 31, 2001 and 2000, and the results of their operations and their
cash flows for the Successor periods, in conformity with accounting principles
generally accepted in the United States of America. Further, in our opinion, the
aforementioned Predecessor consolidated financial statements present fairly, in
all material respects, the results of their operations and their cash flows for
the Predecessor period, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in notes 3 and 8 to the consolidated financial statements, the
Company changed its method of accounting for derivative instruments and hedging
activities in 2001.

As discussed in note 1 to the consolidated financial statements, effective March
9, 1999, AT&T Corp., the former parent company of New Liberty, acquired
Tele-Communications, Inc., the former parent company of Liberty Media
Corporation, in a business combination accounted for as a purchase. As a result
of the acquisition, the consolidated financial information for the periods after
the acquisition is presented on a different cost basis than that for the periods
before the acquisition and, therefore, is not comparable.


                                                                        KPMG LLP

Denver, Colorado
March 8, 2002


<PAGE>





                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                 2001            2000 *
                                                               --------         ------
                                                                  amounts in millions
<S>                                                            <C>              <C>
Assets
Current assets:
           Cash and cash equivalents                           $  2,077          1,295
           Short-term investments                                   397            500
           Trade and other receivables, net                         356            307
           Prepaid expenses and program rights                      352            283
           Deferred income tax assets (note 9)                      311            242
           Other current assets                                      38             73
                                                               --------         ------
                     Total current assets                         3,531          2,700
                                                               --------         ------

Investments in affiliates, accounted for using
the equity method, and related
receivables (note 5)                                             10,076         20,464

Investments in available-for-sale securities and
 other cost investments (note 6)                                 23,544         19,035

Property and equipment, at cost                                   1,190            976
Accumulated depreciation                                           (249)          (131)
                                                               --------         ------
                                                                    941            845
                                                               --------         ------
Intangible assets:
           Excess cost over acquired net assets                  10,752         10,896
           Franchise costs                                          190            190
                                                               --------         ------
                                                                 10,942         11,086
           Accumulated amortization                              (1,588)          (998)
                                                               --------         ------
                                                                  9,354         10,088
                                                               --------         ------
Other assets, at cost, net of accumulated amortization            1,093          1,136
                                                               --------         ------
                     Total assets                              $ 48,539         54,268
                                                               ========         ======
</TABLE>

                                                                     (continued)


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES


                          CONSOLIDATED BALANCE SHEETS

                           December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                       2001            2000 *
                                                                                     --------         ------
                                                                                         amounts in millions
<S>                                                                                  <C>              <C>
Liabilities and Stockholders' Equity
Current liabilities:
           Accounts payable                                                          $    127            148
           Accrued interest payable                                                       159            105
           Other accrued liabilities                                                      278            401
           Accrued stock compensation (note 11)                                           833          1,216
           Program rights payable                                                         240            179
           Current portion of debt                                                      1,143          1,094
                                                                                     --------         ------
                     Total current liabilities                                          2,780          3,143
                                                                                     --------         ------

Long-term debt (note 8)                                                                 4,764          5,269
Call option obligations (note 8)                                                        1,320             --
Deferred income tax liabilities (note 9)                                                8,977         11,337
Other liabilities                                                                         442             62
                                                                                     --------         ------
                     Total liabilities                                                 18,283         19,811
                                                                                     --------         ------

Minority interests in equity of subsidiaries                                              133            348

Stockholders' equity (note 10):

           Preferred stock, $.01 par value Authorized 50,000,000 shares;
             no shares issued and outstanding                                              --             --

           Series A common stock $.01 par value Authorized 4,000,000,000 shares;
             issued and outstanding 2,378,127,544 shares at December 31, 2001              24             --

           Series B common stock $.01 par value. Authorized 400,000,000 shares;
             issued and outstanding 212,045,288 shares at December 31, 2001                 2             --

           Additional paid-in capital                                                  35,996         35,042
           Accumulated other comprehensive earnings
           (loss), net of taxes (note 13)                                                 840           (397)

           Accumulated deficit                                                         (6,739)          (536)
                                                                                     --------         ------
                     Total stockholders' equity                                        30,123         34,109
                                                                                     --------         ------

Commitments and contingencies (note 14)
                     Total liabilities and stockholders' equity                      $ 48,539         54,268
                                                                                     ========         ======
</TABLE>

---------------------
* as restated, see note 2

See accompanying notes to consolidated financial statements.


<PAGE>




                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                     New Liberty                     Old Liberty
                                                                     ------------------------------------------      ------------
                                                                        Year            Year          Ten months     Two months
                                                                       ended           ended            ended          ended
                                                                     December 31,    December 31,     December 31,   February 28,
                                                                        2001            2000 *           1999 *        1999
                                                                     ------------    ------------     ------------   ------------
                                                                                           amounts in millions
<S>                                                                  <C>             <C>              <C>            <C>
Revenue:                                                                                       (note 2)
           Unaffiliated parties                                       $  1,849          1,283            549            192
           Related parties (note 10)                                       210            243            180             43
                                                                      --------          -----         ------            ---
                                                                         2,059          1,526            729            235
                                                                      --------          -----         ------            ---
Operating costs and expenses:
           Operating                                                     1,089            801            343             95
           Selling, general and administrative ("SG&A")                    573            348            229             87
           Charges from related parties (note 10)                           20             37             24              6
           Stock compensation-SG&A (note 11)                               132           (950)         1,785            183
           Depreciation                                                    209            122             19              7
           Amortization                                                    775            732            543             15
           Impairment of long-lived assets (note 3)                        388             --             --             --
                                                                      --------          -----         ------            ---
                                                                         3,186          1,090          2,943            393
                                                                      --------          -----         ------            ---

                     Operating income (loss)                            (1,127)           436         (2,214)          (158)

Other income (expense):
           Interest expense                                               (525)          (399)          (135)           (26)
           Dividend and interest income                                    272            301            242             10
           Share of losses of affiliates, net (note 5)                  (4,906)        (3,485)          (904)           (66)

           Nontemporary declines in fair value of investments
            (note 6)                                                    (4,101)        (1,463)            --             --

           Realized and unrealized gains (losses) on financial
            instruments, net (note 3)                                     (174)           223           (153)            --

           Gains (losses) on dispositions, net (notes 5 and 6)            (310)         7,340              4             14

           Other, net                                                      (11)             3             (4)           363
                                                                      --------          -----         ------            ---
                                                                        (9,755)         2,520           (950)           295
                                                                      --------          -----         ------            ---
                     Earnings (loss) before income taxes and
                      minority interest                                 (10,882)         2,956         (3,164)           137

Income tax benefit (expense) (note 9)                                    3,908         (1,534)         1,097           (211)
Minority interests in losses of subsidiaries                               226             63             46              4
                                                                      --------          -----         ------            ---
                     Earnings (loss) before cumulative effect of
                      accounting change                                (6,748)         1,485         (2,021)           (70)

Cumulative effect of accounting change, net of taxes (notes 3
  and 8)                                                                   545             --             --             --
                                                                      --------          -----         ------            ---
                     Net earnings (loss)                              $ (6,203)         1,485         (2,021)           (70)
                                                                      ========          =====         ======          ======

Pro forma earnings (loss) per common share (note 3):
           Pro forma basic and diluted earnings (loss) before
            cumulative effect of accounting change                    $  (2.61)           .57           (.78)          (.03)
           Cumulative effect of accounting change, net of taxes            .21             --             --             --
                                                                      --------          -----         ------            ---
           Pro forma basic and diluted net earnings (loss)            $  (2.40)           .57           (.78)          (.03)
                                                                      ========          =====         ======          ======
           Pro forma number of common shares outstanding
                                                                         2,588          2,588          2,588          2,588
                                                                      ========          =====         ======          ======
</TABLE>

--------
* as restated, see note 2

See accompanying notes to consolidated financial statements.


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS


<TABLE>
<CAPTION>
                                                                                      New Liberty                    Old Liberty
                                                                     ------------------------------------------      ------------
                                                                        Year            Year          Ten months     Two months
                                                                       ended           ended            ended          ended
                                                                     December 31,    December 31,     December 31,   February 28,
                                                                        2001            2000 *           1999 *        1999
                                                                     ------------    ------------     ------------   ------------
                                                                                           amounts in millions

<S>                                                                  <C>             <C>              <C>            <C>
Net earnings (loss)                                                    $(6,203)          1,485         (2,021)          (70)
                                                                       --------         -------        -------         ------

Other comprehensive earnings, net of taxes (note 13):
           Foreign currency translation adjustments                       (359)           (202)            60           (15)
           Unrealized holding gains (losses) arising during the
            period                                                      (1,013)         (6,115)         6,488           885
           Recognition of previously unrealized losses (gains)
            on available-for-sale securities, net                        2,696            (635)             7            --
           Cumulative effect of accounting change (notes 3 and 8)
                                                                           (87)             --             --            --
                                                                       --------         -------        -------         ------
           Other comprehensive (loss) earnings                           1,237          (6,952)         6,555           870
                                                                       --------         -------        -------         ------

Comprehensive earnings (loss)                                          $(4,966)         (5,467)         4,534           800
                                                                       ========         =======        =======         ======
</TABLE>

--------------------
* as restated, see note 2

See accompanying notes to consolidated financial statements.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY





<TABLE>
<CAPTION>
                                                                                           Common stock           Additional
                                                                          Preferred     ---------------------      paid-in
                                                                            stock       Series A     Series B      capital
                                                                          ---------     --------     --------     -----------
                                                                                           amounts in millions
<S>                                                                       <C>           <C>          <C>          <C>
Balance at January 1, 1999                                                 $ --           --           --          4,682
           Net loss                                                          --           --           --             --
           Other comprehensive earnings                                      --           --           --             --
           Other transfers from related parties, net                         --           --           --            430
                                                                          ---------     --------     --------     -----------
Balance on February 28, 1999                                               $ --           --           --          5,112
                                                                          =========     ========     ========     ==========


Balance at March 1, 1999 (as restated, see note 2)                         $ --           --           --         33,500
           Net loss                                                          --           --           --             --
           Other comprehensive earnings                                      --           --           --             --
           Transfer from related party for redemption of debentures          --           --           --            354
           Gains in connection with issuances of stock of
            affiliates and subsidiaries, net of taxes (note 10)              --           --           --            108
           Utilization of net operating losses of
            Liberty by AT&T (note 9)                                         --           --           --            (88)
                                                                          ---------     --------     --------     -----------
Balance at December 31, 1999                                                 --           --           --         33,874
                                                                          ---------     --------     --------     -----------
           Net earnings                                                      --           --           --             --
           Other comprehensive loss                                          --           --           --             --
           Issuance of AT&T Class A Liberty Media
            Group common stock for acquisitions (note 7)                     --           --           --          1,064
           Gains in connection with issuances of
           stock by affiliates and subsidiaries,
            net of taxes (note 10)                                           --           --           --            355
           Utilization of net operating
            losses of Liberty by AT&T (note 9)                               --           --           --            (38)
           Other transfers to related parties, net                           --           --           --           (213)
                                                                          ---------     --------     --------     -----------
Balance at December 31, 2000                                                 --           --           --         35,042
                                                                          ---------     --------     --------     -----------
           Net loss                                                          --           --           --             --
           Other comprehensive earnings                                      --           --           --             --
           Issuance of common stock upon consummation
            of Split Off Transaction (note 2)                                --           24            2            (26)
           Contribution from AT&T upon consummation
            of Split Off Transaction (note 2)                                --           --           --            803
           Accrual of amounts due to AT&T for
            taxes on deferred intercompany gains (note 2)                    --           --           --           (115)
           Losses in connection with issuances
            of stock by subsidiaries and affiliates,
            net of taxes (note 10)                                           --           --           --             (8)
           Utilization of net operating losses
            of Liberty by AT&T prior to Split
            Off Transaction (note 9)                                         --           --           --             (2)
           Stock option exercises and
            issuance of restricted stock prior to Split
            Off Transaction                                                  --           --           --            302
                                                                          ---------     --------     --------     -----------
Balance at December 31, 2001                                               $ --           24            2         35,996
                                                                          =========     ========     ========     ==========
</TABLE>







<TABLE>
<CAPTION>
                                                                        Accumulated
                                                                          other
                                                                       comprehensive              Accumulated            Total
                                                                         earnings,                 (deficit)          stockholders'
                                                                        net of taxes               earnings              equity
                                                                        ------------              -----------         ------------
                                                                                           amounts in millions
<S>                                                                    <C>                        <C>                 <C>
Balance at January 1, 1999                                                  3,186                   952                   8,820
           Net loss                                                         --                      (70)                  (70)
           Other comprehensive earnings                                     870                     --                    870
           Other transfers from related parties, net                        --                      --                    430
                                                                        ------------              -----------         ------------
Balance on February 28, 1999                                                4,056                   882                   10,050
                                                                        ============              ===========         ============


Balance at March 1, 1999 (as restated, see note 2)                          --                      --                    33,500
           Net loss                                                         --                      (2,021)               (2,021)
           Other comprehensive earnings                                     6,555                   --                    6,555
           Transfer from related party for redemption of debentures         --                      --                    354
           Gains in connection with issuances of stock of
            affiliates and subsidiaries, net of taxes (note 10)             --                      --                    108
           Utilization of net operating losses of
            Liberty by AT&T (note 9)                                        --                      --                    (88)
                                                                        ------------              -----------         ------------
Balance at December 31, 1999                                                6,555                   (2,021)               38,408
                                                                        ------------              -----------         ------------
           Net earnings                                                     --                      1,485                 1,485
           Other comprehensive loss                                         (6,952)                 --                    (6,952)
           Issuance of AT&T Class A Liberty Media
            Group common stock for acquisitions (note 7)                    --                      --                    1,064
           Gains in connection with issuances of
           stock by affiliates and subsidiaries,
            net of taxes (note 10)                                          --                      --                    355
           Utilization of net operating
            losses of Liberty by AT&T (note 9)                              --                      --                    (38)
           Other transfers to related parties, net                          --                      --                    (213)
                                                                        ------------              -----------         ------------
Balance at December 31, 2000                                                (397)                   (536)                 34,109
                                                                        ------------              -----------         ------------
           Net loss                                                         --                      (6,203)               (6,203)
           Other comprehensive earnings                                     1,237                   --                    1,237
           Issuance of common stock upon consummation
            of Split Off Transaction (note 2)                               --                      --                    --
           Contribution from AT&T upon consummation
            of Split Off Transaction (note 2)                               --                      --                    803
           Accrual of amounts due to AT&T for
            taxes on deferred intercompany gains (note 2)                   --                      --                    (115)
           Losses in connection with issuances
            of stock by subsidiaries and affiliates,
            net of taxes (note 10)                                          --                      --                    (8)
           Utilization of net operating losses
            of Liberty by AT&T prior to Split
            Off Transaction (note 9)                                        --                      --                    (2)
           Stock option exercises and
            issuance of restricted stock prior to Split
            Off Transaction                                                 --                      --                    302
                                                                        ------------              -----------         ------------
Balance at December 31, 2001                                                840                     (6,739)               30,123
                                                                        ============              ===========         ============
</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>



                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                       New Liberty                    Old Liberty
                                                                      ------------------------------------------      -----------
                                                                           Year            Year       Ten months       Two months
                                                                          ended           ended          ended           ended
                                                                        December 31,    December 31,   December 31,    February 28,
                                                                            2001            2000 *        1999 *          1999
                                                                      ------------    ------------     ------------   ------------
                                                                                           amounts in millions
<S>                                                                   <C>             <C>              <C>            <C>
Cash flows from operating activities:                                                          (note 4)
  Net earnings (loss)                                                   $(6,203)         1,485         (2,021)           (70)
  Adjustments to reconcile net earnings
     (loss) to net cash provided
     (used) by operating activities:
     Cumulative effect of accounting change, net of taxes                  (545)            --             --             --
     Depreciation and amortization                                          984            854            562             22
     Impairment of long-lived assets                                        388             --             --             --
     Stock compensation                                                     132           (950)         1,785            183
     Payments of stock compensation                                        (244)          (319)          (111)          (126)
     Share of losses of affiliates, net                                   4,906          3,485            904             66
     Nontemporary decline in fair value of investments                    4,101          1,463             --             --
     Realized and unrealized losses (gains) on financial
      instruments, net                                                      174           (223)           153             --
     Losses (gains) on disposition of assets, net                           310         (7,340)            (4)           (14)
     Minority interests in losses of subsidiaries                          (226)           (63)           (46)            (4)
     Deferred income tax expense (benefit)                               (3,613)         1,821         (1,025)           212
     Intergroup tax allocation                                             (222)          (294)           (75)            (1)
     Payments from AT&T pursuant to tax sharing agreement                   166            414              1             --

