Exhibit 99b



                         LIBERTY MEDIA GROUP FINANCIALS

         (a combination of certain assets and businesses owned by AT&T)

         Liberty Media Group is a combination  of certain  assets and businesses
owned by AT&T Corp.  and not a stand-alone  entity.  As Liberty Media Group is a
tracking  stock of AT&T,  separate  financial  statements are not required to be
filed.  We are  providing  these  financial  statements  to  provide  additional
disclosures  to investors to allow them to assess the financial  performance  of
Liberty Media Group.  Presenting separate financial statements for Liberty Media
Group  does  not  indicate   that  we  have  changed  title  to  any  assets  or
responsibility for any liabilities, and does not purport to affect the rights of
any of AT&T's  creditors.  Holders of Liberty Media Group  tracking stock do not
have claims  against the assets of Liberty Media Group.  Instead,  Liberty Media
Group shareholders own a separate class of AT&T common stock that is intended to
reflect  the  financial  performance  and  economic  value  of  the  assets  and
businesses owned by AT&T that are attributed to Liberty Media Group.

<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
AT&T Corp.:

We have audited the accompanying  combined balance sheets of Liberty Media Group
(a combination of certain assets and businesses  owned by AT&T Corp., as defined
in note 1) ("New Liberty" or  "Successor") as of December 31, 2000 and 1999, and
the related  combined  statements  of  operations  and  comprehensive  earnings,
attributed  net assets,  and cash flows for the year ended December 31, 2000 and
the period from March 1, 1999 to December 31, 1999 (Successor  periods) and from
January 1, 1999 to February  28, 1999 and for the year ended  December  31, 1998
(Predecessor   periods).   These   combined   financial   statements   are   the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these combined 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.

The combined  financial  statements  of Liberty  Media Group are  presented  for
purposes of additional analysis of the consolidated financial statements of AT&T
Corp. As more fully  described in note 1, the combined  financial  statements of
Liberty Media Group are intended to reflect the performance of the businesses of
AT&T Corp., that produce, acquire and distribute entertainment,  educational and
informational programming services. The combined financial statements of Liberty
Media  Group  should  be read in  conjunction  with the  consolidated  financial
statements of AT&T Corp.

In our opinion,  the  aforementioned  Successor  combined  financial  statements
present fairly, in all material respects,  the financial position of New Liberty
as of December 31, 2000 and 1999, 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 combined financial statements present fairly, in all
material respects,  the results of their operations and their cash flows for the
Predecessor periods, in conformity with accounting principles generally accepted
in the United States of America.

As discussed in note 1, effective  March 9, 1999,  AT&T Corp.,  the owner of the
assets comprising New Liberty, acquired Tele-Communications,  Inc., the owner of
the assets comprising Old Liberty, in a business combination  accounted for as a
purchase. As a result of the acquisition, the combined 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
February 26, 2001
<PAGE>

                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)
<TABLE>
<CAPTION>
                             COMBINED BALANCE SHEETS

                           December 31, 2000 and 1999
<S>                                                                             <C>                <C>
                                                                                    2000               1999
                                                                                -----------        -----------
                                                                                     amounts in millions
Assets
Current assets:
     Cash and cash equivalents                                                  $     1,295              1,714
     Short-term investments                                                             500                378
     Trade and other receivables, net                                                   307                134
     Prepaid expenses and committed program rights                                      537                406
     Deferred income tax assets (note 9)                                                242                750
     Other current assets                                                                73                  5
                                                                                -----------        -----------
         Total current assets                                                         2,954              3,387
                                                                                -----------        -----------

Investments in affiliates, accounted for under the equity method, and
     related receivables (notes 4 and 6)                                             20,464             15,922

Investments in available-for-sale securities and others (notes 5 and 6)
                                                                                     19,035             28,601

Property and equipment, at cost                                                         976                162
     Less accumulated depreciation                                                      131                 19
                                                                                -----------        -----------
                                                                                        845                143
                                                                                -----------        -----------
Intangible assets:
     Excess cost over acquired net assets                                            11,146              9,973
     Franchise costs                                                                    190                273
                                                                                -----------        -----------
                                                                                     11,336             10,246
         Less accumulated amortization                                                1,048                454
                                                                                -----------        -----------
                                                                                     10,288              9,792
                                                                                -----------        -----------
Other assets, at cost, net of accumulated amortization                                  682                839
                                                                                -----------        -----------
         Total assets                                                           $    54,268             58,684
                                                                                ===========        ===========
</TABLE>

                                   (continued)
<PAGE>
<TABLE>
<CAPTION>

                             COMBINED BALANCE SHEETS

                           December 31, 2000 and 1999
<S>                                                                             <C>                <C>

                                                                                    2000               1999
                                                                                -----------        -----------
                                                                                     amounts in millions
Liabilities and Combined Attributed Net Assets
Current liabilities:

     Accounts payable and accrued liabilities                                   $       473                245
     Accrued stock compensation                                                       1,216              2,405
     Program rights payable                                                             179                166
     Current portion of debt                                                          1,094                554
                                                                                -----------        -----------
         Total current liabilities                                                    2,962              3,370
                                                                                -----------        -----------

Long-term debt (note 8)                                                               5,269              2,723
Deferred income tax liabilities (note 9)                                             11,337             14,107
Other liabilities                                                                        62                 23
                                                                                -----------        -----------
         Total liabilities                                                           19,630             20,223
                                                                                -----------        -----------
Minority interests in equity of attributed subsidiaries (note 7)                        348                  1

Combined attributed net assets (note 10):

     Combined attributed net assets                                                  34,506             31,876
     Accumulated other comprehensive (loss) earnings, net of taxes (note 11)
                                                                                       (397)             6,557
                                                                                -----------        -----------
                                                                                     34,109             38,433
     Due to related parties                                                             181                 27
                                                                                -----------        -----------
         Total combined attributed net assets                                        34,290             38,460
                                                                                -----------        -----------
Commitments and contingencies (note 12)
         Total liabilities and combined attributed net assets                   $    54,268             58,684
                                                                                ===========        ===========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>

                              "LIBERTY MEDIA GROUP"
         (a combination of certain assets and businesses owned by AT&T,
                              as defined in note 1)
<TABLE>
          COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS
<CAPTION>
                                                                   New Liberty                              Old Liberty
                                                       -------------------------------------- -----------------------------------
                                                           Year               Ten months          Two months            Year
                                                           ended                 ended               ended              ended
                                                        December 31,          December 31,       February 28,        December 31,
                                                           2000                  1999                1999               1998
                                                       ----------------- --------------------- ---------------- -----------------
                                                                                     amounts in millions
<S>                                                    <C>                    <C>                   <C>               <C>
                                                                                          (note 1)
Revenue:
     Unaffiliated parties                              $  1,283                   549                 239              1,301
     Related parties (note 10)                              243                   180                  43                258
                                                       ---------             ---------           ---------          ---------
                                                          1,526                   729                 282              1,559
                                                       ---------             ---------           ---------          ---------
Operating costs and expenses:
     Operating                                              801                   343                 136                932
     Selling, general and administrative                    348                   229                  89                427
     Charges from related parties (note 10)                  37                    24                   2                 28
     Stock compensation                                    (950)                1,785                 183                518
     Depreciation and amortization                          854                   562                  47                243
                                                       ----------            ---------           ---------          ---------
                                                          1,090                 2,943                 457              2,148
                                                       ----------            ---------           ---------          ---------
         Operating income (loss)                            436                (2,214)               (175)              (589)

Other income (expense):
     Interest expense                                      (399)                 (134)                (27)              (116)
     Adjustment to interest expense for
        contingent portion of exchangeable
        debentures                                          153                  (153)                 --                 --
     Interest expense to related parties, net
        (note 10)                                            --                    (1)                 (1)               (10)
     Dividend and interest income                           301                   243                  12                100
     Share of losses of affiliates, net (note 4)         (2,161)                 (904)                (66)            (1,034)
     Impairment of investments (note 6)                  (2,787)                   --                  --                 --
     Minority interests in losses of attributed
        subsidiaries                                         63                    46                   4                102
     Gains on dispositions, net (notes 4, 5 and 7)
                                                          7,343                     3                  14              4,738
     Gains on issuance of equity by affiliates and
        subsidiaries (notes 4 and 7)                         --                    --                 389                357
     Unrealized gains on financial instruments
                                                             70                    --                  --                 --
     Other, net                                               3                    (5)                 --                  6
                                                       ---------             ---------           ---------          ---------
                                                          2,586                  (905)                325              4,143
                                                       ---------             ---------           ---------          ---------
<PAGE>
        Earnings (loss) before income taxes               3,022                (3,119)                150              3,554

Income tax benefit (expense) (note 9)                    (1,534)                1,097                (209)            (1,397)
                                                       ---------             ---------           ---------          ---------
        Net earnings (loss)                         $     1,488                (2,022)                (59)             2,157
                                                       ---------             ---------           ---------          ---------

Other comprehensive earnings, net of taxes:
     Foreign currency translation adjustments              (202)                   60                 (15)                 3
     Unrealized holding gains arising during
        the period, net of reclassification
        adjustments                                      (6,752)                6,497                 971              2,947
                                                       ---------             ---------           ---------          ---------
     Other comprehensive earnings (loss)                 (6,954)                6,557                 956              2,950
                                                       ---------             ---------           ---------          ---------

Comprehensive earnings (loss) (note 11)             $    (5,466)                4,535                 897              5,107
                                                       =========             =========           =========          =========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
<TABLE>
<CAPTION>
                  COMBINED STATEMENTS OF ATTRIBUTED NET ASSETS

                  Years ended December 31, 2000, 1999 and 1998
<S>                                                                 <C>            <C>                  <C>            <C>
                                                                                       Accumulated
                                                                                          other                             Total
                                                                     Combined         comprehensive        Due to         combined
                                                                    attributed          earnings,          related       attributed
                                                                    net assets         net of tax          parties       net assets
                                                                   ------------    ----------------     -----------    ------------
                                                                                          amounts in millions

Balance at January 1, 1998                                                4,011                 768             530           5,309
   Net earnings                                                           2,157                  --              --           2,157
   Foreign currency translation adjustments                                  --                   3              --               3
   Unrealized gains on available-for-sale securities                         --               2,947              --           2,947
   Payments for call agreements                                            (140)                 --              --            (140)
   Repurchase of common stock                                               (30)                 --              --             (30)
   Premium received in connection with put obligation
                                                                              2                  --              --               2
   Reclassification of redemption amount of common stock
     subject to put obligation                                              (17)                 --              --             (17)
   Gain in connection with issuance of stock of affiliates and
     attributed subsidiaries (note 4)                                        70                  --              --              70
   Issuance of common stock                                                 777                  --              (5)            772
   Transfer of net liabilities to related party                              50                  --              --              50
   Assignment of option contract from related party                          16                  --             (16)             --
   Other transfers from related parties, net                                 --                  --             188             188
                                                                   -------------   ----------------     -----------    ------------

