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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D. C. 20549

FORM 10-K

|ý                                            | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|-------------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended December 31, 2005 
|OR                                          
|o                                            | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from            to

Commission File Number 001-16615

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

|State of Delaware(State or other jurisdiction of
incorporation or organization)     |  | 84-1288730(I.R.S. Employer
Identification No.)
|----------------------------------------------------------------------------------- |  | ----------------------------------------------
|12300 Liberty Boulevard
Englewood, Colorado(Address of principal executive offices) |  | 80112(Zip Code)                               

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

Securities
registered pursuant to Section 12(b) of the Act:

Title of each class

Name of exchange on which registeredSeries A Common Stock, par value $.01 per share

New York Stock ExchangeSeries B Common Stock, par value $.01 per share

New York Stock Exchange


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

Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes ý No o

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes o No ý

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 ý No o

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.    ý

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in
Rule 12b-2 of the Act).

|Large accelerated filer ý |  | Accelerated filer o |  | Non-accelerated filer o
|------------------------- |  | ------------------- |  | -----------------------

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes o No ý

The aggregate market value of the voting stock held by nonaffiliates of Liberty Media Corporation computed by reference to the last sales price of such stock, as
of the closing of trading on June 30, 2005, was approximately $27.2 billion.

The
number of shares outstanding of Liberty Media Corporation's common stock as of January 31, 2006 was:

Series A
Common Stock2,682,351,118; and
Series B Common Stock121,062,825 shares.

Documents Incorporated by Reference

The Registrant's definitive proxy statement for its 2006 Annual Meeting of Shareholders is hereby incorporated by reference into Part III of this Annual
Report on Form 10-K.



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LIBERTY MEDIA CORPORATION
2005 ANNUAL REPORT ON FORM 10-K

Table of Contents



|         |  |                                                                                                             
|-------- |  | ------------------------------------------------------------------------------------------------------------
|         |  | Part I                                                                                                      
|Item 1.  |  | Business                                                                                                    
|Item 1A. |  | Risk Factors                                                                                                
|Item 1B. |  | Unresolved Staff Comments                                                                                   
|Item 2.  |  | Properties                                                                                                  
|Item 3.  |  | Legal Proceedings                                                                                           
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                         
|         |  | Part II                                                                                                     
|Item 5.  |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|Item 6.  |  | Selected Financial Data                                                                                     
|Item 7.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                       
|Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                                  
|Item 8.  |  | Financial Statements and Supplementary Data                                                                 
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                        
|Item 9A. |  | Controls and Procedures                                                                                     
|Item 9B. |  | Other Information                                                                                           
|         |  | Part III                                                                                                    
|Item 10. |  | Directors and Executive Officers of the Registrant                                                          
|Item 11. |  | Executive Compensation                                                                                      
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              
|Item 13. |  | Certain Relationships and Related Transactions                                                              
|Item 14. |  | Principal Accounting Fees and Services                                                                      
|         |  | Part IV                                                                                                     
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                  

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PART I.

Item 1. Business.



Liberty
Media Corporation is a holding company which, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the electronic retailing, media,
communications and entertainment industries. Through our subsidiaries, we operate in the United States, Europe and Asia. Our principal assets include interests in QVC, Inc., Starz Entertainment
Group LLC, IAC/InterActiveCorp, Expedia, Inc. and News Corporation.

From
March 9, 1999 through August 9, 2001 we were a wholly-owned subsidiary of AT&T Corp. (which recently completed a merger with SBC Communications, Inc., and is
now known as AT&T, Inc.) On March 9, 1999, AT&T acquired by merger our parent company at that time, the former Tele-Communications, Inc. ("TCI"), which was 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 was designed to
reflect the economic performance of the businesses and assets of AT&T attributed to its "Liberty Media Group." Our businesses and assets constituted all of the businesses and assets of Liberty Media
Group.

Effective
August 10, 2001, AT&T effected our split-off pursuant to which our common stock was recapitalized, and each share of AT&T Class A Liberty Media Group
tracking stock was redeemed for one share of our Series A common stock, and each share of AT&T Class B Liberty Media Group tracking stock was redeemed for one share of our
Series B common stock. Following the split
off, we are no longer a subsidiary of AT&T and no shares of AT&T Liberty Media Group tracking stock remain outstanding.



On July 21, 2005, we completed the spin off of Discovery Holding Company, one of our wholly-owned subsidiaries, which we refer to as DHC. In connection
with this spin off transaction, holders of our common stock on July 15, 2005 received 0.10 of a share of DHC Series A common stock for each share of our Series A common stock
owned and 0.10 of a share of DHC Series B common stock for each share of our Series B common stock owned. At the time of the spin off, DHC owned a 100% controlling interest in Ascent
Media Group, LLC, a 50% equity interest in Discovery Communications, Inc. and $200 million in cash. See note 5 to the accompanying consolidated financial statements for more
information on the DHC spin off.

During
2005, we completed our debt reduction program that we announced and initiated in the fourth quarter of 2003. During 2005 and pursuant to this program, we retired $1,719 of our
parent company debt for aggregate cash payments of $1,731 million. A portion ($800 million) of these debt retirements were funded with borrowings under QVC's bank credit facility. Since
the inception of the program, we have retired $4.43 billion of parent and subsidiary debt, net of borrowings under the QVC bank credit facility.

On
November 9, 2005, we announced our intention to create, subject to stockholder approval, two new tracking stocks, one ("Liberty Interactive Stock") intended to reflect the
separate performance of our businesses engaged in video and on-line commerce, including our subsidiaries, QVC and Provide Commerce, Inc. and our interests in IAC/InterActiveCorp and
Expedia, the other ("Liberty Capital Stock") intended to reflect the separate performance of all of our assets and businesses not attributed to the Interactive Group. If the proposal to create the
tracking stocks is approved and completed, each share of our existing Series A and Series B common stock would be exchanged for .25 of a share of the same series of Liberty Interactive
Stock and .05 of a share of the same series of Liberty Capital Stock.

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*
* * * *

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.
To the extent that statements in this Annual Report are not recitations of historical fact, such statements constitute forward-looking statements which, by definition, involve risks and uncertainties.
In some cases, you can identify these statements by our use of forward-looking words such as "may," "will," "should," "anticipate," "estimate," "expect," "plan," "believe," "predict," "potential,"
"intend," and other words of similar substance. In particular, statements under Item 1. "Business," Item 1A. "Risk-Factors," Item 2. "Properties," Item 3. "Legal Proceedings," Item
7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" contain forward-looking statements.
Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable
basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or
events to differ materially from those anticipated:



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These
forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Annual Report, and we expressly disclaim any obligation or undertaking to disseminate
any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on
which any such statement is based. When considering such forward-looking statements, you should keep in mind the factors described in Item 1A, "Risk Factors" and other cautionary statements contained
in this Annual Report. Such risk factors and statements describe circumstances which could cause actual results to differ materially from those contained in any forward-looking statement.

This
Annual Report includes information concerning OpenTV Corp. 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. If you would like further
information about these companies, the reports and other information they file with the SEC can be accessed on the Internet website maintained by the SEC at www.sec.gov. Those reports and other
information are not incorporated by reference in this Annual Report.



Through
our ownership of interests in subsidiaries and other companies, we are primarily engaged in the electronic retailing, media, communications and entertainment industries. Each of
these businesses is separately managed.

We
identify our reportable segments as (A) those consolidated subsidiaries that represent 10% or more of our consolidated revenue, earnings before income taxes or total assets and
(B) those equity method affiliates whose share of earnings represent 10% or more of our pre-tax earnings. Financial information related to our operating segments can be found in
note 18 to our consolidated financial statements found in Part II of this report.



The
following table identifies our more significant subsidiaries and minority investments.



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QVC, Inc. and its subsidiaries market and sell a wide variety of consumer products in the U.S. and several foreign countries primarily by means of
merchandise-focused televised shopping programs on the QVC networks and, to a lesser extent, via the Internet through its domestic and international websites. QVC programming is divided into segments
that are televised live with a host who presents the merchandise, sometimes with the assistance of a guest representing the product vendor, and conveys information relating to the product to QVC's
viewers. QVC's websites offer a complement to televised shopping by allowing consumers to purchase a wide assortment of goods that were previously offered on the QVC networks, as well as other items
that are available from QVC only via its websites. For the year ended December 31, 2005, approximately 18% of QVC's domestic revenue and approximately 16% of QVC's total revenue was generated
from sales of merchandise ordered through its various websites.

QVC
offers a variety of merchandise at competitive prices. 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 classifies its merchandise into three groups: home, apparel/accessories and jewelry. For the year ended December 31, 2005, home,
apparel/accessories and jewelry accounted for approximately 45%, 33% and 22%, respectively, of QVC's net revenue generated by its United States operations. QVC offers products in each of these
merchandise groups that are exclusive to QVC, as well as popular brand name and other products also available from other retailers. QVC's exclusive products are often endorsed by celebrities,
designers and other well known personalities. QVC does not depend on any single supplier or designer for a significant portion of its inventory.

QVC
distributes its television programs, via satellite or optical fiber, to multichannel video program distributors for retransmission to subscribers in the United States, the United
Kingdom, Germany, Japan and neighboring countries that receive QVC's broadcast signals. In the U.S., QVC uplinks its programming from its uplink facility in Pennsylvania to a protected,
non-preemptible transponder on a domestic satellite. "Protected" status means that, in the event of a transponder failure, QVC's signal will be transferred to a spare transponder or, if
none is available, to a preemptible transponder located on the same satellite or, in certain cases, to a transponder on another satellite owned by the same service provider if one is available at the
time of the failure. QVC's international business units each obtain uplinking services from third parties for their uplinking and transmit their programming to non-preemptible transponders
on five international satellites. "Non-preemptible" status means that, in the event of a transponder failure, QVC's transponders cannot be preempted in favor of a user of a "protected"
failure. QVC's transponder service agreement

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for
its domestic transponder expires in 2019. QVC's transponder service agreements for its international transponders expire in 2006 through 2013.

QVC
enters into long-term affiliation agreements with satellite and cable television operators who downlink QVC's programming and distribute the programming to their
customers. QVC's affiliation agreements with these distributors have termination dates ranging from 2006 to 2015. QVC's ability to continue to sell products to its customers is dependent on its
ability to maintain and renew these affiliation agreements in the future.

In
return for carrying the QVC signals, each programming distributor in the United States, the United Kingdom and Germany receives an allocated portion, based upon market share, of up to
5% of the net sales of merchandise sold via the television programs to customers located in the programming distributor's service areas. In Japan, some programming distributors receive an
agreed-upon monthly fee per subscriber regardless of the net sales, while others earn a variable percentage of net sales. In addition to sales-based commissions or
per-subscriber fees, QVC also makes payments to distributors in the United States for carriage and to secure favorable positioning on channel 35 or below on the distributor's channel
line-up. QVC believes that a portion of its sales are attributable to purchases resulting from channel "browsing" and that a channel position near broadcast networks and more popular cable
networks increases the likelihood of such purchases. As more U.S. cable operators convert their analog customers to digital, channel positioning will become more critical due to the increased channel
options on the digital line-up.

QVC's
shopping programs are telecast live 24 hours a day to 91 million homes in the United States. QVC Shopping Channel reaches 18 million households in the United
Kingdom and the Republic of Ireland and is broadcast live 17 hours a day. QVC's shopping network in Germany, reaches 37 million households throughout Germany and Austria and is broadcast
live 24 hours a day. QVC Japan, QVC's joint venture with Mitsui & Co., LTD, reaches 17 million households and is broadcast live 24 hours a day.

QVC
strives to maintain promptness and efficiency in order taking and fulfillment. QVC has four domestic phone centers that can direct calls from one call center to another as volume
mandates, which reduces a caller's hold time, helping to ensure that orders will not be lost as a result of hang-ups. QVC also has one phone center in each of the United Kingdom and Japan
and two call centers in Germany. QVC also utilizes computerized voice response units, which handle approximately 35% of all orders taken. QVC has seven distribution centers worldwide and is able to
ship approximately 88% of its orders within 48 hours.

QVC's
business is seasonal due to a higher volume of sales in the fourth calendar quarter related to year-end holiday shopping. In recent years, QVC has earned
22%-23% of its revenue in each of the first three quarters of the year and 32%-33% of its revenue in the fourth quarter of the year.

We
have an approximate 98% ownership interest in QVC. The QVC management team owns the remaining interest.



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 analog or digital package of programming services for a fixed
monthly fee, or may be delivered individually as a "premium" programming service for a separate monthly charge. Whether a programming service is a basic or premium channel, the programmer generally
enters into separate multi-year affiliation agreements with those distributors that agree to carry the service. Basic programming services derive their revenue principally from the sale of
advertising time on their networks and from per subscriber license fees

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received
from distributors. Their continued ability to generate both advertising revenue and subscriber license fees is dependent on these services' ability to maintain and renew their affiliation
agreements. Premium services do not sell advertising and primarily generate their revenue from subscriber fees.

Starz
Entertainment Group LLC ("SEG"), a wholly-owned subsidiary, provides premium movie networks and programming distributed by cable, direct-to-home satellite,
telephony, the Internet and other distribution media providers in the United States. SEG's primary service offerings are (1) Starz, which is primarily a first-run movie service that
generally
includes five channels branded with the Starz name, each of which exhibits movies targeted to a specific audience and (2) Encore, which airs first-run movies and classic
contemporary movies and generally includes six thematic multiplex channels branded with the Encore name, each of which exhibits movies based upon individual themes. Starz is generally purchased by
subscribers as an a-la-carte premium service for which subscribers pay a separate monthly charge. Distributors may also package Starz with other premium services. Encore is
generally purchased by subscribers as part of a digital package, which includes a variety of general entertainment digital networks. Distributors may also sell Encore on an
a-la-carte basis or packaged with Starz. SEG's services also include Movieplex, a "theme by day" channel featuring a different thematic multiplex channel each day, on a weekly
rotation; Starz On Demand; Encore on Demand; Movieplex on Demand and a high definition feed of the Starz channel on StarzHD. In addition, SEG distributes via the Internet Starz Ticket, a subscription
package comprising Starz and Starz On Demand; and Vongo, also a subscription package, which, in addition to Starz and Starz On Demand, also offers pay-per-view and other
entertainment content. As of December 31, 2005, SEG had 14.1 million Starz subscriptions and 25.8 million Encore subscriptions.

The
majority of SEG's revenue is derived from the delivery of movies to subscribers under long-term affiliation agreements with cable systems and direct broadcast satellite
systems, including Comcast Cable, DirecTV, Echostar, Time Warner, Charter Communications, Cox Communications, Adelphia Communications, Cablevision Systems, Insight Communications, Mediacom
Communications and the National Cable Television Cooperative. Some of SEG's affiliation agreements provide for payments based on the number of subscribers that receive SEG's services. SEG also has
affiliation agreements with certain of its customers, including its agreement with Comcast Cable, pursuant to which those customers pay an agreed-upon rate regardless of the number of
subscribers. These affiliation agreements generally provide for contractual rate increases or rate increases tied to the annual Consumer Price Index. SEG's agreement with Comcast requires Comcast to
carry the Encore and Thematic Multiplex channels through September 2009 and Starz through December 2012. The affiliation agreements with Echostar and DirecTV expire on March 8,
2006 and March 31, 2006, respectively. SEG is currently in negotiations with both providers regarding multi-year distribution agreements for all of SEG's service offerings. SEG's
other affiliation agreements expire between now and December 2008. For the year ended December 31, 2005, SEG earned 58% of its total revenue from Comcast, DirecTV and Echostar,
collectively.

The
costs of acquiring rights to programming are SEG's principal expenses. In order to exhibit theatrical motion pictures, SEG enters into agreements to acquire rights from major motion
picture producers including Hollywood Pictures, Touchstone Pictures, Miramax Films, Disney, Revolution Studios, Sony's Columbia Pictures, Screen Gems and Sony Pictures Classics. SEG also has exclusive
rights to air first-run output from four independent studios. These output agreements expire between 2006 and 2011, with extensions, at the option of two studios, potentially extending the
expiration dates of those agreements to 2013 and 2014.

SEG
uplinks its programming to five non-preemptible, protected transponders on three domestic satellites. SEG leases its transponders under long-term lease
agreements. At December 31, 2005, SEG's transponder leases had termination dates ranging from 2018 to 2021. SEG transmits to these transponders from its uplink center in Englewood, Colorado.

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On Command Corporation, a wholly-owned subsidiary, is a leading provider (based on number of hotel rooms served) of in-room video entertainment and
information services to hotels, motels and resorts (which we collectively refer to as hotels) primarily in the United States. On Command's base of installed rooms was approximately 813,000 rooms at
December 31, 2005.

On
Command provides in-room video entertainment and information services on two main technology platforms: the OCV video system and the OCX video system. The OCV video system
is a video selection and distribution technology platform that allows hotel guests to select, at any time, movies and games through the television sets in their hotel rooms. The OCX video system is a
digital platform that provides the same features as the OCV system and in addition provides enhanced multimedia applications, including an improved graphical interface for movies and games, digital
music, television-based Internet with a wireless keyboard and other guest services. In addition, both of On Command's platforms provide for in-room viewing of select cable channels (such
as HBO, Starz, ESPN, CNN, Disney Channel and Discovery). At December 31, 2005, On Command provided its OCX and OCV video systems in 520,000 and 293,000 rooms, respectively.

The
hotels providing On Command's services collect fees from their guests for the use of On Command's services and are provided a commission equal to a negotiated percentage of the net
revenue earned by On Command for such usage. The amount of revenue realized by On Command is affected by a variety of factors, including among others, hotel occupancy rates, the "buy rate" or
percentage of occupied rooms that buy movies or services, the quality of On Command's pay-per-view movie offerings, business and leisure travel patterns and changes in the
number of rooms served. With the exception of December, which is generally On Command's lowest month for revenue, On Command typically does not experience significant variations in its monthly revenue
that can be attributed solely to seasonal factors.

On
Command primarily provides its services under long-term contracts to hotel corporations, hotel management companies, and individually owned and franchised hotel
properties. On Command's services are offered predominantly in the large deluxe, luxury, and upscale hotel categories serving business travelers, such as Marriott, Hilton, Six Continents, Hyatt,
Wyndham, Starwood,
Radisson, Fairmont, Four Seasons and other select hotels. On Command's contracts with hotels generally provide that On Command will be the exclusive provider of in-room,
pay-per-view video entertainment services to the hotel and generally permit On Command to set its prices. On Command's contracts with hotels typically set forth the terms
governing On Command's provision of free-to-guest programming as well. At December 31, 2005, contracts covering approximately 40% of On Command's installed rooms have
expired, or are scheduled to expire, if not otherwise renewed, during the two-year period ending December 31, 2007. Marriott, Hyatt and Hilton accounted for approximately 34%, 8%
and 7% respectively, of On Command's room revenues for the year ended December 31, 2005. These revenue percentages represent all chain affiliations including owned, managed and franchised
hotels.



Provide Commerce, Inc., a wholly-owned subsidiary that we acquired on February 9, 2006, operates an e-commerce marketplace of websites
for perishable goods that delivers products directly from suppliers to customers at competitive prices. Provide Commerce combines an online storefront, proprietary supply chain management technology,
established supplier relationships and integrated logistical relationships with Federal Express Corporation and United Parcel Service, Inc. to create a market platform that bypasses traditional
supply chains of wholesalers, distributors and retailers. Provide Commerce derives its revenue primarily from the sale of flowers and plants on its proflowers.com website and from the sale of gourmet
foods from its Uptown Prime, a supplier of premium meats and seafood, Cherry Moon Farms, a supplier of fresh premium fruits, and Secret

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Spoon,
a supplier of fresh desserts and confections, branded websites. Provide Commerce also enters into arrangements with businesses desiring to offer high-quality,
time-sensitive or perishable products to customers on a co-branded or private label basis, designing and hosting dedicated websites on behalf of such clients.



OpenTV provides technology, content and applications, and services that enable digital television network operators to deliver and manage interactive television
services on all major digital television platformscable, satellite and terrestrialin all major geographic areas of the world. OpenTV's software products, including its core
middleware and its interactive service platform, have been shipped in more than 60 million digital set-top boxes worldwide. OpenTV offers its customers a comprehensive suite of
interactive and enhanced television solutions that leverage its proprietary software and technologies and worldwide patent portfolio. OpenTV's core software products enable network operators to manage
the creation and delivery of interactive and
enhanced television services to their subscribers. OpenTV develops and manages branded television channels that allow viewers to play interactive games, and it offers applications that enable viewers
to engage in commerce transactions, retrieve information such as weather reports and sports updates, and engage in other interactive services, including fixed-odds gaming, through their
televisions. OpenTV also recently began efforts to market and commercially deploy targeted and addressable advertising solutions and research analyses detailing how viewers engage and interact with
programs and advertisements. To complement its technologies and interactive content and applications, OpenTV also offers a full suite of professional engineering and consulting services. These
services allow OpenTV to manage various interactive television projects, from discrete integration or development assignments to complete end-to-end digital programming
solutions for network operators.

OpenTV
derives revenue from (1) royalties from the sale of set-top boxes that incorporate OpenTV software; (2) fees for consulting engagements for
set-top box manufacturers, network operators and system integrators and maintenance and support for set-top box manufacturers; (3) channel fees from consumers of the
PlayJam interactive games channel who pay to play games and register for prizes; and (4) license fees from the sale of products such as Device Mosaic, OpenTV Core, OpenTV Measure and various
applications, including OpenTV Publisher. Sky Italia, BSkyB and Echostar accounted for 12%, 19% and 17%, respectively, of OpenTV's revenue in 2005.

While
OpenTV is one of the world's leading interactive television companies, the interactive television industry is still in its infancy. The growth of the industry and of OpenTV is
highly dependent upon a number of factors, including (i) consumer acceptance of interactive services and products; (ii) deployment of capital by broadband service providers for
interactive hardware and software; (iii) acceptance by broadband service providers of OpenTV's interactive technology and products; and (iv) continued development of interactive
technology, products and services. These factors are largely not within OpenTV's control and no assurance can be given that interactive television will expand beyond its current state.

We
own shares of OpenTV's Class A common stock and Class B common stock, representing an approximate 31% equity interest and an approximate 78% voting interest in OpenTV.
Each share of OpenTV Class B common stock has 10 votes per share and is convertible into one share of OpenTV Class A common stock, which has one vote per share.



TruePosition, Inc. develops and markets technology for locating wireless phones and other wireless devices, enabling wireless carriers, application
providers and other enterprises to provide E-911 and other location-based services to mobile users worldwide. "E-911" or "Enhanced 911" refers to a

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Federal
Communications Commission mandate requiring wireless carriers to implement wireless location capability. Cingular Wireless began deploying TruePosition's technology in late 2002, and
T-Mobile USA began deploying such technology in 2003. As of December 31, 2005, both wireless carriers are actively deploying TruePosition's technology and using the technology for
E-911. In addition, as of December 31, 2005 three smaller wireless carriers have deployed or started to deploy TruePosition's technology. Although many of the following services
have not yet been developed, and may not be developed successfully or at all, TruePosition's wireless location technology could also be used to implement a number of commercial location based services
including (1) comfort and security related applications, including child, pet and elderly tracking; (2) convenience/information services such as "concierge" and "personal navigation" to
identify and provide directions to the nearest restaurant, ATM, or gas station or allow travelers to obtain other information specific to their location; (3) corporate applications, such as
fleet or asset tracking to enable enterprises to better manage mobile assets to optimize service or cut costs; (4) entertainment/community services such as "friend finder" or
"m-dating" to allow mobile users to create a localized community of people with similar interests and receive notification when another group member is close-by;
(5) mobile commerce services to help users shop or purchase goods or services from the retailer closest to their current location; and (6) safety related applications to help public or
private safety organizations find or track mobile users in need of assistance or help locate stolen property.

TruePosition
earns revenue from the sale of hardware and licensing of software required to generate location records on a cellular network and from the design, installation, testing and
commissioning of such hardware and software. In addition, TruePosition earns software maintenance revenue through the provision of ongoing technical and software support. TruePosition has not earned
revenue from other location-based services, but it could realize such revenue in the future if such services are developed and offered using TruePosition's technology. Substantially all of
TruePosition's reported revenues in 2003, 2004 and 2005 were derived from Cingular Wireless. Recognition of revenue earned from T-Mobile is deferred pending delivery of specified elements,
which to date have not been delivered.

The
TruePosition® Finder system is a passive overlay system designed to enable mobile wireless service providers to determine the location of wireless devices,
including cellular and PCS telephones. Using patented time difference of arrival (TDOA) and angle of arrival (AOA) technology, the TruePosition Finder system calculates the latitude and
longitude of a designated wireless telephone or other transmitter and forwards this information in real time to
application software. TruePosition technology offerings cover multiple major wireless air interfaces such as Time Division Multiple Access (TDMA), Analog Mobile Phone Service (AMPS) and Global System
Mobile (GSM).

We
own approximately 89% of the common equity of TruePosition and 100% of the TruePosition preferred stock with a liquidation preference of $385 million at December 31,
2005.



Courtroom Television Network, LLC owns and operates Court TV, a basic cable network that provides informative and entertaining programming based on the American
legal system. Court TV's day-time programming focuses on trial coverage and legal news. In primetime, the network airs original programming such asForensic
FilesandPsychic Detectives,original movies such asThe Exoneratedand Guilt by Association,reality-based documentary specials and off-network series such asLaw and Order: Trial by
JuryandCOPS. Court TV was launched in 1991, and as of December 31, 2005 had approximately 85 million Nielsen
subscribers. Court TV earns revenue from the sale of advertising on its network, from affiliation agreements with cable television and direct-to-home satellite operators and by
licensing its programs for international distribution. Court TV's affiliation agreements with three affiliates representing, in the aggregate, approximately 26% of Court TV's subscribers have expired,
and Court TV is in negotiations for the renewal of such agreements. At December 31, 2005, Court

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TV's
other affiliation agreements have remaining terms of five years and provide for payments based on the number of subscribers that receive Court TV's services. No single distributor represented
more than 10% of Court TV's consolidated revenue for 2005. Court TV also operates three Internet websites: CourtTV.com, The SmokingGun.com and CrimeLibrary.com, and earns revenue from the sale of
advertising on these websites.

We
and Time Warner Inc. each own 50% of Courtroom Television Network. Pursuant to Courtroom Television Network's operating agreement, no action may be taken with respect to
certain material matters without our approval and that of Time Warner. Also pursuant to Courtroom Television Network's operating agreement, each member has a right of first offer with respect to any
proposed transfer by the other member of its interest in Courtroom Television Network other than to an affiliate of the transferring member. In addition, we may at any time require Time Warner to
purchase all, but not less than all, of our ownership interest, and Time Warner may require us to sell to it all, but not less than all, of our ownership interest in Courtroom Television Network.



Expedia, Inc. is among the world's leading travel services companies, making travel products and services available to leisure and corporate travelers in
the United States and abroad through a diversified portfolio of brands, including Expedia, Hotels.com, Hotwire, Expedia Corporate Travel, Classic Custom Vacations and a range of other domestic and
international brands and businesses. Expedia's various brands and businesses target the needs of different consumers, including those who are focused exclusively on price and those who are focused on
the breadth of product selection and quality of services. Expedia has created an easily accessible global travel marketplace, allowing customers to research, plan and book travel products and services
from travel suppliers and allows these travel suppliers to efficiently reach and provide their products and services to Expedia customers. Through its diversified portfolio of domestic and
international brands and businesses, Expedia makes available, on a stand-alone and package basis, travel products and services provided by numerous airlines, lodging properties, car rental companies,
cruise lines and destination service providers, such as attractions and tours. Using a portfolio approach for Expedia's brands and businesses allows it to target a broad range of customers looking for
different value propositions. Expedia reaches many customers in several countries and multiple continents through its various brands and businesses, typically customizing international points of sale
to reflect local language, currency, customs, traveler behavior and preferences and local hotel markets, all of which may vary from country to country.

Expedia
generates revenue by reserving travel services as the merchant of record and reselling these services to customers at a profit. Expedia also generates revenue by passing
reservations booked by its customers to the relevant services for a fee or commission.

We
indirectly own an approximate 20% equity interest and a 52% voting interest in Expedia. We have entered into governance arrangements pursuant to which Mr. Barry Diller,
Chairman of the Board and Senior Executive of Expedia, is currently entitled to vote our shares of Expedia, subject to certain limitations. Through our governance arrangements we have the right to
appoint and have appointed two of the nine members of Expedia's board of directors.



GSN, LLC owns and operates GSN. With nearly 58 million subscribers as of December 31, 2005, GSN is a basic cable network dedicated to
game-related programming and interactive game playing. GSN offers 24-hour cable programming consisting of game shows, casino games, reality series, documentaries and other
game-related shows. GSN currently features 133 hours per week of interactive programming, which allows viewers a chance to win prizes by playing along with GSN's televised games.
Players can play along using their computer at GSN.com or, in certain markets where available, using their remote control through a digital cable box.