     Other noncash charges (income)                                          40             15              3           (354)
     Changes in operating assets and liabilities, net of the
      effect of acquisitions and dispositions:
          Receivables                                                        30           (116)             7             33
          Prepaid expenses and program rights                              (148)          (121)          (119)           (23)
          Payables and other current liabilities                             (4)            88            119            (31)
                                                                      ------------    ------------     ------------   ------------
            Net cash provided (used) by operating
              activities                                                     26            199            133           (107)
                                                                      ------------    ------------     ------------   ------------
Cash flows from investing activities:
     Cash paid for acquisitions                                            (113)          (735)          (109)            --
     Capital expended for property and equipment                           (358)          (221)           (40)           (15)
     Investments in and loans to equity affiliates                       (1,031)        (1,568)        (1,090)           (30)
     Investments in and loans to cost investments                        (1,548)        (1,791)        (1,506)           (21)
     Purchases of marketable securities                                    (269)          (848)        (7,757)            (3)
     Sales and maturities of marketable securities                          615          1,820          5,725              9
     Cash proceeds from dispositions                                        471            456            130             43
     Other investing activities, net                                         (5)            21            (11)           (62)
                                                                      ------------    ------------     ------------   ------------
                 Net cash used by investing activities                   (2,238)        (2,866)        (4,658)           (79)
                                                                      ------------    ------------     ------------   ------------
Cash flows from financing activities:
     Borrowings of debt                                                   1,639          4,597          3,187            155
     Proceeds attributed to call option obligations upon issuance of
      senior exchangeable debentures                                      1,028             --             --             --
     Repayments of debt                                                  (1,048)        (2,156)        (2,211)          (145)
     Net proceeds from issuance of stock by subsidiaries                     --            121            123             --
     Premium proceeds from financial instruments                            383             --             --             --
     Proceeds from settlement of financial instruments, net                 366             --             --             --
     Payment from AT&T related to Split Off Transaction                     803             --             --             --
     Cash transfers (to) from related parties                              (157)          (286)          (159)            31
     Other financing activities, net                                        (20)           (28)           (20)           (52)
                                                                      ------------    ------------     ------------   ------------
                 Net cash provided (used) by financing activities         2,994          2,248            920            (11)
                                                                      ------------    ------------     ------------   ------------
                         Net increase (decrease) in cash and cash
                           equivalents                                      782           (419)        (3,605)          (197)
                         Cash and cash equivalents at beginning
                           of period                                      1,295          1,714          5,319            228
                                                                      ------------    ------------     ------------   ------------
                         Cash and cash equivalents at end of period     $ 2,077          1,295          1,714             31
                                                                      ============    ============     ============   ============
</TABLE>

-------
* as restated, see note 2

See accompanying notes to consolidated financial statements.


<PAGE>





                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

December 31, 2001, 2000 and 1999

(1)  Basis of Presentation

          The accompanying consolidated financial statements include the
     accounts of Liberty Media Corporation ("Liberty" or the "Company") and
     those of all majority-owned and controlled subsidiaries. ALL significant
     intercompany accounts and transactions have been eliminated in
     consolidation.

          Liberty's domestic subsidiaries generally operate or hold interests in
     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. In addition, certain of Liberty's subsidiaries hold interests in
     businesses engaged in wireless telephony, electronic retailing, direct
     marketing and advertising sales relating to programming services,
     infomercials and transaction processing. Liberty also has significant
     interests in foreign affiliates which operate in cable television,
     programming and satellite distribution.

(2)  AT&T Ownership of Liberty

          On March 9, 1999, AT&T Corp. ("AT&T") acquired Tele-Communications,
     Inc. ("TCI"), the former parent company of Liberty, in a merger transaction
     (the "AT&T Merger"). As a result of the AT&T Merger, each series of TCI
     common stock was converted into a class of AT&T common stock subject to
     applicable exchange ratios. The AT&T Merger was accounted for using the
     purchase method. Accordingly, at the time of the AT&T Merger, Liberty's
     assets and liabilities were recorded at their respective fair values
     resulting in a new cost basis. For financial reporting purposes the AT&T
     Merger is deemed to have occurred on March 1, 1999. Accordingly, for
     periods prior to March 1, 1999 the assets and liabilities of Liberty and
     the related consolidated financial statements are sometimes referred to
     herein as "Old Liberty," and for periods subsequent to February 28, 1999
     the assets and liabilities of Liberty and the related consolidated
     financial statements are sometimes referred to herein as "New Liberty." The
     "Company" and "Liberty" refer to both New Liberty and Old Liberty.



<PAGE>





                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

The following table represents the summary balance sheet of Old Liberty at
February 28, 1999, prior to the AT&T Merger and the opening summary balance
sheet of New Liberty subsequent to 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 securities by affiliates and
subsidiaries, and stock compensation have been reflected in the two-month period
ended February 28, 1999.

<TABLE>
<CAPTION>
                                                         New Liberty   Old Liberty
                                                         -----------   -----------
                                                           amounts in millions

<S>                                                      <C>           <C>
Assets:
Cash and cash equivalents                                  $ 5,319         31
Other current assets                                           434      1,011
Investments in affiliates                                   17,116      3,971
Investments in available-for-sale securities                13,094     11,974
Property and equipment, net                                    125        111
Intangibles and other assets                                11,159        389
                                                           -------     ------
                                                           $47,247     17,487
                                                           =======     ======
Liabilities and Equity:
Current liabilities                                        $ 1,872      1,051
Long-term debt                                               1,845      2,087
Deferred income taxes                                        9,972      4,147
Other liabilities                                               19         90
                                                           -------     ------
           Total liabilities                                13,708      7,375
                                                           -------     ------
Minority interests in equity of subsidiaries                    39         62
Stockholder's equity                                        33,500     10,050
                                                           -------     ------
                                                           $47,247     17,487
                                                           =======     ======
</TABLE>

From March 9, 1999 through August 9, 2001, AT&T owned 100% of the outstanding
common stock of Liberty. During such time, the AT&T Class A Liberty Media Group
common stock and the AT&T Class B Liberty Media Group common stock (together,
the AT&T Liberty Media Group tracking stock) were tracking stocks of AT&T
designed to reflect the economic performance of the businesses and assets of
AT&T attributed to the Liberty Media Group. Liberty was included in the Liberty
Media Group.

On May 7, 2001, AT&T contributed to Liberty assets that were attributed to the
Liberty Media Group but not previously owned by Liberty (the "Contributed
Assets"). These assets included (i) preferred stock and common stock interests
in a subsidiary of IDT Corporation, a multinational telecommunications services
provider and (ii) an approximate 8% indirect common equity interest in Liberty
Digital, Inc. ("Liberty Digital"). Subsequent to these contributions, the
businesses and assets of Liberty and its subsidiaries constituted all of the
businesses and assets of the Liberty Media Group. The contributions have been
accounted for in a manner similar to a pooling of interests and, accordingly,
the financial statements of Liberty for periods prior to the contributions have
been restated to include the financial position and results of operations of the
Contributed Assets.

Effective August 10, 2001, AT&T effected the split-off of Liberty pursuant to
which Liberty's common stock was recapitalized, and each outstanding share of
AT&T Class A Liberty Media Group tracking stock was redeemed for one share of
Liberty Series A common stock and each outstanding share of AT&T Class B Liberty
Media Group tracking stock was redeemed for one share of Liberty Series B common
stock (the "Split Off Transaction"). Subsequent to the Split Off Transaction,
Liberty is no longer a subsidiary of AT&T and no shares of AT&T Liberty Media
Group tracking stock remain outstanding. The Split Off Transaction has been
accounted for at historical cost.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           In connection with the Split Off Transaction, Liberty has also been
           deconsolidated from AT&T for federal income tax purposes. As a
           result, AT&T was required to pay Liberty an amount equal to 35% of
           the amount of the net operating loss carryforward reflected in TCI's
           final federal income tax return that has not been used as an offset
           to Liberty's obligations under the AT&T Tax Sharing Agreement and
           that has been, or is reasonably expected to be, utilized by AT&T. The
           $803 million payment was received by Liberty prior to the Split Off
           Transaction and has been reflected as an increase to additional
           paid-in-capital in the accompanying consolidated statement of
           stockholders' equity. In addition, certain deferred intercompany
           gains will be includible in AT&T's taxable income as a result of the
           Split Off Transaction, and AT&T will be entitled to reimbursement
           from Liberty for the resulting tax liability of approximately $115
           million. Such tax liability has been accrued as of December 31, 2001
           and has been reflected as a reduction in additional paid-in-capital
           in the accompanying consolidated statement of stockholders' equity.

(3)        Summary of Significant Accounting Policies

           Cash and Cash Equivalents

           Cash equivalents consist of investments which are readily convertible
           into cash and have maturities of three months or less at the time of
           acquisition.

           Receivables

           Receivables are reflected net of an allowance for doubtful accounts.
           Such allowance at December 31, 2001 and 2000 was not material.

           Program Rights

           Prepaid program rights are amortized on a film-by-film basis over the
           anticipated number of exhibitions. Committed program rights and
           program rights payable are recorded at the estimated cost of the
           programs when the film is available for airing less prepayments.
           These amounts are amortized on a film-by-film basis over the
           anticipated number of exhibitions.

           Investments

           All marketable equity and debt securities held by the Company are
           classified as available-for-sale and are carried at fair value.
           Unrealized holding gains and losses on securities that are classified
           as available-for-sale ("AFS Securities") and are hedged with a
           derivative financial instrument that qualifies as a fair value hedge
           under Statement of Financial Accounting Standards No. 133 "Accounting
           for Derivative Instruments and Hedging Activities" ("Statement 133")
           are recognized in the Company's consolidated statement of operations.
           Unrealized holding gains and losses of AFS Securities that are not
           hedged pursuant to Statement 133 are carried net of taxes as a
           component of accumulated other comprehensive earnings in
           stockholder's equity. Realized gains and losses are determined on an
           average cost basis. Other investments in which the Company's
           ownership interest is less than 20% and are not considered marketable
           securities are carried at the lower of cost or net realizable value.

           For those investments in affiliates in which the Company has the
           ability to exercise significant influence, the equity method of
           accounting is used. Under this method, the investment, originally
           recorded at cost, is adjusted to recognize the Company's share of net
           earnings or losses of the affiliates as they occur rather then as
           dividends or other distributions are received, limited to the extent
           of the Company's investment in, advances to and commitments for the
           investee. The Company's share of net earnings or losses of affiliates
           includes the amortization of the difference between the Company's
           investment and its share of the net assets of the investee and also
           includes any nontemporary declines in fair value recognized during
           the period.


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Subsequent to the AT&T Merger, changes in the Company's proportionate
           share of the underlying equity of a subsidiary or equity method
           investee, which result from the issuance of additional equity
           securities by such subsidiary or equity investee, are recognized as
           increases or decreases in the Company's consolidated statements of
           stockholders' equity.

         The Company continually reviews its investments to determine whether a
         decline in fair value below the cost basis is other than temporary
         ("nontemporary"). The Company considers a number of factors in its
         determination including (i) the financial condition, operating
         performance and near term prospects of the investee; (ii) the reason
         for the decline in fair value, be it general market conditions,
         industry specific or investee specific; (iii) analysts' ratings and
         estimates of 12 month share price targets for the investee; (iv) the
         length of time that the fair value of the investment is below the
         Company's carrying value; and (v) the Company's intent and ability to
         hold the investment for a period of time sufficient to allow for a
         recovery in fair value. If the decline in fair value is deemed to be
         other than temporary, the cost basis of the security is written down to
         fair value. In situations where the fair value of an investment is not
         evident due to a lack of a public market price or other factors, the
         Company uses its best estimates and assumptions to arrive at the
         estimated fair value of such investment. The Company's assessment of
         the foregoing factors involves a high degree of judgment and
         accordingly, actual results may differ materially from the Company's
         estimates and judgments. Writedowns for cost investments and AFS
         Securities are included in the consolidated statements of operations as
         nontemporary declines in fair values of investments. Writedowns for
         equity method investments are included in share of losses of
         affiliates.

           Property and Equipment

           Property and equipment, including significant improvements, is stated
           at cost. Depreciation is computed using the straight-line method
           using estimated useful lives of 3 to 20 years for support equipment
           and 10 to 40 years for buildings and improvements.

           Excess Cost Over Acquired Net Assets

           Excess cost over acquired net assets consists of the difference
           between the cost of acquiring non-cable entities and amounts assigned
           to their tangible assets. Such amounts are amortized using the
           straight-line method over periods ranging from 5 to 20 years.

           Franchise Costs

           Franchise costs generally include the difference between the cost of
           acquiring cable companies and amounts allocated to their tangible
           assets. Such amounts are amortized using the straight-line method
           over 20 years.

           Impairment of Long-lived Assets

           The Company periodically reviews the carrying amounts of its property
           and equipment and its intangible assets to determine whether current
           events or circumstances indicate that such carrying amounts may not
           be recoverable. If the carrying amount of the asset is greater than
           the expected undiscounted cash flows to be generated by such asset,
           an impairment adjustment is to be recognized. Such adjustment is
           measured by the amount that the carrying value of such assets exceeds
           their fair value. The Company generally measures fair value by
           considering sale prices for similar assets or by discounting
           estimated future cash flows using an appropriate discount rate.
           Considerable management judgment is necessary to estimate the fair
           value of assets, accordingly, actual results could vary significantly
           from such estimates. Assets to be disposed of are carried at the
           lower of their financial statement carrying amount or fair value less
           costs to sell.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           As a result of the weakness in the economy in 2001 certain
           subsidiaries of the Company did not meet their 2001 operating
           objectives and have reduced their 2002 expectations. Accordingly, the
           subsidiaries assessed the recoverability of their property and
           equipment and intangible assets and determined that impairment
           adjustments were necessary. In addition, in the fourth quarter, a
           subsidiary made the decision to consolidate certain of its operations
           and close certain facilities. In connection with these initiatives,
           the subsidiary recorded a restructuring charge related to lease
           cancellation fees and an additional impairment charge related to its
           property and equipment. All of the foregoing charges are included in
           impairment of long-lived assets in the Company's statement of
           operations.

           Minority Interests

           Recognition of minority interests' share of losses of subsidiaries is
           generally limited to the amount of such minority interests' allocable
           portion of the common equity of those subsidiaries. Further, the
           minority interests' share of losses is not recognized if the minority
           holders of common equity of subsidiaries have the right to cause the
           Company to repurchase such holders' common equity.

           Preferred stock (and accumulated dividends thereon) of subsidiaries
           are included in minority interests in equity of subsidiaries.
           Dividend requirements on such preferred stocks are reflected as
           minority interests in earnings of subsidiaries in the accompanying
           consolidated statements of operations and comprehensive earnings.

           Foreign Currency Translation

           The functional currency of the Company is the United States ("U.S.")
           dollar. The functional currency of the Company's foreign operations
           generally is the applicable local currency for each foreign
           subsidiary and foreign equity method investee. Assets and liabilities
           of foreign subsidiaries and foreign equity investees are translated
           at the spot rate in effect at the applicable reporting date, and the
           consolidated statements of operations and the Company's share of the
           results of operations of its foreign equity affiliates are translated
           at the average exchange rates in effect during the applicable period.
           The resulting unrealized cumulative translation adjustment, net of
           applicable income taxes, is recorded as a component of accumulated
           other comprehensive earnings in stockholder's equity.

           Transactions denominated in currencies other than the functional
           currency are recorded based on exchange rates at the time such
           transactions arise. Subsequent changes in exchange rates result in
           transaction gains and losses which are reflected in the accompanying
           consolidated statements of operations and comprehensive earnings as
           unrealized (based on the applicable period end exchange rate) or
           realized upon settlement of the transactions.

           Unless otherwise indicated, convenience translations of foreign
           currencies into U.S. dollars are calculated using the applicable spot
           rate at December 31, 2001, as published in The Wall Street Journal.

           Derivative Instruments and Hedging Activities

           The Company uses various derivative instruments including equity
           collars, put spread collars, bond swaps and foreign exchange
           contracts to manage fair value and cash flow risk associated with
           many of its investments, some of its variable rate debt and
           forecasted transactions to be denominated in foreign currencies. Each
           of these derivative instruments is executed with a counterparty,
           generally well known major financial institutions. While Liberty
           believes these derivative instruments effectively manage the risks
           highlighted above, they are subject to counterparty credit risk.
           Counterparty credit risk is the risk that the counterparty is unable
           to perform under the terms of the derivative instrument upon
           settlement of the derivative


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           instrument. To protect itself against credit risk associated with
           these counterparties the Company:

           - Executes its derivative instruments with several different
             counterparties, and

           - Executes derivative instrument agreements which contain a provision
             that requires the counterparty to post the "in the money" portion
             of the derivative instrument into a cash collateral account for the
             Company's benefit, if the respective counterparty's credit rating
             were to reach certain levels, generally a rating that is below
             Standard & Poor's rating of A- or Moody's rating of A3.