Balance at December 31, 1998                                              6,896               3,718             697          11,311
   Net loss                                                                 (59)                 --              --             (59)
   Foreign currency translation adjustments                                  --                 (15)             --             (15)
   Unrealized gains on available-for-sale securities                         --                 971              --             971
   Reversal of reclassification of redemption amount of common
     stock subject to put obligation                                          8                  --              --               8
   Transfer of net liabilities to related party, net of taxes
                                                                             99                  --              --              99
   Excess paid on settlement of preferred stock conversion
                                                                            (18)                 --              --             (18)
   Other transfers to  related parties, net                                  --                  --             (24)            (24)
                                                                   ------------    ----------------     -----------   -------------

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

                                   (continued)

<PAGE>

                  COMBINED STATEMENTS OF ATTRIBUTED NET ASSETS

                  Years ended December 31, 2000, 1999 and 1998

                                                                                       Accumulated
                                                                                          other                             Total
                                                                     Combined         comprehensive        Due to         combined
                                                                    attributed          earnings,          related       attributed
                                                                    net assets         net of tax          parties       net assets
                                                                   -------------    ------------------  -------------   ------------
                                                                                          amounts in millions

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

 alance at March 1, 1999                                                33,515                  --             197          33,712
   Net loss                                                             (2,022)                 --              --          (2,022)
   Foreign currency translation adjustments                                 --                  60              --              60
   Recognition of previously unrealized losses on
     available-for-sale securities, net                                     --                   7              --               7
   Unrealized gains on available-for-sale securities                        --               6,490              --           6,490
   AT&T Liberty Media Group Tracking Stock issued for

     conversion of debentures                                              354                  --              --             354
   Reversal of reclassification of redemption amount of common
     stock subject to put obligation                                         9                  --              --               9
   Gain in connection with the issuance of common stock of
     affiliates and attributed subsidiaries                                108                  --              --             108
   Utilization of net operating losses of Liberty Media Group
     by AT&T (note 9)                                                      (88)                 --              --             (88)
   Other transfers to related parties, net                                  --                  --            (170)           (170)
                                                                   -----------    ----------------     -----------   -------------

Balance at December 31, 1999                                            31,876               6,557              27          38,460
   Net earnings                                                          1,488                  --              --           1,488
   Foreign currency translation adjustments                                 --                (202)             --            (202)
   Recognition of previously unrealized gains on
     available-for-sale securities, net                                     --                (635)             --            (635)
   Unrealized losses on available-for-sale securities                       --              (6,117)             --          (6,117)
   Issuance of AT&T Class A Liberty Media Group common stock
     for acquisitions (note 7)                                           1,064                  --              --           1,064
   Purchase of AT&T Class A Liberty Media Group common stock
                                                                          (269)                 --              --            (269)
   Premium received in connection with put obligation, net
                                                                             7                  --              --               7
   Gain in connection with the issuance of common stock of
     affiliates and attributed subsidiaries, net
                                                                           355                  --              --             355
   Utilization of net operating losses of Liberty Media Group
     by AT&T (note 9)                                                      (38)                 --              --             (38)
   Exercise of stock options                                                23                  --              --              23
   Other transfers to related parties, net                                  --                  --             154             154
                                                                   ------------    ----------------    -----------   -------------
Balance at December 31, 2000                                       $     34,506                (397)           181          34,290
                                                                   ============    ================    ===========   =============
</TABLE>
See accompanying notes to combined financial statements.

<PAGE>
<TABLE>
                        COMBINED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                         New Liberty                            Old Liberty
                                                          ------------------ -------------------- ------------------ ---------------
                                                                 Year              Ten months         Two months            Year
                                                                 ended                ended              ended              ended
                                                             December 31,         December 31,      February 28,        December 31,
                                                                 2000                 1999               1999               1998
                                                          ------------------ -------------------- ------------------ ---------------
                                                                                            amounts in millions
                                                                                                 (note 3)
<S>                                                       <C>                         <C>                  <C>              <C>
Cash flows from operating activities:
    Net earnings (loss)                                   $         1,488              (2,022)               (59)             2,157
    Adjustments to reconcile net earnings (loss)
       to net cash provided (used) by operating
       activities:
       Depreciation and amortization                                  854                 562                 47                243
       Stock compensation                                            (950)              1,785                183                518
       Payments of stock compensation                                (319)               (111)              (126)               (58)
       Share of losses of affiliates, net                           2,161                 904                 66              1,034
       Deferred income tax (benefit) expense                        1,821              (1,025)               205              1,393
       Intergroup tax allocation                                     (294)                (75)                --                 (2)
       Cash payment from AT&T pursuant to tax
         sharing agreement                                            414                   1                 --                 --
       Minority interests in losses of subsidiaries                   (63)                (46)                (4)              (102)
       Unrealized gains on financial instruments                      (70)                 --                 --                 --
       Gains on issuance of equity by affiliates and
          subsidiaries                                                 --                  --               (389)              (357)
       Gains on disposition of assets, net                         (7,343)                 (3)               (14)            (4,738)
       Impairment of investments                                    2,787                  --                 --                 --
       Noncash interest                                              (138)                153                 --                 --
       Other noncash charges                                           --                   3                  9                 55
       Changes in operating assets and liabilities, net
         of the effect of acquisitions and dispositions:
          Receivables                                                (116)                  7                (19)               (49)
          Prepaid expenses and program rights                        (121)               (119)               (10)               (39)
          Payables and other current liabilities                       88                 119                  4                 11
                                                        -----------------    ----------------     --------------    ---------------
             Net cash provided (used) by operating
               activities                                             199                 133               (107)                66
                                                        -----------------    ----------------     --------------    ---------------
Cash flows used by investing activities:

    Cash paid for acquisitions                                       (735)               (109)                --                (92)
    Capital expended for property and equipment                      (221)                (40)               (21)              (144)
    Investments in and loans to affiliates and others              (3,372)             (2,596)               (45)            (1,404)
    Purchases of marketable securities                               (848)             (7,757)              (132)              (124)
    Sales and maturities of marketable securities                   1,820               5,725                 34                 --
    Cash proceeds from dispositions                                   463                 130                 43                423
    Other, net                                                         34                 (11)               (62)               (17)
                                                        -----------------    ----------------     --------------    ---------------
          Net cash used by investing activities                    (2,859)             (4,658)              (183)            (1,358)
<PAGE>
Cash flows from financing activities:
    Borrowings of debt                                              5,509               3,187                156              2,428
    Repayments of debt                                             (3,068)             (2,211)              (148)              (622)
    Net proceeds from issuance of stock by subsidiaries               121                 123                 --                 75
    Payments for call agreements                                       --                  --                 --               (140)
    Cash transfers (to) from related parties                         (293)               (159)               132               (216)
    Other, net                                                        (28)                (20)               (46)               (50)
                                                        -----------------    ----------------     --------------    ---------------
          Net cash provided by financing activities                 2,241                 920                 94              1,475
                                                        -----------------    ----------------     --------------    ---------------
              Net increase (decrease) in cash and cash
                 equivalents                                         (419)             (3,605)              (196)               183
              Cash and cash equivalents at beginning
                of year                                             1,714               5,319                407                224
                                                        -----------------    ----------------     --------------    ---------------
              Cash and cash equivalents at end of year    $         1,295               1,714                211                407
                                                          ===============    ================     ==============    ===============
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>

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

                        December 31, 1999, 1998 and 1997

(1)      Basis of Presentation

         The accompanying  combined financial statements include the accounts of
         the  assets  and  businesses  owned  by AT&T  Corp.  ("AT&T")  that are
         attributed to Liberty Media Group,  as defined below.  All  significant
         intercompany accounts and transactions have been eliminated.

         On March 9, 1999, AT&T acquired Tele-Communications,  Inc. ("TCI"), the
         former owner of the assets and  businesses  attributed to Liberty Media
         Group, in a merger transaction (the "AT&T Merger").  In connection with
         the AT&T Merger,  holders of shares of TCI's then  outstanding  Liberty
         Media Group  tracking  stock and TCI Ventures Group tracking stock were
         issued shares of a new targeted stock of AT&T. Each share of TCI's then
         outstanding  Liberty Media Group Series A tracking  stock was converted
         into four shares of a newly created class of AT&T tracking  stock,  the
         AT&T Liberty Media Group Class A common stock, each share of TCI's then
         outstanding  Liberty Media Group Series B tracking  stock was converted
         into four shares of a newly created class of AT&T tracking  stock,  the
         AT&T Liberty Media Group Class B common stock, each share of TCI's then
         outstanding  TCI Ventures  Group Series A tracking  stock was converted
         into 2.08 shares of AT&T  Liberty  Media Group Class A common stock and
         each  share of TCI's  then  outstanding  TCI  Ventures  Group  Series B
         tracking  stock was  converted  into 2.08 shares of AT&T Liberty  Media
         Group Class B common stock. 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) are 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.

         Effective  with  the AT&T  Merger,  each  share  of  TCI's  Convertible
         Preferred Stock Series C-Liberty Media was converted into 225 shares of
         AT&T  Liberty  Media Group Class A common stock and each share of TCI's
         Redeemable  Convertible  Liberty Media Group Preferred Stock,  Series H
         was  converted  into 2.3625  shares of AT&T Liberty Media Group Class A
         common stock.  In general,  the holders of shares of AT&T Liberty Media
         Group Class A common  stock and the  holders of shares of AT&T  Liberty
         Media Group Class B common  stock will vote  together as a single class
         with  the  holders  of  shares  of AT&T  common  stock  on all  matters
         presented  to such  stockholders,  with the holders  being  entitled to
         three-eightieths  (3/80th)  of a vote  for each  share of AT&T  Liberty
         Media Group Class A common stock held,  three-eighths (3/8th) of a vote
         for each share of AT&T  Liberty  Media Group Class B common  stock held
         and 1 vote per share of AT&T common stock held.

         The AT&T  Merger  has been  accounted  for using the  purchase  method.
         Accordingly,  Liberty Media Group's  assets and  liabilities  have been
         recorded at their respective fair market values  therefore,  creating a
         new cost basis.  For financial  reporting  purposes the AT&T Merger and
         related restructuring transactions are deemed to have occurred on March
         1, 1999. Accordingly, for periods prior to March 1, 1999 the assets and
         liabilities  attributed to Liberty Media Group and the related combined
         financial statements are sometimes referred to herein as "Old Liberty",
         and for  periods  subsequent  to  February  28,  1999  the  assets  and
         liabilities  attributed to Liberty Media Group and the related combined
         financial statements are sometimes referred to herein as "New Liberty".
         The "Company"  and "Liberty  Media Group" refer to both New Liberty and
         Old Liberty.
<PAGE>
         Immediately  prior  to  the  AT&T  Merger,  certain  assets  previously
         attributed to Old Liberty (including,  among others, the shares of AT&T
         Common Stock received in the merger of AT&T and Teleport Communications
         Group,  Inc.   ("Teleport"),   Old  Liberty's   interests  in  At  Home
         Corporation  ("@Home"),  the National Digital Television  Center,  Inc.
         ("NDTC") and Western Tele-Communications, Inc.) were attributed to "TCI
         Group" (a group of TCI's assets,  which,  prior to the AT&T Merger, was
         comprised   primarily  of  TCI's  domestic  cable  and   communications
         business)  in  exchange  for  approximately  $5.5  billion in cash (the
         "Asset Transfers"). Also, upon consummation of the AT&T Merger, through
         a new tax  sharing  agreement  between  Liberty  Media  Group and AT&T,
         Liberty  Media Group is entitled  to the  benefit of  approximately  $2
         billion in net operating loss  carryforwards  available to the entities
         included in TCI's consolidated  income tax return as of the date of the
         AT&T  Merger.  Such net  operating  loss  carryforwards  are subject to
         adjustment by the Internal  Revenue  Service ("IRS") and are subject to
         limitations  on usage which may affect the  ultimate  amount  utilized.
         Additionally,  certain  warrants to purchase  shares of Motorola,  Inc.
         ("Motorola") (successor to General Instruments  Corporation) ("Motorola
         Warrants")  previously  attributed  to TCI  Group  were  attributed  to
         Liberty Media Group in exchange for approximately $176 million in cash.
         Certain agreements entered into at the time of the AT&T Merger provide,
         among other things,  for preferred vendor status to Liberty Media Group
         for digital basic  distribution  on AT&T's  systems of new  programming
         services  created by Liberty  Media Group and for a renewal of existing
         affiliation agreements.