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GSN's revenue is derived from the delivery of its programming to subscribers under long-term affiliation agreements with cable systems and direct broadcast satellite systems
and from the sale of advertising on its network. GSN's affiliation agreements provide for payments based on the number of subscribers that receive GSN's services and expire between now and 2008. GSN
is currently out of contract with DirecTV, a distributor that accounts for approximately 25% of GSN's current subscriber base, and is in negotiations for the renewal of such contract. For the year
ended December 31, 2005, GSN earned 14% of its total revenue from Comcast and 11% of its total revenue from DirectTV.

We
and Sony Pictures Entertainment, a division of Sony Corporation of America, which is a subsidiary of Sony Corporation, each own 50% of GSN, LLC. GSN's
day-to-day operations are managed by a management committee of its board of managers. Pursuant to GSN's operating agreement, we and Sony each have the right to designate half
of the members of the management committee. Also pursuant to the operating agreement, we and Sony have agreed that direct transfers of our interests in GSN and certain indirect transfers that result
in a change of control of the transferring party are subject to a right of first refusal in favor of the non-transferring member.



WildBlue Communications, Inc. delivers two-way broadband Internet access via satellite to homes and small businesses in rural markets
underserved by terrestrial broadband alternatives. WildBlue provides coverage across the continental United States using a 26-inch satellite mini-dish equipped with both a transmitter and
receiver for two-way satellite connectivity to the Internet. WildBlue has a prepaid license for Ka-band capacity on a geostationary satellite located at 111.1 degrees West
Longitude. The expected life of the satellite is approximately 15 years. In the event the satellite fails at any time through July 2007, WildBlue is entitled to reimbursement of the cash
prepayments made for the license.

WildBlue
launched its service in mid-2005 and generates revenue by charging subscription fees for its Internet access services as well as fees for equipment sales and related
installation charges. At December 31, 2005, WildBlue had approximately 25,000 subscribers.

We
own an approximate 32% equity interest in WildBlue.



IAC/InterActiveCorp is a multi-brand interactive commerce company transacting business worldwide via the Internet, television and the telephone. IAC's portfolio
of companies collectively enables direct-to-consumer transactions across many areas, including home shopping, ticketing, personals, travel, teleservices and local services.

IAC
consists of the following sectors:



IAC's
businesses largely act as intermediaries between suppliers and consumers. IAC aggregates supply from a variety of sources and captures consumer demand across a variety of channels.

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We
indirectly own an approximate 22% equity interest and a 54% voting interest in IAC. We have entered into governance arrangements pursuant to which Mr. Barry Diller, Chairman of
the Board and CEO of IAC, is currently entitled to vote our shares of IAC, subject to certain limitations. Through our governance arrangements we have the right to appoint two of thirteen members of
IAC's board of directors.



News Corp. is a diversified international media and entertainment company with operations in eight industry segments, including filmed entertainment, television,
cable network programming, direct broadcast satellite television, magazines and inserts, newspapers, book publishing and other. News Corp.'s activities are conducted principally in the United States,
Continental Europe, the United Kingdom, Asia, Australia and the Pacific Basin. News Corp. is a holding company that conducts all of its activities through subsidiaries and affiliates. Its principal
subsidiaries and affiliates are Fox Entertainment Group, Inc., Twentieth Century Fox Film Corporation, Fox Television Holdings, Inc., Fox Broadcasting Company, Fox Sports
Networks, Inc., NDS Group plc, News America Marketing In-Store Services, Inc., News American Marketing FSI, Inc., News International Limited, News Limited,
HarperCollins Publishers, Inc., HarperCollins Publishers Limited, STAR Group Limited, BSkyB and The DIRECTV Group. We own shares representing an approximate 16% equity interest and an
approximate 19% voting interest in News Corp.

Regulatory Matters



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 systems 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.

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, which we refer to as MMDS, and direct broadcast satellite distributors on terms and conditions that do not unfairly discriminate
among distributors. The Telecommunications Act of 1996 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

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resolution
of complaints, among other things. Although we no longer own Liberty Cablevision of Puerto Rico Ltd. ("LCPR"), FCC rules continue to attribute an ownership interest in LCPR to us,
thereby subjecting us and satellite-delivered programming services in which we have an interest to the program access rules.

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 provided for the use of two additional channels or a 45% limit, whichever is greater, provided
that the additional channels carried minority-controlled programming services. The regulations also grandfathered existing carriage arrangements that exceeded the channel limits, but required new
channel capacity to be devoted to unaffiliated programming services until the system achieved compliance with the regulations. These channel occupancy limits applied only up to 75 activated channels
on the cable system, and the rules did not apply to local or regional programming services. However, in 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, vacated the FCC's decision and
remanded the rule to the FCC for further consideration. In response to the Court's decision, the FCC issued further notices of proposed rulemaking in 2001 and on May 17, 2005 to consider
channel occupancy limitations. Even if these rules were readopted by the FCC, they would have little impact on programming companies in which we have interests based upon our current attributable
ownership interests in cable systems.

In
its 2001 decision, the Court of Appeals also vacated the FCC's rule imposing a thirty percent limit on the number of subscribers served by systems nationwide in which a multiple
system operator can have an attributable ownership interest. The FCC presently is conducting a rulemaking regarding this ownership limitation and its ownership attribution standards.

The
FCC's rules also generally had prohibited common ownership of a cable system and broadcast television station with overlapping service areas. On February 19, 2002, the United
States Court of Appeals for the District of Columbia Circuit held that the FCC's decision to retain the cable/broadcast cross-ownership rule was arbitrary and capricious and vacated the rule. The FCC
did not seek Supreme Court review of this decision or initiate a new rulemaking proceeding. The FCC rules continue to prohibit common ownership of a cable system and MMDS with overlapping service
areas.

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

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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 and to carriage of all digital
signals. On February 10, 2005, the FCC denied mandatory dual carriage of a television station's analog and digital signals during the digital television transition and also denied mandatory
carriage of all of a television station's digital signals, other than its "primary" signal. Television station owners have sought reconsideration of the FCC's decision and may seek judicial review or
legislative change of the FCC's decision.

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, which began in 2000, 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.

A-La-Carte Proceeding.In 2004, the FCC's Media Bureau conducted a notice of inquiry proceeding
regarding the feasibility of selling video programming services "a-la-carte", i.e. on an individual or small tier basis. The Media Bureau released a report on
November 19, 2004, which concluded that a-la-carte sales of video programming services would not result in lower video programming costs for most consumers and that they
would adversely affect video programming networks. On February 9, 2006, the Media Bureau released a new report which stated that the 2004 report was flawed and which concluded that
a-la-carte sales could be in the best interests of consumers. Although the FCC cannot mandate a-la-carte sales, its endorsement of the concept could
encourage Congress to consider proposals to mandate a-la-carte sales or otherwise seek to impose greater regulatory controls on how cable programming is sold. The programming
companies that distribute their services in tiers or packages of programming services would experience decreased distribution if a-la-carte carriage were mandated.

Copyright Regulation.The programming companies in which we have interests must obtain any necessary music performance rights
from the rights holders. These rights generally are controlled by the music performance rights organizations of the American Society of Composers, Authors and Publishers (ASCAP), Broadcast
Music, Inc. (BMI) and the Society of European Stage Authors and Composers (SESAC), each with rights to the music of various artists. The programming companies in which we have interests
generally have obtained the necessary rights through separate agreements with ASCAP, BMI and SESAC, which have negotiated agreements with some programmers that include new rate structures and may
require retroactive rate increases. Certain of the programming companies also have obtained licenses for music performance rights outside the United States through various licensing agencies located
in the foreign countries in which their services are distributed.

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. The FCC also regulates the earth stations uplinking to and/or downlinking from such
satellites.

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The Internet businesses in which we have interests are subject, both directly and indirectly, to various laws and governmental regulations. Certain of our
subsidiaries engaged in the provision of goods and services over the Internet must comply with federal and state laws and regulations applicable to online communications and commerce. For example, the
Children's Online Privacy Protection Act prohibits web sites from collecting personally identifiable information online from children under age 13 without parental consent and imposes a number of
operational requirements. Certain email activities are subject to the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, commonly known as the
CAN-SPAM Act. The CAN-SPAM Act regulates the sending of unsolicited commercial email by requiring the email sender, among other things, to comply with specific disclosure
requirements and to provide an "opt-out" mechanism for recipients. Both of these laws include statutory penalties for non-compliance. Various states also have adopted laws
regulating certain aspects of Internet communications. Goods sold over the Internet also must comply with traditional regulatory requirements, such as the Federal Trade Commission requirements
regarding truthful and accurate claims. With regard to state and local taxes, legislation enacted by Congress in 2004 extended the moratorium on such taxes on Internet access and commerce until
November 1, 2007.

Congress
and individual states may consider additional online privacy legislation. Other Internet-related laws and regulations enacted in the future may cover issues such as defamatory
speech, copyright infringement, pricing and characteristics and quality of products and services. The future adoption of such laws or regulations 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.



We also have significant ownership interests on a cost basis in other entities, such as News Corporation and Sprint Nextel Corporation, which are extensively
regulated. For example, the broadcast stations owned and the direct broadcast satellite service controlled by News Corp. are subject to a variety of FCC regulations. Sprint Nextel is subject not only
to federal regulation but also to regulation in varying degrees, depending on the jurisdiction, by state and local regulatory authorities.



The regulation of programming services, cable television systems and satellite licensees 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.

Competition

Our businesses that engage in electronic retail compete with traditional offline and online retailers ranging from large department stores to specialty shops,
other electronic retailers, direct marketing retailers, such as mail order and catalog companies, and discount retailers. QVC and IAC's subsidiary, Home Shopping Network, compete for access to
customers and audience share with other conventional forms of entertainment and content. Provide Commerce competes with online floral providers such as 1-800-FLOWERS and
Hallmark Flowers, floral wire services such as FTD and Teleflora, online meat providers, such as Omaha Steaks Company and specialty catalog companies, such as Harry & David.

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We
believe that the principal competitive factors in the markets in which our electronic commerce businesses compete are high-quality products, freshness, brand recognition, selection,
convenience, price, website performance, customer service and accuracy of order shipment.

Our
businesses that distribute programming for cable and satellite television compete with other programmers for distribution on a limited number of channels. Increasing concentration in
the multichannel video distribution industry could adversely affect the programming companies in which we have interests by reducing the number of distributors to whom they sell their programming,
subjecting more of their programming sales to volume discounts and increasing the distributors' bargaining power in negotiating new affiliation agreements. Once distribution is obtained, the
programming services of our programming businesses compete for viewers and advertisers with other cable and off-air broadcast television programming services as well as with other
entertainment media, including home video, pay-per-view services, online activities, movies and other forms of news, information and entertainment. Our programming businesses
also compete for creative talent and programming content. In addition, SEG relies on third parties for substantially all of its programming content whereas SEG's competitors produce some of their own
programming content. We believe that the principal competitive factors for our programming businesses are prices charged for programming, the quantity, quality and variety of the programming offered
and the effectiveness of marketing efforts.

Our
businesses that offer services through the Internet compete with businesses that offer their own services directly through the Internet as well as with online and offline providers
of similar services including providers of ticketing services, lending services, travel agencies, operators of destination search sites and search-centric portals, search technology providers, online
advertising networks, site aggregation companies, media, telecommunications and cable companies, Internet service providers and niche competitors that focus on a specific category or geography.
Expedia also competes with travel planning service providers, including aggregator sites that offer inventory from multiple suppliers, such as airline sites, Orbitz, Travelocity and Priceline, as well
as with American Express and Navigant International, providers of corporate travel services. We believe that the principal competitive factors in the markets in which our businesses that offer
services through the Internet engage are selection, price, availability of inventory, convenience, brand recognition, accessibility, customer service, reliability, website performance, and ease of
use.

The
businesses of providing software and related technologies, content and applications and professional services for interactive and enhanced television are highly competitive and
rapidly changing. The interactive television technology companies with which OpenTV competes include NDS Group plc., Microsoft Corporation and Scientific Atlanta. Companies that develop interactive
television content and applications include dedicated applications providers, interactive television technology companies, and independent third parties that develop and provide applications for
middleware platforms. Competition is also faced from media companies and network operators that have publicly announced interactive television initiatives. We expect competition in the interactive
content and applications area to intensify as the general market for interactive television services further develops, particularly in the case of independent third parties that have the ability to
develop applications for middleware platforms at relatively modest expense through the use of applications development tools.

There
are numerous providers of in-room entertainment services to the hotel industry. Market participants include, but are not limited to, (i) other full service
in-room providers, (ii) cable television companies, (iii) direct broadcast satellite services, (iv) television networks and programmers, (v) Internet service
providers, (vi) broadband connectivity companies, (vii) other telecommunications companies and (viii) certain hotels. In addition, On Command's services compete for a guest's time
and entertainment resources with other forms of entertainment and leisure activities. On Command anticipates that it will continue to face substantial competition from traditional as well as new
competitors.

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Employees

As of December 31, 2005, we had approximately 60 corporate employees, and our consolidated subsidiaries had an aggregate of approximately 13,600 employees.
We believe that our employee relations are good.



For
financial information related to the geographic areas in which we do business, see note 18 to our consolidated financial statements found in Part II of this report.



All
of our filings with the Securities and Exchange Commission (the "SEC"), including our Form 10-Ks, Form 10-Qs and Form 8-Ks,
as well as amendments to such filings are available on our Internet website free of charge generally within 24 hours after we file such material with the SEC. Our website address is
www.libertymedia.com.

Our
corporate governance guidelines, code of ethics, compensation committee charter, nominating and corporate governance committee charter, and audit committee charter are available on
our website. In addition, we will provide a copy of any of these documents, free of charge, to any shareholder who calls or submits a request in writing to Investor Relations, Liberty Media
Corporation, 12300 Liberty Boulevard, Englewood, Colorado 80112, Tel. No. (877) 772-1518.

The
information contained on our website is not incorporated by reference herein.

Item 1A. Risk Factors.

The risks described below and elsewhere in this annual report are not the only ones that relate to our businesses or our capitalization. The risks described below
are considered to be the most material. However, there may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that also could have material adverse effects
on our businesses. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. If any
of the events described below were to occur, our businesses, prospects, financial condition, results of operations and/or cash flows could be materially adversely affected.

We do not have the right to manage our business affiliates, which means we are not able to cause those affiliates to operate in a manner that is favorable to
us.We do not have the right to manage the businesses or affairs of any of our business affiliates (generally those companies in which we have less than a majority
stake). Rather, our rights may take the form of representation on the board of directors or a partners' or similar committee that supervises management or possession of veto rights over significant or
extraordinary actions. The scope of our veto rights vary from agreement to agreement. Although our board representation and veto rights may enable us to exercise influence over the management or
policies of a business affiliate, enable us to prevent the sale of material assets by a business affiliate in which we own less than a majority voting interest or prevent it from paying dividends or
making distributions to its stockholders or partners, they will not enable us to cause these actions to be taken.

If we fail to meet required capital calls to a business affiliate, we could be forced to sell our interest in that company, our interest in that company could be
diluted or we could forfeit important rights.We are a party to stockholder and partnership agreements relating to our equity interest in business affiliates that
provide for possible capital calls on stockholders and partners. Our failure to meet a capital call, or other commitment to provide capital or loans to a particular business affiliate, may have
adverse consequences to us. These consequences may include, among others, the dilution of our equity interest in that company, the forfeiture of our right to vote or exercise other rights, the right
of the other

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stockholders
or partners to force us to sell our interest at less than fair value, the forced dissolution of the company to which we have made the commitment or, in some instances, a breach of
contract action for damages against us. Our ability to meet capital calls or other capital or loan commitments is subject to our ability to access cash.

The liquidity and value of our interests in our business affiliates may be affected by market conditions beyond our control that could cause us to take
significant impairment charges due to other than temporary declines in the market value of our available for sale securities.Included among our assets are equity
interests in publicly traded companies which are or will be accounted for as available-for-sale securities. The value of these interests may be affected by economic and market
conditions that are beyond our control. We are required by accounting principles generally accepted in the United States to determine, from time to time, whether a decline in the market value of any
of those investments below our cost for that investment is other than temporary. If we determine that the decline is other than temporary, we are required to write down our cost to a new cost basis,
with the amount of the write-down accounted for as a realized loss in the determination of net income for the period in which the write-down occurs. We have at times realized
significant losses in prior periods due to other-than-temporary declines in the fair value of certain of our available-for-sale securities, and we may
be required to realize further losses of this nature in future periods. A number of factors are used in determining the fair value of an investment and whether any decline in an investment is other
than temporary. As the assessment of fair value and any resulting impairment losses requires a high degree of judgment and includes significant estimates and assumptions, the actual amount we may
eventually realize for an investment could differ materially from our assessment of the value of that investment made in an earlier period. In addition, our ability to liquidate these interests
without adversely affecting their value may be limited.

A substantial portion of our consolidated debt is held at the parent company level, and we could be unable in the future to obtain cash in amounts sufficient to
service that debt and its other financial obligations.As of December 31, 2005, we had $9.06 billion principal amount of debt outstanding at the
parent company level. Our ability to meet our financial obligations will depend upon our ability to access cash. Our sources of cash include our available cash balances, net cash from operating
activities, dividends and interest from our investments, availability under credit facilities, monetization of our public investment portfolio and proceeds from asset sales. There are no assurances
that we will maintain the amounts of cash, cash equivalents or marketable securities that we maintained over the past few years.

The
ability of our operating subsidiaries to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or
contractual restrictions to which they may be or may become subject. Some of our subsidiaries are subject to loan agreements that restrict sales of assets and prohibit or limit the payment of
dividends or the making of distributions, loans or advances to stockholders and partners.

We
generally will not receive cash, in the form of dividends, loans, advances or otherwise, from our business affiliates. In this regard, we will not have sufficient voting control over
most of our business affiliates to cause those companies to pay dividends or make other payments or advances to their partners or stockholders, including us.

We and our subsidiaries depend on a limited number of potential customers for carriage of our programming.The cable
television and direct-to-home satellite industries have been undergoing a period of consolidation. As a result, the number of potential buyers of our programming services is
decreasing. In this more concentrated market, there can be no assurance that our owned and affiliated program suppliers will be able to obtain or maintain carriage of their programming services by
distributors on commercially reasonable terms or at all.

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Rapid technological advances could render the products and services offered by our subsidiaries and business affiliates obsolete or
non-competitive.Our subsidiaries and business affiliates must stay abreast of rapidly evolving technological developments and offerings to remain
competitive and to increase the utility of their services. These subsidiaries and business affiliates must be able to incorporate new technologies into their products in order to address the needs of
their customers. There can be no assurances that they will be able to compete with advancing technology, and any failure to do so may adversely affect us.

Certain of our subsidiaries and business affiliates depend on their relationships with third party distribution channels, suppliers and advertisers and any
adverse changes in these relationships could adversely affect our results of operations.An important component of the success of our subsidiaries and business
affiliates depends on their ability to maintain their existing, as well as build new, relationships with third party distribution channels, suppliers and advertisers, among other parties. Adverse
changes in existing relationships or the inability to enter into new arrangements with these parties on favorable terms, if at all, could have a significant adverse effect on our results of
operations.

Adverse events or trends in the industries in which our subsidiaries and business affiliates operate could harm those subsidiaries and
us.In general, our subsidiaries and business affiliates are sensitive to trends and events that are outside their control. For example, adverse trends or events,
such as general downturns, decreases in consumer spending and natural or other disasters, among other adverse events and trends, could have a significantly negative impact on our subsidiaries and us.

Our subsidiaries and business affiliates are subject to risks of adverse government regulation.Programming services, cable
television systems, the Internet, telephony services and satellite carriers are subject to varying degrees of regulation in the United States by the Federal Communications Commission and other
entities and in foreign countries by similar entities. Such regulation and legislation are subject to the political process and have been in constant flux over the past decade. The application of
various sales and use tax provisions under state, local and foreign law to certain of our subsidiaries' and business affiliates' products and services sold via the Internet, television and telephone
is subject to interpretation by the applicable taxing authorities, and no assurance can be given that such authorities will not take a contrary position to that taken by those subsidiaries and
business affiliates, which could have a material adverse effect on their business. In addition, there have been numerous attempts at the federal, state and local levels to impose additional taxes on
online commerce transactions. Moreover, substantially every foreign country in which our subsidiaries or business affiliates have, or may in the future make, an investment regulates, in varying
degrees, the distribution, content and ownership of programming services and foreign investment in programming companies and wireline and wireless cable communications, satellite and telephony
services and the Internet. Further material changes in the law and regulatory requirements must be anticipated, and there can be no assurance that our business and the business of our affiliates will
not be adversely affected by future legislation, new regulation or deregulation.

The success of certain of our subsidiaries and business affiliates whose businesses involve the Internet depends on maintaining the integrity of their systems and
infrastructure.A fundamental requirement for online commerce and communications is the secure transmission of confidential information, such as credit card
numbers or other personal information, over public networks. If the security measures of any of our subsidiaries or business affiliates engaged in online commerce were to be compromised, it could have
a detrimental effect on their reputation and adversely affect their ability to attract customers.

Computer
viruses transmitted over the Internet have significantly increased in recent years, thereby increasing the possibility of disabling attacks on and damage to websites of our
subsidiaries and business affiliates whose businesses are dependent on the Internet. In addition, certain of our subsidiaries and business affiliates rely on third-party computer systems and service
providers to

I-19

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facilitate
and process a portion of their transactions. Any interruptions, outages or delays in these services, or a deterioration in their performance, could impair the ability of these subsidiaries
and business affiliates to process transactions for their customers and the quality of service they can offer to them.

Certain of our subsidiaries and business affiliates have significant operations outside of the United States that are subject to numerous operational and
financial risks.Certain of our subsidiaries and business affiliates have significant operations in countries other than the United States and are subject to the
following risks inherent in international operations:



The success of certain of our subsidiaries and business affiliates is dependent upon audience acceptance of its programs and programming services which is
difficult to predict.Entertainment content production and premium subscription television program services are inherently risky businesses because the revenue
derived from the production and distribution of a cable program and the exhibition of theatrical feature films and other programming depend primarily upon their acceptance by the public, which is
difficult to predict. The commercial success of a cable program or premium subscription television service depends upon the quality and acceptance of other competing programs and films released into
the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors,
many of which are difficult to predict. Audience sizes for cable programming and premium subscription television program services are important factors when cable television and DTH satellite
providers negotiate affiliation agreements and, in the case of cable programming, when advertising rates are negotiated. Consequently, low public acceptance of cable programs and premium subscription
television program services will have an adverse effect on our results of operations.

Increased programming and content costs may adversely affect profits.Our subsidiaries and business affiliates produce
programming and incur costs for all types of creative talent including actors, writers and producers. These subsidiaries and business affiliates also acquire programming, such as movies and
television series, from television production companies and movie studios. An increase in the costs of programming may lead to decreased profitability.

QVC conducts its merchandising businesses under highly competitive conditions.Although QVC is the nation's largest televised
home shopping network, it has numerous and varied competitors at the national and local levels, including conventional and specialty department stores, other specialty stores,

I-20

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mass
merchants, value retailers, discounters, and Internet and mail-order retailers. Competition is characterized by many factors, including assortment, advertising, price, quality,
service, location, reputation and credit availability. If QVC does not compete effectively with regard to these factors, its results of operations could be materially and adversely affected.

QVC's sales and operating results depend on its ability to predict or respond to consumer preferences.QVC's sales and
operating results depend in part on its ability to predict or respond to changes in consumer preferences and fashion trends in a timely manner. QVC develops new retail concepts and continuously
adjusts its product mix in an effort to satisfy customer demands. Any sustained failure to identify and respond to emerging trends in lifestyle and consumer preferences could have a material adverse
affect on QVC's business. Consumer spending may be affected by many factors outside of QVC's control, including competition from store-based retailers, mail-order and Internet companies,
consumer confidence and preferences, and general economic conditions.

QVC's success is contingent on its ability to recruit and retain key employees capable of executing its unique business
model.QVC has a business model that requires it to recruit and retain key employees with the skills necessary for a unique business that demands knowledge of the
general retail industry, television production, direct to consumer marketing and fulfillment and the Internet. In April 2005, we announced that two senior officers of QVC, including its
long-time CEO, had decided to retire at different points in time over the next eighteen months. We also recently announced the hiring of a new president for QVC who will assume the role of
chief executive officer after a brief transition period. Although we are implementing transition plans at QVC, there is no assurance that the new management team will be able to execute QVC's business
model in a manner that will allow QVC to sustain growth and continued success. In addition, we also can not assure you that if QVC experiences additional turnover of its key employees, they will be
able to recruit and retain acceptable replacements because the market for such employees is very competitive and limited.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We own our corporate headquarters in Englewood, Colorado. All of our other real or personal property is owned or leased by our subsidiaries and business
affiliates.

QVC
owns its corporate headquarters and operations center in West Chester, Pennsylvania. It also owns call centers in San Antonio, Texas, Port St. Lucie, Florida, Chesapeake, Virginia
and Bochum, Germany, as well as a call center and warehouse in Knowsley, United Kingdom. QVC owns a warehouse in Hücklehoven, Germany and distribution centers in Lancaster,
Pennsylvania, Suffolk, Virginia and Rocky Mount, North Carolina. To supplement the facilities it owns, QVC also leases various facilities in the United States, the United Kingdom, Germany and Japan
for retail outlet stores, office space, warehouse space and call center locations.

SEG
owns its corporate headquarters in Englewood, Colorado. In addition, SEG leases office space for its business affairs and sales staff at five locations around the United States.

On
Command leases its corporate headquarters in Denver, Colorado. It also leases 120,000 square feet of light manufacturing and storage space in Denver, Colorado and 42,000 square feet
of office space in San Jose, California. On Command also has a number of small leased facilities in the United States, Canada and Mexico.

Our
other 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

I-21

---



equipment
(including converter boxes). Our management believes that our current facilities are suitable and adequate for our business operations for the foreseeable future.

Item 3. Legal Proceedings.

Klesch & Company Limited v. Liberty Media Corporation, John C. Malone and Robert R. Bennett.On September 4,
2001, we entered into agreements with Deutsche Telekom AG pursuant to which we would purchase its entire interest in six of nine regional cable television companies in Germany. In
February 2002, we failed to receive regulatory approval for our proposed acquisition. On July 27, 2001, Klesch & Company Limited initiated a lawsuit against us, our chairman, John
C. Malone, and our chief executive officer, Robert R. Bennett, in the United States District Court for the District of Colorado alleging, among other things, breach of fiduciary duty, fraud and breach
of contract in connection with actions alleged to have been taken by us with respect to what then was a proposed transaction with Deutsche Telekom. Klesch sought damages in an unspecified amount in
that action, which was the subject of a jury trial that began on August 30, 2004. On September 28, 2004, the jury returned a verdict in our favor on all of the legal claims asserted by
the plaintiff. The jury also rejected the plaintiff's claims that Messrs. Malone and Bennett had committed fraud in their dealings with the plaintiff. On March 30, 2005, the court
entered a judgment in accordance with the jury's verdict, and in addition ruled in our favor on various equitable claims asserted by the plaintiffs. The plaintiff has appealed the judgment to the
United States Court of Appeals for the Tenth Circuit. Both sides have submitted briefs, but we have not received notice of any decision by the Court.

Dr. Leo Kirch, Individually and as assignee, KGL Pool GmBH, and International Television Trading Corp. v. Liberty Media Corporation, John Malone, Deutsche
Bank, AG, and Dr. Rolf-Ernst Breuer.Dr. Kirch was the primary owner of KirchGroup, a German cable television and media conglomerate. On
September 4, 2001, we entered into agreements with Deutsche Telekom AG pursuant to which we would purchase its entire interest in six of nine regional cable television companies in Germany. In
February 2002, we failed to receive regulatory approval for our proposed acquisition and the transactions with Deutsche Telekom were never consummated. On January 14, 2004,
Dr. Kirch, KGL Pool GBH, and International Television Trading Corp. added our company, and our chairman, John C. Malone, to a lawsuit they had initiated against Deutsche Bank and
Dr. Breuer on February 3, 2003. In that lawsuit, the plaintiffs' claims against us included, among other things, interference with contract, and interference with prospective economic
advantage arising from an alleged conspiracy among our company, Dr. Malone, Deutsche Bank and Dr. Breuer pursuant to which we allegedly were involved in effecting transactions that led
to the collapse of the KirchGroup's control of the German cable market in an effort to facilitate our agreements with Deutsche Telekom. Dr. Kirch, KGL Pool and International Television sought
damages in an unspecified amount. We and Dr. Malone filed a motion to dismiss the lawsuit for failure to state a claim upon which relief can be granted. That motion, as well as the other
defendants' motion to dismiss on the same grounds, was granted by the court on September 24, 2004. The plaintiffs have appealed the court's dismissal of the case. We continue to believe that
their claims are without merit, and we intend to contest the appeal vigorously.