           Due to the importance of these derivative instruments to its risk
           management strategy, Liberty actively monitors the creditworthiness
           of each of these counterparties. Based on its analysis, the Company
           considers nonperformance by any of its counterparties to be unlikely.

           Effective January 1, 2001, Liberty adopted Statement 133, which
           establishes accounting and reporting standards for derivative
           instruments, including certain derivative instruments embedded in
           other contracts, and for hedging activities. All derivatives, whether
           designated in hedging relationships or not, are required to be
           recorded on the balance sheet at fair value. If the derivative is
           designated as a fair value hedge, the changes in the fair value of
           the derivative and of the hedged item attributable to the hedged risk
           are recognized in earnings. If the derivative is designated as a cash
           flow hedge, the effective portions of changes in the fair value of
           the derivative are recorded in other comprehensive earnings and are
           recognized in the statement of operations when the hedged item
           affects earnings. Ineffective portions of changes in the fair value
           of cash flow hedges are recognized in earnings. If the derivative is
           not designated as a hedge, changes in the fair value of the
           derivative are recognized in earnings. Currently, the only
           instruments designated as hedges are the Company's equity collars,
           which are designated as fair value hedges.

           The fair value of derivative instruments is estimated using the
           Black-Scholes model. The Black-Scholes model incorporates a number of
           variables in determining such fair values, including expected
           volatility of the underlying security and an appropriate discount
           rate. The Company selects a volatility rate at the inception of the
           derivative instrument based on the historical volatility of the
           underlying security and on the term of the derivative instrument. The
           volatility assumption is generally not changed during the term of the
           derivative instrument unless there is an indication that the
           historical volatility is no longer appropriate. Considerable
           management judgment is required in estimating the Black-Scholes
           variables. Actual results upon settlement or unwinding of derivative
           instruments may differ materially from these estimates.

           Derivative gains and losses included in other comprehensive earnings
           are reclassified into earnings at the time the sale of the hedged
           item or transaction is recognized.

           Prior to the adoption of Statement 133, changes in the fair value of
           the Company's equity collars were reported as a component of
           comprehensive earnings (in unrealized gains) along with changes in
           the fair value of the underlying securities. Changes in the fair
           value of put spread collars were recorded as unrealized gains
           (losses) on financial instruments in the consolidated statements of
           operations.

           The adoption of Statement 133 on January 1, 2001, resulted in a
           cumulative increase in net earnings of $545 million, or $0.21 per
           common share, (after tax expense of $356 million) and an increase in
           other comprehensive loss of $87 million. The increase in net earnings
           was mostly attributable to separately recording the fair value of the
           embedded call option obligations associated with the Company's senior
           exchangeable debentures. The increase in other comprehensive loss
           relates primarily to changes in the fair value of the Company's
           warrants and options to purchase certain available-for-sale
           securities.



<PAGE>



                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           The Company assesses the effectiveness of equity collars by comparing
           changes in the intrinsic value of the equity collar to changes in the
           fair value of the underlying security. For derivatives designated as
           fair value hedges, changes in the time value of the derivatives,
           which are excluded from the assessment of hedge effectiveness, are
           recognized currently in earnings as a component of realized and
           unrealized gains (losses) on financial instruments. Hedge
           ineffectiveness, determined in accordance with Statement 133, had no
           impact on earnings for the year ended December 31, 2001.

           For the year ended December 31, 2001, realized and unrealized gains
           on financial instruments included a $167 million unrealized gain
           related to call option obligations, a $616 million unrealized net
           loss for changes in the fair value of derivative instruments related
           to available-for-sale securities and other derivatives not designed
           as hedging instruments, and a $275 million unrealized net gain for
           changes in the time value of options for fair value hedges. During
           the year ended December 31, 2001, the Company received cash proceeds
           of $329 million as a result of unwinding certain of its equity
           collars. Pursuant to Statement 133, the proceeds received less the
           offsetting impact of hedge accounting on the underlying securities
           resulted in $162 million of realized and unrealized gains on
           financial instruments in the consolidated statement of operations for
           the year ended December 31, 2001.

           Revenue Recognition

           Programming revenue is recognized in the period during which
           programming is provided, pursuant to affiliation agreements.
           Advertising revenue is recognized, net of agency commissions, in the
           period during which underlying advertisements are broadcast. Revenue
           from post-production services is recognized in the period the
           services are rendered. Cable and other distribution revenue is
           recognized in the period that services are rendered. Cable
           installation revenue is recognized in the period the related services
           are provided to the extent of direct selling costs. Any remaining
           amount is deferred and recognized over the estimated average period
           that customers are expected to remain connected to the cable
           distribution system.

           Advertising Costs

           Advertising costs generally are expensed as incurred. Advertising
           expense aggregated $43 million, $35 million, $18 million and $4
           million for the years ended December 31, 2001 and 2000, the ten
           months ended December 31, 1999 and the two months ended February 28,
           1999, respectively.

           Stock Based Compensation

           Statement of Financial Accounting Standards No. 123, Accounting for
           Stock-Based Compensation ("Statement 123"), establishes financial
           accounting and reporting standards for stock-based employee
           compensation plans as well as transactions in which an entity issues
           its equity instruments to acquire goods or services from
           non-employees. As allowed by Statement 123, Liberty continues to
           account for stock-based compensation pursuant to Accounting
           Principles Board Opinion No. 25 ("APB Opinion No. 25").

           Agreements that may require Liberty to reacquire interests in
           subsidiaries held by officers and employees in the future are
           marked-to-market at the end of each reporting period with
           corresponding adjustments being recorded to stock compensation
           expense.

           Pro Forma Earnings (Loss) Per Common Share

           Pro forma basic earnings (loss) per common share is computed by
           dividing net earnings (loss) by the pro forma number of common shares
           outstanding. The pro forma number of outstanding common shares for
           periods prior to the Split Off Transaction is based upon the number
           of shares of Series A and Series B Liberty common stock issued upon
           consummation of the Split Off


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Transaction. Pro forma diluted earnings (loss) per common share
           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. Excluded from diluted earnings per share for the year
           ended December 31, 2001, are 76 million potential common shares
           because their inclusion would be anti-dilutive.

           Reclassifications

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

           Estimates

           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.

           Recent Accounting Pronouncements

           In June 2001, the Financial Accounting Standards Board (the "FASB")
           issued Statement No. 141, Business Combinations ("Statement 141"),
           and Statement No. 142, Goodwill and Other Intangible Assets
           ("Statement 142"). Statement 141 requires that the purchase method of
           accounting be used for all business combinations. Statement 141 also
           specifies criteria that intangible assets acquired in a purchase
           method business combination must meet to be recognized and reported
           apart from goodwill. Statement 142 will require that goodwill and
           intangible assets with indefinite useful lives no longer be
           amortized, but instead tested for impairment at least annually in
           accordance with the provisions of Statement 142. Statement 142 will
           also require that intangible assets with estimable useful lives be
           amortized over their respective estimated useful lives to their
           estimated residual values, and reviewed for impairment in accordance
           with SFAS Statement No. 121, Accounting for the Impairment of
           Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

           The Company adopted the provisions of Statement 141 effective July 1,
           2001, and is required to adopt Statement 142 effective January 1,
           2002.

           Statement 141 requires upon adoption of Statement 142, that the
           Company evaluate its existing intangible assets and goodwill that
           were acquired in prior purchase business combinations, and make any
           necessary reclassifications in order to conform with the new criteria
           in Statement 141 for recognition apart from goodwill. Upon adoption
           of Statement 142, the Company will be required to reassess the useful
           lives and residual values of all intangible assets acquired, and make
           any necessary amortization period adjustments by the end of the first
           interim period after adoption. In addition, to the extent an
           intangible asset is identified as having an indefinite useful life,
           the company will be required to test the intangible asset for
           impairment in accordance with the provisions of Statement 142 within
           the first interim period. Any impairment loss will be measured as of
           the date of adoption and recognized as the cumulative effect of a
           change in accounting principle in the first interim period.

           In connection with Statement 142's transitional goodwill impairment
           evaluation, Statement 142 will require the Company to perform an
           assessment of whether there is an indication that goodwill and
           equity-method goodwill is impaired as of the date of adoption. To
           accomplish this, the Company must identify its reporting units and
           determine the carrying value of each reporting unit by assigning the
           assets and liabilities, including the existing goodwill and
           intangible assets, to those reporting units as of the date of
           adoption. The Company will then have up to six months from the date
           of adoption to determine the fair value of each reporting unit and
           compare it to the reporting unit's carrying amount. To the extent a
           reporting unit's carrying amount exceeds its fair value, an
           indication exists that the reporting unit's goodwill may be impaired
           and the



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Company must perform the second step of the transitional impairment
           test. In the second step, the Company must compare the implied fair
           value of the reporting unit's goodwill, determined by allocating the
           reporting unit's fair value to all of its assets (recognized and
           unrecognized) and liabilities in a manner similar to a purchase price
           allocation in accordance with Statement 141, to its carrying amount,
           both of which would be measured as of the date of adoption. This
           second step is required to be completed as soon as possible, but no
           later than the end of the year of adoption. Any transitional
           impairment loss will be recognized as the cumulative effect of a
           change in accounting principle in the Company's statement of
           earnings.

           As of the date of adoption, the Company will have unamortized
           goodwill in the amount of $9,191 million, unamortized identifiable
           intangible assets in the amount of $831 million, and unamortized
           equity-method excess costs in the amount of $7,766 million, all of
           which will be subject to the transition provisions of Statements 141
           and 142. Amortization expense related to goodwill was $617 million
           and $587 million for the years ended December 31, 2001 and 2000,
           respectively; and amortization of equity-method excess costs
           (included in share of losses of affiliates) aggregated $798 million
           and $1,058 million for the years ended December 31, 2001 and 2000,
           respectively. The Company currently estimates that upon adoption of
           Statement 142, it will be required to recognize a $1.5 - $2.0 billion
           transitional impairment loss as the cumulative effect of a change in
           accounting principle. The foregoing estimate does not include an
           adjustment for the Company's proportionate share of any transition
           adjustments that its equity method affiliates may record, as the
           Company is currently unable to estimate the amount of such
           adjustment.

           In August 2001, the FASB issued Statement of Financial Accounting
           Standards No. 144 "Accounting for the Impairment or Disposal of
           Long-Lived Assets," which addresses financial accounting and
           reporting for the impairment or disposal of long-lived assets. This
           statement supercedes prior statements that address the disposal of a
           segment of a business, and eliminates the exception to consolidation
           for subsidiaries for which control is likely to be temporary. This
           statement retains the prior statement's fundamental provisions for
           the recognition and measurement of impairment of long-lived assets to
           be held and used, as well as the measurement of long-lived assets to
           be disposed of by sale. The statement is effective for fiscal years
           beginning after December 15, 2001. The Company has not determined the
           impact that adoption of this statement will have on its financial
           position, results of operations or cash flow.

(4)        Supplemental Disclosures to Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                New Liberty                            Old Liberty
                                                   ----------------------------------------------     -------------
                                                       Year             Year          Ten months        Two months
                                                      ended            ended            ended             ended
                                                   December 31,      December 31,     December 31,      February 28,
                                                      2001             2000              1999             1999
                                                   ------------      ------------     ------------      ------------
                                                                        amounts in millions
<S>                                                 <C>              <C>              <C>               <C>
Cash paid for acquisitions:
  Fair value of assets acquired                     $  264            3,733              122               --
  Net liabilities assumed                             (136)          (1,208)             (13)              --
  Deferred tax liability                                (7)            (281)              --               --
  Minority interest                                     (8)            (445)              --               --
  Contribution to equity for acquisitions               --           (1,064)              --               --
                                                   ------------      ------------     ------------      ------------
      Cash paid for acquisitions                    $  113              735              109               --
                                                   ============      ============     ============      ============
Cash paid for interest                              $  451              335               93               32
                                                   ============      ============     ============      ============
Cash paid for income taxes                          $    9                2                1               --
                                                   ============      ============     ============      ============
</TABLE>



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           During the ten months ended December 31, 1999, certain subsidiaries
           with a carrying value of $135 million were exchanged for a cost
           method investment in an online music venture.

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

<TABLE>
<S>                                                                       <C>
Cash and cash equivalents prior to the AT&T Merger                        $     31
   Cash contribution in connection with the AT&T Merger                      5,464
   Cash paid to TCI for certain warrants                                      (176)
                                                                          --------
Cash and cash equivalents subsequent to the AT&T Merger                   $  5,319
                                                                          ========
</TABLE>

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

           Liberty has various investments accounted for using the equity
           method. The following table includes Liberty's carrying amount and
           percentage ownership of the more significant investments in
           affiliates at December 31, 2001 and the carrying amount at December
           31, 2000:

<TABLE>
<CAPTION>
                                                                    December 31,                 December 31,
                                                                       2001                          2000
                                                                   ------------                 ------------
                                                            Percentage       Carrying              Carrying
                                                            Ownership          Amount               Amount
                                                            ----------       --------              --------
                                                                             dollar amounts in millions

<S>                                                         <C>            <C>                      <C>
Discovery Communications, Inc. ("Discovery")                    50%           $  2,900               3,133
QVC, Inc. ("QVC")                                               42%              2,543               2,508
USA Networks, Inc. ("USAI") and related investments             20%              2,857               2,824
UnitedGlobalCom, Inc. ("UnitedGlobalCom")                       20%               (418)                314
Telewest Communications plc ("Telewest")                        25%                 97               2,712
Jupiter Telecommunications Co., Ltd. ("Jupiter")                35%                407                 575
Gemstar-TV Guide International, Inc. ("Gemstar")                N/A                 --               5,855
Other                                                           various          1,690               2,543
                                                                              --------              ------
                                                                              $ 10,076              20,464
                                                                              ========              ======
</TABLE>



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           The following table reflects Liberty's share of earnings (losses) of
           affiliates including excess basis amortization and nontemporary
           declines in value:

<TABLE>
<CAPTION>
                                                                New Liberty                            Old Liberty
                                                   ----------------------------------------------     -------------
                                                       Year             Year          Ten months        Two months
                                                      ended            ended            ended             ended
                                                   December 31,      December 31,     December 31,      February 28,
                                                      2001             2000              1999             1999
                                                   ------------      ------------     ------------      ------------
                                                                        amounts in millions
<S>                                                 <C>              <C>              <C>               <C>

Discovery                                           $      (293)            (293)             (269)               (8)
QVC                                                          36              (12)              (11)               13
USAI and related investments                                 35              (36)              (20)               10
UnitedGlobalCom                                            (751)            (211)               23                --
Telewest                                                 (2,538)            (441)             (222)              (38)
Jupiter                                                     (90)            (114)              (54)               (7)
Cablevision S.A. ("Cablevision")                           (476)             (49)              (28)               (3)
ASTROLINK International LLC ("Astrolink")                  (417)              (8)               --                --
Teligent, Inc. ("Teligent                                   (85)          (1,269)               --                --
Gemstar                                                    (133)            (254)               --                --
Other                                                      (194)            (798)             (323)              (33)
                                                   ------------      ------------     ------------      ------------
                                                      $  (4,906)          (3,485)             (904)              (66)
                                                   ============      ============     ============      ============

</TABLE>

           At December 31, 2001, the aggregate carrying amount of Liberty's
           investments in its affiliates exceeded Liberty's proportionate share
           of its affiliates' net assets by $7,766 million. Such excess is being
           amortized over estimated useful lives of up to 20 years. Such
           amortization was $798 million, $1,058 million, $463 million and $9
           million for the years ended December 31, 2001 and 2000, the ten
           months ended December 31, 1999 and the two months ended February 28,
           1999, respectively, and is included in share of losses of affiliates.

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

           USAI

           USAI owns and operates businesses in network and television
           production, electronic retailing, ticketing operations, and internet
           services. At December 31, 2001, Liberty held 74.4 million shares of
           USAI's common stock. In addition, at December 31, 2001, Liberty held
           shares and other equity interests in certain subsidiaries of USAI
           that are exchangeable for an aggregate of 79.0 million shares of USAI
           common stock. The exchange of such shares and interests is subject to
           certain conditions including that Liberty's ownership of USAI's
           common stock issuable upon such exchange not being restricted by
           Federal Communications Commission ("FCC") regulations. On August 28,
           2001, USAI gave Liberty notice that on August 21, 2001 USAI had sold
           its television broadcast stations and associated broadcast licenses
           and as a result of such sale, FCC regulations no longer restricted
           Liberty's ownership of shares of USAI's common stock issuable upon
           such exchange and, accordingly, that USAI was exercising its right to
           require that Liberty exchange such stock and other interests of such
           subsidiaries for shares of USAI common stock (the "USAI Exchange").