         The following table represents the summary balance sheet of Old Liberty
         at February 28, 1999 prior to the  restructuring  transactions  and the
         consummation  of the AT&T Merger and the opening  summary balance sheet
         of New Liberty  subsequent to the  restructuring  transactions  and the
         consummation  of  the  AT&T  Merger.  Certain  pre-merger  transactions
         occurring  between  March 1, 1999 and March 9, 1999 that  affected  Old
         Liberty's  attributed  net  assets,  gains on  issuance  of  equity  by
         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               211
         Other current assets                                                      451               648
         Investments in affiliates                                              17,116             3,971
         Investment in available-for-sale securities                            13,100            15,855
         Property and equipment, net                                               125               532
         Intangibles and other assets                                           11,159               817
                                                                        --------------  ----------------
                                                                        $       47,270            22,034
                                                                        ==============  ================
         Liabilities and Equity:
         Current liabilities                                            $        1,675             1,446
         Long-term debt                                                          1,845             2,319
         Deferred income taxes                                                   9,971             5,369
         Other liabilities                                                          19               168
                                                                        --------------  ----------------
               Total liabilities                                                13,510             9,302
                                                                        --------------  ----------------
         Minority interests in equity of attributed subsidiaries                    39               450
         Obligation to redeem common stock                                           9                 9
         Attributed net assets                                                  33,712            12,273
                                                                        --------------  ----------------
                                                                        $       47,270            22,034
                                                                        ==============  ================
</TABLE>
                                   (continued)
<PAGE>

         At December 31, 2000,  Liberty  Media Group  consisted  principally  of
         attributed assets and businesses of AT&T related to the following:

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

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

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

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

         The assets  and  businesses  outlined  above are  principally  owned by
         Liberty  Media   Corporation  and  its   subsidiaries.   Liberty  Media
         Corporation is a wholly owned  subsidiary of AT&T.  For  convenience of
         discussion,  assets and properties  acquired,  owned, or disposed of by
         subsidiaries  of AT&T that are  attributed  to Liberty  Media Group are
         referred to herein as being  acquired,  owned or disposed of by Liberty
         Media Group. The shares of AT&T Liberty Media Group common stock issued
         in the AT&T Merger are intended to reflect the separate  performance of
         the assets  and  businesses  attributed  to Liberty  Media  Group.  The
         combined financial  statements of Liberty Media Group are presented for
         purposes  of  additional   analysis  of  the   consolidated   financial
         statements  of  AT&T  and  should  be  read in  conjunction  with  such
         consolidated financial statements.

         The attribution of assets and businesses to Liberty Media Group for the
         purpose of  preparing  these  combined  financial  statements  does not
         affect the  ownership or the  respective  legal title to such assets or
         responsibility for liabilities of AT&T or any of its subsidiaries. AT&T
         and  its  subsidiaries  each  continue  to  be  responsible  for  their
         respective  liabilities.  Holders of each class of AT&T  Liberty  Media
         Group tracking stock are common stockholders of AT&T and are subject to
         risks  associated with an investment in AT&T and all of its businesses,
         assets and  liabilities.  The  issuance  of AT&T  Liberty  Media  Group
         tracking stock does not affect the rights of creditors of AT&T.

         The  financial  impacts of AT&T issuing and  purchasing  shares of AT&T
         Liberty  Media Group  tracking  stock are  reflected in these  combined
         financial statements for Liberty Media Group.

         Pursuant to amended  corporate  governance  documents  for the entities
         attributed to the Liberty Media Group and certain agreements among AT&T
         and TCI,  the  business  of Liberty  Media  Group will  continue  to be
         managed by certain persons who were members of TCI's  management  prior
         to the AT&T  Merger.  As a  result,  AT&T  does not have a  controlling
         financial  interest for financial  reporting  purposes over the Liberty
         Media Group and  therefore  accounts for the Liberty  Media Group as an
         equity method investment.

                                   (continued)
<PAGE>

(2)      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, 2000 and 1999 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 securities held by the Company are classified as
         available-for-sale  and are carried at fair value.  Unrealized  holding
         gains and losses on  securities  classified as  available-for-sale  are
         carried net of taxes as a component of accumulated other  comprehensive
         earnings in combined  attributed net assets.  Realized gains and losses
         are determined on a specific-identification basis.

         Other investments in which the 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's voting interest is 20% to 50%, the equity method of
         accounting  is  generally  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.

         Subsequent to the AT&T Merger,  changes in the Company's  proportionate
         share of the  underlying  equity of an attributed  subsidiary or equity
         method  investee,  which result from the issuance of additional  equity
         securities  by such  attributed  subsidiary  or  equity  investee,  are
         recognized as gains or losses in the Company's  combined  statements of
         attributed net assets.

                                   (continued)
<PAGE>

         The Company  continually reviews its investments to determine whether a
         decline in fair value below the cost basis is other than temporary.  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 and the amount
         of the write-down is included in the combined  statements of operations
         as an impairment of investments.

         Property and Equipment

         Property and equipment,  including significant improvements,  is stated
         at cost.  Depreciation  is  computed  on a  straight-line  basis  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 on a straight-line  basis
         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 on a  straight-line  basis over 20
         years.

         Impairment of Long-lived Assets

         The Company  periodically  reviews the  carrying  amounts of  property,
         plant and  equipment  and its  intangible  assets to determine  whether
         current events or  circumstances  warrant  adjustments to such carrying
         amounts. If an impairment adjustment is deemed necessary,  such loss is
         measured by the amount that the carrying  value of such assets  exceeds
         their fair value.  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.

         Minority Interests

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

                                   (continued)
<PAGE>

         Preferred  stock (and  accumulated  dividends  thereon)  of  attributed
         subsidiaries are included in minority interests in equity of attributed
         subsidiaries.  Dividend  requirements  on  such  preferred  stocks  are
         reflected as minority interests in earnings of attributed  subsidiaries
         in the accompanying combined 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 attributed  foreign
         subsidiary and foreign equity method  investee.  Assets and liabilities
         of attributed  foreign  subsidiaries  and foreign equity  investees are
         translated at the spot rate in effect at the applicable reporting date,
         and the combined  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 combined attributed net
         assets.

         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
         combined  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, 2000, as published in The Wall Street Journal.

         Derivative Instruments and Hedging Activities

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

         Disclosures  regarding the fair value of derivative and other financial
         instruments  are  included  in  notes  5 and 8.  Fair  value  of  these
         instruments  is based on market quotes or option  pricing  models using
         the historical volatility of the underlying security.

                                   (continued)
<PAGE>

         Statement of Financial  Accounting  Standards No. 133,  Accounting  for
         Derivative Instruments and Hedging Activities,  as amended by Statement
         of Financial  Accounting  Standards No. 137,  Accounting for Derivative
         Instruments and Hedging  Activities - Deferral of the Effective Date of
         FASB Statement No. 133, and Statement of Financial Accounting Standards
         No. 138,  Accounting  for Certain  Derivative  Instruments  and Certain
         Hedging Activities, is effective for the Company as of January 1, 2001.
         Statement of Financial  Accounting  Standards  No. 133 requires that an
         entity  recognize  all  derivatives  as either  assets  or  liabilities
         measured at fair value. The accounting for changes in the fair value of
         a derivative  depends on the use of the  derivative.  Adoption of these
         new accounting  standards will result in cumulative after-tax increases
         in net earnings of  approximately  $800 million and reductions in other
         comprehensive  earnings  of  approximately  $300  million  in the first
         quarter of 2001.  The adoption will also impact assets and  liabilities
         recorded on the balance sheet.

         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.

         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 Media Group  continues to account
         for stock-based  compensation  pursuant to Accounting  Principles Board
         Opinion No. 25 ("APB Opinion No. 25").

         Compensation  relating to stock options with tandem stock  appreciation
         rights  ("SARs")  granted to employees  of Liberty  Media Group and its
         subsidiaries  have  been  recorded  as  variable  award  plans  in  the
         accompanying  combined financial statements pursuant to APB Opinion No.
         25.  Liabilities  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  amount  of  compensation  under
         Statement 123 would not have been significantly different from what has
         been reflected in the accompanying combined financial statements due to
         substantially  all of Liberty  Media  Group's stock option plans having
         tandem SARs,  which are treated as liabilities for financial  statement
         purposes and require periodic  remeasurement under both APB Opinion No.
         25 and Statement 123.

                                   (continued)
<PAGE>

         Agreements that may require Liberty Media Group to reacquire  interests
         in  subsidiaries  held by  officers  and  employees  in the  future are
         marked-to-market  periodically  with  corresponding  adjustments  being
         recorded to stock compensation expense.

         Reclassifications

         Certain prior period amounts have been  reclassified for  comparability
         with the 2000 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.
<TABLE>
(3)      Supplemental Disclosures to Combined Statements of Cash Flows
<CAPTION>
                                                       New Liberty                         Old Liberty
                                           --------------------------------    ---------------------------------
                                               Year             Ten months       Two months             Year
                                               ended              ended            ended                ended
                                           December 31,        December 31,    February 28,         December 31,
                                           ------------        ------------    ------------         ------------
                                               2000                1999             1999                1998
                                           ------------        ------------    ------------         ------------
                                                                        amounts in millions
         <S>                               <C>                          <C>             <C>                <C>
         Cash paid for acquisitions:
             Fair value of assets
               acquired                    $      3,733                 122              --                  903
             Net liabilities assumed             (1,208)                (13)             --                 (107)
             Deferred tax liability                (281)                 --              --                 (154)
             Minority interest                     (445)                 --              --                  224
             Contribution to combined
                attributed net assets for
                acquisitions                     (1,064)                 --              --                 (772)
             Other                                   --                  --              --                   (2)
                                           ------------        ------------    ------------         ------------

                Cash paid for acquisitions $        735                 109              --                   92
                                           ============        ============    ============         ============
                Cash paid for interest     $        335                  93              32                  112
                                           ============        ============    ============         ============
                Cash paid for income taxes $         --                  --              --                   29
                                           ============        ============    ============         ============
</TABLE>
         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.

