<PAGE>   1

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                                    FORM 10-K

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the fiscal year ended December 31, 2000

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [No Fee Required]
         For the transition period from ____ to ____

Commission File Number 0-20421


                            LIBERTY MEDIA CORPORATION
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


       State of Delaware                                  84-1288730
-------------------------------            ------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

         9197 So. Peoria Street
         Englewood, Colorado                                80112
----------------------------------------                  ---------
(Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code:  (720) 875-5400

         Securities registered pursuant to Section 12(b) of the Act:  None

         Securities registered pursuant to Section 12(g) of the Act:  None


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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         As of March 1, 2001, there were 1,000 shares of Class A Common Stock,
1,000 shares of Class B Common Stock and 1,000 shares of Class C Common Stock of
Liberty Media Corporation outstanding, all of which were held indirectly by AT&T
Corp. We paid no dividends on our common stock during the year ended December
31, 2000, and we have no intention of paying dividends on our common stock for
the foreseeable future.
<PAGE>   2

                                     PART I.

Item 1. Business.

         (a) General Development of Business

         Liberty Media Corporation owns interests in a broad range of video
programming, communications and Internet businesses in the United States,
Europe, South America and Asia. Liberty Media's principal assets include
interests in Starz Encore Group LLC, Discovery Communications, Inc., AOL Time
Warner Inc., QVC, Inc., USA Networks, Inc., Telewest Communications plc,
Gemstar-TV Guide International, Inc., Motorola, Inc., Sprint PCS Group, The News
Corporation Limited and Liberty Digital, Inc.

         We have been a wholly owned subsidiary of AT&T Corp. since March 9,
1999. On that date, AT&T acquired by merger our parent company, the former
Tele-Communications, Inc. (TCI), which has since been converted to a limited
liability company and renamed AT&T Broadband, LLC. As part of that merger, AT&T
issued its Class A and Class B Liberty Media Group tracking stock, which is
designed to reflect the economic performance of the businesses and assets of
AT&T attributed to its "Liberty Media Group." We have been a member of Liberty
Media Group since the AT&T merger, and our businesses and assets have
constituted substantially all of the businesses and assets of Liberty Media
Group since the AT&T merger.

         We have had a substantial degree of managerial autonomy as a result of
our corporate governance arrangements with AT&T. Our board of directors is
controlled by persons designated by TCI prior to its acquisition by AT&T, and
our management includes individuals who managed the businesses of Liberty Media
Corporation prior to the AT&T merger. We are party to agreements with AT&T which
have provided us with a significant level of operational separation from AT&T,
defined our rights and obligations as a member of AT&T's consolidated tax group
and provided us with certain rights to distribute programming over AT&T's cable
systems.

         On November 15, 2000, AT&T announced that its board of directors and
its capital stock committee had determined to exercise AT&T's right under its
charter to split off its Liberty Media Group by redeeming all outstanding shares
of AT&T Liberty Media Group tracking stock for shares of our common stock.
Immediately prior to the redemption date, AT&T will contribute to us all of the
remaining assets and liabilities attributed to Liberty Media Group that are not
currently held by us.

         Immediately prior to the redemption we will increase our authorized
capital stock, and each share of our Class A common stock and our Class B common
stock will be recapitalized as one share of our Series A common stock, and each
share of our Class C common stock will be recapitalized as one share of our
Series B common stock.

         On the redemption date, each share of AT&T Class A Liberty Media Group
tracking stock will be redeemed for one share of our Series A common stock, and
each share of AT&T Class B Liberty Media Group tracking stock will be redeemed
for one share of our Series B common stock.

         Following the split off, the former holders of AT&T Liberty Media Group
tracking stock will hold all of the outstanding shares of our common stock. We
will be an independent public company, and AT&T will have no continuing stock
ownership in us. In connection with the split off, we will amend and/or
terminate portions of the agreements we entered into with AT&T to give effect to
our status as an independent public company.


                                      I-1
<PAGE>   3

         AT&T has applied for a private letter ruling from the Internal Revenue
Service with regard to the U.S. federal income tax consequences of the split off
to the effect that the split off will be treated as a tax-free exchange under
Section 355 of the Internal Revenue Code of 1986, as amended. Receipt of the
private letter ruling is a condition to the split off. There can be no assurance
that the ruling will be received or that the split off will be effected.

         On February 21, 2001, we filed a registration statement on Form S-1
with the SEC to register the issuance of shares of our Series A common stock and
Series B common stock in the split off.

         Recent Developments

         On January 14, 2000, Liberty Media Group completed its acquisition of
The Associated Group, Inc. pursuant to a merger agreement among AT&T, Liberty
and Associated Group. Under the merger agreement each share of Associated
Group's Class A common stock and Class B common stock was converted into 0.49634
shares of AT&T common stock and 2.41422 shares of AT&T Class A Liberty Media
Group tracking 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 tracking
stock, (3) approximately 10.6 million shares of AT&T Class B Liberty Media Group
tracking stock, (4) approximately 21.4 million shares of common stock of
Teligent, Inc., a full-service, facilities-based communications company, 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 transmitters, including cellular and PCS
telephones. Immediately following the completion of the merger, all of the
assets and businesses of Associated Group, other than its interest in Teligent
and its shares of AT&T common stock and AT&T Liberty Media Group tracking stock,
were transferred to Liberty. Associated Group's interest in Teligent is held by
a member of the Liberty Media Group other than Liberty. All of the shares of
AT&T common stock, AT&T Class A Liberty Media Group tracking stock and AT&T
Class B Liberty Media Group tracking stock previously held by Associated Group
were retired by AT&T.

         On March 16, 2000, we purchased shares of cumulative preferred stock in
Liberty Satellite & Technology, Inc., formerly TCI Satellite Entertainment, Inc.
(LSAT), in exchange for our economic interest in 5,084,745 shares of Sprint PCS
Group stock, valued at $300 million. We 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 us approximately 85% of
the voting power of the outstanding capital stock of LSAT. We and LSAT also
formed a joint venture named Liberty Satellite, LLC to hold and manage interests
in entities engaged globally in the distribution of internet data and other
content via satellite and related businesses. As part of this transaction, we
contributed interests in XM Satellite Radio Holdings Inc., Wildblue
Communications, Inc., LSAT Astro LLC and Sky Latin America in exchange for an
approximately 89% interest in the joint venture. LSAT contributed its interest
in JATO Communications Corp. and General Motors Class H common stock in exchange
for an approximately 11% interest in the joint venture, which is managed by
LSAT. In a related transaction, LSAT paid us $60 million in the form of an
unsecured promissory note in exchange for an approximately 14% interest in a
limited liability company with holdings in ASTROLINK International LLC. The
remaining 86% of the limited liability company is held by Liberty Satellite,
LLC.

                                      I-2
<PAGE>   4

         On June 8, 2000, we completed our acquisition of Ascent Entertainment
Group, Inc. for an aggregate purchase price of approximately $436 million.
Ascent's principal business is providing pay-per-view entertainment and
information services through its majority owned subsidiary, On Command
Corporation. Ascent also provides satellite service to the NBC television
network and owned the National Basketball Association's Denver Nuggets, the
National Hockey League's Colorado Avalanche and the Pepsi Center, Denver's new
entertainment facility which is home to both the Nuggets and the Avalanche. On
July 6, 2000, Ascent sold its interests in the Nuggets, the Avalanche and the
Pepsi Center for approximately $268 million in cash and the assumption of
approximately $136 million in debt. We have retained our 6.5% profits' interests
in each of the Nuggets and the Avalanche and our 6.5% interest in the Pepsi
Center. As a result of our acquisition of Ascent, our consolidated debt includes
approximately $353 million of Ascent's outstanding indebtedness, excluding
approximately $136 million which was assumed by the purchaser of the Nuggets,
the Avalanche and the Pepsi Center.

         On June 9, 2000, we acquired a controlling interest in The Todd-AO
Corporation, consisting of approximately 6.5 million shares of Class B common
stock of Todd-AO, in exchange for the issuance of approximately 5.4 million
shares of AT&T Class A Liberty Media Group tracking stock. The Class B common
stock of Todd-AO we acquired in that transaction represented 60% of the equity
and approximately 94% of the voting power of Todd-AO outstanding immediately
prior to the closing. 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, we contributed
to Todd-AO 100% of the capital stock of Four Media Company, in exchange for
approximately 16.6 million shares of the Class B common stock of Todd-AO. As a
result of that transaction, we increased our 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. Four Media Company
provides technical and creative services to owners, producers and distributors
of television programming, feature films and other entertainment products both
domestically and internationally.

         Following our acquisition of Todd-AO, and our contribution to Todd-AO
of our ownership in Four Media Company, Todd-AO changed its name to Liberty
Livewire Corporation.

         On July 19, 2000, we purchased all of the assets relating to the
post-production, content and sound editorial businesses of SounDelux
Entertainment Group for $90 million. Immediately following the closing, 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. Immediately following this contribution, our 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.

         On December 22, 2000, we acquired all the outstanding capital stock of
Video Services Corporation in exchange for $38 million in cash and 1.4 million
shares of AT&T Class A Liberty Media Group tracking stock. We subsequently
contributed 100% of the capital stock of Video Services Corporation to Liberty
Livewire in exchange for a convertible promissory note in the original principal
amount of $92.5 million, issued pursuant to the First Amended and Restated
Credit Agreement described below. Video Services Corporation provides satellite,
distribution and production services to the motion picture, television, and
advertising industries.

                                      I-3
<PAGE>   5

         On June 26, 2000, we announced that we had entered into an agreement
with UnitedGlobalCom, Inc. and a majority-owned subsidiary of UGC, United
Pan-Europe Communications, N.V. (UPC), pursuant to which UGC would acquire from
us interests in various international broadband distribution and programming
assets, including Telewest Communications plc, Cablevision S.A., Pramer S.C.A.
and Crown Media Holdings, in exchange for 75.3 million shares of UGC's Class B
common stock.

         On February 23, 2001, we and UGC announced a revision to the
transaction announced on June 26, 2000. Pursuant to the transaction as revised,
UGC will not acquire our interest in Telewest. We will acquire up to 100,000
shares of a newly issued series of convertible preferred stock of UGC in
exchange for $1.4 billion in cash. The convertible preferred stock will be
convertible into approximately 54.1 million shares of common stock of UGC. We
will purchase $1 billion of convertible preferred stock upon the receipt of
certain regulatory approvals. We will purchase the remaining $400 million of
convertible preferred stock concurrently with UGC's acquisition of certain of
our Latin American assets, principally consisting of our interests in
Cablevision S.A., Pramer S.C.A. and Torneos y Competencias. If UGC acquires all
of the Latin American assets, we will receive approximately 20.1 million shares
of UGC's common stock or shares of a new series of UGC's convertible preferred
stock that are convertible into approximately 20.1 million shares of UGC's
common stock. We anticipate that each of these acquisitions will close in the
second quarter of 2001.

         The UGC shares to be acquired by us under the current structure
represent, assuming conversion of all these shares into UGC Class B common
stock, a 39% economic interest and, following the occurrence of certain events,
a 72% voting interest in UGC and, when added to our existing UGC holdings, will
result in us having a 43% economic interest and, following the occurrence of
certain events, an 81% voting interest in UGC. Prior to the occurrence of such
events, our voting interest will not exceed 50%. We will be bound by voting and
standstill agreements with UGC and certain of its founding stockholders. Until
the third anniversary of the closing, we will have the right to nominate four of
the 12 members of UGC's board of directors and the founding stockholders will
have the right to nominate the remaining eight. Thereafter, we and the founding
stockholders each will have the right to nominate four directors, and the board
will nominate the other four candidates. The provisions of the voting agreement
regarding the nomination and election of directors will terminate on the tenth
anniversary of the closing, subject to earlier termination upon the occurrence
of specified events.

         The closing of the transaction is subject to various closing
conditions, including receipt of governmental and other third party approvals.
UGC is the largest broadband communications provider of video, voice and data
services outside the U.S. with operations in 23 countries and networks that
reach more than 18 million homes and businesses and serve more than 9.5 million
video customers.

         On September 27, 2000, we entered into a letter agreement with News
Corp. with respect to (1) the transfer of all of our equity interests in
Gemstar-TV Guide and (2) the assignment of all of our rights under the
stockholders agreement we entered into with News Corp., Gemstar-TV Guide and
Henry C. Yuen (Chief Executive Officer of Gemstar-TV Guide), to subsidiaries of
News Corp. in a series of transactions.

         In the first transaction, a subsidiary of News Corp. will merge with
Liberty UVSG, Inc., our subsidiary that holds 70,704,588 shares of common stock
of Gemstar-TV Guide, and we will receive 1.7179 American Depository Receipts
representing preferred limited voting ordinary shares of News Corp. (which we
refer to as News Corp. ADRs) for each share of common stock of Gemstar-TV Guide
held by Liberty UVSG at the time of the merger. In connection with the merger,
we will assign all of our rights under the stockholders agreements to News Corp.
and cause persons designated by News Corp. to replace our designees on the board
of Gemstar-TV Guide. If the merger is not consummated by June 22, 2001, either
we or News Corp. may terminate our respective obligations under the letter
agreement, provided that the failure to occur of any relevant condition to the
merger is not attributable to a breach by the terminating party.

                                      I-4
<PAGE>   6

         If the merger is consummated, subject to the closing of an initial
public offering of Sky Global Networks, Inc. with gross proceeds of at least $1
billion, Sky Global Networks will acquire from us all of the 16,761,150 shares
of common stock of Gemstar held by Liberty TVGIA, Inc., one of our subsidiaries,
and a 10% interest in each of Innova S. de R.L., Sky Multi-County Partners,
NetSat Servicos Ltda, DTH Techco Partners and Sky Latin America Partners in
exchange for shares of Class A common stock of Sky Global Networks representing
4.76% of Sky Global Networks common equity, subject to adjustment (the
transactions described in this sentence, we refer to as the SGN/DTH
Transactions). If the Sky Global Networks public offering fails to occur by
November 27, 2001, neither we nor News Corp. will be under any obligation to
effect the SGN/DTH Transactions, and in lieu of such transactions, we will
effect a transaction with News Corp. pursuant to which we will transfer to News
Corp. each share of Gemstar-TV Guide common stock held by Liberty TVGIA for
1.7179 News Corp. ADRs.

         In addition, upon completion of the merger described above and subject
to the closing of the Sky Global Networks initial public offering, we will
purchase from Sky Global Networks a number of shares of its Class A common stock
for an aggregate purchase price of $500 million based upon the initial public
offering price of a share of Sky Global Networks' Class A common stock. If the
initial public offering does not occur by June 22, 2001, neither we nor Sky
Global Networks will be under any obligation to effect the acquisition described
in the immediately preceding sentence.

         If the foregoing transactions are consummated as currently
contemplated, we will enter into lock-up arrangements and receive registration
rights with respect to the News Corp. ADRs and the shares of Class A common
stock of Sky Global Networks we acquire in these transactions. All of the
foregoing transactions are subject to customary closing conditions.

         In October 2000, we restructured a portion of our ownership interests
in TruePosition, ICG Communications, Sprint PCS, priceline.com and LSAT and
increased our equity interest in LSAT. On October 27, 2000, in three separate
transactions, (1) we sold 608,334 shares of TruePosition common stock to TP
Investment, Inc., a company wholly owned by our Chairman, Dr. Malone, for $6
million in cash; (2) we and TP Investment each contributed shares of
TruePosition common stock to Liberty TP LLC, a newly formed limited liability
company; and (3) we and Liberty AGI, Inc., a member of Liberty Media Group that
is not currently one of our subsidiaries, directly and through our respective
subsidiaries, contributed a portion of our respective ownership interests in
TruePosition, Sprint PCS, ICG Communications and priceline.com to Liberty TP
Management, Inc., a newly formed corporation, in exchange for newly issued
equity securities of Liberty TP Management. Concurrently, TP Investment
contributed shares of LSAT's Class A and Class B common stock and $47.2 million
in cash to Liberty TP Management, in exchange for newly issued equity securities
of Liberty TP Management. On October 31, 2000 Liberty ICGX, Inc., a subsidiary
of Liberty AGI, and Liberty PCLN, Inc., one of our subsidiaries, each of which
contributed assets to Liberty TP Management, each sold a portion of the Liberty
TP Management securities it received in exchange for those assets to TP
Investment for an aggregate of approximately $34.92 million. Salomon Smith
Barney Inc. delivered an opinion to us and Liberty AGI that the aggregate
consideration received in these transactions by us and Liberty AGI and our
respective subsidiaries was fair from a financial point of view.

         On January 23, 2001, BET Holdings, II, Inc. was acquired by Viacom,
Inc. in exchange for shares of Class B common stock of Viacom pursuant to an
Agreement and Plan of Merger among Liberty, BET Holdings II, Inc., Viacom,
Robert L. Johnson and the Johnson Children's Insurance Trust and certain of
their respective affiliates. As a result of the merger, we received
approximately 15.2 million shares of Viacom's Class B common stock in exchange
for our 35% interest in BET Holdings II, Inc.


                                      I-5
<PAGE>   7

         On February 23, 2001, we announced that a partnership organized by us
and Klesch & Company Limited, a London-based private equity firm, had entered
into a letter of intent to purchase the remaining broadband cable assets of
Deutsche Telekom AG in Germany. If consummated as currently contemplated, the
partnership will acquire 55% of the outstanding equity interests in six regional
operating companies of Deutsche Telekom, together with an option for an
additional 20% of such equity interests minus one vote. The partnership also
intends to acquire the portions of Deutsche Telekom Kabel Service GmbH, the
level 4 operator owned by Deutsche Telekom, that correspond to the regions in
which such operating companies operate, as well as all of Deutsche Telekom's
interest in MediaServices GmbH, which operates a digital distribution platform
in Germany. The foregoing transactions are subject to completion of due
diligence, negotiation and execution of definitive documentation, arranging of
financing and satisfaction of customary closing conditions, including receipt of
regulatory approvals. Although no assurance can be given that the contemplated
transactions will be consummated, we anticipate that any closing would occur in
the second or third quarter of 2001.

                                    * * * * *

         Certain statements in this Annual Report on Form 10-K constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. In particular, some of the statements contained
under the captions "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," are forward-looking. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of Liberty (or entities in which Liberty has interests), or
industry results, to differ materially from future results, performance or
achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors as to both Liberty and the entities in
which Liberty has an interest, include, among others: general economic and
business conditions and industry trends; the regulatory and competitive
environment of the industries in which Liberty, and the entities in which
Liberty has interests, operate; uncertainties inherent in new business
strategies; new product launches and development plans; rapid technological
changes; the acquisition, development and/or financing of telecommunications
networks and services; the development and provision of programming for new
television and telecommunications technologies; future financial performance,
including availability, terms and deployment of capital; the ability of vendors
to deliver required equipment, software and services; availability of qualified
personnel; changes in, or failure or inability to comply with, government
regulations, including, without limitation, regulations of the Federal
Communications Commission ("FCC"), and adverse outcomes from regulatory
proceedings; changes in the nature of key strategic relationships with partners
and joint venturers; competitor responses to Liberty's products and services,
and the products and services of the entities in which Liberty has interests,
and the overall market acceptance of such products and services; and other
factors. These forward-looking statements (and such risks, uncertainties and
other factors) speak only as of the date of this Report, and Liberty expressly
disclaims any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein, to reflect any change in
Liberty's expectations with regard thereto, or any other change in events,
conditions or circumstances on which any such statement is based.

         This Annual Report includes information concerning AOL Time Warner
Inc., Gemstar - TV Guide International, Inc., Motorola, Inc., Sprint
Corporation, UnitedGlobalCom, Inc., USA Networks, Inc. and other public
companies that file reports and other information with the SEC in accordance
with the Securities Exchange Act of 1934. Information contained in this Annual
Report concerning those companies has been derived from the reports and other
information filed by them with the SEC. We had no part in the preparation of
those reports and other information, nor we do incorporate them by reference in
this Annual Report.


                                      I-6
<PAGE>   8

         (b) Financial Information about Operating Segments

         Liberty is a holding company with a variety of subsidiaries and
investments operating in the media, communications and entertainment industries.
Each of these businesses is separately managed. Liberty identifies its
reportable segments as those consolidated subsidiaries that represent 10% or
more of its combined revenue and those equity method affiliates whose share of
earnings or losses represent 10% or more of its pre-tax earnings or loss.
Subsidiaries and affiliates not meeting this threshold are aggregated together
for segment reporting purposes. For the year ended December 31, 2000, Liberty
had four operating segments: Starz Encore Media Group, Liberty Livewire, On
Command and Other. Financial information related to Liberty's operating segments
can be found in note 14 to Liberty's consolidated financial statements found in
Part II of this report.

         (c) Narrative Description of Business

         The following table sets forth information concerning Liberty's
subsidiaries and business affiliates. Liberty holds its interests either
directly or indirectly through partnerships, joint ventures, common stock
investments or instruments convertible or exchangeable into common stock.
Ownership percentages in the table are approximate, calculated as of February
28, 2001, and, where applicable and except as otherwise noted, assume conversion
to common equity by Liberty and, to the extent known by Liberty, other holders.
In some cases, Liberty's interest may be subject to buy/sell procedures,
repurchase rights or, under certain circumstances, dilution.

<TABLE>
<CAPTION>
                                                            SUBSCRIBERS
                                                                 AT                                    ATTRIBUTED
                                                              12/31/00               YEAR               OWNERSHIP
                           ENTITY                             (000'S)              LAUNCHED             AT 2/28/01
-------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                    <C>                 <C>
                                                 VIDEO PROGRAMMING SERVICES

AOL Time Warner Inc. (1) (NYSE: AOL)                                                                          4%

Canales n                                                            32(2)             1998                 100%

Corus Entertainment Inc. (3) (TSE: CJR.B)                                                                    17%
    (NYSE: CJR)

Court TV                                                         51,500                1991                  50%

Crown Media Holdings, Inc. (4)                                                                               16%
    (Nasdaq: CRWN)

Discovery Communications, Inc.                                                                               49%
    Discovery Channel                                            80,236                1985
    The Learning Channel                                         76,364                1980
    Animal Planet                                                65,556                1996
    Travel Channel                                               49,048                1987
    Discovery Health Channel                                     18,614                1999
    Discovery Digital Services                                   22,320(2)
    (aggregate units)
       Discovery Civilization                                                          1996
       Discovery Home & Leisure                                                        1996
       Discovery Kids                                                                  1996
       Discovery Science                                                               1996
       Discovery Wings                                                                 1998
       Discovery en Espanol                                                            1998
    Animal Planet Asia                                           18,176                1998                  25%
    Animal Planet Europe                                          8,160                1998
</TABLE>


                                      I-7
<PAGE>   9

<TABLE>
<CAPTION>
                                                              SUBSCRIBERS
                                                                  AT                                     ATTRIBUTED
                                                               12/31/00                YEAR              OWNERSHIP
                       ENTITY                                   (000'S)              LAUNCHED            AT 2/28/01
--------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                    <C>                 <C>
                                                    VIDEO PROGRAMMING SERVICES (CONTINUED)

    Animal Planet Japan (5)                                         N/A                 2000
    Animal Planet Latin America                                   8,600                 1998                  25%
    Animal Planet UK                                              5,847                 1998
    Discovery Asia                                               38,718                 1994
    Discovery Canada                                              6,770                 1995                  10%
    Discovery India                                              18,427                 1996
    Discovery Japan(5)                                            2,138                 1996
    Discovery Europe                                             22,566                 1989
    Discovery Turkey                                                990                 1997
    Discovery Germany                                             1,528                 1996                  25%
    Discovery Italy/Africa                                        2,056                 1996
    Discovery Latin America                                      14,067                 1996
    Discovery Latin America Kids Network                         10,506                 1996
    Discovery Middle East                                           173                 1997
    People & Arts (Latin America)                                10,671                 1995                  25%
    Europe Showcase                                              17,285                 1998
    Discovery Home & Leisure (Europe)                             6,842                 1999
    Health Latin America                                          3,278                 2000
    Health UK                                                     4,326                 2000
    Travel & Adventure (Latin America)                            3,244                 2000
    Discovery.com, Inc.                                          Online                 1995

E! Entertainment Television                                      66,063                 1990                  10%
    Style                                                         8,906                 1998

Flextech Limited (UK)                                                                                         25%(6)
    Bravo                                                         6,801                 1985                  25%
    Challenge TV                                                  6,695                 1993                  25%
    KinderNet                                                     5,751                 1988                   8%
    Living                                                        7,205                 1993                  25%
    SMG                                                             N/A                 1957                   4%
    Trouble                                                       6,749                 1984                  25%
    TV Travel Shop                                                8,564                 1998                   9%
    UK Arena (UKTV)                                               5,054                 1997                  12%
    UK Gold (UKTV)                                                7,561                 1992                  12%
    UK Gold Classics (UKTV)                                       4,947                 1999                  12%
    UK Horizons (UKTV)                                            6,621                 1997                  12%
    UK Style (UKTV)                                               5,840                 1997                  12%
    UK Play (UKTV)                                                5,806                 1998                  12%

Fox Family Worldwide, Inc.                                                                                       (7)

Gemstar-TV Guide International, Inc.
       (Nasdaq:GMST)                                                                                          21%(8)(9)

International Channel                                            10,178                 1990                  90%

Jupiter Programming Co., Ltd. (Japan)                                                                         50%
    Animal Planet (Japan)                                           N/A                 2000                  33%
    Cable Soft Network                                            3,231                 1989                  50%
</TABLE>


                                      I-8
<PAGE>   10

<TABLE>
<CAPTION>
                                                               SUBSCRIBERS
                                                                   AT                                     ATTRIBUTED
                                                               12/31/00                YEAR               OWNERSHIP
                       ENTITY                                   (000'S)              LAUNCHED             AT 2/28/01
--------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                   <C>                  <C>
                                                   VIDEO PROGRAMMING SERVICES (CONTINUED)

    CNBC Japan/Nikkei                                               N/A                 1997                   5%
    Discovery Japan                                               2,138                 1996                  50%
    Golf Network                                                  2,597                 1996                  45%
    Japanese Movies and Dramas                                      N/A                 2000                   5%
    JSky Sports                                                   2,032                 1998                  29%
    Kids Station                                                    N/A                 2000                   8%
    LaLa TV                                                           1                 2000                  50%
    Premium Anime Channel                                           N/A                 2000                   7%
    Shop Channel                                                  9,206                 1996                  35%

MacNeil/Lehrer Productions                                          N/A                 N/A                   67%

MultiThematiques, S.A.                                                                                        27%
    Canal Jimmy (France)                                          2,510                 1991
    Canal Jimmy (Italy)                                             941                 1997
    Cine Cinemas (Benelux/Scandinavia))                              15                 2000
    Cine Cinemas (France)                                           890                 1991
    Cine Cinemas (Italy)                                            122                 1997
    Cine Classics (France)                                          730                 1991
    Cine Classics (Spain)                                           253                 1995                  14%
    Cine Classics (Italy)                                           122                 1997
    Eurochannel (Brazil)                                          1,007                 2000
    Planete (Africia)                                                60                 2000
    Planete (Belgium)                                                39                 2000
    Planete (France)                                              4,579                 1988
    Planete (Germany)                                             1,659                 1997
    Planete (Italy)                                                 942                 1997
    Planete (Poland)                                              2,108                 1996
    Planete (Switzerland)                                           403                 2000
    Seasons (France)                                                127                 1996
    Seasons (Germany)                                                67                 1997
    Seasons (Italy)                                                  56                 1997
    Seasons (Poland)                                                408                 2000
    Seasons (Spain)                                                  38                 1997

The News Corporation Limited (9)(10)                                                                           8%
(NYSE: NWS.A; ASX: NCPDP)

Pramer S.C.A. (Argentina) (4)                                                                                100%
    America Sports                                                2,350                 1990
    Big Channel                                                   2,345                 1992
    Canal a                                                       2,258                 1996
    Cineplaneta                                                   2,028                 1997
    elgourmet.com                                                 3,325                 2000
    Film & Arts                                                   6,495                 2000
    GEMS International                                            3,975                 N/A
    Magic Kids                                                    3,848                 1995
    P&E                                                             771                 1996
    Plus Satelital                                                3,915                 1988
    Rio de la Plata                                                  76                 2000
</TABLE>


                                      I-9
<PAGE>   11

<TABLE>
<CAPTION>
                                                              SUBSCRIBERS
                                                                  AT                                     ATTRIBUTED
                                                               12/31/00                 YEAR             OWNERSHIP
                       ENTITY                                   (000'S)               LAUNCHED           AT 2/28/01
--------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                     <C>                <C>
                                                        VIDEO PROGRAMMING SERVICES (CONTINUED)

The Premium Movie Partnership (4)                                   958                 1995                  20%
(Australia)

QVC Inc.                                                                                                      43%
    QVC                                                          70,120                 1986
    QVC-The Shopping Channel (UK)                                 8,750                 1993                  34%
    QVC-Germany                                                  22,635                 1996
    iQVC                                                         Online                 1995

Starz Encore Group LLC                                                                                       100%
    Encore                                                       16,319                 1991
    MOVIEplex                                                     7,636                 1995
    Thematic Multiplex (aggregate units)                         52,486 (2)
       Love Stories                                                                     1994
       Westerns                                                                         1994
       Mystery                                                                          1994
       Action                                                                           1994
       True Stories                                                                     1994
       WAM! America's Kidz Network                                                      1994
    STARZ!                                                       11,543                 1994
       STARZ! Theater                                                   (2)             1996
       BLACK STARZ!                                                     (2)             1997
       STARZ! Family                                                    (2)             1999
       STARZ! cinema                                                    (2)             1999

Telemundo Communications Group (11)                                 N/A                 N/A                   35%

Torneos y Competencias, S.A. (4)                                    N/A                 N/A                   40%

USA Networks, Inc. (Nasdaq: USAI) (12)                                                                        21%(13)

Viacom, Inc. (14)
       (NYSE:VIA.B)                                                                                           <1%
</TABLE>


                                      I-10
<PAGE>   12

<TABLE>
<CAPTION>

                                           HOMES IN
                                           SERVICE            HOMES
                                             AREA             PASSED           BASIC SUBS                         ATTRIBUTED
                                         12/31/00(15)     12/31/00(16)        12/31/00(17)     PENETRATION         OWNERSHIP
               ENTITY                       (000)            (000)               (000)          12/31/00          AT 2/28/01
------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>              <C>                 <C>              <C>                <C>
                                                               CABLE AND TELEPHONY

Metropolis-Intercom, S.A (Chile)              1,600           1,111                 275            25%                 50%

Cablevision S.A. (4)                          4,000           3,438               1,439            42%                 28%
(Argentina)

Chorus Communication Limited                    627             484                 244            50%                 50%
    (Ireland) (formerly Princes
    Holdings Limited)

Digital Latin America (4)                                                                                              43%

Grupo Portatel (4)                                                                                                     41%

IDT Corporation (Nasdaq:IDTC)                                                                                          10%

Jupiter Telecommunications Co., Ltd.          7,291           5,297                 923            17%                 35%
    (Japan)

Omnipoint Communications, Inc.                                                                                          3%

Sprint PCS Group                                                                                                       21%(18)
(NYSE: PCS)

Liberty Cablevision of Puerto Rico,             442             288                 116            40%                100%
    Inc.

Telewest Communications plc (UK)              6,074           4,534               1,194            26%                 25%
(LN: TWT) (Nasdaq: TWSTY)

360networks inc.                                                                                                        1%
(Nasdaq: TSIX)

The Wireless Group                                                                                                     30%
(LN: TWG)

UnitedGlobalCom, Inc. (4)                                                                                              11%
(Nasdaq: UCOMA)
</TABLE>

                                      I-11
<PAGE>   13

<TABLE>
<CAPTION>
                                                                                                                  ATTRIBUTED
                                                                                                                   OWNERSHIP
ENTITY                                           BUSINESS DESCRIPTION                                             AT 2/28/00
--------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                                                              <C>
                                                SATELLITE COMMUNICATIONS SERVICES

Liberty Satellite & Technology, Inc.             Holds interests in certain communications assets                    27%(19)
(OTC:LSATA/LSATB)                                including Sprint PCS and LSAT

    Aerocast.com, Inc.                           Developer of terrestrial and satellite network to                   23%(20)(21)
                                                 distribute streaming media to businesses and consumers

    ASTROLINK International LLC                  Will build a global telecom network using 3 ka-band                 32%(20)
                                                 geostationary satellites to provide broadband data
                                                 communications services.  The first 2 satellites, to be
                                                 launched in 2002, will service customers in North and
                                                 South America, Europe and the Middle East.  The third
                                                 spacecraft will extend the network worldwide.

    Hughes Electronics Corp.                     A subsidiary of General Motors Corporation, providing                1%(20)
        (NYSE: GMH)                              digital television entertainment (DirecTV), satellite
                                                 services and satellite-based private business networks

    IBEAM Broadcasting Corporation               Satellite delivery of streaming media from programmers               3%(20)
        (Nasdaq: IBEM)                           to Internet providers

    Sky Latin America                            Satellite delivered television platform currently                   10%(9)(20)
                                                 servicing Mexico, Brazil, Chile and Columbia

    Wildblue Communications, Inc.                Will build a ka-band satellite network that will focus              19%(20)
                                                 on providing broadband services to homes and small
                                                 offices in North America and Latin America.

    XM Satellite Radio Holdings Inc.             Plans to transmit up to 100 national audio channels of               2%(20)
        (Nasdaq:XMSR)                            music, news, talk, sports and children's programming
                                                 from two satellites directly to vehicle, home and
                                                 portable radios

                                                  TECHNOLOGY AND MANUFACTURING

Antec Corporation                                Manufacturer of products for hybrid fiber/coaxial
(Nasdaq: ANTC)                                   broadband networks                                                  18%

Motorola, Inc.                                   Provider of integrated communications solutions and                  4%(22)
(NYSE: MOT)                                      embedded electronic solutions

TruePosition, Inc.                               Provider of wireless location technology and services               89%
</TABLE>


                                      I-12
<PAGE>   14

<TABLE>
<CAPTION>
                                                                                                                  ATTRIBUTED
                                                                                                                  OWNERSHIP
ENTITY                                           BUSINESS DESCRIPTION                                             AT 2/28/01
-----------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                                                              <C>
                                                   INTERNET/INTERACTIVE TELEVISION SERVICES

ACTV, Inc.                                       Producer of tools for interactive programming for                    2%(23)
(Nasdaq: IATV)                                   television and Internet platforms

On Command Corporation                           Provider of in-room interactive entertainment, Internet             56%
(Nasdaq: ONCO)                                   access, business information and guest services for the
                                                 lodging industry

priceline.com, Incorporated                      E-commerce service allowing consumers to make offers on              5%
(Nasdaq: PCLN)                                   products and services

Liberty Digital, Inc.                            A diversified new media company focused on the                      84%
(Nasdaq: LDIG)                                   development of interactive television programming with
                                                 interests in interactive television technology,
                                                 e-commerce and content businesses, including DMX, Inc.,
                                                 OpenTV, Inc., move.com, BET.com, Replay TV, Inc., TiVO
                                                 Inc., and rights to provide interactive networks to
                                                 AT&T cable systems

Liberty Livewire Corporation                     Provides a wide range of traditional audio and video                85%(24)
(Nasdaq: LWIRA)                                  post-production, transmission, library services, and
                                                 audio/video distribution services via satellite and
                                                 fiber to worldwide clients in the feature film television and
                                                 advertising industries. Also provides interactive television
                                                 services under the brand name "HyperTv with Livewire."
</TABLE>


                                      I-13
<PAGE>   15

<TABLE>
<CAPTION>
                                                                                                         ATTRIBUTED
                                                                                                         OWNERSHIP
ENTITY                                   BUSINESS DESCRIPTION                                            AT 2/28/01
-------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                                             <C>
                                                          OTHER

Ascent Network Services                  Provides uplink services to the NBC television network             100%

Cendant Corporation                      Franchiser of hotels, rental car agencies, tax                       6%
(NYSE:CD)                                preparation services and real estate brokerage offices.
                                         Provides access to insurance, travel, shopping, auto and
                                         other services primarily through its buying clubs.
                                         Provides vacation time share services, mortgage services
                                         and employee relocation. Operates in over 100 countries.

Emmis Communications                     Owns and operates 16 radio stations, including five in              12%
    Corporation                          the markets of New York, Chicago and Los Angeles. Also
(Nasdaq:EMMS)                            operates six television stations and six magazines.

PRIMEDIA Inc.                            Targeted media company reaching consumer and                         5%
(NYSE: PRM)                              business-to-business audiences through print, Internet,
                                         live events, video and radio
</TABLE>


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

(1)      On January 11, 2001, America Online, Inc. completed its merger with
         Time Warner Inc. to form AOL Time Warner Inc. AOL Time Warner has
         interests in Internet services, including AOL, Netscape and CompuServe;
         filmed entertainment and television production, including Warner Bros.
         and New Line Cinema; recorded music and music publishing; book and
         magazine publishing; cable television systems; and cable television
         programming and television broadcasting, including CNN, Cartoon
         Network, Headline News, TNT, Turner Classic Movies, WTBS Superstation,
         HBO, Cinemax, and the WB Television Network.

(2)      Digital services.

(3)      Corus is a Canadian media company. Its principal assets include 49
         radio stations (subject to Canadian regulatory approval of the proposed
         acquisition of Metromedia Broadcasting), specialty television networks,
         Pay TV, conventional television assets, and Nelvana Limited, an
         international producer and distributor of children's programming and
         products.


                                      I-14
<PAGE>   16

(4)      On June 26, 2000, we announced a transaction in which we would
         contribute certain assets to UnitedGlobalCom, Inc. in exchange for 75.3
         million shares of UGC Class B common stock. On February 23, 2001, we
         announced an amendment to that transaction. Under the modified
         agreement, we will contribute $1.4 billion in cash in exchange for
         shares of UGC convertible preferred stock which will be convertible
         into approximately 54.1 million shares of UGC common stock. We will
         purchase $1.0 billion of the preferred stock upon receipt of certain
         regulatory approvals. The remaining $400 million of preferred stock
         will be purchased at the time UGC completes the acquisition of our
         interests in Cablevision, Pramer, and Torneos y Competencias. Assuming
         the completion of UGC's acquisition from Liberty of these assets and
         certain other assets, including Liberty's interests in Grupo Portatel,
         Digital Latin America, Crown Media Holdings, Inc., Premium Movie
         Partnership and the Latin American operations of Gems Network, we would
         receive additional UGC preferred stock convertible into approximately
         20.1 million additional shares of UGC common stock. Assuming conversion
         of all of the preferred stock into UCG Class B common stock and when
         added to our current interest in UGC, we would have approximately a 43%
         economic interest and a 81% voting interest in UGC, subject to a voting
         agreement with UGC and certain of its controlling shareholders. We also
         would have the right to appoint four of 12 representatives on the UGC
         board.

(5)      Our attributed ownership interest in this entity is listed under
         Jupiter Programming Co., Ltd. of which Liberty Media International,
         Inc. owns 50%.

(6)      In April 2000, Flextech was acquired by, and became a wholly owned
         subsidiary of, Telewest.

(7)      Our interest consists of shares of 30-year 9% preferred stock which
         have a stated aggregate liquidation value of $345 million and are not
         convertible into common stock.

(8)      Gemstar-TV Guide International, Inc. is a media company which provides
         print, passive and interactive program listings guides; distributes
         programming to cable television systems and direct-to home satellite
         providers and markets satellite delivered programming to C-band
         satellite dish owners.

(9)      On September 27, 2000, we and News Corp. announced a transaction in
         which we will exchange approximately 80% of our interest in Gemstar-TV
         Guide International, Inc., for approximately 121.5 million ADRs of News
         Corporation, increasing our ownership interest in News Corp. to
         approximately 18%. We will exchange the remaining 20% of our interest
         in Gemstar-TV Guide and our interest in the Sky Latin America platform
         to Sky Global for approximately 4.76% of the outstanding equity of Sky
         Global Networks. Additionally, we have agreed to acquire $500 million
         of Class A common stock of Sky Global Networks at the time of its
         anticipated initial public offering. The transactions with Sky Global
         are contingent upon the closing of its initial public offering.

(10)     News Corp. has operations in the United States, Canada, the United
         Kingdom, Australia, Latin America and the Pacific Basin. These include
         U.S. cable networks, FX, Fox Family Channel, Fox News Channel and the
         Fox regional and national sports networks. News Corp.'s businesses also
         include Fox Broadcasting Company, 20th Century Fox, satellite platforms
         B Sky B in the United Kingdom, SKYPerfecTV! in Japan and STAR in Asia
         and the publication of newspapers, magazines and books.


                                      I-15
<PAGE>   17

(11)     Telemundo Communications Group consists of (1) Telemundo Network, a
         24-hour broadcast network serving 61 markets in the United States,
         including the 37 largest Hispanic markets, and (2) Telemundo Station
         Group which owns and operates eight full power UHF broadcast stations
         and 15 low power television stations serving some of the largest
         Hispanic markets in the United States and Puerto Rico. Although we have
         an approximately 35% equity interest in Telemundo, we currently have no
         voting power in order to meet certain regulatory requirements.

(12)     USA Networks, Inc. is organized into three distinct but interrelated
         units which include the following assets: USA Entertainment's USA
         Network, SCI FI Channel, TRIO, NWI, Studios USA, USA Films, USA
         Broadcasting and USA Interactive Entertainment; USA Electronic
         Retailing's HSN, HSN International and HSN Interactive; and USA
         Information and Services' Ticketmaster, Ticketmaster Online-Citysearch,
         Inc. (NASDAQ: TMCS), Hotel Reservations Network (NASDAQ: ROOM),
         Electronic Commerce Solutions, Styleclick (NASDAQ: IBUY) and Precision
         Response Corporation.