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

None.

I-22

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PART II.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.



We have two series of common stock, Series A and Series B, which trade on the New York Stock Exchange under the symbols L and LMC.B, respectively.
The following table sets forth the range of high and low sales prices of shares of our Series A and Series B common stock for the years ended December 31, 2005 and 2004.

Series A

Series BHigh

Low

High

Low2005First quarter

$
10.93

9.97

11.60

10.30Second quarter

$
10.64

10.01

11.06

10.20Third quarter through July 20, 2005

$
10.28

9.89

10.75

10.00July 21 through September 30, 2005*

$
8.90

7.98

10.15

8.12Fourth quarter

$
8.18

7.59

8.56

7.552004First quarter

$
12.45

10.57

14.15

11.25Second quarter through June 7, 2004

$
11.45

10.12

12.75

11.00June 8 through June 30, 2004**

$
9.65

8.86

11.00

9.80Third quarter

$
9.02

8.33

10.20

9.00Fourth quarter

$
11.21

8.68

11.92

8.80


---



As of January 31, 2006, there were approximately 166,000 and 1,000 record and beneficial holders of our Series A common stock and Series B
common stock, respectively.



We have not paid any cash dividends on our Series A common stock and Series B common stock, and we have no present intention of so doing. Payment of
cash dividends, if any, in the future will be determined by our Board of Directors in light of our earnings, financial condition and other relevant considerations.



Information required by this item is incorporated by reference to our definitive proxy statement for our 2006 Annual Meeting of shareholders.

II-1

---



Item 6. Selected Financial Data.

The following tables present selected historical information relating to our financial condition and results of operations for the past five years. The following
data should be read in conjunction with our consolidated financial statements.

|                                                                        |  | December 31,
|----------------------------------------------------------------------- |  | ------------
|
|
|Summary Balance Sheet Data(1):                                          |  |             
|Investments in available-for-sale securities and other cost investments |  | $           
|Investment in affiliates                                                |  | $           
|Assets of discontinued operations                                       |  | $           
|Total assets                                                            |  | $           
|Long-term debt(3)                                                       |  | $           
|Stockholders' equity                                                    |  | $           

|                                                                                 |  | Years ended December 31, |      
|-------------------------------------------------------------------------------- |  | ------------------------ | -----
|
|
|Summary Statement of Operations Data(1):                                         |  |                          |      
|Revenue                                                                          |  | $                        | 7,960
|Operating income (loss)(4)                                                       |  | $                        | 897  
|Share of earnings (losses) of affiliates, net(5)                                 |  | $                        | 13   
|Realized and unrealized gains (losses) on financial instruments, net             |  | $                        | 257  
|Gains (losses) on dispositions, net                                              |  | $                        | (365 
|Nontemporary declines in fair value of investments                               |  | $                        | (449 
|Earnings (loss) from continuing operations(4)(5)                                 |  | $                        | (64  
|Basic and diluted earnings (loss) from continuing operations per common share(6) |  | $                        | (.02 

---

II-2

---





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.

Overview

We are a holding company that owns controlling and non-controlling interests in a broad range of electronic retailing, media, communications and
entertainment companies. Our more significant operating subsidiaries, which are also our reportable segments, are QVC, Inc. and Starz Entertainment Group LLC, which we refer to as SEG. QVC
markets and sells a wide variety of consumer products in the United States and several foreign countries, primarily by means of televised shopping programs on the QVC networks and via the Internet
through its domestic and international websites. SEG provides premium programming distributed by cable operators, direct-to-home satellite providers and other distributors
throughout the United States.

Our
corporate and other segment includes our other consolidated subsidiaries and corporate expenses. Our other consolidated subsidiaries include On Command Corporation ("On Command"),
OpenTV Corp. ("OpenTV") and TruePosition, Inc. ("TruePosition"). On Command provides in-room, on-demand video entertainment and information services to hotels, motels
and resorts primarily in the United States. OpenTV provides interactive television solutions, including operating middleware, web browser software, interactive applications and consulting and support
services. TruePosition provides equipment and technology that provide location-based services to wireless users.

In
addition to the foregoing businesses, we hold an approximate 20% interest in Expedia, Inc., which we account for as an equity method investment, and we continue to maintain
significant investments and related derivative positions in public companies such as News Corporation, IAC/InterActiveCorp, Time Warner Inc. and Sprint Nextel Corporation, which are accounted
for at their respective fair market value and are included in corporate and other.

Discontinued Operations

On July 21, 2005, we completed the spin off of our wholly-owned subsidiary, Discovery Holding Company ("DHC"), to our shareholders. At the time of the spin
off, DHC's assets were comprised of

II-3

---



our
100% ownership interest in Ascent Media Group, our 50% ownership interest in Discovery Communications, Inc. and $200 million in cash. In connection with the spin off, holders of our
common stock on July 15, 2005 received 0.10 of a share of DHC Series A common stock for each share of Liberty Series A common stock owned at 5:00 p.m. New York City time on
July 15, 2005 and 0.10 of a share of DHC Series B common stock for each share of Liberty Series B common stock owned at 5:00 p.m. New York City time on July 15,
2005. The spin off is intended to qualify as a tax-free spin off. We recognized no gain or loss in connection with the spin off due to the pro rata nature of the distribution.

On
June 7, 2004, we completed the spin off of our wholly-owned subsidiary, Liberty Media International, Inc. ("LMI"), to our shareholders. Substantially all of the assets
and businesses of LMI were attributed to our International Group segment. In connection with the spin off, holders of our common stock on June 1, 2004 received 0.05 of a share of LMI
Series A common stock for each share of Liberty Series A common stock owned at 5:00 p.m. New York City time on June 1, 2004 and 0.05 of a share of LMI Series B
common stock for each share of Liberty Series B common stock owned at 5:00 p.m. New York City time on June 1, 2004. The spin off is intended to qualify as a tax-free
spin off. For accounting purposes, the spin off is deemed to have occurred on June 1, 2004, and we recognized no gain or loss in connection with the spin off due to the pro rata nature of the
distribution.

During
the fourth quarter of 2004, the executive committee of our board of directors approved a plan to dispose of our approximate 56% ownership interest in Maxide
Acquisition, Inc. (d/b/a DMX Music, "DMX"). On February 14, 2005, DMX commenced proceedings under Chapter 11 of the United States Bankruptcy Code. On May 16, 2005, The Bankruptcy
Court approved the sale of substantially all of the operating assets of DMX to an independent third party. As a result of the DMX bankruptcy filing, we deconsolidated DMX effective January 1,
2005.

Our
consolidated financial statements and accompanying notes have been prepared to reflect DHC, LMI and DMX as discontinued operations. Accordingly, the assets and liabilities, revenue,
costs and expenses, and cash flows of DHC, LMI and DMX have been excluded from the respective captions in the accompanying consolidated balance sheets, statements of operations, statements of
comprehensive earnings (loss) and statements of cash flows and have been reported under the heading of discontinued operations in such consolidated financial statements.

Strategies and Challenges of Business Units

QVC has identified improved domestic growth and continued international growth as key areas of focus in 2006. QVC's steps to achieving these goals will include
(1) continued domestic and international efforts to increase the number of customers who have access to and use its service, (2) continued expansion of brand selection and available
domestic products and (3) continued development and enhancement of the QVC websites to drive Internet commerce. The key challenges to achieving these goals in both the U.S. and international
markets are (1) increased competition from other home shopping and Internet retailers, (2) advancements in technology, such as video on demand and personal video recorders, which may
alter TV viewing habits, (3) maintaining favorable channel positioning as digital TV penetration increases and (4) successful management transition.

SEG
views (1) negotiating new affiliation agreements with key distributors, (2) introducing new pay-per-view and subscription services for Internet
delivery and (3) increasing subscribers as key initiatives in 2006. SEG faces several key obstacles in its attempt to meet these goals, including: (1) continued consolidation in the
broadband and satellite distribution industries; (2) the impact on viewer habits of new technologies such as video on demand and personal video recorders; (3) cable operators' promotion
of bundled service offerings rather than premium video services; and (4) an increasing number of alternative movie and programming sources.

II-4

---



Results of Operations

To assist you in understanding and analyzing our business in the same manner we do, we have organized the following discussion of our results of operations into
two parts: Consolidated Operating Results, and Operating Results by Business.

Consolidated Operating Results

Years ended December 31,2005

2004

2003amounts in millionsRevenueQVC

$
6,501

5,687

1,973SEG


1,004

963

906Corporate and Other


455

401

351Consolidated revenue

$
7,960

7,051

3,230Operating Cash Flow (Deficit)QVC

$
1,422

1,230

434SEG


171

239

368Corporate and Other


(5
)
(30
)
(77
)Consolidated operating cash flow

$
1,588

1,439

725Operating Income (Loss)QVC

$
921

760

292SEG


105

148

266Corporate and Other


(129
)
(183
)
(1,498
)Consolidated operating income (loss)

$
897

725

(940
)


Revenue.Our consolidated revenue increased 12.9% in 2005 and over 100% in 2004, as compared to the
corresponding prior year. The 2005 increase was driven primarily by growth of 14.3% at QVC and growth of 4.3% at SEG. In addition, TruePosition's revenue increased $77 million as it continued
to increase delivery and acceptance of its equipment in Cingular Wireless's markets. The 2004 increase is due primarily to our September 2003 acquisition of a controlling interest in QVC. Our
2004 revenue was also positively impacted by an increase at SEG of $57 million, a $21 million increase for TruePosition and a $14 million increase for OpenTV. See "Operating Results by Business"below for a more complete discussion of QVC and SEG.

Operating Cash Flow.We define Operating Cash Flow as revenue less cost of sales, operating expenses
and selling, general and administrative ("SG&A") expenses (excluding stock compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with
other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of
our businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results, perform analytical comparisons and
benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock compensation, litigation
settlements and impairments of long-lived assets that are included in the measurement of operating income pursuant to generally accepted accounting principles ("GAAP"). Accordingly,
Operating Cash Flow 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

II-5

---



financial
performance prepared in accordance with GAAP. See note 18 to the accompanying consolidated financial statements for a reconciliation of Operating Cash Flow to Earnings (Loss) From
Continuing Operations Before Income Taxes and Minority Interest.

Consolidated
Operating Cash Flow increased $149 million or 10.4% and $714 million or 98.5% in 2005 and 2004, respectively, as compared to the corresponding prior year. The
2005 increase is due to a $192 million increase for QVC and a $30 million improvement for TruePosition, partially offset by a
$68 million decrease for SEG. The 2004 increase is due primarily to our acquisition of QVC, which contributed $1,230 million and $434 million in 2004 and 2003, respectively, to
our consolidated Operating Cash Flow. This increase was partially offset by a decrease in SEG's operating cash flow ($129 million) primarily due to higher programming costs. In addition,
OpenTV's Operating Cash Flow improved $19 million and our corporate general and administrative expenses decreased $11 million in 2004.

Stock compensation.Stock compensation includes compensation related to (1) options and stock
appreciation rights for shares of our common stock that are granted to certain of our officers and employees, (2) phantom stock appreciation rights ("PSARs") granted to officers and employees
of certain of our subsidiaries pursuant to private equity plans and (3) amortization of restricted stock grants. 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, as well as the vesting of PSARs and the equity value of the related
subsidiary. The increase in stock compensation in 2004 is due primarily to an increase in our stock price. The expense reflected in our consolidated statement of operations 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 options are exercised.

Depreciation and amortization.Depreciation and amortization decreased slightly in 2005 due to
certain assets becoming fully amortized, partially offset by an increase in depreciable assets due to capital expenditures. The increase in amortization in 2004 is due primarily to the acquisition of
QVC and amortization of the related intangible assets.

Impairment of long-lived assets.SEG obtained an independent third party valuation in
connection with its 2003 annual year-end evaluation of the recoverability of its goodwill. The result of this valuation, which was based on a discounted cash flow analysis of projections
prepared by the management of SEG, indicated that the fair value of this reporting unit was less than its carrying value. This reporting unit fair value was then used to calculate an implied value of
the goodwill related to SEG. The $1,352 million excess of the carrying amount of the goodwill (including $1,195 million of allocated enterprise-level goodwill) over its implied value was
recorded as an impairment charge in the fourth quarter of 2003. SEG's operating income includes $157 million of the foregoing impairment charge and $1,195 million is included in
Corporate and Other. The reduction in the value of SEG reflected in the third party valuation is believed to be attributable to a number of factors. Those factors include the reliance placed in that
valuation on projections by management reflecting a lower rate of revenue growth compared to earlier projections based, among other things, on the possibility that revenue growth may be negatively
affected by (1) a reduction in the rate of growth in total digital video subscribers and in the subscription video on demand business as a result of cable operators' increased focus on the
marketing and sale of other services, such as high speed Internet access and telephony, and the uncertainty as to the success of marketing efforts by distributors of SEG's services and
(2) lower per subscriber rates under a new affiliation agreement with Comcast.

Operating income (loss).We generated consolidated operating income of $897 million and
$725 million in 2005 and 2004, respectively, compared to an operating loss of $940 million in 2003. The higher operating loss in 2003 is due primarily to the goodwill impairment charge
recorded by SEG

II-6

---



noted
above. Our operating income in 2005 is attributable to QVC ($921 million) and SEG ($105 million) partially offset by operating losses of our other consolidated subsidiaries and
corporate expenses.



Interest expense.Interest expense was $623 million, $615 million and
$508 million, for the years ended December 31, 2005, 2004 and 2003, respectively, including $89 million, $83 million and $61 million, respectively, of accretion of
our exchangeable debentures. The increase in 2005 is due to lower outstanding debt balances, more than offset by higher interest rates on our variable rate debt. The increase in 2004 is due to our
issuance of debt for our acquisition of QVC in September 2003, partially offset by decreases due to our debt retirements in 2004 and the fourth quarter of 2003.

Dividend and interest income.Dividend and interest income was $144 million,
$131 million and $164 million for the years ended December 31, 2005, 2004 and 2003, respectively. The 2004 decrease is due primarily to a decrease in the interest we earned on
invested cash balances. Interest and dividend income for the year ended December 31, 2005 was comprised of interest income earned on invested cash ($59 million), dividends on News Corp.
common stock ($58 million), dividends on other available-for-sale ("AFS") securities ($21 million) and other ($6 million).

Realized and unrealized gains (losses) on derivative instruments.Realized and unrealized gains
(losses) on derivative instruments are comprised of the following:

Years ended December 31,2005

2004

2003amounts in millionsChange in fair value of exchangeable debenture call option features

$
172

(129
)
(158
)Change in fair value of equity collars


311

(941
)
(483
)Change in fair value of borrowed shares


(205
)
(227
)
(121
)Change in fair value of put options


(66
)
2

108Change in fair value of put spread collars


9

8

21Change in fair value of other derivatives(1)


36

3

(28
)$
257

(1,284
)
(661
)


---

Gains (losses) on dispositions.Aggregate gains (losses) from dispositions are comprised of the
following.

Years ended December 31,Transaction2005

2004

2003amounts in millionsSale of investment in Telewest Global, Inc.

$
(266
)


Sale of investment in Cablevisión S.A.


(188
)


Sale of News Corp. non-voting shares




844

236Exchange transaction with Comcast




387

Sale of investment in Cendant Corporation






510Sale of investment in Vivendi Universal






262Other, net


89

175

118$
(365
)
1,406

1,126


II-7

---



In
the above transactions, the gains or losses were calculated based upon the difference between the carrying value of the assets relinquished, as determined on an average cost basis,
compared to the fair value of the assets received. See notes 6, 11 and 15 to the accompanying consolidated financial statements for a discussion of the foregoing transactions.

Nontemporary declines in fair value of investments.During 2005, 2004 and 2003, we determined that
certain of our cost investments experienced other-than-temporary declines in value. As a result, the cost bases of such investments were adjusted to their respective fair
values based primarily on quoted market prices at the date each adjustment was deemed necessary. These adjustments are reflected as nontemporary declines in fair value of investments in the
consolidated statements of operations and aggregated $449 million, $129 million and $22 million for the years ended December 31, 2005, 2004 and 2003, respectively. The
impairment recorded in 2005 includes $352 million related to our investment in News Corp. voting shares.

Income taxes.Our effective tax rate was 68.8% in 2005, 54.3% in 2004 and was not meaningful in 2003.
Our effective tax rate in 2005 was greater than the U.S. federal income tax rate of 35% due to a tax benefit of $147 million that we recorded as a result of a change in our estimated effective
state and foreign tax rates. In the third quarter of 2005, we assessed our weighted average state tax rate in connection with our spin off of Discovery Holding Company. As a result of this assessment,
we decreased our state tax rate used in calculating the amount of our deferred tax liabilities and recognized a deferred income tax benefit of $131 million. Also in 2005, we reduced our
estimated foreign tax rate related to QVC and recognized a tax benefit of $16 million. These tax benefits were partially offset by our foreign tax expense and an increase in our valuation
allowance for deferred tax assets of subsidiaries that we do not consolidate for tax purposes. Our effective tax rate in 2004 differed from the U.S. federal income tax rate of 35% primarily due to
foreign and state taxes, partially offset by a benefit generated by the recognition of our tax basis in the equity of DMX. Although we had a loss before tax expense for book purposes in 2003, we
recorded tax expense of $342 million primarily due to our impairment of goodwill which is not deductible for tax purposes. In addition, we incurred state and foreign taxes and an increase in
our valuation allowance for deferred tax assets of subsidiaries that we do not consolidate for tax purposes.

Net earnings (loss).Our net earnings (loss) was ($33) million, $46 million and ($1,222)
million for the years ended December 31, 2005, 2004 and 2003, respectively, and was the result of the above-described fluctuations in our revenue and expenses. In addition, we recognized
earnings (loss) from discontinued operations of $31 million, ($54) million and $7 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Operating Results by Business

QVC.QVC is a retailer of a wide range of consumer products, which are marketed and sold primarily by
merchandise-focused televised shopping programs and, to a lesser extent, via the Internet. In the United States, the programs are aired through its nationally televised shopping
network24 hours a day, 7 days a week ("QVC-US"). Internationally, QVC has electronic retailing program services based in the United Kingdom
("QVC-UK"), Germany ("QVC-Germany") and Japan ("QVC-Japan"). QVC-UK broadcasts live 17 hours a day. In October 2003,
QVC-Germany increased its daily broadcast time from 19 to 24 hours; and in May 2004, QVC-Japan increased its daily broadcast time from 17 to 24 hours. As
more fully described in note 4 to the accompanying consolidated financial statements, we acquired a controlling interest in QVC on September 17, 2003. For financial reporting purposes,
the acquisition is deemed to have occurred on September 1, 2003, and we have consolidated QVC's results of operations since that date. Accordingly, increases in our revenue and expenses for the
year ended December 31, 2004 are primarily the result of the September 2003 acquisition of QVC.

II-8

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The following discussion describes QVC's results of operations for the full years ended December 31, 2005, 2004 and 2003. Depreciation and amortization for periods prior and
subsequent to our acquisition of Comcast's interest in QVC are not comparable as a result of the effects of purchase accounting. However, in order to provide a more meaningful basis for comparing the
2005, 2004 and 2003 periods, the operating results of QVC for the four months ended December 31, 2003 have been combined with the eight months ended August 31, 2003 in the following
table and discussion. The combining of predecessor and successor accounting periods is not permitted by GAAP.

Years ended December 31,2005

2004

2003amounts in millionsNet revenue

$
6,501

5,687

4,889Cost of sales


(4,112
)
(3,594
)
(3,107
)Gross profit


2,389

2,093

1,782Operating expenses


(570
)
(497
)
(447
)SG&A expenses


(397
)
(366
)
(322
)Operating cash flow


1,422

1,230

1,013Stock compensation


(52
)
(33
)
(6
)Depreciation and amortization


(449
)
(437
)
(222
)Operating income

$
921

760

785


Net
revenue for the years ended December 31, 2005, 2004 and 2003 includes the following revenue by geographical area:

Years ended December 31,2005

2004

2003amounts in millionsQVC-US

$
4,640

4,141

3,845QVC-UK


554

487

370QVC-Germany


781

643

429QVC-Japan


526

416

245Consolidated

$
6,501

5,687

4,889


QVC's
net revenue increased 14.3% and 16.3% for the years ended December 31, 2005 and 2004, respectively, as compared to the corresponding prior year, as average sales per
customer increased in both years. The 2005 increase in revenue is comprised of a $779 million increase due to an increase in the number of units shipped from 138.0 million to
154.4 million and a $204 million increase due to a 3.3% increase in the average sales price per unit ("ASP"). The revenue increases were partially offset by a $198 million
decrease due to an increase in product returns and a $24 million decrease due to unfavorable foreign currency exchange rates. Returns as a percent of gross product revenue increased from 17.6%
in 2004 to 18.0% in 2005 due to a shift in the sales mix from home products to jewelry, apparel and accessories products, which typically have higher return rates.

The
2004 increase is comprised of an $804 million increase due to an increase in the number of units shipped and a $140 million increase due to favorable foreign currency
exchange rates. In 2004, the number of units shipped increased from 121.0 million to 138.0 million, or 14.0%, and average sales per customer increased in each of QVC's markets with
Germany increasing 41.6%, Japan 19.0%, United Kingdom 12.4% and the U.S. 7.7%. While the number of units shipped increased, the ASP in the U.S. market decreased due to purchases of lower priced items
within the home category and a shift in product mix to lower priced apparel and accessories. QVC-Germany and QVC-Japan also experienced a drop in ASP in their respective local
currencies due primarily to a shift in product mix

II-9

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from
jewelry to home products and apparel products. Decreases in consolidated revenue due to lower ASP aggregated $97 million. However, these decreases were more than offset by favorable
exchange rate fluctuations resulting in an increase in U.S. dollar-denominated ASP in both markets. Returns as a percent of gross product revenue decreased from 17.8% in 2003 to 17.6% in 2004. Each of
QVC's markets added subscribers in 2005 and 2004. The number of homes receiving QVC's services are as follows:

Homes (in millions)December 31,2005

2004

2003QVC-US

90.8

88.4

85.9QVC-UK

17.8

15.6

13.1QVC-Germany

37.4

35.7

34.6QVC-Japan

16.7

14.7

11.8


The
QVC service is already received by substantially all of the cable television and direct broadcast satellite homes in the U.S. and Germany. In addition, the rate of growth in
households is expected to diminish in the UK and Japan. As these markets continue to mature, QVC also expects its consolidated rate of growth in revenue to diminish. Future sales growth will primarily
depend on continued additions of new customers from homes already receiving the QVC service, continued growth in sales to existing customers and growth in the number of cable and direct broadcast
satellite homes. QVC's future sales may also be affected by (i) the willingness of cable and satellite distributors to continue carrying QVC's programming service, (ii) QVC's ability to
maintain favorable channel positioning, which may become more difficult as distributors convert analog customers to digital, (iii) changes in television viewing habits because of personal video
recorders, video-on-demand and IP television and (iv) general economic conditions.

As
noted above, during the years ended December 31, 2005 and 2004, the changes in revenue and expenses were also impacted by changes in the exchange rates for the UK pound
sterling, the euro and the Japanese yen. While the U.S. dollar weakened against these currencies in 2004, it began to strengthen in 2005. In the event the U.S. dollar continues to strengthen against
these foreign currencies in the future, QVC's revenue and operating cash flow will be negatively impacted. The percentage increase in revenue for each of QVC's geographic areas in dollars and in local
currency is as follows:

Percentage increase in net revenueYear ended
December 31, 2005

Year ended
December 31, 2004U.S. dollars

Local currency

U.S. dollars

Local currencyQVC-US

12.1
%
12.1
%
7.7
%
7.7
%QVC-UK

13.8
%
15.1
%
31.6
%
17.5
%QVC-Germany

21.5
%
21.9
%
49.9
%
36.3
%QVC-Japan

26.4
%
29.4
%
69.8
%
58.3
%


QVC's
gross profit percentage was 36.7%, 36.8% and 36.4% for the years ended December 31, 2005, 2004 and 2003, respectively. These slight fluctuations are due primarily to
variances in the inventory obsolescence provision for the respective year, as well as changes in product margins due to shifts in product mix.

QVC's
operating expenses are comprised of commissions and license fees, order processing and customer service expense, telecommunications expense, provision for doubtful accounts, and
credit card processing fees. Operating expenses increased 14.7% and 11.2% for the years ended December 31, 2005 and 2004, respectively, as compared to the corresponding prior year period. These
increases are primarily due to increases in sales volume. As a percentage of net revenue, operating expenses were

II-10

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8.8%,
8.7% and 9.1% for 2005, 2004 and 2003, respectively. Commissions and license fees, as a percent of net revenue, were fairly consistent between 2005 and 2004 and decreased in 2004, as compared to
2003. The decrease in 2004 is primarily due to a decrease in QVC-UK resulting from the termination of commissions to one distributor and an increase in the mix of
non-commissionable sales. In addition, there has been an increase in 2005 and 2004 in Internet sales for which lower commissions are required to be paid. As a percent of net revenue, order
processing and customer service expenses decreased in each international segment in 2005 and 2004 compared to the corresponding prior year as a result of reduced personnel expense due to increased
Internet sales, and operator efficiencies in call handling and staffing. QVC's telecommunications expenses decreased in 2005 due to new contracts with certain of its service providers. Credit card
processing fees and the bad debt provision remained consistent as a percent of net revenue for each of the years ended December 31, 2005, 2004 and 2003.

QVC's
SG&A expenses increased 8.5% and 13.7% during the years ended December 31, 2005 and 2004, respectively, as compared to the corresponding prior year. The majority of the 2005
increase reflects a $23 million increase in personnel costs due to the addition of employees to support the increased sales of QVC's foreign operations. In addition, statutory sales and use tax
increased $6 million in 2005. The majority of the increase in SG&A expenses in 2004 resulted from a $28 million increase in personnel costs due to the addition of employees to support
the increased sales of QVC's foreign operations and increased broadcasting hours. Information technology and marketing and advertising costs also increased in 2004. Information technology expenditures
increased $8 million due to higher third-party service costs related to various software projects as well as higher software maintenance fees. The $6 million increase in advertising and
marketing expenditures can largely be attributed to QVC-Japan and QVC-Germany. These increases were partially offset by decreases in transponder fees ($12 million) and a
lower provision for statutory local sales and use tax ($7 million). In connection with our consolidation of QVC in 2003, transponder leases that previously had been accounted for as operating
leases are now accounted for as capital leases pursuant to the provisions of EITF Issue No. 01-8. Accordingly, QVC's transponder expense decreased while depreciation and interest
expense increased in 2004.

QVC's
depreciation and amortization expense increased for the years ended December 31, 2005 and 2004. The 2005 increase is due to fixed asset and software additions, and the 2004
increase is due primarily to the amortization of intangible assets recorded in connection with our purchase of QVC.

SEG.Historically, SEG has provided premium programming distributed by cable operators,
direct-to-home ("DTH") satellite providers and other distributors throughout the United States. In addition, in 2004 and 2005, SEG launched via the Internet Starz Ticket and
Vongo which are comprised of Starz and Starz on Demand and other movie and
entertainment content. Starz Ticket and Vongo are offered on a subscription basis, and in addition, Vongo offers content on a pay-per-view basis. Virtually all of SEG's revenue
continues to be derived from the delivery of movies to subscribers under affiliation agreements with television video programming distributors. Some of SEG's affiliation agreements provide for
payments to SEG based on the number of subscribers that receive SEG's services. SEG also has fixed-rate affiliation agreements with certain of its customers. Pursuant to these agreements,
the customers pay an agreed-upon rate regardless of the number of subscribers. The agreed-upon rate is contractually increased annually or semi-annually as the case
may be, and these agreements, other than the Comcast agreement described below, expire in 2006 through 2008. During the year ended December 31, 2005, 58.3% of SEG's revenue was generated by its
three largest customers, Comcast, Echostar Communications and DirecTV. SEG's affiliation agreement with Echostar has been extended until March 8, 2006, and SEG is currently in negotiations with
Echostar regarding a new agreement. SEG's affiliation agreement with DirecTV expires on March 31, 2006.