                                   (continued)

<PAGE>
<TABLE>
<CAPTION>
         The following  table  reflects the change in cash and cash  equivalents
         resulting from the AT&T Merger and related  restructuring  transactions
         (amounts in millions):
         <S>                                                                                          <C>
         Cash and cash equivalents prior to the AT&T Merger                                            $      211
             Cash received in the Asset Transfers, net of cash balances transferred
                                                                                                            5,284

             Cash paid to TCI for certain warrants                                                           (176)
                                                                                                       ----------

         Cash and cash equivalents subsequent to the AT&T Merger                                       $    5,319
                                                                                                       ==========
</TABLE>
<TABLE>
<CAPTION>
(4)      Investments in Affiliates Accounted for under the Equity Method
         ---------------------------------------------------------------

         Liberty  Media Group has various  investments  accounted  for under the
         equity  method.  The following  table  includes the Company's  carrying
         amount and percentage ownership of the more significant  investments in
         affiliates at December 31, 2000 and the carrying amount at December 31,
         1999:

                                                               December 31,               December 31,
                                                                   2000                       1999
                                                      -------------------------------- ---------------
                                                      Percentage         Carrying             Carrying
                                                      Ownership           Amount               Amount
                                                      ---------      ----------------- ---------------
                                                                              amounts in millions
        <S>                                             <C>          <C>                       <C>
         USA Networks, Inc. ( "USAI ") and related
             investments                                    21%      $          2,824           2,699
         Telewest Communications plc ( "Telewest ")         25%                 2,712           1,996
         Discovery Communications, Inc. ("Discovery")       49%                 3,133           3,441
         Gemstar-TV Guide International, Inc.
             ("Gemstar")                                    21%                 5,855              --
         QVC, Inc. ( "QVC ")                                43%                 2,508           2,515
         UnitedGlobalCom, Inc. ("UnitedGlobalCom")          11%                   314             505
         TV Guide                                                                  --           1,732
         Foreign investments (other than Telewest)      various                 1,754           2,190
         Other                                          various                 1,364             844
                                                                         -------------   ---------------
                                                                         $    20,464              15,922
                                                                         =============   ===============
</TABLE>
                                   (continued)
<PAGE>
The following table reflects Liberty Media Group's share of earnings (losses) of
affiliates:
<TABLE>
<CAPTION>
                                                          New Liberty                             Old Liberty
                                               --------------------------------      ---------------------------------
                                                   Year             Ten months       Two months               Year
                                                   ended               ended            ended                 ended
                                               December 31,        December 31,      February 28,         December 31,
                                               ------------        ------------      ------------         ------------
                                                   2000                1999                 1999              1998
                                               ------------        ------------      ------------         ------------
                                                                         amounts in millions
         <S>                                   <C>                         <C>                <C>               <C>
         USAI and related investments          $         (36)               (20)               10                   30
         Telewest                                       (441)              (222)              (38)                (134)
         Discovery                                      (293)              (269)               (8)                 (39)
         Gemstar                                        (254)                --                --                   --
         QVC                                             (12)               (11)               13                   64
         UnitedGlobalCom                                (211)                23                --                   --
         Teligent, Inc. ("Teligent")                    (430)                --                --                   --
         Foreign investments                            (350)              (208)              (27)                (146)
         PCS Ventures (note 5)                            --                 --                --                 (629)
         Other                                          (134)              (197)              (16)                (180)
                                               -------------       ------------      ------------         ------------
                                               $      (2,161)              (904)              (66)              (1,034)
                                               =============       ============      ============         ============
</TABLE>
         The $15 billion  aggregate  excess of Liberty Media  Group's  aggregate
         carrying   amount  in  its   affiliates   over  Liberty  Media  Group's
         proportionate  share of its  affiliates'  net assets is being amortized
         over  estimated  useful  lives  ranging  from  2  to  20  years.   Such
         amortization was approximately $1,058 million, $463 million, $9 million
         and $8 million for the year ended  December  31,  2000,  the ten months
         ended December 31, 1999, the two months ended February 28, 1999 and the
         year ended December 31, 1998, respectively, and is included in share of
         losses of affiliates.

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

         Summarized  unaudited combined financial  information for affiliates is
         as follows:
                                                          December 31,
                                                     -----------------------
                                                        2000         1999
                                                     ----------   ----------
                                                       amounts in millions
         Combined Financial Position
              Investments                            $    1,924        1,415
              Property and equipment, net                11,854        8,885
              Other intangibles, net                     31,619        19,778
              Other assets, net                          10,014         9,207
                                                     ----------   -----------
                  Total assets                       $   55,411        39,285
                                                     ==========   ===========
              Debt                                   $   21,216        17,210
              Other liabilities                          15,373        12,645
              Owners' equity                             18,822         9,430
                                                     ----------   -----------
                  Total liabilities and equity       $   55,411        39,285
                                                     ==========   ===========

                                   (continued)
<PAGE>
<TABLE>
<CAPTION>
                                                  Year           Ten months       Two months          Year
                                                  ended             ended           ended             ended
                                               December 31,     December 31,      February 28,     December 31,
                                               ------------     ------------      ------------     ------------
                                                   2000             1999              1999             1998
                                               ------------     ------------      ------------     ------------
                                                                       amounts in millions
         <S>                                   <C>                    <C>               <C>             <C>
         Combined Operations

              Revenue                          $     13,895           10,492             2,341           14,062
              Operating expenses                    (12,784)          (9,066)           (1,894)         (13,092)
              Depreciation and amortization          (2,328)          (1,461)             (353)          (2,629)
                                               ------------     ------------      ------------     ------------
                  Operating income (loss)            (1,217)             (35)               94           (1,659)
              Interest expense                       (1,185)            (886)             (281)          (1,728)
              Other, net                                 (2)            (151)             (127)            (166)
                                               ------------     ------------      ------------     ------------
                  Net loss                     $     (2,404)          (1,072)             (314)          (3,553)
                                               ============     ============      ============     ============
</TABLE>
         USAI

         USAI owns and operates businesses in network and television production,
         television  broadcasting,  electronic retailing,  ticketing operations,
         and  internet  services.  At December  31,  2000,  Liberty  Media Group
         directly  and  indirectly  held 74.4  million  shares of USAI's  common
         stock.  Liberty  Media  Group  also held  shares  directly  in  certain
         subsidiaries of USAI which are  exchangeable  into 79 million shares of
         USAI common stock.  Liberty Media Group's  direct  ownership of USAI is
         currently  restricted  by  Federal  Communications  Commission  ("FCC")
         regulations.  The exchange of these shares can be accomplished  only if
         there is a change to  existing  regulations  or if Liberty  Media Group
         obtains  permission  from the FCC. If the exchange of subsidiary  stock
         into USAI common stock was  completed  at December  31,  2000,  Liberty
         Media Group would own 153.4 million shares or  approximately  21% (on a
         fully-diluted  basis) of USAI common  stock.  USAI's common stock had a
         closing market value of $19.44 per share on December 31, 2000.  Liberty
         Media  Group   accounts  for  its   investments  in  USAI  and  related
         subsidiaries on a combined basis under the equity method.

         In  February  1998,  USAI paid cash and  issued  shares  and one of its
         subsidiaries  issued  shares  in  connection  with the  acquisition  of
         certain   assets  from   Universal   Studios,   Inc.  (the   "Universal
         Transaction").   Liberty  Media  Group  recorded  an  increase  to  its
         investment  in  USAI  of  $54  million  and  an  increase  to  combined
         attributed net assets of $33 million (after  deducting  deferred income
         taxes of $21 million) as a result of this share issuance.

         USAI  issued  shares in June 1998 to  acquire  the  remaining  stock of
         Ticketmaster   Group,  Inc.  which  it  did  not  previously  own  (the
         "Ticketmaster  Transaction").  Liberty Media Group recorded an increase
         to its  investment  in USAI of $52  million and an increase to combined
         attributed net assets of $31 million (after  deducting  deferred income
         taxes of $21 million) as a result of this share  issuance.  No gain was
         recognized in the combined  statement of operations  and  comprehensive
         earnings  for  either the  Universal  Transaction  or the  Ticketmaster
         Transaction  due  primarily  to  Liberty  Media  Group's  intention  to
         purchase additional equity interests in USAI.

                                   (continued)
<PAGE>
         In connection with the Universal  Transaction,  Liberty Media Group was
         granted an  antidilutive  right with respect to any future  issuance of
         USAI's common stock, subject to certain limitations, that enables it to
         maintain its percentage ownership interests in USAI.

         Telewest

         Telewest   currently  operates  and  constructs  cable  television  and
         telephone systems in the UK. Flextech Limited ("Flextech") develops and
         sells a variety of  television  programming  in the UK. In April  2000,
         Telewest  acquired  Flextech.  As a result,  each share of Flextech was
         exchanged  for  3.78 new  Telewest  shares.  Prior to the  acquisition,
         Liberty  Media  Group  owned an  approximate  37%  equity  interest  in
         Flextech  and a 22% equity  interest  in  Telewest.  As a result of the
         acquisition,  Liberty  Media  Group owns an  approximate  24.6%  equity
         interest in  Telewest.  Liberty  Media Group  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  Media
         Group's  interest in Flextech and the fair value of the Telewest shares
         received. At December 31, 2000 Liberty Media Group indirectly owned 724
         million  of  the  issued  and  outstanding  Telewest  ordinary  shares.
         Telewest's  ordinary shares reported a closing price of $1.58 per share
         on December 31, 2000.

         Effective  September 1, 1998,  Telewest and General Cable PLC ("General
         Cable")  consummated  a merger (the  "General  Cable  Merger") in which
         holders of General Cable received New Telewest  shares and cash.  Based
         upon Telewest's closing price of $1.51 per share on April 14, 1998, the
         General Cable Merger was valued at approximately $1.1 billion. The cash
         portion of the General  Cable Merger was  financed  through an offer to
         qualifying Telewest  shareholders for the purchase of approximately 261
         million  new  Telewest  shares  at a price  of  $1.57  per  share  (the
         "Telewest  Offer").  Liberty  Media  Group  subscribed  to  85  million
         Telewest  ordinary  shares  at an  aggregate  cost of $133  million  in
         connection  with the Telewest  Offer.  In  connection  with the General
         Cable  Merger,  Liberty Media Group  converted  its entire  holdings of
         Telewest  convertible  preference  shares  (133  million  shares)  into
         Telewest  ordinary  shares.  As a result of the General  Cable  Merger,
         Liberty Media Group's ownership  interest in Telewest decreased to 22%.
         In  connection  with the  increase  in  Telewest's  equity,  net of the
         dilution of Liberty Media Group's  interest in Telewest,  that resulted
         from the General Cable Merger,  Liberty Media Group recorded a non-cash
         gain of $60 million  (before  deducting  deferred  income  taxes of $21
         million) during 1998.