(13)     We own direct and indirect interests in various USA Networks, Inc.,
         USANi LLC and Home Shopping Network, Inc. securities which may be
         converted or exchanged for USA Networks common stock. Assuming the
         conversion or exchange of such securities and the conversion or
         exchange of certain securities owned by Universal Studios, Inc. and
         certain of its affiliates for USA Networks common stock, we would own
         approximately 21% of USA Networks.

(14)     Viacom is a diversified entertainment company with operations in
         broadcasting, cable television programming, radio, outdoor advertising,
         video, publishing and online programming. Viacom's well-known brands
         include CBS, MTV, Nickelodeon, VH1, BET, Paramount Pictures, Infinity
         Broadcasting, UPN, TNN, CMT, Showtime, Blockbuster and Simon & Shuster.

(15)     Homes in Service Area: The number of homes to which the relevant
         operating company is permitted by law to offer its services. Not all
         service areas are granted exclusively to the respective operating
         company.

(16)     Homes Passed: Homes that can be connected to a cable distribution
         system without further extension of the distribution network.

(17)     Basic Subscribers: A subscriber to a cable or other television
         distribution system who receives the basic television service and who
         is usually charged a flat monthly rate for a specific number of
         channels.

(18)     Less than 1% of voting power. We hold securities of Sprint which are
         exercisable for or convertible into Sprint PCS Group common stock --
         Series 1, which is publicly traded.

(19)     We hold preferred stock of LSAT representing approximately 85% of the
         voting power of LSAT.

(20)     Owned through Liberty Satellite, LLC of which we own approximately 89%
         and LSAT owns approximately 11%. Percentages listed are ownership by
         Liberty Satellite, LLC.

(21)     Liberty Satellite, LLC owns a warrant to purchase up to an additional
         7,000,001 shares of Series A-2 convertible preferred stock at an
         exercise price of $1.05 per share. If the warrant is exercised Liberty
         Satellite, LLC's ownership would equal approximately 36% of the equity
         in Aerocast.com on a fully diluted basis. The warrant expires March 2,
         2001.


                                      I-16
<PAGE>   18

(22)     In addition to our common stock holdings in Motorola, we own warrants
         to purchase approximately 28.3 million additional shares of Motorola
         common stock at $8.26 per share, all of which are vested. The 4%
         ownership interest assumes exercise of all warrants.

(23)     Ownership percentage includes 805,000 shares, or 2%, owned directly by
         us. Liberty Digital owns an additional 14%. Liberty Digital also holds
         warrants, exercisable at prices of $13 at March 29, 2001, and $15 at
         March 29, 2004, to purchase an additional 5,000,000 shares of common
         stock. Exercise of the additional warrants would bring Liberty
         Digital's ownership to approximately 24%.

(24)     We own common stock representing 85% of the equity and 98% of the
         voting power of Liberty Livewire on a fully diluted basis.

BUSINESS OPERATIONS

         Liberty is engaged principally in three fundamental areas of business:

    -   Programming, consisting principally of interests in video programming
        services;
    -   Communications, consisting principally of interests in cable television
        systems, telephone and satellite systems; and
    -   Internet services and technology.

         The principal assets and consolidated subsidiaries of Liberty are
described in greater detail below.

         VIDEO PROGRAMMING SERVICES

         Programming networks distribute their services through a number of
distribution technologies, including cable television, direct-to-home satellite,
broadcast television and the Internet. Programming services may be delivered to
subscribers as part of a video distributor's basic package of programming
services for a fixed monthly fee, or may be delivered as a "premium" programming
service for an additional monthly charge. Whether a programming service is on a
basic or premium tier, the programmer generally enters into separate multi-year
agreements, known as "affiliation agreements," with those distributors that
agree to carry the service. Basic programming services derive their revenues
principally from the sale of advertising time on their networks and from per
subscriber license fees received from distributors. Premium services do not sell
advertising and primarily generate their revenues from subscriber fees.

         Relationship with AT&T Broadband. Most of the networks affiliated with
Liberty have entered into affiliation agreements with Satellite Services, Inc.
("SSI") a company owned by AT&T Broadband, the successor company to TCI. SSI
purchases programming services from programming suppliers and then makes such
services available to cable television systems owned by or affiliated with AT&T
Broadband ("SSI Affiliates"). Customers served by SSI Affiliates represented
approximately 22% of U.S. households which received cable or satellite delivered
programming at December 31, 2000. Except as described below, substantially all
of the video programming services operated by Liberty's subsidiaries and
business affiliates received 22% or less of their revenues from SSI. Each of
Starz Encore Group and Liberty Digital, Inc. has entered into long term, fixed
rate affiliation agreements with AT&T Broadband pursuant to which AT&T Broadband
pays monthly fixed amounts in exchange for unlimited access to certain
programming services of such companies. For the year ended December 31, 2000,
such fixed rate affiliation fees represented approximately 36% and 29.5% of the
total revenues of Starz Encore Group and Liberty Digital, respectively.


                                      I-17
<PAGE>   19

         STARZ ENCORE GROUP LLC

         Starz Encore Group LLC is a leading provider of cable and
satellite-delivered premium movie networks in the United States. It currently
owns and operates 13 full-time domestic movie channels, including Encore, which
airs first-run movies and classic contemporary movies, STARZ!, a first-run
premium movie service, a number of Thematic multiplex channels, and MOVIEplex, a
"theme by day" channel featuring a different Encore or Encore Thematic Multiplex
channel each day, on a weekly rotation.

         Starz Encore Group currently has access to approximately 6,500 movies
through long-term licensing agreements. In addition, it has licensed the
exclusive rights to first-run output from Disney's Hollywood Pictures,
Touchstone and Miramax, Universal Studios, New Line and Fine Line, Sony's
Columbia Pictures and Sony Classics and other major studios. Starz Encore Group
also has exclusive rights to first run output from four independent studios. The
output agreements expire between 2003 and 2011. Starz Encore Group is not
committed to or dependent on any one source of film productions, and has
affiliations with every major Hollywood studio, either through long-term output
agreements or library access arrangements. Starz Encore Group also engages in
original programming production.

         Ownership Interest. We own 100% of Starz Encore Group. Our ownership in
Starz Encore Group began with an investment in its predecessor in 1991 when
Encore was launched as a low-priced movie channel that cable operators could
offer individually or packaged with higher-priced services such as HBO and
Showtime. Since December 31, 1992, Encore's subscribers have grown from
approximately 3.5 million to approximately 16.3 million at December 31, 2000,
and Starz Encore Group's program offerings have grown from one movie channel in
1991 to its current slate of 13 full-time movie channels.

         PRAMER S.C.A.

         Pramer S.C.A. is the largest owner and distributor of cable television
programming services in Argentina. Pramer currently owns 11 programming services
and distributes them throughout Argentina. Pramer also distributes 12 additional
programming services, including two of Argentina's four terrestrial broadcast
networks, throughout Argentina. Of the 23 programming services owned and/or
distributed by Pramer, nine of them are distributed throughout Latin America.
Pramer intends to continue to develop and acquire branded programming services
and to further expand the carriage of its programming to distribution networks
outside Argentina.

         Ownership Interest. Our ownership in Pramer evolved out of a 1995
transaction in which Liberty Media International, Inc., our wholly owned
subsidiary, acquired an equity interest in Cablevision S.A. from its founding
stockholders. As part of the transaction, Liberty Media International was
granted a right of first refusal to purchase the programming assets of Pramer,
which at that time were owned by the former Cablevision stockholders. In August
1998, Liberty Media International exercised this right and purchased 100% of
Pramer's issued and outstanding common stock for $32 million in cash and $65
million in notes payable. We made an $11 million payment on the notes on October
1, 1998 and the remainder was due in 20 equal monthly installments beginning
October 15, 1998. The notes have now been paid in full. If our transaction with
UGC is consummated as currently structured, our interests in Pramer will be
transferred to UGC in connection with the closing of that transaction.


                                      I-18
<PAGE>   20

         DISCOVERY COMMUNICATIONS, INC.

         Discovery Communications, Inc. is the leading global real-world media
and entertainment company. Discovery has grown from its core property, Discovery
Channel, first launched in the United States in 1985, to current global
operations in over 150 countries across six continents, with 200 million total
subscribers. Discovery's programming is tailored to the specific needs of
viewers around the globe, and distributed through 77 separate feeds in 33
languages. Discovery's 33 networks of distinctive programming represent 14
entertainment brands including TLC, Animal Planet, Travel Channel, Discovery
Health Channel, Discovery Kids, and a family of digital channels. Discovery's
other properties consist of Discovery.com and 165 Discovery Channel retail
stores. Discovery also distributes BBC America in the United States.

         Ownership Interest. We hold a 49.3% interest in Discovery. Cox
Communications, Inc., Advance/ Newhouse Communications and Discovery's founder
and Chairman, John S. Hendricks, hold interests in Discovery of 24.65%, 24.65%
and 1.4%, respectively. Our involvement in Discovery dates back to 1986, when
TCI provided Discovery with $25 million of capital in furtherance of TCI's
strategy of supporting quality, cable-exclusive programming companies.

         Terms of Ownership. Discovery is organized as a close corporation
managed by its stockholders rather than a board of directors. Generally, all
actions to be taken by Discovery require the approval of the holders of a
majority of Discovery's shares, subject to certain exceptions, including certain
fundamental actions, which require the approval of the holders of at least 80%
of Discovery's shares. The stockholders of Discovery have agreed that they will
not be required to make additional capital contributions to Discovery unless
they all consent. They have also agreed not to own another basic programming
service carried by domestic cable systems that consists primarily of
documentary, science and nature programming, subject to certain exceptions.

         Each stockholder has been granted preemptive rights on share issuances
by Discovery. Any proposed transfer of Discovery shares by a stockholder will be
subject to rights of first refusal in favor of the other stockholders, subject
to certain exceptions, with our right of first refusal being secondary under
certain circumstances. In addition, we are not permitted to hold in excess of
50% of Discovery's stock unless our increased ownership results from exercises
of our preemptive rights or rights of first refusal.

         FLEXTECH LIMITED (A WHOLLY OWNED SUBSIDIARY OF TELEWEST COMMUNICATIONS
PLC)

         Flextech, through its subsidiaries and affiliates, creates, packages
and markets entertainment and information programming for distribution on cable
television, direct-to-home satellite and digital terrestrial television
providers throughout the United Kingdom and parts of continental Europe.
Flextech has interests in 14 cable and satellite channels, 13 of which are
distributed in the United Kingdom market. In addition to managing its six wholly
owned programming services, Flextech currently provides management services to
two joint ventures that it has formed with BBC Worldwide Limited, which operate
six subscription television channels and HSN Direct International Limited. For
its management and consultancy services, Flextech receives a management fee and,
in some cases, a percentage of the programming company's gross revenues.
Flextech also holds interests in programming production and distribution
companies and a terrestrial broadcast network.


                                      I-19
<PAGE>   21

         Ownership Interest. Prior to Telewest's acquisition of Flextech in
April 2000, we held a 37% equity interest in Flextech, representing a 50% voting
interest. Our involvement with Flextech developed out of programming investments
made by TCI in the United Kingdom and continental Europe beginning in 1988. TCI
found that the United Kingdom, like other parts of Europe, lacked the size
necessary to sustain a large number of niche-oriented programming services.
Attracted by Flextech's business model of co-managing several programming
services to achieve economies of scale, TCI chose Flextech as the vehicle to
pursue its European programming strategy in 1994 by consolidating its U.K. and
European programming investments and merging those investments into Flextech.

         In April 2000, Telewest acquired Flextech at a purchase price of
approximately L2.76 billion. As a result, each share of Flextech was exchanged
for 3.78 new Telewest shares, and we now own approximately a 24.6% equity
interest in Telewest. See " -- Communications -- Telewest Communications plc."

         THE NEWS CORPORATION LIMITED

         News Corp. is a diversified international communications company
principally engaged in:

         -        the production and distribution of motion pictures and
                  television programming;

         -        television, satellite and cable broadcasting;

         -        publication of newspapers, magazines and books;

         -        production and distribution of promotional and advertising
                  products and services;

         -        development of digital broadcasting;

         -        development of conditional access and subscriber management
                  systems; and

         -        the provision of computer information services.

News Corp.'s operations are located in the United States, Canada, the United
Kingdom, Australia, Latin America and the Pacific Basin. News Corp.'s preferred
limited voting ordinary shares trade on the Australian Stock Exchange under the
symbol "NCPDP," and are represented on the NYSE by ADRs under the symbol
"NWS.A."

         Ownership Interest. In July 1999, we transferred to News Corp. our 50%
interest in our jointly owned Fox/Liberty Networks programming venture, in
exchange for 51.8 million News Corp. ADRs representing preferred limited voting
ordinary shares of News Corp., valued at approximately $1.425 billion, or
approximately $27.52 per ADR. In a related transaction, we acquired from News
Corp. 28.1 million additional ADRs representing preferred limited voting
ordinary shares of News Corp. for approximately $695 million, or approximately
$24.74 per ADR. As a result of these transactions and subsequent open market
purchases, we own approximately 81.7 million ADRs representing preferred limited
voting ordinary shares of News Corp. or approximately 8% of News Corp.'s
ordinary shares on a fully diluted basis.


                                      I-20
<PAGE>   22

         As part of the agreement relating to the acquisition by News Corp. of
our interest in Fox/Liberty Networks, we and News Corp. agreed that, during a
specified period following the second anniversary of the closing date of this
transaction, we will have the right to cause News Corp. to acquire, and News
Corp. will have the right to cause us to sell to News Corp., our interest in an
international sports programming venture that we jointly own with News Corp. in
exchange for News Corp. ADRs with an aggregate value, at April 1, 1999, of
approximately $100 million plus an additional number of ADRs representing the
aggregate number of News Corp. shares which could have been purchased by
reinvesting in ADRs each cash dividend declared on such number of shares between
the closing of the sale of our interest in Fox/Liberty Networks and the sale of
the international interests. Between the closing of the sale of our interest in
Fox/Liberty Networks and the sale of the international interests, we have
further agreed to make capital contributions in respect of the international
interests in the amount of $100 million, as and when requested by News Corp.

         Terms of Ownership. In connection with the acquisition by News Corp. of
our interest in Fox/ Liberty Networks, certain agreements were entered into
regarding our ability to transfer News Corp. shares and other matters. Under
these agreements, certain of the ADRs and the underlying News Corp. shares
issued to us are subject to a lock-up ending July 2001, subject to certain
exceptions. We are entitled to certain registration rights with respect to our
News Corp. shares. In addition, we have agreed that we will not engage, directly
or indirectly, in any sports programming service in the United States and its
territories (excluding Puerto Rico) or in Canada, subject to certain exceptions,
until July 2004.

         QVC, INC.

         QVC, Inc. is one of the two largest home shopping companies in the
United States. QVC markets and sells a wide variety of consumer products and
accessories primarily by means of televised shopping programs on the QVC network
and via the Internet through iQVC. QVC also operates shopping networks in
Germany and the United Kingdom. QVC purchases, or obtains on consignment,
products from domestic and foreign manufacturers and wholesalers, often on
favorable terms based upon the volume of the transactions. QVC does not depend
upon any one particular supplier for any significant portion of its inventory.

         QVC distributes its television programs, via satellite, to affiliated
video program distributors for retransmission to subscribers. In return for
carrying QVC, each domestic programming distributor receives an allocated
portion, based upon market share, of up to 5% of the net sales of merchandise
sold to customers located in the programming distributor's service area.

         Ownership Interest. We own approximately 43% of QVC, and Comcast owns
the remaining 57%. Our involvement in the televised home shopping business
originated in 1986 when TCI began acquiring ownership interests in QVC Network,
Inc. in exchange for agreeing to carry QVC's programming to a specified number
of subscribers. During the same period, TCI also invested in another home
shopping channel, CVN Companies, Inc. In October 1989, CVN and QVC merged which
resulted in TCI owning approximately 34% of the combined company. In August
1994, we and Comcast purchased all of the remaining equity interests in QVC not
owned by either of us, resulting in our respective current ownership interests.

         Terms of Ownership. QVC is managed on a day-to-day basis by Comcast and
Comcast has the right to appoint all of the members of the QVC board of
directors. Liberty's interests are represented by two members on QVC's
five-member management committee. Generally, QVC's management committee votes on
every matter submitted, or required to be submitted, to a vote of the QVC board,
and we and Comcast are required to use our respective best efforts to cause QVC
to follow the direction of any resolution of the management committee. We also
have veto rights with respect to certain fundamental actions proposed to be
taken by QVC.


                                      I-21
<PAGE>   23

         We have been granted a tag-along right that will apply if Comcast
proposes to transfer control of QVC and Comcast may require us to sell our QVC
stock as part of the transaction, under certain circumstances and subject to
certain conditions. In addition, we have the right to initiate a put/call
procedure with Comcast in respect of our interest in QVC.

         We and Comcast have certain mutual rights of first refusal and mutual
rights to purchase the other party's QVC stock following certain events,
including change of control events affecting them. Both also have registration
rights.

         AOL TIME WARNER INC.

         On January 11, 2001, America Online, Inc. and Time Warner announced the
completion of their merger to create AOL Time Warner Inc., whose businesses
include interactive services, cable systems, publishing, music, television
networks and filmed entertainment. AOL Time Warner classifies its business
interests into the following fundamental areas:

         -        interactive services, consisting principally of the
                  development and operation of branded interactive services such
                  as AOL, CompuServe and Netscape, branded properties that
                  operate across multiple services and platforms such as Digital
                  City, Moviefone and MapQuest and interactive messaging
                  services such as AIM and ICQ;

         -        cable systems, consisting principally of interests in cable
                  television systems, including Time Warner Cable;

         -        publishing, consisting principally of interests in magazine
                  publishing, book publishing and direct marketing, including
                  Time, People, Sports Illustrated, Warner Books and Time Life
                  Inc.;

         -        music, consisting principally of interests in recorded music
                  and music publishing, including Warner Music Group and its
                  labels Atlantic, Elektra, London-Sire, Rhino, Warner Bros.
                  Records and Warner Music International;

         -        television networks, consisting principally of interests in
                  cable television programming and television broadcasting,
                  including WTBS Superstation, TNT, Cartoon Network, CNN News
                  Group, Home Box Office and the WB Television Network; and

         -        filmed entertainment, consisting principally of interests in
                  filmed entertainment and television production, including
                  Warner Bros. and New Line Cinema.

AOL Time Warner's common stock trades on the NYSE under the symbol "AOL."

         Ownership Interest. We currently own an approximate 4% interest in AOL
Time Warner. Our interest in AOL Time Warner evolved from a 1987 transaction in
which TCI led a consortium of cable operators in providing Turner Broadcasting
System with an aggregate cash infusion of approximately $560 million. TCI
invested approximately $250 million in Turner Broadcasting System in exchange
for two series of preferred stock. The terms of the preferred stock and
agreements entered into in connection with the investment provided the holders
with significant control rights, including representation on the Turner
Broadcasting System board and veto rights over extraordinary transactions, and
with rights of first refusal on certain dispositions of Turner Broadcasting
System stock held by Ted Turner. In 1996, Time Warner acquired Turner
Broadcasting System in a merger transaction.


                                      I-22
<PAGE>   24

         In connection with the Turner Broadcasting System/Time Warner merger,
Time Warner, Turner Broadcasting System, we and TCI entered into an Agreement
Containing Consent Order (the FTC Consent Decree) with the Federal Trade
Commission. The FTC Consent Decree effectively prohibits us and our affiliates
from owning voting securities of Time Warner other than securities that have
limited voting rights. Pursuant to the FTC Consent Decree, among other things,
we agreed to exchange the shares we were to receive in the Turner Broadcasting
System/Time Warner combination for shares of a separate series of common stock
with limited voting rights designated as Series LMCN-V common stock. The Series
LMCN-V common stock entitles the holder to one one-hundredth (1/100th) of a vote
for each share with respect to the election of directors. As a result of the
AOL/Time Warner merger, each share of Series LMCN-V common stock of Time Warner
held by us has been converted into 1.5 shares of Series LMCN-V common stock, par
value $0.01 per share, of AOL Time Warner. These securities have substantially
the same terms as the Series LMCN-V common stock of Time Warner held by us prior
to the AOL/Time Warner merger. We hold approximately 171 million shares of such
stock, which represent less than 1% of the voting power of AOL Time Warner's
outstanding common stock. The Series LMCN-V common stock is not transferable,
except in limited circumstances, and is not listed on any securities exchange.
Each share of the Series LMCN-V common stock is convertible at our option into
one share of ordinary AOL Time Warner common stock, at any time when such
conversion would not violate the federal communications laws, subject to the FTC
Consent Decree, and is mandatorily convertible into ordinary AOL Time Warner
common stock upon transfer to a non-affiliate of Liberty. Further, while shares
of ordinary AOL Time Warner common stock are redeemable by action of the AOL
Time Warner board of directors under certain circumstances, to the extent
necessary to prevent the loss of certain types of governmental licenses or
franchises, shares of Series LMCN-V common stock are not redeemable under these
circumstances.

         GEMSTAR-TV GUIDE INTERNATIONAL, INC.

         Gemstar International Group Limited acquired TV Guide, Inc. (formerly
United Video Satellite Group, Inc.) on July 12, 2000, and changed its name to
Gemstar-TV Guide International, Inc. TV Guide is now a wholly owned subsidiary
of Gemstar-TV Guide. Gemstar-TV Guide's common stock trades on the Nasdaq
National Market under the symbol "GMST."

         Gemstar-TV Guide develops, markets and licenses proprietary
technologies and systems that simplify and enhance consumers' interaction with
electronics products and other platforms that deliver video, programming
information and other data. TV Guide is a media and communications company that
provides print, passive and interactive program listings guides to households,
distributes programming to cable television systems and direct-to-home satellite
providers, and markets satellite-delivered programming to C-band satellite dish
owners. Gemstar-TV Guide seeks to have its technologies widely licensed,
incorporated and accepted as the technologies and systems of choice by consumer
electronics manufacturers, service providers (such as owners or operators of
cable systems, telephone networks, Internet service providers, direct broadcast
satellite providers, wireless systems and other multi-channel video programming
distributors), software developers and consumers.


                                      I-23
<PAGE>   25

         Ownership Interest. Prior to the Gemstar merger, TV Guide was jointly
controlled by News Corp. and us, with each owning approximately 44% of its
equity and 49% of its voting power. Our interest in TV Guide began in January
1996 when TCI acquired a controlling interest in United Video Satellite Group,
Inc. (UVSG), a provider of satellite-delivered video, audio, data and program
promotion services to cable television systems, satellite dish owners, radio
stations and private network users primarily throughout North America. TCI
believed that the availability of electronic program guide services was becoming
an increasingly important element of video programming delivery due to
developments in digital and other technologies that were increasing the volume
and variety of video programming. As a result of the transaction, UVSG became a
majority-controlled subsidiary of TCI. In January 1998, TCI increased its equity
interest in UVSG to approximately 73% and its voting interest to approximately
93%. On March 1, 1999, UVSG acquired our 40% interest in Superstar/Netlink Group
and our 100% interest in Netlink USA, which uplinks the signals of six
Denver-based broadcast television stations, in exchange for shares of UVSG
common stock. On the same date, UVSG acquired News Corp.'s TV Guide properties
in exchange for cash and shares of UVSG common stock. By combining UVSG's
passive and interactive electronic program listing guides with TV Guide's
well-recognized magazine and brand name, UVSG became a leading provider of
program listing guides. Following this transaction, UVSG changed its name to TV
Guide, Inc.

         As a result of the Gemstar/TV Guide merger, in which TV Guide
stockholders received 0.6573 shares of Gemstar common stock for each outstanding
share of TV Guide common stock, or an aggregate of approximately 45% of the
fully diluted shares of the combined company, we own approximately 21% of
Gemstar-TV Guide's voting power.

         Terms of Ownership. In connection with the Gemstar merger, the board of
directors of Gemstar-TV Guide was expanded to twelve members, of which six
members are persons designated by the board of directors of TV Guide prior to
the merger. Also in connection with the Gemstar merger, we entered into a
stockholders agreement with News Corp., Henry Yuen (the Chief Executive Officer
of Gemstar-TV Guide) and Gemstar-TV Guide. Pursuant to this agreement, we are
able to appoint, and have appointed, three members to Gemstar-TV Guide's board
of directors. News Corp. is also entitled to appoint, and has appointed, three
members to the board. In addition, we and News Corp. have agreed to vote for and
use our respective best efforts to cause our respective board designees to vote
for Mr. Yuen's election as a director and appointment as Chairman of the Board,
and Mr. Yuen has agreed to vote for the election to the board of our and News
Corp's respective designees. If we or News Corp. transfer 90% or more of our
respective interests in Gemstar-TV Guide to a third party, the transferring
holder will lose the right to designate one director. We and News Corp. have
also agreed to use our respective best efforts to cause our board designees (1)
to vote for Mr. Yuen's election as Chairman of the Board and Chief Executive
Officer, and against any removal or diminution of his responsibilities (absent
disability or cause), and (2) to vote for Elsie Ma Leung's election as
co-President, co-Chief Operating Officer and Chief Financial Officer, and
against any removal or diminution of her responsibilities (absent cause), in
each case until July 12, 2005. Mr. Yuen has also agreed to vote, and use his
best efforts to cause his board designees to vote for the election of Joachim
Kiener and Peter C. Boylan III as co-Presidents and co-Chief Operating Officers,
and against any removal or diminution of their respective responsibilities
(absent cause), in each case until July 12, 2005. Pursuant to the stockholders
agreement, we, News Corp. and Mr. Yuen have agreed, until the earlier of July
12, 2005 and the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar-TV Guide (other than as a result of his termination without cause), not
to take certain actions which would result in a change in control of Gemstar-TV
Guide. We and News Corp. have one demand registration right during each twelve
month period until our respective shares cease to be restricted under the
Securities Act. We and News Corp. also generally have a right of first refusal
over Mr. Yuen's shares in Gemstar-TV Guide, which represent approximately 3% of
its outstanding stock.

                                      I-24
<PAGE>   26

         On September 27, 2000, we entered into a letter agreement with News
Corp., pursuant to which we have agreed to transfer all of our equity interests
in Gemstar-TV Guide and assign all of our rights under the stockholders
agreement to subsidiaries of News Corp. in a series of transactions, and, in
connection therewith, cause persons designated by News Corp. to replace our
board designees. The first of these transactions is subject to certain
conditions, which, if not satisfied by June 22, 2001, would enable News Corp. or
us to terminate our respective obligations under the letter agreement, provided
that the failure to occur of the relevant condition is not attributable to a
breach by the terminating party. The remaining transactions are also subject to
customary closing conditions. See " -- Recent Developments" above for a
description of this letter agreement.

         USA NETWORKS, INC.

         USA Networks is a diversified media and electronic commerce company
that is engaged in seven principal areas of business:

         -        Networks and Television Production, which operates the USA
                  Network, a general entertainment basic cable television
                  network, Sci-Fi Channel, which features science fiction,
                  horror, fantasy and science-fact oriented programming, and
                  Studios USA, which produces and distributes television
                  programming;

         -        Electronic Retailing, which primarily consists of Home
                  Shopping Network and America's Store, which are engaged in the
                  electronic retailing business;

         -        Broadcasting, which owns and operates television stations;

         -        Ticketing Operations, which includes Ticketmaster, the leading
                  provider of automated ticketing services in the United States,
                  and Ticketmaster Online, Ticketmaster's exclusive agent for
                  online ticket sales;

         -        Hotel Reservations, consisting of Hotel Reservations Network,
                  a leading consolidator of hotel rooms for resale in the
                  consumer market in the United States;

         -        Internet Services, which represents USA Networks' online
                  retailing networks business and local city guide business; and

         -        Filmed Entertainment, which primarily represents USA Networks'
                  domestic theatrical film distribution and production
                  businesses.

USA Networks' common stock trades on the Nasdaq National Market under the symbol
"USAI."

         Ownership Interest. Our interest in USA Networks consists of shares of
USA Networks common stock held by us and our subsidiaries, shares of USA
Networks common stock held by certain entities in which we have an equity
interest but only limited voting rights, and securities of certain subsidiaries
of USA Networks which are exchangeable for shares of USA Networks common stock.
Assuming the exchange of these securities and the conversion or exchange of
certain securities owned by Universal Studios, Inc. and certain of its
affiliates for USA Networks common stock, we and Universal would own
approximately 21% and 45%, respectively, of USA Networks. In general, until the
occurrence of certain events and with the exception of certain negative
controls, Mr. Barry Diller has voting power over our interest in USA Networks,
as more fully described below under " -- Terms of Ownership."


                                      I-25
<PAGE>   27

         Our ownership in USA Networks began in 1993 when we purchased a
controlling stake in Home Shopping Network, Inc., which at the time was
principally engaged in the sale of merchandise to viewers of its home shopping
programming. In connection with that acquisition, we also obtained an option to
acquire a controlling interest in Silver King Communications, Inc., an owner and
operator of broadcast television stations. In August 1995, we formed an alliance
with Mr. Barry Diller that resulted in a significant shift in our strategy for
Home Shopping Network and Silver King. As part of this alliance, we contributed
our control option relating to Silver King to a new corporation in which we
retained substantially all of the equity interests and ceded control over the
voting securities of Silver King held by the corporation to Mr. Diller, except
with respect to certain fundamental matters. At the same time, Mr. Diller agreed
to join Home Shopping Networks' board of directors. In December 1996, Silver
King and Home Shopping Network were combined to form HSN, Inc., which also
acquired Savoy Pictures Entertainment, Inc., a television broadcasting and
filmed entertainment company, and Ticketmaster Group, Inc., a leading provider
of automated ticketing services. In February 1998, HSN, Inc. acquired certain
assets from Universal USA Networks, consisting of USA Network and Sci-Fi
Channel, and the domestic television production and distribution business of
Universal. Following this transaction, HSN, Inc. changed its name to USA
Networks, Inc. In connection with this transaction, we contributed $300 million
in cash to a subsidiary of USA Networks (the LLC) in exchange for equity shares
of that subsidiary (LLC Shares) (which are generally exchangeable for USA
Networks common stock on a one-for-one basis). The LLC holds all of the assets
acquired from Universal and all of the businesses of HSN, Inc. and its
subsidiaries, other than the broadcasting business.

         Terms of Ownership. In connection with the Universal transaction, USA
Networks, Universal, we and Mr. Diller entered into several agreements involving
governance matters relating to USA Networks and stockholder arrangements. With
respect to governance matters, Mr. Diller generally has full authority to
operate the day-to-day business affairs of USA Networks and has an irrevocable
proxy over all USA Networks securities owned by Universal, us and certain of
Universal's and our respective affiliates for all matters except for certain
fundamental changes. However, we, Universal and Mr. Diller each have veto rights
with respect to certain fundamental changes relating to USA Networks and its
subsidiaries (including the LLC). If Mr. Diller and Universal agree to certain
fundamental changes that we do not agree to, Universal will be entitled to
purchase our entire equity interest in USA Networks, subject to certain
conditions, at a price determined by an independent appraiser taking into
account a number of agreed upon factors.

         Pursuant to FCC law and regulations, we are not currently permitted to
have a designee on the board of directors of USA Networks. However, at such time
as we are no longer subject to such prohibition, we will have the right to
designate up to two directors if our stock ownership in USA Networks remains at
certain levels. We currently have the right to designate up to two directors to
the LLC board and will continue to have that right for so long as we are not
permitted to designate directors of USA Networks and continue to maintain
certain ownership levels.

         We and Universal each have a preemptive right with respect to future
issuances of USA Networks' capital stock, subject to certain limitations. We
have agreed with Universal that we will not beneficially own more than
approximately 21% of the equity of USA Networks until the earlier of such time
as we beneficially own less than 5% of the shares of USA Networks securities or
the date that Universal beneficially owns fewer shares than we beneficially own.
Also, we have agreed not to propose to the board of directors of USA Networks
our acquisition of the outstanding USA Networks securities or to otherwise
influence the management of USA Networks, including by proposing or supporting
certain transactions relating to USA Networks that are not supported by USA
Networks' board of directors.


                                      I-26
<PAGE>   28

         We are subject to a number of agreements that limit or control our
ability to transfer our USA Network securities. Each of Universal and Mr. Diller
has a right of first refusal with respect to certain sales of USA Networks
securities by the other party. Our rights in this regard are secondary to any
Universal right of refusal on transfers by Mr. Diller. Also, we and Mr. Diller
each generally have a right of first refusal with respect to certain transfers
by the other party and tag-along sale rights on certain sales of USA Networks
stock by the transferring stockholder and in the event Universal transfers a
substantial amount of its USA Networks stock. We, Universal and Mr. Diller are
each entitled to registration rights relating to our respective USA Networks
securities and have agreed to certain put and call arrangements, pursuant to
which one party has the right to sell (or the other party has the right to
acquire) shares of USA Networks stock held by another party, at a price
determined by an independent appraiser taking into account a number of agreed
upon factors.

COMMUNICATIONS

         Cable television systems deliver multiple channels of television
programming to subscribers who pay a monthly fee for the service. Video, audio
and data signals are received over-the-air or via satellite delivery by
antennas, microwave relay stations and satellite earth stations and are
modulated, amplified and distributed over a network of coaxial and fiber optic
cable to the subscribers' television sets. Cable television providers in most
markets are currently upgrading their cable systems to deliver new technologies,
products and services to their customers. These upgraded systems allow cable
operators to expand channel offerings, add new digital video services, offer
high-speed data services and, where permitted, provide telephony services. The
implementation of digital technology significantly enhances the quantity and
quality of channel offerings, allows the cable operator to offer
video-on-demand, additional pay-per-view offerings, premium services and
incremental niche programming. Upgraded systems also enable cable networks to
transmit data and gain access to the Internet at significantly faster speeds, up
to 100 times faster, than data can be transmitted over conventional dial-up
connections. Lastly, cable providers have been developing the capability to
provide telephony services to residential and commercial users at rates well
below those offered by incumbent telephone providers. Each of these businesses
represents a significant opportunity for cable providers to increase their
revenue and operating cash flow from the traditional pay television services
currently offered today.

         Telephony providers offer local, long distance, switched services,
private line and advanced networking features to customers who pay a monthly fee
for the service, generally based upon usage. Wireless telecommunications
networks use a variety of radio frequencies to transmit voice and data in place
of, or in addition to, standard landline telephone networks. Wireless
telecommunications technologies include two-way radio applications, such as
cellular, personal communications services, specialized mobile radio and
enhanced specialized mobile radio networks, and one-way radio applications, such
as paging services. Each application operates within a distinct radio frequency
block. As a result of advances in digital technology, digital-based wireless
system operators are able to offer enhanced services, such as integrated
voicemail, enhanced custom-calling and short-messaging, high-speed data
transmissions to and from computers, advanced paging services, facsimile
services and Internet access service. Wireless subscribers generally are charged
for service activation, monthly access, air time, long distance calls and
custom-calling features. Wireless system operators pay fees to local exchange
companies for access to their networks and toll charges based upon standard or
negotiated rates. When wireless operators provide service to roamers from other
systems, they generally charge roamer air time usage rates, which usually are
higher than standard air time usage rates for their own subscribers, and
additionally may charge daily access fees.


                                      I-27
<PAGE>   29

         LIBERTY CABLEVISION OF PUERTO RICO, INC.

         Liberty Cablevision of Puerto Rico, Inc. is one of the largest
providers of cable television services in Puerto Rico. It owns and operates
cable television franchises, serving the communities of Luquillo, Arecibo,
Florida, Caguas, Humacao, Cayey and Barranquitas.

         On September 21, 1998, hurricane Georges struck Puerto Rico and caused
considerable property damage to the area in general, including Liberty
Cablevision of Puerto Rico's cable television systems. However, all of Liberty
Cablevision of Puerto Rico's systems have been rebuilt, and as of December 31,
1999, all of its pre-hurricane basic customers were receiving cable television
services.

         At December 31, 2000, 100% of Liberty Cablevision of Puerto Rico's
network had been rebuilt utilizing 550 MHz bandwidth capacity. At December 31,
2000, Liberty Cablevision of Puerto Rico operated from three headends, and
provided subscribers with 68 analog channels. In some service areas, Liberty
Cablevision of Puerto Rico began offering 137 digital channels at December 31,
2000.

         A significant portion of Liberty Cablevision of Puerto Rico's cable
network consists of fiber-optic and coaxial cable. This infrastructure allows
Liberty Cablevision of Puerto Rico to offer enhanced entertainment information
and telecommunications services and, when and to the extent permitted by law,
cable telephony services. Liberty Cablevision of Puerto Rico currently offers
its subscribers pay-per-view events, digital cable and premium movies. As it
introduces new revenue generating products and services, such as interactive
services, Liberty Cablevision of Puerto Rico expects to market aggressively
those products and services to its subscribers in areas with sufficient
bandwidth capacity. Liberty Cablevision of Puerto Rico expects to begin offering
high speed data transmission services and Internet access using high speed cable
modems to its subscribers during the first half of 2001.

         SPRINT PCS GROUP

         Sprint Corporation operates a 100% digital PCS wireless network in the
United States with licenses to provide service nationwide using a single
frequency band and a single technology. Sprint, together with affiliates, owns
licenses to serve the entire United States population, including Puerto Rico and
the U.S. Virgin Islands. At December 31, 2000, Sprint, together with certain
affiliates, operated PCS systems in the majority of the metropolitan areas in
the U.S. Sprint attributes this business and its assets to Sprint's "Sprint PCS
Group." The Sprint PCS stock is a tracking stock intended to reflect the
performance of the Sprint PCS Group. The Sprint PCS Group common stock -- Series
1 trades on the NYSE under the symbol "PCS."

         Ownership Interest. We own approximately 21% (on a fully diluted basis)
of the Sprint PCS Group stock through our ownership of shares of Sprint PCS
Group common stock -- Series 2 (which have limited voting rights) and warrants
and shares of convertible preferred stock exercisable for or convertible into
these shares.

         Our interest in the business that makes up the Sprint PCS Group began
in 1994 when TCI, Comcast Corporation, Cox Communications, Inc. and Sprint
Corporation determined to engage in the wireless communications business through
a series of limited partnerships known collectively as "Sprint PCS." In November
1998, Sprint Corporation assumed ownership and management control of Sprint PCS
and issued a new class of Sprint stock, the "Sprint PCS Common Stock," which was
issued in three series, to track the performance of Sprint's combined wireless
operations. In exchange for its approximate 30% limited partnership interest in
Sprint PCS, TCI received shares of Sprint PCS Group common stock -- Series 2,
shares of Sprint PCS Group preferred stock and warrants to purchase shares of
Sprint PCS Group common stock -- Series 2.


                                      I-28
<PAGE>   30

         Pursuant to a final judgment agreed to by TCI, AT&T and the United
States Department of Justice in connection with the TCI merger, all of the
Sprint PCS Group securities held by TCI were deposited in a trust with an
independent trustee, pursuant to a trust agreement approved by the Department of
Justice and the FCC. We hold trust certificates evidencing our beneficial
interest in the assets of the trust. The final judgment, which was entered by
the United States District Court for the District of Columbia on August 23,
1999, requires the trustee, on or before May 23, 2002, to dispose of a portion
of the Sprint PCS Group securities held by the trust sufficient to cause us to
own beneficially no more than 10% of the Sprint PCS Group stock that would be
outstanding on a fully diluted basis on such date. On or before May 23, 2004,
the trustee is required to divest the remainder of the Sprint PCS Group
securities held by the trust.

         The trust agreement grants the trustee the sole right to sell the
Sprint PCS Group securities beneficially owned by us and provides that all
decisions regarding such divestiture will be made by the trustee. The trustee is
required to consult with our board of directors (other than AT&T representatives
and John C. Malone) regarding such divestiture and is required, to accomplish
such divestiture only in a manner reasonably calculated to maximize the value of
the Sprint PCS Group securities beneficially owned by us.

         The trust agreement provides for the trustee to vote the Sprint PCS
Group securities beneficially owned by us in the same proportion as other
holders of Sprint PCS Group stock so long as such securities are held by the
trust. The final judgment also prohibits our acquisition of additional Sprint
PCS Group securities without the prior written consent of the Department of
Justice, subject to limited exceptions.

         Terms of Ownership. We were granted registration rights with respect to
our Sprint PCS Group holdings. These registration rights are currently
exercisable by the trustee. If our shares of Sprint PCS Group common stock
-Series 2 are transferred, the transferred shares become shares of full voting
Sprint PCS Group common stock -- Series 1.

         TELEWEST COMMUNICATIONS PLC

         Telewest is a leading provider of cable television and residential and
business cable telephony services in the United Kingdom. Telewest provides cable
television services over a broadband network and uses its network, together with
twisted-pair copper wire connections for final delivery to the customer
premises, to provide telephony services to its customers. The broadband network
enables Telewest to deliver a wide variety of both television and telephony
services to its customers and to provide customers with a wide range of
interactive and integrated entertainment, telecommunications and information
services as they become more widely available in the future. Telewest has
installed its own telephone switches, which permits it to minimize fees
otherwise charged by public telephone companies and to offer a variety of
value-added services without relying on public telephone operators for
implementation. Telewest also offers home access to the Internet in all of its
franchises. Telewest's ordinary shares trade on the London Stock Exchange under
the symbol "TWT," and are represented by ADRs in the United States, where they
trade on the Nasdaq National Market under the symbol "TWSTY."


                                      I-29
<PAGE>   31

         Telewest owns and operates 41 cable franchises and has a minority
equity interest in an affiliated company which owns and operates four affiliated
franchises. At December 31, 2000, these owned and operated and affiliated
franchises covered approximately 34% of the homes in the United Kingdom in areas
for which cable franchises have been awarded. At that date, these franchises
together included approximately 6.1 million homes and over 400,000 businesses.
At December 31, 2000, the network in these franchises passed approximately 4.7
million homes (approximately 4.5 million of which had been passed and marketed)
and Telewest had approximately 1.2 million cable television customers, 1.6
million residential telephone lines and 333,000 business telephone lines.
According to Telewest, approximately 65% of its customers subscribe for both
cable television and cable telephony services.