           If the USAI Exchange had been completed at December 31, 2001, Liberty
           would have owned 153.4 million shares or approximately 20% (on a
           fully-diluted basis) of USAI common stock. The closing price of
           USAI's common stock on December 31, 2001 was $27.31 per share.



<PAGE>



                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued


           In December 2001, Liberty entered into an agreement with USAI and
           Vivendi Universal, S.A. ("Vivendi"), pursuant to which USAI will
           contribute substantially all of its entertainment assets to a
           partnership controlled by Vivendi. In connection with the
           transaction, Liberty entered into a separate agreement with Vivendi,
           pursuant to which Vivendi will acquire from Liberty 25 million shares
           of common stock of USAI, approximately 38.7 millions shares of USANi
           LLC, which are exchangeable, on a one-for-one basis, for shares of
           USAI common stock, and all of its approximate 30% interest in
           multiThematiques S.A., together with certain liabilities with respect
           thereto, in exchange for ADSs representing approximately 37.4 million
           Vivendi ordinary shares, subject to adjustment. The closing of
           Liberty's transaction with Vivendi and the closing of Vivendi's
           transaction with USAI are conditioned on one another. Subsequent to
           the Vivendi transaction with USAI, USAI will be renamed USA
           Interactive. The Company anticipates that the Vivendi transaction
           will be consummated in the second quarter of 2002. Upon completion
           Liberty will own approximately 3% of Vivendi and 20% of USA
           Interactive.

           UnitedGlobalCom

           UnitedGlobalCom is a global broadband communications provider of
           video, voice and data services with operations in over 25 countries
           throughout the world. At December 31, 2001, Liberty owned an
           approximate 20% economic ownership interest representing an
           approximate 40% voting interest in UnitedGlobalCom. Liberty owns 9.9
           million shares of UnitedGlobalCom Class B common stock and 13.1
           million shares of UnitedGlobalCom Class A common stock. The
           UnitedGlobalCom Class B common stock is convertible, on a one -
           for-one basis, into UnitedGlobalCom Class A common stock. The closing
           price of UnitedGlobalCom's Class A common stock on December 31, 2001
           was $5.00 per share.

           On January 30, 2002, the Company and UnitedGlobalCom completed a
           transaction (the "New United Transaction") pursuant to which a new
           holding company ("New United") was formed to own UnitedGlobalCom, and
           all shares of UnitedGlobalCom common stock were exchanged for shares
           of common stock of New United. In addition, the Company contributed
           (i) cash consideration of $200 million; (ii) a note receivable from
           Belmarken Holding B.V., a subsidiary of UnitedGlobalCom, with an
           accreted value of $892 million and (iii) Senior Notes and Senior
           Discount Notes of United-Pan Europe Communications N.V., a subsidiary
           of UnitedGlobalCom, comprised of U.S. dollar denominated notes with a
           face amount of $1,435 million and euro denominated notes with a face
           amount of euro 263 million to New United in exchange for 281.3
           million shares of Class C common stock of New United. Upon
           consummation of the New United Transaction, Liberty owns an
           approximate 72% economic interest and a 94% voting interest in New
           United. Pursuant to certain voting and standstill arrangements
           entered into at the time of closing, Liberty is unable to exercise
           control of New United, and accordingly, Liberty will continue to use
           the equity method of accounting for its investment. Due to the
           Company's commitment to increase its investment in UnitedGlobalCom,
           as evidenced by the New United Transaction, the Company recognized
           its share of UnitedGlobalCom's losses such that its investment in
           UnitedGlobalCom was less than zero at December 31, 2001. As the
           Company's investment in United Pan-Europe Communications, N.V., a
           subsidiary of UnitedGlobalCom, has a carrying value of $718 million
           at December 31, 2001, the Company continues to include the negative
           carrying value of its UnitedGlobalCom investment in investments
           accounted for using the equity method.

           Also on January 30, 2002, New United acquired from Liberty its debt
           and equity interests in IDT United, Inc. and $751 million principal
           amount at maturity of UnitedGlobalCom's $1,375 million 10-3/4% senior
           secured discount notes due 2008 (the "2008 Notes"), which had been
           distributed to Liberty in redemption of a portion of its interest in
           IDT United. IDT United was formed as an indirect subsidiary of IDT
           Corporation for purposes of effecting a tender offer for all
           outstanding 2008 Notes at a purchase price of $400 per $1,000
           principal amount at maturity, which tender offer expired on February
           1, 2002. The aggregate purchase price for the Company's interest in
           IDT United of approximately $449 million was equal to the aggregate
           amount Liberty had invested in IDT United, plus interest.
           Approximately $305 million of the purchase paid was paid by the
           assumption by New United of



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           debt owed by Liberty to a subsidiary of UnitedGlobalCom, and the
           remainder was credited against the $200 million cash contribution by
           Liberty to New United described above. In connection with the New
           United Transaction, a subsidiary of Liberty agreed to loan to a
           subsidiary of New United up to $105 million. As of February 28, 2002,
           such subsidiary of New United has borrowed $103 million from the
           Liberty subsidiary to acquire additional shares of preferred stock
           and promissory notes issued by IDT United. The 2008 Notes owned by
           IDT United, together with 2008 Notes acquired by New United directly
           from Liberty referred to above, all of which remain outstanding,
           represent approximately 98.2% of the outstanding 2008 Notes.

           Telewest

           Telewest currently operates and constructs cable television and
           telephone systems in the UK. In April 2000, Telewest acquired
           Flextech p.l.c. ("Flextech") which develops and sells a variety of
           television programming in the UK. Prior to the acquisition, Liberty
           owned an approximate 37% equity interest in Flextech and a 22% equity
           interest in Telewest. As a result of the acquisition, Liberty owns an
           approximate 25% equity interest in Telewest. Liberty recognized a
           $649 million gain (excluding related tax expense of $227 million) on
           the acquisition based on the difference between the carrying value of
           Liberty's interest in Flextech and the fair value of the Telewest
           shares received. At December 31, 2001 Liberty indirectly owned 744.4
           million of the issued and outstanding Telewest ordinary shares. The
           closing price of Telewest's ordinary shares on December 31, 2001 was
           $0.94 per share.

           During the year ended December 31, 2001, Liberty determined that its
           investment in Telewest experienced a nontemporary decline in value.
           As a result, the carrying value of Telewest was adjusted to its
           estimated fair value, and the Company recorded a charge of $1,801
           million. Such charge is included in share of losses of affiliates.
           Summarized financial information for Telewest is as follows:

<TABLE>
<CAPTION>
                                                                   December 31,
                                                               -------------------
                                                                 2001         2000
                                                               ------      ------
                                                               amounts in millions
<S>                                                            <C>         <C>
        Financial Position
           Investments                                         $  795         377
           Property and equipment, net                          5,051       5,078
           Intangibles, net                                     2,752       4,666
           Other assets, net                                      611         586
                                                               ------      ------
             Total assets                                      $9,209      10,707
                                                               ======      ======

           Debt                                                $7,122       6,360
           Other liabilities                                    1,431       1,080
           Owners' equity                                         656       3,267
                                                               ------      ------
             Total liabilities and equity                      $9,209      10,707
                                                               ======      ======
</TABLE>


<TABLE>
<CAPTION>
                                                                 Years ended December 31,
                                                              ---------------------------------
                                                              2001          2000           1999
                                                            -------        ------         ------
                                                                    amounts in millions
<S>                                                         <C>           <C>             <C>
        Results of Operations
           Revenue                                          $ 1,811         1,623         1,064
           Operating expenses                                (1,380)       (1,293)         (777)
                                                            -------        ------         ------
           Operating cash flow (as defined by Liberty)          431           330           287
           Depreciation and amortization                       (941)         (863)         (475)
           Impairment of long-lived assets                   (1,112)           --            --
           Interest expense                                    (681)         (585)         (350)
           Other, net                                          (217)          (27)         (155)
                                                             -------        ------         ------
              Net loss                                      $(2,520)       (1,145)         (693)
                                                            =======        ======          ======
</TABLE>



<PAGE>




                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Gemstar

           Gemstar is a global technology and media company focused on consumer
           entertainment. The common stock of Gemstar is publicly traded. On
           July 12, 2000, Gemstar acquired TV Guide, Inc. ("TV Guide"). TV Guide
           shareholders received .6573 shares of Gemstar common stock in
           exchange for each share of TV Guide. As a result of this transaction,
           133 million shares of TV Guide held by Liberty were exchanged for
           87.5 million shares or 21% of Gemstar common stock. Liberty
           recognized a $4,391 million gain (before deferred tax expense of
           $1,737 million) on such transaction during the third quarter of 2000
           based on the difference between the carrying value of Liberty's
           interest in TV Guide and the fair value of the Gemstar securities
           received.

           In May 2001, Liberty consummated a transaction ("Exchange
           Transaction") with The News Corporation Limited ("News Corp.")
           whereby Liberty exchanged 70.7 million shares of Gemstar for 121.5
           million News Corp. American Depository Shares ("ADSs") representing
           preferred, limited voting, ordinary shares of News Corp. Liberty
           recorded a loss of $764 million in connection with the Exchange
           Transaction as the fair value of the securities received by Liberty
           was less than the carrying value of the Gemstar shares. In December
           2001, Liberty exchanged its remaining Gemstar shares for 28.8 million
           additional News Corp. ADSs and recorded an additional loss of $201
           million.

           Cablevision

           Cablevision provides cable television and high speed data services in
           Argentina. At December 31, 2001, the Company has a 50% ownership in
           Cablevision. The Argentine government has historically maintained an
           exchange rate of one Argentine peso to one U.S. dollar (the "peg
           rate"). Due to deteriorating economic and political conditions in
           Argentina in late 2001, the Argentine government eliminated the peg
           rate effective January 11, 2002. The value of the Argentine peso
           dropped significantly on the day the peg rate was eliminated. In
           addition, the Argentine government placed restrictions on the payment
           of obligations to foreign creditors. As a result of the devaluation
           of the Argentine peso, Cablevision recorded foreign currency
           translation losses of $393 million in the fourth quarter of 2001. At
           December 31, 2001, the Company determined that its investment in
           Cablevision had experienced a nontemporary decline in value, and
           accordingly, recorded an impairment charge of $195 million. Such
           charge is included in share of losses of affiliates. The Company's
           share of losses in 2001, when combined with foreign currency
           translation losses recorded in other comprehensive loss at December
           31, 2001, reduced the carrying value of its investment in Cablevision
           to zero as of December 31, 2001. Included in accumulated other
           comprehensive earnings at December 31, 2001 is $257 million of
           unrealized foreign currency translation losses related to the
           Company's investment in Cablevision.

           Astrolink

           Astrolink, a developmental stage entity, originally intended to build
           a global telecom network using Ka-band geostationary satellites to
           provide broadband data communications services. Astrolink's original
           business plan required significant additional financing over the next
           several years. During the fourth quarter of 2001, two of the members
           of Astrolink informed Astrolink that they do not intend to provide
           any of Astrolink's required financing. In light of this decision,
           Astrolink is considering several alternatives with respect to its
           proposed business plan, including, but not limited to, seeking
           alternative funding sources, scaling back their proposed business
           plan, and liquidating the venture entirely. There can be no assurance
           that Astrolink will be able to obtain the necessary financing on
           acceptable terms, or that it will be able to fulfill the business
           plan as originally proposed, or at all.

           During the second quarter of 2001, the Company determined that its
           investment in Astrolink experienced a nontemporary decline in value.
           Accordingly, the carrying amount of such investment was adjusted to
           its then estimated fair value resulting in a recognized loss of $155
           million. Such loss is included in share of losses of affiliates.
           Based on a fourth quarter 2001



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           assessment of Astrolink's remaining sources of liquidity and
           Astrolink's inability to obtain financing for its business plan, the
           Company concluded that the carrying value of its investment in
           Astrolink should be further reduced to reflect a fair value that
           assumes the liquidation of Astrolink. Accordingly, the Company
           wrote-off all of its remaining investment in Astrolink during the
           fourth quarter of 2001. The aggregate amount required to reduce its
           investment in Astrolink to zero was $250 million. Including such
           fourth quarter amount, the Company recorded losses and charges
           relating to its investment in Astrolink aggregating $417 million
           during the year ended December 31, 2001.

           Teligent

           In January 2000, the Company acquired a 40% equity interest in
           Teligent, a full-service facilities based communications company.
           During the nine months ended September 30, 2000, the Company
           determined that its investment in Teligent experienced a nontemporary
           decline in value. As a result, the carrying amount of this investment
           was adjusted to its estimated fair value resulting in a charge of
           $839 million. This impairment charge is included in share of losses
           of affiliates. In April 2001, the Company exchanged its investment in
           Teligent for shares of IDT Investments, Inc., a subsidiary of IDT
           Corporation. As the fair value of the consideration received in the
           exchange approximated the carrying value of the Company's investment
           in Teligent, no gain or loss was recognized on the transaction. The
           Company accounts for its investment in IDT Investments, Inc. using
           the cost method.

           Summarized unaudited combined financial information for affiliates
           other than Telewest is as follows:

<TABLE>
<CAPTION>
                                                            December 31,
                                                        -------------------
                                                          2001         2000
                                                       -------       ------
                                                        amounts in millions
<S>                                                    <C>           <C>
           Combined Financial Position
           Investments                                 $   872        1,776
           Property and equipment, net                   7,060        8,294
           Intangibles, net                             15,183       26,763
           Other assets, net                            10,837       11,603
                                                       -------       ------
              Total assets                             $33,952       48,436
                                                       =======       ======

           Debt                                        $17,262       18,351
           Other liabilities                            14,075       15,904
           Owners' equity                                2,615       14,181
                                                       -------       ------
              Total liabilities and equity             $33,952       48,436
                                                       =======       ======
</TABLE>

<TABLE>
<CAPTION>
                                                         Years ended December 31,
                                                  --------------------------------------
                                                    2001            2000           1999
                                                  --------         ------         ------
                                                          amounts in millions
<S>                                               <C>             <C>             <C>
           Combined Operations
           Revenue                                $ 15,132         14,626         10,787
           Operating expenses                      (13,381)       (13,511)        (9,401)
           Depreciation and amortization            (2,703)        (2,718)        (1,087)
           Impairment charges                       (1,426)            --             --
                                                  --------         ------         ------
                     Operating income (loss)        (2,378)        (1,603)           299
           Interest expense                         (1,639)        (1,616)          (599)
           Other, net                                 (685)           174            (75)
                                                  --------         ------         ------
                     Net loss                     $ (4,702)        (3,045)          (375)
                                                  ========         ======         ======
</TABLE>



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued


(6)        Investments in Available-for-Sale Securities and Other Cost
           Investments

           Investments in available-for-sale securities and other cost
           investments are summarized as follows:

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

<S>                                                                 <C>               <C>
           Sprint Corporation ("Sprint")                            $  5,697          5,192
           AOL Time Warner Inc. ("AOL Time Warner")                    6,236             --
           News Corp.                                                  6,118          2,342
           Motorola, Inc. ("Motorola")                                 1,773          1,982
           Viacom, Inc. ("Viacom")                                       670             --
           United Pan-Europe Communications N.V. ("UPC")                 718            203
           Time Warner Inc. ("Time Warner")                               --          6,325
           Other available-for-sale securities                         2,386          2,989
           Other investments, at cost, and related receivables           343            502
                                                                    --------         ------
                                                                      23,941         19,535
             Less short-term investments                                (397)          (500)
                                                                    --------         ------
                                                                    $ 23,544         19,035
                                                                    ========         ======
</TABLE>

           Sprint PCS

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

         Pursuant to a final judgment (the "Final Judgment") agreed to by
         Liberty, AT&T and the United States Department of Justice (the "DOJ")
         on December 31, 1998, Liberty transferred all of its beneficially owned
         Sprint Securities to a trustee (the "Trustee") prior to the AT&T
         Merger. The Final Judgment, which was entered by the United States
         District Court of the District of Columbia on August 23, 1999, requires
         the Trustee, on or before May 23, 2002, to dispose of a portion of the
         Sprint Securities sufficient to cause Liberty to beneficially own no
         more than 10% of the outstanding Sprint PCS Group common stock - Series
         1 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. As of December 31, 2001, Liberty beneficially owned
         approximately 19% of Sprint PCS Group common stock - Series 2.