SEG's
affiliation agreements generally do not provide for the inclusion of its services in specific programming packages of the distributors. The affiliation agreement with Comcast,
however, did include a short-term packaging commitment to carry the Encore and Thematic Multiplex channels

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---



(EMP)
in specified digital tiers on Comcast's cable systems. The affiliation agreement originally expired at the end of 2010, and Comcast's packaging commitment expired at the end of 2005. In the
second quarter of 2005, SEG and Comcast renegotiated their affiliation agreement. The new agreement eliminates Comcast's packaging commitment for EMP and provides for a fixed fee payment structure,
with certain Consumer Price Index ("CPI") adjustments, for EMP through September 2009. The agreement also provides for a guaranteed payment structure for Comcast's carriage of Starz through
December 2012 with contractual increases for 2006 and 2007 and annual CPI adjustments for the remainder of the term. The foregoing payment structure for EMP and Starz may be adjusted in the
event Comcast acquires or disposes of cable systems. Finally, Comcast has agreed to the elimination of certain future marketing support commitments from SEG. As a result of this new agreement, SEG's
future revenue from Comcast for its EMP and Starz products will not be impacted by any increases or decreases in actual subscribers, except in the case of acquisitions or dispositions noted above. The
terms of the EMP and Starz payment structures can be extended by Comcast, at its option, for a total of six years and five years, respectively.

SEG's
operating results are as follows:

Years ended December 31,2005

2004

2003amounts in millionsRevenue

$
1,004

963

906Operating expenses


(706
)
(603
)
(430
)SG&A expenses


(127
)
(121
)
(108
)Operating cash flow


171

239

368Stock-based compensation


(17
)
(28
)
130Depreciation and amortization


(49
)
(63
)
(75
)Impairment of long-lived assets






(157
)Operating income

$
105

148

266


SEG's
revenue increased 4.3% and 6.3% for the years ended December 31, 2005 and 2004, respectively, as compared to the corresponding prior year. The 2005 increase in revenue is
due to an $85 million increase resulting from an increase in the average number of subscription units for SEG's services partially offset by a $52 million decrease due to a decrease in
the effective rate for SEG's services. The increase in 2004 is due primarily to an increase in the average number of subscription units for SEG's
Thematic Multiplex and Encore services ($39 million) and an increase in rates charged to affiliates ($17 million).

SEG's
Starz movie service and its EMP movie service are the primary drivers of SEG's revenue. Starz average subscriptions increased 6.7% and 4.2% in 2005 and 2004, respectively; and EMP
average subscriptions increased 8.0% and 8.9% in 2005 and 2004, respectively. While the average subscription units have increased in 2005, as compared to 2004, most of this growth occurred in late
2004, and SEG's Starz and EMP units have remained relatively flat for most of 2005. SEG believes that this trend is due to a number of factors including (1) certain cable operators shifting
their marketing efforts away from the addition of premium video subscribers to promotion of other services; (2) a reduction in the rate of growth of digital subscribers; and (3) a loss
of subscribers due to the hurricane damage in the Gulf Coast region in the third quarter of 2005.

At
December 31, 2005, cable, direct broadcast satellite, and other distribution represented 67.2%, 31.7% and 1.1%, respectively, of SEG's total subscription units.

SEG's
operating expenses increased $103 million or 17.1% and $173 million or 40.2% for the years ended December 31, 2005 and 2004, respectively, as compared to the
corresponding prior year. Such

II-12

---



increases
are due primarily to increases in programming costs, which increased from $398 million in 2003 to $564 million in 2004 and to $668 million in 2005. The 2005 increase in
programming costs is due to (1) a $55 million increase resulting from a higher percentage of first-run movie exhibitions (which have a relatively higher cost per title) as
compared to the number of library product exhibitions in 2005 and (2) a $49 million increase due to a higher cost per title for movie titles under certain of SEG's license agreements.
The 2004 increase in programming costs is due to (1) a $96 million increase resulting from a higher percentage of first-run movie exhibitions as compared to the number of
library product exhibitions, (2) a $28 million increase due to a higher cost per title due to new rate cards for movie titles under certain of its license agreements, and
(3) amortization of deposits previously made under the output arrangements ($42 million). In addition, in the first quarter of 2003, SEG entered into a settlement agreement regarding the
payment of certain music license fees, which resulted in the reversal of a related accrual in the amount of $8 million.

SEG
expects that its programming costs in 2006 will be 5%-7% higher than the 2005 costs due to the factors described above. This estimate is subject to a number of
assumptions that could change depending on the number and timing of movie titles actually becoming available to SEG and their ultimate box office performance. Accordingly, the actual amount of cost
increases experienced by SEG may differ from the amounts noted above.

SEG's
SG&A expenses increased $6 million or 5.0% and $13 million or 12.0% during 2005 and 2004, respectively, as compared to the corresponding prior year. The 2005 increase
in SG&A expenses is due
to (1) $11 million of consulting and marketing expenses incurred in connection with SEG's 2005 development and 2006 launch of Vongo, and (2) a $12 million credit recorded
by SEG in 2004 related to the recovery of certain accounts receivable from Adelphia Communications and other customers. These increases were offset by a $16 million decrease in sales and
marketing as SEG participated in fewer national marketing campaigns and obtained reduced marketing commitments under the new affiliation agreement with Comcast in 2005.

The
2004 increase in SG&A expenses is due primarily to increases in sales and marketing expenses partially offset by decreases in bad debt and payroll tax expense. As noted above, SEG
has entered into new affiliation agreements with certain multichannel television distributors, which, in some cases, has resulted in new packaging of SEG's services and increased
co-operative marketing commitments. As a result, sales and marketing expenses increased $33 million for the year ended December 31, 2004. During the year ended
December 31, 2004, SEG sold a portion of its pre-petition accounts receivable from Adelphia Communications to an independent third party. SEG had previously provided an allowance
against the Adelphia accounts receivable based on SEG's estimate of the amount it would collect. The proceeds from the sale of the Adelphia accounts receivable exceeded the net accounts receivable
balance by approximately $8 million, resulting in a corresponding reduction in bad debt expense of $8 million. In addition, SEG recovered approximately $4 million of additional
accounts receivable from various customers for which a reserve had previously been provided.

SEG
has outstanding phantom stock appreciation rights held by its former chief executive officer. Compensation relating to the phantom stock appreciation rights has been recorded based
upon the estimated fair value of SEG. 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
SEG. SEG recorded a $130 million credit to stock compensation in 2003 as a result of a decrease in the estimated equity value of SEG.

As
more fully described above under "Consolidated Operating ResultsImpairment of Long-lived Assets," we recorded a $1,352 million impairment
charge in 2003 related to SEG, of which $1,195 million related to enterprise-level goodwill and is included in Corporate and Other.

II-13

---



Liquidity and Capital Resources



Our sources of liquidity include our available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such
cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted), proceeds from asset sales, monetization of our public investment portfolio (including derivatives), debt
and equity issuances, and dividend and interest receipts.

During
the year ended December 31, 2005, our primary corporate use of cash was the retirement of $1,719 million principal amount of parent company debt for aggregate cash
payments of $1,731 million, plus accrued interest. We made a portion of these debt retirements pursuant to tender offers that we completed in the second quarter of 2005 whereby we purchased
$200 million principal amount of our 3.50% Senior Notes due 2006 and $800 million principal amount of our Floating Rate Senior Notes due 2006 for aggregate cash payments of
$1,010 million plus accrued interest. We funded the debt repurchases under our tender offer with cash on hand and proceeds from a short-term credit facility collateralized by
certain of our derivative instruments. This short-term credit facility was subsequently repaid with proceeds from the QVC credit facility described below.

Our
projected uses of cash in 2006 include approximately $1,400 million to retire our senior notes that mature in September 2006, $481 million to fund our
acquisition of Provide Commerce, Inc. (which was consummated on February 9, 2006), approximately $465 million for interest payments, approximately $200 million to fund our
acquisition of FUN Technologies plc and approximately $200 million to fund a secured loan to WildBlue Communications. In addition, we may make additional investments in existing or new
businesses. However, we are unable to quantify such investments at this time.

We
expect that our investing and financing activities will be funded with a combination of borrowings under the QVC bank credit facility, cash on hand, cash provided by operating
activities, proceeds from equity collar expirations and dispositions of non-strategic assets. At December 31, 2005, our sources of liquidity include $2,335 million in cash
and marketable debt securities and $7,583 million of non-strategic AFS securities, including related derivatives. In addition, we own $8,171 million of News Corp. common
stock and $1,960 million of IAC/InterActiveCorp common stock, which we consider to be strategic assets. To the extent we recognize any taxable gains from the sale of assets or expiration of
derivative instruments, we may incur current tax expense and be required to make tax payments.

Our
derivatives ("AFS Derivatives") related to certain of our AFS investments provide us with an additional source of liquidity. Based on the put price and assuming we deliver owned or
borrowed shares to settle each of our AFS Derivatives and excluding any provision for income taxes, we would be entitled to cash proceeds of approximately $395 million in 2006,
$385 million in 2007, zero in 2008, $1,180 million in 2009, $1,683 in 2010, and $1,312 million thereafter upon settlement of our AFS Derivatives.

Prior
to the maturity of our equity collars, the terms of certain of our equity and narrow-band collars allow us to borrow against the future put option proceeds at LIBOR or
LIBOR plus an applicable spread, as the case may be. As of December 31, 2005, we had not made any borrowings under these arrangements and the borrowing capacity aggregated approximately
$4,853 million. Such borrowings would reduce the cash proceeds upon settlement noted in the preceding paragraph.

During
2005, each of Standard and Poor's Rating Service, Moody's Investors Service and Fitch Ratings lowered its rating of our senior debt to one level below investment grade. None of
our existing indebtedness includes any covenant under which a default could occur as a result of a downgrade in our credit rating. However, such downgrades could adversely affect our access to the
public debt

II-14

---



markets
and our overall cost of future corporate borrowings. Notwithstanding the foregoing, we do not believe that our downgrades have adversely impacted the ability of our subsidiaries to arrange
bank financing or our ability to borrow against the value of our equity collars.



Effective May 20, 2005, QVC entered into a $2 billion bank credit facility. The QVC Credit Facility is comprised of an $800 million term loan
that was drawn at closing, a $400 million U.S. dollar term loan that can be drawn at any time before September 30, 2006, a $400 million multi-currency term loan that can be drawn
at any time before September 30, 2006, a $200 million U.S. dollar revolving loan and a $200 million multi-currency revolving loan. The foregoing multi-currency loans can be made,
at QVC's option, in U.S. dollars, Japanese yen, U.K. pound sterling or euros. All loans are due and payable on May 20, 2010, and accrue interest, at the option of QVC, at LIBOR plus an
applicable margin or the Alternative Base Rate, as defined in the QVC Credit Facility, plus an applicable margin. QVC is required to pay a commitment fee quarterly in arrears on the unused portion of
the commitments.

Subsequent
to December 31, 2005, the QVC bank facility was refinanced with a new $3.5 billion bank facility. The new bank facility is comprised of an $800 million
term loan drawn at closing, an $800 million U.S. dollar term loan that can be drawn at any time before September 30, 2006, a $600 million multi-currency term loan that can be
drawn at any time before September 30, 2006, a $650 million U.S. dollar revolving loan and a $650 million multi-currency revolving loan. All loans are due and payable on
March 3, 2011.

In
2005, our subsidiaries funded capital expenditures ($233 million), and the repurchase of certain subsidiary common stock ($85 million) with cash on hand and cash
generated by their operating activities.

Our
subsidiaries currently expect to spend approximately $430 million for capital expenditures in 2006, including $355 million by QVC. These amounts are expected to be
funded by the cash flows of the respective subsidiary.



Various partnerships and other affiliates of ours accounted for using 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. Notwithstanding the foregoing, certain of our affiliates may require additional
capital to finance their operating or investing activities. In the event our affiliates require additional financing and we fail to meet a capital call, or other commitment to provide capital or loans
to a particular company, such failure may have adverse consequences to us. These consequences may include, among others, the dilution of our equity interest in that company, the forfeiture of our
right to vote or exercise other rights, the right of the other stockholders or partners to force us to sell our interest at less than fair value, the forced dissolution of the company to which we have
made the commitment or, in some instances, a breach of contract action for damages against us. Our ability to meet capital calls or other capital or loan commitments is subject to our ability to
access cash.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

SEG has entered into agreements with a number of motion picture producers which obligate SEG to pay fees ("Programming Fees") for the rights to exhibit certain
films that are released by these producers. The unpaid balance under agreements for film rights related to films that were available for exhibition by SEG at December 31, 2005 is reflected as a
liability in the accompanying consolidated

II-15

---



balance
sheet. The balance due as of December 31, 2005 is payable as follows: $191 million in 2006; $11 million in 2007; and $13 million thereafter.

SEG
has also contracted to pay Programming Fees for the rights to exhibit films that have been released theatrically, but are not available for exhibition by SEG until some future date.
These amounts
have not been accrued at December 31, 2005. SEG's estimate of amounts payable under these agreements is as follows: $539 million in 2006; $178 million in 2007; $103 million
in 2008; $95 million in 2009; $75 million in 2010 and $52 million thereafter.

In
addition, SEG is obligated to pay Programming Fees for all qualifying films that are released theatrically in the United States by studios owned by The Walt Disney Company through
2009, all qualifying films that are released theatrically in the United States by studios owned by Sony Pictures Entertainment through 2010 and all qualifying films produced for theatrical release in
the United States by Revolution Studios through 2006. Films are generally available to SEG for exhibition 10 - 12 months after their theatrical release. The
Programming Fees to be paid by SEG are based on the quantity and domestic theatrical exhibition receipts of qualifying films. As these films have not yet been released in theatres, SEG is unable to
estimate the amounts to be paid under these output agreements. However, such amounts are expected to be significant.

In
addition to the foregoing contractual film obligations, each of Disney and Sony has the right to extend its contract for an additional three years. If Sony elects to extend its
contract, SEG has agreed to pay Sony a total of $190 million in four annual installments of $47.5 million beginning in 2011. This option expires December 31, 2007. If made, SEG's
payments to Sony would be amortized ratably over the extension period beginning in 2011. An extension of this agreement would also result in the payment by SEG of Programming Fees for qualifying films
released by Sony during the extension period. If Disney elects to extend its contract, SEG is not obligated to pay any amounts in excess of its Programming Fees for qualifying films released by Disney
during the extension period.

Liberty
guarantees SEG's film licensing obligations under certain of its studio output agreements. At December 31, 2005, Liberty's guarantees for studio output obligations for
films released by such date aggregated $779 million. While the guarantee amount for films not yet released is not determinable, such amount is expected to be significant. As noted above, SEG
has recognized the liability for a portion of its obligations under the output agreements. As this represents a commitment of SEG, a consolidated subsidiary of ours, we have not recorded a separate
liability for our guarantees of these obligations.

Information
concerning the amount and timing of required payments, both accrued and off-balance sheet, under our contractual obligations is summarized below:

|                                      |  | Payments due by period
|------------------------------------- |  | ----------------------
|
|
|Long-term debt (1)                    |  | $                     
|Long-term derivative instruments      |  |                       
|Interest payments (2)                 |  |                       
|Operating lease obligations           |  |                       
|Programming Fees (3)                  |  |                       
|Purchase orders and other obligations |  |                       
|                                      |  |                       
|Total contractual payments            |  | $                     
|                                      |  |                       

---

II-16

---





Since
the date we issued our exchangeable debentures, we have claimed interest deductions on such exchangeable debentures for federal income tax purposes based on the "comparable yield"
at which we could have issued a fixed-rate debenture with similar terms and conditions. In all instances, this policy has resulted in us claiming interest deductions significantly in
excess of the cash interest currently paid on our exchangeable debentures. Interest deducted in prior years on our exchangeable debentures has contributed to net operating losses ("NOLs") that may be
carried to offset taxable income in 2005 and later years. These NOLs and current interest deductions on our exchangeable debentures are being used to offset taxable income currently being generated.

The
IRS has issued Technical Advice Memorandums ("TAMs") challenging the current deductibility of interest expense claimed on exchangeable debentures issued by other companies. The
TAMs conclude that such interest expense must be capitalized as basis to the shares referenced in the exchangeable debentures. If the IRS were to similarly challenge our tax treatment of these
interest deductions, and ultimately win such challenge, there would be no impact to our reported total tax expense as the resulting increase in current tax expense would be offset by a decrease in our
deferred tax expense. However, the NOLs we have recorded would not be available to offset our current taxable income, and we would be required to make current federal income tax payments. These
federal income tax payments could prove to be significant.

Pursuant
to a tax sharing agreement between us and AT&T when we were a subsidiary of AT&T, we received a cash payment from AT&T in periods when we generated taxable losses and such
taxable losses were utilized by AT&T to reduce its consolidated income tax liability. To the extent such losses were not utilized by AT&T, such amounts were available to reduce federal taxable income
generated by us in future periods, similar to a net operating loss carryforward. While we were a subsidiary of AT&T, we recorded our stand-alone tax provision on a separate return basis. Subsequent to
our spin off from AT&T, if adjustments are made to amounts previously paid under the AT&T Tax Sharing Agreement, such adjustments are reflected as adjustments to additional paid-in
capital. During the period from March 10, 1999 to December 31, 2002, we received cash payments from AT&T aggregating $670 million as payment for our taxable losses that AT&T
utilized to reduce its income tax liability.

Also,
pursuant to the tax sharing agreement and in connection with the split off from AT&T, AT&T was required to pay us an amount equal to 35% of the amount of the net operating loss
carryforward ("TCI NOLs") reflected in TCI's final federal income tax return that had not been used as an offset to our obligations under the tax sharing agreement and that had been, or were
reasonably expected to be, utilized by AT&T. In connection with the split off, we received an $803 million payment for the TCI NOLs and recorded such payment as an increase to additional
paid-in capital. We were not paid for certain of the TCI NOLs ("SRLY NOLs") due to limitations and uncertainty regarding AT&T's ability to use them to offset taxable income in the future.
In the event AT&T was ultimately able to use any of the SRLY NOLs, they would be required to pay us 35% of the amount of the SRLY NOLs used. In the fourth quarter of 2004 and in connection with the
completion of an IRS audit of TCI's tax return for 1994, it was determined that we were required to recognize additional taxable income related to the recapitalization of one of our investments
resulting in a tax liability of

II-17

---



approximately
$30 million. As a result of the tax assessment, we also received a corresponding amount of additional tax basis in the investment. However, we were able to cause AT&T to use a
portion of the SRLY NOLs to offset this taxable income, the benefit of which resulted in the elimination of the $30 million tax liability and an increase to additional paid-in
capital.

In
the fourth quarter of 2004, AT&T requested a refund from us of $70 million, plus accrued interest, relating to losses that it generated in 2002 and 2003 and was able to carry
back to offset taxable income previously offset by our losses. AT&T has asserted that our losses caused AT&T to pay $70 million in alternative minimum tax ("AMT") that it would not have been
otherwise required to pay had our losses not been included in its return. In 2004, we estimated that we may ultimately pay AT&T up to
$30 million of the requested $70 million because we believed AT&T received an AMT credit of $40 million against income taxes resulting from the AMT previously paid. Accordingly,
we accrued a $30 million liability with an offsetting reduction of additional paid-in capital. The net effect of the completion of the IRS tax audit noted above (including the
benefit derived from AT&T for the utilization of the SRLY NOLs) and our accrual of amounts due to AT&T was an increase to our deferred tax assets and an increase to our other liabilities.

In
the fourth quarter of 2005, AT&T requested an additional $21 million relating to additional losses it generated and was able to carry back to offset taxable income previously
offset by our losses. In addition, the information provided to us in connection with AT&T's request shows that AT&T has not yet claimed a credit for AMT previously paid. Accordingly, in the fourth
quarter of 2005, we increased our accrual by approximately $40 million (with a corresponding decrease to additional paid-in capital) representing our estimate of the amount we may
ultimately pay to AT&T as a result of this request. Although we have not reduced our accrual for any future refunds, we believe we are entitled to a refund when AT&T is able to realize a benefit in
the form of a credit for the AMT previously paid.

In
March 2006, AT&T requested an additional $21 million relating to additional losses and IRS audit adjustments that it claims it is able to use to offset taxable income
previously offset by our losses. We are currently reviewing this claim and have not recorded an accrual for this request in our consolidated financial statements for the year ended December 31,
2005.

Although
for accounting purposes we have accrued a portion of the amounts claimed by AT&T to be owed by us under the tax sharing agreement, we believe there are valid defenses or
set-off or similar rights in our favor that may cause the total amount that we owe AT&T to be less than the amounts accrued.

In
connection with agreements for the sale of certain assets, we typically retain liabilities that relate to events occurring prior to the sale, such as tax, environmental, litigation
and employment matters. We generally indemnify the purchaser in the event that a third party asserts a claim against the purchaser that relates to a liability retained by us. These types of
indemnification guarantees typically extend for a number of years. We are unable to estimate the maximum potential liability for these types of indemnification guarantees as the sale agreements
typically do not specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time.
Historically, we have not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these
indemnification guarantees.

We
have contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible we 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.

II-18

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During the third quarter of 2005, a subsidiary of Liberty, TruePosition, Inc. ("TruePosition"), entered into an agreement with one of its major customers whereby TruePosition will
remove and replace certain location-based equipment supplied by another vendor and currently installed in the customer's network. TruePosition currently estimates that the costs to provide this
equipment and service will exceed the revenue earned and that it will incur a loss of approximately $18 million on the contract. Since this agreement is an executory contract, TruePosition will
recognize this loss during the term of the contract as material elements of the contract are delivered. TruePosition entered into this agreement because it believes its appointment as the customer's
exclusive provider of these services and the resulting future potential revenue earned from the customer's continuing network build-out and expansion will exceed the loss computed on the
contractual arrangement. However, no assurance can be given that future business from this customer will be sufficient to offset the loss incurred on this portion of the contract.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payments"("Statement 123R"). Statement 123R, which is a revision of Statement 123 and supersedes APB Opinion No. 25, establishes
standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on transactions in which an entity obtains employee
services. Statement 123R generally requires companies to measure the cost of employee services received in exchange for an award of equity instruments (such as stock options and restricted stock)
based on the grant-date fair value of the award, and to recognize that cost over the period during which the employee is required to provide service (usually the vesting period of the
award). Statement 123R also requires companies to measure the cost of employee services received in exchange for an award of liability instruments (such as stock appreciation rights that will be
settled in cash) based on the current fair value of the award, and to remeasure the fair value of the award at each reporting date.

Public
companies are required to adopt Statement 123R as of the beginning of the first fiscal year that begins after June 15, 2005, or January 1, 2006 for
calendar-year companies such as Liberty. The provisions of Statement 123R will affect the accounting for all awards granted, modified, repurchased or cancelled after December 31,
2005. The accounting for awards granted, but not vested, prior to January 1, 2006 will also be impacted. The provisions of Statement 123R allow companies to adopt the standard on a prospective
basis or to restate all periods for which Statement 123 was effective. We expect to adopt Statement 123R on a prospective basis, and our financial statements for periods that begin after
December 31, 2005 will include pro forma information as though the standard had been adopted for all periods presented.

We
currently estimate that upon adoption of Statement 123R, we will be required to record a $125 million charge to earnings (before related income taxes) as the cumulative effect
of a change in accounting. Such transition adjustment primarily represents the aggregate differences between the fair value and intrinsic value of our liability awards. In addition, at
December 31, 2005, we have approximately $65 million of unamortized stock based compensation related to equity awards granted prior to January 1, 2006 that will be amortized into
our statement of operations over approximately 4 years.

Critical Accounting Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us 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. Listed
below are the accounting estimates that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates

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or
assumptions involved and the magnitude of the asset, liability, revenue or expense being reported. All of these accounting estimates and assumptions, as well as the resulting impact to our
financial statements, have been discussed with our audit committee.

Carrying Value of Investments.Our cost and equity method investments comprise 49% and 45% of our
total assets at December 31, 2005 and 2004, respectively. We account for these investments pursuant to Statement of Financial Accounting Standards No. 115, Statement of Financial
Accounting Standards No. 142, Accounting Principles Board Opinion No. 18, EITF Topic 03-1 and SAB No. 59. These accounting principles require us to periodically
evaluate our investments to determine if decreases in fair value below our cost bases are other than temporary or "nontemporary." If a decline in fair value is determined to be nontemporary, we are
required to reflect such decline in our statement of operations. Nontemporary declines in fair value of our cost investments are recognized on a separate line in our statement of operations, and
nontemporary declines in fair value of our equity method investments are included in share of losses of affiliates in our statement of operations.

The
primary factors we consider in our determination of whether declines in fair value are nontemporary are the length of time that the fair value of the investment is below our carrying
value; and the financial condition, operating performance and near term prospects of the investee. In addition, we consider the reason for the decline in fair value, be it general market conditions,
industry specific or investee specific; analysts' ratings and estimates of 12 month share price targets for the investee; changes in stock price or valuation subsequent to the balance sheet
date; and our intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value. Fair value of our publicly traded investments is based on the market
prices of the investments at the balance sheet date. We estimate the fair value of our other cost and equity investments using a variety of
methodologies, including cash flow multiples, discounted cash flow, per subscriber values, or values of comparable public or private businesses. Impairments are calculated as the difference between
our carrying value and our estimate of fair value. As our assessment of the fair value of our investments and any resulting impairment losses and the timing of when to recognize such charges requires
a high degree of judgment and includes significant estimates and assumptions, actual results could differ materially from our estimates and assumptions.

Our
evaluation of the fair value of our investments and any resulting impairment charges are made as of the most recent balance sheet date. Changes in fair value subsequent to the
balance sheet date due to the factors described above are possible. Subsequent decreases in fair value will be recognized in our statement of operations in the period in which they occur to the extent
such decreases are deemed to be nontemporary. Subsequent increases in fair value will be recognized in our statement of operations only upon our ultimate disposition of the investment.

At
December 31, 2005, we had unrealized holding losses of $27 million related to certain of our AFS equity securities.

Accounting for Derivative Instruments.We use various derivative instruments, including equity
collars, narrow-band collars, put spread collars, written put and call options, interest rate swaps and foreign exchange contracts, to manage fair value and cash flow risk associated with
many of our investments, some of our debt and transactions denominated in foreign currencies. We account for these derivative instruments pursuant to Statement 133 and Statement of Financial
Accounting Standards No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities."Statement 133 and
Statement 149 require that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of our derivatives are included in realized and unrealized gains
(losses) on derivative instruments in our statement of operations.

We
use the Black-Scholes model to estimate the fair value of our derivative instruments ("AFS Derivatives") that we use to manage market risk related to certain of our AFS securities.
The Black-Scholes model incorporates a number of variables in determining such fair values, including expected

II-20

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volatility
of the underlying security and an appropriate discount rate. We obtain volatility rates from independent sources based on the expected volatility of the underlying security over the term of
the derivative instrument. The volatility assumption is evaluated annually to determine if it should be adjusted, or more often if there are indications that it should be adjusted. We obtain a
discount rate at the inception of the derivative instrument and update such rate each reporting period based on our estimate of the discount rate at which we could currently settle the derivative
instrument. At December 31, 2005, the expected volatilities used to value our AFS Derivatives generally ranged from 21% to 27% and the discount rates ranged from 4.8% to 5.0%. Considerable
management judgment is required in estimating the Black-Scholes variables. Actual results upon settlement or unwinding of our derivative instruments may differ from these estimates.

Changes
in our assumptions regarding (1) the discount rate and (2) the volatility rates of the underlying securities that are used in the Black-Scholes model would have the
most significant impact on the valuation of our AFS Derivatives. The table below summarizes changes in these assumptions and the resulting impacts on our estimate of fair value.

Assumption

Estimated aggregate
fair value of AFS
Derivatives

Dollar value
changeamounts in millionsAs recorded at December 31, 2005

$
1,19925% increase in discount rate

$
1,027

(172
)25% decrease in discount rate

$
1,380

18125% increase in expected volatilities

$
1,186

(13
)25% decrease in expected volatilities

$
1,212

13


Carrying Value of Long-lived Assets.Our property and equipment, intangible assets and
goodwill (collectively, our "long-lived assets") also comprise a significant portion of our total assets at December 31, 2005 and 2004. We account for our long-lived
assets pursuant to Statement of Financial Accounting Standards No. 142 and Statement of Financial Accounting Standards No. 144. These accounting standards require that we periodically,
or upon the occurrence of certain triggering events, assess the recoverability of our long-lived assets. If the carrying value of our long-lived assets exceeds their estimated
fair value, we are required to write the carrying value down to fair value. Any such writedown is included in impairment
of long-lived assets in our consolidated statement of operations. A high degree of judgment is required to estimate the fair value of our long-lived assets. We may use quoted
market prices, prices for similar assets, present value techniques and other valuation techniques to prepare these estimates. In addition, we may obtain independent appraisals in certain
circumstances. We may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques. Accordingly, any value ultimately
derived from our long-lived assets may differ from our estimate of fair value. As each of our operating segments has long-lived assets, this critical accounting policy affects
the financial position and results of operations of each segment.