         In April 2000, Telewest acquired Flextech at a purchase price of
approximately L2.76 billion. As a result, each share of Flextech was exchanged
for 3.78 new Telewest shares. Prior to the acquisition, we owned approximately a
37% equity interest in Flextech and a 22% equity interest in Telewest. As a
result of the acquisition, the business of Flextech described under " --
Programming -- Business Affiliates -- Flextech Limited" above has become part of
Telewest's business.

         Ownership Interest. As a result of Telewest's recent acquisition of
Flextech, we now own approximately a 24.6% interest in Telewest. Our involvement
with Telewest developed out of investments in the cable business made by TCI in
the United Kingdom beginning in 1986. In April 1992, U S WEST, Inc. and TCI
contributed substantially all of their respective U.K. cable interests to a
joint venture in which each held a 50% interest. TCI and U S WEST combined
substantially all of their respective U.K. cable interests in an effort to
obtain cost and other efficiencies inherent in a larger network, as well as to
gain greater access to the capital markets. The combination also permitted TCI
to gain the benefits of U S WEST's telephony experience, and U S WEST to gain
the benefits of TCI's cable television experience. Telewest was formed in
anticipation of its initial public offering (which was effected in November
1994) to acquire the assets of the TCI/U S WEST joint venture. Subsequent to
Telewest's initial public offering, TCI contributed its interests in Telewest to
Liberty Media International, and Liberty Media International and U S WEST
contributed all of their respective equity ownership interests in Telewest to a
limited liability company previously owned 50% by us and 50% by MediaOne Group,
Inc. and currently owned exclusively by us. In June 1998, MediaOne separated
from U S WEST and, in connection with that transaction, succeeded to all of U S
WEST's rights and obligations relating to its Telewest investment.

         On July 7, 2000, in connection with AT&T's acquisition of MediaOne,
Microsoft Corporation purchased substantially all of MediaOne's interest in
Telewest through a tax-free exchange of Microsoft shares. As a result, Microsoft
succeeded to substantially all of MediaOne's rights and obligations in Telewest,
and Microsoft now owns approximately a 23.6% interest in Telewest.


                                      I-30
<PAGE>   32

         Terms of Ownership. We and Microsoft have been granted preemptive
rights on specified share issuances by Telewest. We and Microsoft have
agreements with respect to our respective interests in Telewest and the manner
in which we and Microsoft will cause our respective designees to the Telewest
board of directors to vote. In general, we and Microsoft have agreed, on any
matter requiring stockholder approval, to vote our Telewest shares together in
such manner as we may agree. As a result, we and Microsoft together generally
will be able to influence materially the outcome of any matter requiring
stockholder approval, provided that we and Microsoft are not disqualified from
voting on a particular matter due to conflicts of interest. In addition, we and
Microsoft each have veto rights with respect to certain fundamental matters
affecting Telewest for so long as each holds 15% or more of the outstanding
Telewest ordinary shares. However, in response to regulatory concerns, Microsoft
has agreed not to exercise its veto right with respect to the appointment of
Telewest's independent directors or chief executive officer. Further, for so
long as we and Microsoft each beneficially owns at least 15% of the outstanding
Telewest ordinary shares, each is entitled to appoint three members to the
16-member Telewest board of directors. We and Microsoft have agreed that on any
matter requiring board approval, we and Microsoft will cause our respective
designated directors to vote together as we and Microsoft agree. However, also
in response to regulatory concerns, Microsoft has agreed that its board
representatives will vote in accordance with the recommendations of Telewest's
independent directors unless those recommendations conflict with our views, in
which case Microsoft will cause its board representatives to vote in the same
manner as our board representatives, in compliance with our agreement with
Microsoft.

         We and Microsoft have agreed that any proposed transfer of our
respective Telewest shares will be subject to rights of first refusal in favor
of the other party, in each case subject to certain exceptions. In addition, we
and Microsoft have the right to trigger a put/call procedure in the event the
other is deemed to undergo a change of control. For so long as MediaOne retains
any interest in Telewest, that interest will be subject to substantially similar
terms as those described with respect to Microsoft and our company in this
paragraph.

         Telewest has agreed to certain restrictions on its ability to engage in
businesses in the United Kingdom outside of cable television, cable telephony
and wireless telephony.

         JUPITER TELECOMMUNICATIONS CO., LTD.

         Jupiter is a leading broadband provider of integrated entertainment,
information and communication services in Japan. Jupiter is currently the
largest provider of cable television services in Japan based upon the number of
customers served. On September 1, 2000, Jupiter acquired Titus Communications
Corporation, a major broadband provider of cable television, telephony and
high-speed Internet access services in Japan. Titus primarily serves customers
in areas geographically contiguous with some of Jupiter's managed franchises.

         Jupiter operates its broadband networks through 20 individually
operated cable franchises, most of which are located in some of the most
populated urban regions of Japan. It is the largest shareholder in each of these
franchises. Nineteen of these franchises are organized in three large regional
clusters, one of which includes its managed franchises in and around Tokyo, the
second of which includes its managed franchises in and around Osaka and Kobe and
the third of which includes its managed franchises in and around Fukuoka and
Kitakyushu. As of December 31, 2000, Jupiter's franchise areas covered 6.3
million homes; its broadband networks passed 4.8 million homes; and it served
over 816,000 cable television customers, 73,000 telephony customers and 141,000
high-speed Internet access customers.


                                      I-31
<PAGE>   33

         In addition to its managed franchises, Jupiter owns non-controlling
equity interests of between 7% and 20% in three cable franchises that are
operated and managed by third-party franchise operators. As of December 31,
2000, the non-managed investments had 942,000 homes within their franchise
areas, of which 665,000 homes were passed by their broadband networks, and they
served 95,000 cable television and 16,000 high-speed Internet customers.

         Jupiter owns a 35.7% interest in @Home Japan Co., Limited, a joint
venture with Sumitomo and At Home Corporation. Jupiter also owns a 26% interest
in Kansai Multimedia Services, a provider of high-speed Internet access for
cable system operators in the Kansai region of Japan. In association with these
joint ventures, Jupiter offers high-speed Internet access in all of it's managed
franchises.

         Ownership Interest. Jupiter was founded in 1995 as a 60%-40% joint
venture between Sumitomo and Liberty Media International. In May 2000, Liberty
Media International purchased an additional 10% interest in Jupiter from
Sumitomo, resulting in a 50%-50% joint venture. As a result of the merger with
Titus, Liberty's ownership is currently 35% of the combined entity. Sumitomo
owns 35%, and Microsoft owns approximately 24% with the remaining 6% owned by
three other shareholders.

         Terms of Ownership. Sumitomo, Liberty and Microsoft have agreed that
each of them shall be permitted to sell its interest in Jupiter to a third party
only if it sells all of its shares in the company and the shares are first
offered to the others on the same terms as those agreed with the third party.

         LIBERTY SATELLITE & TECHNOLOGY, INC.

         Liberty Satellite & Technology, Inc. was formed in 1996 under the name,
"TCI Satellite Entertainment, Inc." Since that time, LSAT has undergone a number
of significant changes in its business. LSAT was formed in November 1996 as a
subsidiary of TCI to own and operate TCI's interest in the digital satellite
business. In December 1996, TCI spun off LSAT by means of a stock dividend to
the holders of the then outstanding TCI Group tracking stock. From December 1996
until March 1998, LSAT marketed and distributed PRIMESTAR's medium power digital
satellite television services under the brand names "PRIMESTAR By TCI" and
"PRIMESTAR By TSAT" and owned an aggregate approximately 21% partnership
interest in PRIMESTAR Partners L.P. (now known as Phoenixstar Partners L.P.).

         In a series of transactions beginning in March 1998, LSAT received
1.407 million shares of General Motors Class H common stock for the sale of its
interest in PRIMESTAR and certain other satellite businesses to General Motors.
As a result of these transactions, LSAT is no longer engaged in the
direct-to-home satellite television business.

         During the second half of 1999 and calendar year 2000, LSAT was
engaged, through an 80% subsidiary, in research and development activities
relating to emerging technologies in the satellite and video distribution areas.
Effective February 1, 2000, LSAT entered into a Management Agreement with
Phoenixstar pursuant to which LSAT is managing Phoenixstar's affairs in exchange
for a monthly management fee of $45,000.


                                      I-32
<PAGE>   34

         Concurrent with our March 2000 investment in LSAT described below, we
formed a new joint venture with LSAT to hold and manage interests in entities
engaged globally in the distribution of internet data and other content via
satellite and related businesses. We contributed interests in XM Satellite Radio
Holdings Inc., Wildblue Communications, Inc., LSAT Astro LLC and the Sky Latin
America satellite businesses in exchange for an approximately 89% ownership
interest in the joint venture. LSAT contributed its interest in JATO
Communications Corp. and General Motors Class H common stock in exchange for an
approximately 11% ownership interest in the joint venture. LSAT will manage the
business and affairs of the venture, which has been named Liberty Satellite,
LLC. In a related transaction, LSAT paid us $60 million in the form of an
unsecured promissory note in exchange for an approximately 14% managing
ownership interest in LSAT Astro LLC, a limited liability company that owns an
approximately 32% interest in ASTROLINK International LLC. The remaining 86% of
LSAT Astro LLC was contributed by us to Liberty Satellite, LLC, as indicated
above.

         LSAT currently intends to leverage its capital position and interests
in joint ventures it forms with us to pursue strategic opportunities worldwide
in the distribution of internet data and other content via satellite and related
businesses and is actively seeking to develop or acquire one or more operating
businesses related to, or complementary with, that strategy. LSAT's common stock
is quoted on the over-the-counter bulletin board under the symbols "LSATA" and
"LSATB."

         Terms of Ownership. On March 16, 2000, we completed a transaction with
LSAT in which we purchased shares of LSAT's Series A 12% Cumulative Preferred
Stock with a liquidation value of $150 million and shares of LSAT's Series B 8%
Cumulative Convertible Voting Preferred Stock with a liquidation value of $150
million in exchange for our economic interest in 5,084,745 shares of Sprint PCS
Group stock, valued at approximately $300 million as of March 14, 2000. This
preferred stock is senior to all other classes and series of capital stock of
LSAT. The Series A preferred stock does not have voting rights and is not
convertible into common stock. The holders of the Series B preferred stock have
voting rights representing, in the aggregate, approximately 85% of the total
voting power of LSAT and vote together with the holders of all other classes or
series of voting stock of LSAT, except as required by law. In addition, the
Series B preferred stock is convertible at the option of the holder into shares
of Series B common stock at a conversion price of $8.84 per share of Series B
common stock, subject to adjustments as described in the Certificate of
Designation for the Series B preferred stock.

INTERNET SERVICES AND TECHNOLOGY

         The Internet has emerged as a significant global communications and
commerce medium, enabling millions of people worldwide to share information,
create communities among individuals with similar interests and conduct business
electronically. In addition to its emergence as a significant global
communications medium, the Internet has features and functions that are
unavailable in traditional media, which enable online merchants to communicate
effectively with customers and advertisers to target users with specific needs
and interests. As a result, the Internet has emerged as an attractive medium for
advertising and electronic commerce.


                                      I-33
<PAGE>   35

         LIBERTY DIGITAL, INC.

         Liberty Digital, Inc. (formerly known as TCI Music, Inc.) is a
diversified new media company focused on the development of interactive
television programming with interests in interactive television technology,
E-commerce and content businesses, including OpenTV, Inc., move.com, BET.com,
MTV Online, Replay TV, Inc., TiVO Inc. and rights to provide interactive
networks to AT&T's cable systems. Liberty Digital also delivers music services
to commercial and residential customers via cable, satellite, the Internet and
other platforms through its subsidiary, DMX, Inc. Liberty Digital's Series A
common stock trades on the Nasdaq National Market under the symbol "LDIG."

         Ownership Interest. We hold approximately an 84% interest in Liberty
Digital, and another member of Liberty Media Group, not owned by us, holds
approximately an additional 8% interest in Liberty Digital.

         Our interest in Liberty Digital began in 1997 when TCI Music was formed
as a wholly owned subsidiary of TCI for the purpose of entering into a business
combination with DMX, LLC. DMX currently programs, markets and distributes the
premium digital audio music service known as Digital Music Express, to more than
29 million subscribers in the United States. In December of 1997, TCI Music
acquired The Box Worldwide, Inc., which programs and distributes an interactive
music video television programming service to cable and broadcast television
systems via satellite delivery, and SonicNet, Inc., a leading Internet music
network consisting of a group of music web sites. TCI Music acquired The Box to
serve as the platform for music video and acquired SonicNet to provide
music-related content to DMX and The Box and to position itself to take
advantage of developments in music distribution through the Internet.

         In July 1999, TCI Music entered into a joint venture with MTV Networks,
a division of Viacom, Inc., to form and operate an online music venture, MTVN
Online L.P. As part of that transaction, TCI Music contributed to MTVN Online
substantially all of the assets and business of The Box and SonicNet, subject to
certain exceptions. In return, TCI Music received a 10% interest in MTVN Online.
In connection with this transaction, we and TCI Music each agreed not to compete
with MTVN Online in its online music video business until July 15, 2002 or in
the music video business generally until July 15, 2004, subject to certain
exceptions.

         In September 1999, we and TCI Music completed a transaction pursuant to
which we and certain of our affiliates contributed to TCI Music substantially
all of our respective Internet content and interactive television programming
assets, certain rights with respect to access to AT&T cable systems for the
provision of interactive video services, and a combination of cash and notes
receivable equal to $150 million, in exchange for preferred and common stock of
TCI Music. Following this transaction, TCI Music changed its name to Liberty
Digital, Inc. In addition, we adopted a policy that Liberty Digital would be our
primary (but not exclusive) vehicle to pursue corporate opportunities relating
to interactive programming and content related services in the United States and
Canada.

         On February 23, 2001, Liberty Digital, through its wholly owned
subsidiary LDIG Gamenet, Inc., acquired a 50% interest in the Game Show Network,
LLC from subsidiaries of Sony Pictures Entertainment Inc. for $125 million in
cash, plus (1) delivery of a promissory note made by LDIG Gamenet and us in the
principal amount of $100 million, (2) delivery of an aggregate of 2,184,433
million shares of Liberty Digital Series A common stock, of which (x) 1,491,598
shares were delivered in payment of $50 million of the aggregate purchase price
and (y) 692,835 shares were issued to LDIG Gamenet and delivered by it to
subsidiaries of Sony Pictures Entertainment in prepayment in full of the
interest payable under the promissory note.


                                      I-34
<PAGE>   36

         As consideration to us for becoming an obligor on the promissory note
described above, Liberty Digital transferred to us 888,517 shares of the common
stock of Internet Pictures Corporation, one of its portfolio investments. In
connection with the issuance of the promissory note, we, Liberty Digital and
LDIG Gamenet entered into an agreement which provides, among other things, that
to the extent we are required to pay any amount under the promissory note, LDIG
Gamenet will be required to transfer a portion of its interests in the Game Show
Network to us in consideration of our making such payment. The amount of the
interests in the Game Show Network to be transferred to us in such event would
be equal to the greater of (x) the percentage equivalent of $100 million divided
by twice the sum of $275 million and the aggregate amount of cash capital
contributions made by LDIG Gamenet to the Game Show Network after February 23,
2001, and (y) the percentage equivalent of $110 million divided by the fair
market value of the Game Show Network at such time (such fair market value to be
determined through negotiations between us and LDIG Gamenet, or if we and LDIG
Gamenet cannot reach agreement, by an investment banking or valuation firm
selected by us). We and LDIG Gamenet also entered into a security agreement
which secures LDIG Gamenet's obligations under the promissory note through the
creation of a security interest in the interests held by LDIG Gamenet in the
Game Show Network.

         We also loaned an aggregate of $12.5 million to Liberty Digital at the
time of the closing of the Game Show Network transaction. A portion of this
amount was used to fund the purchase price for the interest in the Game Show
Network and the remainder of this amount is to be used to fund the operations of
Liberty Digital's business. This loan was evidenced by a promissory note of
Liberty Digital issued on February 23, 2001. We are entitled to demand repayment
of the promissory note on or after August 22, 2001. The promissory note is
unsecured, bears interest at the rate of 10% per annum, and contains other
customary provisions for a promissory note of this type. The promissory note may
be prepaid without penalty at any time and Liberty Digital has agreed to apply
the proceeds of certain asset sales, if any, to prepay such note.

         LIBERTY LIVEWIRE CORPORATION

         Liberty Livewire Corporation provides a wide range of services to
clients in the feature film, television and advertising industries worldwide.
Service offerings include traditional audio and video post-production,
transmission and distribution services via satellite and fiber, Internet library
services and Internet hosting. Liberty Livewire also provides interactive
television services under the brand name HyperTV(R) with Liberty Livewire.
Liberty Livewire has locations in Los Angeles, New York, Atlanta, London, San
Francisco, Singapore, and Barcelona.

         Liberty Livewire's sound services include music recording, sound
editing, and the mixing of dialogue, music and sound effects; video services
include film-to-video transfer, visual effects and graphics, videotape editing,
and mastering and duplication of videotape and DVD formats. Liberty Livewire and
its employees have won 12 Academy Awards(R) for Best Sound and eight Oscars(R)
for technical achievement.

         On July 25, 2000, Liberty Livewire acquired privately held Triumph
Communications Group for .7 million shares of Liberty Livewire Class A common
stock and $5.7 million in cash.


                                      I-35
<PAGE>   37

         On February 1, 2001, Liberty Livewire acquired Group W Network
Services' program channel origination, studio production, post-production,
graphics and satellite transmission services business for approximately $95
million in cash, plus approximately $21.5 million in assumed liabilities and
obligations. Liberty Livewire borrowed approximately $95.8 million from us in
order to finance this acquisition, through the issuance of a convertible
promissory note in the aggregate original principal amount of $82 million under
the First Amended and Restated Credit Agreement described below, and two
additional non-convertible notes in the aggregate original principal amounts of
$9.4 million and $4.4 million, respectively.

         Liberty Livewire Class A common stock trades on the Nasdaq National
Market under the symbol "LWIRA."

         Terms of Ownership. We own approximately 31.3 million shares of Liberty
Livewire Class B common stock, representing an 85% equity interest and a 98%
voting interest in Liberty Livewire, on a fully diluted basis. In addition, we
have made loans to Liberty Livewire under a First Amended and Restated Credit
Agreement between our company and Liberty Livewire, dated as of December 22,
2000, in connection with certain of Liberty Livewire's recent acquisitions.
Liberty Livewire executed and delivered two convertible promissory notes
evidencing these loans on January 26, 2001 and February 1, 2001, in the
aggregate original principal amounts of approximately $92.5 million and $82
million, respectively. The notes are convertible into shares of Liberty Livewire
Class B common stock at a conversion price of $10.00 per share, at any time,
until June 30, 2008, which is the maturity date of the notes. Liberty Livewire
may borrow up to $34 million in additional convertible loans under the First
Amended and Restated Credit Agreement for other purposes allowed under the terms
of that agreement. Each share of Liberty Livewire Class B common stock is
convertible into one share of Liberty Livewire Class A common stock.

         We acquired our interest in Liberty Livewire through the following
transactions:

    -   On April 10, 2000, we acquired all of the outstanding common stock of
        Four Media Company in exchange for $123 million in cash, 6.4 million
        shares of AT&T Class A Liberty Media Group tracking stock and a warrant
        to purchase 0.7 million shares of AT&T Class A Liberty Media Group
        tracking stock.

    -   On June 9, 2000, we acquired a controlling interest in The Todd-AO
        Corporation, consisting of 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, in exchange of 5.4 million shares of AT&T Class
        A Liberty Media Group tracking stock. The stock of Four Media was then
        contributed to Todd-AO in exchange for 16.6 million Todd-A Class B
        shares. Concurrently, Todd-AO changed its name to Liberty Livewire
        Corporation.

    -   On July 19, 2000, we acquired 100% of SounDelux Entertainment Group's
        post-production and sound related businesses for $90 million in cash. We
        contributed our interest in these assets to Liberty Livewire for 8.2
        million additional shares of Liberty Livewire Class B common stock.

    -   On December 22, 2000, we acquired all the outstanding capital stock of
        Video Services Corporation in exchange for $38 million in cash and 1.4
        million shares of AT&T Class A Liberty Media Group tracking stock. We
        subsequently contributed 100% of the capital stock of Video Services
        Corporation to Liberty Livewire in exchange for a convertible promissory
        note in the original principal amount of approximately $92.5 million,
        issued pursuant to the First Amended and Restated Credit Agreement
        described above. Video Services Corporation provides satellite,
        distribution and production services to the motion picture, television,
        and advertising industries.


                                      I-36
<PAGE>   38

         ON COMMAND CORPORATION

         In connection with our acquisition of Ascent Entertainment Group, Inc.,
we acquired an approximate 56% ownership interest in On Command Corporation, a
leading provider of in-room interactive entertainment, Internet access, business
information and guest services for the lodging industry. On Command's common
stock trades on the Nasdaq National Market under the symbol "ONCO."

         MOTOROLA, INC. (SUCCESSOR TO GENERAL INSTRUMENT CORPORATION)

         Our interest in Motorola, Inc. derives from our former interest in
General Instrument Corporation. GI merged with Motorola on January 5, 2000.
Prior to its merger with Motorola, GI was a leading worldwide provider of
integrated and interactive broadband access solutions which, with its strategic
partners and customers, sought to advance the convergence of the Internet,
telecommunications and video entertainment industries. To that end, GI made
products that allow video, voice and data to be delivered over cable, digital
satellite and telephony networks. GI was a leading supplier of digital and
analog set-top terminals and systems for wired and wireless cable television
networks, as well as hybrid fiber/coaxial network transmission systems used by
cable television operators. GI also provided digital satellite television
systems for programmers, direct-to-home satellite networks and private networks
for business communications. Through its limited partnership interest in Next
Level Communications L.P., GI provided next-generation broadband access
solutions for local telephone companies. GI also had audio and Internet/data-
delivery systems among its product lines.

         In the Motorola merger, each share of GI common stock was exchanged for
0.575 shares of Motorola common stock. In connection with the merger, we entered
into an agreement with Motorola, pursuant to which we agreed to vote our shares
of GI common stock in favor of the transaction and Motorola granted to us
certain registration rights with respect to the shares of Motorola common stock
acquired by us in the merger. Immediately following the merger, GI stockholders
owned approximately 17% of Motorola.

         Motorola is a global leader in providing integrated communications
solutions and embedded electronic solutions. These include:

    -   software-enhanced wireless telephone, two-way radio, messaging and
        satellite communications products and systems, as well as networking and
        Internet access products, for consumers, network operators, and
        commercial, government and industrial customers;

    -   embedded semiconductor solutions for customers in networking,
        transportation, wireless communications and imaging and entertainment
        markets; and

    -   embedded electronic systems for automotive, communications, imaging,
        manufacturing systems, computer and consumer markets.

Motorola's common stock trades on the NYSE under the symbol "MOT."

         Ownership Interest. We currently hold a 4% interest in Motorola,
including vested warrants to purchase approximately 28.3 million shares of
Motorola common stock.


                                      I-37
<PAGE>   39

         Our relationship with GI began in December 1997 when National Digital
Television Center, Inc., a wholly owned subsidiary of TCI, entered into an
agreement with GI to purchase advanced digital set-top terminals. In connection
with NDTC's purchase commitment, GI granted the warrants specified above. In
July 1998, TCI acquired 21.4 million restricted shares of GI common stock in
exchange for:

    -   certain of the assets of NDTC's set-top authorization business;

    -   the license of certain related software to GI;

    -   a $50 million promissory note from TCI to GI; and

    -   a nine year revenue guarantee from TCI in favor of GI.

In connection with the AT&T merger, the shares of GI common stock and the note
payable were contributed to us. In April 1999, we acquired an additional 10
million shares of GI from Forstmann Little & Co. for $280 million. This purchase
increased our ownership in GI to approximately 18% and made us the largest
stockholder of GI.

         ANTEC CORPORATION

         We also hold an approximately 18% interest in Antec Corporation, an
international communications technology company specializing in the design and
engineering of hybrid fiber/coaxial broadband networks and the development and
distribution of products for these broadband networks. Antec provides its
customers, primarily cable system operators, with products and services that
enable reliable, high-speed, two-way broadband transmission of video, telephony,
and data. In addition, Antec has developed a full line of technologically
advanced fiber optic products to capitalize on current and future upgrades of
cable systems employing hybrid fiber/coaxial technology capable of providing
state-of-the-art video, voice and data services. Antec's common stock trades on
the Nasdaq National Market under the symbol "ANTC."

REGULATORY MATTERS

         DOMESTIC PROGRAMMING

         In the United States, the FCC regulates the providers of satellite
communications services and facilities for the transmission of programming
services, the cable television systems that carry such services, and, to some
extent, the availability of the programming services themselves through its
regulation of program licensing. Cable television systems in the United States
are also regulated by municipalities or other state and local government
authorities. Cable television companies are currently subject to federal rate
regulation on the provision of basic service, and continued rate regulation or
other franchise conditions could place downward pressure on the fees cable
television companies are willing or able to pay for programming services in
which we have interests. Regulatory carriage requirements also could adversely
affect the number of channels available to carry the programming services in
which we have an interest.


                                      I-38
<PAGE>   40

         Regulation of Program Licensing. The Cable Television Consumer
Protection and Competition Act of 1992 (the 1992 Cable Act) directed the FCC to
promulgate regulations regarding the sale and acquisition of cable programming
between multi-channel video programming distributors (including cable operators)
and satellite-delivered programming services in which a cable operator has an
attributable interest. The legislation and the implementing regulations adopted
by the FCC preclude virtually all exclusive programming contracts between cable
operators and satellite programmers affiliated with any cable operator (unless
the FCC first determines the contract serves the public interest) and generally
prohibit a cable operator that has an attributable interest in a satellite
programmer from improperly influencing the terms and conditions of sale to
unaffiliated multi-channel video programming distributors. Further, the 1992
Cable Act requires that such affiliated programmers make their programming
services available to cable operators and competing multi-channel video
programming distributors such as multi-channel multi-point distribution systems
and direct broadcast satellite distributors on terms and conditions that do not
unfairly discriminate among distributors. The Telecommunications Act of 1996 has
extended these rules to programming services in which telephone companies and
other common carriers have attributable ownership interests. The FCC revised its
program licensing rules by implementing a damages remedy in situations where the
defendant knowingly violates the regulations and by establishing a timeline for
the resolution of such complaints, among other things.

         Regulation of Carriage of Programming. Under the 1992 Cable Act, the
FCC has adopted regulations prohibiting cable operators from requiring a
financial interest in a programming service as a condition to carriage of such
service, coercing exclusive rights in a programming service or favoring
affiliated programmers so as to restrain unreasonably the ability of
unaffiliated programmers to compete.

         Regulation of Ownership. The 1992 Cable Act required the FCC, among
other things, (1) to prescribe rules and regulations establishing reasonable
limits on the number of channels on a cable system that will be allowed to carry
programming in which the owner of such cable system has an attributable interest
and (2) to consider the necessity and appropriateness of imposing limitations on
the degree to which multi-channel video programming distributors (including
cable operators) may engage in the creation or production of video programming.
In 1993, the FCC adopted regulations limiting carriage by a cable operator of
national programming services in which that operator holds an attributable
interest to 40% of the first 75 activated channels on each of the cable
operator's systems. The rules provide for the use of two additional channels or
a 45% limit, whichever is greater, provided that the additional channels carry
minority-controlled programming services. The regulations also grandfather
existing carriage arrangements that exceed the channel limits, but require new
channel capacity to be devoted to unaffiliated programming services until the
system achieves compliance with the regulations. These channel occupancy limits
apply only up to 75 activated channels on the cable system, and the rules do not
apply to local or regional programming services. However, on March 2, 2001, the
United States Court of Appeals for the District of Columbia Circuit found that
the FCC had failed to justify adequately the channel occupancy limit, reversed
the FCC's decision and remanded the rule to the FCC for further consideration.
These rules, if readopted by the FCC upon remand with record support, may limit
carriage of the programming companies in which we have interests on certain
systems of affiliated cable operators. In the same rulemaking, the FCC concluded
that additional restrictions on the ability of multi-channel distributors to
engage in the creation or production of video programming were then unwarranted.

         In its March 2 decision, the Court of Appeals also reversed the FCC's
rule imposing a thirty percent limit on the number of subscribers served by
systems in which a multiple system operator can have an attributable ownership
interest.


                                      I-39
<PAGE>   41

         The FCC's rules also generally prohibit common ownership of a cable
system and broadcast television stations or multichannel multi-point
distribution systems (MMDS) with overlapping service areas. In August 1999, the
FCC revised the attribution standards, which are used to implement these
ownership rules, and adopted new attribution standards based upon a combination
of equity, debt and other indicia of influence. On December 14, 2000, the FCC
adopted further revised attribution standards. The new attribution criteria
could limit our ability to engage in certain transactions involving broadcast
stations and MMDS systems. The ownership attribution standards used to enforce
other rules, including the horizontal cable system ownership, channel occupancy
limits, program access and program carriage rules, also were revised in October
1999. The Court of Appeals reversed these revised standards, in part, in its
March 2 decision.

         Regulation of Carriage of Broadcast Stations. The 1992 Cable Act
granted broadcasters a choice of must carry rights or retransmission consent
rights. The rules adopted by the FCC generally provided for mandatory carriage
by cable systems of all local full-power commercial television broadcast signals
selecting must carry rights and, depending on a cable system's channel capacity,
non-commercial television broadcast signals. Such statutorily mandated carriage
of broadcast stations coupled with the provisions of the Cable Communications
Policy Act of 1984, which require cable television systems with 36 or more
"activated" channels to reserve a percentage of such channels for commercial use
by unaffiliated third parties and permit franchise authorities to require the
cable operator to provide channel capacity, equipment and facilities for public,
educational and government access channels, could adversely affect some or
substantially all of the programming companies in which we have interests by
limiting the carriage of such services in cable systems with limited channel
capacity. On January 18, 2001, the FCC adopted rules relating to the cable
carriage of digital television signals. Among other things, the rules clarify
that a digital-only television station can assert a right to analog or digital
carriage on a cable system. The FCC initiated a further proceeding to determine
whether television stations may assert rights to carriage of both analog and
digital signals during the transition to digital television. The imposition of
such additional must carry regulation, in conjunction with the current limited
cable system channel capacity, would make it likely that cable operators will be
forced to drop cable programming services, which may have an adverse impact on
the programming companies in which we have interests.

         Closed Captioning and Video Description Regulation. The
Telecommunications Act of 1996 also required the FCC to establish rules and an
implementation schedule to ensure that video programming is fully accessible to
the hearing impaired through closed captioning. The rules adopted by the FCC
will require substantial closed captioning over an eight to ten year phase-in
period with only limited exemptions. As a result, the programming companies in
which we have interests are expected to incur significant additional costs for
closed captioning. In July 2000, the FCC also adopted rules requiring certain
broadcasters and the largest national video programming services to begin to
provide audio descriptions of visual events for the visually impaired on the
secondary audio program.


                                      I-40
<PAGE>   42

         Copyright Regulation. Satellite carriers, such as Gemstar-TV Guide's
UVTV division, retransmit the broadcast signals of "superstations," such as KWGN
and WGN, and of network stations to home satellite dish owners for private home
viewing under statutory license pursuant to the Satellite Home Viewer Act of
1994 (the SHV Act). The Intellectual Property and Communications Omnibus Reform
Act of 1999 (IPCORA), enacted into law in November 1999, extends the SHV Act
license until December 31, 2004. Under the SHV Act, satellite carriers
previously paid a monthly fee of 27 cents per subscriber for the secondary
transmission of distant superstations and distant network stations. However,
IPCORA has decreased the royalty fee for distant superstations by 30% and
distant network stations by 45%. To the extent that satellite carriers transmit
superstation or network station signals to cable operators, such cable operators
pay the copyright fee under the separate compulsory license. Satellite carriers
may only distribute the signals of network broadcast stations, as distinguished
from superstations, to "unserved households" that are outside the Grade B
contours of a station affiliated with such network. In October 2000, the FCC
adopted rules that subject superstations and distant network stations delivered
by satellite directly to dish owners to new program exclusivity rules (similar
to those imposed on cable operators), including syndicated exclusivity, network
non-duplication and sports blackout rules. The FCC also adopted rules in May
2000 establishing signal strength measurement and subscriber eligibility
standards. The statute provides a copyright liability moratorium for all
satellite carriers distributing distant network signals to existing (as of
October 31, 1999) and recently terminated (after July 1, 1998) subscribers who
are within Grade B contours of local network affiliates. Moreover, the entire
C-band satellite industry is exempt from all restrictions on delivering distant
network signals to subscribers who received C-band service before October 31,
1999. IPCORA and rulemakings, exemptions, and regulatory requirements adopted
under it will substantially impact the C-band and DBS industry, potentially
affecting the economics of uplinking and distributing distant network stations
and superstations to dish owners. A subsidiary of Gemstar-TV Guide entered into
an agreement with the National Association of Broadcasters, the ABC, CBS, FOX
and NBC networks, their affiliate associations, and several hundred broadcast
stations to identify by zip code those geographic areas which are "unserved" by
network affiliated stations in May 1998. With the passage of IPCORA, that
subsidiary opted to discontinue that agreement, and the parties resolved their
dispute over such termination in June 2000.

         Satellites and Uplink. In general, authorization from the FCC must be
obtained for the construction and operation of a communications satellite. The
FCC authorizes utilization of satellite orbital slots assigned to the United
States by the World Administrative Radio Conference. Such slots are finite in
number, thus limiting the number of carriers that can provide satellite
transponders and the number of transponders available for transmission of
programming services. At present, however, there are numerous competing
satellite service providers that make transponders available for video services
to the cable industry.

         Proposed Changes in Regulation. The regulation of programming services,
cable television systems, satellite carriers and television stations is subject
to the political process and has been in constant flux over the past decade.
Further material changes in the law and regulatory requirements must be
anticipated and there can be no assurance that our business will not be
adversely affected by future legislation, new regulation or deregulation.


                                      I-41
<PAGE>   43

         DOMESTIC TELEPHONY AND SATELLITE SYSTEMS

         The FCC regulates the licensing, construction, operation, acquisition,
resale and interconnection arrangements of domestic wireless telecommunications
systems. The activities of wireless service providers, such as the Sprint PCS
Group of Sprint Corporation, are subject to regulation in varying degrees,
depending on the jurisdiction, by state and local regulatory agencies as well.
The FCC, in conjunction with the U.S. Federal Aviation Administration, also
regulates tower marking and lighting, and FCC environmental rules may cause
certain PCS network facilities to become subject to regulation under the
National Environmental Policy Act and the National Historic Preservation Act.

         We also hold interests in various entities that provide domestic
interstate and intrastate telephony services, including competitive local
exchange, exchange access and interexchange services. Interstate telephone
services are regulated at the federal level pursuant to the Communications Act
and the rules of the FCC. Intrastate telephone services are regulated to varying
degrees by the public utility commissions of the respective states.

         INTERNATIONAL CABLE, TELEPHONY AND PROGRAMMING

         Some of the foreign countries in which we have, or propose to make, an
investment regulate, in varying degrees, (1) the granting of cable and telephony
franchises, the construction of cable and telephony systems and the operations
of cable, other multi-channel television operators and telephony operators and
service providers, as well as the acquisition of, and foreign investments in,
such operators and service providers, and (2) the distribution and content of
programming and Internet services and foreign investment in programming
companies. Regulations or laws may cover wireline and wireless telephony,
satellite and cable communications and Internet services, among others.
Regulations or laws that exist at the time we make an investment in a foreign
subsidiary or business affiliate may thereafter change, and there can be no
assurance that material and adverse changes in the regulation of the services
provided by our subsidiaries and business affiliates will not occur in the
future. Regulation can take the form of price controls, service requirements and
programming and other content restrictions, among others. Moreover, some
countries do not issue exclusive licenses to provide multi-channel television
services within a geographic area, and in those instances we may be adversely
affected by an overbuild by one or more competing cable operators. In certain
countries where multi-channel television is less developed, there is minimal
regulation of cable television, and, hence, the protections of the cable
operator's investment available in the United States and other countries (such
as rights to renewal of franchises and utility pole attachment) may not be
available in these countries.


                                      I-42
<PAGE>   44

         INTERNET SERVICES

         The Internet companies in which we have interests are subject, both
directly and indirectly, to various laws and governmental regulations relating
to their respective businesses. There are currently few laws or regulations
directly applicable to access to or commerce on commercial online services or
the Internet. For example, the Digital Millennium Copyright Act, enacted into
law in 1998, protects certain qualifying online service providers from copyright
infringement liability, the Internet Tax Freedom Act, also enacted in 1998,
placed a three year moratorium on new state and local taxes on Internet access
and commerce, and, under the Communications Decency Act, an Internet service
provider will not be treated as the publisher or speaker of any information
provided by another information content provider. However, because of the
increasing popularity and use of commercial online services and the Internet, a
number of laws and regulations may be adopted with respect to commercial online
services and the Internet. For example, the Internet Tax Freedom Act expires in
2001, but Congress may extend this moratorium in some form. Other
Internet-related laws and regulations may cover issues such as user privacy,
defamatory speech, copyright infringement, pricing and characteristics and
quality of products and services. The adoption of such laws or regulations in
the future may slow the growth of commercial online services and the Internet,
which could in turn cause a decline in the demand for the services and products
of the Internet companies in which we have interests and increase such
companies' costs of doing business or otherwise have an adverse effect on their
businesses, operating results and financial conditions. Moreover, the
applicability to commercial online services and the Internet of existing laws
governing issues such as property ownership, libel, personal privacy and
taxation is uncertain and could expose these companies to substantial liability.

         BROADCASTERS

         We also have nonattributable minority ownership interests in group
owners of broadcast television and radio stations. The FCC extensively regulates
the ownership and operation of such stations through a variety of rules. Among
other things, FCC regulations: (1) limit the number of television stations in
which a person or entity may hold an attributable interest both locally and
nationally; (2) limit the common ownership of television stations and radio
stations in a particular market; and (3) prohibit the common ownership of a
broadcast station and a daily newspaper published in or a cable system operating
in a community over which that station places a broadcast signal of certain
strength.

COMPETITION

         Programming. The business of distributing programming for cable and
satellite television is highly competitive, both in the United States and in
foreign countries. The programming companies in which we have interests directly
compete with other programmers for distribution on a limited number of channels.
Once distribution is obtained, our programming services and our business
affiliates' programming services compete, in varying degrees, for viewers and
advertisers with other cable and off-air broadcast television programming
services as well as with other entertainment media, including home video
(generally video rentals), pay-per-view services, online activities, movies and
other forms of news, information and entertainment. The programming companies in
which we have interests also compete, to varying degrees, for creative talent
and programming content. Our management believes that important competitive
factors include the prices charged for programming, the quantity, quality and
variety of the programming offered and the effectiveness of marketing efforts.
In addition, HSN and QVC operate in direct competition with businesses that are
engaged in retail merchandising.


                                      I-43
<PAGE>   45

         Communications. The cable television systems and other forms of media
distribution in which we have interests directly compete for viewer attention
and subscriptions in local markets with other providers of entertainment, news
and information, including other cable television systems in those countries
that do not grant exclusive franchises, broadcast television stations,
direct-to-home satellite companies, satellite master antenna television systems,
multi-channel multi-point distribution systems and telephone companies, other
sources of video programs (such as videocassettes) and additional sources for
entertainment news and information, including the Internet. Cable television
systems also face strong competition from all media for advertising dollars. Our
management believes that important competitive factors include fees charged for
basic and premium services, the quantity, quality and variety of the programming
offered, the quality of signal reception, customer service and the effectiveness
of marketing efforts.

         In addition, there is substantial competition in the domestic wireless
telecommunications industry, and it is expected that such competition will
intensify as a result of the entrance of new competitors and the increasing pace
of development of new technologies, products and services. Each of the markets
in which the Sprint PCS Group competes is served by other two-way wireless
service providers, including cellular and PCS operators and resellers. A
majority of the markets will have five or more commercial mobile radio service
providers and each of the top 50 metropolitan markets have at least one other
PCS competitor in addition to two cellular incumbents. Many of these competitors
have been operating for a number of years and currently service a significant
subscriber base.

         Internet Services and Technology. The markets for Internet services,
online content and products are relatively new, intensely competitive and
rapidly changing. Since the Internet's commercialization in the early 1990's,
the number of Internet companies and web sites competing for consumers'
attention and spending has proliferated with no substantial barriers to entry,
and we expect that competition will continue to intensify in the future. The
Internet companies and web sites in which we have interests compete, directly
and indirectly, for members, visitors, advertisers, content providers and
merchandise sales with many categories of companies, including:

    -   other Internet companies and web sites targeted to the respective
        audiences of the Internet companies and web sites in which we have
        interests;

    -   publishers and distributors of traditional off-line media (such as
        television, radio and print), including those targeted to the respective
        audiences of the Internet companies and web sites in which we have
        interests, many of which have made, or may in the future make,
        significant acquisitions of or investments in Internet companies and/or
        have established, or may in the future establish, web sites;

    -   general purpose consumer online services such as America Online and
        Microsoft Network, each of which provides access to content and services
        targeted to the respective audiences of the Internet companies and web
        sites in which we have interests;

    -   vendors of information, merchandise, products and services distributed
        through other means, including retail stores, mail, facsimile and
        private bulletin board services; and

    -   web search and retrieval services and other high-traffic web sites.

Liberty anticipates that the number of such competitors will increase in the
future.