         Gemstar

         Gemstar is a leading  global  technology  and media company  focused on
         consumer entertainment. The common stock of Gemstar is publicly traded.
         At December 31, 2000,  Liberty Media Group held 87.5 million  shares of
         Gemstar  common  stock.  Gemstar's  stock  reported a closing  price of
         $46.13 per share on December 31, 2000.

                                   (continued)
<PAGE>
         On July 12,  2000,  TV Guide and  Gemstar  completed  a merger  whereby
         Gemstar acquired TV Guide. TV Guide shareholders  received .6573 shares
         of Gemstar  common stock in exchange  for each share of TV Guide.  As a
         result of this  transaction,  133  million  shares of TV Guide  held by
         Liberty Media Group were  exchanged for 87.5 million  shares of Gemstar
         common  stock.   Following   the  merger,   Liberty  Media  Group  owns
         approximately  21.4% of Gemstar.  Liberty Media Group recognized a $4.4
         billion gain (before  deducting  deferred income taxes of $1.7 billion)
         on such transaction based on the difference  between the carrying value
         of Liberty Media Group's interest in TV Guide and the fair value of the
         Gemstar securities received.

         UnitedGlobalCom

         UnitedGlobalCom is a global broadband communications provider of video,
         voice and data services with operations in over 20 countries throughout
         the  world.  At  December  31,  2000,  Liberty  Media  Group  owned  an
         approximate   10.9%  economic   ownership   interest   representing  an
         approximate  36.8% voting  interest in  UnitedGlobalCom.  Liberty Media
         Group owns 9.9 million shares of  UnitedGlobalCom  Class B common stock
         and .6 million  shares of  UnitedGlobalCom  Class A common  stock.  The
         UnitedGlobalCom  Class B common stock is convertible,  on a one-for-one
         basis,  into  UnitedGlobalCom  Class A common stock.  UnitedGlobalCom's
         Class A common  stock  reported a closing  price of $13.63 per share on
         December 31, 2000.

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

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

                                                          December 31,
                                                   ---------------------------
                                                       2000           1999
                                                   -----------    ------------
                                                       amounts in millions
         Sprint Corporation ("Sprint PCS")         $     5,192          10,186
         Time Warner, Inc. ("Time Warner")               6,325           8,202
         News Corp.                                      2,342           2,403
         Motorola                                        1,982           3,430
         Other available-for-sale securities             2,989           3,773
         Other investments, at cost, and related
           receivables                                     705             985
                                                   -----------     -----------
                                                        19,535          28,979
             Less short-term investments                   500             378
                                                   -----------     -----------
                                                   $    19,035          28,601
                                                   ===========     ===========
         Sprint PCS

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

                                   (continued)
<PAGE>

         Pursuant  to a final  judgment  (the  "Final  Judgment")  agreed  to by
         Liberty Media Group,  AT&T and the United States  Department of Justice
         (the "DOJ") on December 31, 1998,  Liberty Media Group  transferred all
         of its  beneficially  owned  securities of Sprint PCS 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  Media  Group  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
         Media Group.

         The Final Judgment requires that the Trustee vote the Sprint Securities
         beneficially   owned  by  Liberty  Media  Group  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  Media Group of
         additional  Sprint  Securities,  with certain  exceptions,  without the
         prior written consent of the DOJ.

         On November 23, 1998,  Liberty Media Group exchanged its investments in
         certain wireless  businesses ("PCS Ventures") for the Sprint Securities
         (the "PCS  Exchange").  Liberty Media Group recorded a non-cash gain of
         $1.9 billion (before  deducting  deferred income taxes of $647 million)
         on the PCS Exchange based on the difference between the carrying amount
         of Liberty Media Group's equity method interest in the PCS Ventures and
         the fair value of the Sprint Securities received.

         Time Warner

         Liberty  Media Group holds shares of a series of Time  Warner's  series
         common stock with limited voting rights (the "TW Exchange  Stock") that
         are convertible  into an aggregate of 114 million shares of Time Warner
         common stock.  Liberty Media Group  accounts for its investment in Time
         Warner as an available-for-sale security.

         On January 11, 2001,  Time Warner and America  Online,  Inc.  completed
         their  merger,  pursuant to which each share of the Time Warner  common
         stock held by Liberty Media Group was  converted  into 1.5 shares of an
         identical  series of stock of AOL Time Warner Inc. ("AOL Time Warner").
         Following this conversion,  Liberty Media Group owns  approximately 171
         million shares of AOL Time Warner,  which  represents an approximate 4%
         interest in the combined entity.

         Pursuant  to an option  granted by Liberty  Media  Group,  Time  Warner
         acquired Southern Satellite Systems,  Inc.,  effective January 1, 1998,
         for $213 million in cash. Liberty Media Group recognized a $515 million
         pre-tax gain in connection  with such  transaction in the first quarter
         of 1998.

                                   (continued)
<PAGE>

         News Corp.

         On July 15,  1999,  News  Corp.  acquired  Liberty  Media  Group's  50%
         interest in  Fox/Liberty  Networks in exchange  for 51.8  million  News
         Corp.  American  Depository  Receipts ("ADRs")  representing  preferred
         limited voting  ordinary  shares of News Corp. Of the 51.8 million ADRs
         received,  3.6 million were placed in an escrow (the  "Escrow  Shares")
         pending  an  independent  third  party  valuation,   as  of  the  third
         anniversary of the transaction.  The remainder of the 51.8 million ADRs
         received  (the  "Restricted  Shares") are subject to a two-year  lockup
         which  restricts  any  transfer of the  securities  for a period of two
         years from the date of the  transaction.  Liberty Media Group  recorded
         the Restricted Shares at fair value of $1,403 million, which included a
         discount from market value due to the two-year restriction on transfer,
         resulting  in a $13  million  gain  on the  transaction.  In a  related
         transaction,  Liberty Media Group acquired from News Corp. 28.1 million
         additional ADRs  representing  preferred limited voting ordinary shares
         of News Corp.  for  approximately  $695  million.  Liberty  Media Group
         accounts  for its  investment  in News Corp.  as an  available-for-sale
         security.

         Motorola

         On January 5,  2000,  Motorola  completed  the  acquisition  of General
         Instrument  through a merger of General  Instrument with a wholly owned
         subsidiary  of Motorola.  In connection  with the merger  Liberty Media
         Group  received 54 million  shares and  warrants to purchase 37 million
         shares of Motorola common stock in exchange for its holdings in General
         Instrument.   Liberty  Media  Group  recognized  a  $2.2  billion  gain
         (excluding  related  tax expense of $883  million) on such  transaction
         during the first  quarter of 2000 based on the  difference  between the
         carrying value of Liberty Media Group's interest in General  Instrument
         and the fair value of the Motorola  securities  received.  During 2000,
         Liberty  Media Group  exercised a warrant to purchase  approximately  9
         million  shares of Motorola  common stock at an exercise price of $8.26
         per share. At December 31, 2000 Liberty Media Group holds approximately
         63 million  shares of  Motorola  common  stock and vested  warrants  to
         purchase an additional 28 million shares of such common stock.

         AT&T

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

                                   (continued)
<PAGE>

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

                                                           December 31,
                                                    ---------------------------
                                                        2000           1999
                                                    ------------   ------------
                                                        amounts in millions
               Equity securities:
                  Cost basis                        $     17,641         13,661
                  Gross unrealized holding gains           2,254         11,457
                  Gross unrealized holding losses         (2,620)          (646)
                                                    ------------   ------------
                  Fair value                              17,275         24,472
                                                    ------------   ------------
               Debt securities:
                  Cost basis                               1,533          2,017
                  Gross unrealized holding gains              86             --
                  Gross unrealized holding losses            (64)           (22)
                                                    ------------   ------------
                  Fair value                        $      1,555          1,995
                                                    ------------   ------------


         Management estimates the fair market value of all of its investments in
         available-for-sale  securities and others  aggregated $19.7 billion and
         $29.2 billion at December 31, 2000 and December 31, 1999, 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.

         Equity Collars and Put Spread Collars

         The Company enters into equity collars and put spread collars to manage
         pricing risk  associated  with its  investments  in certain  marketable
         securities.  These  instruments  are  recorded  at fair value  based on
         option pricing models using the historical volatility of the underlying
         security.  Accounting  for  changes in fair value of these  instruments
         depends on the  amount of  correlation  between  the change in the fair
         value of the  instrument  and the  offsetting  change in the underlying
         equity security.  Equity collars generally have a high correlation with
         the underlying security, while put spread collars generally do not have
         high correlation.  Accordingly, changes in the fair value of the equity
         collar are  recorded  as an  adjustment  to the  carrying  value of the
         related   investment  with  an  offsetting  change  recorded  in  other
         comprehensive  earnings.  The  offsetting  change  in the  value of put
         spread collars is recorded in the combined  statements of operations as
         unrealized  gains  on  financial   instruments.   The  following  table
         illustrates  the fair value of the  Company's  equity  collars  and put
         spread collars as follows:

                                                          December 31,
                                                    ------------------------
              Type of Derivative                       2000          1999
              ------------------                    ----------    ----------

               Equity collars                       $    1,293          (633)
               Put spread collars                          188            --

                                   (continued)
<PAGE>
(6)      Impairment of Investments

         During the year ended December 31, 2000, Liberty Media Group determined
         that its investments in ICG  Communications,  Inc.  ("ICG"),  Teligent,
         Motorola,  Primedia,  Inc. and certain  others  experienced  other than
         temporary  declines  in  value.  As a  result,  the cost  bases of such
         investments  were adjusted to their  respective fair values at December
         31,  2000  based  primarily  on  recent  quoted  market  prices.  These
         adjustments  resulted in realized losses of approximately  $2.8 billion
         and  are  reflected  as  impairment  of  investments  in  the  combined
         statements of operations.

(7)      Acquisitions and Dispositions

         2000

         Associated Group, Inc. ("Associated Group")

         On January 14, 2000,  Liberty Media Group  completed its acquisition of
         Associated  Group pursuant to a merger  agreement  among AT&T,  Liberty
         Media Group 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) approximately
         19.7  million  shares of AT&T  common  stock,  (2)  approximately  46.8
         million  shares of AT&T Class A Liberty Media Group common  stock,  (3)
         approximately  10.6 million  shares of AT&T Class B Liberty Media Group
         common stock, (4) approximately  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 Media Group.
         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  Media  Group  recorded  a $778  million
         increase to combined attributed net assets.

                                   (continued)

<PAGE>

         Liberty Satellite and Technology, Inc. ("LSAT")

         On March 16, 2000,  Liberty Media Group  purchased  shares of preferred
         stock in TCI  Satellite  Entertainment,  Inc. in  exchange  for Liberty
         Media Group's  economic  interest in  approximately 5 million shares of
         Sprint  PCS Group  stock,  valued  at $300  million.  During  the third
         quarter of 2000, TCI Satellite Entertainment,  Inc. changed its name to
         LSAT.  Liberty Media Group 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  Media Group  approximately  85% of the voting  power of
         LSAT. In connection with this transaction, Liberty Media Group 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 Media Group announced that it had completed
         its cash tender offer for the  outstanding  common stock of Ascent at a
         price of $15.25 per share.  Approximately 85% of the outstanding shares
         of common stock of Ascent were  tendered in the offer and Liberty Media
         Group paid approximately  $385 million.  On June 8, 2000, Liberty Media
         Group completed its acquisition of 100% of Ascent for an additional $67
         million.  Such transaction was accounted for as a purchase and the $228
         million  excess of the  purchase  price  over the fair value of the net
         assets acquired is being amortized over 5 years.