Electronic Retailing Reserves.QVC records reserves for sales returns, inventory obsolescence and
allowance for uncollectible receivables. Each of these reserves is estimated based on historical experience. Sales returns are calculated as a percent of sales and are netted against revenue in our
statement of operations. For the years ended December 31, 2005 and 2004, sales returns represented 16.5% and 16.1% of QVC's gross revenue, respectively. The inventory obsolescence reserve is
calculated as a percent of QVC's inventory at the end of a reporting period, and the change in such reserve is included in cost of goods sold in our statement of operations. At December 31,
2005, QVC's inventory is $809 million and the obsolescence reserve is $90 million. QVC's allowance for doubtful accounts is calculated as a percent of accounts receivable at the end of a
reporting period, and the change in such allowance is recorded as bad debt expense in our statement of operations. At

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December 31,
2005, QVC's trade accounts receivable are $837 million, net of the allowance for doubtful accounts of $65 million. Each of these reserves requires management judgment
and may not reflect actual results.

Income Taxes.We are required to estimate the amount of tax payable or refundable for the current
year and the deferred income tax liabilities and assets for the future tax consequences of events that have been reflected in our financial statements or tax returns for each taxing jurisdiction in
which we operate. This process requires our management to make judgments regarding the timing and probability of the ultimate tax impact of the various agreements and transactions that we enter into.
Based on these judgments we may record tax reserves or adjustments to valuation allowances on deferred tax assets to reflect the expected realizability of future tax benefits. Actual income taxes
could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate, our inability to generate sufficient future taxable income or
unpredicted results from the final determination of each year's liability by taxing authorities. These changes could have a significant impact on our financial position.

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

We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities and our subsidiaries in different foreign
countries. Market risk refers to the risk of loss arising from adverse changes in stock prices, interest rates and foreign currency exchange rates. The risk of loss can be assessed from the
perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of
financial instruments to manage our exposure to such risks.

We
are exposed to changes in interest rates primarily as a result of our borrowing and investment activities, which include investments in fixed and floating rate debt instruments and
borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future
requirements, market conditions and other factors. We manage our exposure to interest rates by maintaining what we believe is an appropriate mix of fixed and variable rate debt. We believe this best
protects us from interest rate risk. We have achieved this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to maturity and
(ii) issuing short-term variable rate debt to take advantage of historically low short-term interest rates. As of December 31, 2005, the face amount of our fixed
rate debt (considering the effects of interest rate swap agreements) was $8,203 million, which had a weighted average interest rate of 4.6%. Our variable rate debt of $1,758 million had
a weighted average interest rate of 6.0% at December 31, 2005. Had market interest rates been 100 basis points higher (representing an approximate 16.6% increase over our variable rate debt
effective cost of borrowing) throughout the year ended December 31, 2005, we would have recognized approximately $21 million of additional interest expense.

We
are exposed to changes in stock prices primarily as a result of our significant holdings in publicly traded securities. We continually monitor changes in stock markets, in general,
and changes in the stock prices of our holdings, specifically. We believe that changes in stock prices can be expected to vary as a result of general market conditions, technological changes, specific
industry changes and other factors. We use equity collars, put spread collars, narrow-band collars, written put and call options and other financial instruments to manage market risk
associated with certain investment positions. These instruments are recorded at fair value based on option pricing models. Equity collars provide us with a put option that gives us the right to
require the counterparty to purchase a specified number of shares of the underlying security at a specified price (the "Company Put Price") at a specified date in the future. Equity collars also
provide the counterparty with a call option that gives the counterparty the right to purchase the same securities at a specified price at a specified date in the future. The put option and the call
option generally have equal fair values at the time of origination resulting in no

II-22

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cash
receipts or payments. Narrow-band collars are equity collars in which the put and call prices are set so that the call option has a relatively higher fair value than the put option at
the time of origination. In these cases we receive cash equal to the difference between such fair values.

Among
other factors, changes in the market prices of the securities underlying the AFS Derivatives affect the fair market value of the AFS Derivatives. The following table illustrates
the impact that changes in the market price of the securities underlying our AFS Derivatives would have on the fair market value of such derivatives. Such changes in fair market value would be
included in realized and unrealized gains (losses) on financial instruments in our consolidated statement of operations.

Estimated aggregate fair valueEquity
collars(1)

Put
spread
collars

Put
options

Totalamounts in millionsFair value at December 31, 2005

$
1,408

133

(342
)
1,1995% increase in market prices

$
1,270

133

(329
)
1,07410% increase in market prices

$
1,133

133

(316
)
9505% decrease in market prices

$
1,545

133

(355
)
1,32310% decrease in market prices

$
1,683

133

(368
)
1,448


---

At
December 31, 2005, the fair value of our AFS securities was $18,427 million. Had the market price of such securities been 10% lower at December 31, 2005, the
aggregate value of such securities would have been $1,843 million lower resulting in a decrease to unrealized holding gains in other comprehensive earnings. Such decrease would be partially
offset by an increase in the value of our AFS Derivatives as noted in the table above.

In
connection with certain of our AFS Derivatives, we periodically borrow shares of the underlying securities from a counterparty and deliver these borrowed shares in settlement of
maturing derivative positions. In these transactions, a similar number of shares that we own have been posted as collateral with the counterparty. These share borrowing arrangements can be terminated
at any time at our option by delivering shares to the counterparty. The counterparty can terminate these arrangements upon the occurrence of certain events which limit the trading volume of the
underlying security. The liability under these share borrowing arrangements is marked to market each reporting period with changes in value recorded in unrealized gains or losses in the consolidated
statement of operations. The shares posted as collateral under these arrangements continue to be treated as AFS securities and are marked to market each reporting period with changes in value recorded
as unrealized holding gains or losses in other comprehensive earnings. We have recorded a $1,581 million liability for shares borrowed under these arrangements at December 31, 2005.

We
are exposed to foreign exchange rate fluctuations related primarily to the monetary assets and liabilities and the financial results of QVC's foreign subsidiaries. We typically do not
hedge our investment in foreign subsidiaries due to the long-term nature of our investment. Assets and liabilities of foreign subsidiaries for which the functional currency is the local
currency are translated into U.S. dollars at period-end exchange rates, and the statements of operations are translated at the average exchange rate for the period. Exchange rate
fluctuations on translating foreign currency financial statements into U.S. dollars that result in unrealized gains or losses are referred to as translation adjustments. Cumulative translation
adjustments are recorded in other comprehensive earnings (loss) as a separate component of stockholders' equity. Transactions denominated in currencies other than the functional currency are recorded
based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which are reflected in income as unrealized (based on
period-end translations) or realized upon settlement of the

II-23

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transactions.
Cash flows from our operations in foreign countries are translated at the average rate for the period. Accordingly, we may experience economic loss and a negative impact on earnings and
equity with respect to our holdings solely as a result of foreign currency exchange rate fluctuations.

From
time to time we enter into total return debt swaps in connection with our purchase of our own or third-party public and private indebtedness. Under these arrangements, we direct a
counterparty to purchase a specified amount of the underlying debt security for our benefit. We initially post collateral with the counterparty equal to 10% to 15% of the value of the purchased
securities. We earn interest income based upon the face amount and stated interest rate of the purchased securities, and we pay interest expense at market rates on the amount funded by the
counterparty. In the event the fair value of the underlying debt securities declines more than a specified percentage, we are required to post cash collateral for the decline, and we record an
unrealized loss on financial instruments. The cash collateral is further adjusted up or down for subsequent changes in fair value of the underlying debt security. At December 31, 2005, the
aggregate purchase price of debt securities underlying total return debt swap arrangements was $222 million ($129 million of which related to our senior notes and debentures). As of such
date, we had posted cash collateral equal to $27 million. In the event the fair value of the purchased debt securities were to fall to zero, we would be required to post additional cash
collateral of $195 million. The posting of such collateral and the related settlement of the agreements with respect to our senior notes and debentures would reduce our outstanding debt by an
equal amount.

We
periodically assess the effectiveness of our derivative financial instruments. With regard to interest rate swaps, we monitor 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. We believe that any losses incurred with regard to interest rate swaps would be offset by the
effects of interest rate movements on the underlying debt facilities. With regard to equity collars, we monitor historical market trends relative to values currently present in the market. We believe
that any unrealized losses incurred with regard to equity collars and swaps would be offset by the effects of fair value changes on the underlying assets. These measures allow our management to
measure the success of its use of derivative instruments and to determine when to enter into or exit from derivative instruments.

Our
derivative instruments are executed with counterparties who are well known major financial institutions with high credit ratings. While we believe these derivative instruments
effectively manage the risks highlighted above, they are subject to counterparty credit risk. Counterparty credit risk is the risk that the counterparty is unable to perform under the terms of the
derivative instrument upon settlement of the derivative instrument. To protect ourselves against credit risk associated with these counterparties we generally:



Due
to the importance of these derivative instruments to our risk management strategy, we actively monitor the creditworthiness of each of these counterparties. Based on our analysis, we
currently consider nonperformance by any of our counterparties to be unlikely.

II-24

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Our
counterparty credit risk by financial institution is summarized below:

Counterparty

Aggregate fair value of
derivative instruments at
December 31, 2005amounts in millionsCounterparty A

$
437Counterparty B


428Counterparty C


409Other


510$
1,784


Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements of Liberty Media Corporation are filed under this Item, beginning on Page II-29. The financial statement schedules required
by Regulation S-X are filed under Item 15 of this Annual Report on Form 10-K.

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

None.

Item 9A. Controls and Procedures.

In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried out an evaluation, under the supervision and with the
participation of management, including its chief executive officer, principal accounting officer and principal financial officer (the "Executives"), of the effectiveness of its disclosure controls and
procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of
December 31, 2005 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

See
page II-26 forManagement's Report on Internal Control Over Financial Reporting.

See
page II-27 forReport of Independent Registered Public Accounting Firmfor our accountant's attestation regarding our internal
controls over financial reporting.

There
has been no change in the Company's internal controls over financial reporting that occurred during the three months ended December 31, 2005 that has materially affected, or
is reasonably likely to materially affect, its internal controls over financial reporting.

Item 9B. Other Information.

None.

II-25

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MANAGEMENT'S REPORT ON INTERNAL  CONTROL OVER FINANCIAL REPORTING

Liberty
Media Corporation's management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting. The Company's internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements and related
disclosures in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of the consolidated financial statements and related disclosures in accordance with generally accepted accounting principles; (3) provide reasonable assurance that receipts
and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (4) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the consolidated financial statements and related disclosures.

Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The
Company assessed the design and effectiveness of internal control over financial reporting as of December 31, 2005. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") inInternal ControlIntegrated Framework.

Based
upon our assessment using the criteria contained in COSO, management has concluded that, as of December 31, 2005, Liberty Media Corporation's internal control over financial
reporting is effectively designed and operating effectively.

Liberty
Media Corporation's independent registered public accountants audited the consolidated financial statements and related disclosures in the Annual Report on
Form 10-K and have issued an audit report on management's assessment of the Company's internal control over financial reporting. This report appears on page II-27 of
this Annual Report on Form 10-K.

II-26

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Board of Directors and Stockholders
Liberty Media Corporation:

We
have audited management's assessment, included in the accompanying Management's Report on Internal Control over Financial Reporting appearing on page II-26, that Liberty
Media Corporation maintained effective internal control over financial reporting as of December 31, 2005, based on the criteria established inInternal
ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Management of Liberty Media Corporation is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to
express an opinion on management's assessment and an opinion on the effectiveness of the internal control over financial reporting of Liberty Media Corporation based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements and related disclosure in accordance with generally accepted accounting principles; (3) provide reasonable
assurance that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (4) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, management's assessment that Liberty Media Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in
all material respects, based on criteria established inInternal ControlIntegrated Frameworkissued by the COSO. Also, in our opinion,
Liberty Media Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal ControlIntegrated
Frameworkissued by COSO.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Liberty Media Corporation and
subsidiaries as of December 31, 2005 and December 31, 2004, and the related consolidated statements of operations, comprehensive earnings (loss), stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 2005, and our report dated March 7, 2006 expressed an unqualified opinion on those consolidated financial
statements.



Denver,
Colorado
March 7, 2006

II-27

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Board of Directors and Stockholders
Liberty Media Corporation:

We
have audited the accompanying consolidated balance sheets of Liberty Media Corporation and subsidiaries as of December 31, 2005 and 2004, and the related consolidated
statements of operations, comprehensive earnings (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2005. These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Liberty Media Corporation and subsidiaries as
of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity
with U.S. generally accepted accounting principles.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the internal control over financial
reporting of Liberty Media Corporation as of December 31, 2005, based on the criteria established inInternal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), and our report dated March 7, 2006 expressed an unqualified opinion on
management's assessment of, and the effective operation of, internal control over financial reporting.



Denver,
Colorado
March 7, 2006

II-28

---





LIBERTY MEDIA CORPORATION AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        December 31, 2005 and 2004

|                                                                                                                                                                                   |                                  | 2005                 |        | 2004  |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | -------------------- | ------ | ----- | ------
|
|Assets                                                                                                                                                                             |                                  |                      |        |       |       
|Current assets:                                                                                                                                                                    |                                  |                      |        |       |       
|                                                                                                                                                                                   | Cash and cash equivalents        |                      | $      | 1,946 |       
|                                                                                                                                                                                   | Trade and other receivables, net |                      |        | 1,106 |       
|                                                                                                                                                                                   | Inventory, net                   |                      |        | 719   |       
|                                                                                                                                                                                   | Program rights                   |                      |        | 599   |       
|                                                                                                                                                                                   | Derivative instruments (note 7)  |                      |        | 661   |       
|                                                                                                                                                                                   | Other current assets             |                      |        | 129   |       
|                                                                                                                                                                                   |                                  |                      |        |       |       
|                                                                                                                                                                                   |                                  | Total current assets |        |       | 5,160 
|                                                                                                                                                                                   |                                  |                      |        |       |       
|Investments in available-for-sale securities and other cost investments, including $1,581 million and $907 million pledged as collateral for share borrowing arrangements (note 6) |                                  |                      | 18,497 |       | 21,847
|Long-term derivative instruments (note 7)                                                                                                                                          |                                  |                      | 1,123  |       | 1,601 
|Investments in affiliates, accounted for using the equity method (note 8)                                                                                                          |                                  |                      | 1,908  |       | 784   
|Property and equipment, at cost                                                                                                                                                    |                                  |                      | 1,726  |       | 1,637 
|Accumulated depreciation                                                                                                                                                           |                                  |                      | (595   | )     | (504  
|                                                                                                                                                                                   |                                  |                      |        |       |       
|                                                                                                                                                                                   |                                  |                      | 1,131  |       | 1,133 
|                                                                                                                                                                                   |                                  |                      |        |       |       
|Intangible assets not subject to amortization (note 2):                                                                                                                            |                                  |                      |        |       |       
|                                                                                                                                                                                   | Goodwill                         |                      |        | 6,953 |       
|                                                                                                                                                                                   | Trademarks                       |                      |        | 2,385 |       
|                                                                                                                                                                                   |                                  |                      |        |       |       
|                                                                                                                                                                                   |                                  |                      | 9,338  |       | 9,323 
|                                                                                                                                                                                   |                                  |                      |        |       |       
|Intangible assets subject to amortization, net (note 2)                                                                                                                            |                                  |                      | 4,028  |       | 4,436 
|Other assets, at cost, net of accumulated amortization                                                                                                                             |                                  |                      | 767    |       | 765   
|Assets of discontinued operations (note 5)                                                                                                                                         |                                  |                      |       |       | 5,716 
|                                                                                                                                                                                   |                                  |                      |        |       |       
|                                                                                                                                                                                   |                                  | Total assets         |        | $     | 41,952
|                                                                                                                                                                                   |                                  |                      |        |       |       

(continued)

II-29

---



LIBERTY MEDIA CORPORATION AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        December 31, 2005 and 2004

|                                                |                                                                                                                                                                                       | 2005                                       |        | 2004    |       
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------- | ------
|
|Liabilities and Stockholders' Equity            |                                                                                                                                                                                       |                                            |        |         |       
|Current liabilities:                            |                                                                                                                                                                                       |                                            |        |         |       
|                                                | Accounts payable                                                                                                                                                                      |                                            | $      | 516     |       
|                                                | Accrued liabilities                                                                                                                                                                   |                                            |        | 826     |       
|                                                | Accrued stock compensation                                                                                                                                                            |                                            |        | 133     |       
|                                                | Program rights payable                                                                                                                                                                |                                            |        | 191     |       
|                                                | Derivative instruments (note 7)                                                                                                                                                       |                                            |        | 1,939   |       
|                                                | Current portion of debt (note 9)                                                                                                                                                      |                                            |        | 1,379   |       
|                                                | Other current liabilities                                                                                                                                                             |                                            |        | 302     |       
|                                                |                                                                                                                                                                                       |                                            |        |         |       
|                                                |                                                                                                                                                                                       | Total current liabilities                  |        |         | 5,286 
|                                                |                                                                                                                                                                                       |                                            |        |         |       
|Long-term debt (note 9)                         |                                                                                                                                                                                       |                                            | 6,371  |         | 8,566 
|Long-term derivative instruments (note 7)       |                                                                                                                                                                                       |                                            | 1,087  |         | 1,812 
|Deferred income tax liabilities (note 10)       |                                                                                                                                                                                       |                                            | 8,728  |         | 9,701 
|Other liabilities                               |                                                                                                                                                                                       |                                            | 1,070  |         | 801   
|Liabilities of discontinued operations (note 5) |                                                                                                                                                                                       |                                            |       |         | 1,305 
|                                                |                                                                                                                                                                                       |                                            |        |         |       
|                                                |                                                                                                                                                                                       | Total liabilities                          |        |         | 22,542
|                                                |                                                                                                                                                                                       |                                            |        |         |       
|Minority interests in equity of subsidiaries    |                                                                                                                                                                                       |                                            | 290    |         | 299   
|Stockholders' equity (note 11):                 |                                                                                                                                                                                       |                                            |        |         |       
|                                                | Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued                                                                                                       |                                            |        |        |       
|                                                | Series A common stock $.01 par value. Authorized 4,000,000,000 shares; issued and outstanding 2,681,745,985 shares at December 31, 2005 and 2,678,895,158 shares at December 31, 2004 |                                            |        | 27      |       
|                                                | Series B common stock $.01 par value. Authorized 400,000,000 shares; issued 131,062,825 shares at December 31, 2005 and 2004                                                          |                                            |        | 1       |       
|                                                | Additional paid-in capital                                                                                                                                                            |                                            |        | 29,098  |       
|                                                | Accumulated other comprehensive earnings, net of taxes ("AOCE") (note 15)                                                                                                             |                                            |        | 3,421   |       
|                                                | AOCE of discontinued operations                                                                                                                                                       |                                            |        |        |       
|                                                | Unearned compensation                                                                                                                                                                 |                                            |        | (24     | )     
|                                                | Accumulated deficit                                                                                                                                                                   |                                            |        | (13,278 | )     
|                                                |                                                                                                                                                                                       |                                            |        |         |       
|                                                |                                                                                                                                                                                       |                                            | 19,245 |         | 24,711
|                                                | Series B common stock held in treasury, at cost (10,000,000 shares at December 31, 2005 and 2004)                                                                                     |                                            |        | (125    | )     
|                                                |                                                                                                                                                                                       |                                            |        |         |       
|                                                |                                                                                                                                                                                       | Total stockholders' equity                 |        |         | 19,120
|                                                |                                                                                                                                                                                       |                                            |        |         |       
|Commitments and contingencies (note 17)         |                                                                                                                                                                                       |                                            |        |         |       
|                                                |                                                                                                                                                                                       | Total liabilities and stockholders' equity |        | $       | 41,952
|                                                |                                                                                                                                                                                       |                                            |        |         |       

See
accompanying notes to consolidated financial statements.

II-30

---





LIBERTY MEDIA CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS        Years ended December 31, 2005, 2004 and 2003

|                                                                    |                                                                                | 2005                                                                                 |        | 2004  |       | 2003   |      
|------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------ | ------ | ----- | ----- | ------ | -----
|
|Revenue:                                                            |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    | Net sales from electronic retailing                                            |                                                                                      | $      | 6,501 |       | 5,687  |      
|                                                                    | Communications and programming services                                        |                                                                                      |        | 1,459 |       | 1,364  |      
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    |                                                                                |                                                                                      | 7,960  |       | 7,051 |        | 3,230
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|Operating costs and expenses:                                       |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    | Cost of saleselectronic retailing services                                    |                                                                                      |        | 4,112 |       | 3,594  |      
|                                                                    | Operating                                                                      |                                                                                      |        | 1,608 |       | 1,356  |      
|                                                                    | Selling, general and administrative ("SG&A")                                   |                                                                                      |        | 652   |       | 662    |      
|                                                                    | Stock compensationSG&A (note 2)                                               |                                                                                      |        | 52    |       | 98     |      
|                                                                    | Litigation settlement                                                          |                                                                                      |        |      |       | (42    | )    
|                                                                    | Depreciation                                                                   |                                                                                      |        | 162   |       | 172    |      
|                                                                    | Amortization                                                                   |                                                                                      |        | 477   |       | 486    |      
|                                                                    | Impairment of long-lived assets (note 2)                                       |                                                                                      |        |      |       |       |      
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    |                                                                                |                                                                                      | 7,063  |       | 6,326 |        | 4,170
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    |                                                                                | Operating income (loss)                                                              |        |       | 897   |        | 725  
|Other income (expense):                                             |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    | Interest expense                                                               |                                                                                      |        | (623  | )     | (615   | )    
|                                                                    | Dividend and interest income                                                   |                                                                                      |        | 144   |       | 131    |      
|                                                                    | Share of earnings of affiliates, net (note 8)                                  |                                                                                      |        | 13    |       | 15     |      
|                                                                    | Realized and unrealized gains (losses) on derivative instruments, net (note 7) |                                                                                      |        | 257   |       | (1,284 | )    
|                                                                    | Gains (losses) on dispositions, net (notes 6, 11 and 15)                       |                                                                                      |        | (365  | )     | 1,406  |      
|                                                                    | Nontemporary declines in fair value of investments (note 6)                    |                                                                                      |        | (449  | )     | (129   | )    
|                                                                    | Other, net                                                                     |                                                                                      |        | (38   | )     | (25    | )    
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    |                                                                                |                                                                                      | (1,061 | )     | (501  | )      | 53   
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    |                                                                                | Earnings (loss) from continuing operations before income taxes and minority interest |        |       | (164  | )      | 224  
|Income tax benefit (expense) (note 10)                              |                                                                                |                                                                                      | 141    |       | (119  | )      | (342 
|Minority interests in earnings of subsidiaries                      |                                                                                |                                                                                      | (41    | )     | (5    | )      |     
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    |                                                                                | Earnings (loss) from continuing operations                                           |        |       | (64   | )      | 100  
|Earnings (loss) from discontinued operations, net of taxes (note 5) |                                                                                |                                                                                      | 31     |       | (54   | )      | 7    
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    |                                                                                | Net earnings (loss)                                                                  |        | $     | (33   | )      | 46   
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|Earnings (loss) per common share (note 2):                          |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    | Basic and diluted earnings (loss) from continuing operations                   |                                                                                      | $      | (.02  | )     | .04    |      
|                                                                    | Discontinued operations                                                        |                                                                                      |        | .01   |       | (.02   | )    
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|                                                                    | Basic and diluted net earnings (loss)                                          |                                                                                      | $      | (.01  | )     | .02    |      
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      
|Weighted average number of common shares outstanding                |                                                                                |                                                                                      | 2,795  |       | 2,856 |        | 2,748
|                                                                    |                                                                                |                                                                                      |        |       |       |        |      

See
accompanying notes to consolidated financial statements.

II-31

---



LIBERTY MEDIA CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)        Years ended December 31, 2005, 2004 and 2003

|                                                             |                                                                                           | 2005 |      | 2004   |       | 2003  |       
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------- | ---- | ---- | ------ | ----- | ----- | ------
|
|Net earnings (loss)                                          |                                                                                           | $    | (33  | )      | 46    |       | (1,222
|                                                             |                                                                                           |      |      |        |       |       |       
|Other comprehensive earnings (loss), net of taxes (note 15): |                                                                                           |      |      |        |       |       |       
|                                                             | Foreign currency translation adjustments                                                  |      |      | (5     | )     | 23    |       
|                                                             | Recognition of previously unrealized foreign currency translation losses                  |      |      | 312    |       |      |       
|                                                             | Unrealized holding gains (losses) arising during the period                               |      |      | (1,121 | )     | 1,490 |       
|                                                             | Recognition of previously unrealized losses (gains) on available-for-sale securities, net |      |      | 217    |       | (488  | )     
|                                                             | Reclass unrealized gain on available-for-sale security to equity method investment        |      |      | (197   | )     |      |       
|                                                             | Other comprehensive earnings (loss) from discontinued operations (note 5)                 |      |      | (7     | )     | (55   | )     
|                                                             |                                                                                           |      |      |        |       |       |       
|                                                             | Other comprehensive earnings (loss)                                                       |      |      | (801   | )     | 970   |       
|                                                             |                                                                                           |      |      |        |       |       |       
|Comprehensive earnings (loss)                                |                                                                                           | $    | (834 | )      | 1,016 |       | 1,753 
|                                                             |                                                                                           |      |      |        |       |       |       

See
accompanying notes to consolidated financial statements.

II-32

---





LIBERTY MEDIA CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        Years ended December 31, 2005, 2004 and 2003

|                                                                    |                                                                                                   | 2005                                                                                             |                                                      | 2004                                             |      | 2003   |       
|------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ---------------------------------------------------- | ------------------------------------------------ | ---- | ------ | ------
|
|Cash flows from operating activities:                               |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    | Net earnings (loss)                                                                               |                                                                                                  | $                                                    | (33                                              | )    | 46     |       
|                                                                    | Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities: |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    |                                                                                                   | Loss (earnings) from discontinued operations                                                     |                                                      |                                                  | (31  | )      | 54    
|                                                                    |                                                                                                   | Depreciation and amortization                                                                    |                                                      |                                                  | 639  |        | 658   
|                                                                    |                                                                                                   | Impairment of long-lived assets                                                                  |                                                      |                                                  |     |        |      
|                                                                    |                                                                                                   | Stock compensation                                                                               |                                                      |                                                  | 52   |        | 98    
|                                                                    |                                                                                                   | Payments of stock compensation                                                                   |                                                      |                                                  | (103 | )      | (10   
|                                                                    |                                                                                                   | Noncash interest expense                                                                         |                                                      |                                                  | 101  |        | 96    
|                                                                    |                                                                                                   | Share of earnings of affiliates, net                                                             |                                                      |                                                  | (13  | )      | (15   
|                                                                    |                                                                                                   | Realized and unrealized losses (gains) on derivative instruments, net                            |                                                      |                                                  | (257 | )      | 1,284 
|                                                                    |                                                                                                   | Losses (gains) on disposition of assets, net                                                     |                                                      |                                                  | 365  |        | (1,406
|                                                                    |                                                                                                   | Nontemporary decline in fair value of investments                                                |                                                      |                                                  | 449  |        | 129   
|                                                                    |                                                                                                   | Minority interests in earnings of subsidiaries                                                   |                                                      |                                                  | 41   |        | 5     
|                                                                    |                                                                                                   | Deferred income tax expense (benefit)                                                            |                                                      |                                                  | (405 | )      | (233  
|                                                                    |                                                                                                   | Other noncash charges                                                                            |                                                      |                                                  | 42   |        | 21    
|                                                                    |                                                                                                   | Changes in operating assets and liabilities, net of the effect of acquisitions and dispositions: |                                                      |                                                  |      |        |       
|                                                                    |                                                                                                   |                                                                                                  | Current assets                                       |                                                  |      | (184   | )     
|                                                                    |                                                                                                   |                                                                                                  | Payables and other current liabilities               |                                                  |      | 447    |       
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    |                                                                                                   |                                                                                                  |                                                      | Net cash provided (used) by operating activities |      |        | 1,110 
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|Cash flows from investing activities:                               |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    | Cash proceeds from dispositions                                                                   |                                                                                                  |                                                      | 63                                               |      | 479    |       
|                                                                    | Premium proceeds from origination of derivatives                                                  |                                                                                                  |                                                      | 473                                              |      | 193    |       
|                                                                    | Net proceeds from settlement of derivatives                                                       |                                                                                                  |                                                      | 461                                              |      | 322    |       
|                                                                    | Investments in and loans to cost and equity investees                                             |                                                                                                  |                                                      | (24                                              | )    | (960   | )     
|                                                                    | Cash paid for acquisitions, net of cash acquired                                                  |                                                                                                  |                                                      | (5                                               | )    | (93    | )     
|                                                                    | Capital expended for property and equipment                                                       |                                                                                                  |                                                      | (233                                             | )    | (177   | )     
|                                                                    | Net sales (purchases) of short term investments                                                   |                                                                                                  |                                                      | (85                                              | )    | 272    |       
|                                                                    | Repayments of notes receivable from LMI                                                           |                                                                                                  |                                                      |                                                 |      | 117    |       
|                                                                    | Other investing activities, net                                                                   |                                                                                                  |                                                      | (15                                              | )    | (14    | )     
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    |                                                                                                   | Net cash provided by investing activities                                                        |                                                      |                                                  | 635  |        | 139   
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|Cash flows from financing activities:                               |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    | Borrowings of debt                                                                                |                                                                                                  |                                                      | 861                                              |      |       |       
|                                                                    | Repayments of debt                                                                                |                                                                                                  |                                                      | (1,801                                           | )    | (1,006 | )     
|                                                                    | Purchases of Liberty Series A common stock                                                        |                                                                                                  |                                                      |                                                 |      | (547   | )     
|                                                                    | Repurchases of subsidiary common stock                                                            |                                                                                                  |                                                      | (95                                              | )    | (171   | )     
|                                                                    | Proceeds from issuance of common stock                                                            |                                                                                                  |                                                      |                                                 |      |       |       
|                                                                    | Other financing activities, net                                                                   |                                                                                                  |                                                      | 100                                              |      | 37     |       
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    |                                                                                                   | Net cash provided (used) by financing activities                                                 |                                                      |                                                  | (935 | )      | (1,687
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|Effect of foreign currency exchange rates on cash                   |                                                                                                   |                                                                                                  | (45                                                  | )                                                | 3    |        | 18    
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|Net cash provided to discontinued operations (revised, see note 3): |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    | Cash provided by operating activities                                                             |                                                                                                  |                                                      | 31                                               |      | 216    |       
|                                                                    | Cash used by investing activities                                                                 |                                                                                                  |                                                      | (47                                              | )    | (247   | )     
|                                                                    | Cash provided (used) by financing activities                                                      |                                                                                                  |                                                      |                                                 |      | 996    |       
|                                                                    | Change in available cash held by discontinued operations                                          |                                                                                                  |                                                      | (190                                             | )    | (1,829 | )     
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    |                                                                                                   | Net cash provided to discontinued operations                                                     |                                                      |                                                  | (206 | )      | (864  
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    |                                                                                                   |                                                                                                  | Net increase (decrease) in cash and cash equivalents |                                                  |      | 559    |       
|                                                                    |                                                                                                   |                                                                                                  | Cash and cash equivalents at beginning of year       |                                                  |      | 1,387  |       
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       
|                                                                    |                                                                                                   |                                                                                                  | Cash and cash equivalents at end of year             |                                                  | $    | 1,946  |       
|                                                                    |                                                                                                   |                                                                                                  |                                                      |                                                  |      |        |       

See accompanying notes to consolidated financial statements.