           The Final Judgment requires that the Trustee vote the Sprint
           Securities beneficially owned by Liberty and its consolidated
           subsidiaries in the same proportion as other holders of Sprint
           Securities so long as such securities are held by the trust. The
           Final Judgment also prohibits the acquisition by Liberty of
           additional Sprint Securities, with certain exceptions, without the
           prior written consent of the DOJ. At Liberty's request, the
           Department of Justice has joined Liberty and AT&T in a joint motion
           to terminate the Final Judgment which was filed in the District Court
           in February 2002. Under the terms of the Final Judgment, the
           obligation of the trustee to dispose of the first tranche of shares
           by May 23, 2002 will be stayed while the District Court considers the
           joint motion. Liberty is also seeking the approval of the Federal
           Communications Commission to the stay of the trustee's obligation to
           dispose of the first tranche of shares pending the District Court's
           determination of the joint motion.




<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued


           AOL Time Warner

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

           News Corp.

           In May and December of 2001, Liberty acquired an aggregate of 154
           million News Corp. ADSs in exchange for its shares of Gemstar common
           stock and another equity investment. Liberty recorded a loss of $965
           million in connection with these exchanges based on the difference
           between the fair value of the News Corp. ADSs received and the
           carrying value of the Gemstar investment. In connection with this
           transaction, the Company agreed to restrictions on its ability to
           transfer certain of the ADSs prior to May 2003. Liberty had
           previously acquired 51.8 million News Corp. ADSs in 1999 in exchange
           for Liberty's 50% interest in Fox/Liberty Networks, and had acquired
           28.1 million ADSs for $695 million in cash. Liberty recognized a $13
           million gain on the 1999 exchange. At December 31, 2001, Liberty
           owned 236 million ADSs or approximately 18% of the outstanding equity
           of News Corp. Liberty accounts for its investment in News Corp. as an
           available-for-sale security.

           Motorola

           On January 5, 2000, Motorola acquired General Instrument Corporation
           ("General Instrument"). In connection with such acquisition, Liberty
           received 54 million shares of Motorola common stock and warrants to
           purchase an additional 37 million shares in exchange for its holdings
           in General Instrument. Liberty recognized a $2,233 million gain
           (before deferred tax expense of $883 million) on such transaction
           during the first quarter of 2000 based on the difference between the
           carrying value of Liberty's interest in General Instrument and the
           fair value of the Motorola securities received. At December 31, 2001
           Liberty holds approximately 71 million shares of Motorola common
           stock and vested warrants to purchase an additional 18 million shares
           of such common stock at $8.26 per share. Such warrants expire on June
           30, 2002.

           Viacom

           On January 23, 2001, BET Holdings II, Inc. ("BET") was acquired by
           Viacom in exchange for shares of Class B common stock of Viacom. As a
           result of the merger, Liberty received 15.2 million shares of
           Viacom's Class B common stock (less than 1% of Viacom's common
           equity) in exchange for its 35% ownership interest in BET, which
           investment had been accounted for using the equity method. Liberty
           accounts for its investment in Viacom as an available-for-sale
           security. Liberty recognized a gain of $559 million (before deferred
           tax expense of $221 million) in the first quarter of 2001 based upon
           the difference between the carrying value of Liberty's interest in
           BET and the value of the Viacom securities received.

           UPC

           In May 2001, the Company entered into a loan agreement with UPC and
           Belmarken Holding B.V. ("Belmarken"), a subsidiary of UPC, pursuant
           to which the Company loaned Belmarken $857 million, which represented
           a 30% discount to the face amount of the loan of $1,225 million (the
           "Belmarken Loan"). UPC is a consolidated subsidiary of
           UnitedGlobalCom. The loan accrues interest at 6% per annum, and all
           principal and interest are due in May 2007. After May 29, 2002, the
           loan is exchangeable, at the option of the Company, into shares of
           ordinary common stock of UPC at a rate of $6.85 per share. At
           inception, Liberty recorded the conversion feature of the loan at its
           estimated fair value of $420 million, and the $437 million remaining
           balance as a


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           loan receivable. Liberty accounts for the convertible feature of the
           Belmarken Loan as a derivative security under Statement 133, and
           records the convertible feature at fair value with periodic market
           adjustments recorded in the statement of operations as unrealized
           gains or losses. The discounted loan receivable is being accreted up
           to the $1,225 million face amount over its term. Such accretion,
           which includes the stated interest of 6%, is being recognized in
           interest income over the term of the loan. Upon consummation of the
           New United Transaction, the Company contributed the Belmarken Loan to
           New United in exchange for Class C shares of New United. Liberty had
           previously purchased exchangeable preferred stock and warrants of UPC
           in December 2000 for $203 million.

           During 2001, the Company acquired certain outstanding senior notes
           and senior discount notes of UPC. Liberty acquired approximately
           $1,435 million face amount of U.S. dollar denominated notes and euro
           263 million face amount of euro denominated notes for an aggregate
           purchase price of $358 million. Such notes were contributed to New
           United in connection with the New United Transaction on January 30,
           2002.

           Nontemporary Decline in Fair Value of Investments

           During the years ended December 31, 2001 and 2001, Liberty determined
           that certain of its AFS Securities and cost investments experienced
           nontemporary declines in value. As a result, the cost bases of such
           investments were adjusted to their respective fair values based
           primarily on recent quoted market prices. These adjustments are
           reflected as nontemporary declines in fair value of investments in
           the consolidated statements of operations. The following table
           identifies the realized losses attributable to each of the individual
           investments as follows:

<TABLE>
<CAPTION>
                                        Year ended
                                        December 31,
                                    -------------------
                                     2001         2000
                                    ------       -----
<S>                                 <C>          <C>
           Investments              amounts in millions

           AOL Time Warner          $2,052          --
           News Corp.                  915          --
           Viacom                      201          --
           UPC preferred stock         195          --
           Antec Corporation           127          --
           Motorola                    232       1,276
           Primedia                     --         103
           Others                      379          84
                                    ------       -----
                                    $4,101       1,463
                                    ======       =====
</TABLE>

           Equity Collars and Put Spread Collars

           The Company has entered into equity collars, put spread collars and
           other financial instruments to manage market risk associated with its
           investments in certain marketable securities. These instruments are
           recorded at fair value based on option pricing models. Equity collars
           provide the Company with a put option that gives the Company the
           right to require the counterparty to purchase a specified number of
           shares of the underlying security at a specified price (the "Company
           Put Price") at a specified date in the future. Equity collars also
           provide the counterparty with a call option that gives the
           counterparty the right to purchase the same securities at a specified
           price at a specified date in the future. The put option and the call
           option generally are equally priced at the time of origination
           resulting in no cash receipts or payments. The Company's equity
           collars are accounted for as fair value hedges.

           Put spread collars provide the Company and the counterparty with put
           and call options similar to equity collars. In addition, put spread
           collars provide the counterparty with a put option that gives it the
           right to require the Company to purchase the underlying securities at
           a price that is lower than the Company Put Price. The inclusion of
           the secondary put option allows the


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Company to secure a higher call option price while maintaining net
           zero cost to enter into the collar. The Company's put spread collars
           have not been designated as fair value hedges.

           Investments in available-for-sale securities at December 31, 2001 and
           2000 are summarized as follows:

<TABLE>
<CAPTION>
                                                                     December 31, 2001
                                                   -------------------------------------------------------------------
                                                                                     Put
                                                     Equity          Equity         spread         Debt
                                                   securities        collars        collars     securities      Total
                                                   ----------        -------        -------     ----------     -------
                                                                           amounts in millions
<S>                                                 <C>               <C>             <C>         <C>           <C>
           Cost basis                               $ 19,310             --            --         1,457         20,767
           Gross gains recognized in earnings             84          1,800           263            --          2,147
           Gross losses recognized in earnings        (1,542)            --            --            --         (1,542)
           Gross unrealized holding gains              2,185             --            --            94          2,279
           Gross unrealized holding losses              (500)            --            --           (46)          (546)
                                                   ----------        -------        -------     ----------      -------
                 Fair value                         $ 19,537          1,800           263         1,505         23,105
                                                   ==========        =======        =======     ==========      ======
</TABLE>

<TABLE>
<CAPTION>
                                                                     December 31, 2000
                                                   -------------------------------------------------------------------
                                                                                     Put
                                                     Equity          Equity         spread         Debt
                                                   securities        collars        collars     securities      Total
                                                   ----------        -------        -------     ----------     -------
                                                                           amounts in millions
<S>                                                <C>               <C>            <C>         <C>            <C>
           Cost basis                              $ 17,640             --            --         1,533         19,173
           Gross gains recognized in earnings            --             --           188            --            188
           Gross unrealized holding gains             1,003          1,080            --            86          2,169
           Gross unrealized holding losses           (2,636)            --            --           (64)        (2,700)
                                                   ----------        -------        -------     ----------      -------
                                Fair value         $ 16,007          1,080           188         1,555         18,830
                                                   ==========        =======        =======     ==========      ======
</TABLE>

         Management estimates that the fair market value of all of its
         investments in available-for-sale securities and others aggregated
         $23,760 million and $19,664 million at December 31, 2001 and December
         31, 2000, respectively. Management calculates market values using a
         variety of approaches including multiple of cash flow, per subscriber
         value, a value of comparable public or private businesses or publicly
         quoted market prices. No independent appraisals were conducted for
         those assets.

           Forward Foreign Exchange Contracts

           The Company does not hedge the majority of its foreign currency
           exchange risk because of the long term nature of its interests in
           foreign affiliates. During 2001, the Company entered into a
           definitive agreement to acquire six regional cable television systems
           in Germany. A portion of the consideration for such acquisition was
           to be denominated in euros. In order to reduce its exposure to
           changes in the euro exchange rate, Liberty had entered into forward
           purchase contracts with respect to euro 3,243 million as of December
           31, 2001. Such contracts generally have terms ranging from 90 to 120
           days and can be renewed at their expiration at Liberty's option.
           Liberty is not accounting for the forward purchase contracts as
           hedges. At December 31, 2001, the Company had recorded a liability of
           $24 million representing unrealized losses related to these contracts
           due to a decrease in the value of the euro compared to the U.S.
           dollar.

           Total Return Debt Swaps

           From time to time the Company enters into total return debt swaps in
           connection with its purchase of its own or third-party public and
           private indebtedness. Under these arrangements, Liberty directs a
           counterparty to purchase a specified amount of the underlying debt
           security for the benefit of the Company. The Company posts collateral
           with the counterparty equal to 10% of the value of the purchased
           securities. The Company earns interest income based upon the face
           amount and stated interest rate of the debentures, and



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           pays interest expense at market rates on the amount funded by the
           counterparty. In the event the fair value of the underlying
           debentures declines, the Company is required to post cash collateral
           for the decline, and the Company records an unrealized loss on
           financial instruments. Liberty has the contractual right to net
           settle the total return debt swaps, and currently, intends to do so.
           Accordingly, Liberty records the net asset related to the total
           return debt swaps.

           At December 31, 2001, the aggregate purchase price of debt securities
           underlying Liberty's total return debt swap arrangements was $118
           million. As of such date, the Company had posted cash collateral
           equal to $59 million. In the event the fair value of the purchased
           debt securities were to fall to zero, the Company would be required
           to post additional cash collateral of $59 million.

(7)        Acquisitions and Dispositions

           2000

           Associated Group, Inc. ("Associated Group")

           On January 14, 2000, Liberty completed its acquisition of Associated
           Group pursuant to a merger agreement among AT&T, Liberty and
           Associated Group. Under the merger agreement, each share of
           Associated Group's Class A common stock and Class B common stock was
           converted into 0.49634 shares of AT&T common stock and 2.41422 shares
           of AT&T Class A Liberty Media Group common stock. Prior to the
           merger, Associated Group's primary assets were (1) 19.7 million
           shares of AT&T common stock, (2) 46.8 million shares of AT&T Class A
           Liberty Media Group common stock, (3) 10.6 million shares of AT&T
           Class B Liberty Media Group common stock, (4) 21.4 million shares of
           common stock of Teligent, and (5) all of the outstanding shares of
           common stock of TruePosition, Inc., which provides location services
           for wireless carriers and users designed to determine the location of
           any wireless transmitter, including cellular and PCS telephones.
           Immediately following the completion of the merger, all of the assets
           and businesses of Associated Group were transferred to Liberty. All
           of the shares of AT&T common stock, AT&T Class A Liberty Media Group
           common stock and AT&T Class B Liberty Media Group common stock
           previously held by Associated Group were retired by AT&T.

           The acquisition of Associated Group was accounted for as a purchase,
           and the $17 million excess of the fair value of the net assets
           acquired over the purchase price is being amortized over ten years.
           As a result of the issuance of AT&T Class A Liberty Media Group
           common stock, net of the shares of AT&T Class A Liberty Media Group
           common stock acquired in this transaction, Liberty recorded a $778
           million increase to additional paid-in-capital, which represents the
           total purchase price of this acquisition.

           Liberty Satellite & Technology, Inc.

           On March 16, 2000, Liberty purchased shares of preferred stock in TCI
           Satellite Entertainment, Inc. in exchange for Liberty's economic
           interest in approximately 5 million shares of Sprint PCS Group stock,
           which had a fair value of $300 million. During the third quarter of
           2000, TCI Satellite Entertainment, Inc. changed its name to Liberty
           Satellite & Technology, Inc. ("LSAT"). Liberty received 150,000
           shares of LSAT Series A 12% Cumulative Preferred Stock and 150,000
           shares of LSAT Series B 8% Cumulative Convertible Voting Preferred
           Stock. The Series A preferred stock does not have voting rights,
           while the Series B preferred stock gives Liberty approximately 85% of
           the voting power of LSAT. In connection with this transaction,
           Liberty realized a $211 million gain (before related tax expense of
           $84 million) based on the difference between the cost basis and fair
           value of the economic interest in the Sprint PCS Group stock
           exchanged.

           Ascent Entertainment Group, Inc. ("Ascent")

           On March 28, 2000, Liberty completed its cash tender offer for the
           outstanding common stock of Ascent at a price of $15.25 per share.
           Approximately 85% of the outstanding shares of common


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           stock of Ascent were tendered in the offer and Liberty paid
           approximately $385 million. On June 8, 2000, Liberty completed its
           acquisition of 100% of Ascent for an additional $67 million. The
           total purchase price for the acquisition was $452 million. Such
           transaction was accounted for as a purchase, and the $228 million
           excess of the purchase price over the fair value of the net assets
           acquired is being amortized over five years.

           Liberty Livewire Corporation ("Liberty Livewire")

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

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

           Immediately following the closing of such transaction, Liberty
           contributed to Todd-AO 100% of the capital stock of Four Media, in
           exchange for approximately 16.6 million shares of the Class B Common
           Stock of Todd-AO increasing Liberty's ownership interest in Todd-AO
           to approximately 84% of the equity and approximately 98% of the
           voting power. Following Liberty's acquisition of Todd-AO, and the
           contribution by Liberty to Todd-AO of Liberty's ownership in Four
           Media, Todd-AO changed its name to Liberty Livewire.

           On July 19, 2000, Liberty purchased all of the assets relating to the
           post production, content and sound editorial businesses of SounDelux
           Entertainment Group for $90 million in cash, and contributed such
           assets to Liberty Livewire in exchange for approximately 8.2 million
           additional shares of Liberty Livewire Class B Common Stock. Following
           this contribution, Liberty's ownership in Liberty Livewire increased
           to approximately 88% of the equity and approximately 99% of the
           voting power of Liberty Livewire.

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

           1999

           TV Guide

           On March 1, 1999, United Video Satellite Group, Inc. ("UVSG"), a
           consolidated subsidiary of Liberty, and News Corp. completed a
           transaction whereby UVSG acquired News Corp.'s TV Guide properties
           and UVSG was renamed TV Guide. Upon completion of this transaction,
           and another transaction completed by TV Guide on the same date,
           Liberty owned an economic interest of approximately 44% and
           controlled approximately 49% of the voting power of TV Guide. In
           connection with the increase in TV Guide's equity, net of dilution of
           Liberty's ownership interest in TV Guide, Liberty recognized a gain
           of $372 million (before deducting deferred income taxes of $147
           million). Upon consummation, Liberty began accounting for its
           interest in TV Guide under the equity method of accounting.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Pro Forma Information

           The following unaudited pro forma information for the year ended
           December 31, 2000 was prepared assuming the 2000 acquisitions
           discussed above occurred on January 1, 2000. These pro forma amounts
           are not necessarily indicative of operating results that would have
           occurred if the acquisitions discussed above had occurred on January
           1, 2000.