         Liberty Livewire Corporation ("Liberty Livewire")

         On April 10, 2000,  Liberty Media Group acquired all of the outstanding
         common  stock of Four Media  Company  ("Four  Media") in  exchange  for
         approximately $123 million,  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. The acquisition was accounted for as a
         purchase.  In  connection  with the AT&T  Class A Liberty  Media  Group
         common stock issued in this transaction, Liberty Media Group recorded a
         $145 million  increase to combined  attributed  net assets and the $276
         million  excess of the  purchase  price  over the fair value of the net
         assets acquired is being  amortized over 20 years.  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.

                                   (continued)

<PAGE>

         On June 9, 2000, Liberty Media Group acquired a controlling interest in
         The Todd-AO  Corporation  ("Todd-AO"),  consisting of approximately 6.5
         million shares of Class B Common Stock of Todd-AO,  representing 60% of
         the  equity  and  approximately  94% of the  voting  power  of  Todd-AO
         outstanding   immediately  prior  to  the  closing,   in  exchange  for
         approximately  5.4 million  shares of AT&T Class A Liberty  Media Group
         common stock.  The  acquisition  was  accounted  for as a purchase.  In
         connection  with the AT&T  Class A Liberty  Media  Group  common  stock
         issued in this transaction, Liberty Media Group recorded a $106 million
         increase to combined  attributed  net assets and the $96 million excess
         of the purchase price over the fair value of the net assets acquired is
         being  amortized  over 20  years.  Todd-AO  provides  sound,  video and
         ancillary  post  production  and  distribution  services  to the motion
         picture and television industries in the United States and Europe.

         Immediately  following the closing of such  transaction,  Liberty Media
         Group  contributed  to Todd-AO 100% of the capital stock of Four Media,
         in exchange for approximately 16.6 million shares of the Class B Common
         Stock of Todd-AO increasing Liberty Media Group's ownership interest in
         Todd-AO to approximately 84% of the equity and approximately 98% of the
         voting power of Todd-AO outstanding immediately following the closing.

         Following  Liberty  Media  Group's  acquisition  of  Todd-AO,  and  the
         contribution by Liberty Media Group to Todd-AO of Liberty Media Group's
         ownership in Four Media, Todd-AO changed its name to Liberty Livewire.

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

         1999

         TV Guide

         On March 1, 1999,  United Video Satellite Group, Inc. ("UVSG") 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 Media Group 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 Media Group's ownership interest in TV Guide,  Liberty Media
         Group  recognized a gain of $372  million  (before  deducting  deferred
         income taxes of $147 million).  Upon consummation,  Liberty Media Group
         began  accounting  for its interest in TV Guide under the equity method
         of accounting.

                                   (continued)

<PAGE>

         1998

         Pramer S.A. ("Pramer")

         On August 24, 1998,  Liberty Media Group  purchased  100% of the issued
         and  outstanding  common  stock of  Pramer,  an  Argentine  programming
         company, for a total purchase price of $97 million, which was satisfied
         by $32 million in cash and the issuance of notes  payable in the amount
         of $65 million.  Such  transaction was accounted for under the purchase
         method.  Accordingly,  the  results of  operations  of Pramer have been
         consolidated  with those of Liberty  Media Group since August 24, 1998.
         The  $101  million  excess  cost  over  acquired  net  assets  is being
         amortized over ten years.

         Other

         During 1998, TCI acquired  certain  minority  interests of TV Guide and
         Liberty Media International,  Inc. (formerly named  Tele-Communications
         International,   Inc.).   The   transactions   were  accounted  for  as
         acquisitions of minority interests. The aggregate value assigned to the
         shares  issued by TCI was based  upon the  market  value of the  shares
         issued  at  the  time  each  transaction  was  announced.   Immediately
         following  the  transactions  TCI  contributed  the minority  interests
         acquired to Liberty Media Group. The contributions  were recorded as an
         increase to combined attributed net assets of $772.

         Proforma Information

         The following  unaudited  condensed results of operations for the years
         ended  December  31,  2000 and 1999  were  prepared  assuming  the 2000
         acquisitions discussed above and the AT&T Merger occurred on January 1,
         1999.  These  pro  forma  amounts  are not  necessarily  indicative  of
         operating   results  that  would  have  occurred  if  the  acquisitions
         discussed above and the AT&T Merger had occurred on January 1, 1999.

                                        Years ended
                                        December 31,
                                   -----------------------
                                      2000         1999
                                   ----------   ----------
                                    (amounts in millions)

              Revenue              $    1,769        1,848
              Net earnings (loss)  $    1,416       (2,853)

                                   (continued)


<PAGE>
(8)      Long-Term Debt

         Debt is summarized as follows:
                                           Weighted
                                            average
                                           interest
                                             rate              December 31,
                                                       ----------------------
                                             2000         2000        1999
                                           ---------   ----------  ----------
                                                        amounts in millions
         Parent company debt:
             Senior notes                    7.88%     $      742         741
             Senior debentures               8.33%          1,486         494
             Senior exchangeable
               debentures                    3.70%          1,679       1,022
             Securities lending
               agreement                     6.53%            338          --
             Bank credit facilities          7.43%            475         390
                                                       ----------   ---------
                                                            4,720       2,647
         Debt of subsidiaries:
             Bank credit facilities          8.41%          1,129         573
             Senior notes                   11.88%            179          --
             Other debt, at varying rates                     335          57
                                                       ----------   ---------
                                                            1,643         630
                                                       ----------   ---------
             Total debt                                     6,363       3,277
         Less current maturities                            1,094         554
                                                       ----------   ---------
             Total long-term debt                      $    5,269       2,723
                                                       ==========   =========
         Senior Notes and Debentures

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

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

         The  senior  notes  and  debentures  are  stated  net  of an  aggregate
         unamortized  discount of $22  million  and $15 million at December  31,
         2000 and  1999,  respectively,  which is being  amortized  to  interest
         expense in the combined statements of operations.

         Senior Exchangeable Debentures

         On November  16,  1999,  Liberty  Media Group issued $869 million of 4%
         Senior Exchangeable  Debentures due 2030 for aggregate cash proceeds of
         $854  million.  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 Media Group's  ownership level
         in the Sprint PCS Group falls below a specified  level,  Liberty  Media
         Group may, at its election,  pay the exchange value in cash, Sprint PCS
         Group stock or a combination thereof.  Prior to such time, the exchange
         value must be paid in cash.

                                   (continued)
<PAGE>

         On February 10, 2000, Liberty Media Group issued $750 million of 3-3/4%
         Senior Exchangeable  Debentures due 2030 for aggregate cash proceeds of
         $735 million.  On March 8, 2000,  an  additional  $60 million of 3-3/4%
         Senior  Exchangeable  Debentures  due 2030 were  issued  for  aggregate
         proceeds of $59 million.  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  Media  Group's
         ownership level in the Sprint PCS Group falls below a specified  level,
         Liberty  Media Group may, at its  election,  pay the exchange  value in
         cash,  Sprint PCS Group stock or a combination  thereof.  Prior to such
         time, the exchange value must be paid in cash.

         The carrying amount of the senior  exchangeable  debentures is adjusted
         based on the fair  value of the  underlying  Sprint  PCS  Group  stock.
         Increases or decreases in the value of the underlying  Sprint PCS Group
         stock above the principal amount of the senior exchangeable  debentures
         (the  "Contingent  Portion") is recorded as an  adjustment  to interest
         expense in the combined  statements  of  operations  and  comprehensive
         earnings.  If the  value  of the  underlying  Sprint  PCS  Group  stock
         decreases  below  the  principal  amount  of  the  senior  exchangeable
         debentures  there  is  no  effect  on  the  principal  amount  of  such
         debentures.

         Securities Lending Agreement

         On  January  7,  2000,  a trust,  which  holds  Liberty  Media  Group's
         investment in Sprint, entered into agreements to loan 18 million shares
         of Sprint PCS Group stock to a third party, as Agent. The obligation to
         return those shares is secured by cash collateral  equal to 100% of the
         market  value of that stock,  which was $338  million at  December  31,
         2000.  During the  period of the loan,  which is  terminable  by either
         party at any time, the cash collateral is to be marked-to-market daily.
         The trust,  for the benefit of Liberty Media Group,  has the use of 80%
         of the cash collateral plus any interest earned thereon during the term
         of the loan,  and is  required to pay a rebate fee equal to the federal
         funds rate less 30 basis points to the  borrower of the loaned  shares.
         Unutilized  cash  collateral  of  $49  million  at  December  31,  2000
         represents  restricted  cash and is included in other current assets on
         the combined balance sheets. At December 31, 2000,  Liberty Media Group
         had utilized $289 million of the cash  collateral  under the securities
         lending agreement.

         At  December  31,  2000,  Liberty  Media Group had  approximately  $270
         million in unused lines of credit under its bank credit facilities. The
         bank  credit  facilities  of  Liberty  Media  Group  generally  contain
         restrictive   covenants   which  require,   among  other  things,   the
         maintenance of certain  financial  ratios,  and include  limitations on
         indebtedness,   liens,   encumbrances,    acquisitions,   dispositions,
         guarantees  and dividends.  Liberty Media Group was in compliance  with
         its debt  covenants at December 31, 2000.  Additionally,  Liberty Media
         Group  pays fees  ranging  from .15% to .375% per annum on the  average
         unborrowed portions of the total amounts available for borrowings under
         bank credit facilities.

         The U.S.  dollar  equivalent of the annual  maturities of Liberty Media
         Group's  debt for each of the next  five  years are as  follows:  2001:
         $1,094  million;  2002: $28 million;  2003:  $132 million;  2004:  $270
         million and 2005: $347 million.

                                   (continued)
<PAGE>

         Based on quoted market prices,  the fair value of Liberty Media Group's
         debt at December 31, 2000 is as follows (amounts in millions):

                 Senior notes of parent company                     $      737
                 Senior debentures of parent company                     1,384
                 Senior exchangeable debentures of parent
                   company                                               1,053
                 Senior notes of subsidiary                                184

         Liberty Media Group believes that the carrying  amount of the remainder
         of its debt approximated its fair value at December 31, 2000.

(9)      Income Taxes

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

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

         In periods when Liberty Media Group  generates  federal taxable income,
         AT&T has agreed to satisfy such tax  liability on Liberty Media Group's
         behalf up to a certain  amount.  The  reduction  of such  computed  tax
         liabilities will be accounted for by Liberty Media Group as an addition
         to combined  attributed net assets.  The total amount of future federal
         tax  liabilities  of Liberty  Media Group which AT&T will satisfy under
         the AT&T Tax Sharing  Agreement is  approximately  $830 million,  which
         represents  the tax  effect  of the  net  operating  loss  carryforward
         reflected  in TCI's final  federal  income tax  return,  subject to IRS
         adjustments.  Thereafter,  Liberty Media Group is required to make cash
         payments to AT&T for federal tax liabilities of Liberty Media Group.