                                      I-44
<PAGE>   46

         The technology companies in which we have interests compete with a
substantial number of foreign and domestic companies, and the rapid
technological changes occurring in such companies' markets are expected to lead
to the entry of new competitors. The ability of the technology companies in
which we have interests to anticipate technological changes and introduce
enhanced products on a timely basis will be a significant factor in their
ability to expand and remain competitive. Existing competitors' actions and new
entrants may have an adverse impact on these companies' sales and profitability.

EMPLOYEES

         As of December 31, 2000, we had approximately 40 employees and our
consolidated subsidiaries had an aggregate of approximately 6,900 employees.
None of our employees are represented by a labor union or covered by a
collective bargaining agreement. We believe that our employee relations are
good.


Item 2. Properties

         With the exception of our corporate offices in Englewood, Colorado
(which we lease), we do not own or lease any real or personal property other
than through our interests in our subsidiaries and business affiliates. Our
subsidiaries and business affiliates own or lease the fixed assets necessary for
the operation of their respective businesses, including office space,
transponder space, headends, cable television and telecommunications
distribution equipment, telecommunications switches and customer equipment
(including converter boxes). We are currently building a new corporate
headquarters in Englewood, Colorado, which we expect to occupy by the end of
2001. Our management believes that our current facilities are, and our new
headquarters will be, suitable and adequate for our business operations for the
foreseeable future.


Item 3. Legal Proceedings

         There are no material pending legal proceedings, other than ordinary
routine litigation incidental to our business, to which we or any of our
subsidiaries is a party or of which any of our respective properties are
subject.


Item 4. Submission of Matters to a Vote of Security Holders.

         None.


                                      I-45
<PAGE>   47

                                    PART II.

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

         (a) There is no market for our common equity. See "Certain
Relationships and Related Transactions" in Part III of this report.

         (b) Recent Sales of Unregistered Securities. On March 8, 1999, in
connection with the merger of AT&T and TCI, we reclassified each share of our
existing and outstanding common stock, $1.00 par value per share, held by TCI
into one share of Class A Common Stock, $.0001 par value per share, one share of
Class B Common Stock, $.0001 par value per share, and one share of Class C
Common Stock, $.0001 par value per share. We believe this transaction was exempt
from registration under the Securities Act either because it did not involve a
"sale" of securities as defined in Section 2(3) of the Securities Act or, if it
did involve a "sale", the transaction was exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) of the Securities
Act since it did not involve a public offering.

         We believe that the sales of the following securities were exempt from
the registration requirements of the Securities Act by virtue of Section 4(2) of
the Securities Act because none of these transactions involved a public
offering. We used the proceeds from the following issuances for working capital
purposes.

         On June 30, 1999, we sold to Lehman Brothers, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Banc of America Securities LLC, BNY Capital
Markets, Inc., Credit Lyonnais Securities, Donaldson, Lufkin & Jenrette, Morgan
Stanley Dean Witter, Salomon Smith Barney, Schroder & Co. Inc. and TD Securities
our 7-7/8% Senior Notes due 2009 at an aggregate offering price of $750 million
(less a discount to these initial purchasers of approximately $4.9 million) and
our 8-1/2% Senior Debentures due 2029 at an aggregate offering price of $500
million (less a discount to these initial purchasers of approximately $4.4
million).

         On November 16, 1999, we sold our 4% Senior Exchangeable Debentures due
2029 to Donaldson, Lufkin & Jenrette, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co. and Salomon Smith Barney at an aggregate
offering price of approximately $868.8 million (less a discount to these initial
purchasers of $15 million). Each $1,000 principal amount debenture is
exchangeable, at the option of the holder, for the value of 22.9486 shares of
Sprint PCS Group stock. We may pay this value in cash, with a number of shares
of Sprint PCS Group stock or a combination of cash and stock, as determined in
the debentures.

         On February 2, 2000, we sold to Lehman Brothers and Salomon Smith
Barney Inc. our 8-1/4% Senior Debentures due 2030, at an aggregate offering
price of $1 billion (less a discount to the initial purchasers of $8.8 million).

         On February 10, 2000, we sold to Salomon Smith Barney Inc. our 3-3/4%
Senior Exchangeable Debentures due 2030 at an aggregate offering price of $750
million (less a discount to the initial purchaser of $15 million). On March 8,
2000, we sold to Salomon Smith Barney Inc. an additional $60 million principal
amount of our 3-3/4% Senior Exchangeable Debentures due 2030 (less a discount to
the initial purchaser of $1 million). Each $1,000 principal amount debenture is
exchangeable, at the option of the holder, for the value of 16.7764 shares of
Sprint PCS Group stock. We may pay this value in cash, with a number of shares
of Sprint PCS Group stock or a combination of cash and stock, as determined in
the debentures.

                                      II-1
<PAGE>   48

         On January 11, 2001, we sold to Lehman Brothers Inc. our 3-1/2% senior
exchangeable debentures due 2031 at an aggregate offering price of $550 million
(less a discount to the initial purchaser of $11 million). On January 17, 2001,
we sold to Lehman Brothers Inc. an additional $50 million principal amount of
our 3-1/2% senior exchangeable debentures due 2031 (less a discount to the
initial purchaser of $1 million). Each $1,000 principal amount debenture is
exchangeable, at the option of the holder, for the value of 36.8189 shares of
Motorola common stock. We may pay this value in cash, with a number of shares of
Motorola stock or a combination of cash and stock, as determined in the
debentures.

         On March 8, 2001, we sold to Salomon Smith Barney Inc. our 3-1/4%
senior exchangeable debentures due 2031 at an aggregate offering price of
approximately $817.7 million (less a discount to the initial purchaser of
approximately $16.7 million). Each $1,000 principal amount debenture is
exchangeable, at the option of the holder, for the value of 18.5666 shares of
Viacom, Inc. common stock. We may pay this value in cash, with a number of
shares of Viacom stock or a combination of cash and stock, as determined in the
debentures.

Item 6.  Selected Financial Data.

         The following tables present selected historical information relating
to the financial condition and results of operations of Liberty for the past
five years. The following data should be read in conjunction with Liberty's
consolidated financial statements. Liberty was a wholly owned subsidiary of
Tele-Communications, Inc. ("TCI") since August 1994. On March 9, 1999, AT&T
Corp. acquired TCI in a merger transaction. For financial reporting purposes,
the merger of AT&T and TCI is deemed to have occurred on March 1, 1999. In
connection with the merger, the assets and liabilities of Liberty were adjusted
to their respective fair values pursuant to the purchase method of accounting.
For periods prior to March 1, 1999, the assets and liabilities of Liberty and
the related consolidated results of operations are referred to below as "Old
Liberty," and for periods subsequent to February 28, 1999, the assets and
liabilities of Liberty and the related consolidated results of operations are
referred to as "New Liberty." In connection with the merger, TCI effected an
internal restructuring as a result of which certain assets and approximately
$5.5 billion in cash were contributed to Liberty.

<TABLE>
<CAPTION>
                                                        New Liberty                          Old Liberty
                                                 -------------------------     ----------------------------------------
                                                        December 31,                        December 31,
                                                 -------------------------     ----------------------------------------
                                                    2000           1999           1998           1997           1996
                                                 ----------     ----------     ----------     ----------     ----------
                                                                       amounts in millions
<S>                                              <C>                <C>             <C>            <C>            <C>
Summary Balance Sheet Data:

Investment in affiliates                         $   20,379         15,922          3,079          2,359          1,519

Investments in available-for-sale securities
     and others                                  $   19,035         28,593         10,539          3,971          2,257

Total assets                                     $   54,176         58,650         15,783          7,735          6,722

Debt, including current portion                  $    6,363          3,277          2,096            785            555

Stockholder's equity                             $   34,224         38,408          9,230          4,721          4,519
</TABLE>

                                      II-2
<PAGE>   49

<TABLE>
<CAPTION>
                                                   New Liberty                                    Old Liberty
                                     -------------------------------------- -----------------------------------------------------
                                            Year            Ten months          Two months
                                            ended              ended              ended                   Years ended
                                        December 31,       December 31,         February 28,              December 31,
                                     -----------------  ------------------  ------------------  ---------------------------------
                                           2000               1999                1999              1998        1997       1996
                                     -----------------  ------------------  ------------------  -----------  ----------  --------
                                                                          amounts in millions
<S>                                  <C>                <C>                  <C>                <C>          <C>         <C>
Summary Statement of
  Operations Data:

Revenue                                  $     1,526                729               235            1,359      1,225        2,208

Operating income (loss)                  $       437             (2,214)             (158)            (431)      (260)         (66)

Interest expense                         $      (399)              (134)              (25)            (104)       (40)         (53)

Share of losses of affiliates, net       $    (1,731)              (904)              (66)          (1,002)      (785)        (332)

Gains on dispositions, net               $     7,339                  4                14            2,449        406        1,558

Net earnings (loss)                      $     2,569             (1,975)              (70)             622       (470)         741
</TABLE>


Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations.

         The following discussion and analysis provides information concerning
our results of operations and financial condition. This discussion should be
read in conjunction with our accompanying consolidated financial statements and
the notes thereto.

         AT&T's Liberty Media Group common stock is a tracking stock designed to
reflect the economic performance of the businesses and assets of AT&T attributed
to the "Liberty Media Group." We are included in the Liberty Media Group, and
the businesses and assets of Liberty and its subsidiaries constitute
substantially all of the businesses and assets of the Liberty Media Group.

         Liberty's domestic subsidiaries generally operate or hold interests in
businesses which provide programming services including production, acquisition
and distribution through all available formats and media of branded
entertainment, educational and informational programming and software. In
addition, certain of Liberty's subsidiaries hold interests in technology and
Internet businesses, as well as interests in businesses engaged in wireless
telephony, electronic retailing, direct marketing and advertising sales relating
to programming services, infomercials and transaction processing. Liberty also
has significant interests in foreign affiliates, which operate in cable
television, programming and satellite distribution.

         Liberty's most significant consolidated subsidiaries at December 31,
2000, were Starz Encore Group LLC, Liberty Livewire Corporation and On Command
Corporation. These businesses are either wholly or majority owned and,
accordingly, the results of operations of these businesses are included in the
consolidated results of Liberty for the periods in which they were wholly or
majority owned.

                                      II-3
<PAGE>   50

         A significant portion of Liberty's operations are conducted through
entities in which Liberty holds a 20%-50% ownership interest. These businesses
are accounted for using the equity method of accounting and, accordingly, are
not included in the consolidated results of Liberty except as they affect
Liberty's interest in earnings or losses of affiliates for the period in which
they were accounted for using the equity method. Included in Liberty's
investments in affiliates at December 31, 2000 were USA Networks, Inc.,
Discovery Communications, Inc., Gemstar-TV Guide International, Inc. (successor
to TV Guide, Inc.), QVC, Inc., UnitedGlobalCom, Inc. and Telewest Communications
plc.

         Liberty also holds interests in companies that are neither consolidated
subsidiaries nor affiliates accounted for using the equity method. The most
significant of these include AOL Time Warner Inc. (successor to Time Warner
Inc.), Sprint Corporation, The News Corporation Limited and Motorola, Inc. The
investments in AOL Time Warner, Sprint Corporation, News Corporation and
Motorola that Liberty holds are classified as available-for-sale securities and
are carried at fair value. Unrealized holding gains and losses on these
securities are carried net of taxes as a component of accumulated other
comprehensive earnings in stockholder's equity. Realized gains and losses are
determined on a specific-identification basis.

         AT&T's acquisition of Tele-Communications, Inc. ("TCI") by merger on
March 9, 1999, has been accounted for using the purchase method. Accordingly,
Liberty's assets and liabilities have been recorded at their respective fair
values resulting in a new cost basis. For financial reporting purposes the AT&T
merger is deemed to have occurred on March 1, 1999. Accordingly, for periods
prior to March 1, 1999, the assets and liabilities of Liberty and the related
consolidated financial statements are sometimes referred to herein as "Old
Liberty," and for periods subsequent to February 28, 1999, the assets and
liabilities of Liberty and the related consolidated financial statements are
sometimes referred to herein as "New Liberty." "Liberty" refers to both New
Liberty and Old Liberty.

SUMMARY OF OPERATIONS

         Starz Encore Group provides premium programming distributed by cable,
direct-to-home satellite and other distribution media throughout the United
States. Liberty Livewire provides sound, video and ancillary post production and
distribution services to the motion picture and television industries in the
United States and Europe. On Command provides in-room on-demand video
entertainment and information services to the domestic lodging industry. To
enhance the reader's understanding, separate financial data has been provided
below for the periods in which they were consolidated for Starz Encore Group,
Liberty Livewire and On Command due to the significance of those operations. The
table sets forth, for the periods indicated, certain financial information and
the percentage relationship that certain items bear to revenue. Liberty holds
significant equity investments, the results of which are not a component of
operating income, but are discussed below under "Investments in Affiliates
Accounted for Under the Equity Method." Other items of significance are
discussed separately below.

         General Information

         Liberty's consolidated statements of operations include information
reflecting the year ended December 31, 2000 and the ten month period ended
December 31, 1999 which represent the operations of New Liberty for periods
subsequent to the AT&T Merger. The two month period ended February 28, 1999 and
the year ended December 31, 1998 represent the operations of Old Liberty for
periods prior to the AT&T Merger.

                                      II-4
<PAGE>   51
<TABLE>
<CAPTION>
                                                         New Liberty
                                     ---------------------------------------------------
                                          Year                    Ten months
                                         ended        % of          ended         % of
                                      December 31,   total       December 31,     total
                                         2000        revenue         1999        revenue
                                     ------------    -------     ------------    -------
                                                  (dollar amounts in millions)
<S>                                  <C>             <C>         <C>             <C>
  Starz Encore Group

   Revenue                           $        733        100%    $        539        100%
   Operating, selling, general and
      administrative                          498         68              415         77
   Stock compensation                         163         22              283         53
   Depreciation and amortization              157         21              148         27
                                     ------------    -------     ------------    -------
      Operating (loss) income        $        (85)       (11)%   $       (307)       (57)%
                                     ============    =======     ============    =======

Liberty Livewire
   Revenue                           $        295        100%    $         --         --
   Operating, selling, general and
      administrative                          251         85               --         --
   Stock compensation                         (42)       (14)              --         --
   Depreciation and amortization               55         19               --         --
                                     ------------    -------     ------------    -------
      Operating income               $         31         10%    $         --         --
                                     ============    =======     ============    =======

On Command
   Revenue                           $        200        100     $         --         --
   Operating, selling, general and
      administrative                          151         76               --         --
   Depreciation and amortization               65         32               --         --
                                     ------------    -------     ------------    -------
      Operating loss                 $        (16)        (8)    $         --         --
                                     ============    =======     ============    -------

Other
   Revenue                           $        298         (a)    $        190         (a)
   Operating, selling, general and
      administrative                          286                         181
   Stock compensation                      (1,071)                      1,502
   Depreciation and amortization              576                         414
                                     ------------                ------------
      Operating income (loss)        $        507                $     (1,907)
                                     ============                ============
<CAPTION>
                                                       Old Liberty
                                     ------------------------------------------------
                                     Two months                   Year
                                        ended        % of         ended        % of
                                     February 28,    total     December 31,    total
                                         1999       revenue        1998       revenue
                                     ------------   -------    ------------   -------
                                              (dollar amounts in millions)
<S>                                  <C>            <C>        <C>            <C>
  Starz Encore Group

   Revenue                           $        101       100%   $        541       100%
   Operating, selling, general and
      administrative                           60        59             445        82
   Stock compensation                           3         3              58        11
   Depreciation and amortization                1         1               8         1
                                     ------------   -------    ------------   -------
      Operating (loss) income        $         37        37%   $         30         6%
                                     ============   =======    ============   =======

Liberty Livewire
   Revenue                           $         --        --    $         --        --
   Operating, selling, general and
      administrative                           --        --              --        --
   Stock compensation                          --        --              --        --
   Depreciation and amortization               --        --              --        --
                                     ------------   -------    ------------   -------
      Operating income               $         --        --    $         --        --
                                     ============   =======    ============   =======

On Command
   Revenue                           $         --        --    $         --        --
   Operating, selling, general and
      administrative                           --        --              --        --
   Depreciation and amortization               --        --              --        --
                                     ------------   -------    ------------   -------
      Operating loss                 $         --        --    $         --        --
                                     ============   =======    ============   =======

Other
   Revenue                           $        134        (a)    $        818       (a)
   Operating, selling, general and
      administrative                          128                        698
   Stock compensation                         180                        460
   Depreciation and amortization               21                        121
                                     ------------              ------------
      Operating income (loss)        $       (195)             $       (461)
                                     ============              ============
</TABLE>


----------
(a)      Not meaningful.

                                      II-5

<PAGE>   52

         In order to provide a meaningful basis for comparing the years ended
December 31, 2000, 1999 and 1998, the operating results of New Liberty for the
ten months ended December 31, 1999 have been combined with the operating results
of Old Liberty for the two months ended February 28, 1999, for purposes of the
following table and discussion. Depreciation, amortization and certain other
line items included in the operating results presented below are not comparable
between periods as a result of the effects of purchase accounting adjustments
related to the AT&T merger. The combining of predecessor and successor
accounting periods is not permitted by generally accepted accounting principles.

<TABLE>
<CAPTION>
                                                                     Combined Liberty
                                    ----------------------------------------------------------------------------------
                                       Year                         Year                         Year
                                       ended          % of          ended          % of         ended           % of
                                    December 31,      total      December 31,      total      December 31,      total
                                        2000         revenue         1999         revenue         1998         revenue
                                    ------------     -------     ------------     -------     ------------     -------
                                                               (dollar amounts in millions)
<S>                                 <C>              <C>         <C>              <C>         <C>              <C>
Starz Encore Group
  Revenue                           $        733         100%    $        640         100%    $        541         100%
  Operating, selling, general and
     administrative                          498          68              475          74              445          82
  Stock compensation                         163          22              286          45               58          11
  Depreciation and amortization              157          21              149          23                8           1
                                    ------------     -------     ------------     -------     ------------     -------
       Operating (loss) income      $        (85)        (11)%   $       (270)        (42)%   $         30           6%
                                    ============     =======     ============     =======     ============     =======

Liberty Livewire
  Revenue                           $        295         100%    $         --          --     $         --          --
  Operating, selling, general and
     administrative                          251          85               --          --               --
  Stock compensation                         (42)        (14)              --          --               --          --
  Depreciation and amortization               55          19               --          --               --          --
                                    ------------     -------     ------------     -------     ------------     -------
       Operating income             $         31          10%    $         --          --     $         --          --
                                    ============     =======     ============     =======     ============     =======
On Command
  Revenue                           $        200         100%    $         --          --     $         --          --
  Operating, selling, general and
     administrative                          151          76               --          --               --          --
  Depreciation and amortization               65          32               --          --               --          --
                                    ------------     -------     ------------     -------     ------------     -------
       Operating loss               $        (16)         (8)%   $         --          --     $         --          --
                                    ============     =======     ============     =======     ============     =======
Other
  Revenue                           $        298          (a)    $        324          (a)    $        818          (a)
  Operating, selling, general and
     administrative                          286                          309                          698
  Stock compensation                      (1,071)                       1,682                          460
  Depreciation and amortization              576                          435                          121
                                    ------------                 ------------                 ------------
       Operating income (loss)      $        507                 $     (2,102)                $       (461)
                                    ============                 ============                 ============
</TABLE>

----------

(a)  Not meaningful.

                                      II-6
<PAGE>   53

         YEAR ENDED DECEMBER 31, 2000, COMPARED TO DECEMBER 31, 1999


         CONSOLIDATED SUBSIDIARIES

         Starz Encore Group. The majority of Starz Encore Group's revenue is
derived from the delivery of movies to subscribers under affiliation agreements
between Starz Encore Group and cable operators and satellite direct-to-home
distributors. Starz Encore Group entered into a 25-year affiliation agreement in
1997 with TCI. TCI cable systems subsequently acquired by AT&T in the AT&T
merger operate under the name AT&T Broadband. Under this affiliation agreement
with AT&T Broadband, Starz Encore Group receives fixed monthly payments in
exchange for unlimited access to all of the existing Encore and STARZ! services.
The payment from AT&T Broadband can be adjusted, in certain instances, if AT&T
acquires or disposes of cable systems or if Starz Encore Group's programming
costs increase above certain specified levels. As a result of AT&T's acquisition
of MediaOne Group, Inc. on June 15, 2000, the contracted payment amount
increased by approximately 20%. After adjusting for the elimination of the
former MediaOne contract, the net payment amount from the combined AT&T
companies increased by approximately 10%. Starz Encore Group's other affiliation
agreements generally provide for payments based on the number of subscribers
that receive Starz Encore Group's services.

         Revenue increased to $733 million in 2000 from $640 million in 1999.
Revenue from AT&T Broadband increased 11% during 2000 compared to the same
period of 1999, pursuant to the terms of the AT&T/Starz Encore Group affiliation
agreement. As AT&T's acquisition of MediaOne did not close until June 2000, the
increase in revenue from AT&T Broadband only reflects the 20% increase in the
contracted payment required under the AT&T/Starz Encore Group affiliation
agreement for six and one-half months of 2000. Under this agreement, the amount
paid by AT&T Broadband does not vary with the number of subscription units from
AT&T Broadband unless such variations in subscription units are due to
acquisitions or dispositions of cable systems, as discussed above. This category
also includes revenue from cable systems that have been contributed by AT&T to
joint ventures and are subject to the AT&T/Starz Encore Group affiliation
agreement. Revenue from cable affiliates other than AT&T Broadband increased 33%
during 2000, compared to 1999 due to increases in subscription units for Encore
and STARZ! services. MOVIEplex and Thematic Multiplex subscribers from cable
affiliates other than AT&T Broadband increased by 15% and 239%, respectively,
during 2000 compared to 1999, contributing to the increase in revenue. Revenue
from satellite providers and other distribution technologies increased 7% during
2000, due to 17%, 26% and 51% increases in STARZ!, Encore and Thematic Multiplex
subscription units, respectively. Revenue from satellite providers and other
distribution technologies grew at a slower rate than subscription units due to
contractual incentives. Starz Encore Group's revenue could be adversely affected
by a strike by certain entertainment guilds. A strike of this type could affect
the quality and quantity of programming available to Starz Encore Group, which
could result in slower growth in subscriptions for the Starz Encore Group
programming services. A prolonged downturn in the economy and consumer
confidence indices could also have a material adverse impact on Starz Encore
Group's future growth as consumers' willingness to upgrade television
programming services and/or its distributors' ability to make the necessary
capital expenditures to offer such services may be negatively affected.

         Operating, selling, general and administrative expenses increased by 5%
during 2000 as compared to 1999, primarily due to an increase in programming
expenses. Programming expenses increased due to an increase in programming
license fees resulting from increased use of higher quality first-run films from
certain movie studios. The increase in programming expense was partially offset
by reduced spending on affiliate marketing and national branding efforts.


                                      II-7
<PAGE>   54

         Depreciation and amortization increased from $149 million during 1999
to $157 million during 2000. The increase was primarily the result of purchase
accounting adjustments being in effect for the full year 2000 compared to only
the last ten months of 1999.

         Starz Encore Group has granted phantom stock appreciation rights to
certain of its officers. Compensation relating to the phantom stock appreciation
rights has been recorded based upon the fair value of the Starz Encore Group as
determined by a third-party appraisal. The amount of expense associated with the
phantom stock appreciation rights is generally based on the vesting of such
rights and the change in the fair value of the Starz Encore Group.

         Liberty Livewire. On April 10, 2000, Liberty acquired all of the
outstanding common stock of Four Media Company in exchange for AT&T Class A
Liberty Media Group common stock and cash. On June 9, 2000 Liberty acquired a
controlling interest in The Todd-AO Corporation in exchange for AT&T Class A
Liberty Media Group common stock. Immediately following the closing of such
transaction, Liberty contributed 100% of the capital stock of Four Media Company
to Todd-AO in exchange for additional Todd-AO common stock. Following these
transactions, Todd-AO changed its name to Liberty Livewire. On July 19, 2000,
Liberty purchased all of the assets relating to the post production, content and
sound editorial businesses of Soundelux Entertainment Group. Immediately
following such transaction, the assets of Soundelux were contributed to Liberty
Livewire for additional Liberty Livewire stock. Following these transactions,
Liberty owned approximately 88% of the equity and controlled approximately 99%
of the voting power of Liberty Livewire, and as a result, began to consolidate
the operations of Liberty Livewire during the quarter ended June 30, 2000.
Liberty Livewire is dependent on the television and movie production industries
for a substantial portion of its revenue. A strike by certain entertainment
guilds could have a significant negative impact on Liberty Livewire's revenue
during the periods affected by such strike. Liberty Livewire could also be
affected by a prolonged downturn in the economy as such an event may
significantly reduce the development of and investments in new television and
motion picture programming.

         On Command. On March 28, 2000, Liberty announced that it had completed
its cash tender offer for the outstanding common stock of Ascent Entertainment
Group, Inc. Approximately 85% of the outstanding shares of common stock of
Ascent were tendered in the offer. On June 8, 2000, Liberty completed its
acquisition of 100% of Ascent. On Command is a majority owned subsidiary of
Ascent. On Command's principal business is providing pay-per-view entertainment
and information services to the lodging industry. Upon completion of the tender
offer, Liberty consolidated the operations of On Command. On Command's revenue
could be negatively impacted by a strike by certain entertainment guilds as the
amount of programming available to On Command could be negatively impacted,
thereby potentially reducing purchases of pay-per-view entertainment services
by consumers. A prolonged downturn in the economy could also have a material
adverse impact on On Command's revenue as such an event could reduce business
and personal travel by consumers, therefore potentially reducing On Command's
customer base.

         Other. Included in this information are the results of Liberty's other
consolidated subsidiaries and corporate expenses. Some of Liberty's significant
other consolidated subsidiaries include Liberty Digital, Inc., Pramer S.C.A. and
Liberty Cablevision of Puerto Rico. Liberty Digital is principally engaged in
programming, distributing and marketing digital and analog music services to
homes and businesses. Pramer is one of the largest owners and distributors of
cable programming services in Argentina. Liberty Cablevision of Puerto Rico is
one of the largest providers of cable television services in Puerto Rico. The
results of TV Guide are included for the two months ended February 28, 1999,
after which time Liberty began accounting for this investment under the equity
method of accounting.


                                      II-8
<PAGE>   55


         Revenue decreased 8% to $298 million for 2000 as compared to $324
million in 1999 primarily due to the deconsolidation of TV Guide on March 1,
1999, which accounted for $97 million of the decrease. The effect of the
deconsolidation of TV Guide was partially offset by a $12 million increase in
revenue at Pramer, a $20 million increase in revenue at Liberty Digital and a
$12 million increase in revenue at other international subsidiaries. Ascent
Network Services, Inc. which was acquired during March 2000 as part of the
Ascent transaction, also contributed $17 million in additional revenue.

         Operating, selling, general and administrative expenses decreased 7% to
$286 million for 2000 as compared to $309 million for 1999. The decrease in
expenses is primarily due to the deconsolidation of TV Guide, which accounted
for $76 million of the decrease. The effect of the TV Guide deconsolidation was
offset by start up expenses of $26 million at True Position, Inc. which was
acquired on January 14, 2000 as part of the Associated Group transaction,
increased expenses of $9 million at each of Pramer and Liberty Digital, and $11
million of expenses associated with the acquisition of Ascent Network Services.

         Depreciation and amortization increased $141 million to $576 million
for 2000 from $435 million for 1999. The increase was a result of the effects of
purchase accounting adjustments related to the AT&T merger and other
acquisitions.

         The amount of expense associated with stock compensation is generally
based on the vesting of the related stock options and stock appreciation rights
and the market price of the underlying common stock. The expense reflected in
the table is based on the market price of the underlying common stock as of the
date of the financial statements and is subject to future adjustment based on
market price fluctuations, vesting percentages and, ultimately, on the final
determination of market value when the rights are exercised.

         Other Income and Expense. Interest expense was $399 million, $134
million and $25 million for the year ended December 31, 2000, the ten month
period ending December 31, 1999 and the two month period ending February 28,
1999, respectively. The increase in interest expense during 2000 was a result of
increased borrowings by Liberty during the second half of 1999 and the first
quarter of 2000.

         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 consolidated
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.

         Dividend and interest income was $301 million, $242 million and $10
million for the year ended December 31, 2000, the ten month period ended
December 31, 1999 and the two month period ended February 28, 1999,
respectively. The increase in dividend and interest income during the year ended
December 31, 2000 primarily represents interest earned on the cash collateral
balance associated with the securities lending agreement, increased dividends
from investments in News Corp. and Motorola and interest earned on cash balances
at Ascent and Liberty Satellite and Technology, Inc. ("LSAT").

         Impairment of investments was $1,476 million for the year ending
December 31, 2000. During the year ended December 31, 2000, Liberty determined
that its investments in Motorola, Primedia and certain other investments
experienced other than temporary declines in value. As a result, the carrying
amounts of these investments were adjusted to their respective fair values at
December 31, 2000 based upon recent quoted market prices.


                                      II-9
<PAGE>   56


         Aggregate gains from dispositions during the year ended December 31,
2000, the ten month period ended December 31, 1999 and the two month period
ended February 28, 1999 were $7,339 million, $4 million and $14 million,
respectively. Liberty recognized a gain of $2,233 million during the year ended
December 31, 2000, in connection with the acquisition of General Instrument by
Motorola. Liberty also recognized a $211 million gain during the year ended
December 31, 2000, in connection with the exchange of Sprint PCS Group stock,
valued at $300 million, for a preferred stock interest in LSAT. Liberty
recognized a gain of $649 million during the year ended December 31, 2000, in
connection with the acquisition of Flextech Limited by Telewest. Liberty
recognized a gain of $4,391 million during the year ended December 31, 2000 in
connection with the acquisition of TV Guide by Gemstar. In all of the above
exchange transactions, the gains were calculated based upon the difference
between the carrying value of the assets relinquished compared to the fair value
of the assets received.

         Liberty recognized a gain on issuance of equity by affiliates and
subsidiaries of $372 million during the two months ended February 28, 1999, in
connection with the acquisition by United Video Satellite Group of the TV Guide
properties.

         INVESTMENTS IN AFFILIATES ACCOUNTED FOR UNDER THE EQUITY METHOD

         Liberty's share of losses of affiliates was $1,731 million, $904
million and $66 million during the year ended December 31, 2000, the ten month
period ending December 31, 1999 and the two month period ending February 28,
1999, respectively. At December 31, 2000, the excess of Liberty's aggregate
carrying amount in its affiliates over Liberty's proportionate share of its
affiliates' net assets is approximately $15 billion. This excess basis is being
amortized over estimated useful lives ranging from 2 to 20 years. Such
amortization was approximately $936 million, $463 million and $9 million for the
year ended December 31, 2000, the ten months ended December 31, 1999 and the two
months ended February 28, 1999, respectively. Such excess basis amortization is
included in Liberty's share of losses of its affiliates.

         USA Networks, Inc. Liberty's share of USA Networks, Inc.'s net earnings
(loss) was approximately $(36) million, $(20) million and $10 million for the
year ended December 31, 2000, the ten month period ended December 31, 1999 and
the two month period ended February 28, 1999, respectively. Liberty's share of
losses for the year ended December 31, 2000 and the ten month period ended
December 31, 1999, included $64 million and $53 million, respectively, in excess
basis amortization. The increase in Liberty's share of USA Networks net loss
from 1999 to 2000 is due to the inclusion of a full year of excess basis
amortization during 2000 as compared to ten months excess basis amortization in
1999.

         Telewest. Liberty's share of Telewest's net losses was approximately
$441 million, $222 million and $38 million for the year ended December 31, 2000,
the ten month period ended December 31, 1999 and the two month period ended
February 28, 1999, respectively. Liberty's share of losses for the year ended
December 31, 2000 and the ten month period ended December 31, 1999 included $164
million and $73 million, respectively, in excess basis amortization. Liberty's
share of Telewest's net loss increased due to the increase in excess basis
amortization combined with a $270 million increase in Telewest's net loss from
1999 to 2000. Telewest's net loss increased due to increased interest expense
and increased depreciation and amortization expense resulting from acquisitions.


                                     II-10
<PAGE>   57


         Discovery. Liberty's share of Discovery's net loss was approximately
$293 million, $269 million, and $8 million for the year ended December 31, 2000,
the ten month period ended December 31, 1999 and the two month period ended
February 28, 1999, respectively. Liberty's share of losses for the year ended
December 31, 2000 and the ten month period ended December 31, 1999, included
$187 million and $155 million, respectively, in excess basis amortization. The
increase in Liberty's share of Discovery's net loss from 1999 to 2000 is due to
the inclusion of a full year of excess basis amortization during 2000 as
compared to ten months excess basis amortization in 1999. The increase in excess
basis amortization was offset by a reduction in Discovery's net loss due to an
increase in earnings before interest, taxes, depreciation and amortization
("Operating Cash Flow") that was partially offset by increased interest expense
and launch support.

         Gemstar. Liberty's share of Gemstar's net loss was $254 million from
the date of acquisition through December 31, 2000 and included excess basis
amortization of $199 million. On July 12, 2000, TV Guide and Gemstar completed a
merger whereby Gemstar acquired TV Guide. As a result of this transaction, 133
million shares of TV Guide held by Liberty were exchanged for 87.5 million
shares of Gemstar common stock. Following the merger, Liberty owns approximately
21.4% of Gemstar.

         QVC. Liberty's share of QVC's net earnings (loss) was approximately
$(12) million, $(11) million and $13 million for the year ended December 31,
2000, the ten month period ended December 31, 1999 and the two month period
ended February 28, 1999, respectively. Liberty's share of losses for the year
ended December 31, 2000 and the ten month period ended December 31, 1999
included $110 million and $92 million, respectively, in excess basis
amortization. The increase in excess basis amortization was offset by an
increase in QVC's net income. The increase in net income principally resulted
from growth at QVC's domestic and international businesses.

         UnitedGlobalCom. Liberty's share of UnitedGlobalCom's net loss was $211
million for the year ended December 31, 2000 and Liberty's share of earnings was
$23 million for the ten months ended December 31, 1999. Liberty's share of
UnitedGlobalCom's operations included $46 million and $6 million in excess basis
amortization for the year ended December 31, 2000 and the ten months ended
December 31, 1999, respectively. Liberty purchased 9.9 million class B shares of
UnitedGlobalCom for approximately $493 million in cash on September 30, 1999.
Liberty's ownership in UnitedGlobalCom is approximately 11% on an economic basis
and 37% on voting basis. Liberty recorded share of earnings in 1999 due to gains
that UnitedGlobalCom recorded during the fourth quarter of 1999 resulting from
sales of investments in affiliates. Such gains recorded by UnitedGlobalCom in
1999 were non-recurring.


                                     II-11
<PAGE>   58

         YEAR ENDED DECEMBER 31, 1999, COMPARED TO DECEMBER 31, 1998

         CONSOLIDATED SUBSIDIARIES

         Starz Encore Group. Revenue increased to $640 million in 1999 from $541
million in 1998. Revenue from AT&T Broadband increased 13% during 1999, compared
to the same period of 1998, pursuant to the terms of the AT&T/Starz Encore Group
affiliation agreement. Under this agreement, the amount paid by AT&T Broadband
does not vary with the number of subscription units from AT&T Broadband. This
category also includes revenue from cable systems that have been contributed by
AT&T to joint ventures and are subject to the AT&T/Starz Encore Group
affiliation agreement. Revenue from cable affiliates other than AT&T Broadband
increased 33% during 1999, compared to 1998 mainly due to increases in
subscription units for Encore and STARZ! services, combined with small increases
in rates charged. MOVIEplex and Thematic Multiplex subscribers from cable
affiliates other than AT&T Broadband increased by 42% and 414%, respectively,
during 1999 compared to 1998, contributing to the increase in revenue. Revenue
from satellite providers and other distribution technologies increased 21%
during 1999, due to 17%, 15% and 26% increases in STARZ!, Encore and Thematic
Multiplex subscription units, respectively, partially offset by subscriber
volume and penetration discounts.

         Programming and other operating expenses increased by 12% during 1999,
compared to 1998, primarily due to increased first run exhibitions on Encore and
the Thematic Multiplex channels. Sales and marketing expenses increased by 6%
during 1999, compared to 1998, due to the "New Encore" national awareness
campaign during 1999. The "New Encore" campaign is branding Encore as a
first-run premium pay service.

         Depreciation and amortization increased from $8 million during 1998 to
$149 million during 1999. The increase was a direct result of the effects of
purchase accounting adjustments related to the AT&T merger.

         Starz Encore Group has granted phantom stock appreciation rights to
certain of its officers. Compensation relating to the phantom stock appreciation
rights has been recorded based upon the fair value of the Starz Encore Group as
determined by a third-party appraisal. The amount of expense associated with the
phantom stock appreciation rights is generally based on the vesting of such
rights and the change in the fair value of the Starz Encore Group.

         Other. Revenue decreased 60% from $818 million for 1998, to $324
million for 1999. The decrease in revenue was due to the sale of Netlink
Wholesale, Inc. during January 1999, the sale of CareerTrack, Inc. in February
1999, and the deconsolidation of TV Guide in March 1999. Netlink Wholesale,
Career Track and TV Guide accounted for $33 million, $73 million and $501
million of the decrease, respectively. This decrease was partially offset by the
acquisition of Pramer in August 1998, which contributed $47 million to revenue
in 1999.

         Operating, selling, general and administrative expenses decreased 56%
to $309 million for 1999, from $698 million for 1998. The sales of Netlink and
CareerTrack and the deconsolidation of TV Guide accounted for $22 million, $74
million and $399 million of the decrease, respectively. These decreases were
partially offset by the acquisition of Pramer, which added $37 million of
expenses, and $18 million of additional corporate expenses in 1999 associated
with the AT&T merger.

         Depreciation and amortization increased $314 million to $435 million
for 1999 from $121 million during 1998. The increase was a result of the effects
of purchase accounting adjustments related to the AT&T merger.


                                     II-12
<PAGE>   59

         The amount of expense associated with stock compensation is generally
based on the vesting of the related stock options and stock appreciation rights
and the market price of the underlying common stock. The expense reflected in
the table is based on the market price of the underlying common stock as of the
date of the financial statements and is subject to future adjustment based on
market price fluctuations and, ultimately, on the final determination of market
value when the rights are exercised.

         Other Income and Expense. Interest expense was $134 million, $25
million and $104 million for the ten month period ending December 31, 1999, the
two month period ending February 28, 1999, and the year ended December 31, 1998,
respectively. The increase in interest expense during the 1999 periods was a
result of increased borrowings by Liberty during 1999.

         Dividend and interest income was $242 million, $10 million and $65
million for the ten month period ending December 31, 1999, the two month period
ending February 28, 1999 and the year ending December 31, 1998, respectively.
The increase in dividend and interest income during 1999 primarily represents
dividends and interest income from the investment of the $5.5 billion received
in connection with the AT&T merger.

         Aggregate gains from dispositions and issuance of equity by affiliates
and subsidiaries during the ten month period ended December 31, 1999, the two
month period ended February 28, 1999, and the year ended December 31, 1998 were
$4 million, $386 million and $2,554 million, respectively. Liberty recognized a
gain of $372 million during the two months ended February 28, 1999, in
connection with the acquisition by United Video Satellite Group of the TV Guide
properties. Liberty recorded a gain of $1,873 million during 1998 as a result of
the exchange of its interest in PCS Ventures for shares of Sprint PCS Group
stock. Effective January 1, 1998, Time Warner acquired the business of Southern
Satellite from Liberty for $213 million in cash resulting in a $515 million
pre-tax gain.

         INVESTMENTS IN AFFILIATES ACCOUNTED FOR UNDER THE EQUITY METHOD

         Liberty's share of losses of affiliates was $904 million, $66 million
and $1,002 million during the ten month period ending December 31, 1999, the two
month period ending February 28, 1999, and the year ending December 31, 1998,
respectively. Liberty's share of losses of affiliates included $463 million, $9
million and $8 million in excess basis amortization for the ten months ended
December 31, 1999, the two months ended February 28, 1999 and the year ended
December 31, 1998.

         USA Networks, Inc. Liberty's share of USA Networks, Inc.'s net earnings
(loss) was approximately $(20) million, $10 million and $30 million for the ten
month period ended December 31, 1999, the two month period ended February 28,
1999 and the year ended December 31, 1998, respectively. Liberty's share of
losses for the ten month period ended December 31, 1999, included $53 million in
excess basis amortization. Liberty's recorded increased share of losses in USA
Networks in 1999 due to the excess basis amortization combined with a decrease
in USA Network's net income.

         Telewest. Liberty's share of Telewest's net loss was approximately $222
million, $38 million and $134 million for the ten month period ended December
31, 1999, the two month period ended February 28, 1999, and the year ended
December 31, 1998, respectively. Liberty's share of losses for the ten month
period ended December 31, 1999, included $73 million in excess basis
amortization. Liberty's share of Telewest's net loss increased due to the excess
basis amortization combined with a $308 million increase in Telewest's net loss.
The increase in Telewest's net loss was due to increased interest expense and
increased depreciation and amortization expense resulting from acquisitions and
increased foreign currency transaction losses.


                                     II-13
<PAGE>   60

         Discovery. Liberty's share of Discovery's net loss was approximately
$269 million, $8 million and $39 million for the ten month period ended December
31, 1999, the two month period ended February 28, 1999 and the year ended
December 31, 1998, respectively. Liberty's share of losses for the ten month
period ended December 31, 1999, included $155 million in excess basis
amortization. Liberty's share of Discovery's net loss increased due to the
excess basis amortization combined with a $175 million increase in Discovery's
net loss. The increase in the net loss was due to increased interest expense and
launch support.