II-33

---





LIBERTY MEDIA CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        Years ended December 31, 2005, 2004 and 2003

|                             |                                                                                           |   |   | Common stock |    |    |   |    |        | AOCE
from
discontinued
operations |       |       |      |     |     |      |         |        |     
|---------------------------- | ----------------------------------------------------------------------------------------- | - | - | ------------ | -- | -- | - | -- | ------ | --------------------------------- | ----- | ----- | ---- | --- | --- | ---- | ------- | ------ | ----
|
|
|
|Balance at January 1, 2003   |                                                                                           | $ |  |              | 25 |    | 2 |    | 36,498 |                                   | 493   |       | (267 | )   |    |      | (12,069 | )      |    
|                             | Net loss                                                                                  |   |   |             |    |   |   |   |        |                                  |       |      |      |    |     |     |         | (1,222 | )   
|                             | Other comprehensive earnings                                                              |   |   |             |    |   |   |   |        |                                  |       | 2,748 |      | 227 |     |     |         |       |     
|                             | Issuance of Series A common stock for acquisitions                                        |   |   |             |    | 2  |   |   |        | 2,654                             |       |      |      |    |     |     |         |       |     
|                             | Issuance of Series A common stock for cash                                                |   |   |             |    |   |   |   |        | 141                               |       |      |      |    |     |     |         |       |     
|                             | Purchases of Series A common stock                                                        |   |   |             |    |   |   |   |        | (437                              | )     |      |      |    |     |     |         |       |     
|                             | Issuance of restricted stock                                                              |   |   |             |    |   |   |   |        | 102                               |       |      |      |    |     | (102 | )       |       |     
|                             | Amortization of deferred compensation                                                     |   |   |             |    |   |   |   |        |                                  |       |      |      |    |     | 4    |         |       |     
|                             | Series A common stock put options, net of cash received                                   |   |   |             |    |   |   |   |        | 37                                |       |      |      |    |     |     |         |       |     
|                             | Gain in connection with the issuance of stock of a subsidiary, net of taxes               |   |   |             |    |   |   |   |        | 6                                 |       |      |      |    |     |     |         |       |     
|                             |                                                                                           |   |   |              |    |    |   |    |        |                                   |       |       |      |     |     |      |         |        |     
|Balance at December 31, 2003 |                                                                                           |   |  |              | 27 |    | 2 |    | 39,001 |                                   | 3,241 |       | (40  | )   | (98 | )    | (13,291 | )      |    
|                             | Net earnings                                                                              |   |   |             |    |   |   |   |        |                                  |       |      |      |    |     |     |         | 46     |     
|                             | Other comprehensive earnings (loss)                                                       |   |   |             |    |   |   |   |        |                                  |       | 1,025 |      | (55 | )   |     |         |       |     
|                             | Issuance of Series A common stock for acquisitions                                        |   |   |             |    |   |   |   |        | 152                               |       |      |      |    |     |     |         |       |     
|                             | Issuance of Series A common stock in exchange for Series B common stock (note 11)         |   |   |             |    | 1  |   | (1 | )      | 125                               |       |      |      |    |     |     |         |       |     
|                             | Acquisition of Series A common stock (note 11)                                            |   |   |             |    | (1 | ) |   |        | (1,016                            | )     |      |      |    |     |     |         |       |     
|                             | Amortization of deferred compensation                                                     |   |   |             |    |   |   |   |        |                                  |       |      |      |    |     | 31   |         |       |     
|                             | Distribution to stockholders for spin off of Liberty Media International ("LMI") (note 5) |   |   |             |    |   |   |   |        | (4,512                            | )     | (51   | )    | 107 |     |     |         |       |     
|                             | Stock compensation for Liberty options held by LMI employees (note 13)                    |   |   |             |    |   |   |   |        | (4                                | )     |      |      |    |     |     |         |       |     
|                             | Stock compensation for LMI options held by Liberty employees (note 13)                    |   |   |             |    |   |   |   |        | 17                                |       |      |      |    |     |     |         |       |     
|                             | Other                                                                                     |   |   |             |    |   |   |   |        | 2                                 |       |      |      |    |     | 3    |         |       |     
|                             |                                                                                           |   |   |              |    |    |   |    |        |                                   |       |       |      |     |     |      |         |        |     
|Balance at December 31, 2004 |                                                                                           |   |  |              | 27 |    | 1 |    | 33,765 |                                   | 4,215 |       | 12   |     | (64 | )    | (13,245 | )      | (125
|                             | Net loss                                                                                  |   |   |             |    |   |   |   |        |                                  |       |      |      |    |     |     |         | (33    | )   
|                             | Other comprehensive loss                                                                  |   |   |             |    |   |   |   |        |                                  |       | (794  | )    | (7  | )   |     |         |       |     
|                             | Issuance of Series A common stock for investment in available-for-sale security           |   |   |             |    |   |   |   |        | 14                                |       |      |      |    |     |     |         |       |     
|                             | Amortization of deferred compensation                                                     |   |   |             |    |   |   |   |        |                                  |       |      |      |    |     | 38   |         |       |     
|                             | Distribution to stockholders for spin off of Discovery Holding Company ("DHC") (note 5)   |   |   |             |    |   |   |   |        | (4,609                            | )     |      |      | (5  | )   |     |         |       |     
|                             | Losses in connection with issuances of stock by subsidiaries and affiliates, net of taxes |   |   |             |    |   |   |   |        | (22                               | )     |      |      |    |     |     |         |       |     
|                             | Issuance of common stock upon exercise of stock options                                   |   |   |             |    |   |   |   |        | 10                                |       |      |      |    |     |     |         |       |     
|                             | Stock compensation for Liberty options held by LMI employees (note 13)                    |   |   |             |    |   |   |   |        | 4                                 |       |      |      |    |     |     |         |       |     
|                             | Stock compensation for LMI options held by Liberty employees (note 13)                    |   |   |             |    |   |   |   |        | (4                                | )     |      |      |    |     |     |         |       |     
|                             | AT&T tax sharing agreement adjustments (note 10)                                          |   |   |             |    |   |   |   |        | (40                               | )     |      |      |    |     |     |         |       |     
|                             | Adjustment of spin off of LMI                                                             |   |   |             |    |   |   |   |        | (28                               | )     |      |      |    |     |     |         |       |     
|                             | Other                                                                                     |   |   |             |    |   |   |   |        | 8                                 |       |      |      |    |     | 2    |         |       |     
|                             |                                                                                           |   |   |              |    |    |   |    |        |                                   |       |       |      |     |     |      |         |        |     
|Balance at December 31, 2005 |                                                                                           | $ |  |              | 27 |    | 1 |    | 29,098 |                                   | 3,421 |       |     |     | (24 | )    | (13,278 | )      | (125
|                             |                                                                                           |   |   |              |    |    |   |    |        |                                   |       |       |      |     |     |      |         |        |     

See accompanying notes to consolidated financial statements.

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LIBERTY MEDIA CORPORATION AND SUBSIDIARIES        Notes to Consolidated Financial Statements        December 31, 2005, 2004 and 2003

(1)Basis of Presentation

The accompanying consolidated financial statements include the accounts of Liberty Media Corporation and its controlled subsidiaries ("Liberty" or the "Company,"
unless the context otherwise requires). All significant intercompany accounts and transactions have been eliminated in consolidation.

Liberty
is a holding company which, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the electronic retailing, media, communications and
entertainment industries in the United States, Europe and Asia. In addition, companies in which Liberty owns interests are engaged in, among other things, (i) interactive commerce via the
Internet, television and telephone, (ii) domestic cable and satellite broadband services, and (iii) telephony and other technology ventures.

(2)Summary of Significant Accounting Policies

Cash and Cash Equivalents

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

Receivables

Receivables are reflected net of an allowance for doubtful accounts. Such allowance aggregated $67 million and $65 million at December 31,
2005 and 2004, respectively. A summary of activity in the allowance for doubtful accounts is as follows:

AdditionsBalance
beginning
of year

Charged
to expense

Acquisitions

Deductions-
write-offs

Balance
end of
yearamounts in millions2005

$
65

38



(36
)
672004

$
80

20



(35
)
652003

$
18

16

62

(16
)
80


Inventory

Inventory, consisting primarily of products held for sale, is stated at the lower of cost or market. Cost is determined by the average cost method, which
approximates the first-in, first-out method.

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---



The
Company records a reserve for obsolete inventory as a percent of gross inventory based on historical experience. A summary of activity in the reserve for obsolete inventory account
is as follows:

AdditionsBalance
beginning
of year

Charged
to expense

Acquisitions

Deductions-
write-offs

Balance
end of
yearamounts in millions2005

$
88

75



(73
)
902004

$
93

54



(59
)
882003

$


19

93

(19
)
93


Program Rights

Program rights are amortized on a film-by-film basis over the anticipated number of exhibitions. Program rights payable are initially
recorded at the estimated cost of the programs when the film is available for airing.

Investments

All marketable equity and debt securities held by the Company are classified as available-for-sale ("AFS") and are carried at fair value.
Unrealized holding gains and losses on AFS Securities are carried net of taxes as a component of accumulated other comprehensive earnings in stockholders' equity. Realized gains and losses are
determined on an average cost basis. Other investments in which the Company's ownership interest is less than 20% and are not considered marketable securities are carried at cost.

For
those investments in affiliates in which the Company has the ability to exercise significant influence, the equity method of accounting is used. Under this method, the investment,
originally recorded at cost, is adjusted to recognize the Company's share of net earnings or losses of the affiliates as they occur rather than as dividends or other distributions are received. Losses
are 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 loss of affiliates also includes any
other-than-temporary declines in fair value recognized during the period.

Changes
in the Company's proportionate share of the underlying equity of a subsidiary or equity method investee, which result from the issuance of additional equity securities by such
subsidiary or equity investee, are recognized as increases or decreases in stockholders' equity.

The
Company continually reviews its investments to determine whether a decline in fair value below the cost basis is other than temporary ("nontemporary"). The primary factors the
Company considers in its determination are the length of time that the fair value of the investment is below the Company's carrying value; and the financial condition, operating performance and near
term prospects of the investee. In addition, the Company considers the reason for the decline in fair value, be it general market conditions, industry specific or investee specific; analysts' ratings
and estimates of 12 month share price targets for the investee; changes in stock price or valuation subsequent to the balance sheet date; and the Company's intent and ability to hold the
investment for a period of time sufficient to allow for a recovery in fair value. If the decline in fair value is deemed to be nontemporary, the cost basis of the security is written down to fair
value. In situations where the fair

II-36

---



value
of an investment is not evident due to a lack of a public market price or other factors, the Company uses its best estimates and assumptions to arrive at the estimated fair value of such
investment. The Company's assessment of the foregoing factors involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments.
Writedowns for cost investments and AFS Securities are included in the consolidated statements of operations as nontemporary declines in fair values of investments. Writedowns for equity method
investments are included in share of earnings (losses) of affiliates.

Derivative Instruments and Hedging Activities

The Company uses various derivative instruments including equity collars, narrow-band collars, put spread collars, written put and call options, bond
swaps and interest rate swaps to manage fair value and cash flow risk associated with many of its investments and some of its variable rate debt. Liberty's derivative instruments are executed with
counterparties who are well known major financial institutions. While Liberty believes these derivative instruments effectively manage the risks highlighted above, they are subject to counterparty
credit risk. Counterparty credit risk is the risk that the counterparty is unable to perform under the terms of the derivative instrument upon settlement of the derivative instrument. To protect
itself against credit risk associated with these counterparties the Company generally:



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

Liberty
accounts for its derivatives pursuant to Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("Statement 133"). All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative is
designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is not designated
as a hedge, changes in the fair value of the derivative are recognized in earnings. At December 31, 2005 and for the three years then ended none of the Company's derivatives were designated as
hedges.

The
fair value of derivative instruments is estimated using third party estimates or the Black-Scholes model. The Black-Scholes model incorporates a number of variables in determining
such fair values, including expected volatility of the underlying security and an appropriate discount rate. The Company obtains volatility rates from independent sources based on the expected
volatility of the underlying security over the term of the derivative instrument. The volatility assumption is evaluated annually to determine if it should be adjusted, or more often if there are
indications that it should be adjusted. A discount rate is obtained at the inception of the derivative instrument and updated each reporting period based on the Company's estimate of the discount rate
at which it could currently settle

II-37

---



the
derivative instrument. Considerable management judgment is required in estimating the Black-Scholes variables. Actual results upon settlement or unwinding of derivative instruments may differ
materially from these estimates.

Property and Equipment

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

Intangible Assets

The Company accounts for its intangible assets pursuant to Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("Statement 142"). Statement 142 requires that goodwill and other intangible assets with indefinite useful lives (collectively, "indefinite lived intangible
assets") not be amortized, but instead be tested for impairment at least annually. Equity method goodwill is also not amortized, but continues to be considered for impairment under Accounting
Principles Board Opinion No. 18. Statement 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets"("Statement 144").

Statement
142 requires the Company to perform an annual assessment of whether there is an indication that goodwill is impaired. To accomplish this, the Company identifies its reporting
units and determines the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. Statement 142
requires the Company to consider equity method affiliates as separate reporting units. As a result, a portion of the Company's enterprise-level goodwill balance is allocated to various reporting units
which include a single equity method investment as its only asset. This allocation is performed for goodwill impairment testing purposes only and does not change the reported carrying value of the
investment. However, to the extent that all or a portion of an equity method investment which is part of a reporting unit containing allocated goodwill is disposed of in the future, the allocated
portion of goodwill will be relieved and included in the calculation of the gain or loss on disposal.

The
Company determines the fair value of its reporting units using independent appraisals, public trading prices and other means. The Company then compares the fair value of each
reporting unit to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, the Company compares the implied fair value of the reporting unit's
goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation, to its
carrying amount, and records an impairment charge to the extent the carrying amount exceeds the implied fair value.

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---



Goodwill

Changes in the carrying amount of goodwill for the year ended December 31, 2005 are as follows:

|                             |                                          | QVC, Inc. |       | Starz
Entertainment
Group LLC |       | Other(3) |       | Total |      
|---------------------------- | ---------------------------------------- | --------- | ----- | ----------------------------- | ----- | -------- | ----- | ----- | -----
|
|Balance at January 1, 2005   |                                          | $         | 4,048 |                               | 1,383 |          | 1,507 |       | 6,938
|                             | Acquisitions(1)                          |           |       |                              |       |         |       | 10    |      
|                             | Foreign currency translation adjustments |           |       | 23                            |       |         |       |      |      
|                             | Other(2)                                 |           |       | (14                           | )     |         |       | (4    | )    
|                             |                                          |           |       |                               |       |          |       |       |      
|Balance at December 31, 2005 |                                          | $         | 4,057 |                               | 1,383 |          | 1,513 |       | 6,953
|                             |                                          |           |       |                               |       |          |       |       |      

---

Entity

Allocable
goodwillQVC

$
1,216Courtroom Television Network, LLC ("Court TV")


124GSN, LLC ("GSN")


17Other


14$
1,371


Starz
Entertainment Group LLC ("SEG") obtained an independent third party valuation in connection with its 2003 annual year-end evaluation of the recoverability of its
goodwill. The result of this valuation, which was based on a discounted cash flow analysis of projections prepared by the management of SEG, indicated that the fair value of this reporting unit was
less than its carrying value. This reporting unit fair value was then used to calculate an implied value of the goodwill (including $1,195 million of allocated enterprise-level goodwill)
related to SEG. The $1,352 million excess of the carrying amount of the goodwill over its implied value was recorded as an impairment charge in the fourth quarter of 2003.

II-39

---



Intangible Assets Subject to Amortization

Intangible assets subject to amortization are comprised of the following:

|                       |  | December 31, 2005 |       | December 31, 2004
|---------------------- |  | ----------------- | ----- | -----------------
|
|
|Distribution rights    |  | $                 | 2,628 |                  
|Customer relationships |  |                   | 2,365 |                  
|Other                  |  |                   | 653   |                  
|                       |  |                   |       |                  
|Total                  |  | $                 | 5,646 |                  
|                       |  |                   |       |                  

Amortization
of intangible assets with finite useful lives was $477 million, $486 million and $267 million for the years ended December 31, 2005, 2004 and
2003, respectively. Based on its current amortizable intangible assets, Liberty expects that amortization expense will be as follows for the next five years (amounts in millions):

2006

$
4512007

$
4102008

$
3762009

$
3432010

$
333


Impairment of Long-lived Assets

Statement 144 requires that the Company periodically review the carrying amounts of its property and equipment and its intangible assets (other than goodwill) to
determine whether current events or circumstances indicate that such carrying amounts may not be recoverable. If the carrying amount of the asset is greater than the expected undiscounted cash flows
to be generated by such asset, an impairment adjustment is to be recognized. Such adjustment is measured by the amount that the carrying value of such assets exceeds their fair value. The Company
generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate. Considerable management judgment is
necessary to estimate the fair value of assets. Accordingly, actual results could vary significantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement
carrying amount or fair value less costs to sell.

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.

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

II-40

---



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 stockholders'
equity.

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

Revenue Recognition

Revenue is recognized as follows:



Cost of SalesElectronic Retailing

Cost of sales primarily includes actual product cost, provision for obsolete inventory, buying allowances received from suppliers, shipping and handling costs and
warehouse costs.

Advertising Costs

Advertising costs generally are expensed as incurred. Advertising expense aggregated $46 million, $49 million and $19 million for the years
ended December 31, 2005, 2004 and 2003, respectively. Co-operative marketing costs are recognized as advertising expense to the extent an identifiable benefit is received and fair
value of the benefit can be reasonably measured. Otherwise, such costs are recorded as a reduction of revenue.

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Stock-Based Compensation

As more fully described in note 13, the Company has granted to its employees options, stock appreciation rights ("SARs") and options with tandem SARs to
purchase shares of Liberty Series A and Series B common stock. The Company accounts for these grants pursuant to the recognition and measurement provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25"). Under these provisions, no compensation expense is
recognized for fixed plan awards because the exercise price is equal to the market price of the underlying common stock on the date of grant. Compensation for variable plan awards is recognized based
upon the percentage of the options that are vested and the difference between the market price of the underlying common stock and the exercise price of the options at the balance sheet date. The
following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("Statement 123") to its options. Compensation expense for SARs and options with tandem SARs
is the same under APB Opinion No. 25 and Statement 123. Accordingly, no pro forma adjustment for such awards is included in the following table.

|                                                                        |                                                                                     | Years ended
December 31, |     
|----------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------ | ----
|
|
|Earnings (loss) from continuing operations                              |                                                                                     | $                        | (64 
|                                                                        | Add stock compensation as determined under the intrinsic value method, net of taxes |                          |     
|                                                                        | Deduct stock compensation as determined under the fair value method, net of taxes   |                          |     
|                                                                        |                                                                                     |                          |     
|Pro forma earnings (loss) from continuing operations                    |                                                                                     | $                        | (109
|                                                                        |                                                                                     |                          |     
|Basic and diluted earnings (loss) from continuing operations per share: |                                                                                     |                          |     
|                                                                        | As reported                                                                         |                          | $   
|                                                                        | Pro forma                                                                           |                          | $   

Income Taxes

The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying value amounts and income tax bases of assets and liabilities and the expected benefits of utilizing net operating loss and tax
credit carryforwards. The deferred tax assets and liabilities are calculated using enacted tax rates in effect for each taxing jurisdiction in which the company operates for the year in which those
temporary differences are expected to be recovered or settled. Net deferred tax assets are then reduced by a valuation allowance if the Company believes it
more-likely-than-not such net deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of an enacted change in tax rates is
recognized in income in the period that includes the enactment date.

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Earnings (Loss) Per Common Share

Basic earnings (loss) per common share ("EPS") is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding for the
period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. The basic EPS calculation is
based on 2,795 million and 2,856 million weighted average shares outstanding for the years ended December 31, 2005 and 2004, respectively. The diluted EPS calculation for 2005 and
2004 includes 13 million and 14 million potential common shares, respectively. However, due to the relative insignificance of these dilutive securities, their inclusion does not impact
the EPS amount as reported in the accompanying consolidated statement of operations. Excluded from diluted earnings per share for the years ended December 31, 2005, 2004 and 2003, are
71 million, 72 million and 84 million potential common shares because their inclusion would be anti-dilutive.

Reclassifications

Certain prior period amounts have been reclassified for comparability with the 2005 presentation.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") 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. Liberty considers (i) the estimate of the fair value of its long-lived assets (including goodwill) and any
resulting impairment charges, (ii) its accounting for income taxes, (iii) the fair value of its derivative instruments and (iv) its assessment of nontemporary declines in value of
its investments to be its most significant estimates.

Liberty
holds investments that are accounted for using the equity method. Liberty does not control the decision making process or business management practices of these affiliates.
Accordingly, Liberty relies on management of these affiliates to provide it with accurate financial information prepared in accordance with GAAP that Liberty uses in the application of the equity
method. In addition, Liberty relies on audit reports that are provided by the affiliates' independent auditors on the financial statements of such affiliates. The Company is not aware, however, of any
errors in or possible misstatements of the financial information provided by its equity affiliates that would have a material effect on Liberty's consolidated financial statements.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payments" ("Statement 123R"). Statement 123R, which is a revision of Statement 123 and supersedes APB Opinion No. 25, establishes
standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on transactions in which an entity obtains employee
services. Statement 123R generally requires companies to measure the cost of employee services received in exchange for an award of equity instruments (such as stock options and restricted stock)
based on the grant-date fair value of the award, and to recognize that cost over the period during which the employee is required to provide service (usually the vesting period of the
award). Statement 123R also requires companies to

II-43

---



measure
the cost of employee services received in exchange for an award of liability instruments (such as stock appreciation rights that will be settled in cash) based on the current fair value of the
award, and to remeasure the fair value of the award at each reporting date.

Public
companies are required to adopt Statement 123R as of the beginning of the first fiscal year that begins after June 15, 2005, or January 1, 2006 for
calendar-year companies such as Liberty. The provisions of Statement 123R will affect the accounting for all awards granted, modified, repurchased or cancelled after December 31,
2005. The accounting for awards granted, but not vested, prior to January 1, 2006 will also be impacted. The provisions of Statement 123R allow companies to adopt the standard on a prospective
basis or to restate all periods for which Statement 123 was effective. Liberty expects to adopt Statement 123R on a prospective basis, and will include in its financial statements for periods that
begin after December 31, 2005 pro forma information as though the standard had been adopted for all periods presented.

Liberty
currently estimates that upon adoption of Statement 123R, it will be required to record a $125 million charge to earnings (before related income taxes) as the cumulative
effect of a change in accounting. Such charge primarily represents the aggregate differences between the fair value and intrinsic value of the Company's liability awards. In addition, at
December 31, 2005, the Company has approximately $65 million of unamortized stock-based compensation related to equity awards granted prior to January 1, 2006 that will be
amortized into its statement of operations over approximately 4 years.

(3)Supplemental Disclosures to Consolidated Statements of Cash Flows

We have revised our 2004 and 2003 statements of cash flows to separately disclose the operating, investing and financing portions of the cash flows attributable
to our discontinued operations. We previously had reported these amounts on a combined basis.

|                            |                               | Years ended December 31,                         |    
|--------------------------- | ----------------------------- | ------------------------------------------------ | ---
|
|
|Cash paid for acquisitions: |                               |                                                  |    
|                            | Fair value of assets acquired |                                                  | $  
|                            | Net liabilities assumed       |                                                  |    
|                            | Long-term debt issued         |                                                  |    
|                            | Deferred tax liability        |                                                  |    
|                            | Minority interest             |                                                  |    
|                            | Common stock issued           |                                                  |    
|                            |                               |                                                  |    
|                            |                               | Cash paid for acquisitions, net of cash acquired |    
|                            |                               |                                                  |    
|Cash paid for interest      |                               | $                                                | 477
|                            |                               |                                                  |    
|Cash paid for income taxes  |                               | $                                                | 162
|                            |                               |                                                  |    

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(4)Acquisition of Controlling Interest in QVC, Inc.

On September 17, 2003, Liberty completed its acquisition of Comcast Corporation's ("Comcast") approximate 56.5% ownership interest in QVC for an aggregate
purchase price of approximately $7.9 billion. QVC markets and sells a wide variety of consumer products in the U.S. and several foreign countries primarily by means of televised shopping
programs on the QVC networks and via the Internet through its domestic and international websites. Prior to the closing, Liberty owned approximately 41.7% of QVC. Subsequent to the closing, Liberty
owned approximately 98% of QVC's outstanding shares, and the remaining shares of QVC were held by members of the QVC management team.

Liberty's
purchase price for QVC was comprised of 217.7 million shares of Liberty's Series A common stock valued, for accounting purposes, at $2,555 million,
Floating Rate Senior Notes due 2006 in an aggregate principal amount of $4,000 million and approximately $1,358 million in cash (including acquisition costs). The foregoing value of the
Series A common stock issued was based on the average closing price for such stock for the five days surrounding July 3, 2003, which was the date that Liberty announced that it had
reached an agreement with Comcast to acquire Comcast's interest in QVC. Substantially all of the cash component of the purchase price was funded with the proceeds from the Company's issuance of its
3.50% Senior Notes due 2006 in the aggregate principal amount of $1.35 billion.

Subsequent
to the closing, QVC is a consolidated subsidiary of Liberty. For financial reporting purposes, the acquisition is deemed to have occurred on September 1, 2003, and
since that date QVC's results of operations have been consolidated with Liberty's. Prior to its acquisition of Comcast's interest, Liberty accounted for its investment in QVC using the equity method
of accounting. Liberty recorded the acquisition of QVC as a step acquisition, and accordingly, QVC's assets and liabilities were recorded at amounts equal to (1) 56.5% of estimated fair value
at the date of acquisition plus (2) 43.5% of historical cost. The $2,048 million excess of the purchase price over the estimated fair value of 56.5% of QVC's assets and liabilities
combined with Liberty's historical equity method goodwill of $1,848 million was recorded as goodwill. The excess of the purchase price for Comcast's interest in QVC over the estimated fair
value of QVC's assets and liabilities is attributable to the following: (i) QVC's position as a market leader in its industry, (ii) QVC's ability to generate significant cash from
operations and Liberty's ability to obtain access to such cash, and (iii) QVC's perceived significant international growth opportunities.