         To the extent AT&T utilizes  existing net  operating  losses of Liberty
         Media Group,  such amounts will be accounted for by Liberty Media Group
         as a reduction of combined  attributed net assets. Net operating losses
         of  Liberty  Media  Group  with a tax  effected  carrying  value of $38
         million  and $88  million  were  recorded  as a  reduction  to combined
         attributed  net assets during the year ended  December 31, 2000 and the
         ten months ended December 31, 1999.

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

                                   (continued)
<PAGE>

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

         Liberty  Media  Group's  obligation  under  the  1995  TCI Tax  Sharing
         Agreement of approximately $138 million (subject to adjustment),  which
         is included in "due to related  parties," shall be paid at the time, if
         ever, that Liberty Media Corporation  deconsolidates from AT&T. Liberty
         Media Group's  receivable  under the 1997 TCI Tax Sharing  Agreement of
         approximately  $220  million  was  forgiven  in the  AT&T  Tax  Sharing
         Agreement  and recorded as an  adjustment  to combined  attributed  net
         assets by Liberty Media Group in connection with the AT&T Merger.

         Income tax benefit (expense) consists of:
<TABLE>
<CAPTION>
                                                  New Liberty                           Old Liberty
                                          ---------------------------          ------------------------------
                                             Year         Ten months            Two months            Year
                                             ended          ended                 ended               ended
                                          December 31,   December 31,           February 28,      December 31,
                                          ------------   ------------          -------------      ------------
                                              2000           1999                   1999              1998
                                          ------------   ------------          -------------      ------------
                                                                 amounts in millions
         <S>                              <C>                   <C>                     <C>             <C>
         Current:
             Federal                      $        277             75                     (3)               (1)
             State and local                        10             (3)                    (1)               (2)
             Foreign                                --             --                     --                (1)
                                          ------------   ------------          -------------      ------------
                                                   287             72                     (4)               (4)
                                          ------------   ------------          -------------      ------------
         Deferred:
             Federal                            (1,490)           873                   (169)           (1,190)
             State and local                      (331)           152                    (36)             (200)
             Foreign                                --             --                     --                (3)
                                          ------------   ------------          -------------      ------------
                                                (1,821)         1,025                   (205)           (1,393)
                                          ------------   ------------          -------------      ------------
         Income tax benefit (expense)     $     (1,534)         1,097                   (209)           (1,397)
                                          ============   ============          =============      ============
</TABLE>
                                   (continued)

<PAGE>
<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:
<CAPTION>
                                                          New Liberty                            Old Liberty
                                               ------------        ------------      ------------         ------------
                                                  Year             Ten months        Two months               Year
                                                 ended               ended             ended                 ended
                                               December 31,        December 31,      February 28,         December 31,
                                               ------------        ------------      ------------         ------------
                                                   2000                1999              1999                 1998
                                               ------------        ------------      ------------         ------------
                                                                        amounts in millions
         <S>                                   <C>                        <C>                <C>                <C>
         Computed expected tax benefit
             (expense)                         $     (1,058)              1,092               (53)              (1,244)
         Dividends excluded for income
             tax purposes                                22                  11                 6                   16
         Minority interest in equity of
             subsidiaries                                22                  16                 3                   33
         Amortization not deductible for
             income tax purposes                       (187)               (122)               (4)                 (21)
         State and local income taxes,
             net of federal income taxes               (204)                102               (29)                (132)
         Recognition of difference in
             income tax basis of
             investments in subsidiaries                (69)                 --              (133)                  (1)
         Change in valuation allowance                  (50)                 --                --                  (44)
         Other, net                                     (10)                 (2)                1                   (4)
                                               ------------        ------------      -------------        ------------
                                               $     (1,534)              1,097              (209)              (1,397)
                                               ============        ============      ============         ============
</TABLE>
         The tax effects of temporary  differences that give rise to significant
         portions of the deferred tax assets and  deferred  tax  liabilities  at
         December 31, 2000 and 1999 are presented below:

                                                          December 31,
                                                  ----------------------------
                                                      2000            1999
                                                  -------------   ------------
                                                       amounts in millions
         Deferred tax assets:
             Net operating and capital loss
               carryforwards                      $     295                 43
             Accrued stock compensation                 247                749
             Other future deductible amounts             --                 61
                                                  ---------       ------------
             Deferred tax assets                        542                853
                Less valuation allowance                131                 50
                                                  ---------       ------------
             Net deferred tax assets                    411                803
                                                  ---------       ------------
         Deferred tax liabilities:
             Investments in affiliates               11,255             13,915
             Intangible assets                          221                200
             Other                                       30                 45
                                                  ---------       ------------
             Deferred tax liabilities                11,506             14,160
                                                  ---------       ------------
         Net deferred tax liabilities             $  11,095             13,357
                                                  =========       ============

                                   (continued)
<PAGE>
         At December 31, 2000, Liberty Media Group had net operating and capital
         loss  carryforwards for income tax purposes  aggregating  approximately
         $800 million which,  if not utilized to reduce taxable income in future
         periods, will expire as follows:  2004: $63 million; 2005: $42 million;
         2006:  $14 million;  2007: $27 million;  2008:  $12 million;  2009: $23
         million;  2010: $34 million;  and beyond 2010: $585 million.  These net
         operating losses are subject to certain rules limiting their usage.

(10)     Combined Attributed Net Assets

         Stock Purchases

         During the year ended December 31, 2000, pursuant to a stock repurchase
         program,  14 million  shares of AT&T Class A Liberty Media Group common
         stock were purchased at an aggregate cost of $269 million.  Such amount
         is  reflected  as a decrease to combined  attributed  net assets in the
         accompanying combined financial statements.

         During the year ended December 31, 1998, pursuant to a stock repurchase
         program,  Liberty Media Group  repurchased  .2 million  shares of TCI's
         then  outstanding  TCI Ventures  Group  tracking  stock and 1.5 million
         shares of TCI's then outstanding  Liberty Media Group tracking stock at
         an aggregate cost of approximately $30 million.

         Stock Issuances of Subsidiaries and Equity Affiliates

         Certain  consolidated  subsidiaries  and equity  affiliates  of Liberty
         Media  Group 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 Media Group's ownership interest, that resulted from such stock
         issuances,   Liberty  Media  Group   recorded   increases  to  combined
         attributed net assets as follows (amounts in millions):

                                                                     Ten months
                                                    Year ended         ended
                                                   December 31,     December 31,
                                                       2000             1999
                                                   ------------     ------------
              Stock issuances by consolidated
                subsidiaries                       $    212              107
                  Stock issuances by equity
                    affiliates (net of deferred
                    income taxes of $75 million
                    and $1 million, respectively)       143                1
                                                   ------------     ------------
                                                   $    355              108
                                                   ============     ============

                                   (continued)

<PAGE>
         Transactions with Officers and Directors

         In December  2000,  Liberty  Media Group  entered  into an agreement to
         guaranty  the  repayment  of a revolving  line of credit  extended by a
         financial  institution  to a director  of Liberty  Media  Group with an
         aggregate  available amount of up to $19.2 million. In consideration of
         this  guaranty,  the director has agreed to pay Liberty  Media Group an
         annual fee of $96,000, payable quarterly, for each year of the two year
         term of the line of credit.  To secure the director's  repayment of any
         amount paid by Liberty Media Group under the guaranty, the director has
         granted to Liberty Media Group a security  interest in all of his stock
         options  and  tandem or  free-standing  SARs with  respect to shares of
         AT&T's  Liberty Media Group  tracking stock and shares of AT&T's common
         stock. If the value of these securities fall below two times the amount
         of the loan  Liberty  Media  Group  has  guaranteed,  the  director  is
         required  to pledge  additional  collateral  to Liberty  Media Group of
         sufficient value to maintain the two-times coverage ratio.

         In November  2000,  Liberty Media Group  granted  certain  officers,  a
         director of Liberty  Media Group and a board member of a subsidiary  an
         aggregate  4.0725%  common stock  interest in a subsidiary  that owns a
         direct interest in Liberty Livewire.  The common stock interest granted
         to  these  individuals  had a  value  of  approximately  $400,000.  The
         subsidiary  also awarded the director of Liberty Media Group 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 director.  Liberty Media Group and the
         individuals  entered  into  a  stockholders'  agreement  in  which  the
         individuals could require Liberty Media Group to repurchase, after five
         years,  all or part of their common stock interest in exchange for AT&T
         Class A Liberty Media Group common stock at its then fair market value.
         In  addition,  Liberty  Media  Group  has the right to  repurchase,  in
         exchange for AT&T Class A Liberty Media Group common stock,  the common
         stock  interests  held by the  individuals  at fair market value at any
         time.

         In  October  2000,  Liberty  Media  Group  restructured  its  ownership
         interests in certain assets into a new consolidated subsidiary. Liberty
         Media Group then sold a preferred  interest in such  subsidiary  to the
         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.

         In September 2000,  certain officers of Liberty Media Group 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 Media Group's  investments in satellite and technology  related
         assets.   Liberty   Media  Group  and  the  officers   entered  into  a
         shareholders agreement in which the officers could require a subsidiary
         of Liberty  Media Group to purchase,  after five years,  all or part of
         their common stock  interest in exchange for AT&T Class A Liberty Media
         Group common stock at the then fair market value. In addition,  Liberty
         Media Group has the right to  purchase,  in  exchange  for AT&T Class A
         Liberty Media Group common stock,  the common stock  interests  held by
         the officers at fair market value at any time.

                                   (continued)
<PAGE>

         In August 2000, a subsidiary of Liberty Media Group sold shares of such
         subsidiary's  Series A Convertible  Participating  Preferred Stock (the
         "Preferred  Shares") to a director of Liberty Media Group,  who is 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, an officer of Liberty Media Group,  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 10%
         interest in Jupiter  Telecommunications  Co., Inc.  Liberty Media Group
         and the individuals entered into a shareholders  agreement in which the
         individuals  could  require a  subsidiary  of  Liberty  Media  Group to
         purchase,  after five years, all or part of their common stock interest
         in exchange  for AT&T Class A Liberty  Media Group  common stock at its
         then fair market value. In addition,  Liberty Media Group has the right
         to purchase,  in exchange  for AT&T Class A Liberty  Media Group common
         stock,  the common stock  interests held by the officers at fair market
         value at any  time.  Liberty  Media  Group  recognized  $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 year ended December 31, 2000.

         In connection with the AT&T Merger, Liberty Media Group 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  combined  statements of  operations  and
         comprehensive earnings.

         Liberty  Media  Group  is  party  to  a  call  agreement  with  certain
         shareholders  of  AT&T  Class  B  Liberty  Media  Group  common  stock,
         including the Chairman of the Board of Directors,  which grants Liberty
         Media  Group a right to acquire  all of the AT&T Class B Liberty  Media
         Group common stock held by such shareholders in certain  circumstances.
         The price of acquiring  such shares is generally  limited to the market
         price of the AT&T Class A Liberty Media Group common stock,  plus a 10%
         premium.  Liberty  Media Group paid an aggregate  $140 million to these
         shareholders for the rights under the call agreement in February 1998.