         QVC. Liberty's share of QVC's net (loss) earnings was approximately
$(11) million, $13 million and $64 million for the ten month period ended
December 31, 1999, the two month period ended February 28, 1999, and the year
ended December 31, 1998, respectively. Liberty's share of losses for the ten
month period ended December 31, 1999 included $92 million in excess basis
amortization. The decrease in Liberty's share of QVC's earnings was due to the
excess basis amortization offset partially by a $72 million increase to QVC's
net income resulting from revenue growth and improved gross margins.

         PCS Ventures. Liberty's share of losses from its investment in the PCS
Ventures was $629 million during 1998. On November 23, 1998, Liberty exchanged
its investments in certain wireless businesses ("PCS Ventures") for Sprint PCS
Group Stock and certain other instruments convertible into such securities
("Sprint Securities"). Through November 23, 1998, Liberty accounted for its
interest in the PCS Ventures using the equity method of accounting; however, as
a result of the foregoing exchange, Liberty's less than 1% voting interest in
Sprint and the transfer of its Sprint Securities to a trust prior to the AT&T
merger, Liberty no longer exercises significant influence with respect to its
investment in the PCS Ventures. Accordingly, Liberty accounts for its investment
in the Sprint PCS Group stock as an available-for-sale security.

LIQUIDITY AND CAPITAL RESOURCES

         Liberty's sources of funds include its available cash balances, net
cash from operating activities, dividend and interest receipts, proceeds from
asset sales and proceeds from financing activities. Liberty is generally not
entitled to the cash resources or cash generated by operations of its
subsidiaries and business affiliates. Liberty is primarily dependent upon its
financing activities to generate sufficient cash resources to meet its future
cash requirements and planned commitments.

         Upon consummation of the AT&T merger, through a new tax sharing
agreement between Liberty and AT&T, Liberty became entitled to the benefit of
all of the 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. In
addition, under the tax sharing agreement, Liberty will receive a cash payment
from AT&T in periods when it generates taxable losses and those taxable losses
are utilized by AT&T to reduce the consolidated income tax liability. During the
year ended December 31, 2000 Liberty received $414 million from AT&T pursuant to
the tax sharing agreement.

         Liberty held shares of Time Warner Series LMCN-V common stock, which
were convertible into 114 million shares of Time Warner common stock. Liberty
owns approximately 81.7 million ADRs representing preferred limited voting
shares of News Corp. Liberty owns 62.6 million shares of Motorola common stock.
Liberty receives dividends on its ownership interests in these entities
periodically. 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 was converted into 1.5 shares of an identical series of
stock of AOL Time Warner. AOL Time Warner does not currently intend to pay
dividends on its common stock. Liberty anticipates that it will continue to
receive dividends on its ownership interests in News Corp. and Motorola.
However, there can be no assurance that such dividends will continue to be paid.


                                     II-14
<PAGE>   61

         Liberty receives approximately $8 million in cash dividends quarterly
on the Fox Kids Worldwide preferred stock. This preferred stock pays quarterly
dividends at the annual rate of 9% of the liquidation value of $1,000 per share.
If Fox Kids Worldwide does not declare or pay a quarterly dividend, that
dividend will be added to the liquidation value and the dividend rate will
increase to 11.5% per annum until all accrued and unpaid dividends are paid.
News Corp. has undertaken to fund all amounts needed by Fox Kids Worldwide to
pay any amounts it is required to pay under the certificate of designations for
the Fox Kids Worldwide preferred stock, including payment of the liquidation
value of that stock upon any optional or mandatory redemption of that stock.

         At December 31, 2000, Liberty and its consolidated subsidiaries had
bank credit facilities which provided for borrowings of up to $1.9 billion.
Borrowings under these facilities of $1.6 billion were outstanding at December
31, 2000. Certain assets of Liberty's consolidated subsidiaries serve as
collateral for borrowings under these bank credit facilities. Also, these bank
credit facilities contain provisions which limit additional indebtedness, sale
of assets, liens, guarantees, and distributions by the borrowers.

         On January 7, 2000, a trust, which holds Liberty'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, 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 consolidated balance sheets. At December
31, 2000, Liberty had utilized $289 million of the cash collateral under the
securities lending agreement.

         In February 2000, Liberty received net cash proceeds of $983 million
from the issuance of its 8-1/4% Senior Debentures due 2030. The 8-1/4% Senior
Debentures have an aggregate principal amount of $1 billion.

         In February 2000, Liberty received net cash proceeds of $735 million
from the issuance of its 3-3/4% Senior Exchangeable Debentures due 2030. In
March 2000, Liberty received net cash proceeds of $59 million, including accrued
interest from February 10, 2000, from the issuance of an additional $60 million
principal amount of such debentures. These debentures are exchangeable, at the
option of the holder, for the value of 16.7764 shares of the Sprint PCS Group
stock. Liberty may pay such value in cash, with a number of shares of Sprint PCS
Group stock or a combination of cash and stock, as determined in the debentures.

         In January 2001, Liberty received net cash proceeds of $588 million
from the issuance of its 3-1/2% senior exchangeable debentures due 2031, in the
aggregate principal amount of $600 million. These debentures are exchangeable,
at the option of the holder, for the value of 36.8189 shares of Motorola stock.
Liberty may pay such value in cash, with a number of shares of Motorola stock or
a combination of cash and stock, as determined in the debentures.

         In March 2001, Liberty received net cash proceeds of $801 million from
the issuance of its 3-1/4% senior exchangeable debentures due 2031. The 3-1/4%
senior exchangeable debentures have an aggregate principal amount of
approximately $818 million. These debentures are exchangeable, at the option of
the holder, for the value of 18.5666 shares of Viacom. Liberty may pay such
value in cash, with a number of shares of Viacom stock or a combination of cash
and stock, as determined in the debentures.


                                     II-15
<PAGE>   62

         There are restrictions on incurrence of debt of Liberty through an
Inter-Group Agreement with AT&T. Liberty may not incur any debt that would cause
the total indebtedness of Liberty at any time to be in excess of 25% ($9 billion
at December 31, 2000) of the total market capitalization of the AT&T Liberty
Media Group tracking stock, if the excess would adversely affect the credit
rating of AT&T.

         Various partnerships and other affiliates of Liberty accounted for
under the equity method finance a substantial portion of their acquisitions and
capital expenditures through borrowings under their own credit facilities and
net cash provided by their operating activities.

         During September 1999, Liberty Media Group announced the approval to
repurchase from time to time up to 135 million shares of AT&T Class A or Class B
Liberty Media Group common stock. During 2000, Liberty made distributions to
Liberty Media Group totaling approximately $269 million to repurchase
approximately 14 million shares under this repurchase plan. The distributions
were accounted for as a reduction to additional paid-in-capital.

         Pursuant to a final judgment (the "Final Judgment") agreed to by
Liberty, AT&T and the United States Department of Justice (the "DOJ") on
December 31, 1998, Liberty transferred all of its beneficially owned 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 PCS Group stock sufficient to cause
Liberty to beneficially own no more than 10% of the outstanding Sprint PCS Group
common stock - Series 1 on a fully diluted basis on such date. On or before May
23, 2004, the Trustee must divest the remainder of the Sprint Securities
beneficially owned by Liberty.

         Liberty has guaranteed notes payable and other obligations of certain
affiliates. At December 31, 2000, the U.S. dollar equivalent of the amounts
borrowed pursuant to these guaranteed obligations aggregated approximately $659
million.

         Liberty intends to continue to develop its entertainment and
information programming services and has made certain financial commitments
related to the acquisition of programming. As of December 31, 2000, Starz Encore
Group's future minimum obligation related to certain film licensing agreements
was $1.3 billion. The amount of the total obligation 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.
Continued development may require additional financing and it cannot be
predicted whether Starz Encore Group will obtain such financing. If additional
financing cannot be obtained by Starz Encore Group, Starz Encore Group or
Liberty could attempt to sell assets but there can be no assurance that asset
sales, if any, can be consummated at a price and on terms acceptable to Liberty.

         On February 23, 2001, Liberty announced that a partnership organized by
Liberty and Klesch & Company Limited, a London-based private equity firm, had
entered into a letter of intent to purchase the remaining broadband cable assets
of Deutsche Telekom AG in Germany. If consummated as currently contemplated, the
partnership will acquire 55% of the outstanding equity interests in six regional
operating companies of Deutsche Telekom, together with an option for an
additional 20% of such equity interests minus one vote. The partnership also
intends to acquire certain other assets. Although no assurance can be given that
the contemplated transactions will be consummated, Liberty anticipates that any
closing would occur in the second or third quarter of 2001 and such closing
could have a significant impact on Liberty's capital resources.


                                      II-16
<PAGE>   63

         On June 26, 2000, Liberty announced that they had entered into an
agreement with UnitedGlobalCom, Inc. and a majority-owned subsidiary of UGC,
United Pan-Europe Communications, N.V. (UPC), pursuant to which UGC would
acquire from Liberty interests in various international broadband distribution
and programming assets. On February 23, 2001, Liberty and UGC announced a
revision to the original transaction. Pursuant to the transaction as revised,
UGC will not acquire Liberty's interest in Telewest. Liberty will acquire up to
100,000 shares of a newly issued series of convertible preferred stock of UGC in
exchange for $1.4 billion in cash. Liberty will purchase $1 billion of the
convertible preferred stock upon the receipt of certain regulatory approvals.
Liberty will purchase the remaining $400 million of convertible preferred stock
concurrently with UGC's acquisition of certain of our Latin American assets,
principally consisting of our interests in Cablevision S.A., Pramer S.C.A. and
Torneos y Competencias. Liberty anticipates that each of these acquisitions will
close in the second quarter of 2001.

         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 our
split off from AT&T by means of a redemption of AT&T Liberty Media Group
tracking stock (the "Split Off Transaction"). Prior to the Split Off
Transaction, Liberty will increase its authorized capital stock, and the Liberty
Class A and Class B Common Stock will be reclassified as Series A Liberty Media
Corporation common stock ("Series A common stock") and the Class C Common Stock
will be 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 tracking stock will be exchanged for a like share of
Series A common stock and Series B common stock, respectively. Upon completion
of the Split Off Transaction, Liberty Media Corporation will no longer be a
subsidiary of AT&T and no shares of AT&T Liberty Media Group tracking stock will
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 currently attributed to the Liberty Media Group
but not held by us (the "Contributed Assets"). These assets include (i) a
preferred stock interest and common stock warrants in ICG Communications, Inc.,
a competitive local exchange telephone company; (ii) an approximate 34% common
equity interest in Teligent, Inc., a full service facilities based
communications company and (iii) an approximate 8% indirect common equity
interest in Liberty Digital. 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 will also be
deconsolidated from AT&T for federal income tax purposes. As a result, AT&T will
be required to pay Liberty an amount equal to 35% of the amount of the net
operating loss carryforward reflected in TCI's final federal income tax return
that has not been used as an offset to 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'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
into 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.


                                     II-17
<PAGE>   64
CASH FLOWS FROM OPERATING ACTIVITIES

         Cash provided by operating activities for the year ended December 31,
2000, the ten months ended December 31, 1999 and the year ended December 31,
1998 was $181 million, $133 million and $26 million, respectively. Cash used in
operating activities for the two month period ended February 28, 1999 was $107
million. Improved operating cash flow for Starz Encore Group and increased
dividend and interest income contributed to the higher cash flows from operating
activities for the year ended December 31, 2000 and the ten month period ended
December 31, 1999. Cash used during the two months ended February 28, 1999
included payments related to stock appreciation rights of $126 million.

CASH FLOWS FROM INVESTING ACTIVITIES

         Cash used in investing activities was $2,866 million, $4,658 million,
$79 million and $1,121 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. Liberty uses cash to make
contributions and investments in entities in which Liberty holds a 50% or less
ownership interest. Cash flows from investing activities included cash used for
investments in and loans to affiliates amounting to $3,372 million, $2,596
million, $51 million and $1,404 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. Liberty made purchases of
marketable securities of $848 million and $7,757 million during the year ended
December 31, 2000 and the ten month period ended December 31, 1999,
respectively. Liberty had cash proceeds from sales and maturities of marketable
securities of $1,820 million and $5,725 million during the year ended December
31, 2000 and ten month period ended December 31, 1999, respectively.
Additionally, Liberty invested $735 million and $109 million in acquisitions of
consolidated businesses during the year ended December 31, 2000 and the ten
month period ended December 31, 1999.

CASH FLOWS FROM FINANCING ACTIVITIES

         Liberty is primarily dependent on financing activities to generate
sufficient cash resources to meet its cash requirements. Financing cash flows
consist primarily of borrowings and repayments of debt. Liberty had borrowings
of $5,509 million, $3,187 million, $155 million and $2,199 million and
repayments of $3,068 million, $2,211 million, $145 million and $609 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.

ACCOUNTING STANDARDS

         SFAS 133, Accounting for Derivative Instruments and Hedging Activities,
as amended by SFAS 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133, and SFAS
138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities, is effective for the Company as of January 1, 2001. SFAS 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
income of approximately $300 million in the first quarter of 2001. The adoption
will also impact assets and liabilities recorded on the balance sheet.


                                     II-18
<PAGE>   65

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

         Liberty is exposed to market risk in the normal course of its business
operations due to its investments in different foreign countries and ongoing
investing and financial activities. Market risk refers to the risk of loss
arising from adverse changes in foreign currency exchange rates, interest rates
and stock prices. The risk of loss can be assessed from the perspective of
adverse changes in fair values, cash flows and future earnings. Liberty has
established policies, procedures and internal processes governing its management
of market risks and the use of financial instruments to manage its exposure to
such risks. These financial instruments are entered into for purposes other than
for trading.

         Contributions to Liberty's foreign affiliates are denominated in
foreign currency. Liberty therefore is exposed to changes in foreign currency
exchange rates. Liberty does not hedge the majority of its foreign currency
exchange risk because of the long-term nature of its interests in foreign
affiliates. At December 31, 2000, Liberty was party to a foreign currency
forward contract for 100 million Euros. Had the price of the Euro been 10% lower
at December 31, 2000, Liberty would have recorded an additional unrealized loss
on financial instruments of $9 million. Liberty continually evaluates its
foreign currency exposure based on current market conditions and the business
environment in each country in which it operates.

         Liberty is exposed to changes in interest rates primarily as a result
of its borrowing and investment activities, which include fixed and floating
rate investments and borrowings used to maintain liquidity and fund its business
operations. The nature and amount of Liberty's long-term and short-term debt are
expected to vary as a result of future requirements, market conditions and other
factors. As of December 31, 2000, the majority of Liberty's debt was composed of
fixed rate debt resulting from the 1999 and 2000 issuances of senior notes and
senior debentures for net proceeds of approximately $3.9 billion. The proceeds
were used to repay floating rate debt, which reduced Liberty's exposure to
interest rate risk associated with rising variable interest rates, however it
increased Liberty's fair value interest rate risk. If market interest rates were
1% higher throughout the year ended December 31, 2000 and 1999, Liberty would
have recorded approximately $14 million and $16 million of additional interest
expense, respectively. At December 31, 2000, the aggregate fair value of
Liberty's senior notes and debentures was approximately $3.4 billion.

         Liberty is exposed to changes in stock prices primarily as a result of
its significant holdings in publicly traded securities. Liberty continually
monitors changes in stock markets, in general, and changes in the stock prices
of its significant holdings, specifically. Changes in stock prices can be
expected to vary as a result of general market conditions, technological
changes, specific industry changes and other factors. Equity collars and put
spread collars have been used to hedge certain investment positions subject to
fluctuations in stock prices.

         In order to illustrate the effect of changes in stock prices on Liberty
we provide the following sensitivity analysis. If the stock price of our
investments accounted for as available-for-sale securities had been 10% lower at
December 31, 2000, and December 31, 1999, the value of such securities would
have been lower, including consideration of our equity collars, by $1.7 billion
and $2.4 billion, respectively. Our unrealized gains, net of taxes would have
also been lower by $1.0 billion and $1.5 billion, respectively. If the stock
price of our publicly traded investments accounted for using the equity method
been 10% lower at December 31, 2000 and 1999, there would have been no impact on
the carrying value of such investments. If the stock price of the Sprint PCS
Group stock underlying Liberty's senior exchangeable debentures been 10% higher
at December 31, 2000, Liberty's total debt and correspondingly, Liberty's
interest expense would have been unchanged as the stock price of the Sprint PCS
Group stock would have been below the respective initial exchange prices.
Liberty's cash collateral account and debt balance under the securities lending
agreement would be reduced by $34 million if the underlying shares of the Sprint
PCS Group stock decreased in value by 10%.


                                     II-19
<PAGE>   66


         Liberty measures the market risk of its derivative financial
instruments through comparison of the blended rates achieved by those derivative
financial instruments to the historical trends in the underlying security. With
regard to interest rate swaps, Liberty monitors the fair value of interest rate
swaps as well as the effective interest rate the interest rate swap yields, in
comparison to historical interest rate trends. Liberty believes that any losses
incurred with regard to interest rate swaps would be offset by the effects of
interest rate changes on the underlying facilities. With regard to equity
collars, Liberty monitors historical market trends relative to values currently
present in the market. Liberty believes that any unrealized losses incurred with
regard to equity collars would be offset by the effects of fair value changes on
the underlying assets. These measures allow Liberty's management to measure the
success of its use of derivative instruments and to determine when to enter into
or exit from derivative instruments.

Item 8.  Financial Statements and Supplementary Data.

         The consolidated financial statements of Liberty Media Corporation are
filed under this Item, beginning on Page II-21. The financial statement
schedules required by Regulation S-X are filed under Item 14 of this Annual
Report on Form 10-K.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

         None.



                                     II-20
<PAGE>   67

                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholder
Liberty Media Corporation:


We have audited the accompanying consolidated balance sheets of Liberty Media
Corporation and subsidiaries ("New Liberty" or "Successor") as of December 31,
2000 and 1999, and the related consolidated statements of operations and
comprehensive earnings, stockholder's equity, 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 consolidated financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the aforementioned Successor consolidated financial statements
present fairly, in all material respects, the financial position of New Liberty
as of December 31, 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 consolidated 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 to the consolidated financial statements, effective March
9, 1999, AT&T Corp., parent company of New Liberty, acquired
Tele-Communications, Inc., the former parent company of Liberty Media
Corporation, in a business combination accounted for as a purchase. As a result
of the acquisition, the consolidated financial information for the periods after
the acquisition is presented on a different cost basis than that for the periods
before the acquisition and, therefore, is not comparable.



                                    KPMG LLP

Denver, Colorado
February 26, 2001

                                     II-21
<PAGE>   68

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
                           (subsidiary of AT&T Corp.)

                           CONSOLIDATED BALANCE SHEETS

                           December 31, 2000 and 1999


<TABLE>
<CAPTION>
                                                                           2000         1999
                                                                        ----------   ----------
                                                                          amounts in millions
<S>                                                                     <C>               <C>
Assets
Current assets:
     Cash and cash equivalents                                          $    1,295        1,714
     Short-term investments                                                    500          378
     Trade and other receivables, net                                          307          116
     Prepaid expenses and program rights                                       537          405
     Deferred income tax assets (note 9)                                       242          750
     Other current assets                                                       73            5
                                                                        ----------   ----------
         Total current assets                                                2,954        3,368
                                                                        ----------   ----------
Investments in affiliates, accounted for under the equity
     method, and related receivables (note 5)                               20,379       15,922

Investments in available-for-sale securities and others (note 6)            19,035       28,593

Property and equipment, at cost                                                976          162
     Less accumulated depreciation                                             131           19
                                                                        ----------   ----------
                                                                               845          143
                                                                        ----------   ----------
Intangible assets:
     Excess cost over acquired net assets (note 7)                          11,138        9,966
     Franchise costs                                                           190          273
                                                                        ----------   ----------
                                                                            11,328       10,239
         Less accumulated amortization                                       1,047          454
                                                                        ----------   ----------
                                                                            10,281        9,785
                                                                        ----------   ----------
Other assets, at cost, net of accumulated amortization                         682          839
                                                                        ----------   ----------
         Total assets                                                   $   54,176       58,650
                                                                        ==========   ==========
</TABLE>

                                                                    (continued)

                                     II-22


<PAGE>   69
                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
                           (subsidiary of AT&T Corp.)

                           CONSOLIDATED BALANCE SHEETS

                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                  2000          1999
                                                                               ----------    ----------
                                                                                 amounts in millions
<S>                                                                            <C>           <C>
Liabilities and Stockholder's Equity
Current liabilities:
     Accounts payable and accrued liabilities                                  $      473           245
     Accrued stock compensation (note 11)                                           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)                                           11,311        14,103
Other liabilities                                                                      62            23
                                                                               ----------    ----------
         Total liabilities                                                         19,604        20,219
                                                                               ----------    ----------
Minority interests in equity of subsidiaries (note 7)                                 348            23

Stockholder's equity (note 10):
     Preferred stock, $.0001 par value.  Authorized 100,000 shares; no
        shares issued and outstanding                                                  --            --
     Class A common stock $.0001 par value.  Authorized 1,000,000 shares;
        issued and outstanding 1,000 shares                                            --            --
     Class B common stock $.0001 par value.  Authorized 1,000,000 shares;
        issued and outstanding 1,000 shares .                                          --            --
     Class C common stock, $.0001 par value.  Authorized 1,000,000 shares;
        issued and outstanding 1,000 shares                                            --            --
     Additional paid-in capital                                                    34,169        33,838
     Accumulated other comprehensive (loss) earnings, net of taxes (note 12)         (397)        6,518
     Accumulated earnings (deficit)                                                   594        (1,975)
                                                                               ----------    ----------
                                                                                   34,366        38,381
     Due to (from) related parties                                                   (142)           27
                                                                               ----------    ----------
         Total stockholder's equity                                                34,224        38,408
                                                                               ----------    ----------
Commitments and contingencies (note 13)
         Total liabilities and stockholder's equity                            $   54,176        58,650
                                                                               ==========    ==========
</TABLE>


See accompanying notes to consolidated financial statements.


                                     II-23
<PAGE>   70

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
                           (subsidiary of AT&T Corp.)

        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS


<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
                                                                                           (note 2)
<S>                                                          <C>               <C>               <C>               <C>
Revenue:
     Unaffiliated parties                                    $        1,283               549               192             1,197
     Related parties (note 10)                                          243               180                43               162
                                                             --------------    --------------    --------------    --------------
                                                                      1,526               729               235             1,359
                                                             --------------    --------------    --------------    --------------
Operating costs and expenses:
     Operating                                                          801               343                95               713
     Selling, general and administrative                                348               229                87               387
     Charges from related parties (note 10)                              37                24                 6                43
     Stock compensation (note 11)                                      (950)            1,785               183               518
     Depreciation and amortization                                      853               562                22               129
                                                             --------------    --------------    --------------    --------------
                                                                      1,089             2,943               393             1,790
                                                             --------------    --------------    --------------    --------------
         Operating income (loss)                                        437            (2,214)             (158)             (431)

Other income (expense):
     Interest expense                                                  (399)             (134)              (25)             (104)
     Adjustment to interest expense for contingent portion
        of exchangeable debentures                                      153              (153)               --                --
     Interest expense to related parties, net                            --                (1)               (1)               (9)
     Dividend and interest income                                       301               242                10                65
     Share of losses of affiliates, net (note 5)                     (1,731)             (904)              (66)           (1,002)
     Impairment of investments (note 6)                              (1,476)               --                --                --
     Minority interests in losses of subsidiaries                        62                92                 4                13
     Gains on dispositions, net (notes 5, 6 and 7)                    7,339                 4                14             2,449
     Gains on issuance of equity by affiliates and
        subsidiaries (notes 5 and 7)                                     --                --               372               105
     Unrealized gains on financial instruments                           70                --                --                --
     Other, net                                                           3                (4)               (9)               (3)
                                                             --------------    --------------    --------------    --------------
                                                                      4,322              (858)              299             1,514
                                                             --------------    --------------    --------------    --------------
        Earnings (loss) before income taxes                           4,759            (3,072)              141             1,083

Income tax (expense) benefit (note 9)                                (2,190)            1,097              (211)             (461)
                                                             --------------    --------------    --------------    --------------
        Net earnings (loss)                                  $        2,569            (1,975)              (70)              622
                                                             --------------    --------------    --------------    --------------
Other comprehensive earnings, net of taxes:
     Foreign currency translation adjustments                          (202)               60               (15)                2
     Unrealized holding (losses) gains arising during the
        period, net of reclassification adjustments                  (6,713)            6,458               885             2,417
                                                             --------------    --------------    --------------    --------------
     Other comprehensive (loss) earnings                             (6,915)            6,518               870             2,419
                                                             --------------    --------------    --------------    --------------
Comprehensive (loss) earnings (note 12)                      $       (4,346)            4,543               800             3,041
                                                             ==============    ==============    ==============    ==============
</TABLE>


See accompanying notes to consolidated financial statements.


                                     II-24
<PAGE>   71

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
                           (subsidiary of AT&T Corp.)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY


<TABLE>
<CAPTION>
                                                                                                                      Accumulated
                                                                                                                         other
                                                                             Common stock               Additional    comprehensive
                                                    Preferred    ------------------------------------    paid-in       earnings,
                                                      stock        Class A     Class B      Class C      capital      net of taxes
                                                   ------------  -----------  ----------  -----------  ------------   ------------
                                                                              amounts in millions
<S>                                                <C>           <C>           <C>         <C>         <C>            <C>
Balance at January 1, 1998                                   --           --          --           --         3,610            767
    Net earnings                                             --           --          --           --            --             --
    Foreign currency translation adjustments                 --           --          --           --            --              2
    Unrealized gains on available-for-sale
       securities                                            --           --          --           --            --          2,417
    Payments for call agreements                             --           --          --           --          (140)            --
    Gains in connection with issuances of stock
       of affiliates and subsidiaries (note 5)               --           --          --           --            70             --
    Transfers from related party due to
       acquisitions of minority interests (note 7)           --           --          --           --           772             --
    Assignment of option from related party                  --           --          --           --            16             --
    Transfer from related party for acquisition
       of cost investment                                    --           --          --           --           354             --
    Other transfers from related parties, net                --           --          --           --            --             --
                                                   ------------  -----------  ----------  -----------  ------------   ------------
Balance at December 31, 1998                                 --           --          --           --         4,682          3,186
    Net loss                                                 --           --          --           --            --             --
    Foreign currency translation adjustments                 --           --          --           --            --            (15)
    Unrealized gains on available-for-sale
       securities                                            --           --          --           --            --            885
    Other transfers from (to) related parties, net           --           --          --           --           430             --
                                                   ------------  -----------  ----------  -----------  ------------   ------------
Balance on February 28, 1999                       $         --           --          --           --         5,112          4,056
                                                   ============  ===========  ==========  ===========  ============   ============
</TABLE>

<TABLE>
<CAPTION>
                                                                        Due to
                                                     Accumulated         (from)           Total
                                                      (deficit)         related       stockholder's
                                                      earnings          parties           equity
                                                    --------------   --------------   --------------
                                                                  amounts in millions
<S>                                                 <C>              <C>              <C>
Balance at January 1, 1998                                     330               14            4,721
    Net earnings                                               622               --              622
    Foreign currency translation adjustments                    --               --                2
    Unrealized gains on available-for-sale
       securities                                               --               --            2,417
    Payments for call agreements                                --               --             (140)
    Gains in connection with issuances of stock
       of affiliates and subsidiaries (note 5)                  --               --               70
    Transfers from related party due to
       acquisitions of minority interests (note 7)              --               --              772
    Assignment of option from related party                     --              (16)              --
    Transfer from related party for acquisition
       of cost investment                                       --               --              354
    Other transfers from related parties, net                   --              412              412
                                                    --------------   --------------   --------------
Balance at December 31, 1998                                   952              410            9,230
    Net loss                                                   (70)              --              (70)
    Foreign currency translation adjustments                    --               --              (15)
    Unrealized gains on available-for-sale
       securities                                               --               --              885
    Other transfers from (to) related parties, net              --           (1,011)            (581)
                                                    --------------   --------------   --------------
Balance on February 28, 1999                                   882             (601)           9,449
                                                    ==============   ==============   ==============
</TABLE>

                                     II-25
<PAGE>   72

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
                           (subsidiary of AT&T Corp.)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY


<TABLE>
<CAPTION>
                                                                                                                        Accumulated
                                                                                                                           other
                                                                                                          Additional   comprehensive
                                                       Preferred                Common stock               paid-in        earnings,
                                                         stock       Class A      Class B      Class C     capital      net of taxes
                                                       ----------   ----------   ----------   ----------  -----------  ------------
                                                                                   amounts in millions
<S>                                                    <C>          <C>          <C>          <C>          <C>          <C>
Balance on February 28, 1999                           $       --           --           --           --        5,112         4,056

Balance at March 1, 1999                               $       --           --           --           --       33,468            --
    Net loss                                                   --           --           --           --           --            --
    Foreign currency translation adjustments                   --           --           --           --           --            60
    Recognition of previously unrealized
       losses on available-for-sale securities,
       net                                                     --           --           --           --           --             7
    Unrealized gains on available-for-sale
       securities                                              --           --           --           --           --         6,451
    Transfer from related party for redemption of
       debentures                                              --           --           --           --          354            --
    Gains in connection with issuances of stock
       of affiliates and subsidiaries (note 10)                --           --           --           --          104            --
    Utilization of net operating losses of
       Liberty by AT&T (note 9)                                --           --           --           --          (88)           --
    Other transfers to related parties, net                    --           --           --           --           --            --
                                                       ----------   ----------   ----------   ----------   ----------    ----------
Balance at December 31, 1999                           $       --           --           --           --       33,838         6,518
                                                       ==========   ==========   ==========   ==========   ==========    ==========
    Net earnings                                               --           --           --           --           --            --
    Foreign currency translation adjustments                   --           --           --           --           --          (202)
    Recognition of previously unrealized gains
       on available-for-sale securities, net                   --           --           --           --           --          (635)
    Unrealized losses on available-for-sale
       securities                                              --           --           --           --           --        (6,078)
    Contribution to equity from related party for
       acquisitions                                            --           --           --           --          217            --
    Gains in connection with issuances of stock
       of affiliates and subsidiaries, net (note 10)           --           --           --           --          362            --
    Note receivable from related party                         --           --           --           --           --            --
    Utilization of net operating losses of
       Liberty by AT&T (note 9)                                --           --           --           --          (38)           --
    Other transfers to related parties, net                    --           --           --           --         (210)           --
                                                       ----------   ----------   ----------   ----------   ----------    ----------
Balance at December 31, 2000                           $       --           --           --           --       34,169          (397)
                                                       ==========   ==========   ==========   ==========   ==========    ==========
<CAPTION>
                                                                            Due to
                                                        Accumulated         (from)             Total
                                                          (deficit)         related        stockholder's
                                                          earnings          parties           equity
                                                       --------------    --------------    --------------
                                                                      amounts in millions
<S>                                                    <C>               <C>               <C>
Balance on February 28, 1999                                      882              (601)            9,449

Balance at March 1, 1999                                           --               197            33,665
    Net loss                                                   (1,975)               --            (1,975)
    Foreign currency translation adjustments                       --                --                60
    Recognition of previously unrealized
       losses on available-for-sale securities,
       net                                                         --                --                 7
    Unrealized gains on available-for-sale
       securities                                                  --                --             6,451
    Transfer from related party for redemption of
       debentures                                                  --                --               354
    Gains in connection with issuances of stock
       of affiliates and subsidiaries (note 10)                    --                --               104
    Utilization of net operating losses of
       Liberty by AT&T (note 9)                                    --                --               (88)
    Other transfers to related parties, net                        --              (170)             (170)
                                                       --------------    --------------    --------------
Balance at December 31, 1999                                   (1,975)               27            38,408
                                                       ==============    ==============    ==============
    Net earnings                                                2,569                --             2,569
    Foreign currency translation adjustments                       --                --              (202)
    Recognition of previously unrealized gains
       on available-for-sale securities, net                       --                --              (635)
    Unrealized losses on available-for-sale
       securities                                                  --                --            (6,078)
    Contribution to equity from related party for
       acquisitions                                                --                --               217
    Gains in connection with issuances of stock
       of affiliates and subsidiaries, net (note 10)               --                --               362
    Note receivable from related party                             --              (476)             (476)
    Utilization of net operating losses of
       Liberty by AT&T (note 9)                                    --                --               (38)
    Other transfers to related parties, net                        --               307                97
                                                       --------------    --------------    --------------
Balance at December 31, 2000                                      594              (142)           34,224
                                                       ==============    ==============    ==============
</TABLE>


See accompanying notes to consolidated financial statements.


                                     II-26
<PAGE>   73

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
                           (subsidiary of AT&T Corp.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<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
                                                                                             (note 4)
<S>                                                                <C>             <C>             <C>             <C>
Cash flows from operating activities:
     Net earnings (loss)                                           $      2,569          (1,975)            (70)            622
     Adjustments to reconcile net earnings (loss) to net cash
        provided (used) by operating activities:
        Depreciation and amortization                                       853             562              22             129
        Stock compensation                                                 (950)          1,785             183             518
        Payments of stock compensation                                     (319)           (111)           (126)            (58)
        Share of losses of affiliates, net                                1,731             904              66           1,002
        Deferred income tax expense (benefit)                             2,325          (1,025)            212             546
        Intergroup tax allocation                                          (141)            (75)             (1)            (89)
        Cash payment from AT&T pursuant to tax sharing agreement            414               1              --              --
        Minority interests in losses of subsidiaries                        (62)            (92)             (4)            (13)
        Unrealized gains on financial instruments                           (70)             --              --              --
        Gains on issuance of equity by affiliates and
           subsidiaries                                                      --              --            (372)           (105)
        Gains on disposition of assets, net                              (7,339)             (4)            (14)         (2,449)
        Impairment of investments                                         1,476              --              --              --
        Noncash interest                                                   (138)            153              --              --
        Other noncash charges                                                --               3              18              --
        Changes in operating assets and liabilities, net of the
           effect of acquisitions and dispositions:
               Receivables                                                 (134)              7              33             (56)
               Prepaid expenses and program rights                         (121)           (119)            (23)            (65)
               Payables and other current liabilities                        87             119             (31)             44
                                                                   ------------    ------------    ------------    ------------
                 Net cash provided (used) by operating
                    activities                                              181             133            (107)             26
                                                                   ------------    ------------    ------------    ------------
Cash flows used by investing activities:
     Cash paid for acquisitions                                            (735)           (109)             --             (92)
     Capital expended for property and equipment                           (221)            (40)            (15)            (60)
     Investments in and loans to affiliates and others                   (3,372)         (2,596)            (51)         (1,404)
     Purchases of marketable securities                                    (848)         (7,757)             (3)             --
     Sales and maturities of marketable securities                        1,820           5,725               9              --
     Cash proceeds from dispositions                                        456             130              43             423
     Other, net                                                              34             (11)            (62)             12
                                                                   ------------    ------------    ------------    ------------
        Net cash used by investing activities                            (2,866)         (4,658)            (79)         (1,121)
                                                                   ------------    ------------    ------------    ------------
Cash flows from financing activities:
     Borrowings of debt                                                   5,509           3,187             155           2,199
     Repayments of debt                                                  (3,068)         (2,211)           (145)           (609)
     Net proceeds from issuance of stock by subsidiaries                    121             123              --              --
     Payments for call agreements                                            --              --              --            (140)
     Cash transfers (to) from related parties                              (268)           (159)             31            (215)
     Other, net                                                             (28)            (20)            (52)            (12)
                                                                   ------------    ------------    ------------    ------------
        Net cash provided (used) by financing activities                  2,266             920             (11)          1,223
                                                                   ------------    ------------    ------------    ------------
             Net (decrease) increase in cash and cash
                equivalents                                                (419)         (3,605)           (197)            128
             Cash and cash equivalents at beginning of year               1,714           5,319             228             100
                                                                   ------------    ------------    ------------    ------------
             Cash and cash equivalents at end of year              $      1,295           1,714              31             228
                                                                   ============    ============    ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.

                                     II-27
<PAGE>   74

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998

(1)      Basis of Presentation

         The accompanying consolidated financial statements include the accounts
         of Liberty Media Corporation ("Liberty" or the "Company") and those of
         all majority-owned subsidiaries. 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.
         The subsidiaries and assets of Liberty Media Corporation are attributed
         to the Liberty Media Group. All significant intercompany accounts and
         transactions have been eliminated in consolidation. Effective March 9,
         1999, AT&T Corp. ("AT&T") indirectly owns 100% of the outstanding
         common stock of Liberty. Previously, Liberty was a wholly owned
         subsidiary of the former Tele-Communications, Inc. ("TCI").

         Liberty's domestic subsidiaries generally operate or hold interests in
         businesses which provide programming services including production,
         acquisition and distribution through all available formats and media of
         branded entertainment, educational and informational programming and
         software. In addition, certain of Liberty's subsidiaries hold interests
         in businesses engaged in wireless telephony, electronic retailing,
         direct marketing and advertising sales relating to programming
         services, infomercials and transaction processing. Liberty also has
         significant interests in foreign affiliates which operate in cable
         television, programming and satellite distribution.

(2)      Merger with AT&T

         On March 9, 1999, AT&T acquired TCI in a merger transaction (the "AT&T
         Merger") whereby a wholly owned subsidiary of AT&T merged with and into
         TCI, and TCI thereby became a subsidiary of AT&T. As a result of the
         AT&T Merger, each series of TCI common stock was converted into a class
         of AT&T common stock subject to applicable exchange ratios. The AT&T
         Merger has been accounted for using the purchase method. Accordingly,
         Liberty's assets and liabilities have been recorded at their respective
         fair values therefore, creating a new cost basis. For financial
         reporting purposes the AT&T Merger is deemed to have occurred on March
         1, 1999. Accordingly, for periods prior to March 1, 1999 the assets and
         liabilities of Liberty and the related consolidated financial
         statements are sometimes referred to herein as "Old Liberty", and for
         periods subsequent to February 28, 1999 the assets and liabilities of
         Liberty and the related consolidated financial statements are sometimes
         referred to herein as "New Liberty". The "Company" and "Liberty" refers
         to both New Liberty and Old Liberty.

                                                                     (continued)


                                     II-28
<PAGE>   75

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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


<TABLE>
<CAPTION>
                                                         New Liberty      Old Liberty
                                                        --------------   --------------
                                                           (amounts in millions)
<S>                                                     <C>                          <C>
         Assets:
         Cash and cash equivalents                      $        5,319               31
         Other current assets                                      434              410
         Investments in affiliates                              17,116            3,971
         Investments in available-for-sale securities           13,053           11,974
         Property and equipment, net                               125              111
         Intangibles and other assets                           11,159              389
                                                        --------------   --------------
                                                        $       47,206           16,886
                                                        ==============   ==============
         Liabilities and Equity:
         Current liabilities                            $        1,675            1,051
         Long-term debt                                          1,845            2,087
         Deferred income taxes                                   9,963            4,147
         Other liabilities                                          19               90
                                                        --------------   --------------
               Total liabilities                                13,502            7,375
                                                        --------------   --------------
         Minority interests in equity of subsidiaries               39               62
         Stockholder's equity                                   33,665            9,449
                                                        --------------   --------------
                                                        $       47,206           16,886
                                                        ==============   ==============
</TABLE>

(3)      Summary of Significant Accounting Policies


         Cash and Cash Equivalents

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


         Receivables

         Receivables are reflected net of an allowance for doubtful accounts.
         Such allowance at December 31, 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.

                                                                     (continued)

                                     II-29
<PAGE>   76

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements



         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 stockholder's equity. 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 a subsidiary or equity method
         investee, which result from the issuance of additional equity
         securities by such subsidiary or equity investee, are recognized as
         gains or losses in the Company's consolidated statements of
         stockholder's equity.

         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 consolidated 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.


                                                                     (continued)

                                     II-30
<PAGE>   77

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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

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

         Foreign Currency Translation

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

                                                                     (continued)


                                     II-31
<PAGE>   78

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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

         Unless otherwise indicated, convenience translations of foreign
         currencies into U.S. dollars are calculated using the applicable spot
         rate at December 31, 2000, as published in The Wall Street Journal.

         Derivative Instruments and Hedging Activities

         The Company 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. The Company monitors its positions and the
         credit quality of counter parties, consisting primarily of major
         financial institutions, and does not anticipate nonperformance by any
         counter-party.

         Disclosures regarding the fair value of derivative and other financial
         instruments are included in notes 6 and 8. Fair value of these
         instruments is based on market quotes or option pricing models using
         the historical volatility of the underlying security.

         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.

                                                                     (continued)


                                     II-32
<PAGE>   79

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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 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 and its subsidiaries
         have been recorded as variable award plans in the accompanying
         consolidated 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 consolidated financial statements due to
         substantially all of Liberty'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.

         Agreements that may require Liberty 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.

                                                                     (continued)


                                     II-33
<PAGE>   80

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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.

(4)      Supplemental Disclosures to Consolidated Statements of Cash Flows

<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>
         Cash paid for acquisitions:
             Fair value of assets acquired       $      2,345                 122              --                 903
             Net liabilities assumed                   (1,208)                (13)             --                (107)
             Deferred tax asset
                (liability)                               260                  --              --                (154)
             Minority interest                           (445)                 --              --                 224
             Contribution to equity for
                acquisitions                             (217)                 --              --                (772)
             Other                                         --                  --              --                  (2)
                                                 ------------        ------------    ------------        ------------

                Cash paid for acquisitions       $        735                 109              --                  92
                                                 ============        ============    ============        ============
                Cash paid for interest           $        335                  93              32                 103
                                                 ============        ============    ============        ============
                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.