<TABLE>
<S>                                                       <C>
                      Revenue                             $   1,769
                      Net earnings                        $   1,413
                      Pro forma basic and diluted
                       earnings per common share          $   0.55
</TABLE>

(8)        Long-Term Debt

           Debt is summarized as follows:


<TABLE>
<CAPTION>
                                                               Weighted
                                                               average
                                                               interest        December 31,
                                                                 rate      -------------------
                                                                 2001       2001           2000
                                                                 ----       ----           ----
                                                                      amounts in millions
<S>                                                              <C>     <C>             <C>
           Parent company debt:
                      Senior notes                               7.8%    $   982           742
                      Senior debentures                          8.3%      1,486         1,486
                      Senior exchangeable debentures             3.7%        858         1,679
                      Bank credit facilities                     2.6%        675           475
                      Other debt                                 8.0%        288           580
                                                                         -------         -----
                                                                           4,289         4,962
                      Debt of subsidiaries:
                      Bank credit facilities                     4.3%      1,310         1,129
                      Senior notes                               N/A          --           179
                      Other debt, at varying rates                           308            93
                                                                         -------         -----
                                                                           1,618         1,401
                                                                         -------         -----
                      Total debt                                           5,907         6,363
           Less current maturities                               4.5%     (1,143)       (1,094)
                                                                         -------         -----
                      Total long-term debt                               $ 4,764         5,269
                                                                         =======         =====
</TABLE>

           Senior Notes and Debentures

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

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

           In December 2001, the Company issued $237.8 million of 7-3/4% Senior
           Notes due 2009 for cash proceeds of $238.4 million. Interest on these
           notes is payable on January 15 and July 15 of each year.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           The senior notes and debentures are stated net of an aggregate
           unamortized discount of $19 million and $22 million at December 31,
           2001 and 2000, respectively, which is being amortized to interest
           expense in the consolidated statements of operations.

           Senior Exchangeable Debentures

           In November 1999, Liberty issued $869 million of 4% Senior
           Exchangeable Debentures due 2029. Interest is payable on May 15 and
           November 15 of each year. Each $1,000 debenture is exchangeable at
           the holder's option for the value of 22.9486 shares of Sprint PCS
           Group stock. After the later of December 31, 2001 or the date
           Liberty's ownership level in the Sprint PCS Group falls below a
           specified level, Liberty may, at its election, pay the exchange value
           in cash, Sprint PCS Group stock or a combination thereof. Prior to
           such time, the exchange value must be paid in cash.

           In February and March 2000, Liberty issued an aggregate of $810
           million of 3-3/4% Senior Exchangeable Debentures due 2030. Interest
           is payable on February 15 and August 15 of each year. Each $1,000
           debenture is exchangeable at the holder's option for the value of
           16.7764 shares of Sprint PCS Group stock. After the later of February
           15, 2002 or the date Liberty's ownership level in the Sprint PCS
           Group falls below a specified level, Liberty may, at its election,
           pay the exchange value in cash, Sprint PCS Group stock or a
           combination thereof. Prior to such time, the exchange value must be
           paid in cash.

         In January 2001, Liberty issued $600 million of 3-1/2% Senior
         Exchangeable Debentures due 2031. Interest is payable on January 15 and
         July 15 of each year. Each $1,000 debenture is exchangeable at the
         holder's option for the value of 36.8189 shares of Motorola common
         stock. Such exchange value is payable, at Liberty's option, in cash,
         Motorola stock or a combination thereof. On or after January 15, 2006,
         Liberty, at its option, may redeem the debentures for cash.

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

         Prior to the adoption of Statement 133, the carrying amount of the
         senior exchangeable debentures was adjusted based on the fair value of
         the underlying security. Increases or decreases in the value of the
         underlying security above the principal amount of the senior
         exchangeable debentures were recorded as unrealized gains or losses on
         financial instruments in the consolidated statements of operations. If
         the value of the underlying security decreased below the principal
         amount of the senior exchangeable debentures there was no effect on the
         principal amount of the debentures.

             Upon adoption of Statement 133, the call option feature of the
             exchangeable debentures is reported separately in the consolidated
             balance sheet at fair value. Accordingly, at January 1, 2001,
             Liberty recorded a transition adjustment to reflect the call option
             obligations at fair value ($459 million) and to recognize in net
             earnings the difference between the fair value of the call option
             obligations at issuance and the fair value of the call option
             obligations at January 1, 2001. Such adjustment to net earnings
             aggregated $757 million (before tax expense of $299 million) and is
             included in cumulative effect of accounting change. Changes in the
             fair value of the call option obligations subsequent to January 1,
             2001 are recognized as unrealized gains (losses) on financial
             instruments in Liberty's consolidated statements of operations.
             During the year ended December 31, 2001, Liberty recorded
             unrealized gains of $167 million related to the call option
             obligations.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

             Under Statement 133, the reported amount of the long-term debt
             portion of the exchangeable debentures is calculated as the
             difference between the face amount of the debentures and the fair
             value of the call option feature on the date of issuance. The fair
             value of the call option obligations related to the $1,418 million
             of exchangeable debentures issued during the year ended December
             31, 2001, aggregated $1,028 million on the date of issuance.
             Accordingly, the long-term debt portion was recorded at $390
             million. The long-term debt is accreted to its face amount over the
             term of the debenture using the effective interest method. Such
             accretion aggregated $6 million during the year ended December 31,
             2001, and is included in interest expense. The transition
             adjustment noted above resulted in a decrease in the carrying value
             of the long-term debt portion of the senior exchangeable debentures
             of $1,216 million on January 1, 2001.

           Bank Credit Facilities

           At December 31, 2001, Liberty and its subsidiaries had approximately
           $217 million in unused lines of credit under their respective bank
           credit facilities. The bank credit facilities generally contain
           restrictive covenants which require, among other things, the
           maintenance of certain financial ratios, and include limitations on
           indebtedness, liens, encumbrances, acquisitions, dispositions,
           guarantees and dividends. The borrowers were in compliance with their
           debt covenants at December 31, 2001. Additionally, the bank credit
           facilities require the payment of fees ranging from .15% to .375% per
           annum on the average unborrowed portions of the total commitments.

           The U.S. dollar equivalent of the annual maturities of Liberty's debt
           for each of the next five years are as follows (amounts in millions):

<TABLE>
<S>                                                  <C>
                       2002                          $ 1,143
                       2003                              211
                       2004                              121
                       2005                              435
                       2006                              589
</TABLE>

           Liberty estimates the fair value of its debt based on the quoted
           market prices for the same or similar issues or on the current rate
           offered to Liberty for debt of the same remaining maturities. The
           fair value of Liberty's publicly traded debt at December 31, 2001 is
           as follows (amounts in millions):

<TABLE>
<S>                                                                             <C>
                       Senior notes of parent company                           $1,024
                       Senior debentures of parent company                       1,438
                       Senior exchangeable debentures of parent
                        company, including call option liability                 2,323
</TABLE>

           Liberty believes that the carrying amount of the remainder of its
           debt, which is comprised primarily of variable rate debt,
           approximated its fair value at December 31, 2001.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           A reconciliation of the carrying value of the Company's debt to the
           face amount at maturity is as follows (amounts in millions):

<TABLE>
<S>                                                                                          <C>
                   Carrying value at December 31, 2001                                       $    5,907
                   Add:
                              Unamortized issue discount on Senior Notes and Debentures              19
                              Unamortized discount attributable to call
                               option feature of exchangeable debentures                          2,238
                                                                                             ----------
                               Face amount at maturity                                       $    8,164
                                                                                             ==========
</TABLE>

(9)        Income Taxes

           During the period from March 9, 1999 to August 10, 2001, Liberty was
           included in the consolidated federal income tax return of AT&T and
           was a party to a tax sharing agreement with AT&T (the "AT&T Tax
           Sharing Agreement"). Liberty calculated its respective tax liability
           on a separate return basis. The income tax provision for Liberty was
           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 were attributable
           to Liberty.

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

           In periods when Liberty generated federal taxable income, AT&T agreed
           to satisfy such tax liability on Liberty's behalf up to a certain
           amount. Thereafter, Liberty was required to make cash payments to
           AT&T for federal tax liabilities of Liberty. The reduction of such
           computed tax liabilities was accounted for by Liberty as an increase
           to additional paid-in-capital.

           To the extent AT&T utilized existing net operating losses of Liberty,
           such amounts were accounted for by Liberty as a reduction of
           additional paid-in-capital. Net operating losses of Liberty with a
           tax effected carrying value of $2 million, $38 million and $88
           million were recorded as a reduction to additional paid-in-capital
           during the seven months ended July 31, 2001, the year ended December
           31, 2000 and the ten months ended December 31, 1999, respectively.

           Liberty generally made cash payments to AT&T related to states where
           it generated taxable income and received cash payments from AT&T in
           states where it generates taxable losses.

           Prior to the AT&T Merger, Liberty was included in TCI's consolidated
           tax return and was a party to the TCI tax sharing agreements.




<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Income tax benefit (expense) consists of:

<TABLE>
<CAPTION>
                                                                            New Liberty                            Old Liberty
                                                               ----------------------------------------------     -------------
                                                                   Year             Year          Ten months        Two months
                                                                  ended            ended            ended             ended
                                                               December 31,      December 31,     December 31,      February 28,
                                                                  2001             2000              1999             1999
                                                               ------------      ------------     ------------      ------------
                                                                                    amounts in millions
<S>                                                            <C>              <C>              <C>               <C>
            Current:
              Federal                                          $  297                277             75                   1
              State and local                                      (2)                10             (3)                 --
                                                               ------------      ------------     ------------      ------------
                                                                  295                287             72                   1
                                                               ------------      ------------     ------------      ------------

            Deferred:
              Federal                                           3,166              (1,490)           873               (168)
              State and local                                     447                (331)           152                (44)
                                                               ------------      ------------     ------------      ------------
                                                                3,613              (1,821)         1,025               (212)
                                                               ------------      ------------     ------------      ------------

            Income tax benefit (expense)                       $3,908              (1,534)         1,097               (211)
                                                               ============      ============     ============      ============
</TABLE>

           Income tax benefit (expense) differs from the amounts computed by
           applying the U.S. federal income tax rate of 35% as a result of the
           following:

<TABLE>
<CAPTION>
                                                                            New Liberty                            Old Liberty
                                                               ----------------------------------------------     -------------
                                                                   Year             Year          Ten months        Two months
                                                                  ended            ended            ended             ended
                                                               December 31,      December 31,     December 31,      February 28,
                                                                  2001             2000              1999             1999
                                                               ------------      ------------     ------------      ------------
                                                                                    amounts in millions
<S>                                                            <C>              <C>              <C>               <C>
             Computed expected tax benefit (expense)               $ 3,809           (1,035)           1,107              (49)
             Dividends excluded for income tax purposes                 18               22               11                2
             Amortization not deductible for income
              tax purposes                                            (260)            (187)            (122)              (4)
             State and local income taxes, net of federal
              income taxes                                             289             (204)             102              (29)
             Recognition of difference in income tax basis of
              investments in subsidiaries                               21              (69)              --             (130)
             Effect of change in estimated state tax rate               91               --               --               --
             Change in valuation allowance                             (71)             (50)              --               --
             Other, net                                                 11              (11)              (1)              (1)
                                                               ------------      ------------     ------------      ------------
                                                                   $ 3,908           (1,534)           1,097             (211)
                                                               ============      ============     ============      ============
</TABLE>




<PAGE>



                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           The tax effects of temporary differences that give rise to
           significant portions of the deferred tax assets and deferred tax
           liabilities at December 31, 2001 and 2000 are presented below:

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                          -------------------
                                                                          2001           2000
                                                                        -------        ------
                                                                          amounts in millions
<S>                                                                     <C>            <C>
           Deferred tax assets:
                      Net operating and capital loss carryforwards      $   370           363
                      Accrued stock compensation                            296           247
                      Other future deductible amounts                        31            --
                                                                        -------        ------
                      Deferred tax assets                                   697           610
                        Valuation allowance                                (273)         (202)
                                                                        -------        ------
                      Net deferred tax assets                               424           408
                                                                        -------        ------
           Deferred tax liabilities:
                      Investments                                         8,422        11,255
                      Intangible assets                                     164           218
                      Discount on exchangeable debentures                   455            --
                      Other                                                  49            30
                                                                        -------        ------
                      Deferred tax liabilities                            9,090        11,503
                                                                        -------        ------

           Net deferred tax liabilities                                 $ 8,666        11,095
                                                                        =======        ======
</TABLE>


           At December 31, 2001, Liberty had net operating and capital loss
           carryforwards for income tax purposes aggregating approximately
           $1,016 million which, if not utilized to reduce taxable income in
           future periods, will expire as follows: 2004: $1 million; 2005: $16
           million; 2006: $14 million; 2007: $16 million; 2008: $12 million;
           2009: $27 million; 2010: $6 million; and beyond 2010: $924 million.
           These net operating losses are subject to certain rules limiting
           their usage.

           AT&T, as the successor to TCI, is the subject of an Internal Revenue
           Service ("IRS") audit for the 1993-1995 tax years. The IRS has
           notified AT&T and Liberty that it is considering proposing income
           adjustments and assessing certain penalties in connection with TCI's
           1994 tax return. The IRS's position could result in recognition of up
           to approximately $305 million of additional income, resulting in as
           much as $107 million of additional tax liability, plus interest. In
           addition, the IRS may assert certain penalties. AT&T and Liberty do
           not agree with the IRS's proposed adjustments and penalties, and AT&T
           and Liberty intend to vigorously defend their position. Pursuant to
           the AT&T Tax Sharing Agreement, Liberty may be obligated to reimburse
           AT&T for any tax that AT&T is ultimately assessed as a result of this
           audit. Liberty is currently unable to estimate a range of any such
           reimbursement, but believes that any such reimbursement would not be
           material to its financial position.

(10)       Stockholder's Equity

           Preferred Stock

           The Preferred Stock is issuable, from time to time, with such
           designations, preferences and relative participating, option or other
           special rights, qualifications, limitations or restrictions thereof,
           as shall be stated and expressed in a resolution or resolutions
           providing for the issue of such Preferred Stock adopted by the Board.
           As of December 31, 2001, no shares of preferred stock were issued.

           Common Stock

           Prior to the Split Off Transaction, Liberty had 1,000 shares of each
           of Class A, Class B and Class C common stock outstanding. In
           connection with the Split Off Transaction, the Class A and Class B
           common stock were reclassified into Series A common stock and the
           Class C common



<PAGE>



                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued


           stock was reclassified into Series B common stock. The Series A
           common stock has one vote per share, and the Series B common stock
           has ten votes per share. Each share of the Series B common stock is
           exchangeable at the option of the holder for one share of Series A
           common stock.

           As of December 31, 2001, there were 75 million shares of Liberty
           Series A common stock reserved for issuance under exercise privileges
           of outstanding stock options.

           Stock Issuances of Subsidiaries and Equity Affiliates

           Certain consolidated subsidiaries and equity affiliates of Liberty
           have issued shares of common stock in connection with acquisitions
           and the exercise of employee stock options. In connection with the
           increase in the issuers' equity, net of the dilution of Liberty's
           ownership interest, that resulted from such stock issuances, Liberty
           recorded increases (decreases) to additional paid-in-capital as
           follows:

<TABLE>
<CAPTION>
                                                                                      Ten months
                                                     Year ended      Year ended         ended
                                                     December 31,    December 31,     December 31,
                                                        2001            2000            1999
                                                     ------------    ------------     ------------
                                                                 amounts in millions
<S>                                                  <C>             <C>              <C>
           Stock issuances by consolidated
             subsidiaries                                $  (8)           212           107
           Stock issuances by equity affiliates
             (net of deferred income taxes of $75
             million and $1 million, respectively)          --            143             1
                                                     ------------    ------------     ------------
                                                         $  (8)           355           108
                                                     ============    ============     ============
</TABLE>

           Transactions with Officers and Directors

           During the second quarter of 2001, Liberty purchased 2,245,155 shares
           of common stock of On Command Corporation ("On Command"), a
           consolidated subsidiary of Liberty, from an executive officer and
           director of On Command, who is also a director of Liberty, for
           aggregate cash consideration of $25.2 million. Such purchase price
           represents a per share price of $11.22. The closing market price for
           On Command common stock on the day the transaction was signed was
           $7.77. The Company has included the difference between the aggregate
           market value of the shares purchased and the cash consideration paid
           in selling, general and administrative expenses in the accompanying
           consolidated statement of operations.