         Transactions with AT&T and Other Related Parties

         Certain  subsidiaries of Liberty Media Group produce and/or  distribute
         programming  and  other  services  to  cable   distribution   operators
         (including   AT&T)  and  others  pursuant  to  long  term   affiliation
         agreements.  Charges to AT&T are based upon customary  rates charged to
         others.  Amounts included in revenue for services provided to AT&T were
         $243 million, $180 million, $43 million and $258 million for the twelve
         months  ended  December 31, 2000,  the ten months  ending  December 31,
         1999, the two month period ending  February 28, 1999 and the year ended
         December 31, 1998, respectively.

                                   (continued)
<PAGE>

         AT&T allocates certain corporate  general and  administrative  costs to
         Liberty Media Group  pursuant to an  intergroup  agreement for services
         provided.  Management  believes such allocation  methods are reasonable
         and  materially  approximate  the amount that Liberty Media Group would
         have  incurred  on  a  stand-alone   basis.  In  addition,   there  are
         arrangements  between  subsidiaries of Liberty Media Group and AT&T and
         its other subsidiaries for satellite  transponder  services,  marketing
         support,  programming,  and hosting services. These expenses aggregated
         $37 million,  $24 million,  $2 million and $28 million  during the year
         ended  December 31, 2000,  the ten months ended  December 31, 1999, the
         two months  ended  February  28, 1999 and the year ended  December  31,
         1998, respectively, and are included in operating, selling, general and
         administrative  expenses in the  accompanying  combined  statements  of
         operations and comprehensive earnings.

         On April 8, 1999,  Liberty Media Group 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 Media Group recorded an increase to combined attributed
         net assets of $354 million.

         During  September  1998,  TCI assigned its  obligation  under an option
         contract  to  Liberty  Media  Group.  As a result  of such  assignment,
         Liberty   Media  Group   recorded  a  $16  million   reduction  to  the
         intercompany amount due to TCI and a corresponding increase to combined
         attributed net assets.

         Due to Related Parties

         The  amounts  included  in  "Due  to  related   parties"   represent  a
         non-interest  bearing  intercompany  account which includes  income tax
         allocations  that are to be  settled  at some  future  date.  All other
         amounts included in the  intercompany  account are to be settled within
         thirty days following notification.

                                   (continued)

<PAGE>
(11)     Other Comprehensive Earnings

         Accumulated  other  comprehensive  earnings  included in Liberty  Media
         Group's combined  balance sheets and combined  statements of attributed
         net  assets  reflect  the  aggregate  of foreign  currency  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, net
                                                               adjustments       securities             of taxes
                                                             ------------------------------------- -----------------
                                                                              amounts in millions
         <S>                                                  <C>                    <C>                   <C>
         Balance at January 1, 1998                           $          3              765                   768
         Other comprehensive earnings                                    3            2,947                 2,950
                                                             ----------------   --------------    ------------------
         Balance at December 31, 1998                                    6            3,712                 3,718
         Other comprehensive earnings (loss)                           (15)             971                   956
                                                             ----------------   --------------    ------------------
         Balance at February 28, 1999                         $         (9)           4,683                 4,674
                                                             ================   ==============    ==================

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


         Balance at March 1, 1999                             $         --               --                    --
         Other comprehensive earnings                                   60            6,497                 6,557
                                                             ----------------   --------------    ------------------
         Balance at December 31, 1999                                   60            6,497                 6,557
                                                             ----------------   --------------    ------------------
         Other comprehensive earnings                                 (202)          (6,752)               (6,954)
                                                             ----------------   --------------    ------------------
         Balance at December 31, 2000                         $       (142)            (255)                 (397)
                                                             ================   ==============    ==================
</TABLE>
                                   (continued)
<PAGE>
         The components of other comprehensive earnings are reflected in Liberty
         Media  Group's  combined  statements of  operations  and  comprehensive
         earnings,  net of taxes  and  reclassification  adjustments  for  gains
         realized in net earnings (loss). The following table summarizes the tax
         effects and  reclassification  adjustments 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, 2000:
         Foreign currency translation adjustments                         $        (334)          132             (202)
                                                                          ------------- -------------  ---------------
         Unrealized gains on securities:
              Unrealized holding losses arising during period                   (10,119)        4,002           (6,117)
              Less reclassification adjustment for gains realized in
                  net loss                                                       (1,050)          415             (635)
                                                                          ------------- -------------  ---------------
              Net unrealized losses                                             (11,169)        4,417           (6,752)
                                                                          ------------- -------------  ---------------
         Other comprehensive earnings                                     $     (11,503)        4,549           (6,954)
                                                                          ============= =============  ===============
         Ten months ended December 31, 1999:
         Foreign currency translation adjustments                         $          99           (39)              60
                                                                          ---------------------------  ---------------
         Unrealized gains on securities:
              Unrealized holding gains arising during period                     10,736        (4,246)           6,490
              Less reclassification adjustment for losses realized in
                  net loss                                                           12            (5)               7
                                                                          ---------------------------  ---------------
              Net unrealized gains                                               10,748        (4,251)           6,497
                                                                          ---------------------------  ---------------
         Other comprehensive earnings                                     $      10,847        (4,290)           6,557
                                                                          ===========================  ===============

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

         Two months ended February 28, 1999:
         Foreign currency translation adjustments                         $         (25)           10              (15)
         Unrealized gains on securities:
              Unrealized holding gains arising during period                      1,606          (635)             971
                                                                          ---------------------------  ---------------
         Other comprehensive earnings                                     $       1,581          (625)             956
                                                                          ===========================  ===============
         Year ended December 31, 1998:
         Foreign currency translation adjustments                         $           5            (2)               3
         Unrealized gains on securities:
              Unrealized holding gains arising during period                      4,875        (1,928)           2,947
                                                                          ---------------------------- ---------------
         Other comprehensive earnings                                     $       4,880        (1,930)           2,950
                                                                          ===========================  ===============
</TABLE>
                                   (continued)
<PAGE>

(12)     Commitments and Contingencies

         Starz Encore Group,  a wholly owned  subsidiary of Liberty Media Group,
         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  2017  (the  "Film
         Licensing Obligations"). Based on customer levels at December 31, 2000,
         these  agreements  require minimum payments  aggregating  approximately
         $1.3 billion.  The aggregate  amount of the Film Licensing  Obligations
         under these license agreements is not currently  estimable because such
         amount is  dependent  upon the  number  of  qualifying  films  released
         theatrically  by certain motion picture studios as well as the domestic
         theatrical  exhibition  receipts  upon the  release of such  qualifying
         films.  Nevertheless,   required  aggregate  payments  under  the  Film
         Licensing Obligations could prove to be significant.

         Liberty  Media  Group has  guaranteed  various  loans,  notes  payable,
         letters of credit and other obligations (the "Guaranteed  Obligations")
         of certain affiliates. At December 31, 2000, the Guaranteed Obligations
         aggregated approximately $659 million.  Currently,  Liberty Media Group
         is not certain of the  likelihood  of being  required to perform  under
         such guarantees.

         Liberty  Media Group  leases  business  offices,  has entered into pole
         rental and  transponder  lease  agreements  and uses certain  equipment
         under  lease  arrangements.  Rental  expense  under  such  arrangements
         amounts to $50 million,  $30  million,  $18 million and $98 million for
         the year ended December 31, 2000, for the ten months ended December 31,
         1999,  the two  months  ended  February  28,  1999 and the  year  ended
         December 31, 1998, respectively.

         A  summary  of  future  minimum  lease  payments  under   noncancelable
         operating leases as of December 31, 2000 follows (amounts in millions):

                  Years ending December 31:

                        2001                              $      46
                        2002                                     41
                        2003                                     37
                        2004                                     32
                        2005                                     23
                        Thereafter                               61

         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 2000.

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

                                   (continued)
<PAGE>

(13) Proposed Split Off Transaction

         AT&T currently owns all the outstanding shares of Class A Common Stock,
         Class B  Common  Stock  and  Class C  Common  Stock  of  Liberty  Media
         Corporation.  Subsequent to December 31, 2000, AT&T initiated a process
         for  effecting a split off of Liberty  Media  Corporation  from AT&T by
         means of a redemption of AT&T Liberty Media Group  tracking  stock (the
         "Split Off Transaction").  Prior to the Split Off Transaction,  Liberty
         Media  Corporation  will increase its  authorized  capital  stock.  The
         Liberty Class A and Class B Common Stock will be reclassified as Series
         A Liberty Media Corporation common stock ("Series A common stock"), and
         the Class C Common Stock will be reclassified as Series B Liberty Media
         Corporation  common stock ("Series B common  stock").  In the Split Off
         Transaction,  each  share of Class A and  Class B Liberty  Media  Group
         Common  Stock  will be  exchanged  for a like  share of  Liberty  Media
         Corporation  Series A common stock and Liberty Media Corporation Series
         B  common  stock,  respectively.  Upon  completion  of  the  Split  Off
         Transaction,  Liberty Media  Corporation will no longer be a subsidiary
         of AT&T,  and no shares of AT&T Liberty Media Group tracking stock will
         be  outstanding.  The Split Off  Transaction  will be accounted  for at
         historical  cost.  There can be no assurance that the split off will be
         effected.

         Immediately prior to the Split Off Transaction, AT&T will contribute to
         Liberty Media Corporation  assets that are currently  attributed to the
         Liberty  Media  Group but not held by Liberty  Media  Corporation  (the
         "Contributed  Assets").  These  assets  include (i) a  preferred  stock
         interest and common stock warrants in ICG, a competitive local exchange
         telephone  company;  (ii) an approximate  34% common equity interest in
         Teligent,  a full service facilities based  communications  company and
         (iii) an  approximate  8% indirect  common  equity  interest in Liberty
         Digital,  Inc., a consolidated  subsidiary.  The contributions  will be
         accounted  for in a manner  similar  to a  pooling  of  interests  and,
         accordingly,  the financial statements of Liberty Media Corporation for
         periods  prior  to  contributions  will  be  restated  to  include  the
         financial  position and results of operations of the Contributed Assets
         once this transaction is completed.

         In connection with the Split Off Transaction, Liberty Media Corporation
         will also be deconsolidated  from AT&T for federal income tax purposes.
         As a result,  AT&T will be required to pay Liberty Media Corporation 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 our obligations under the Tax Sharing
         Agreement and that has been, or is reasonably  expected to be, utilized
         by AT&T.  The payment  will be reduced by Liberty  Media  Corporation's
         obligation under the 1995 TCI Tax Sharing  Agreement.  The expected net
         payment from AT&T is approximately $692 million.  In addition,  certain
         deferred  intercompany  gains will be includible in taxable income as a
         result of the Split Off  Transaction and the resulting tax liability of
         approximately  $122  million  will be an  obligation  to Liberty  Media
         Corporation.