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

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

         Cash and cash equivalents subsequent to the AT&T Merger               $    5,319
                                                                               ==========
</TABLE>

                                                                     (continued)


                                     II-34
<PAGE>   81

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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

         Liberty has various investments accounted for under the equity method.
         The following table includes Liberty'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:

<TABLE>
<CAPTION>
                                                                     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             1,279            844
                                                                             ------------   ------------
                                                                             $     20,379         15,922
                                                                             ============   ============
</TABLE>

         The following table reflects Liberty'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              --                  --
         Foreign investments                          (350)               (208)            (27)               (146)
         PCS Ventures (note 6)                          --                  --              --                (629)
         Other                                        (134)               (197)            (16)               (148)
                                               ------------        ------------    ------------        ------------
                                               $    (1,731)               (904)            (66)             (1,002)
                                               ============        ============    ============        ============
</TABLE>

                                                                     (continued)


                                     II-35
<PAGE>   82

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         The $15 billion aggregate excess of Liberty's aggregate carrying amount
         in its affiliates over Liberty'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 $936 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'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:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                          -------------------------
                                                             2000           1999
                                                          ----------     ----------
                                                             amounts in millions
<S>                                                       <C>                 <C>
         Combined Financial Position
              Investments                                 $    1,795          1,415
              Property and equipment, net                     11,294          8,885
              Other intangibles, net                          31,430         19,778
              Other assets, net                                9,682          9,207
                                                          ----------     ----------
                  Total assets                            $   54,201         39,285
                                                          ==========     ==========

              Debt                                        $   19,781         17,210
              Other liabilities                               15,158         12,645
              Owners' equity                                  19,262          9,430
                                                          ----------     ----------
                  Total liabilities and equity            $   54,201         39,285
                                                          ==========     ==========
</TABLE>

<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                        $     13,743              10,492           2,341              14,062
              Operating expenses                  (12,193)             (9,066)         (1,894)            (13,092)
              Depreciation and
                 amortization                      (2,227)             (1,461)           (353)             (2,629)
                                              ------------        ------------    ------------        ------------
                  Operating income (loss)            (677)                (35)             94              (1,659)
              Interest expense                     (1,051)               (886)           (281)             (1,728)
              Other, net                              169                (151)           (127)               (166)
                                              ------------        ------------    ------------        ------------
                  Net loss                    $    (1,559)             (1,072)           (314)             (3,553)
                                              ============        ============    ============        ============
</TABLE>

                                                                     (continued)


                                     II-36

<PAGE>   83

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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 directly and
         indirectly held 74.4 million shares of USAI's common stock. Liberty
         also held shares directly in certain subsidiaries of USAI which are
         exchangeable into 79 million shares of USAI common stock. Liberty'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 obtains permission from the FCC. If the
         exchange of subsidiary stock into USAI common stock was completed at
         December 31, 2000, Liberty 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 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 recorded an increase to its investment in USAI
         of $54 million and an increase to additional paid-in-capital 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 recorded an increase to its
         investment in USAI of $52 million and an increase to additional
         paid-in-capital of $31 million (after deducting deferred income taxes
         of $21 million) as a result of this share issuance. No gain was
         recognized in the consolidated statement of operations and
         comprehensive earnings for either the Universal Transaction or the
         Ticketmaster Transaction due primarily to Liberty's intention to
         purchase additional equity interests in USAI.

         In connection with the Universal Transaction, Liberty 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.

                                                                     (continued)


                                     II-37
<PAGE>   84

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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 owned an approximate 37% equity interest in Flextech and a 22%
         equity interest in Telewest. As a result of the acquisition, Liberty
         owns an approximate 24.6% equity interest in Telewest. Liberty
         recognized a $649 million gain (excluding related tax expense of $227
         million) on the acquisition based on the difference between the
         carrying value of Liberty's interest in Flextech and the fair value of
         the Telewest shares received. At December 31, 2000 Liberty 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 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
         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's ownership interest in Telewest
         decreased to 22%. In connection with the increase in Telewest's equity,
         net of the dilution of Liberty's interest in Telewest, that resulted
         from the General Cable Merger, Liberty 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 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.

         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 were exchanged for 87.5 million shares of Gemstar common stock.
         Following the merger, Liberty owns approximately 21.4% of Gemstar.
         Liberty 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's interest in TV Guide
         and the fair value of the Gemstar securities received.

                                                                     (continued)


                                     II-38
<PAGE>   85

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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 owned an approximate 10.9%
         economic ownership interest representing an approximate 36.8% voting
         interest in UnitedGlobalCom. Liberty 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.

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

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

<TABLE>
<CAPTION>
                                                                     December 31,
                                                               ---------------------------
                                                                   2000           1999
                                                               ------------   ------------
                                                                   amounts in millions
<S>                         <C>                                <C>                  <C>
         Sprint Corporation ("Sprint PCS")                     $      5,192         10,186
         Time Warner, Inc. ("Time Warner")                            6,325          8,202
         News Corp.                                                   2,342          2,403
         Motorola, Inc. ("Motorola")                                  1,982          3,430
         Other available-for-sale securities                          2,989          3,765
         Other investments, at cost, and related receivables            705            985
                                                               ------------   ------------
                                                                     19,535         28,971
             Less short-term investments                                500            378
                                                               ------------   ------------
                                                               $     19,035         28,593
                                                               ============   ============
</TABLE>

         Sprint PCS

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

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

                                                                     (continued)


                                     II-39

<PAGE>   86

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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

         On November 23, 1998, Liberty exchanged its investments in certain
         wireless businesses ("PCS Ventures") for the Sprint Securities ( the
         "PCS Exchange"). Liberty 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's equity method interest in the PCS Ventures and the fair value
         of the Sprint Securities received.

         Time Warner

         Liberty holds shares of a series of Time Warner's 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 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 was converted into 1.5 shares of an identical
         series of stock of AOL Time Warner, Inc. ("AOL Time Warner"). Following
         this conversion, Liberty 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, Time Warner acquired Southern
         Satellite Systems, Inc., effective January 1, 1998, for $213 million in
         cash. Liberty recognized a $515 million pre-tax gain in connection with
         such transaction in the first quarter of 1998.

         News Corp.

         On July 15, 1999, News Corp. acquired Liberty'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 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 acquired
         from News Corp. 28.1 million additional ADRs representing preferred
         limited voting ordinary shares of News Corp. for approximately $695
         million. Liberty accounts for its investment in News Corp. as an
         available-for-sale security.

                                                                     (continued)


                                     II-40
<PAGE>   87

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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 received
         54 million shares and warrants to purchase 37 million shares of
         Motorola common stock in exchange for its holdings in General
         Instrument. Liberty 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's interest in General Instrument and the fair value of the
         Motorola securities received. During 2000, Liberty 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
         holds approximately 63 million shares of Motorola common stock and
         vested warrants to purchase an additional 28 million shares of such
         common stock.

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

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                           -------------------------
                                                                              2000           1999
                                                                           ----------     ----------
                                                                              amounts in millions
<S>                                                                        <C>            <C>
              Equity securities:
                 Cost basis                                                $   17,641         13,657
                 Gross unrealized holding gains                                 2,254         11,453
                 Gross unrealized holding losses                               (2,620)          (646)
                                                                           ----------     ----------
                 Fair value                                                    17,275         24,464
                                                                           ----------     ----------
              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
                                                                           ----------     ----------
</TABLE>

         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.

         Impairment of Investments

         During the year ended December 31, 2000, Liberty determined that its
         investments in 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 $1.5 billion
         and are reflected as impairment of investments in the consolidated
         statements of operations.

                                                                     (continued)


                                     II-41
<PAGE>   88

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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 consolidated 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:

<TABLE>
<CAPTION>
                                                                December 31,
                                                         ------------------------
                         Type of Derivative                 2000           1999
                         ------------------              ----------     ----------
<S>                                                      <C>            <C>
               Equity collars                             $  1,293         (633)
               Put spread collars                              188           --
</TABLE>

(7)      Acquisitions and Dispositions

         2000

         Associated Group, Inc. ("Associated Group")

         On January 14, 2000, AT&T completed the acquisition of Associated
         Group. Each share of Associated Group's common stock was converted into
         shares of AT&T common stock and AT&T Liberty Media Group tracking
         stock, subject to applicable exchange ratios. Prior to the merger,
         Associated Group's primary assets were shares of AT&T common stock and
         AT&T Liberty Media Group tracking stock, approximately 21.4 million
         shares of common stock of Teligent, Inc. ("Teligent") and all of the
         outstanding shares of common stock of TruePosition, Inc. ("True
         Position"), 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 other than the AT&T stock and the equity interest in
         Teligent were transferred to Liberty. 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. In connection with the net liability
         contributed to Liberty in this transaction, Liberty recorded a $69
         million decrease to additional paid-in-capital.

                                                                     (continued)


                                     II-42
<PAGE>   89

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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

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

         Ascent Entertainment Group, Inc. ("Ascent")

         On March 28, 2000, Liberty 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 paid
         approximately $385 million. On June 8, 2000, Liberty 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 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 recorded a $145 million increase to
         additional paid-in-capital 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.

         On June 9, 2000, Liberty 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 recorded a $106 million increase to additional
         paid-in-capital 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.

                                                                     (continued)


                                     II-43
<PAGE>   90

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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

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

         On July 19, 2000, Liberty purchased all of the assets relating to the
         post production, content and sound editorial businesses of Soundelux
         Entertainment Group ("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'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 owned an economic interest of approximately 44% and
         controlled approximately 49% of the voting power of TV Guide. In
         connection with the increase in TV Guide's equity, net of dilution of
         Liberty's ownership interest in TV Guide, Liberty recognized a gain of
         $372 million (before deducting deferred income taxes of $147 million).
         Upon consummation, Liberty began accounting for its interest in TV
         Guide under the equity method of accounting.

         1998

         Pramer S.A. ("Pramer")

         On August 24, 1998, Liberty 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 since August 24, 1998. The $101 million excess
         cost over acquired net assets is being amortized over ten years.

                                                                     (continued)


                                     II-44
<PAGE>   91

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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. The contributions were recorded as an increase to
         additional paid-in-capital of $772 million.

         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.

<TABLE>
<CAPTION>
                                                    Years ended
                                                    December 31,
                                             -------------------------
                                                2000           1999
                                             ----------     ----------
                                                (amounts in millions)
<S>                                          <C>            <C>
              Revenue                         $  1,769         1,754
              Net earnings (loss)             $  2,497        (2,826)
</TABLE>

(8)      Long-Term Debt

         Debt is summarized as follows:

<TABLE>
<CAPTION>
                                                                    Weighted
                                                                     average
                                                                    interest              December 31,
                                                                      rate         -------------------------
                                                                      2000            2000           1999
                                                                   ----------      ----------     ----------
                                                                                      amounts in millions
<S>                                                                <C>             <C>            <C>
         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
                                                                                   ==========     ==========
</TABLE>

                                                                     (continued)


                                     II-45
<PAGE>   92

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         Senior Notes and Debentures

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

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

         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 consolidated statements of operations.

         Senior Exchangeable Debentures

         On November 16, 1999, Liberty 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's ownership level in the Sprint
         PCS Group falls below a specified level, Liberty may, at its election,
         pay the exchange value in cash, Sprint PCS Group stock or a combination
         thereof. Prior to such time, the exchange value must be paid in cash.

         On February 10, 2000, Liberty 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's ownership level in the
         Sprint PCS Group falls below a specified level, Liberty may, at its
         election, pay the exchange value in cash, Sprint PCS Group stock or a
         combination thereof. Prior to such time, the exchange value must be
         paid in cash.

         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 consolidated 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.

                                                                     (continued)


                                     II-46
<PAGE>   93

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         Securities Lending Agreement

         On January 7, 2000, a trust, which holds Liberty'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, 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 consolidated balance sheets. At December
         31, 2000, Liberty had utilized $289 million of the cash collateral
         under the securities lending agreement.

         At December 31, 2000, Liberty had approximately $270 million in unused
         lines of credit under its bank credit facilities. The bank credit
         facilities of Liberty 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 was in
         compliance with its debt covenants at December 31, 2000. Additionally,
         Liberty 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'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.

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

<TABLE>
<S>                                                                     <C>
            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
</TABLE>

         Liberty 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 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
         calculates its respective tax liability on a separate return basis. The
         income tax provision for Liberty 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.

                                                                     (continued)


                                     II-47
<PAGE>   94

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         Under the AT&T Tax Sharing Agreement, Liberty 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 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 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 generates federal taxable income, AT&T has
         agreed to satisfy such tax liability on Liberty's behalf up to a
         certain amount. The reduction of such computed tax liabilities will be
         accounted for by Liberty as an addition to additional paid-in-capital.
         The total amount of future federal tax liabilities of Liberty 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 is required to make
         cash payments to AT&T for federal tax liabilities of Liberty.

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

         Liberty 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.

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

         Liberty's obligation under the 1995 TCI Tax Sharing Agreement of
         approximately $138 million (subject to adjustment), which is included
         in "due to (from) related parties," shall be paid at the time, if ever,
         that Liberty deconsolidates from AT&T. Liberty'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 additional paid-in-capital by Liberty in connection with
         the AT&T Merger.

                                                                     (continued)


                                     II-48
<PAGE>   95

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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                          $       132                  75               1                  89
             State and local                            3                  (3)             --                  (4)
                                              -----------         -----------     -----------         -----------
                                                      135                  72               1                  85
                                              -----------         -----------     -----------         -----------

         Deferred:
             Federal                               (1,904)                873            (168)               (437)
             State and local                         (421)                152             (44)               (109)
                                              -----------         -----------     -----------         -----------
                                                   (2,325)              1,025            (212)               (546)
                                              -----------         -----------     -----------         -----------

         Income tax benefit (expense)         $    (2,190)              1,097            (211)               (461)
                                              ===========         ===========     ===========         ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                        New Liberty                          Old Liberty
                                              --------------------------------    --------------------------------
                                                 Year              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)                        $    (1,666)              1,075             (49)               (379)
         Dividends excluded for income
             tax purposes                              22                  11               2                  13
         Minority interest in equity of
             subsidiaries                              22                  32              --                  (5)
         Amortization not deductible for
             income tax purposes                     (187)               (122)             (4)                (21)
         State and local income taxes,
             net of federal income taxes             (267)                 97             (29)                (74)
         Recognition of difference in
             income tax basis of
             investments in subsidiaries              (54)                 --            (130)                 --
         Change in valuation allowance                (50)                 --              --                  --
         Other, net                                   (10)                  4              (1)                  5
                                              -----------         -----------     -----------         -----------
                                              $    (2,190)              1,097            (211)               (461)
                                              ===========         ===========     ===========         ===========
</TABLE>

                                                                     (continued)


                                     II-49
<PAGE>   96

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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:

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                     -------------------------
                                                                        2000           1999
                                                                     ----------     ----------
                                                                        amounts in millions
<S>                                                                  <C>            <C>
         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                                   11,229         13,912
             Intangible assets                                              221            200
             Other                                                           30             44
                                                                     ----------     ----------
             Deferred tax liabilities                                    11,480         14,156
                                                                     ----------     ----------

         Net deferred tax liabilities                                $   11,069         13,353
                                                                     ==========     ==========
</TABLE>

         At December 31, 2000, Liberty 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)     Stockholder's Equity

         Preferred Stock

         The Preferred Stock is issuable, from time to time, with such
         designations, preferences and relative participating, option or other
         special rights, qualifications, limitations or restrictions thereof, as
         shall be stated and expressed in a resolution or resolutions providing
         for the issue of such Preferred Stock adopted by the Board.

         Common Stock

         The Class A Stock has one vote per share, and each of the Class B and
         Class C Stock has ten votes per share.

         As of December 31, 2000, all of the issued and outstanding common stock
         of Liberty was held by AT&T.

                                                                     (continued)


                                     II-50
<PAGE>   97

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         Stock Issuances of Subsidiaries and Equity Affiliates

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

<TABLE>
<CAPTION>
                                                                                  Ten months
                                                                  Year ended        ended
                                                                 December 31,    December 31,
                                                                     2000            1999
                                                                 ------------    ------------
<S>                                                              <C>             <C>
            Stock issuances by consolidated subsidiaries           $    199            102
            Stock issuances by equity affiliates
              (net of deferred income taxes of
              $88 million and $1 million, respectively)                 163               2
                                                                   --------        --------
                                                                   $    362             104
                                                                   ========        ========
</TABLE>

         Transactions with Officers and Directors

         In December 2000, Liberty entered into an agreement to guaranty the
         repayment of a revolving line of credit extended by a financial
         institution to a director of Liberty with an aggregate available amount
         of up to $19.2 million. In consideration of this guaranty, the director
         has agreed to pay Liberty 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 under the guaranty,
         the director has granted to Liberty a security interest in all of his
         stock options and tandem or free-standing SARs with respect to shares
         of AT&T 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 has guaranteed, the director is required to pledge
         additional collateral to Liberty of sufficient value to maintain the
         two-times coverage ratio.

         In November 2000, Liberty granted certain officers, a director of
         Liberty 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 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 and the individuals entered into a stockholders'
         agreement in which the individuals could require Liberty to repurchase,
         after five years, all or part of their common stock interest in
         exchange for AT&T Class A Liberty Media Group common stock at its then
         fair market value. In addition, Liberty 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.

                                                                     (continued)


                                     II-51
<PAGE>   98

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         In October 2000, Liberty restructured its ownership interests in
         certain assets into a new consolidated subsidiary. Liberty then sold a
         preferred interest in such subsidiary to 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 purchased a 6% common
         stock interest in a subsidiary for $1.3 million. Such subsidiary owns
         an indirect interest in an entity that holds certain of Liberty's
         investments in satellite and technology related assets. Liberty and the
         officers entered into a shareholders agreement in which the officers
         could require Liberty to purchase, after five years, all or part of
         their common stock interest in exchange for AT&T Class A Liberty Media
         Group common stock at the then fair market value. In addition, Liberty
         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.

         In August 2000, a subsidiary of Liberty sold shares of such
         subsidiary's Series A Convertible Participating Preferred Stock (the
         "Preferred Shares") to a director of Liberty, who 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, 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 and the individuals
         entered into a shareholders agreement in which the individuals could
         require Liberty to purchase, after five years, all or part of their
         common stock interest in exchange for AT&T Class A Liberty Media Group
         common stock at its then fair market value. In addition, Liberty 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 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 paid two of its directors
         and one other individual, all three of whom were directors of TCI, an
         aggregate of $12 million for services rendered in connection with the
         AT&T Merger. Such amount is included in operating, selling, general and
         administrative expenses for the two months ended February 28, 1999 in
         the accompanying consolidated statements of operations and
         comprehensive earnings.

                                                                     (continued)


                                     II-52
<PAGE>   99

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         Liberty 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 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 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 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 $162 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.

         AT&T allocates certain corporate general and administrative costs to
         Liberty pursuant to an intergroup agreement. Management believes such
         allocation methods are reasonable and materially approximate the amount
         that Liberty would have incurred on a stand-alone basis. In addition,
         there are arrangements between subsidiaries of Liberty and AT&T and its
         other subsidiaries for satellite transponder services, marketing
         support, programming, and hosting services. These expenses aggregated
         $37 million, $24 million, $6 million and $43 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 consolidated statements of
         operations and comprehensive earnings.

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

         During September 1998, TCI assigned its obligation under an option
         contract to Liberty. As a result of such assignment, Liberty recorded a
         $16 million reduction to the intercompany amount due to TCI and a
         corresponding increase to additional paid-in-capital.

                                                                     (continued)


                                     II-53
<PAGE>   100

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         Due to (from) Related Parties

         The components of "Due to (from) related parties" are as follows:

<TABLE>
<CAPTION>
                                                             December 31,
                                                         2000           1999
                                                      ----------     ----------
                                                         amounts in millions
<S>                                                   <C>            <C>
         Note receivable from related party           $    (476)             --
         Intercompany account                               334              27
                                                      ---------      ----------
                                                      $    (142)             27
                                                      =========      ==========
</TABLE>

         During 2000, Liberty transferred its interest in ICG Communications,
         Inc. ("ICG") to an attributed subsidiary of Liberty Media Group that is
         not a subsidiary of the Company for $485 million which was equal to
         Liberty's carrying value of ICG. No gain or loss was recognized due to
         the related party nature of such transaction. In exchange for its
         interest in ICG, Liberty received a note receivable, which is due and
         payable in 2010. During the fourth quarter of 2000, Liberty received a
         $9 million payment on the note from the related party.

         The non-interest bearing intercompany account 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.

(11)     Stock Options and Stock Appreciation Rights

         Liberty

         Certain officers and employees of Liberty hold options with tandem
         stock appreciation rights ("SARs") to acquire AT&T common stock and
         AT&T Class A and/or B Liberty Media Group common stock as well as
         restricted stock awards of AT&T common stock and AT&T Class A Liberty
         Media Group common stock. The following descriptions of stock options
         and/or SARs have been adjusted to reflect the AT&T Merger and any
         subsequent stock splits.

                                                                     (continued)


                                     II-54
<PAGE>   101

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         The following table presents the number and weighted average exercise
         price ("WAEP") of certain options in tandem with SARs to purchase AT&T
         common stock and AT&T Liberty Media Group Class A and Class B tracking
         stock granted to certain officers and other key employees of the
         Company.

<TABLE>
<CAPTION>
                                                                                   AT&T Liberty
                                                             AT&T                  Media Group
                                                            common                   tracking
                                                            stock         WAEP        stock         WAEP
                                                         ------------     ----     ------------     ----
                                                              amounts in thousands, except for WAEP
<S>                                                      <C>             <C>       <C>             <C>
         Outstanding at January 1, 1998                        3,628     $10.38         54,380     $ 8.05
               Granted                                           137      22.10         33,362      43.11
               Exercised                                      (1,549)      8.90         (9,538)      6.63
               Canceled                                          (27)     12.82            (46)      4.40
                                                         -----------               -----------
         Outstanding at December 31, 1998                      2,189      12.06         78,158      23.19
               Granted                                            --         --          1,244      18.43
               Exercised                                        (316)     11.65         (7,510)      5.02
               Adjustment for transfer of employees           (1,140)      8.14         (1,158)      6.70
                                                         -----------               -----------
         Outstanding at December 31, 1999                        733      13.23         70,734       6.97
               Granted                                            --         --          2,341      21.73
               Exercised                                         (55)     12.53         (7,214)      5.69
               Canceled                                           --         --           (479)      9.45
               Options issued in mergers                          --         --         12,134       4.75
                                                         -----------               -----------
         Outstanding at December 31, 2000                        678      13.29         77,516       7.20
                                                         ===========               ===========
         Exercisable at December 31, 2000                        614                    52,856
                                                         ===========               ===========
         Vesting period                                      5 yrs                     5yrs
</TABLE>

         Liberty Digital, Inc. ("Liberty Digital")

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

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

                                                                     (continued)


                                     II-55
<PAGE>   102

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         Starz Encore Group

         Starz Encore Group Phantom Stock Appreciation Rights Plan. During 2000,
         1999 and 1998 Starz Encore Group granted Phantom Stock Appreciation
         Rights (PSARS) to certain of its officers under this plan. PSARS
         granted under the plan generally vest over a five year period.
         Compensation under the PSARS is computed based upon a formula derived
         from the appraised fair value of the net assets of Starz Encore Group.
         All amounts earned under the plan are payable in cash.

         Other

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

(12)     Other Comprehensive Earnings

         Accumulated other comprehensive earnings included in Liberty's
         consolidated balance sheets and consolidated statements of
         stockholder's equity reflect the aggregate of foreign currency
         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              764                767
         Other comprehensive earnings                                   2            2,417              2,419
                                                               ----------        ---------       ------------
         Balance at December 31, 1998                                   5            3,181              3,186

         Other comprehensive earnings (loss)                          (15)             885                870
                                                               ----------        ---------       ------------
         Balance at February 28, 1999                          $      (10)           4,066              4,056
                                                               ==========        =========       ============

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

         Balance at March 1, 1999                              $       --               --                 --
         Other comprehensive earnings                                  60            6,458              6,518
                                                               ----------        ---------       ------------
         Balance at December 31, 1999                                  60            6,458              6,518
                                                               ----------        ---------       ------------

         Other comprehensive earnings                                (202)          (6,713)            (6,915)
                                                               ----------        ---------       ------------
         Balance at December 31, 2000                          $     (142)            (255)              (397)
                                                               ==========        =========       ============
</TABLE>

                                                                     (continued)


                                     II-56
<PAGE>   103

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         The components of other comprehensive earnings are reflected in
         Liberty's consolidated 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                (10,055)         3,977          (6,078)
              Less reclassification adjustment for gains realized in
                  net loss                                                    (1,050)           415            (635)
                                                                           ---------       --------       ---------
              Net unrealized losses                                          (11,105)         4,392          (6,713)
                                                                           ---------       --------       ---------
         Other comprehensive earnings                                      $ (11,439)         4,524          (6,915)
                                                                           =========       ========       =========

         Ten months ended December 31, 1999:
         Foreign currency translation adjustments                          $      99            (39)             60
                                                                           ---------       --------       ---------
         Unrealized gains on securities:
              Unrealized holding gains arising during period                  10,671         (4,220)          6,451
              Less reclassification adjustment for losses realized
                in net loss                                                       12             (5)              7
                                                                           ---------       --------       ---------
              Net unrealized gains                                            10,683         (4,225)          6,458
                                                                           ---------       --------       ---------
         Other comprehensive earnings                                      $  10,782         (4,264)          6,518
                                                                           =========       ========       =========

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

         Two months ended February 28, 1999:
         Foreign currency translation adjustments                          $     (25)           10              (15)
         Unrealized gains on securities:
              Unrealized holding gains arising during period                   1,464           (579)            885
                                                                           ---------       --------       ---------
         Other comprehensive earnings                                      $   1,439           (569)            870
                                                                           =========       ========       =========

         Year ended December 31, 1998:
         Foreign currency translation adjustments                          $       3             (1)              2
         Unrealized gains on securities:
              Unrealized holding gains arising during period                   3,998         (1,581)          2,417
                                                                           ---------       --------       ---------
         Other comprehensive earnings                                      $   4,001         (1,582)          2,419
                                                                           =========       ========       =========
</TABLE>

                                                                     (continued)


                                     II-57
<PAGE>   104

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(13)     Commitments and Contingencies

         Starz Encore Group, a wholly owned subsidiary of Liberty, provides
         premium programming distributed by cable, direct satellite, TVRO and
         other distributors throughout the United States. Starz Encore Group is
         obligated to pay fees for the rights to exhibit certain films that are
         released by various producers through 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 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 is not certain of the
         likelihood of being required to perform under such guarantees.

         Liberty leases business offices, has entered into pole rental and
         transponder lease agreements and uses certain equipment under lease
         arrangements. Rental expense under such arrangements amounts to $50
         million, $30 million, $9 million and $27 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):

<TABLE>
<CAPTION>
                  Years ending December 31:
<S>                                                          <C>
                        2001                                 $   46
                        2002                                     41
                        2003                                     37
                        2004                                     32
                        2005                                     23
                        Thereafter                               61
</TABLE>

         It is expected that in the normal course of business, leases that
         expire generally will be renewed or replaced by leases on other
         properties; thus, it is anticipated that future minimum lease
         commitments will not be less than the amount shown for 2000.

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

                                                                     (continued)


                                     II-58
<PAGE>   105

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(14)     Information about Liberty's Operating Segments

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

         For the year ended December 31, 2000, Liberty had four operating
         segments: Starz Encore Group, Liberty Livewire, On Command Corporation
         ("On Command") and Other. Starz Encore Group provides premium
         programming distributed by cable, direct-to-home satellite and other
         distribution media throughout the United States and is wholly owned and
         consolidated by Liberty. Liberty Livewire provides sound, video and
         ancillary post production and distribution services to the motion
         picture and television industries in the United States and Europe and
         is majority owned and consolidated by Liberty. On Command provides
         in-room on-demand video entertainment and information services to the
         domestic lodging industry and is majority owned and consolidated by
         Liberty. Other includes Liberty's non-consolidated investments,
         corporate and other consolidated businesses not representing separately
         reportable segments.

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

                                                                     (continued)


                                     II-59
<PAGE>   106

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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

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

<TABLE>
<CAPTION>
                                                      Starz
                                                      Encore      Liberty         On
                                                      Group       Livewire      Command      Other      Total
                                                     --------    ----------    ---------    -------    -------
                                                                          amounts in millions
<S>                                                  <C>         <C>           <C>          <C>        <C>
         Performance measures:

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

         Ten months ended December 31, 1999
             Revenue                                   $  539            --           --        190        729
             Operating cash flow                          124            --           --          9        133

         Balance Sheet Information:

         As of December 31, 2000
             Total assets                               2,754         1,141          439     49,842     54,176
             Investments in affiliates                    155             8            2     20,214     20,379

         As of December 31, 1999
             Total assets                               2,636            --           --     56,014     58,650
             Investments in affiliates                     --            --           --     15,922     15,922

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

         Performance Measures:

         Two months ended February 28, 1999
             Revenue                                   $  101            --           --        134        235
             Operating cash flow                           41            --           --          6         47

         Year ended December 31, 1998
             Revenue                                      541            --           --        818      1,359
             Operating cash flow                           96            --           --        120        216
</TABLE>

                                                                     (continued)


                                     II-60
<PAGE>   107

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


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

<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>
         Segment operating cash flow          $       340                 133              47                 216
         Stock compensation                           950              (1,785)           (183)               (518)
         Depreciation and amortization               (853)               (562)            (22)               (129)
         Interest expense, including
              amounts to related parties             (246)               (288)            (26)               (113)
         Share of losses of affiliates             (1,731)               (904)            (66)             (1,002)
         Gains on dispositions, net                 7,339                   4              14               2,449
         Impairment of investments                 (1,476)                 --              --                  --
         Other, net                                   436                 330             377                 180
                                              -----------         -----------     -----------         -----------
         Earnings (loss) before income
              taxes                           $     4,759              (3,072)            141               1,083
                                              ===========         ===========     ===========         ===========
</TABLE>

(15)     Proposed Split Off Transaction

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

                                                                     (continued)


                                     II-61
<PAGE>   108

                   LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


         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 Communications, Inc. ("ICG
         Communications"), 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, a consolidated
         subsidiary of Liberty. 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 will also be
         deconsolidated from AT&T for federal income tax purposes. As a result,
         AT&T will be required to pay Liberty an amount equal to 35% of the
         amount of the net operating loss carryforward reflected in TCI's final
         federal income tax return that has not been used as an offset to our
         obligations under the AT&T Tax Sharing Agreement and that has been, or
         is reasonably expected to be, utilized by AT&T. The payment will be
         reduced by Liberty'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.

(16)     Quarterly Financial Information (Unaudited)

<TABLE>
<CAPTION>
                                                1st          2nd          3rd          4th
                                              Quarter      Quarter      Quarter      Quarter
                                             ---------    ---------    ---------    ---------
                                                            amounts in millions
<S>                                           <C>         <C>          <C>          <C>
         2000:
           Revenue                            $   235          382          436          473
                                              =======      =======      =======      =======
           Operating income (loss)            $   (83)          67          147          306
                                              =======      =======      =======      =======
           Net earnings (loss)                $   977          318        2,621       (1,347)
                                              =======      =======      =======      =======
</TABLE>

<TABLE>
<CAPTION>
                                      Old Liberty                     New Liberty
                                     ------------   -----------------------------------------------
                                       Two months    One month
                                         ended         ended         2nd         3rd         4th
                                      February 28    March 31,     Quarter     Quarter     Quarter
                                     ------------   -----------   ---------   ---------   ---------
                                                            amounts in millions
<S>                                  <C>            <C>           <C>         <C>         <C>
         1999:
           Revenue                    $     235            71         221         214         223
                                      =========      ========      ======      ======      ======
           Operating income (loss)    $    (158)            3        (636)        (95)     (1,486)
                                      =========      ========      ======      ======      ======
           Net loss                   $     (70)          (58)       (543)       (213)     (1,161)
                                      =========      ========      ======      ======      ======
</TABLE>


                                     II-62
<PAGE>   109

                                    PART III.

Item 10. Directors and Executive Officers of the Registrant.

         The following table sets forth certain information concerning the
directors and executive officers of the Company, including a five year
employment history and any directorships held in public companies:


<TABLE>
<CAPTION>
Name                                                                         Positions
-------------------------------------       ---------------------------------------------------------------------------
<S>                                         <C>
John C. Malone                              Chairman of the Board and one of our directors since 1990. Dr. Malone
Born March 7, 1941                          served as Chairman of the Board and a director of Liberty Satellite &
                                            Technology, Inc. (formerly TCI Satellite Entertainment, Inc.) from December
                                            1996 to August 2000. Dr. Malone also served as Chairman of the Board of TCI
                                            from November 1996 to March 1999, as Chief Executive Officer of TCI from
                                            January 1994 to March 1999, and as President of TCI from January 1994 to
                                            March 1997. Dr. Malone is also a director of AT&T, The Bank of New York,
                                            USANi LLC, UnitedGlobalCom, Inc. and Cendant Corporation.

Robert R. Bennett                           President and Chief Executive Officer since April 1997 and one of our
Born April 19, 1958                         directors since September 1994. Mr. Bennett served as Executive Vice
                                            President of TCI from April 1997 to March 1999. Mr. Bennett served as our
                                            Executive Vice President, Secretary and Treasurer from June 1995 through
                                            March 1997, Chief Financial Officer from May 1996 through March 1997, and
                                            in various executive positions since our inception in 1990. Mr. Bennett
                                            also served as acting Chief Financial Officer of Liberty Digital, Inc. from
                                            June 1997 to July 1997. Mr. Bennett is a director of Gemstar-TV Guide
                                            International, Inc., Liberty Livewire Corporation, Liberty Satellite &
                                            Technology, Inc., USANi LLC and Telewest Communications plc and serves as
                                            Chairman of the Board of Liberty Digital, Inc.
</TABLE>

                                                                     (continued)


                                     III-1
<PAGE>   110

<TABLE>
<CAPTION>
Name                                                                         Positions
-------------------------------------       ---------------------------------------------------------------------------
<S>                                         <C>
Gary S. Howard                              Executive Vice President, Chief Operating Officer and one of our directors
Born February 22, 1951                      since July 1998. Mr. Howard has also served as Chairman of the Board of
                                            Liberty Satellite & Technology, Inc. since August 2000. Mr. Howard served
                                            as Chief Executive Officer of Liberty Satellite & Technology, Inc. from
                                            December 1996 to April 2000. Mr. Howard also served as Executive Vice
                                            President of TCI from December 1997 to March 1999; as Chief Executive
                                            Officer, Chairman of the Board and a director of TV Guide, Inc. (prior to
                                            its merger with Gemstar) from June 1997 to March 1999; and as President and
                                            Chief Executive Officer of TCI Ventures Group, LLC from December 1997 to
                                            March 1999. Mr. Howard served as President of TV Guide, Inc. (prior to its
                                            merger with Gemstar) from June 1997 to September 1997; as President of
                                            Liberty Satellite & Technology, Inc. from February 1995 through August
                                            1997; and as Senior Vice President of TCIC from October 1994 to December
                                            1996. Mr. Howard is a director of Liberty Digital, Inc., Liberty Livewire
                                            Corporation, Liberty Satellite & Technology, Inc., Teligent, Inc. and On
                                            Command Corporation.

David J.A. Flowers                          A Senior Vice President and Treasurer of Liberty since October 2000. Mr.
Born May 17, 1954                           Flowers served as a Vice President and Treasurer of Liberty since April
                                            1997. Mr. Flowers served as Vice President -- Portfolio Manager of Liberty
                                            from June 1995 to April 1997. Prior to joining Liberty, Mr. Flowers held
                                            several positions at Toronto Dominion Bank from August 1989 to June 1995,
                                            including Managing Director in its Media Finance Group. Mr. Flowers is a
                                            director of Corus Entertainment, Inc.

Elizabeth M. Markowski                      A Senior Vice President of Liberty since November 2000. Prior to joining
Born October 26, 1948                       Liberty, Ms. Markowski was a partner in the law firm of Baker Botts L.L.P
                                            for more than the past five years.

Charles Y. Tanabe                           A Senior Vice President and General Counsel of Liberty since January 1999.
Born November 27, 1951                      Prior to joining Liberty, Mr. Tanabe was a member of Sherman & Howard
                                            L.L.C., a law firm based in Denver, Colorado, for more than five years.

Peter N. Zolintakis                         A Senior Vice President of Tax Strategy of Liberty since November 1998.
Born July 10, 1957                          Prior to joining Liberty, Mr. Zolintakis was a partner of
                                            PricewaterhouseCoopers, where he specialized, for more than five years,
                                            in the tax issues relating to corporate mergers, acquisitions,
                                            divestitures and restructurings for clients primarily in the cable
                                            television and high technology industries.
</TABLE>

                                                                     (continued)


                                     III-2
<PAGE>   111

<TABLE>
<CAPTION>
Name                                                                         Positions
-------------------------------------       ---------------------------------------------------------------------------
<S>                                         <C>
Christopher W. Shean                        A Vice President and Controller of Liberty since October 2000. Prior to
Born July 16, 1965                          joining Liberty, Mr. Shean served at the accounting firm of KPMG for more
                                            than the past five years, most recently as an assurance partner.

Paul A. Gould                               A director since March 1999. Mr. Gould has also served as a Managing
Born September 27, 1945                     Director and Executive Vice President of Allen & Company Incorporated, an
                                            investment banking services company, for more than the last five years. Mr.
                                            Gould served as a director of TCI from December 1996 to March 1999, Liberty
                                            Media International, Inc. from July 1995 to October 1998, and TV Guide,
                                            Inc. (before its merger with Gemstar) from January 1996 to February 1998.
                                            Mr. Gould is a director of On Command Corporation.

Harold R. Handler                           A director since July 2000.  Mr. Handler has also served as Of Counsel to
Born August 24, 1935                        the law firm of Simpson Thacher & Bartlett since 1998 and President of the
                                            Jewish Community Center on the Upper West Side since 1998.  Mr. Handler
                                            served as a Partner with Simpson Thacher & Bartlett from 1970 to 1998.  Mr.
                                            Handler is a director of the Jewish Community Center on the Upper West Side
                                            and the Jewish Communal Fund.

Jerome H. Kern                              A director since since March 1999. Mr. Kern is the Chief Executive Officer
Born June 1, 1937                           and Chairman of the board of directors of On Command Corporation. Mr. Kern
                                            served as Vice Chairman and as a consultant of TCI from June 1998 to March
                                            1999. Prior to joining TCI, Mr. Kern was Special Counsel with the law firm
                                            of Baker Botts L.L.P. from July 1996 to June 1998, and a senior partner of
                                            Baker Botts L.L.P. from September 1992 to July 1996. He is a director of
                                            TCI Pacific Communications Inc. and On Command Corporation.

Frank J. Macchiarola                        A director since July 2000.  Dr. Macchiarola has also served as President
Born April 7, 1941                          of St. Francis College since July 1996 and special counsel to the law firm
                                            of Tannenbaum, Halpern, Syracuse & Hirschtritt LLP since 1990.  Dr.
                                            Macchiarola served as a Professor of Law and Political Science and the Dean
                                            of the Benjamin N. Cardozo School of Law at Yeshiva University from 1991 to
                                            1996.  Dr. Macchiarola is a director of Jefferies Group, Inc.
</TABLE>

                                                                     (continued)


                                     III-3
<PAGE>   112

<TABLE>
<CAPTION>
Name                                                                         Positions
-------------------------------------       ---------------------------------------------------------------------------
<S>                                         <C>
Michael T. Ricks                            A director since July 2000.  Mr. Ricks has also served as Vice President,
Born November 21, 1959                      Treasury of Telseon, Inc., a metropolitan Internet infrastructure company
                                            since September, 2000.  Mr. Ricks served as Executive Director-Finance of
                                            MediaOne Group, Inc. during 1999, Chief Financial Officer-Atlanta Region of
                                            MediaOne from 1997 to 1999 and Director of Financial Planning and Analysis,
                                            US West Media Group from 1994 to 1996.

Larry E. Romrell                            A director since since March 1999. Mr. Romrell served as Executive Vice
Born December 30, 1939                      President of TCI from January 1994 to March 1999 and since March 1999 has
                                            served as a consultant to AT&T Broadband. Mr. Romrell also   served, from
                                            December 1997 to March 1999, as Executive Vice President and Chief
                                            Executive Officer of TCI Business Alliance and Technology Co., a subsidiary
                                            of TCI prior to the TCI merger that oversaw and developed TCI's technology
                                            activities; from December 1997 to March 1999, as Senior Vice President of
                                            TCI Ventures Group, LLC; and, from September 1994 to October 1997, as
                                            President of TCI Technology Ventures, Inc., a subsidiary of TCI prior to
                                            the TCI merger that invested in and developed companies engaged in
                                            advancing telecommunications technology. Mr. Romrell is a director of
                                            Liberty Livewire Corporation and General Communication, Inc.
</TABLE>

         The executive officers named above will serve in such capacities until
the next annual meeting of our board of directors, or until their respective
successors have been duly elected and have been qualified, or until their
earlier death, resignation, disqualification or removal from office. There is no
family relationship between any of the directors.

         During the past five years, none of the above persons has had any
involvement in such legal proceedings as would be material to an evaluation of
his or her ability or integrity.

BOARD COMPOSITION

         Our certificate of incorporation (the "Liberty Charter") provides for a
classified board of directors of not less than three members, with the exact
number of directors to be fixed by resolution of our board. The Liberty Charter
further provides for the number of directors to always be a multiple of three,
divided evenly among three classes. The number of directors on our board is
currently nine. Of the nine members of our board, three are elected by the
holders of our Class A common stock, voting as a separate class (the "Class A
Directors"), three are elected by the holders of our Class B common stock,
voting as a separate class (the "Class B Directors"), and three are elected by
the holders of our Class C common stock, voting as a separate class (the "Class
C Directors"). Currently, all of our common stock is owned by AT&T; however, the
Class B Directors and the Class C Directors were designated by TCI prior to the
AT&T merger.