           In November 2000, Liberty granted certain officers, a director of
           Liberty (the "Liberty Director"), and a board member of Liberty
           Livewire an aggregate 4.0725% common stock interest in Liberty LWR,
           Inc. ("LWR"), which owned a direct interest in Liberty Livewire. The
           common stock interest granted to these individuals had a value of
           approximately $400,000. LWR also awarded the Liberty Director a
           deferred bonus in the initial total amount of approximately $3.4
           million, which amount will decrease by an amount equal to any
           increase over the five-year period from the date of the award in the
           value of certain of the common shares granted to the Liberty
           Director. Liberty and the individuals entered into a stockholders'
           agreement in which the individuals could require Liberty to
           repurchase, after five years, all or part of their common stock
           interest in exchange for Series A Liberty stock at its then fair
           market value. In addition, Liberty has the right to repurchase, in
           exchange for Series A Liberty common stock, the common stock
           interests held by the individuals at fair market value at any time.

           In July 2001, LWR formed Liberty Livewire Holdings, Inc. ("Livewire
           Holdings") as a wholly owned subsidiary. LWR then sold to certain
           officers and the Liberty Director an aggregate 19.872% common stock
           interest in Livewire Holdings with an aggregate value of $600.
           Liberty, LWR and



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           these individuals entered into a stockholders agreement pursuant to
           which the individuals can require Liberty to purchase, after five
           years, all or part of their common stock interest in Livewire
           Holdings, in exchange for Liberty common stock, at its then-fair
           market value. In addition, Liberty has the right to purchase, in
           exchange for its common stock, their common stock interests in
           Livewire Holdings for fair market value at any time.

           In August 2001, in connection with the termination of Liberty
           Livewire's director and chief executive officer, LWR purchased his
           common stock interest in LWR. In October 2001, LWR purchased from the
           Liberty officers and the Liberty Director their respective common
           stock interests in LWR. In connection with the purchase of his common
           stock interest in LWR, the Liberty Director waived the right to
           receive his deferred bonus. Upon the completion of these purchases,
           LWR became a wholly owned subsidiary of the Company.

           In October 2000, Liberty restructured its ownership interests in
           certain assets into a new consolidated subsidiary. Liberty then sold
           a preferred interest in such subsidiary to Liberty's Chairman of the
           Board of Directors in exchange for approximately 540,000 shares of
           LSAT Series A common stock, approximately 3.3 million shares of LSAT
           Series B common stock and cash consideration of approximately $88
           million. No gain or loss was recognized due to the related party
           nature of such transaction. The preferred interest has a liquidation
           value of $106 million and accrues dividends at 9% per annum payable
           quarterly in cash.

           In September 2000, certain officers of Liberty purchased a 6% common
           stock interest in a subsidiary for $1.3 million. Such subsidiary owns
           an indirect interest in an entity that holds certain of Liberty's
           investments in satellite and technology related assets. Liberty and
           the officers entered into a shareholders agreement in which the
           officers could require Liberty to purchase, after five years, all or
           part of their common stock interest in exchange for Series A Liberty
           stock at the then fair market value. In addition, Liberty has the
           right to purchase, in exchange for Series A Liberty common stock, the
           common stock interests held by the officers at fair market value at
           any time. During 2001, two of the officers resigned their positions
           with the Company, and the Company purchased their respective
           interests in the subsidiary for the original purchase price plus 6%
           interest.

           In August 2000, a subsidiary of Liberty sold shares of such
           subsidiary's Series A Convertible Participating Preferred Stock (the
           "Preferred Shares") to a director of Liberty, who was also the
           Chairman and Chief Executive Officer of such subsidiary, for a $21
           million note. The Preferred Shares are convertible into 1.4 million
           shares of the subsidiary's common stock. The note is secured by the
           Preferred Shares or the proceeds from the sale of such shares and the
           director's personal obligations under such loan are limited. The
           note, which matures on August 1, 2005, may not be prepaid and
           interest on the note accrues at a rate of 7% per annum.

           In May 2000, Liberty's President and Chief Executive Officer, certain
           officers of a subsidiary and another individual purchased an
           aggregate 20% common stock interest in a subsidiary for $800,000.
           This subsidiary owns a 7% interest in Jupiter Telecommunications Co.,
           Inc. Liberty and the individuals entered into a shareholders
           agreement in which the individuals could require Liberty to purchase,
           after five years, all or part of their common stock interest in
           exchange for Series A Liberty common stock at its then fair market
           value. In addition, Liberty has the right to purchase, in exchange
           for Series A Liberty common stock, the common stock interests held by
           the officers at fair market value at any time. Liberty recognized $ 4
           million and $3 million of compensation expense related to changes in
           the market value of its contingent liability to reacquire the common
           stock interests held by these officers during the years ended
           December 31, 2001 and 2000, respectively.

           In connection with the AT&T Merger, Liberty paid two of its directors
           and one other individual, all three of whom were 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 consolidated statements of operations.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Liberty is party to a call agreement with certain shareholders of
           Series B Liberty common stock, including the Chairman of the Board of
           Directors, which grants Liberty a right to acquire all of the Series
           B Liberty common stock held by such shareholders in certain
           circumstances. The price of acquiring such shares is generally
           limited to the market price of the Series A Liberty common stock,
           plus a 10% premium.

           Transactions with AT&T and Other Related Parties

           Certain subsidiaries of Liberty produce and/or distribute programming
           and other services to cable distribution operators (including AT&T)
           and others pursuant to long term affiliation agreements. Charges to
           AT&T are based upon customary rates charged to others. Amounts
           included in revenue for services provided to AT&T were $210 million,
           $243 million, $180 million and $43 million for the seven months ended
           July 31, 2001, the year ended December 31, 2000, the ten months ended
           December 31, 1999 and the two months ended February 28, 1999,
           respectively.

           Prior to the Split Off Transaction, AT&T allocated certain corporate
           general and administrative costs to Liberty pursuant to an intergroup
           agreement. Management believes such allocation methods were
           reasonable and materially approximated the amount that Liberty would
           have incurred on a stand-alone basis. In addition, there are
           arrangements between subsidiaries of Liberty and AT&T and its other
           subsidiaries for satellite transponder services, marketing support,
           programming, and hosting services. These expenses aggregated $20
           million, $37 million, $24 million and $6 million during the seven
           months ended July 31, 2001 (the period immediately prior to the Split
           Off Transaction), the year ended December 31, 2000, the ten months
           ended December 31, 1999 and the two months ended February 28, 1999,
           respectively.

           On April 8, 1999, Liberty redeemed all of its outstanding 4-1/2%
           convertible subordinated debentures. The debentures were convertible
           into shares of AT&T Liberty Media Group Class A common stock at a
           conversion price of $11.77, or 84.96 shares per $1,000 principal
           amount. Certain holders of the debentures had exercised their rights
           to convert their debentures and 29.2 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 recorded an increase to additional paid-in-capital of $354
           million.

(11)       Stock Options and Stock Appreciation Rights

           Liberty

           Effective with the Split Off Transaction, Liberty assumed from AT&T
           the Amended and Restated AT&T Corp. Liberty Media Group 2000
           Incentive Plan and renamed it the Liberty Media Corporation 2000
           Incentive Plan (the "Liberty Incentive Plan"). Grants by TCI of
           options and options with tandem stock appreciation rights ("SARs")
           with respect to shares of Liberty Media Group stock prior to 1999
           were assumed by Liberty under the Liberty Incentive Plan. Grants of
           free standing SARs made under the Plan in 2000 and in 2001 prior to
           the Split Off Transaction were converted into options upon assumption
           by Liberty.

           The Liberty Incentive Plan provides for awards to be made in respect
           of a maximum of 160 million shares of common stock of Liberty. Awards
           may be made as grants of stock options, SARs, restricted shares,
           stock units, cash or any combination thereof.

           Effective February 28, 2001 (the "Effective Date"), the Company
           restructured the options and options with tandem SARs to purchase
           AT&T common stock and AT&T Liberty Media Group tracking stock
           (collectively the "Restructured Options") held by certain executive
           officers of the Company. Pursuant to such restructuring, all
           Restructured Options became exercisable on the Effective Date, and
           each executive officer was given the choice to exercise all of his
           Restructured



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           Options. Each executive officer who opted to exercise his
           Restructured Options received consideration equal to the excess of
           the closing price of the subject securities on the Effective Date
           over the exercise price. The exercising officers received (i) a
           combination of cash and AT&T Liberty Media Group tracking stock for
           Restructured Options that were vested prior to the Effective Date and
           (ii) cash for Restructured Options that were previously unvested. The
           executive officers used the cash proceeds from the previously
           unvested options to purchase restricted shares of AT&T Liberty Media
           Group tracking stock. Such restricted shares are subject to
           forfeiture upon termination of employment. The forfeiture obligation
           will lapse according to a schedule that corresponds to the vesting
           schedule applicable to the previously unvested options.

           In addition, each executive officer was granted free-standing SARs
           equal to the total number of Restructured Options exercised. The
           free-standing SARs were tied to the value of AT&T Liberty Media Group
           tracking stock and will vest as to 30% in year one and 17.5% in years
           two through five. The free-standing SARs have an exercise price of
           $14.70 and had a fair value of $9.56 on the date of the grant. Upon
           completion of the Split Off Transaction, the free-standing SARs
           automatically converted to options to purchase Liberty Series A
           common stock. Prior to the Effective Date, the Restructured Options
           were accounted for using variable plan accounting pursuant to APB
           Opinion No. 25. Accordingly, the above-described transaction did not
           have a significant impact on Liberty's results of operations.

           The following table presents the number and weighted average exercise
           price ( "WAEP ") of certain options and options with tandem SARs to
           purchase Liberty Series A common stock granted to certain officers
           and other key employees of the Company.

<TABLE>
<CAPTION>
                                                                       Liberty
                                                                       Series A
                                                                       common
                                                                       stock       WAEP
                                                                       -----       ----
                                                                       amounts in thousands,
                                                                        except for WAEP


<S>                                                                    <C>       <C>
           Outstanding at January 1, 1999                              78,158    $ 23.19
                      Granted                                           1,244      18.43
                      Exercised                                        (7,510)      5.02
                      Adjustment for transfer of employees             (1,158)      6.70
                                                                       ------
           Outstanding at December 31, 1999                            70,734       6.97
                      Granted                                           2,341      21.73
                      Exercised                                        (7,214)      5.69
                      Canceled                                           (479)      9.45
                      Options issued in mergers                        12,134       4.75
                                                                       ------
           Outstanding at December 31, 2000                            77,516       7.20
                      Granted                                          49,087      14.72
                      Exercised                                       (50,315)      7.62
                      Canceled                                         (1,167)     16.88
                                                                       ------
           Outstanding at December 31, 2001                            75,121      11.69
                                                                       ======

           Exercisable at December 31, 1999                            14,341
                                                                       ======
           Exercisable at December 31, 2000                            52,856
                                                                       ======
           Exercisable at December 31, 2001                            23,494
                                                                       ======

           Vesting period                                              5 yrs
</TABLE>



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           The following table provides certain information about the Company's
           outstanding options at December 31, 2001.



<TABLE>
<CAPTION>
                       No. of                                             Weighted          No. of        WAEP
                     outstanding       Range of            WAEP of         average       exercisable       of
                      options         exercise           outstanding      remaining        options     exercisable
                      (000's)          prices              options          life           (000's)       options
                     -----------   ----------------      ----------        -------       -----------   ------------
<S>                  <C>           <C>                   <C>               <C>           <C>           <C>
                     17,566        $ 1.08 - $ 5.00        $  2.04           4.0 yrs         17,534       $  2.04
                      1,180        $ 6.30 - $ 9.95        $  7.05           5.1 yrs          1,043       $  7.00
                     53,336        $ 10.81 -$ 14.75       $ 14.47           8.9 yrs          4,126       $  12.25
                      3,039        $ 16.35 -$ 28.40       $ 20.59           8.6 yrs            791       $  20.11
                     ------                                                                ------
                     75,121                                                                23,494
                     ======                                                                ======
</TABLE>

         As permitted by Statement 123, the Company accounts for stock-based
         compensation pursuant to the intrinsic value method prescribed by APB
         Opinion No. 25 and its interpretations. In accordance with APB Opinion
         No. 25, Liberty accounts for stock options with tandem SARs granted to
         its employees as variable plan awards. Liabilities and the related
         compensation expense under these awards are subject to future
         adjustment based upon vesting provisions and the market value of the
         underlying security and, ultimately, on the final determination of
         market value when the rights are exercised. The Company accounts for
         stand-alone options as fixed plan awards, and accordingly, no
         compensation is recognized for these awards. If the Company had
         determined compensation expense based upon the grant-date fair value
         method pursuant to Statement 123, the Company's 2001 net loss and pro
         forma net loss per common share would have been $6,335 million and
         $2.45, respectively. The Company's net earnings (loss) and pro forma
         net earnings (loss) per share for 2000 and 1999 would not have been
         significantly different from what has been reflected in the
         accompanying consolidated financial statements as substantially all of
         Liberty's stock option awards had tandem SARs in 2000 and 1999.

           In addition to the SARs issued in the aforementioned option
           restructuring, during 2001 and pursuant to the Liberty Incentive
           Plan, Liberty awarded 2,104,000 options to purchase Liberty Series A
           common stock to certain officers and key employees of the Company.
           Such options have exercise prices ranging from $12.40 to $16.35, vest
           as to 25% in each of years 2 through 5 after the date of grant, and
           had a weighted-average grant date fair value of $9.40.

           The estimated fair values of the options noted above are based on the
           Black-Scholes model and are stated in current annualized dollars on a
           present value basis. The key assumptions used in the model for
           purposes of these calculations generally include the following: (a) a
           discount rate equal to the 10-year Treasury rate on the date of
           grant; (b) a 45% volatility factor, (c) the 10-year option term; (d)
           the closing price of the respective common stock on the date of
           grant; and (e) an expected dividend rate of zero.

           Liberty Digital, Inc.

           Deferred Compensation and Stock Option Plan. On September 8, 1999,
           Liberty Digital adopted the Deferred Compensation and Stock
           Appreciation Rights Plan for key executives. This plan is comprised
           of a deferred compensation component and SARs grants. The deferred
           compensation component provides participants with the right to
           receive an aggregate of nine and one half percent of the appreciation
           in the Liberty Digital Series A common stock market price over $2.46
           subject to a maximum amount of $19.125. The SARs provide participants
           with the appreciation in the market price of the Liberty Digital
           Series A common stock above the maximum amount payable under the
           deferred compensation component. Obligations to the executives under
           both the deferred compensation and SAR elements of this plan are
           accounted for as variable award plans.




<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           There are 19,295,193 shares subject to this plan all of which were
           granted in 1999 at an effective exercise price of $2.46 and a
           weighted average remaining life of 3 years at year end. The deferred
           compensation and SARs components vest 20% annually beginning with the
           first vesting date of December 15, 1999. Fully vested unexercised
           SARs total 3,046,188 at year-end. During the year ended December 31,
           1999, there were no exercises, cancellations or expirations. During
           2000 there were 3,859,038 options exercised, and 3,251,401 options
           cancelled. This plan terminates on December 15, 2003.

           Subsequent to December 31, 2001, Liberty effected a short form merger
           with Liberty Digital whereby Liberty Digital shareholders received
           0.25 shares of Liberty Series A common stock for each share of
           Liberty Digital Series A common stock held. Subsequent to this merger
           Liberty owns 100% of Liberty Digital. In connection with this merger,
           all outstanding Liberty Digital SARs were converted to Liberty SARs
           at the rate of 0.25 for 1. In addition, all amounts accrued under the
           deferred compensation plan were paid, and the deferred compensation
           plan was terminated.

           During the first quarter of 2000, an executive officer of Liberty
           Digital elected to exercise certain of his SARs that had been granted
           by Liberty Digital. In order to satisfy Liberty Digital's obligations
           under the stock option agreement, LDIG and Liberty offered to issue,
           and the executive agreed to accept, a combination of cash and AT&T
           Liberty Media Group tracking stock in lieu of a cash payment.
           Accordingly, Liberty paid cash of $50 million and issued 5.8 million
           shares to the executive officer in the first quarter of 2001.

           STARZ ENCORE GROUP

           Starz Encore Group Phantom Stock Appreciation Rights Plan. During
           2000 and 1999 Starz Encore Group granted Phantom Stock Appreciation
           Rights (PSARS) to certain of its officers under this plan. PSARS
           granted under the plan generally vest over a five year period.
           Compensation under the PSARS is computed based upon a formula derived
           from the appraised fair value of the net assets of Starz Encore
           Group. All amounts earned under the plan are payable in cash.

           OTHER

         Certain of the Company's subsidiaries have stock based compensation
         plans under which employees and non-employees are granted options or
         similar stock based awards. Awards made under these plans vest and
         become exercisable over various terms. The awards and compensation
         recorded, if any, under these plans is not significant to Liberty.