Liberty's
total investment in QVC of $10,717 million is comprised of $2,804 million attributable to its historical equity method investment and $7,913 million
representing the purchase price for

II-45

---



Comcast's
interest. This total investment has been allocated based on a third party appraisal to QVC's assets and liabilities as follows (amounts in millions):

Current assets, including cash and cash equivalents of $632 million

$
1,764Property and equipment


631Intangible assets subject to amortization:Customer relationships(1)


2,336Cable and satellite television distribution rights(1)


2,022Intangible assets not subject to amortization:Trademarks


2,385Goodwill


3,896Other assets


269Liabilities


(888
)Minority interest


(101
)Deferred income taxes


(1,597
)$
10,717


---

The
following unaudited pro forma information for Liberty and its consolidated subsidiaries for the year ended December 31, 2003 was prepared assuming the acquisition of QVC
occurred on January 1, 2003. These pro forma amounts are not necessarily indicative of operating results that would have occurred if the QVC acquisition had occurred on January 1, 2003
(amounts in millions, except per share amounts)

Revenue

$
6,145Loss from continuing operations

$
(1,182
)Net loss

$
(1,175
)Loss per common share

$
(.41
)


(5)Discontinued Operations

Spin Off of Discovery Holding Company

On July 21, 2005 (the "DHC Spin Off Date"), Liberty completed the spin off (the "DHC Spin Off") of DHC to its shareholders. The DHC Spin Off was effected
as a dividend by Liberty to holders of its Series A and Series B common stock of shares of DHC Series A and Series B common stock, respectively. Holders of Liberty common
stock on July 15, 2005 received 0.10 of a share of DHC Series A common stock for each share of Liberty Series A common stock owned and 0.10 of a share of DHC Series B
common stock for each share of Liberty Series B common stock owned. The DHC Spin Off did not involve the payment of any consideration by the holders of Liberty common stock and is intended to
qualify as a tax-free transaction. At the time of the DHC Spin Off, DHC's assets were comprised of Liberty's 100% ownership interest in Ascent Media Group, LLC, Liberty's 50% ownership
interest in Discovery Communications, Inc. and $200 million in cash.

Following
the DHC Spin Off, DHC and Liberty operate independently, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the DHC Spin Off, DHC
and

II-46

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Liberty
entered into certain agreements in order to govern certain of the ongoing relationships between Liberty and DHC after the DHC Spin Off and to provide for an orderly transition. These
agreements include a Reorganization Agreement, a Facilities and Services Agreement, a Tax Sharing Agreement and a Short-Term Credit Facility.

The
Reorganization Agreement provides for, among other things, the principal corporate transactions required to effect the DHC Spin Off and cross indemnities. Pursuant to the Facilities
and Services Agreement, Liberty provides DHC with office space and certain general and administrative services including legal, tax, accounting, treasury, engineering and investor relations support.
DHC reimburses Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services and for DHC's allocable portion of facilities costs and costs
associated with any shared services or personnel.

Under
the Tax Sharing Agreement, Liberty generally is responsible for U.S. federal, state and local and foreign income taxes owing with respect to consolidated returns which include both
Liberty and DHC. DHC is responsible for all other taxes with respect to returns which include DHC, but do not include Liberty whether accruing before, on or after the DHC Spin Off. The Tax Sharing
Agreement requires that DHC will not take, or fail to take, any action where such action, or failure to act, would be inconsistent with or prohibit the DHC Spin Off from qualifying as a
tax-free transaction. Moreover, DHC has indemnified Liberty for any loss resulting from such action or failure to act, if such action or failure to act precludes the DHC Spin Off from
qualifying as a tax-free transaction.

Spin Off of Liberty Media International, Inc.

On June 7, 2004 (the "LMI Spin Off Date"), Liberty completed the spin off (the "LMI Spin Off") of its wholly-owned subsidiary, Liberty Media
International, Inc., to its shareholders. Substantially all of the assets and businesses of LMI were attributed to Liberty's former International Group segment. In connection with the LMI Spin
Off, holders of Liberty common stock on June 1, 2004 received 0.05 of a share of LMI Series A common stock for each share of Liberty Series A common stock owned and 0.05 of a
share of LMI Series B common stock for each share of Liberty Series B common stock owned. The LMI Spin Off is intended to qualify as a tax-free spin off. For accounting
purposes, the
LMI Spin Off is deemed to have occurred on June 1, 2004, and no gain or loss was recognized by Liberty in connection with the LMI Spin Off due to the pro rata nature of the distribution.

In
addition to the assets in Liberty's International Group operating segment, Liberty also contributed certain monetary assets to LMI in connection with the LMI Spin Off. These monetary
assets consisted of $50 million in cash, 5 million American Depository Shares for preferred, limited voting ordinary shares of News Corporation ("News Corp.") and related derivatives,
and a 99.9% economic interest in 345,000 shares of preferred stock of ABC Family Worldwide, Inc.

Following
the LMI Spin Off, LMI and Liberty operate independently, and neither had any stock ownership, beneficial or otherwise, in the other. In connection with the LMI Spin Off, LMI
and Liberty entered into certain agreements in order to govern certain of the ongoing relationships between Liberty and LMI after the LMI Spin Off and to provide for an orderly transition. These
agreements include a Reorganization Agreement and a Tax Sharing Agreement.

The
Reorganization Agreement provided for, among other things, the principal corporate transactions required to effect the LMI Spin Off and cross indemnities.

Under
the Tax Sharing Agreement, Liberty generally is responsible for U.S. federal, state and local and foreign income taxes owing with respect to consolidated returns which include both
Liberty and

II-47

---



LMI.
LMI is responsible for all other taxes with respect to returns which include LMI, but do not include Liberty whether accruing before, on or after the LMI Spin Off. The Tax Sharing Agreement
requires that LMI will not take, or fail to take, any action where such action, or failure to act, would be inconsistent with or prohibit the LMI Spin Off from qualifying as a tax-free
transaction. Moreover, LMI has indemnified Liberty for any loss resulting from such action or failure to act, if such action or failure to act precludes the LMI Spin Off from qualifying as a
tax-free transaction.

In
the third quarter of 2005, Liberty filed its 2004 tax return and adjusted the amount of net operating loss and capital loss carryforwards allocated to LMI. Such adjustment resulted in
an increase to Liberty's deferred income tax liabilities and a reduction of additional paid-in capital of $28 million.

DMX Music

During the fourth quarter of 2004, the executive committee of the board of directors of Liberty approved a plan to dispose of Liberty's approximate 56% ownership
interest in Maxide Acquisition, Inc. (d/b/a DMX Music, "DMX"). DMX was principally engaged in programming, distributing and marketing digital and analog music services to homes and businesses
and was included in Liberty's former Networks Group segment. On February 14, 2005, DMX commenced proceedings under Chapter 11 of the United States Bankruptcy Code. DMX entered into an
arrangement, subject to the approval by the Bankruptcy Court, to sell substantially all of its operating assets to an independent third party. On May 16, 2005, the Bankruptcy Court entered a
written order approving the transaction, and the sale transaction was completed. As a result of the DMX Bankruptcy filing, Liberty deconsolidated DMX effective January 1, 2005. In connection
with its decision to dispose of its ownership interest, Liberty recognized a $23 million impairment loss to write down the carrying value of the net assets of DMX to their estimated fair value
based upon the aforementioned arrangement to sell the assets. Such loss has been included in loss from discontinued operations in the accompanying consolidated financial statements for the year ended
December 31, 2004.

The
consolidated financial statements and accompanying notes of Liberty have been prepared reflecting DHC, LMI and DMX as discontinued operations. Accordingly, the assets and
liabilities, revenue, costs and expenses, and cash flows of DHC, LMI and DMX have been excluded from the respective captions in the accompanying consolidated balance sheets, statements of operations,
statements of comprehensive earnings (loss) and statements of cash flows and have been reported separately in such consolidated financial statements.

Certain
combined statement of operations information for DHC, LMI and DMX, which is included in earnings (loss) from discontinued operations, is as follows:

Years ended
December 31,2005

2004

2003amounts in millionsRevenue

$
390

1,773

798Earnings (loss) before income taxes and minority interests

$
48

(93
)
37


Certain
asset and liability amounts for DHC as of July 21, 2005 are as follows (amounts in millions):

Investment in Discovery

$
2,982Goodwill

$
2,135Deferred tax liabilities

$
(1,060
)


II-48

---



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

Investments in AFS securities, which are recorded at their respective fair market values, and other cost investments are summarized as follows:

December 31,2005

2004amounts in millionsNews Corp.

$
8,171

9,667IAC/InterActiveCorp ("IAC")


1,960

3,824Time Warner Inc. ("Time Warner") (1)


2,985

3,330Sprint Nextel Corporation ("Sprint") (2)


2,162

2,342Motorola, Inc. ("Motorola") (3)


1,672

1,273Other AFS equity securities (4)


1,088

1,023Other AFS debt securities (5)


389

304Other cost investments and related receivables


79

8718,506

21,850Less short-term investments


(9
)
(3
)$
18,497

21,847


---

News Corp.

Effective October 14, 2003, pursuant to a put/call arrangement with News Corp., Liberty acquired $500 million of American Depository Shares ("ADSs")
for News Corp. preferred limited voting shares at $21.50 per ADS. In addition during 2003, Liberty sold certain of its News Corp. non-voting ADSs in the open market and purchased voting
News Corp. ADSs in the open market. Liberty recognized a pre-tax gain of $236 million on the sale of its non-voting ADSs. In early 2004, Liberty purchased additional
voting ADSs and sold additional non-voting ADSs in the open market and recorded a pre-tax gain of $134 million. On a net basis, Liberty effectively exchanged
21.2 million non-voting ADSs and $693 million in cash for 48 million voting ADSs, taking into account proceeds from sales of, and unwinding of collars on,
non-voting News Corp. ADSs.

In
the fourth quarter of 2004, News Corp. reincorporated as a U.S. corporation and effected a reverse stock split by exchanging one share of newly issued voting stock ("NWS") or
non-voting stock

II-49

---



("NWSA")
for every two outstanding ADSs. In November 2004, Liberty entered into total return equity swaps with a financial institution with respect to 92 million shares of NWS. Pursuant
to the terms of the swap, the financial institution acquired the 92 million shares of NWS for Liberty's benefit for a weighted average strike price of $17.48. In December 2004, Liberty
elected to terminate the swaps. In connection with such termination, Liberty delivered 86.9 million shares of NWSA with a fair market value of $1,608 million in exchange for the
92 million shares of NWS with a fair market value of $1,749 million. Accordingly, Liberty recognized a pre-tax gain on the swap transaction of $141 million, which is
included in realized and unrealized gains on financial instruments and a pre-tax gain on the exchange of NWSA for NWS of $710 million, which is included in gains on dispositions. At
December 31, 2005, Liberty has an approximate 16% economic interest and an approximate 19% voting interest in News Corp.

IAC/InterActiveCorp

Effective August 9, 2005, IAC completed the spin-off of its subsidiary, Expedia, Inc. ("Expedia"). Shareholders of IAC, including
Liberty, received one share of Expedia for each share of IAC owned. Subsequent to the spin-off of Expedia, Liberty owns approximately 20% of the outstanding Expedia common stock
representing a 52% voting interest. However, under existing governance arrangements, the Chairman of Expedia is currently entitled to vote Liberty's shares of Expedia, subject to certain limitations.
As Liberty has appointed two out of nine members of Expedia's board of directors, it accounts for this investment using the equity method of accounting. Liberty allocated its pre-spin off
carrying value in IAC between IAC and Expedia based on the relative trading prices of IAC and Expedia. Unrealized holding gains included in the carrying value allocated to Expedia were reversed as
part of this allocation.

At
December 31, 2005, Liberty owns approximately 22% of IAC common stock representing an approximate 54% voting interest. However, under existing governance arrangements, the
Chairman of IAC is currently entitled to vote Liberty's shares, and due to the fact that Liberty has rights to appoint only two of thirteen members to the IAC board of directors, Liberty's ability to
exert significant influence over IAC is limited at this time. Accordingly, Liberty accounts for this investment as an AFS security.

Other

During the fourth quarter of 2003, Liberty sold all of its shares of Vivendi Universal common stock in the open market for aggregate cash proceeds of
$838 million and recognized a $262 million gain (before tax expense of $102 million).

Nontemporary Declines in Fair Value of Investments

During the years ended December 31, 2005, 2004 and 2003, Liberty determined that certain of its AFS securities (including News Corp. in 2005) and cost
investments experienced nontemporary declines in value. The primary factors considered by Liberty in determining the timing of the recognition for the majority of these impairments was the length of
time the investments traded below Liberty's cost bases and the lack of near-term prospects for recovery in the stock prices. As a result, the carrying amounts of such investments were
adjusted to their respective fair values based primarily on quoted market prices at the balance sheet date. These adjustments are reflected as nontemporary declines in fair value of investments in the
consolidated statements of operations. The amount of nontemporary decline recognized for Liberty's News Corp. voting shares in 2005 was $352 million.

II-50

---



Unrealized Holdings Gains and Losses

Unrealized holding gains and losses related to investments in AFS securities are summarized below.

|                                |  | December 31, 2005 |       | December 31, 2004
|------------------------------- |  | ----------------- | ----- | -----------------
|
|
|Gross unrealized holding gains  |  | $                 | 5,459 |                  
|Gross unrealized holding losses |  | $                 | (27   | )                

The
aggregate fair value of securities with unrealized holding losses at December 31, 2005 was $411 million. None of these securities had unrealized losses for more than 12
continuous months.

(7)Derivative Instruments

The Company's derivative instruments are summarized as follows:

December 31,Type of derivative2005

2004amounts in millionsAssetsEquity collars

$
1,568

2,016Put spread collars


133

291Other


83

1211,784

2,428Less current portion


(661
)
(827
)$
1,123

1,601LiabilitiesExchangeable debenture call option obligations

$
927

1,102Put options


342

445Equity collars


160

398Borrowed shares


1,581

907Other


16

1393,026

2,991Less current portion


(1,939
)
(1,179
)$
1,087

1,812


Equity Collars, Narrow-Band Collars, Put Spread Collars and Put Options

The Company has entered into equity collars, narrow-band collars, put spread collars, written put and call options and other financial instruments to
manage market risk associated with its investments in certain marketable securities. These instruments are recorded at fair value based on option pricing models. Equity collars provide the Company
with a put option that gives the Company the right to require the counterparty to purchase a specified number of shares of the underlying security at a specified price at a specified date in the
future. Equity collars also provide the counterparty with a call option that gives the counterparty the right to purchase the same securities at a specified price at a

II-51

---



specified
date in the future. The put option and the call option generally have equal fair values at the time of origination resulting in no cash receipts or payments. Narrow-band collars
are equity collars in which the put and call prices are set so that the call option has a relatively higher fair value than the put option at the time of origination. In these cases the Company
receives cash equal to the difference between such fair values.

Borrowed Shares

In connection with certain of its derivative instruments, Liberty periodically borrows shares of the underlying securities from a counterparty and delivers these
borrowed shares in settlement of maturing derivative positions. In these transactions, a similar number of shares that are owned by Liberty have been posted as collateral with the counterparty. These
share borrowing arrangements can be terminated at any time at Liberty's option by delivering shares to the counterparty. The counterparty can terminate these arrangements upon the occurrence of
certain events which limit the trading volume of the underlying security. The liability under these share borrowing arrangements is marked to market each reporting period with changes in value
recorded in unrealized gains or losses in the consolidated statement of operations. The shares posted as collateral under these arrangements continue to be treated as AFS securities and are marked to
market each reporting period with changes in value recorded as unrealized gains or losses in other comprehensive earnings.

Exchangeable Debenture Call Option Obligations

Liberty has issued senior exchangeable debentures which are exchangeable for the value of a specified number of shares of Sprint common stock, Motorola and
Freescale Semiconductor, Inc. common stock, Viacom Class B and CBS Corporation Class B common stock or Time Warner common stock, as applicable. (See note 9 for a more
complete description of the exchangeable debentures.)

Under
Statement 133, the call option feature of the exchangeable debentures is reported separately from the long-term debt portion in the consolidated balance sheets at fair
value. Changes in the fair value of the call option obligations are recognized as unrealized gains (losses) on derivative instruments in Liberty's consolidated statements of operations.

Realized and Unrealized Gains on Derivative Instruments

Realized and unrealized gains (losses) on derivative instruments are comprised of the following:

|                                                                   |  | Years ended
December 31, |     
|------------------------------------------------------------------ |  | ------------------------ | ----
|
|
|Change in fair value of exchangeable debenture call option feature |  | $                        | 172 
|Change in the fair value of equity collars                         |  |                          | 311 
|Change in the fair value of borrowed shares                        |  |                          | (205
|Change in the fair value of put options                            |  |                          | (66 
|Change in the fair value of put spread collars                     |  |                          | 9   
|Change in fair value of other derivatives(1)                       |  |                          | 36  
|                                                                   |  |                          |     
|                                                                   |  | $                        | 257 
|                                                                   |  |                          |     

---

II-52

---



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

Liberty has various investments accounted for using the equity method. The following table includes Liberty's carrying amount and percentage ownership of the more
significant investments in affiliates at December 31, 2005 and the carrying amount at December 31, 2004:

|         |  | December 31,
2005 |  | December 31,
2004
|-------- |  | ----------------- |  | -----------------
|
|
|Expedia  |  | 20%               |  | $                
|Court TV |  | 50%               |  |                  
|GSN      |  | 50%               |  |                  
|Other    |  | various           |  |                  
|         |  |                   |  |                  
|         |  |                   |  | $                
|         |  |                   |  |                  

Expedia

IAC completed the spin off of Expedia on August 9, 2005. Accordingly, the Company recorded its share of earnings of Expedia for the five months ended
December 31, 2005. The fair value of the Company's investment in Expedia was $1,659 million at December 31, 2005. Summarized financial

II-53

---



information
as of December 31, 2005 and for the year then ended for Expedia is as follows (amounts in millions):

Consolidated Balance SheetCurrent assets

$
590Property and equipment


91Goodwill


5,860Intangible assets


1,177Other assets


39Total assets

$
7,757Current liabilities

$
1,438Deferred income taxes


369Other liabilities


144Minority interest


72Stockholders' equity


5,734Total liabilities and equity

$
7,757Consolidated Statement of OperationsRevenue

$
2,120Cost of revenue


(471
)Gross profit


1,649Selling, general and administrative


(1,034
)Stock compensation


(92
)Amortization


(126
)Operating income


397Interest income


49Other expense


(31
)Income tax expense


(186
)Net earnings

$
229


II-54

---





(9)Long-Term Debt

Debt is summarized as follows:

Carrying value
December 31,Outstanding
principal
December 31,
20052005

2004amounts in millionsParent company debt:Senior notes and debentures3.5% Senior Notes due 2006

$
121


121

513Floating Rate Senior Notes due 2006


1,247


1,247

2,4637.875% Senior Notes due 2009


670


666

7117.75% Senior Notes due 2009


234


235

2355.7% Senior Notes due 2013


802


800

8008.5% Senior Debentures due 2029


500


495

4958.25% Senior Debentures due 2030


902


895

951Senior exchangeable debentures4% Senior Exchangeable Debentures due 2029


869


251

2493.75% Senior Exchangeable Debentures due 2030


810


231

2283.5% Senior Exchangeable Debentures due 2031


600


235

2313.25% Senior Exchangeable Debentures due 2031


551


117

1180.75% Senior Exchangeable Debentures due 2023


1,750


1,552

1,4739,056


6,845

8,467QVC bank credit facility


800


800

Other subsidiary debt


105


105

109Total debt

$
9,961


7,750

8,576Less current maturities





(1,379
)
(10
)Total long-term debt




$
6,371

8,566


Parent Company Debt

During the year ended December 31, 2005, and pursuant to a previously announced debt reduction plan, Liberty retired $1,719 million principal amount
of its parent company debt (primarily comprised of its senior notes) for aggregate cash consideration of $1,731 million plus accrued interest. In connection with these debt retirements, Liberty
recognized a loss on early extinguishment of debt of $18 million, which is included in other income (expense) in the accompanying consolidated statement of operations.

Senior Notes and Debentures

The Floating Rate Notes accrue interest at 3 month LIBOR plus a margin. At December 31, 2005 the borrowing rate was 5.99%.

Interest
on the Senior Notes and Senior Debentures is payable semi-annually based on the date of issuance.

II-55

---



The
Senior Notes and Senior Debentures are stated net of an aggregate unamortized discount of $17 million and $20 million at December 31, 2005 and 2004,
respectively, which is being amortized to interest expense in the accompanying consolidated statements of operations.

Senior Exchangeable Debentures

Each $1,000 debenture of Liberty's 4% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 11.4743 shares of Sprint common
stock. Liberty may, at its election, pay the exchange value in cash, Sprint common stock or a combination thereof. Liberty, at its option, may redeem the debentures, in whole or in part, for cash
generally equal to the face amount of the debentures plus accrued interest.

Each
$1,000 debenture of Liberty's 3.75% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 8.3882 shares of Sprint common stock. Liberty may, at its
election, pay the exchange value in cash, Sprint common stock or a combination thereof. Liberty, at its option, may redeem the debentures, in whole or in part, for cash equal to the face amount of the
debentures plus accrued interest.

Each
$1,000 debenture of Liberty's 3.5% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 36.8189 shares of Motorola common stock and 4.0654 shares
of Freescale Semiconductor, Inc. ("Freescale"), which Motorola spun off to its shareholders in December 2004. Such exchange value is payable, at Liberty's option, in cash, Motorola and
Freescale stock or a combination thereof. Liberty, at its option, may redeem the debentures, in whole or in part, for cash generally equal to the face amount of the debentures plus accrued interest.

Each
$1,000 debenture of Liberty's 3.25% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 9.2833 shares of Viacom Class B common stock and
9.2833 shares of CBS Corporation ("CBS") Class B common stock, which Viacom spun off to its shareholders in December 2005. Such exchange value is payable at Liberty's option in cash,
Viacom and CBS stock or a combination thereof. On or after March 15, 2006, Liberty, at its option, may redeem the debentures, in whole or in part, for cash equal to the face amount of the
debentures plus accrued interest.

Each
$1,000 debenture of Liberty's 0.75% Senior Exchangeable Debentures is exchangeable at the holder's option for the value of 57.4079 shares of Time Warner common stock. Liberty may,
at its election, pay the exchange value in cash, Time Warner common stock, shares of Liberty Series A common stock or a combination thereof. On or after April 5, 2008, Liberty, at its
option, may redeem the debentures, in whole or in part, for shares of Time Warner common stock, cash or any combination thereof equal to the face amount of the debentures plus accrued interest. On
March 30, 2008, March 30, 2013 or March 30, 2018, each holder may cause Liberty to purchase its exchangeable debentures, and Liberty, at its election, may pay the purchase price
in shares of Time Warner common stock, cash, Liberty Series A common stock, or any combination thereof.

Interest
on the Company's exchangeable debentures is payable semi-annually based on the date of issuance. At maturity, all of the Company's exchangeable debentures are
payable in cash.

In
accordance with Statement 133, the call option feature of the exchangeable debentures is reported at fair value and separately from the long-term debt in the consolidated
balance sheet. The reported amount of the long-term debt portion of the exchangeable debentures is calculated as the difference between the face amount of the debentures and the fair value
of the call option feature on the date of issuance. The long-term debt is accreted to its face amount over the expected term of the

II-56

---



debenture
using the effective interest method. Accordingly, at December 31, 2005, the difference between the principal amount and the carrying value of the long-term debt portion is
the unamortized fair value of the call option feature that was recorded at the date of issuance of the respective debentures. Accretion related to the Company's exchangeable debentures aggregated
$89 million, $83 million and $61 million during the years ended December 31, 2005, 2004 and 2003, respectively, and is included in interest expense in the accompanying
consolidated statements of operations.

QVC Bank Credit Facility

Effective May 20, 2005, QVC entered into a $2 billion bank credit facility (the "QVC Credit Facility"). The QVC Credit Facility is comprised of an
$800 million term loan that was drawn at closing, a $400 million U.S. dollar term loan that can be drawn at any time before September 30, 2006, a $400 million
multi-currency term loan that can be drawn at any time before September 30, 2006, a $200 million U.S. dollar revolving loan and a $200 million multi-currency revolving loan. The
foregoing multi-currency loans can be made, at QVC's option, in U.S. dollars, Japanese yen, U.K. pound sterling or euros. All loans are due and payable on May 20, 2010, and accrue interest
(4.94% at December 31, 2005), at the option of QVC, at LIBOR plus an applicable margin or the Alternative Base Rate, as defined in the QVC Credit Facility, plus an applicable margin. QVC is
required to pay a commitment fee quarterly in arrears on the unused portion of the commitments.

The
QVC Credit Facility contains restrictive covenants, which require among other things, the maintenance of certain financial ratios and include limitations on indebtedness, liens,
encumbrances, dispositions, guarantees and dividends. QVC was in compliance with its debt covenants at December 31, 2005.

Other Subsidiary Debt

Other subsidiary debt at December 31, 2005 is comprised primarily of capitalized satellite transponder lease obligations.

Five Year Maturities

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

2006

$
1,3792007

$
112008

$
1,7622009

$
9162010

$
12


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Fair Value of Debt

Liberty estimates the fair value of its debt based on the quoted market prices for the same or similar issues or on the current rate offered to Liberty for debt
of the same remaining maturities. The fair value of Liberty's publicly traded debt at December 31, 2005 is as follows (amounts in millions):

Fixed rate senior notes

$
1,838Floating rate senior notes

$
1,228Senior debentures

$
1,347Senior exchangeable debentures, including call option obligation

$
3,858


Liberty
believes that the carrying amount of its subsidiary debt approximated fair value at December 31, 2005.

(10)Income Taxes

Income tax benefit (expense) consists of:

Years ended
December 31,2005

2004

2003amounts in millionsCurrent:Federal

$
(100
)
(177
)
(4
)State and local


(75
)
(61
)
(29
)Foreign


(89
)
(114
)
(40
)(264
)
(352
)
(73
)Deferred:Federal


237

166

(224
)State and local


170

59

(44
)Foreign


(2
)
8

(1
)405

233

(269
)Income tax benefit (expense)

$
141

(119
)
(342
)


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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:

Years ended
December 31,2005

2004

2003amounts in millionsComputed expected tax benefit (expense)

$
72

(77
)
310Change in foreign and state tax rates


147



State and local income taxes, net of federal income taxes


16

(6
)
(45
)Foreign taxes


(31
)
(47
)
(40
)Change in valuation allowance affecting tax expense


(59
)
(12
)
(65
)Recognition of tax basis in equity of DMX




38

Goodwill impairment charges not deductible for income tax purposes






(477
)Other, net


(4
)
(15
)
(25
)Income tax benefit (expense)

$
141

(119
)
(342
)


The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

December 31,2005

2004amounts in millionsDeferred tax assets:Net operating and capital loss carryforwards

$
787

1,116Accrued stock compensation


90

125Other future deductible amounts


406

189Deferred tax assets


1,283

1,430Valuation allowance


(459
)
(400
)Net deferred tax assets


824

1,030Deferred tax liabilities:Investments


6,033

7,297Intangible assets


2,528

2,465Discount on exchangeable debentures


1,006

863Other


112

240Deferred tax liabilities


9,679

10,865Net deferred tax liabilities

$
8,855

9,835


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---



The
Company's deferred tax assets and liabilities are reported in the accompanying consolidated balance sheets as follows:

December 31,2005

2004amounts in millionsCurrent deferred tax asset

$
(33
)
(28
)Current deferred tax liabilities


160

162Long-term deferred tax liabilities


8,728

9,701Net deferred tax liabilities

$
8,855

9,835


The
Company's valuation allowance increased $59 million in 2005.

At
December 31, 2005, Liberty had net operating and capital loss carryforwards for income tax purposes aggregating approximately $1,943 million which, if not utilized to
reduce taxable income in future periods, will expire as follows: 2006: $3 million; 2007: $2 million; 2008: $12 million; 2009: $392 million;
2010: $4 million and beyond 2010: $1,530 million. Of the foregoing net operating and capital loss carryforward amount, approximately $871 million is subject to certain limitations
and may not be currently utilized. The remaining $1,072 million is currently available to be utilized to offset future taxable income of Liberty's consolidated tax group.

Since
the date Liberty issued its exchangeable debentures, it has claimed interest deductions on such exchangeable debentures for federal income tax purposes based on the "comparable
yield" at which it could have issued a fixed-rate debenture with similar terms and conditions. In all instances, this policy has resulted in Liberty claiming interest deductions
significantly in excess of the cash interest currently paid on its exchangeable debentures. Interest deducted in prior years on its exchangeable debentures has contributed to net operating losses
("NOLs") that may be carried to offset taxable income in 2005 and later years. These NOLs and current interest deductions on its exchangeable debentures are being used to offset taxable income
currently being generated.