                                                                     (continued)


                                     III-4
<PAGE>   113

         The Class A Directors, whose terms expire at the annual meeting of
stockholders in 2001, are Harold R. Handler, Frank J. Macchiarola and Michael T.
Ricks. The Class B Directors, whose terms expire at the annual meeting of
stockholders in 2006, are Larry E. Romrell, Jerome H. Kern and Gary S. Howard.
The Class C Directors, whose terms expire at the annual meeting of stockholders
in 2009, are John C. Malone, Paul A. Gould and Robert R. Bennett. At each annual
meeting of our stockholders, the successors of that class or classes of
directors whose term(s) expire at that meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held, in the case of
the Class A Directors, in the following year, in the case of the Class B
Directors, in the seventh year following the year of such election and, in the
case of the Class C Directors, in the tenth year following the year of such
election. The directors of each class will hold office until their respective
death, resignation or removal and until their respective successors are elected
and qualified.

COMMITTEES OF THE BOARD

         Our board of directors has established an Executive Committee, whose
members are the Class C Directors. The Executive Committee has been granted and
may exercise all the powers and authority of the board in the management of our
business and affairs, except as specifically prohibited by the General
Corporation Law of the State of Delaware (the "DGCL"), the Liberty Charter or
Liberty's bylaws. The Executive Committee does not have power or authority to:
(1) approve or adopt, or recommend to the stockholders, any action or matter
expressly required by the DGCL to be submitted to stockholders for approval, or
(2) adopt, amend or repeal any of Liberty's bylaws.

         The board, by resolution passed by a majority of the whole board
present at any meeting at which a quorum is present (provided that any such
majority must include a majority of the Class B Directors and Class C
Directors), may from time to time establish certain other committees of the
board, consisting of one or more directors of Liberty. Any committee so
established will have the powers delegated to it by resolution of the board,
subject to applicable law and the Liberty Charter.

COMPENSATION OF DIRECTORS

         No member of our board of directors receives any compensation from us
for serving on our board. However, each of the Class A Directors receives a
$30,000 annual retainer from AT&T for serving on our board as well as $10,000
compensation, plus expenses, for each meeting of our board or any committee
thereof that they attend in person. In addition we reimburse all Class B and
Class C members of our board for travel expenses incurred to attend any meetings
of our board or any committee thereof.

Item 11. Executive Compensation.

         (a)      Summary Compensation Table of Liberty Media Corporation

         The following tables set forth information relating to compensation
including grants of stock options and stock appreciation rights ("SARs") in
respect of securities of AT&T for:

    -    our Chief Executive Officer; and

    -    our four other most highly compensated executive officers for the
         fiscal year ended December 31, 2000.

                                                                     (continued)


                                     III-5
<PAGE>   114

These executive officers are collectively referred to as our "named executive
officers".

     Summary Compensation Table. The following table sets forth information
concerning the compensation paid to the named executive officers by Liberty for
the three years ended December 31, 2000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                       Annual
                                    Compensation                          Long-Term Compensation
                                -----------------------    -------------------------------------------------------
                                                                                Securities
                                                                                Underlying
   Name and Principal                                                          Options/ SARs         All Other
        Position                                                                  (# in            Compensation
      with Liberty              Year        Salary ($)        Bonus ($)         thousands)              ($)
---------------------------     ----      -------------    --------------     ---------------    -----------------
<S>                             <C>       <C>              <C>                <C>                <C>
Robert R. Bennett               2000      $   1,000,000      $      ---             ---          $   47,013 (2)(3)
President and Chief             1999      $   1,000,000      $      ---             ---          $   47,013 (2)(3)
   Executive Officer            1998      $     559,354      $      ---          12,000 (1)      $   36,540 (2)(3)

Gary S. Howard                  2000      $     786,058      $      ---             ---          $   15,000 (3)
Executive Vice President        1999      $     750,000      $   23,210             ---          $   15,000 (3)
   and Chief Operating          1998      $     533,769      $      ---          10,000 (1)      $   15,000 (3)
   Officer

Charles Y. Tanabe               2000      $     524,039      $      ---             ---          $   15,000 (3)
Senior Vice President           1999      $     492,308      $      ---             ---          $   15,000 (3)
   and General Counsel          1998      $         ---      $      ---           2,400 (1)      $      ---

Peter N. Zolintakis             2000      $     485,692      $      ---             ---          $   15,000 (3)
Senior Vice President           1999      $     496,865      $      ---             ---          $   15,000 (3)
                                1998      $      76,946      $      ---           2,400 (1)      $      ---

David J.A. Flowers              2000      $     323,077      $      ---             ---          $   15,000 (3)
Senior Vice President           1999      $     274,038      $      ---             ---          $   10,000 (3)
   and Treasurer                1998      $     250,000      $     ---              500 (1)      $   10,000 (3)
</TABLE>

(1)      On December 29, 1998, pursuant to the 1998 Incentive Plan, these
         executive officers were granted options in tandem with SARs to acquire
         shares of TCI Series A Liberty Media Group common stock. In the AT&T
         merger, those options and tandem SARs were converted into options and
         rights with respect to AT&T Class A Liberty Media Group tracking stock
         at an exercise price of $10.81 per share, as adjusted for a subsequent
         two-for-one stock split. The options and tandem SARs vest evenly over
         five years on each anniversary of the date of grant. The options and
         tandem SARs expire on December 29, 2008, subject to earlier termination
         in certain events. Notwithstanding the vesting schedule as set forth in
         the option agreements, the options and SARs will immediately vest and
         become exercisable if the grantee's employment with Liberty terminates
         by reason of disability or the grantee dies while employed by Liberty.

                                                                     (continued)


                                     III-6
<PAGE>   115

(2)      Includes $32,013, $32,013 and $21,540 which consists of the amounts of
         premiums Liberty paid in fiscal 2000, 1999 and 1998, respectively,
         pursuant to split dollar, whole life insurance policies for the insured
         executive officer. Liberty will pay a portion of the premiums annually
         until the first to occur of:

         -    10 years from the date of the policy;
         -    the insured executive's death;
         -    the premiums are waived under a waiver of premium provision;
         -    the policy is terminated as set forth below; and
         -    premiums are prepaid in full for the 10-year period as set forth
              below.

         The insured executive has granted an assignment of policy benefits in
         favor of Liberty in the amounts of the premiums paid by Liberty. At the
         end of such 10-year period or upon acceleration of premiums as
         described below, the entire policy vests to the sole benefit of the
         insured executive and Liberty will remove or cancel the assignment in
         its favor against the policy. In the event of a change of control of
         Liberty, liquidation of Liberty or sale of substantially all of the
         assets of Liberty, the policy will immediately be prepaid in full
         through the tenth year, prior to such event. Similarly, if the insured
         executive is dismissed for any reason (except for conviction of a
         felony class miscarriage of responsibilities as a Liberty officer),
         Liberty will immediately prepay and fully fund the policy through the
         tenth year. Upon any of the foregoing events, the policy will vest to
         the sole benefit of the insured executive. If, however, the insured
         executive voluntarily chooses to terminate employment (and that
         decision is not a result of pressure from Liberty to resign or a
         resignation related to an adverse change in Liberty or its affiliates)
         without cause, Liberty will have no further obligation to fund
         premiums, but the policy will vest to the sole benefit of the insured
         executive.

(3)      Amounts represent contributions to the Liberty Media 401(k) Savings
         Plan (the "Liberty Savings Plan"). The Liberty Savings Plan provides
         employees with an opportunity to save for retirement. The Liberty
         Savings Plan participants may contribute up to 10% of their
         compensation and Liberty contributes a matching contribution of 100% of
         the participants' contributions. Participant contributions to the
         Liberty Savings Plan are fully vested upon contribution.

         Generally, participants acquire a vested right in Liberty contributions
         as follows:

<TABLE>
<CAPTION>
                   Years of service                   Vesting Percentage
                   ----------------                   ------------------
<S>                                                   <C>
                   Less than 1                                 0%
                          1-2                                 33%
                          2-3                                 66%
                          3 or more                          100%
</TABLE>

         With respect to Liberty contributions made to the Liberty Savings Plan
         in 2000, 1999 and 1998, Messrs. Bennett, Howard and Flowers are fully
         vested.

         Directors who are not employees of Liberty are ineligible to
         participate in the Liberty Savings Plan. Under the terms of the Liberty
         Savings Plan, employees are eligible to participate after three months
         of service.

                                                                     (continued)


                                     III-7
<PAGE>   116
         (b)      Option and SAR Grants in Last Fiscal Year.  No named executive
officer was granted stock options or SARs during the year ended December 31,
2000.

         (c)      Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
Values. The following table sets forth information concerning exercises of stock
options and SARs by the named executive officers during the year ended December
31, 2000 (numbers of securities and dollar amounts in thousands).

           AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR AND
                        FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                                                 Number of Securities      Value of Unexercised
                                                                                Underlying Unexercised         In-the-Money
                                               Shares                               Options/SARs at           Options/SARs at
                                              Acquired             Value         December 31, 2000 (#)       December 31, 2000
                                             on Exercise         Realized            Exercisable/             ($)Exercisable/
Name                                           (#) (1)              ($)             Unexercisable              Unexercisable
-----                                       -------------       ----------     ------------------------   ----------------------
<S>                                         <C>                 <C>            <C>                        <C>
Robert R. Bennett
    Exercisable
       AT&T Class A Liberty Media
          Group                                 2,000            $ 51,490                7,986                 $     45,659
       AT&T common stock                          ---                 ---                   40                 $        161
    Unexercisable
       AT&T Class A Liberty Media
          Group                                   ---                 ---                8,207                 $     29,290
       AT&T common stock                          ---                 ---                   30                 $        114

Gary S. Howard
    Exercisable
       AT&T Class A Liberty Media
          Group                                 1,600            $ 28,160                2,465                 $      7,264
       AT&T common stock                          ---                 ---                  ---                 $        ---
    Unexercisable
       AT&T Class A Liberty Media
          Group                                   ---                 ---                6,000                 $     16,515
       AT&T common stock                          ---                 ---                  ---                 $        ---

Charles Y. Tanabe
    Exercisable
       AT&T Class A Liberty Media
          Group                                   ---                 ---                  480                 $      1,321
    Unexercisable
       AT&T Class A Liberty Media
          Group                                   ---                 ---                1,440                 $      3,964

Peter N. Zolintakis
    Exercisable
       AT&T Class A Liberty Media
          Group                                   ---                 ---                  480                 $      1,321
    Unexercisable
       AT&T Class A Liberty Media
          Group                                   ---                 ---                1,440                 $      3,964

David J. A. Flowers
    Exercisable
       AT&T Class A Liberty Media
          Group                                   100            $  1,801                1,020                 $     10,032
    Unexercisable
       AT&T Class A Liberty Media
          Group                                   ---                 ---                  420                 $      1,952
</TABLE>

                                                                     (continued)


                                     III-8
<PAGE>   117

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

(1)      Represents the number of shares underlying SARs which were exercised in
         2000.

         (d)      Compensation of directors. No member of our board of directors
receives any compensation from us for serving on our board. However, each of the
Class A Directors receives a $30,000 annual retainer from AT&T for serving on
our board as well as $10,000 compensation, plus expenses, for each meeting of
our board or any committee thereof that they attend in person. In addition we
reimburse all Class B and Class C members of our board for travel expenses
incurred to attend any meetings of our board or any committee thereof.

         (e)      Employment Contracts and Termination of Employment and Change
in Control Arrangements. Except as described below, Liberty has no employment
contracts, termination of employment agreements or change of control agreements
with any of the named executive officers of Liberty.

         In connection with the AT&T merger, an employment agreement between Dr.
Malone and TCI was assigned to Liberty. The term of Dr. Malone's employment
agreement is extended daily so that the remainder of the employment term is five
years. The employment agreement was amended in June 1999 to provide for, among
other things, an annual salary of $2,600, subject to increase upon approval of
Liberty's board. Additionally, the employment agreement provides for personal
use of Liberty's aircraft and flight crew, limited to an aggregate value of
$200,000 per year, and payment or reimbursement of professional fees and
expenses incurred by Dr. Malone for estate and tax planning services.

         Dr. Malone's employment agreement provides, among other things, for
deferral of a portion (not in excess of 40%) of the monthly compensation payable
to him. The deferred amounts will be payable in monthly installments over a
20-year period commencing on the termination of Dr. Malone's employment,
together with interest thereon at the rate of 8% per annum compounded annually
from the date of deferral to the date of payment.

         Dr. Malone's employment agreement also provides that, upon termination
of his employment by Liberty (other than for cause, as defined in the agreement)
or if Dr. Malone elects to terminate the agreement because of a change in
control of Liberty, all remaining compensation due under the agreement for the
balance of the employment term shall be immediately due and payable.

         Dr. Malone's agreement provides that, during his employment with
Liberty and for a period of two years following the effective date of his
termination of employment with Liberty, unless termination results from a change
in control of Liberty, he will not be connected with any entity in any manner
specified in the agreement, which competes in a material respect with the
business of Liberty. The agreement provides, however, that Dr. Malone may own
securities of any corporation listed on a national securities exchange or quoted
in The Nasdaq Stock Market to the extent of an aggregate of 5% of the amount of
such securities outstanding.

         For a period of 12 months following a change in control, as defined in
Dr. Malone's employment agreement, Liberty's ability to terminate Dr. Malone's
employment for cause will be limited to situations in which Dr. Malone has
entered a plea of guilty to, or has been convicted of, the commission of a
felony offense.

                                                                     (continued)


                                     III-9
<PAGE>   118

         Dr. Malone's agreement also provides that in the event of termination
of his employment with Liberty, he will be entitled to receive 240 consecutive
monthly payments of $15,000 (increased at the rate of 12% per annum compounded
annually from January 1, 1988 to the date payment commences), the first of which
will be payable on the first day of the month succeeding the termination of Dr.
Malone's employment. In the event of Dr. Malone's death, his beneficiaries will
be entitled to receive the foregoing monthly payments.

         Liberty pays a portion of the annual premiums on three whole-life
insurance policies of which Dr. Malone is the insured and trusts for the benefit
of members of his family are the owners. The portion that Liberty pays is equal
to the "PS-58" costs, which represent the costs to buy one-year term insurance
coverage as set forth in IRS Pension Service Table No. 58. For the year ending
December 31, 2000, such amount is $446,285. Liberty is the designated
beneficiary of the proceeds of such policies less an amount equal to the greater
of the cash surrender value thereof at the time of Dr. Malone's death and the
amounts of the premiums paid by the policy owners.

         Dr. Malone deferred a portion of his monthly compensation under his
previous employment agreement. The obligation to pay that deferred compensation
was assumed by Liberty in connection with the AT&T merger. The compensation that
he deferred (together with interest on that compensation at the rate of 13% per
annum compounded annually from the date of deferral to the date of payment) will
continue to be payable under the terms of the previous agreement. The rate at
which interest accrues on the previously deferred compensation was established
in 1983 pursuant to the previous agreement.

         (f)      Compensation Committee Interlocks and Insider Participation in
Compensation Decisions.

         Our board of directors appointed a Compensation Committee on September
1, 2000. The members of the Compensation Committee are John C. Malone, Paul A.
Gould and Larry E. Romrell. Before the Compensation Committee was established,
its functions were performed by the Executive Committee appointed by our board
of directors. John C. Malone, Paul A. Gould and Robert R. Bennett are the
members of the Executive Committee.

                                                                     (continued)


                                     III-10
<PAGE>   119

         John C. Malone

         In October 2000, we restructured the ownership of our interests in
TruePosition, ICG Communications, Sprint PCS, priceline.com and LSAT and
increased our equity interest in LSAT. On October 27, 2000, in three separate
transactions, (1) we sold 608,334 shares of TruePosition common stock to TP
Investment, Inc., a company wholly owned by our Chairman, John C. Malone, for $6
million in cash; (2) we and TP Investment each contributed shares of
TruePosition common stock to Liberty TP LLC, a newly formed limited liability
company; and (3) we and Liberty AGI, Inc., a member of AT&T's Liberty Media
Group that is not currently one of our subsidiaries, directly and through our
respective subsidiaries, contributed our respective ownership interests in
TruePosition, Sprint PCS, ICG Communications and priceline.com to Liberty TP
Management, Inc., a newly formed corporation, in exchange for newly issued
equity securities of Liberty TP Management. Concurrently, TP Investment
contributed shares of LSATs Class A and Class B common stock and $47.2 million
in cash to Liberty TP Management, in exchange for newly issued equity securities
of Liberty TP Management. On October 31, 2000 Liberty ICGX, Inc., a subsidiary
of Liberty AGI, and Liberty PCLN, Inc., one of our subsidiaries, each of which
contributed assets to Liberty TP Management, each sold a portion of the Liberty
TP Management securities it received in exchange for those assets to TP
Investment for an aggregate of approximately $34.92 million. Salomon Smith
Barney Inc. delivered an opinion to us and Liberty AGI that the aggregate
consideration received in these transactions by us and Liberty AGI and our
respective subsidiaries was fair from a financial point of view.

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

                                                                     (continued)


                                     III-11
<PAGE>   120

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

         In connection with the TCI merger, we became entitled to exercise TCI's
rights and became subject to its obligations under the call agreement and the
stockholders' agreement with respect to AT&T Class B Liberty Media Group
tracking stock acquired by the Malones and the Magness Group as a result of the
TCI merger. We may not exercise our call right under the call agreement with the
Malones or the Magness Group, unless we also purchase the high voting shares of
the other group.

         Paul A. Gould

         Paul A. Gould is a managing director of Allen & Company Incorporated.
Some of our acquired subsidiaries have retained Allen & Co. from time to time to
provide investment banking services.

         Robert R. Bennett

         Robert R. Bennett, our President, Chief Executive Officer and Director,
serves on the compensation committee of the board of directors of Gemstar-TV
Guide International.

         In May 2000, Robert R. Bennett, some officers of one of our
subsidiaries and a consultant to Liberty purchased an aggregate 20% common stock
interest in one of our subsidiaries for $800,000. This subsidiary owns a 10%
interest in Jupiter Telecommunications Co., Inc. Mr. Bennett purchased a 4.5%
interest for $180,000. We and the purchasers, including Mr. Bennett, entered
into a stockholders agreement pursuant to which the purchasers can require us to
purchase, after five years, all or part of their common stock interest in the
subsidiary, in exchange for shares of AT&T Class A Liberty Media Group tracking
stock, at its then-fair market value. In addition, we have the right to
purchase, in exchange for shares of AT&T Class A Liberty Media Group tracking
stock, the purchasers' common stock interests in the subsidiary for fair market
value at any time.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

         (a)      Security Ownership of Certain Beneficial Owners. All of our
common stock is held of record by an indirect subsidiary of AT&T Corp.

                                                                     (continued)


                                     III-12
<PAGE>   121

         (b)      Security Ownership of Management. The following table sets
forth information with respect to the ownership by each director and each of the
named executive officers of Liberty and by all directors and executive officers
of Liberty as a group of shares of AT&T common stock and Class A and Class B
Liberty Media Group tracking stock and AT&T Wireless Group tracking stock, all
of which are equity securities of AT&T Corp., which owns 100% of AT&T Broadband
LLC, which in turn indirectly owns 100% of the outstanding common stock of
Liberty. The table also sets forth information with respect to the ownership by
each director and each of the named executive officers of Liberty and by all
directors and executive officers of Liberty as a group of shares of (1) Series A
common stock of Liberty Digital, Inc., (2) Series A common stock of Liberty
Livewire Corporation, (3) Series A and Series B common stock of Liberty
Satellite & Technology, Inc. and (4) common stock of On Command Corporation. The
corporations named in the immediately preceding sentence are our controlled
subsidiaries. The Liberty Media Group tracking stock is intended to reflect the
separate performance of the businesses and assets attributed to the Liberty
Media Group. Liberty is included in the Liberty Media Group, and the businesses
and assets of Liberty and its subsidiaries constitute substantially all of the
businesses and assets of the Liberty Media Group.

         The AT&T charter provides that, except as otherwise required by New
York law or any special voting rights of AT&T preferred stock, the holders of
AT&T common stock, AT&T Liberty Media Group tracking stock, AT&T Wireless Group
tracking stock and AT&T preferred stock, if any, entitled to vote with the
common shareholders, vote together as one class. No separate class vote is
required for the approval of any matter except as described in the next
sentence. The following circumstances require the separate class approval of the
AT&T Liberty Media Group tracking stock:

    -    any amendment to the AT&T charter that would change the total number
         of authorized shares or the par value of AT&T Liberty Media Group
         tracking stock or that would adversely change the rights of AT&T
         Liberty Media Group tracking stock;

    -    a Covered Disposition, which generally includes a sale or transfer by
         AT&T of its equity interest in Liberty or Liberty Media Group LLC or a
         grant of a pledge or other security interest in the equity interest of
         AT&T in Liberty or Liberty Media Group LLC; and

    -    any merger or similar transaction in which AT&T Liberty Media Group
         tracking stock is converted, reclassified or changed into or otherwise
         exchanged for any consideration unless specified requirements are met
         that are generally intended to ensure that the rights of the holders
         are not materially altered and the composition of the holders is not
         changed.

In a separate shareholder vote with respect to any of the foregoing matters, the
ownership of AT&T Class A Liberty Media Group and AT&T Class B Liberty Media
Group tracking stock indicated in the table below as beneficially owned by (1)
Dr. Malone would entitle him to cast 44.2% of the votes on such matter and (2)
by all directors and executive officers as a group would entitle them to cast,
in the aggregate, 44.6% of the votes on such matter. No other person named in
the table below had the right, at February 28, 2001, to cast 1% or more of the
votes on any such matter.

                                                                     (continued)


                                     III-13
<PAGE>   122

         The following information is given as of February 28, 2001 and, in the
case of percentage ownership information, is based on (1) 3,807,460,036 shares
of AT&T common stock; (2) 2,376,765,123 shares of AT&T Class A Liberty Media
Group tracking stock and 212,045,288 shares of AT&T Class B Liberty Media Group
tracking stock; (3) 362,750,025 shares of AT&T Wireless Group tracking stock;
(4) 33,206,409 shares of Liberty Digital Series A common stock; (5) 5,467,594
shares of Liberty Livewire Series A common stock; (6) 65,471,095 shares of LSAT
Series A common stock and 7,732,496 shares of LSAT Series B common stock; and
(7) 30,556,768 shares of On Command common stock, in each case outstanding on
that date. Shares of common stock issuable upon exercise or conversion of
options, warrants and convertible securities that were exercisable or
convertible on or within 60 days after February 28, 2001, are deemed to be
outstanding and to be beneficially owned by the person holding the options,
warrants or convertible securities for the purpose of computing the percentage
ownership of the person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. So far as is known to
us, the persons indicated below have sole voting power with respect to the
shares indicated as owned by them except as otherwise stated in the notes to the
table.

<TABLE>
<CAPTION>
                                                          Amount and
                                                           Nature of
                                                           Beneficial        Percent
     Name of                                               Ownership           of         Voting
 Beneficial Owner             Title of Class             (in thousands)       Class        Power
------------------      ---------------------------      --------------      -------      ------
<S>                     <C>                              <C>                 <C>          <C>
John C. Malone          AT&T Common Stock                  26,052(1)            *          2.31%
                        Class A Liberty Media Group         1,930(1)            *
                        Class B Liberty Media Group       198,586(1)(2)       93.65%
                        AT&T Wireless Group                    25(3)            *
                        Liberty Digital Series A                0
                        Liberty Livewire Series A               0
                        LSAT Series A                         370(4)            *           *
                        LSAT Series B                         117              1.52%
                        On Command                              0
</TABLE>

                                                                     (continued)


                                     III-14
<PAGE>   123

<TABLE>
<CAPTION>
                                                          Amount and
                                                           Nature of
                                                           Beneficial        Percent
     Name of                                               Ownership           of         Voting
 Beneficial Owner             Title of Class             (in thousands)       Class        Power
------------------      ---------------------------      --------------      -------      ------
<S>                     <C>                              <C>                 <C>          <C>
Robert R. Bennett       AT&T Common Stock                     249(5)            *            *
                        Class A Liberty Media Group         3,603(6)            *
                        Class B Liberty Media Group             0
                        AT&T Wireless Group                     0
                        Liberty Digital Series A               80(7)            *            *
                        Liberty Livewire Series A               0
                        LSAT Series A                           5(8)            *            *
                        LSAT Series B                           0
                        On Command                              0

Paul A. Gould           AT&T Common Stock                       0                             *
                        Class A Liberty Media Group         1,498(9)            *
                        Class B Liberty Media Group           438               *
                        AT&T Wireless Group                     0
                        Liberty Digital Series A                0
                        Liberty Livewire Series A               0
                        LSAT Series A                           0
                        LSAT Series B                           0
                        On Command                              0

Howard R. Handler       AT&T Common Stock                       0
                        Class A Liberty Media Group             0
                        Class B Liberty Media Group             0
                        AT&T Wireless Group                     0
                        Liberty Digital Series A                0
                        Liberty Livewire Series A               0
                        LSAT Series A                           0
                        LSAT Series B                           0
                        On Command                              0
</TABLE>

                                                                     (continued)


                                     III-15
<PAGE>   124

<TABLE>
<CAPTION>
                                                          Amount and
                                                           Nature of
                                                           Beneficial        Percent
     Name of                                               Ownership           of         Voting
 Beneficial Owner             Title of Class             (in thousands)       Class        Power
------------------      ---------------------------      --------------      -------      ------
<S>                     <C>                              <C>                 <C>          <C>
Gary S. Howard          AT&T Common Stock                      16
                        Class A Liberty Media Group         1,370(10)           *            *
                        Class B Liberty Media Group             0
                        AT&T Wireless Group                     0
                        Liberty Digital Series A               20(11)           *            *
                        Liberty Livewire Series A               0
                        LSAT Series A                         755(12)         1.14%          *
                        LSAT Series B                           0
                        On Command                              0

Jerome H. Kern          AT&T Common Stock                   1,415(13)(14)       *            *
                        Class A Liberty Media Group         6,237(13)(14)       *
                        Class B Liberty Media Group             0
                        AT&T Wireless Group                     0
                        Liberty Digital Series A                0
                        Liberty Livewire Series A               0
                        LSAT Series A                           0
                        LSAT Series B                          92(15)           *            *
                        On Command                          3,594(14)         11.76%       11.76%

Frank J. Macchiarola    AT&T Common Stock                       0                            *
                        Class A Liberty Media Group             6(16)           *
                        Class B Liberty Media Group             0
                        AT&T Wireless Group                     0
                        Liberty Digital Series A                0
                        Liberty Livewire Series A               0
                        LSAT Series A                           0
                        LSAT Series B                           0
                        On Command                              0
</TABLE>

                                                                     (continued)


                                     III-16
<PAGE>   125

<TABLE>
<CAPTION>
                                                          Amount and
                                                           Nature of
                                                           Beneficial        Percent
     Name of                                               Ownership           of         Voting
 Beneficial Owner             Title of Class             (in thousands)       Class        Power
------------------      ---------------------------      --------------      -------      ------
<S>                     <C>                              <C>                 <C>          <C>
David J. A. Flowers     AT&T Common Stock                       1               *            *
                        Class A Liberty Media Group           514(17)           *
                        Class B Liberty Media Group             0
                        AT&T Wireless Group                     0
                        Liberty Digital Series A                0
                        Liberty Livewire Series A               0
                        LSAT Series A                           0
                        LSAT Series B                           0
                        On Command                              0               *            *

Michael T. Ricks        AT&T Common Stock                      22(18)           *            *
                        Class A Liberty Media Group             0
                        Class B Liberty Media Group             0
                        AT&T Wireless Group                     0
                        Liberty Digital Series A                0
                        Liberty Livewire Series A               0
                        LSAT Series A                           0
                        LSAT Series B                           0
                        On Command                              0

Larry E. Romrell        AT&T Common Stock                     511(19)           *            *
                        Class A Liberty Media Group         2,778(19)           *
                        Class B Liberty Media Group             3               *
                        AT&T Wireless Group                     0
                        Liberty Digital Series A                0
                        Liberty Livewire Series A               0
                        LSAT Series A                         741(20)         1.12%          *
                        LSAT Series B                           0
                        On Command                              0
</TABLE>

                                                                     (continued)


                                     III-17
<PAGE>   126

<TABLE>
<CAPTION>
                                                          Amount and
                                                           Nature of
                                                           Beneficial        Percent
     Name of                                               Ownership           of         Voting
 Beneficial Owner             Title of Class             (in thousands)       Class        Power
------------------      ---------------------------      --------------      -------      ------
<S>                     <C>                              <C>                 <C>          <C>
Charles Y. Tanabe       AT&T Common Stock                     1(21)             *            *
                        Class A Liberty Media Group         283(21)(22)         *
                        Class B Liberty Media Group           0
                        AT&T Wireless Group                   0
                        Liberty Digital Series A              0
                        Liberty Livewire Series A             0
                        LSAT Series A                         0
                        LSAT Series B                         0
                        On Command                            0

Peter N. Zolintakis     AT&T Common Stock                    58                 *            *
                        Class A Liberty Media Group         280(23)             *
                        Class B Liberty Media Group           0
                        AT&T Wireless Group                   0
                        Liberty Digital Series A              0
                        Liberty Livewire Series A             1                 *            *
                        LSAT Series A                         0
                        LSAT Series B                         0
                        On Command                            0

All directors and       AT&T Common Stock                28,323(24)(25)(26)     *           2.38%
executive officers      Class A Liberty Media Group      18,564(24)(25)(26)     *
as a group (14          Class B Liberty Media Group     199,028(2)(24)        93.86%
persons)                AT&T Wireless Group                  25(3)
                        Liberty Digital Series A            100(27)             *            *
                        Liberty Livewire Series A             1                 *            *
                        LSAT Series A                     1,963(24)(28)        2.92%         *
                        LSAT Series B                       117                1.52%         *
                        On Command                        3,619(24)(29)       11.84%       11.84%
</TABLE>

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

*  Less than one percent

                                                                     (continued)


                                     III-18
<PAGE>   127

(1)      Includes 1,004,620 shares of AT&T common stock , 50,904 shares of AT&T
         Class A Liberty Media Group tracking stock and 3,409,436 shares of AT&T
         Class B Liberty Media Group tracking stock held by Dr. Malone's wife,
         Mrs. Leslie Malone, as to which shares Dr. Malone has disclaimed
         beneficial ownership.

(2)      In connection with the TCI merger, TCI assigned to us its rights under
         a call agreement with Dr. Malone and Dr. Malone's wife (the Malones)
         and a call agreement with the Estate of Bob Magness, the Estate of
         Betsy Magness, Gary Magness (individually and in certain representative
         capacities) and Kim Magness (individually and in certain representative
         capacities) (collectively, the Magness Group). As a result, we have the
         right, under certain circumstances, to acquire AT&T Class B Liberty
         Media Group tracking stock owned by the Malones and the Magness Group.
         Further, in connection with the TCI merger, TCI assigned to us its
         rights under a stockholders agreement with the Magness Group and the
         Malones, pursuant to which, among other things, Dr. Malone has an
         irrevocable proxy, under certain circumstances, to vote shares of AT&T
         Class B Liberty Media Group tracking stock or any super voting class of
         equity securities issued by us and held by the Magness Group. See
         "Certain Relationships and Related Party Transactions -- Certain Rights
         to Purchase Our Common Stock," for additional information related to
         the call agreements and the stockholders' agreement.

         As a result of certain provisions of the stockholders' agreement
         referred to above, Dr. Malone's beneficial ownership of AT&T Class B
         Liberty Media Group tracking stock includes 95,582,332 shares held by
         the Magness Group.

(3)      Includes beneficial ownership of 3,750 shares of AT&T Wireless Group
         tracking stock which may be acquired within 60 days after February 28,
         2001, pursuant to stock options.

(4)      Includes beneficial ownership of 250,000 shares of Liberty Satellite &
         Technology, Inc. Series A common stock which may be acquired within 60
         days after February 28, 2001, pursuant to stock options (200,000 of
         which were granted in tandem with SARs).

(5)      Includes 232,710 restricted shares of AT&T common stock, none of which
         is currently vested.

(6)      Includes 902,767 restricted shares of AT&T Class A Liberty Media Group
         tracking stock, none of which is currently vested.

(7)      Assumes the exercise in full of stock options to acquire 80,000 shares
         of Liberty Digital Series A common stock, all of which are currently
         exercisable.

(8)      Includes beneficial ownership of 5,000 shares of Liberty Satellite &
         Technology, Inc. Series A common stock which may be acquired within 60
         days after February 28, 2001, pursuant to stock options granted in
         tandem with SARs.

(9)      Includes beneficial ownership of 91,400 shares of AT&T Class A Liberty
         Media Group tracking stock which may be acquired within 60 days after
         February 28, 2001, pursuant to stock options granted in tandem with
         SARs.

(10)     Includes 582,177 restricted shares of AT&T Class A Liberty Media Group
         tracking stock, none of which is currently vested.

                                                                     (continued)


                                     III-19


<PAGE>   128

(11)     Assumes the exercise in full of stock options to acquire 20,000 shares
         of Liberty Digital Series A common stock, all of which are currently
         exercisable.

(12)     Includes beneficial ownership of 694,076 shares of Liberty Satellite &
         Technology, Inc. Series A common stock which may be acquired within 60
         days after February 28, 2001, pursuant to stock options (30,000 of
         which were granted in tandem with SARs).

(13)     Includes beneficial ownership of the following shares which may be
         acquired within 60 days after February 28, 2001, pursuant to stock
         options granted in tandem with SARs: (a) 1,396,261 shares of AT&T
         common stock; and (b) 5,904,600 shares of AT&T Class A Liberty Media
         Group tracking stock.

(14)     Includes 12,798 shares of AT&T common stock, 80,400 shares of AT&T
         Class A Liberty Media Group tracking stock and 20,000 shares of On
         Command Corporation common stock held by Mr. Kern's wife, Mary Rossick
         Kern, as to which shares Mr. Kern has disclaimed beneficial ownership.

(15)     Includes beneficial ownership of 92,000 shares of Liberty Satellite &
         Technology, Inc. Series A common stock which may be acquired within 60
         days after February 28, 2001, pursuant to stock options granted in
         tandem with SARs.

(16)     Includes 6,480 shares of AT&T Class A Liberty Media Group tracking
         stock held by Dr. Macchiarola's wife and sons, as to which shares Dr.
         Macchiarola has disclaimed beneficial ownership.

(17)     Includes 52,725 restricted shares of AT&T Class A Liberty Media Group
         tracking stock, none of which is currently vested.

(18)     Includes beneficial ownership of 21,730 shares of AT&T common stock
         which may be acquired within 60 days after February 28, 2001, pursuant
         to stock options.

(19)     Includes beneficial ownership of the following shares which may be
         acquired within 60 days after February 28, 2001, pursuant to stock
         options granted in tandem with SARs: (a) 350,229 shares of AT&T common
         stock; and (b) 2,425,776 shares of AT&T Class A Liberty Media Group
         tracking stock.

(20)     Includes beneficial ownership of 734,076 shares of Liberty Satellite &
         Technology, Inc. Series A common stock which may be acquired within 60
         days after February 28, 2001, pursuant to stock options (70,000 of
         which were granted in tandem with SARs).

(21)     Includes 621 shares of AT&T common stock and 3,068 shares of AT&T Class
         A Liberty Media Group tracking stock held by Mr. Tanabe's wife, Arlene
         Bobrow, as to which shares Mr. Tanabe has disclaimed beneficial
         ownership.

                                                                     (continued)


                                     III-20
<PAGE>   129

(22)     Includes 139,722 restricted shares of AT&T Class A Liberty Media Group
         tracking stock, none of which is currently vested.

(23)     Includes 139,722 restricted shares of AT&T Class A Liberty Media Group
         tracking stock, none of which is currently vested.

(24)     Includes 1,018,039 shares of AT&T common stock, 143,120 shares of AT&T
         Class A Liberty Media Group tracking stock, 3,409,436 shares of AT&T
         Class B Liberty Media Group tracking stock, 200 shares of Liberty
         Satellite & Technology, Inc. Series A common stock and 20,000 shares of
         On Command Corporation common stock held by relatives of certain
         directors and executive officers, as to which shares beneficial
         ownership by such directors and executive officers has been disclaimed.

(25)     Includes beneficial ownership of the following shares which may be
         acquired within 60 days after February 28, 2001, pursuant to stock
         options granted in tandem with SARs: (a) 1,768,220 shares of AT&T
         common stock; and (b) 8,421,776 shares of AT&T Class A Liberty Media
         Group tracking stock.

(26)     Includes 342,555 restricted shares of AT&T common stock and 1,817,113
         restricted shares of AT&T Class A Liberty Media Group tracking stock,
         none of which is currently vested.

(27)     Assumes the exercise in full of stock options to acquire 100,000 shares
         of Liberty Digital Series A common stock, all of which are currently
         exercisable.

(28)     Includes beneficial ownership of 1,775,152 shares of Liberty Satellite
         & Technology, Inc. Series A common stock which may be acquired within
         60 days after December 31, 2000, pursuant to stock options (305,000 of
         which were granted in tandem with SARs.)

(29)     Includes 25,000 restricted shares of On Command Corporation common
         stock, none of which is currently vested.

         (c)      Change of Control. On March 9, 1999, the Company became a
wholly-owned subsidiary of AT&T pursuant to the AT&T Merger. See "Item 8.
Financial Statements and Supplementary Date" for additional information
regarding the AT&T Merger. Except as discussed below, the Company knows of no
arrangements, including any pledge by any person of securities of the Company,
the operation of which may at a subsequent date result in a change in control of
the Company.

         On November 15, 2000, AT&T announced that it would effect the split off
of its Liberty Media Group, pursuant to the terms of its charter, by redeeming
all of its outstanding AT&T Liberty Media Group tracking stock in exchange for
shares of our common stock. As a result of the split off, we would become an
independent, publicly traded company, and all of our outstanding common stock
would be owned by the former shareholders of AT&T Liberty Media Group tracking
stock. The split off is subject to specified conditions, including AT&T's
receipt of a private letter ruling from the Internal Revenue Service with regard
to the U.S. federal income tax consequences of the split off to the effect that
the split off will be treated as a tax-free exchange under Section 355 of the
Internal Revenue Code of 1986, as amended. We cannot provide assurance that the
private letter ruling will be received or that the split off will be effected.

                                                                     (continued)


                                     III-21
<PAGE>   130

Item 13. Certain Relationships and Related Transactions.

         (a)      Transactions with Management and Others.

         RELATIONSHIP WITH AT&T.

         Liberty is a wholly owned subsidiary of AT&T Broadband, LLC. The
businesses and assets of Liberty and its subsidiaries constitute substantially
all of the businesses and assets of AT&T's Liberty Media Group, which was
created in connection with the AT&T merger. The assets attributed to the Liberty
Media Group that are not also currently assets of Liberty consist of
approximately 21.4 million shares of common stock of Teligent, Inc., which are
held indirectly by AGI LLC, and interests in each of the following subsidiaries
of AT&T: Liberty AGI, Inc., Liberty SP, Inc. and LMC Interactive, Inc. Neither
Liberty SP, Inc. nor Liberty AGI, Inc. currently has any significant assets. LMC
Interactive, Inc.'s assets consist of an 8% interest in Liberty Digital.

         AT&T's Liberty Media Group tracking stock, which is intended to reflect
the separate performance of the Liberty Media Group, is capital stock of AT&T.
It is not stock of Liberty.

         In connection with the AT&T merger, a number of agreements were entered
into and governance arrangements put in place that address the relationship
between AT&T and Liberty.

         In April 2000, AT&T issued a new tracking stock intended to reflect the
economic performance of the AT&T Wireless Group. The relationship between the
Liberty Media Group and the AT&T Wireless Group is substantially similar to the
relationship between the Liberty Media Group and the AT&T Common Stock Group
described below.

         LIBERTY ORGANIZATIONAL DOCUMENTS The Liberty Charter provides that
Liberty will have three classes of directors, each of which is to have the same
number of directors, as follows:

         -        the Class A Directors, who are elected for a term of one year;

         -        the Class B Directors, who are elected for a term of seven
                  years; and

         -        the Class C Directors, who are elected for a term of ten
                  years.

         The current Class B Directors and Class C Directors were designated by
TCI prior to the AT&T merger and, unless they resign, die or are otherwise
removed, will comprise two-thirds of the Liberty board until at least 2006. The
members of the Liberty board are only removable for cause (as defined in the
Liberty Charter) and, in the event of the death or resignation of a director in
any class, the remaining directors of that class are to choose a successor.

         Under Delaware law, the Liberty board manages the business and affairs
of Liberty. In accordance with the Liberty Charter and bylaws, action by the
Liberty board generally requires the affirmative vote of a majority of the
directors present at a meeting at which a quorum is present, which majority must
include a majority of the Class B Directors and Class C Directors.

                                                                     (continued)


                                     III-22
<PAGE>   131

         The officers of Liberty include the executive officers who were
formerly in charge of overseeing the businesses of TCI's former Liberty Media
Group and TCI Ventures Group. The Liberty Charter provides that officers of
Liberty may only be removed by the Liberty board by the affirmative vote
described above. Similar governance arrangements were instituted with respect to
each of the subsidiaries of AT&T which are attributed to Liberty Media Group
that are not also assets of Liberty.

         CONTRIBUTION AGREEMENT. Liberty is a party to a Contribution Agreement
entered into immediately prior to the AT&T merger. The Contribution Agreement
provides that, in the event of a Triggering Event, Liberty will be obligated to
transfer all of its assets and liabilities to Liberty Media Group LLC, an entity
controlled by Liberty's current management through Liberty Management LLC, the
managing member, unless the Triggering Event is waived by Liberty Management
LLC. The subsidiary of AT&T that holds the stock of Liberty as well as the
subsidiaries of AT&T which are attributed to the Liberty Media Group that are
not also assets of Liberty is also a party to the Contribution Agreement and is
obligated under the same circumstances to contribute the subsidiaries of AT&T
which are attributed to the Liberty Media Group that are not also assets of
Liberty or the assets of those subsidiaries to Liberty Media Group LLC. A
Triggering Event will occur if the incumbent Class B and Class C directors, and
their successors, cease to constitute a majority of the Liberty board, or
Liberty Management LLC reasonably determines that such event is reasonably
likely to occur.