(12)       Employee Benefit Plans

           Liberty is the sponsor of the Liberty Media 401(k) Savings Plan (the
           "Liberty 401(k) Plan"), which provides employees an opportunity for
           ownership in the Company and creates a retirement fund. The Liberty
           401(k) Plan provides for employees to contribute up to 10% of their
           compensation to a trust for investment in Liberty common stock, as
           well as several mutual funds. The Company, by annual resolution of
           the Board, generally contributes up to 100% of the amount contributed
           by employees. Certain of the Company's subsidiaries have their own
           employee benefit plans. Contributions to all plans aggregated $10
           million, $7 million, $3 million and $1 million for the years ended
           December 31, 2001 and 2000, the ten months ended December 31, 1999
           and the two months ended February 28, 1999, respectively.

(13)       Other Comprehensive Earnings

           Accumulated other comprehensive earnings included in Liberty's
           consolidated balance sheets and consolidated statements of
           stockholder's equity reflect the aggregate of foreign currency


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued


           translation adjustments and unrealized holding gains and losses on
           securities classified as available-for-sale. The change in the
           components of accumulated other comprehensive earnings, net of taxes,
           is summarized as follows:

<TABLE>
<CAPTION>
                                                                                           Accumulated
                                                           Foreign                           other
                                                          currency      Unrealized       comprehensive
                                                         translation    gains on       earnings (loss), net
                                                         adjustments    securities        of taxes
                                                         -----------    ----------     --------------------
                                                                       amounts in millions
<S>                                                     <C>             <C>            <C>
           Balance at January 1, 1999                   $    5            3,181            3,186
           Other comprehensive earnings (loss)             (15)             885              870
                                                        ------            -----            -----
           Balance at February 28, 1999                 $  (10)           4,066            4,056
                                                        ======            =====            =====
           -------------------------------------------------------------------------------------------------

           Balance at March 1, 1999                     $   --               --               --
           Other comprehensive earnings                     60            6,495            6,555
                                                        ------            -----            -----
           Balance at December 31, 1999                     60            6,495            6,555

           Other comprehensive loss                       (202)          (6,750)          (6,952)
                                                        ------            -----            -----
           Balance at December 31, 2000                   (142)            (255)            (397)

           Other comprehensive loss                       (359)           1,596            1,237
           Balance at December 31, 2001                 $ (501)           1,341              840
                                                        ======            =====            =====
</TABLE>




<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued


           The components of other comprehensive earnings are reflected in
           Liberty's consolidated statements of comprehensive earnings, net of
           taxes. The following table summarizes the tax effects related to each
           component of other comprehensive earnings.


<TABLE>
<CAPTION>
                                                                                                         Tax
                                                                                    Before-tax        (expense)         Net-of-tax
                                                                                     amount            benefit           amount
                                                                                    ----------        ---------         ----------
                                                                                               amounts in millions
<S>                                                                                <C>                <C>               <C>
           Year ended December 31, 2001:
           -----------------------------
           Foreign currency translation adjustments                                $   (588)               229               (359)
           Unrealized holding losses on securities
            arising during period                                                    (1,661)               648             (1,013)
           Reclassification adjustment for losses realized in net loss                4,420             (1,724)             2,696
           Cumulative effect of accounting change                                      (143)                56                (87)
                                                                                   --------              -----             ------
           Other comprehensive earnings                                            $  2,028               (791)             1,237
                                                                                   ========              =====             ======

           Year ended December 31, 2000:
           -----------------------------
           Foreign currency translation adjustments                                $   (334)               132               (202)
           Unrealized holding losses on securities
            arising during period                                                   (10,116)             4,001             (6,115)

           Reclassification adjustment for
             gains realized in net earnings                                          (1,050)               415               (635)
                                                                                   --------              -----             ------
           Other comprehensive loss                                                $(11,500)             4,548             (6,952)
                                                                                   ========              =====             ======


           Ten months ended December 31, 1999:
           -----------------------------------
           Foreign currency translation adjustments                                $     99                (39)                60
           Unrealized holding gains on securities
            arising during period                                                     10,733             (4,245)             6,488
           Reclassification adjustment for losses realized in net loss                   12                 (5)                 7
                                                                                   --------              -----             ------
           Other comprehensive earnings                                            $ 10,844             (4,289)             6,555
                                                                                   ========              =====             ======
           ----------------------------------------------------------------------------------------------------------------------
           Two months ended February 28, 1999:
           Foreign currency translation adjustments                                $    (25)                10                (15)
           Unrealized holding gains arising during period                             1,464               (579)               885
                                                                                   --------              -----             ------
           Other comprehensive earnings                                            $  1,439               (569)               870
                                                                                   ========              =====             ======
</TABLE>

(14)       Commitments and Contingencies

           Starz Encore Group LLC, a wholly owned subsidiary of Liberty,
           provides premium programming distributed by cable, direct satellite,
           TVRO and other distributors throughout the United States. Starz
           Encore Group is obligated to pay fees for the rights to exhibit
           certain films that are released by various producers through 2014
           (the "Film Licensing Obligations"). 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. Starz Encore Group's estimate, based on customer
           levels at December 31, 2001, of the future minimum obligation related
           to the Film Licensing Obligations for the five years after 2001 and
           thereafter are as follows (amounts in millions):

<TABLE>
<S>                                                 <C>
                           2002                     $ 405
                           2003                       224
                           2004                       154
                           2005                       88
                           2006                       103
                           Thereafter                 388
</TABLE>


<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued


           Liberty has guaranteed $619 million of the bank debt of Jupiter, an
           equity affiliate that provides broadband services in Japan.
           Approximately $343 million of such guaranteed amount is due and
           payable by Jupiter during the first quarter of 2002. Jupiter is
           currently negotiating the refinancing of substantially all of its
           long-term and short-term debt. Liberty anticipates that it and the
           other Jupiter shareholders will make equity contributions to Jupiter
           in connection with such refinancing, and that Liberty's share of such
           equity contributions will be approximately $450 million. Upon such
           refinancing, Liberty anticipates that its guarantee of Jupiter debt
           would be cancelled.

           Liberty has also guaranteed various loans, notes payable, letters of
           credit and other obligations (the "Guaranteed Obligations") of
           certain other affiliates. At December 31, 2001, the Guaranteed
           Obligations aggregated approximately $170 million. Currently, Liberty
           is not certain of the likelihood of being required to perform under
           such guarantees.

           Liberty leases business offices, has entered into pole rental and
           transponder lease agreements and uses certain equipment under lease
           arrangements. Rental expense under such arrangements amounts to $76
           million, $50 million, $30 million and $9 million for the years ended
           December 31, 2001 and 2000, for the ten months ended December 31,
           1999 and the two months ended February 28, 1999, respectively.

           A summary of future minimum lease payments under noncancelable
           operating leases as of December 31, 2001 follows (amounts in
           millions):

<TABLE>
<CAPTION>
                      Years ending December 31:
<S>                                                   <C>
                                2002                  $  70
                                2003                     63
                                2004                     52
                                2005                     40
                                2006                     31
                                Thereafter              115
</TABLE>

           It is expected that in the normal course of business, leases that
           expire generally will be renewed or replaced by leases on other
           properties; thus, it is anticipated that future minimum lease
           commitments will not be less than the amount shown for 2001.

           Starz Encore Group LLC v. AT&T Broadband LLC and Satellite Services,
           Inc. Starz Encore Group entered into a 25-year affiliation agreement
           in 1997 with TCI. TCI cable systems subsequently acquired by AT&T in
           the TCI merger operate under the name AT&T Broadband. Starz Encore
           Group receives fixed monthly payments in exchange for unlimited
           access to all of the existing Encore and STARZ! services. The payment
           from AT&T Broadband can be adjusted if AT&T acquires or disposes of
           cable systems. The affiliation agreement further provides that to the
           extent Starz Encore Group's programming costs increase above or
           decrease below amounts specified in the agreement, then AT&T
           Broadband's payments under the affiliation agreement will be
           increased or decreased in an amount equal to a proportion of the
           excess or shortfall. Starz Encore Group requested payment from AT&T
           Broadband of its proportionate share of excess programming costs
           during the first quarter of 2001 (which amount aggregated
           approximately $32 million for the year 2001). Excess programming
           costs payable by AT&T Broadband could be significantly larger in
           future years.

           By letter dated May 29, 2001, AT&T Broadband has disputed the
           enforceability of the excess programming costs pass through
           provisions of the affiliation agreement and questioned whether the
           affiliation agreement, as a whole, is "voidable." In addition, AT&T
           Broadband raised certain issues concerning interpretations of the
           contractual requirements associated with the treatment of
           acquisitions and dispositions. Starz Encore Group believes the
           position expressed by AT&T Broadband to be without merit. On July 10,
           2001, Starz Encore Group initiated a lawsuit against




<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

           AT&T Broadband and Satellite Services, Inc., a subsidiary of AT&T
           Broadband that is also a party to the affiliation agreement, in
           Arapahoe County District Court, Colorado for breach of contract.
           Starz Encore Group is seeking a judgment of specific performance of
           the contract, damages and costs.

           On October 19, 2001, Starz Encore Group entered into a standstill and
           tolling agreement whereby the parties agreed to move the court to
           stay the lawsuit until August 31, 2002 to permit the parties an
           opportunity to resolve their dispute. This agreement provides that
           either party may unilaterally petition the court to lift the stay
           after April 30, 2002 and proceed with the litigation. The court
           granted the stay on October 30, 2001. In conjunction with this
           agreement, AT&T Broadband and the Company entered into various
           agreements whereby Starz Encore Group will indirectly receive payment
           for AT&T Broadband's proportionate share of the programming costs
           pass through for 2001.

           Liberty has contingent liabilities related to legal proceedings and
           other matters arising in the ordinary course of business. Although it
           is reasonably possible Liberty 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 consolidated financial
           statements.

(15)       Information about Liberty's Operating Segments

           Liberty is a holding company with a variety of subsidiaries and
           investments operating in the media, communications and entertainment
           industries. Each of these businesses is separately managed. Liberty
           identifies its reportable segments as those consolidated subsidiaries
           that represent 10% or more of its combined revenue and those equity
           method affiliates whose share of earnings or losses represent 10% or
           more of its pre-tax earnings or loss. Subsidiaries and affiliates not
           meeting this threshold are aggregated together for segment reporting
           purposes. The segment presentation for prior periods has been
           conformed to the current period segment presentation.

           For the year ended December 31, 2001, Liberty had five operating
           segments: Starz Encore Group, Liberty Livewire, On Command
           Corporation ("On Command"), Telewest and Other. Starz Encore Group
           provides premium programming distributed by cable, direct-to-home
           satellite and other distribution media throughout the United States
           and is wholly owned and consolidated by Liberty. Liberty Livewire
           provides sound, video and ancillary post production and distribution
           services to the motion picture and television industries in the
           United States and Europe and is majority owned and consolidated by
           Liberty. On Command provides in-room, on-demand video entertainment
           and information services to hotels, motels and resorts primarily in
           the United States and is majority owned and consolidated by Liberty.
           Telewest, an equity method affiliate, operates and constructs cable
           television and telephone systems in the UK. Other includes Liberty's
           non-consolidated investments, corporate and other consolidated
           businesses not representing separately reportable segments.

           The accounting policies of the segments that are also consolidated
           subsidiaries are the same as those described in the summary of
           significant accounting policies. Liberty evaluates performance based
           on the measures of revenue and operating cash flow (as defined by
           Liberty), appreciation in stock price and non-financial measures such
           as average prime time rating, prime time audience delivery,
           subscriber growth and penetration, as appropriate. Liberty believes
           operating cash flow is a widely used financial indicator of companies
           similar to Liberty and its affiliates, which should be considered in
           addition to, but not as a substitute for, operating income, net
           income, cash flow provided by operating activities and other measures
           of financial performance prepared in accordance with generally
           accepted accounting principles. Liberty generally accounts for
           intersegment sales and transfers as if the sales or transfers were to
           third parties, that is, at current prices.



<PAGE>


                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued

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

           Liberty utilizes the following financial information for purposes of
           making decisions about allocating resources to a segment and
           assessing a segment's performance:

<TABLE>
<CAPTION>
                                                Consolidated Subsidiaries
                                                ----------------------------
                                                                                              Equity
                                                                                              method
                                                Starz                                       affiliate
                                                Encore   Liberty        On                  ---------
                                                Group    Livewire     Command    Other       Telewest     Eliminations     Total
                                                -----    --------     -------    -----       --------     ------------     -----
                                                                           amounts in millions
<S>                                           <C>        <C>          <C>        <C>        <C>           <C>              <C>
Performance Measures:

Year ended December 31, 2001
           Revenue                            $   863         593        239         364        1,811        (1,811)        2,059
           Operating cash flow                    313          89         44         (69)         431          (431)          377

Year ended December 31, 2000
           Revenue                                733         295        200         298        1,623        (1,623)        1,526
           Operating cash flow                    235          44         49          12          330          (330)          340

Ten months ended December 31, 1999
           Revenue                                539          --         --         190          857          (857)          729
           Operating cash flow                    124          --         --           9          235          (235)          133

Two months ended February 28, 1999
           Revenue                                101          --         --         134          207          (207)          235
           Operating cash flow                     41          --         --           6           52           (52)           47

Balance Sheet Information:

As of December 31, 2001
           Total assets                         2,861         915        433      44,330        9,209        (9,209)       48,539
           Investments in affiliates              138          --         --       9,938          795          (795)       10,076

As of December 31, 2000
           Total assets                         2,754       1,141        439      49,934       10,707       (10,707)       54,268
           Investments in affiliates              155           8          2      20,299          377          (377)       20,464
</TABLE>



<PAGE>
                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, continued

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

<TABLE>
<CAPTION>
                                                                New Liberty                            Old Liberty
                                                   ----------------------------------------------     -------------
                                                       Year             Year          Ten months        Two months
                                                      ended            ended            ended             ended
                                                   December 31,      December 31,     December 31,      February 28,
                                                      2001             2000              1999             1999
                                                   ------------      ------------     ------------      ------------
                                                                        amounts in millions
<S>                                                 <C>              <C>              <C>               <C>

           Segment operating cash flow              $    377              340              133              47
           Stock compensation                           (132)             950           (1,785)           (183)
           Depreciation and amortization                (984)            (854)            (562)            (22)
           Impairment of long-lived assets              (388)              --               --              --
           Interest expense                             (525)            (399)            (135)            (26)
           Share of losses of affiliates              (4,906)          (3,485)            (904)            (66)
           Nontemporary declines in fair
             value of investments                     (4,101)          (1,463)              --              --
           Gains (losses) on dispositions, net
                                                        (310)           7,340                4              14
           Other, net                                     87              527               85             373
                                                    --------           ------           ------            ----
           Earnings (loss) before income
             taxes and minority interest            $(10,882)           2,956           (3,164)            137
                                                    ========           ======           ======            ====
</TABLE>

           During the year ended December 31, 2001, Liberty derived 13.6% its
           total revenue from a single customer. Such revenue is attributable to
           the Starz Encore Group segment and the Other segment.

(16)       Quarterly Financial Information (Unaudited)

<TABLE>
<CAPTION>
                                                      1st              2nd             3rd               4th
                                                    Quarter          Quarter         Quarter            Quarter
                                                    -------          -------         -------            -------
                                                                        amounts in millions
           2001:

<S>                                                 <C>              <C>                <C>            <C>
             Revenue                                $  504              513              521              521
                                                    =======          =======         =======            =======
             Operating loss                         $ (207)            (195)             (51)            (674)
                                                    =======          =======         =======            =======
             Loss before cumulative effect
              of accounting change                  $ (697)          (2,125)            (215)          (3,711)
                                                    =======          =======         =======            =======
             Net loss                               $ (152)          (2,125)            (215)          (3,711)
                                                    =======          =======         =======            =======
             Pro forma basic and diluted
              loss before cumulative
              effect of accounting change
              per common share                      $ (.27)            (.82)            (.08)           (1.43)
                                                    =======          =======         =======            =======
             Pro forma basic and diluted
              net loss per common share             $ (.06)            (.82)            (.08)           (1.43)
                                                    =======          =======         =======            =======

          2000:

             Revenue                                $  235              382              436              473
                                                    =======          =======         =======            =======
             Operating income (loss)                $  (83)              67              147              305
                                                    =======          =======         =======            =======
             Net earnings (loss)                    $  939              267            1,756           (1,477)
                                                    =======          =======         =======            =======
             Pro forma basic and diluted
              net earnings (loss)
              per common share                      $  .36              .10              .68             (.57)
                                                    =======          =======         =======            =======
</TABLE>



<PAGE>



                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, continued