         AT&T TRACKING STOCK AMENDMENT. AT&T's certificate of incorporation was
amended in connection with the AT&T merger in order to authorize the AT&T
Liberty Media Group tracking stock. Of particular relevance to Liberty is a
provision that requires a separate class vote of the holders of Liberty Media
Group tracking stock to authorize a Covered Disposition, which generally
includes a sale or transfer by AT&T of its equity interest in Liberty or Liberty
Media Group LLC or a grant of a pledge or other security interest in the equity
interest of AT&T in Liberty or Liberty Media Group LLC. Such separate approval
would not be required in connection with a redemption permitted by AT&T's
amended certificate of incorporation of all of the outstanding Liberty Media
Group tracking stock in exchange for all of the shares of common stock of a
subsidiary of AT&T that holds all of the assets and liabilities of the Liberty
Media Group and satisfies certain other requirements.

         AT&T's amended certificate of incorporation also provides that neither
the Liberty Media Group nor the AT&T Common Stock Group will have any duty,
responsibility or obligation to refrain from any of the following:

         -        engaging in the same or similar activities or lines of
                  business as any member of the other group;

         -        doing business with any potential or actual supplier or
                  customer of any member of the other group; or

         -        engaging in, or refraining from, any other activities
                  whatsoever relating to any of the potential or actual
                  suppliers or customers of any member of the other group.

                                                                     (continued)


                                     III-23
<PAGE>   132

         Further, neither the Liberty Media Group nor the AT&T Common Stock
Group will have any duty, responsibility or obligation:

         -        to communicate or offer any business or other corporate
                  opportunity to any other person (including any business or
                  other corporate opportunity that may arise that either group
                  may be financially able to undertake, and that are, from their
                  nature, in the line of more than one group's business and are
                  of practical advantage to more than one group);

         -        to provide financial support to the other group (or any member
                  thereof); or

         -        otherwise to assist the other group.

         The foregoing provisions of the AT&T certificate of incorporation do
not prevent any member of the Liberty Media Group (including Liberty) from
entering into written agreements with AT&T or any other member of the AT&T
Common Stock Group to define or restrict any aspect of the relationship between
the groups.

         INTER-GROUP AGREEMENT. AT&T, for itself and on behalf of the members of
the Common Stock Group, on the one hand, and Liberty, Liberty Media Group LLC
and each subsidiary of AT&T which is attributed to Liberty Media Group that is
not also owned by Liberty, for themselves and on behalf of the members of the
Liberty Media Group, on the other hand, entered into the Inter-Group Agreement,
in connection with the AT&T merger. A summary of the material provisions of the
Inter-Group Agreement is set forth below.

         Neither the AT&T Common Stock Group Nor the Liberty Media Group Is
Required to Offer Financial Support or Corporate Opportunities to the Other. In
general, neither the AT&T Common Stock Group nor the Liberty Media Group will
have any obligation or responsibility to provide financial support or offer
corporate opportunities to the other group or to otherwise assist the other
group. Generally, neither group will have any rights to the tradenames,
trademarks or other intellectual property rights of the other group.

         There are Restrictions on the Incurrence of Debt and Other Financial
Obligations. Neither the Liberty Media Group nor the AT&T Common Stock Group may
incur any debt or other obligation, including any preferred equity obligation,
that has or purports to have recourse to any member, or to the assets of any
member, of the other group. In addition, unless otherwise expressly agreed
between the two groups, no member of the Liberty Media Group or the AT&T Common
Stock Group may enter into any agreement, or incur any other liability or
obligation, that binds or purports to bind or impose any liabilities or
obligation on any member of the other group. AT&T may not attribute any debt or
other obligation to, or create, authorize or issue any AT&T preferred stock that
is attributed to, the Liberty Media Group without the consent of the Liberty
board.

         The Liberty Media Group may not incur any debt, other than the
refinancing of debt without any increase in amount, that would cause the total
indebtedness of the Liberty Media Group at any time to be in excess of 25% of
the total market capitalization of the AT&T Liberty Media Group tracking stock,
if the excess debt would adversely affect the credit rating of AT&T. Prior to
incurring any debt that would exceed the 25% threshold, the Liberty Media Group
is required to consult with AT&T and, if requested by AT&T, with two nationally
recognized credit rating agencies to be selected by each of Liberty and AT&T to
determine if the incurrence of the excess debt would adversely affect the credit
rating of AT&T.

                                                                     (continued)


                                     III-24
<PAGE>   133

         Each Group is Solely Responsible for its Costs and Liabilities;
Indemnification. Each of the Liberty Media Group and the AT&T Common Stock Group
will be solely responsible for all claims, obligations, liabilities and costs
arising from that group's operations and businesses, whether arising before or
after the AT&T merger.

         Each of the Liberty Media Group and the AT&T Common Stock Group is
required to indemnify the other group and to hold the other group harmless
against all claims, liabilities, losses and expenses, including attorneys' fees,
allocated to the indemnifying group in accordance with the previous paragraph.

         AT&T May Generally Not Allocate Corporate Overhead Expenses to the
Liberty Media Group. The AT&T Common Stock Group may not allocate general
overhead expenses to the Liberty Media Group, except (1) to the extent that the
Liberty Media Group receives specific services pursuant to services agreements
or similar arrangements between the AT&T Common Stock Group and the Liberty
Media Group and (2) if the Liberty Media Group uses the same independent
accounting firm as AT&T, an allocable share of the fees and expenses of such
firm for AT&T's annual audits.

         Liberty Has a Limited Ability to Issue its own Stock. Liberty may issue
shares of its common stock and may authorize and issue shares of its preferred
stock only if, after giving effect to the issuance, AT&T would still be able to
include Liberty on its consolidated federal income tax return and Liberty would
remain a "Qualified Subsidiary" for purposes of the tax-free distribution rules
of Section 355 of the Code. Currently, Liberty would deconsolidate from AT&T if
Liberty issued an amount of shares that would result in neither AT&T nor a
subsidiary of AT&T owning at least 80% of the total combined voting power of all
classes of stock of Liberty entitled to vote and 80% of the fair market value of
all classes of stock of Liberty. For purposes of the preceding sentence, "stock"
does not include stock which is not entitled to vote, which is limited and
preferred as to dividends and does not participate in corporate growth to any
significant extent, which has redemption and liquidation rights which do not
exceed the issue price of such stock (except for a reasonable redemption or
liquidation premium), and which is not convertible into another class of stock.

         Any Proceeds from the Issuance of AT&T Liberty Media Group Tracking
Stock will be Contributed to Liberty. The net proceeds of any issuance or sale
of AT&T Liberty Media Group tracking stock are generally required to be
contributed by AT&T to Liberty. The parties have entered into a supplement to
the Inter-Group Agreement to provide an exception to this requirement and have
made alternative arrangements regarding The Associated Group, Inc.

         AT&T will Include in its SEC Reports Combined Financial Statements of
the Liberty Media Group. For so long as AT&T Liberty Media Group tracking stock
is outstanding, AT&T will include in its filings with the SEC combined financial
statements of the Liberty Media Group.

         AT&T will Not Take Any Actions Involving the Equity of Liberty. AT&T
has also agreed that it will not, and will not permit any member of the AT&T
Common Stock Group to, directly or indirectly:

         -        sell, transfer, dispose of or otherwise convey, whether by
                  merger, consolidation, sale or contribution of assets or
                  stock, or otherwise, any direct or indirect equity interest of
                  AT&T in Liberty;

         -        incur any indebtedness secured by, or pledge or grant a lien,
                  security interest or other encumbrance on, any direct or
                  indirect equity interest of AT&T in Liberty; or

                                                                     (continued)


                                     III-25
<PAGE>   134

         -        create any derivative instrument whose value is based on any
                  direct or indirect equity interest of AT&T in Liberty;

         except that the foregoing will not apply to:

         -        any of the foregoing approved by the Liberty board by the
                  affirmative vote described under " -- Liberty Organizational
                  Documents" above;

         -        AT&T's issuance or sale of its own securities, other than
                  indebtedness secured by any direct or indirect equity interest
                  of AT&T in Liberty and other than any security convertible
                  into or exercisable or exchangeable for, or any derivative
                  instrument whose value is based on, any direct or indirect
                  equity interest of AT&T in Liberty; or

         -        AT&T's participation in any merger, consolidation, exchange of
                  shares or other business combination transaction in which
                  AT&T, or its successors, continues immediately following the
                  transaction to hold the same interest in the business, assets
                  and liabilities comprising the Liberty Media Group that it
                  held immediately prior to the transaction, other than as a
                  result of any action by Liberty or any other person included
                  in the Liberty Media Group.

         AT&T has also agreed that for so long as any AT&T Liberty Media Group
tracking stock is outstanding, AT&T will not, and will not permit any member of
the AT&T Common Stock Group to, intentionally take any action that AT&T knows
would have the effect of deconsolidating Liberty from the AT&T consolidated
group for federal income tax purposes. This restriction will not apply to
certain dispositions or redemptions expressly contemplated by AT&T's amended
certificate of incorporation or to a Covered Disposition approved by the
separate class vote of the holders of AT&T Liberty Media Group tracking stock.

         INTERCOMPANY AGREEMENT. In connection with the AT&T merger, AT&T, on
behalf of itself and the members of the Common Stock Group, and Liberty, on
behalf of itself and the members of the Liberty Media Group, entered into an
Intercompany Agreement, the material provisions of which are described below.

         Preferred Vendor Status. We are granted preferred vendor status with
respect to access, timing and placement of new programming services. This means
that AT&T will use its reasonable efforts to provide digital basic distribution
of new services created by Liberty and its affiliates, on mutual "most favored
nation" terms and conditions and otherwise consistent with industry practices,
subject to the programming meeting standards that are consistent with the type,
quality and character of AT&T's cable services as they may evolve over time.

         Extension of Term of Affiliation Agreements. AT&T has agreed to extend
any existing affiliation agreement of Liberty and its affiliates that expires on
or before March 9, 2004, to a date not before March 9, 2009, if most favored
nation terms are offered and the arrangements are consistent with industry
practice.

                                                                     (continued)


                                     III-26
<PAGE>   135

         Interactive Video Services. AT&T will enter into arrangements with
Liberty for interactive video services under one of the following two
arrangements, which will be at the election of AT&T:

         -        Pursuant to a five-year arrangement, renewable for an
                  additional four-year period on then-current most favored
                  nation terms, AT&T will make available to Liberty capacity
                  equal to one 6 megahertz channel (in digital form and
                  including interactive enablement, first screen access and hot
                  links to relevant web sites -- all to the extent implemented
                  by AT&T cable systems) to be used for interactive,
                  category-specific video channels that will provide
                  entertainment, information and merchandising programming. The
                  foregoing, however, will not compel AT&T to disrupt other
                  programming or other channel arrangements. The suite of
                  services are to be accessible through advanced set-top devices
                  or boxes deployed by AT&T, except that, unless specifically
                  addressed in a mutually acceptable manner, AT&T will have no
                  obligation to deploy set-top devices or boxes of a type,
                  design or cost materially different from that it would
                  otherwise have deployed. The content categories may include,
                  among others, music, travel, health, sports, books, personal
                  finance, automotive, home video sales and games; or

         -        AT&T may enter into one or more mutually agreeable ventures
                  with Liberty for interactive, category-specific video channels
                  that will provide entertainment, information and merchandising
                  programming. Each venture will be structured as a 50/50
                  venture for a reasonable commercial term and provide that AT&T
                  and Liberty will not provide interactive services in the
                  category(s) of interactive video services provided through the
                  venture for the duration of such term other than the joint
                  venture services in the applicable categories. When the
                  distribution of interactive video services occurs through a
                  venture arrangement, AT&T will share in the revenue and
                  expense of the provision of the interactive services pro rata
                  to its ownership interest in lieu of the commercial
                  arrangements described in the preceding paragraph. At the
                  third anniversary of the formation of any such venture, AT&T
                  may elect to purchase the ownership interest of Liberty in the
                  venture at fair market value. The parties will endeavor to
                  make any such transaction tax efficient to Liberty.

         TAX SHARING AGREEMENT. Liberty, for itself and each member of the
Liberty Media Group, is a party to a tax sharing agreement that provides, among
other things, that:

         -        to the extent that the inclusion of the Liberty Media Group
                  within the consolidated U.S. federal income tax return (or any
                  combined, consolidated or unitary tax return) filed by a
                  member of the AT&T Common Stock Group increases tax liability
                  for any period, the Liberty Media Group will be responsible
                  for paying the AT&T Common Stock Group an amount equal to the
                  increased tax liability; and

         -        to the extent that the Liberty Media Group's inclusion within
                  the consolidated U.S. federal income tax return (or any
                  combined, consolidated or unitary tax return) filed by a
                  member of the AT&T Common Stock Group reduces tax liability
                  for any period, the AT&T Common Stock Group will be
                  responsible for paying the Liberty Media Group an amount equal
                  to the reduced tax liability.

                                                                     (continued)


                                     III-27
<PAGE>   136

         The net operating loss for U.S. federal income tax purposes of the
affiliated group of which TCI was the common parent at the time of the AT&T
merger (the "TCI Affiliated Group") will be allocated to the Liberty Media Group
(the "Allocated NOL") to offset any obligations it would otherwise incur under
the tax sharing agreement for periods subsequent to March 9, 1999 (the date of
the AT&T merger). If the Liberty Media Group is deconsolidated for U.S. federal
income tax purposes from the affiliated group of which AT&T is the parent
corporation, the AT&T Common Stock Group will be required to pay the Liberty
Media Group an amount equal to the product of the amount of the Allocated NOL
that has not been used as an offset to the Liberty Media Group's obligations
under the tax sharing agreement, and that has been, or is reasonably expected to
be, utilized by the AT&T Common Stock Group and 35%. Certain other tax
carryovers of the TCI Affiliated Group will be allocated to the AT&T Common
Stock Group to offset any obligations it would otherwise incur under the tax
sharing agreement for periods subsequent to the AT&T merger on March 9, 1999.

         In general, with respect to the TCI Affiliated Group, for periods
ending on or prior to March 9, 1999:

         -        the Liberty Media Group will pay the TCI Group any portion of
                  regular tax liability attributable to TCI's former Liberty
                  Media Group or TCI Ventures Group;

         -        any regular tax losses or other tax attributes may be used by
                  the Liberty Media Group or the TCI Group without compensation
                  to any other group; and

         -        if the TCI Affiliated Group has an alternative minimum tax
                  liability, the group, if any, generating alternative minimum
                  tax losses will be paid for such losses to the extent that
                  such losses reduce alternative minimum tax liability of the
                  TCI Affiliated Group, but the Liberty Media Group will not
                  otherwise be required to pay its share of such alternative
                  minimum tax liability.

         FACILITIES AND SERVICES AGREEMENT. Liberty and AT&T Broadband have
entered into a facilities and services agreement. Pursuant to the agreement,
AT&T Broadband provides Liberty with office space and related services at AT&T
Broadband's facilities. Pursuant to the agreement, Liberty reimburses AT&T
Broadband for all direct expenses incurred by AT&T Broadband in providing
services thereunder and a pro rata share of all indirect expenses incurred by
AT&T Broadband in connection with the rendering of such services. The
obligations of AT&T Broadband to provide services under the agreement will
terminate on December 31, 2001.

         Liberty was allocated $2 million in corporate and general and
administrative costs by AT&T Broadband for both the year ended December 31, 2000
and the ten months ended December 31, 1999, and $13 million for both the two
months ended February 28, 1999 and the year ended December 31, 1998. We are
currently building a new corporate headquarters in Englewood, Colorado, which we
expect to occupy by the end of 2001.

                                                                     (continued)


                                     III-28

<PAGE>   137

         AFFILIATION AGREEMENTS. TCI is party to affiliation agreements pursuant
to which it purchases programming from subsidiaries and affiliates of Liberty.
TCI Cable systems subsequently acquired by AT&T in the AT&T merger operate under
the name of AT&T Broadband. Certain of these agreements provide for penalties
and charges in the event the supplier's programming is not carried on AT&T
Broadband's cable systems or not delivered to a contractually specified number
of customers. Charges to AT&T Broadband for such programming is generally based
on customary rates and often provide for payments to AT&T Broadband by Liberty's
subsidiaries and business affiliates for marketing support. In July 1997, AT&T
Broadband entered into a 25 year affiliation agreement with Starz Encore Media
Group pursuant to which AT&T Broadband is obligated to pay monthly fixed amounts
in exchange for unlimited access to Encore and STARZ! programming. Also in 1997,
in connection with the merger of Liberty Digital and DMX, AT&T Broadband
transferred to Liberty Digital the right to receive all revenue from sales of
DMX music services to AT&T Broadband's residential and commercial subscribers,
net of an amount equal to 10% of revenue from such sales to residential
subscribers and net of the revenue otherwise payable to DMX as license fees
under AT&T Broadband's existing affiliation agreements. Liberty received $243
million, $180 million, $43 million and $162 million in revenue for programming
services provided to AT&T Broadband 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.

OTHER RELATED PARTY TRANSACTIONS

         Business Relationships with Directors and Officers.

         For a discussion of certain related party transactions involving John
C. Malone see "Item 11. Executive Compensation - (f) Compensation Committee
Interlocks and Insider Participation in Compensation Decisions - John C.
Malone."

         For a discussion of certain related party transactions involving Paul
A. Gould, see "Item 11. Executive Compensation - (f) Compensation Committee
Interlocks and Insider Participation in Compensation Decisions - Paul A. Gould."

         For a discussion of certain related party transactions involving Robert
R. Bennett, see "Item 11. Executive Compensation - (f) Compensation Committee
Interlocks and Insider Participation in Compensation Decisions - Robert R.
Bennett."

         Jerome H. Kern, one of our directors and Chief Executive Officer of On
Command, was Special Counsel with the law firm of Baker Botts L.L.P. from July
1996 to June 1998 and a senior partner of Baker Botts L.L.P. from September 1992
to July 1996. We have retained Baker Botts to perform various legal services
from time to time for us and certain of our subsidiaries and business affiliates
during our last fiscal year as well as our current fiscal year.

         On December 29, 2000, Liberty entered into an agreement to guaranty the
repayment of a revolving line of credit extended by The Bank of New York to Mr.
Kern with an aggregate available amount of up to $19.2 million. In consideration
of this guaranty, Mr. Kern has agreed to pay Liberty an annual fee of $96,000,
payable quarterly, for each year of the two year term of the line of credit. To
secure Mr. Kern's repayment of any amount paid by Liberty under the guaranty,
Mr. Kern has granted to Liberty 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 has guaranteed,
Mr. Kern is required to pledge additional collateral to Liberty of sufficient
value to maintain the two-times coverage ratio.

                                                                     (continued)


                                     III-29
<PAGE>   138

         On August 10, 2000, Mr. Kern purchased from On Command shares of its
Series A Convertible Participating Preferred Stock (the "Preferred Shares") for
a $21 million note. The Preferred Shares are convertible into 1.4 million shares
of On Command's common stock. The note is secured by the Preferred Shares or the
proceeds from the sale of the shares and Mr. Kern's personal obligations under
the 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 September 2000, the following executive officers of our company
purchased common stock interests in one of our subsidiaries: David J.A. Flowers
purchased a 0.46% interest for $100,000, Elizabeth M. Markowski purchased a
0.91% interest for $200,000, Charles Y. Tanabe purchased a 0.68% interest for
$150,000 and Peter N. Zolintakis purchased a 0.68% interest for $150,000. This
subsidiary owns an indirect interest in an entity that holds some of our
investments in satellite and technology related assets. We and the officers
named entered into a stockholders agreement pursuant to which the officers can
require us to purchase, after five years, all or part of their common stock
interest in the subsidiary, in exchange for shares of AT&T's Liberty Media Group
common stock, at its then-fair market value. In addition, we have the right to
purchase, in exchange for shares of AT&T's Liberty Media Group common stock, the
officers' common stock interests for fair market value at any time.

         In November 2000, we granted Elizabeth M. Markowski, Larry E. Romrell
and a board member of Liberty Livewire an aggregate 2.82% common stock interest
in one of our subsidiaries that owns a direct interest in Liberty Livewire. The
common stock interest granted to these individuals had an aggregate value of
$282,000. Ms. Markowski holds a .6263% interest with a value of $62,625, and Mr.
Romrell holds a 1.4625% interest with a value of $146,250. This subsidiary also
awarded Mr. Romrell deferred bonuses in the initial amount of $3,373,836, 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 some of the common shares
granted to Mr. Romrell. We and these individuals entered into a stockholders
agreement pursuant to which the individuals can require us to purchase, after
five years, all or part of their common stock interest in the subsidiary, in
exchange for shares of AT&T's Liberty Media Group common stock, at its then-fair
market value. In addition, we have the right to purchase, in exchange for shares
of AT&T's Liberty Media Group common stock, their common stock interests for
fair market value at any time.

         Ms. Markowski was a partner with the law firm of Baker Botts L.L.P.
from August 1992 to October 2000. We have retained Baker Botts to perform
various legal services from time to time for us and certain of our subsidiaries
and business affiliates during our last fiscal year as well as our current
fiscal year.

         Indemnification of Certain of Our Employees. In connection with the
AT&T merger, certain employees (including directors and executive officers) of
Liberty who were officers or directors of TCI prior to the AT&T merger received
undertakings of indemnification from TCI with respect to the effects of U.S.
federal excise taxes that may become payable by them as a result of the AT&T
merger and the resulting change in control of TCI. Pursuant to the Inter-Group
Agreement, each of the Liberty Media Group and the AT&T Common Stock Group are
responsible for all obligations to their respective officers and employees.
Accordingly, following the AT&T merger, these tax protection undertakings to
Liberty Media Group officers and employees became Liberty's obligations.

         Liberty believes that the foregoing business dealings with management
were based upon terms no less advantageous to Liberty than those which would be
available in dealing with unaffiliated persons.

                                                                     (continued)


                                     III-30

<PAGE>   139

         Other Transactions. National Digital Television Center, a subsidiary of
TCI ("NDTC"), leases transponder facilities to certain Liberty subsidiaries.
Charges by NDTC for such arrangements were $19 million, $20 million, $4 million
and $25 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.

         On January 14, 2000, the Liberty Media Group completed its acquisition
of The Associated Group, Inc. pursuant to an Amended and Restated Agreement and
Plan of Merger, dated October 28, 1999, among AT&T, A-Group Merger Corp., a
wholly owned subsidiary of AT&T, Liberty and Associated Group. In this
transaction, Associated Group was acquired by and became a member of the Liberty
Media Group through the merger of A-Group Merger Corp into Associated Group. In
the merger, 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 tracking stock. Prior to the merger,
Associated Group was principally engaged in the ownership and operation of
interests in various communications-related businesses. Associated Group's
primary assets were:

         -        approximately 19.7 million shares of AT&T common stock;

         -        approximately 23.4 million shares of AT&T Class A Liberty
                  Media Group tracking stock;

         -        approximately 5.3 million shares of AT&T Class B Liberty Media
                  Group tracking stock;

         -        approximately 21.4 million shares of common stock of Teligent,
                  Inc., a full-service, facilities-based communications company;
                  and

         -        all of the outstanding shares of common stock of TruePosition,
                  Inc., a wholly-owned subsidiary of Associated Group which
                  provides location services for wireless carriers and users
                  designed to determine the location of any wireless
                  transmitters, including cellular and PCS telephones.

         Immediately following the completion of the merger, all of the shares
of AT&T common stock, Class A Liberty Media Group tracking stock and Class B
Liberty Media Group tracking stock previously held by Associated Group were
retired by AT&T and all of the businesses and assets of Associated Group, other
than its interest in Teligent, were transferred to Liberty. A member of the
Liberty Media Group other than Liberty holds Associated Group's interest in
Teligent.


                                     III-31
<PAGE>   140

                                    PART IV.

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) (1)  Financial Statements

<TABLE>
<CAPTION>
Included in Part II of this Report:                                                          Page No.
                                                                                             --------
<S>                                                                                       <C>
Liberty Media Corporation:

         Independent Auditors' Report                                                           II-21

         Consolidated Balance Sheets,
           December 31, 2000 and 1999                                                     II-22 to II-23

         Consolidated Statements of Operations and
           Comprehensive Earnings,
               Year ended December 31, 2000
               Ten months ended December 31, 1999
               Two months ended February 28, 1999
               Year ended December 31, 1998                                                     II-24

         Consolidated Statements of Stockholder's Equity,
               Year ended December 31, 2000
               Ten months ended December 31, 1999
               Two months ended February 28, 1999
               Year ended December 31, 1998                                               II-25 to II-26

         Consolidated Statements of Cash Flows,
               Year Ended December 31, 2000
               Ten months ended December 31, 1999
               Two months ended February 28, 1999
               Year ended December 31, 1998                                                     II-27

         Notes to Consolidated Financial Statements,
               December 31, 2000, 1999 and 1998                                           II-28 to II-62

(a) (2)  Financial Statement Schedules

         None.
</TABLE>

                                      IV-1
<PAGE>   141

(a) (3)  Exhibits

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

     3 - Articles of Incorporation and Bylaws:

         3.1   Restated Certificate of Incorporation of Liberty, dated March
                  8, 1999 (incorporated by reference to Exhibit 3.1 to the
                  Registration Statement on Form S-4 of Liberty Media
                  Corporation (File No. 333-86491) as filed on September 3, 1999
                  (the "Liberty S-4 Registration Statement")).

         3.2   Bylaws of Liberty, as adopted March 8, 1999 (incorporated by
                  reference to Exhibit 3.2 of the Liberty S-4 Registration
                  Statement).

     4 - Instruments Defining the Rights of Securities Holders, including
         Indentures:

         4.1   Liberty undertakes to furnish the Securities and Exchange
                  Commission, upon request, a copy of all instruments with
                  respect to long-term debt not filed herewith.

     10 - Material Contracts:

         10.1  Contribution Agreement dated March 9, 1999, by and among
                  Liberty Media Corporation, Liberty Media Management LLC,
                  Liberty Media Group LLC and Liberty Ventures Group LLC
                  (incorporated by reference to Exhibit 10.1 to the Liberty S-4
                  Registration Statement).

         10.2  Inter-Group Agreement dated as of March 9, 1999, between AT&T
                  Corp. and Liberty Media Corporation, Liberty Media Group LLC
                  and each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.2 to the Liberty S-4
                  Registration Statement).

         10.3  Intercompany Agreement dated as of March 9, 1999, between
                  Liberty and AT&T Corp. (incorporated by reference to Exhibit
                  10.3 to the Liberty S-4 Registration Statement).

         10.4  Tax Sharing Agreement dated as of March 9, 1999, by and among
                  AT&T Corp., Liberty Media Corporation, Tele-Communications,
                  Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI
                  Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
                  listed on the signature pages thereof (incorporated by
                  reference to Exhibit 10.4 to the Liberty S-4 Registration
                  Statement).

         10.5  First Amendment to Tax Sharing Agreement dated as of May 28,
                  1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.5 to the Liberty S-4
                  Registration Statement).

         10.6  Second Amendment to Tax Sharing Agreement dated as of
                  September 24, 1999, by and among AT&T Corp., Liberty Media
                  Corporation, Tele-Communications, Inc., Liberty Ventures Group
                  LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT
                  Holdings, Inc. and each Covered Entity listed on the signature
                  pages thereof (incorporated by reference to Exhibit 10.6 to
                  the Registration Statement on Form S-1 of Liberty Media
                  Corporation (File No. 333-93917) as filed on December 30, 1999
                  (the "Liberty S-1 Registration Statement)).


                                      IV-2
<PAGE>   142

     10 - Material Contracts:

         10.7  Third Amendment to Tax Sharing Agreement dated as of October 20,
                  1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.7 to the Liberty S-l
                  Registration Statement).

         10.8  Fourth Amendment to Tax Sharing Agreement dated as of October
                  28, 1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.8 to the Liberty S-l
                  Registration Statement).

         10.9  Fifth Amendment to Tax Sharing Agreement dated as of December
                  6, 1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.9 to the Liberty S-l
                  Registration Statement).

         10.10 Sixth Amendment to Tax Sharing Agreement dated as of December
                  10, 1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.10 to the Liberty S-l
                  Registration Statement).

         10.11 Seventh Amendment to Tax Sharing Agreement dated as of
                  December 30, 1999, by and among AT&T Corp., Liberty Media
                  Corporation, Tele-Communications, Inc., Liberty Ventures Group
                  LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT
                  Holdings, Inc. and each Covered Entity listed on the signature
                  pages thereof (incorporated by reference to Exhibit 10.11 to
                  the Liberty S-l Registration Statement).

         10.12 Eighth Amendment to Tax Sharing Agreement dated as of July 25,
                  2000, by and among AT&T Corp., Liberty Media Corporation, AT&T
                  Broadband LLC, Liberty Ventures Group LLC, Liberty Media Group
                  LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered
                  Entity listed on the signature pages thereof (incorporated by
                  reference to Exhibit 10.12 to the Registration Statement on
                  Form S-1 of Liberty Media Corporation (File No. 333-55998) as
                  filed on February 21, 2001 (the "Split Off Registration
                  Statement")).

         10.13 Instrument dated January 14, 2000, adding The Associated
                  Group, Inc. as a party to the Tax Sharing Agreement dated as
                  of March 9, 1999, as amended, among The Associated Group,
                  Inc., AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.12 to the Liberty S-1
                  Registration Statement).

         10.14 Amended and Restated Contribution Agreement dated January 14,
                  2000, by and among Liberty Media Corporation, Liberty Media
                  Management LLC, Liberty Media Group LLC, Liberty Ventures
                  Group LLC, The Associated Group, Inc. and Liberty AGI, Inc.
                  (incorporated by reference to Exhibit 10.13 to the Liberty S-1
                  Registration Statement).

                                      IV-3
<PAGE>   143

    10 - Material Contracts:

        10.15 First Supplement to Inter-Group Agreement dated as of May 28,
                 1999, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.14 to the
                 Liberty S-1 Registration Statement).

        10.16 Second Supplement to Inter-Group Agreement dated as of
                 September 24, 1999, between and among AT&T Corp., on the one
                 hand, and Liberty Media Corporation, Liberty Media Group LLC
                 and each Covered Entity listed on the signature pages thereof,
                 on the other hand (incorporated by reference to Exhibit 10.15
                 to the Liberty S-1 Registration Statement).

        10.17 Third Supplement to Inter-Group Agreement dated as of October 20,
                 1999, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.16 to the
                 Liberty S-1 Registration Statement).

        10.18 Fourth Supplement to Inter-Group Agreement dated as of
                 December 6, 1999, between and among AT&T Corp., on the one
                 hand, and Liberty Media Corporation, Liberty Media Group LLC
                 and each Covered Entity listed on the signature pages thereof,
                 on the other hand (incorporated by reference to Exhibit 10.17
                 to the Liberty S-1 Registration Statement).

        10.19 Fifth Supplement to Inter-Group Agreement dated as of December 10,
                 1999, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.18 to the
                 Liberty S-1 Registration Statement).

        10.20 Sixth Supplement to Inter-Group Agreement dated as of December 30,
                 1999, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.19 to the
                 Liberty S-1 Registration Statement).

        10.21 Seventh Supplement to Inter-Group Agreement dated as of July 25,
                 2000, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.21 to the
                 Split Off Registration Statement).

        10.22 Instrument dated January 14, 2000, adding The Associated
                 Group, Inc. as a party to the Inter-Group Agreement dated as
                 of March 9, 1999, as supplemented, between and among AT&T
                 Corp., on the one hand, and Liberty Media Corporation, Liberty
                 Media Group LLC and each Covered Entity listed on the
                 signature pages thereof, on the other hand (incorporated by
                 reference to Exhibit 10.20 to the Liberty S-1 Registration
                 Statement).

        10.23 Restated and Amended Employment Agreement dated November 1,
                 1992, between Tele-Communications, Inc. and John C. Malone
                 (assumed by Liberty as of March 9, 1999), and the amendment
                 thereto dated June 30, 1999 and effective as of March 9, 1999,
                 between Liberty and John C. Malone (incorporated by reference
                 to Exhibit 10.6 to the Liberty S-4 Registration Statement).

                                      IV-4
<PAGE>   144

     21 - Subsidiaries of Liberty Media Corporation.

     (b) Report on Form 8-K filed during the quarter ended December 31, 2000:

         None.

                                      IV-5
<PAGE>   145

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          LIBERTY MEDIA CORPORATION


Dated:  March 27, 2001                    By  /s/   Charles Y. Tanabe
                                             ----------------------------------
                                                    Charles Y. Tanabe
                                                    Senior Vice President and
                                                      General Counsel

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
           Signature                                Title                                        Date
           ---------                                -----                                        ----
<S>                                             <C>                                           <C>
/s/    John C. Malone                           Chairman of the Board,                        March 27, 2001
--------------------------------------               and Director
       John C. Malone


 /s/   Robert R. Bennett                        Director, President and Chief                 March 27, 2001
--------------------------------------               Executive Officer
       Robert R. Bennett


 /s/   Gary S. Howard                           Director, Executive Vice                      March 27, 2001
--------------------------------------               President and Chief
       Gary S. Howard                                  Operating Officer


 /s/   Jerome H. Kern                           Director                                      March 27, 2001
--------------------------------------
       Jerome H. Kern

 /s/   Paul A. Gould                            Director                                      March 27, 2001
--------------------------------------
       Paul A. Gould

 /s/   Larry E. Romrell                         Director                                      March 27, 2001
--------------------------------------
       Larry E. Romrell

--------------------------------------          Director
       Harold R. Handler

--------------------------------------          Director
       Frank J. Macchiarola

--------------------------------------          Director
       Michael T. Ricks

 /s/   David J.A. Flowers                       Senior Vice President and                     March 27, 2001
--------------------------------------            Treasurer (Principal Financial
       David J.A. Flowers                           Officer)

 /s/   Christopher W. Shean                     Vice President and Controller                 March 27, 2001
--------------------------------------          (Principal Accounting Officer)
       Christopher W. Shean
</TABLE>

                                      IV-6

<PAGE>   146

                                 EXHIBIT INDEX


     3 - Articles of Incorporation and Bylaws:

         3.1   Restated Certificate of Incorporation of Liberty, dated March
                  8, 1999 (incorporated by reference to Exhibit 3.1 to the
                  Registration Statement on Form S-4 of Liberty Media
                  Corporation (File No. 333-86491) as filed on September 3, 1999
                  (the "Liberty S-4 Registration Statement")).

         3.2   Bylaws of Liberty, as adopted March 8, 1999 (incorporated by
                  reference to Exhibit 3.2 of the Liberty S-4 Registration
                  Statement).

     4 - Instruments Defining the Rights of Securities Holders, including
         Indentures:

         4.1   Liberty undertakes to furnish the Securities and Exchange
                  Commission, upon request, a copy of all instruments with
                  respect to long-term debt not filed herewith.

     10 - Material Contracts:

         10.1  Contribution Agreement dated March 9, 1999, by and among
                  Liberty Media Corporation, Liberty Media Management LLC,
                  Liberty Media Group LLC and Liberty Ventures Group LLC
                  (incorporated by reference to Exhibit 10.1 to the Liberty S-4
                  Registration Statement).

         10.2  Inter-Group Agreement dated as of March 9, 1999, between AT&T
                  Corp. and Liberty Media Corporation, Liberty Media Group LLC
                  and each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.2 to the Liberty S-4
                  Registration Statement).

         10.3  Intercompany Agreement dated as of March 9, 1999, between
                  Liberty and AT&T Corp. (incorporated by reference to Exhibit
                  10.3 to the Liberty S-4 Registration Statement).

         10.4  Tax Sharing Agreement dated as of March 9, 1999, by and among
                  AT&T Corp., Liberty Media Corporation, Tele-Communications,
                  Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI
                  Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
                  listed on the signature pages thereof (incorporated by
                  reference to Exhibit 10.4 to the Liberty S-4 Registration
                  Statement).

         10.5  First Amendment to Tax Sharing Agreement dated as of May 28,
                  1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.5 to the Liberty S-4
                  Registration Statement).

         10.6  Second Amendment to Tax Sharing Agreement dated as of
                  September 24, 1999, by and among AT&T Corp., Liberty Media
                  Corporation, Tele-Communications, Inc., Liberty Ventures Group
                  LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT
                  Holdings, Inc. and each Covered Entity listed on the signature
                  pages thereof (incorporated by reference to Exhibit 10.6 to
                  the Registration Statement on Form S-1 of Liberty Media
                  Corporation (File No. 333-93917) as filed on December 30, 1999
                  (the "Liberty S-1 Registration Statement)).


<PAGE>   147

     10 - Material Contracts:

         10.7  Third Amendment to Tax Sharing Agreement dated as of October 20,
                  1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.7 to the Liberty S-l
                  Registration Statement).

         10.8  Fourth Amendment to Tax Sharing Agreement dated as of October
                  28, 1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.8 to the Liberty S-l
                  Registration Statement).

         10.9  Fifth Amendment to Tax Sharing Agreement dated as of December
                  6, 1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.9 to the Liberty S-l
                  Registration Statement).

         10.10 Sixth Amendment to Tax Sharing Agreement dated as of December
                  10, 1999, by and among AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.10 to the Liberty S-l
                  Registration Statement).

         10.11 Seventh Amendment to Tax Sharing Agreement dated as of
                  December 30, 1999, by and among AT&T Corp., Liberty Media
                  Corporation, Tele-Communications, Inc., Liberty Ventures Group
                  LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT
                  Holdings, Inc. and each Covered Entity listed on the signature
                  pages thereof (incorporated by reference to Exhibit 10.11 to
                  the Liberty S-l Registration Statement).

         10.12 Eighth Amendment to Tax Sharing Agreement dated as of July 25,
                  2000, by and among AT&T Corp., Liberty Media Corporation, AT&T
                  Broadband LLC, Liberty Ventures Group LLC, Liberty Media Group
                  LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered
                  Entity listed on the signature pages thereof (incorporated by
                  reference to Exhibit 10.12 to the Registration Statement on
                  Form S-1 of Liberty Media Corporation (File No. 333-55998) as
                  filed on February 21, 2001 (the "Split Off Registration
                  Statement")).

         10.13 Instrument dated January 14, 2000, adding The Associated
                  Group, Inc. as a party to the Tax Sharing Agreement dated as
                  of March 9, 1999, as amended, among The Associated Group,
                  Inc., AT&T Corp., Liberty Media Corporation,
                  Tele-Communications, Inc., Liberty Ventures Group LLC, Liberty
                  Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
                  each Covered Entity listed on the signature pages thereof
                  (incorporated by reference to Exhibit 10.12 to the Liberty S-1
                  Registration Statement).

         10.14 Amended and Restated Contribution Agreement dated January 14,
                  2000, by and among Liberty Media Corporation, Liberty Media
                  Management LLC, Liberty Media Group LLC, Liberty Ventures
                  Group LLC, The Associated Group, Inc. and Liberty AGI, Inc.
                  (incorporated by reference to Exhibit 10.13 to the Liberty S-1
                  Registration Statement).

<PAGE>   148

    10 - Material Contracts:

        10.15 First Supplement to Inter-Group Agreement dated as of May 28,
                 1999, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.14 to the
                 Liberty S-1 Registration Statement).

        10.16 Second Supplement to Inter-Group Agreement dated as of
                 September 24, 1999, between and among AT&T Corp., on the one
                 hand, and Liberty Media Corporation, Liberty Media Group LLC
                 and each Covered Entity listed on the signature pages thereof,
                 on the other hand (incorporated by reference to Exhibit 10.15
                 to the Liberty S-1 Registration Statement).

        10.17 Third Supplement to Inter-Group Agreement dated as of October 20,
                 1999, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.16 to the
                 Liberty S-1 Registration Statement).

        10.18 Fourth Supplement to Inter-Group Agreement dated as of
                 December 6, 1999, between and among AT&T Corp., on the one
                 hand, and Liberty Media Corporation, Liberty Media Group LLC
                 and each Covered Entity listed on the signature pages thereof,
                 on the other hand (incorporated by reference to Exhibit 10.17
                 to the Liberty S-1 Registration Statement).

        10.19 Fifth Supplement to Inter-Group Agreement dated as of December 10,
                 1999, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.18 to the
                 Liberty S-1 Registration Statement).

        10.20 Sixth Supplement to Inter-Group Agreement dated as of December 30,
                 1999, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.19 to the
                 Liberty S-1 Registration Statement).

        10.21 Seventh Supplement to Inter-Group Agreement dated as of July 25,
                 2000, between and among AT&T Corp., on the one hand, and
                 Liberty Media Corporation, Liberty Media Group LLC and each
                 Covered Entity listed on the signature pages thereof, on the
                 other hand (incorporated by reference to Exhibit 10.21 to the
                 Split Off Registration Statement).

        10.22 Instrument dated January 14, 2000, adding The Associated
                 Group, Inc. as a party to the Inter-Group Agreement dated as
                 of March 9, 1999, as supplemented, between and among AT&T
                 Corp., on the one hand, and Liberty Media Corporation, Liberty
                 Media Group LLC and each Covered Entity listed on the
                 signature pages thereof, on the other hand (incorporated by
                 reference to Exhibit 10.20 to the Liberty S-1 Registration
                 Statement).

        10.23 Restated and Amended Employment Agreement dated November 1,
                 1992, between Tele-Communications, Inc. and John C. Malone
                 (assumed by Liberty as of March 9, 1999), and the amendment
                 thereto dated June 30, 1999 and effective as of March 9, 1999,
                 between Liberty and John C. Malone (incorporated by reference
                 to Exhibit 10.6 to the Liberty S-4 Registration Statement).

     21 - Subsidiaries of Liberty Media Corporation.