The
IRS has issued Technical Advice Memorandums ("TAMs") challenging the current deductibility of interest expense claimed on exchangeable debentures issued by other companies. The
TAMs conclude that such interest expense must be capitalized as basis to the shares referenced in the exchangeable debentures. If the IRS were to similarly challenge Liberty's tax treatment of
these interest deductions, and ultimately win such challenge, there would be no impact to Liberty's reported total tax expense as the resulting increase in current tax expense would be offset by a
decrease in its deferred tax expense. However, the NOLs Liberty has recorded would not be available to offset its current taxable income, and Liberty would be required to make current federal income
tax payments. These federal income tax payments could prove to be significant.

During
the period from March 9, 1999 to August 10, 2001, Liberty was included in the consolidated federal income tax return of AT&T and was a party to a tax sharing
agreement with AT&T (the "AT&T Tax Sharing Agreement"). While Liberty was a subsidiary of AT&T, Liberty recorded its stand-alone tax provision on a separate return basis. Under the AT&T Tax Sharing
Agreement, Liberty received a cash payment from AT&T in periods when Liberty generated taxable losses and such taxable losses were utilized by AT&T to reduce its consolidated income tax liability. To
the extent such losses were not utilized by AT&T, such amounts were available to reduce federal

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taxable
income generated by Liberty in future periods, similar to a net operating loss carryforward, and were accounted for as a deferred federal income tax benefit. Subsequent to Liberty's spin off
from AT&T, if adjustments are made to amounts previously paid under the AT&T Tax Sharing Agreement, such adjustments are reflected as adjustments to additional paid-in capital. During the
period from March 10, 1999 to December 31, 2002, Liberty received cash payments from AT&T aggregating $670 million as payment for Liberty's taxable losses that AT&T utilized to
reduce its income tax liability.

Also,
pursuant to the AT&T Tax Sharing Agreement and in connection with the split off from AT&T, AT&T was required to pay Liberty an amount equal to 35% of the amount of the NOLs
reflected in
TCI's final federal income tax return that had not been used as an offset to Liberty's obligations under the AT&T Tax Sharing Agreement and that had been, or were reasonably expected to be, utilized
by AT&T. In connection with the split off, Liberty received an $803 million payment for TCI's NOLs and recorded such payment as an increase to additional paid-in capital. Liberty
was not paid for certain of TCI's NOLs ("SRLY NOLs") due to limitations and uncertainty regarding AT&T's ability to use them to offset taxable income in the future. In the event AT&T was ultimately
able to use any of the SRLY NOLs, they would be required to pay Liberty 35% of the amount of the SRLY NOLs used. In the fourth quarter of 2004 and in connection with the completion of an IRS audit of
TCI's tax return for 1994, it was determined that Liberty was required to recognize additional taxable income related to the recapitalization of one of its investments resulting in a tax liability of
approximately $30 million. As a result of the tax assessment, Liberty also received a corresponding amount of additional tax basis in the investment. However, Liberty was able to cause AT&T to
use a portion of the SRLY NOLs to offset this taxable income, the benefit of which resulted in the elimination of the $30 million tax liability and an increase to additional paid-in
capital.

In
the fourth quarter of 2004, AT&T requested a refund from Liberty of $70 million, plus accrued interest, relating to losses that it generated in 2002 and 2003 and was able to
carry back to offset taxable income previously offset by Liberty's losses. AT&T has asserted that Liberty's losses caused AT&T to pay $70 million in alternative minimum tax ("AMT") that it
would not have been otherwise required to pay had Liberty's losses not been included in its return. In 2004, Liberty estimated that it may ultimately pay AT&T up to $30 million of the requested
$70 million because Liberty believed AT&T received an AMT credit of $40 million against income taxes resulting from the AMT previously paid. Accordingly, Liberty accrued a
$30 million liability with an offsetting reduction of additional paid-in capital. The net effect of the completion of the IRS tax audit noted above (including the benefit derived
from AT&T for the utilization of the SRLY NOLs) and Liberty's accrual of amounts due to AT&T was an increase to deferred tax assets and an increase to other liabilities.

In
the fourth quarter of 2005, AT&T requested an additional $21 million relating to additional losses it generated and was able to carry back to offset taxable income previously
offset by Liberty's losses. In addition, the information provided to Liberty in connection with AT&T's request shows that AT&T has not yet claimed a credit for AMT previously paid. Accordingly, in the
fourth quarter of 2005, Liberty increased its accrual by approximately $40 million (with a corresponding reduction of additional paid-in capital) representing its estimate of the
amount it may ultimately pay (excluding accrued interest, if any) to AT&T as a result of this request. Although Liberty has not reduced its accrual for any future refunds, Liberty believes it is
entitled to a refund when AT&T is able to realize a benefit in the form of a credit for the AMT previously paid.

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In
March 2006, AT&T requested an additional $21 million relating to additional losses and IRS audit adjustments that it claims it is able to use to offset taxable income
previously offset by Liberty's losses. Liberty is currently reviewing this claim and has not recorded an accrual for this request in its consolidated financial statements for the year ended
December 31, 2005.

Although
for accounting purposes Liberty has accrued a portion of the amounts claimed by AT&T to be owed by Liberty under the AT&T Tax Sharing Agreement, Liberty believes there are valid
defenses or set-off or similar rights in its favor that may cause the total amount that it owes AT&T to be less than the amounts accrued.

(11)Stockholders' Equity

Preferred Stock

Liberty's preferred stock is issuable, from time to time, with such designations, preferences and relative participating, optional or other 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 Liberty's Board of
Directors. As of December 31, 2005, no shares of preferred stock were issued.

Common Stock

Liberty's Series A common stock has one vote per share, and its Series B common stock has ten votes per share. Each share of the Series B
common stock is exchangeable at the option of the holder for one share of Series A common stock.

As
of December 31, 2005, there were 52.8 million shares of Liberty Series A common stock and 30.0 million shares of Liberty Series B common stock
reserved for issuance under exercise privileges of outstanding stock options and warrants.

Purchases of Common Stock

During 2005, Liberty sold put options with respect to shares of its Series A common stock for net cash proceeds of $2 million. Liberty accounts for
the put options pursuant to Statement of Financial Accounting Standards No. 150,"Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity"("Statement 150"). Accordingly, the put options are recorded at fair value, and changes in the fair value are included in realized and unrealized gains
(losses) on derivative instruments in the accompanying consolidated statement of operations. At December 31, 2005, Liberty had outstanding put options with respect to 12.5 million shares
of its Series A common stock with an average put price of $7.88 per share. All of these put options expire within 45 days after December 31, 2005.

During
the year ended December 31, 2004, the Company acquired approximately 96.0 million shares of its Series B common stock from the estate and family of the late
founder of Liberty's former parent in exchange for approximately 105.4 million shares of Liberty Series A common stock. Ten million of the acquired Series B shares have been
accounted for as treasury stock in the accompanying consolidated balance sheet, and the remaining Series B shares have been retired.

On
July 28, 2004, Liberty completed a transaction with Comcast pursuant to which Liberty repurchased 120.3 million shares of its Series A common stock (valued at
$1,017 million) held by

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Comcast
in exchange for 100% of the stock of Encore ICCP, Inc. ("Encore ICCP"), a wholly owned subsidiary of Liberty. At the time of the exchange, Encore ICCP held Liberty's 10% ownership
interest in E! Entertainment Television, Liberty's 100% ownership interest in International Channel Networks, all of Liberty's rights, benefits and obligations under a TCI Music contribution
agreement, and $547 million in cash. The transaction also resolved all litigation pending between Comcast and Liberty regarding the TCI Music contribution agreement, to which Comcast succeeded
as part of its acquisition of AT&T Broadband in November of 2002. In connection with this transaction, Liberty recognized a pre-tax gain on disposition of assets of $387 million.

During
2004, Liberty entered into zero-strike call spreads ("Z-Call") with respect to six million shares of its Series A common stock. Liberty net cash
settled all of its Z-calls during the first quarter of 2005 for net cash proceeds of $63 million, which primarily represented the return of collateral posted by Liberty in 2004.
Liberty accounts for the Z-Calls pursuant to Statement No. 150. Changes in the fair value of the Z-Calls are included in realized and unrealized gains (losses) on
derivative instruments in the accompanying consolidated statement of operations.

During
2004, Liberty also sold put options with respect to shares of its Series A common stock for cash proceeds of $3 million. All of these put options expired unexercised
prior to December 31, 2004.

During
the year ended December 31, 2003, the Company purchased 42.3 million shares of its common stock for aggregate cash consideration of $437 million. These
purchases have been accounted for as retirements of common stock and have been reflected as a reduction of stockholders' equity in the accompanying consolidated balance sheet.

(12)Transactions with Officers and Directors

Chairman's Employment Agreement

The Chairman's employment agreement provides for, among other things, deferral of a portion (not in excess of 40%) of the monthly compensation payable to him for
all employment years commencing on or after January 1, 1993. The deferred amounts will be payable in monthly installments over a 20-year period commencing on the termination of the
Chairman'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. The aggregate liability under this arrangement
at December 31, 2005 is $1.9 million, and is included in other liabilities in the accompanying consolidated balance sheet.

The
Chairman's employment agreement also provides that in the event of termination of his employment with Liberty, he will be entitled to receive 240 consecutive monthly payments equal
to $15,000 increased at the rate of 12% per annum compounded annually from January 1, 1988 to the date payment commences ($102,991 per month as of December 31, 2005). Such payments would
commence on the first day of the month succeeding the termination of employment. In the event of the Chairman's death, his beneficiaries would be entitled to receive the foregoing monthly payments.
The aggregate liability under this arrangement at December 31, 2005 is $24.7 million, and is included in other liabilities in the accompanying consolidated balance sheet.

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The Company's Chairman deferred a portion of his monthly compensation under his previous employment agreement with Tele-Communications, Inc.
("TCI"). The Company assumed the obligation to pay that deferred compensation in connection with the TCI/AT&T Merger in 1999. The deferred obligation (together with interest at the rate of 13% per
annum compounded annually), which aggregated $13.9 million at December 31, 2005 and is included in other liabilities in the accompanying consolidated balance sheets, is payable on a
monthly basis, following the occurrence of specified events, under the terms of the previous employment agreement. The rate at which interest accrues on the deferred obligation was established in 1983
pursuant to the previous employment agreement.

Other

In September 2000, certain officers of Liberty purchased a 6% common stock interest in a subsidiary for $1.3 million. Such subsidiary owned an
indirect interest in an entity that held certain of Liberty's investments in satellite and technology related assets. Liberty and the officers entered into a shareholders agreement in which the
officers could require Liberty to purchase, after five years, all or part of their common stock interest in exchange for Series A Liberty stock at the then fair market value. In addition,
Liberty had the right to purchase, in exchange for Series A Liberty common stock, the common stock interests held by the officers at fair market value at any time. During 2001, two of the
officers resigned their positions with the Company, and the Company purchased their respective interests in the subsidiary for the original purchase price plus 6% interest. In December 2005,
Liberty redeemed all of the remaining shares of common stock of the subsidiary from the officers for aggregate cash proceeds of $80.

Effective
November 28, 2003, Liberty acquired all the outstanding stock of TP Investment, Inc. ("TPI"), a corporation wholly owned by TP-JCM, LLC, a limited
liability company in which the sole member is the Company's Chairman. In exchange for the stock of TPI, TP-JCM received 5,281,739 shares of the Company's Series B common stock,
valued in the agreement at $11.50 per share. As prescribed by the Agreement and Plan of Merger pursuant to which the acquisition was effected, that per share value equals 110% of the average of the
closing sale prices of the Company's Series A common stock for the ten trading days ended November 28, 2003. TPI owns 10,602 shares of Series B Preferred Stock of Liberty TP
Management, Inc. ("Liberty TP Management"), a subsidiary of the Company. Those shares of Series B Preferred Stock represent 12% of the voting power of Liberty TP Management. TPI also
owns a 5% membership interest (representing a 50% voting interest) in
Liberty TP LLC, a limited liability company which owns approximately 20.6% of the common equity and 27.2% of the voting power of Liberty TP Management. As a result of the acquisition, the Company
beneficially owns all the equity and voting interests in Liberty TP Management. Liberty TP Management owns Liberty's interest in TruePosition, Inc. and certain equity interests in Sprint Nextel
Corporation and IDT Investments, Inc.

In
connection with the acquisition of TPI, the Company entered into a registration rights agreement. That agreement provides for the registration by the Company under applicable federal
and state securities laws, at the holder's request, of the sale of shares of the Company's Series A common stock issuable upon conversion of shares of the Series B common stock that were
issued to TP-JCM.

The
shares of Liberty Series B common stock issued to TP-JCM are subject to the Company's rights to purchase such shares pursuant to a call agreement entered into in
February 1998 by the Chairman and his spouse. Pursuant to the call agreement, Liberty has the right to acquire all of the Liberty Series B common stock held by the Chairman and his
spouse in certain circumstances. The

II-64

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price
of acquiring such shares is generally limited to the market price of the Liberty Series A common stock, plus a 10% premium.

(13)Stock Options and Stock Appreciation Rights

Liberty

Pursuant to the Liberty Media Corporation 2000 Incentive Plan (the "Liberty Incentive Plan"), the Company has granted to certain of its employees stock options,
SARs and stock options with tandem SARs (collectively, "Awards") to purchase shares of Liberty Series A and Series B common stock. The Liberty Incentive Plan provides for Awards to be
made in respect of a maximum of 160 million shares of common stock of Liberty.

In
connection with the Company's rights offering, which expired on December 2, 2002, and pursuant to the Liberty Incentive Plan antidilution provisions, the number of shares and
the applicable exercise prices of all Liberty options granted pursuant to the Liberty Incentive Plan were adjusted as of
October 31, 2002, the record date for the rights offering. As a result of the foregoing modifications, all of the Company's options granted prior to October 31, 2002 are accounted for as
variable plan awards.

On
December 17, 2002, shareholders of the Company approved the Liberty Media Corporation 2002 Nonemployee Director Incentive Plan (the "NDIP"). Under the NDIP, the Liberty Board
of Directors (the "Liberty Board") has the full power and authority to grant eligible nonemployee directors stock options, SARs, stock options with tandem SARs, and restricted stock.

Awards
granted pursuant to the Liberty Incentive Plan and the NDIP during the years ended December 31, 2005, 2004 and 2003 are provided in the table below. The exercise prices in
the table represent the exercise price on the date of grant and have not been adjusted for the effects of the LMI Spin Off and the DHC Spin Off.

|Grant year      |  | Grant group |  | Grant type |  | Number of awards granted |  | Weighted average exercise price |       | Vesting period |         | Term |          | Weighted average grant date fair value
|--------------- |  | ----------- |  | ---------- |  | ------------------------ |  | ------------------------------- | ----- | -------------- | ------- | ---- | -------- | --------------------------------------
|Series A Awards |  |             |  |            |  |                          |  |                                 |       |                |         |     
|2003            |  | Employees   |  | SARs       |  | 4,667,000                |  | $                               | 11.09 |                | 5 years |      | 10 years |                                       
|2003            |  | Employees   |  | SARs       |  | 1,500,000                |  | $                               | 14.33 |                | 5 years |      | 10 years |                                       
|2003            |  | Directors   |  | SARs       |  | 66,000                   |  | $                               | 11.85 |                | 1 year  |      | 10 years |                                       
|2004            |  | Employees   |  | SARs       |  | 4,011,450                |  | $                               | 8.45  |                | 5 years |      | 10 years |                                       
|2004            |  | Directors   |  | SARs       |  | 66,000                   |  | $                               | 11.00 |                | 1 year  |      | 10 years |                                       
|2005            |  | Employees   |  | Options    |  | 9,076,750                |  | $                               | 8.26  |                | 4 years |      | 7 years  |                                       
|2005            |  | Directors   |  | SARs       |  | 55,000                   |  | $                               | 10.36 |                | 1 year  |      | 10 years |                                       
|Series B Awards |  |             |  |            |  |                          |  |                                 |       |                |         |     
|2005            |  | Employees   |  | Options    |  | 1,800,000                |  | $                               | 9.21  |                | 3 years |      | 10 years |                                       

The
estimated fair values of the options noted above are based on the Black-Scholes model and are stated in current annualized dollars on a present value basis. The key assumptions used
in the model for purposes of these calculations generally include the following: (a) a discount rate equal to the Treasury rate for bonds with the same expected term as the Award; (b) a
21% volatility factor;

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(c) the
expected term of the Award; (d) the closing price of the respective common stock on the date of grant; and (e) an expected dividend rate of zero.

In
connection with the LMI Spin Off and pursuant to the anti-dilution provisions of the Liberty Incentive Plan, the Liberty incentive plan committee determined to make
adjustments to outstanding Liberty Awards. As of the record date, each outstanding Award held by (1) employees of LMI, (2) employees of Liberty in departments of Liberty that were
expected to provide services to LMI pursuant to the Facilities and Services Agreement and (3) directors of Liberty were divided into (A) an option to purchase shares of LMI common stock
equal to 0.05 times the number of LMC Awards held by the option holder on the record date and (B) an Award to purchase shares of Liberty common stock equal to the same number of shares of
Liberty common stock for which the outstanding Award was exercisable. The aggregate exercise price of each pre-Spin Off Award was allocated between the new Liberty Award and the LMI Award.
All other Awards were adjusted to increase the number of shares of Liberty common stock for which the Award was exercisable and to decrease the exercise price to reflect the dilutive effect of the
distribution of LMI common stock in the LMI Spin Off.

Pursuant
to the Reorganization Agreement Liberty is responsible for settlement of all Liberty Awards whether held by Liberty employees or LMI employees, and LMI is responsible for
settlement of all LMI Awards whether held by Liberty employees or LMI employees. Liberty will continue to record compensation for all Liberty and LMI Awards held by Liberty employees. The compensation
for LMI Awards will be reflected as an adjustment to additional paid-in capital in Liberty's statement of stockholders' equity.

In
connection with the DHC Spin Off and pursuant to the anti-dilution provisions of the Liberty Incentive Plan, the Liberty incentive plan committee determined to make
adjustments to outstanding Liberty Awards. As of the record date, each outstanding Award held by (1) employees of DHC, (2) employees of Liberty in departments of Liberty that were
expected to provide services to DHC pursuant to the Facilities and Services Agreement and (3) directors of Liberty were divided into (A) an option to purchase shares of DHC common stock
equal to 0.10 times the number of LMC Awards held by the option holder on the record date and (B) an Award to purchase shares of Liberty common stock equal to the same number of shares of
Liberty common stock for which the outstanding Award was exercisable. The aggregate exercise price of each pre-Spin Off Award was allocated between the new Liberty Award and the DHC Award.
All other Awards were adjusted to increase the number of shares of Liberty common stock for which the Award was exercisable and to
decrease the exercise price to reflect the dilutive effect of the distribution of DHC common stock in the DHC Spin Off.

Pursuant
to the Reorganization Agreement Liberty is responsible for settlement of all Liberty Awards whether held by Liberty employees or DHC employees, and DHC is responsible for
settlement of all DHC Awards whether held by Liberty employees or DHC employees. Liberty will continue to record compensation for all Liberty and DHC Awards held by Liberty employees. The compensation
for DHC Awards will be reflected as an adjustment to additional paid-in capital in Liberty's statement of stockholders' equity.

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

|                                 |                                     | Liberty
Series A
common
stock |         | WAEP |       | Liberty
Series B
common
stock |        | WAEP 
|-------------------------------- | ----------------------------------- | ----------------------------- | ------- | ---- | ----- | ----------------------------- | ------ | -----
|
|Outstanding at January 1, 2003   |                                     | 48,661                        |         | $    | 9.60  |                               | 28,165 |      
|                                 | Granted                             |                               | 6,233   |      | $     | 11.88                         |        |     
|                                 | Exercised                           |                               | (323    | )    | $     | 4.68                          |        |     
|                                 | Canceled                            |                               | (619    | )    | $     | 17.22                         |        |     
|                                 | Options issued in mergers           |                               | 1,142   |      | $     | 78.53                         |        |     
|                                 |                                     |                               |         |      |       |                               |        |      
|Outstanding at December 31, 2003 |                                     | 55,094                        |         | $    | 11.23 |                               | 28,165 |      
|                                 | Granted                             |                               | 4,078   |      | $     | 8.54                          |        |     
|                                 | Exercised                           |                               | (2,060  | )    | $     | 2.13                          |        |     
|                                 | Canceled                            |                               | (5,457  | )    | $     | 13.32                         |        |     
|                                 | Adjustments related to LMI Spin Off |                               | 4,321   |      |       |                               |        |     
|                                 |                                     |                               |         |      |       |                               |        |      
|Outstanding at December 31, 2004 |                                     | 55,976                        |         | $    | 9.15  |                               | 28,165 |      
|                                 | Granted                             |                               | 9,189   |      | $     | 8.28                          |        | 1,800
|                                 | Exercised                           |                               | (14,249 | )    | $     | 2.05                          |        |     
|                                 | Repurchased                         |                               | (1,121  | )    | $     | 23.59                         |        |     
|                                 | Canceled                            |                               | (2,211  | )    | $     | 13.93                         |        |     
|                                 | Adjustments related to DHC Spin Off |                               | 4,145   |      |       |                               |        |     
|                                 |                                     |                               |         |      |       |                               |        |      
|Outstanding at December 31, 2005 |                                     | 51,729                        |         | $    | 9.23  |                               | 29,965 |      
|                                 |                                     |                               |         |      |       |                               |        |      
|Exercisable at December 31, 2003 |                                     | 34,529                        |         | $    | 9.12  |                               | 13,378 |      
|                                 |                                     |                               |         |      |       |                               |        |      
|Exercisable at December 31, 2004 |                                     | 37,558                        |         | $    | 8.18  |                               | 18,307 |      
|                                 |                                     |                               |         |      |       |                               |        |      
|Exercisable at December 31, 2005 |                                     | 32,953                        |         | $    | 9.52  |                               | 23,236 |      
|                                 |                                     |                               |         |      |       |                               |        |      

The
following table provides additional information about the Company's outstanding options to purchase Liberty Series A common stock at December 31, 2005.

|No. of outstanding
options (000's) |  | Range of
exercise prices |                  | WAEP of
outstanding
options |   | Weighted
average
remaining life |  | No. of
exercisable
options (000's) |  | WAEP of
exercisable
options
|---------------------------------- |  | ------------------------ | ---------------- | --------------------------- | - | ------------------------------- |  | ---------------------------------- |  | ---------------------------
|7,022                              |  | $                        | 0.55 - $    3.72 |                             | $ | 0.74                            |  | 0.2 years                          |  | 7,022                      
|21,576                             |  | $                        | 5.55 - $    9.87 |                             | $ | 8.17                            |  | 6.8 years                          |  | 6,089                      
|22,193                             |  | $                        | 10.65 - $  12.16 |                             | $ | 10.79                           |  | 5.1 years                          |  | 18,963                     
|938                                |  | $                        | 16.82 - $251.69  |                             | $ | 60.09                           |  | 4.8 years                          |  | 879                        
|                                   |  |                          |                  |                             |   |                                 |  |                                    |  |                            
|51,729                             |  |                          |                  |                             |   |                                 |  |                                    |  | 32,953                     
|                                   |  |                          |                  |                             |   |                                 |  |                                    |  |                            

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QVC

QVC has a qualified and nonqualified combination stock option/stock appreciation rights plan (collectively, the "Tandem Plan") for employees, officers, directors
and other persons designated by the Stock Option Committee of QVC's board of directors. Under the Tandem Plan, the option price is generally equal to the fair market value, as determined by an
independent appraisal, of a share of the underlying common stock of QVC at the date of the grant. The fair value of a share of QVC common stock as of the latest valuation date is $2,960. If the
eligible participant elects the SAR feature of the Tandem Plan, the participant receives 75% of the excess of the fair market value of a share of QVC common stock over the exercise price of the option
to which it is attached at the exercise date. The holders of a majority of the outstanding options have stated an intention not to exercise the SAR feature of the Tandem Plan. Because the exercise of
the option component is more likely than the exercise of the SAR feature, compensation expense is measured based on the stock option component. As a result, QVC is applying fixed plan accounting in
accordance with APB Opinion No. 25. Under the Tandem Plan, option/SAR terms are ten years from the date of grant, with options/SARs generally becoming exercisable over four years from the date
of grant. At December 31, 2005, there were a total of 186,789 options and SARs outstanding, 77,862 of which were vested at a weighted average exercise price of $1,148 and 108,927 of which were
unvested at a weighted average exercise price of $2,324.
During the years ended December 31, 2005 and 2004, QVC received cash proceeds from the exercise of options aggregating $46 million and $39 million, respectively. In 2005 and 2004,
QVC also repurchased shares of common stock issued upon exercise of stock options in prior years. Cash payments aggregated $71 million and $168 million, respectively, for these
repurchases.

As
of December 31, 2005, Liberty had granted to certain officers and employees of QVC a total of 6,383,410 restricted shares of Liberty Series A common stock. Such shares
generally vest as to 50% on each of January 1, 2006 and 2007.

SEG

SEG has outstanding Phantom Stock Appreciation Rights ("PSARS") held by its former chief executive officer. Such PSARs are fully vested and expire on
October 17, 2011, and SEG has accrued $131 million as of December 31, 2005 related to the PSARs. Such amount is payable in cash, Liberty common stock or a combination thereof. In
December 2005, SEG terminated a second PSAR plan for certain of its other executive officers and made cash payments aggregating $7 million upon termination.

Other

Certain of the Company's other 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.

(14)Employee Benefit Plans

Liberty is the sponsor of the Liberty Media 401(k) Savings Plan (the "Liberty 401(k) Plan"), which provides its employees and the employees of certain of its
subsidiaries an opportunity for ownership in the Company and creates a retirement fund. The Liberty 401(k) Plan provides for employees to make contributions to a trust for investment in Liberty common
stock, as well as several mutual funds. The Company and its subsidiaries make matching contributions to the Liberty 401(k) Plan based on a

II-68

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percentage
of the amount contributed by employees. In addition, certain of the Company's subsidiaries have similar employee benefit plans. Employer cash contributions to all plans aggregated
$24 million, $23 million and $12 million for the years ended December 31, 2005, 2004 and 2003, respectively.

(15)Other Comprehensive Earnings (Loss)

Accumulated other comprehensive earnings (loss) included in Liberty's consolidated balance sheets and consolidated statements of stockholders' equity reflect the
aggregate of foreign currency translation adjustments and unrealized holding gains and losses on AFS Securities.

The
change in the components of accumulated other comprehensive earnings (loss), net of taxes, is summarized as follows:

|                             |                              | Foreign
currency
translation
adjustments |      | Unrealized
holding
gains (losses)
on securities |       | Accumulated
other
comprehensive
earnings (loss),
net of taxes |      
|---------------------------- | ---------------------------- | ---------------------------------------- | ---- | ----------------------------------------------- | ----- | ------------------------------------------------------------- | -----
|
|Balance at January 1, 2003   |                              | $                                        | (316 | )                                               | 809   |                                                               | 493  
|                             | Other comprehensive earnings |                                          |      | 35                                              |       | 2,713                                                         |      
|                             |                              |                                          |      |                                                 |       |                                                               |      
|Balance at December 31, 2003 |                              |                                          | (281 | )                                               | 3,522 |                                                               | 3,241
|                             | Other comprehensive earnings |                                          |      | 23                                              |       | 1,002                                                         |      
|                             | Contribution to LMI          |                                          |      |                                                |       | (51                                                           | )    
|                             | Other activity               |                                          |      | 9                                               |       | (9                                                            | )    
|                             |                              |                                          |      |                                                 |       |                                                               |      
|Balance at December 31, 2004 |                              |                                          | (249 | )                                               | 4,464 |                                                               | 4,215
|                             | Other comprehensive loss     |                                          |      | 307                                             |       | (1,101                                                        | )    
|                             |                              |                                          |      |                                                 |       |                                                               |      
|Balance at December 31, 2005 |                              | $                                        | 58   |                                                 | 3,363 |                                                               | 3,421
|                             |                              |                                          |      |                                                 |       |                                                               |      

Included
in Liberty's accumulated other comprehensive earnings (loss) at December 31, 2004 was $123 million, net of income taxes, of foreign currency translation losses
related to Cablevisión, S.A. ("Cablevisión"), a former equity method investment of Liberty, and $186 million, net of income taxes, of foreign currency translation
losses related to Telewest Global, Inc. ("Telewest"), another former equity method investment of Liberty. In the first quarter of 2005, Liberty disposed of its interests in
Cablevisión and Telewest. Accordingly, Liberty recognized in its statement of operations $488 million of foreign currency translation losses (before income tax benefits) related
to Cablevisión and Telewest that were previously included in accumulated other comprehensive earnings (loss).

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

|                                                                         |                              | Before-tax
amount |        | Tax
(expense)
benefit |        | Net-of-tax
amount |       
|------------------------------------------------------------------------ | ---------------------------- | ----------------- | ------ | --------------------- | ------ | ----------------- | ------
|
|Year ended December 31, 2005:                                            |                              |                   |        |                       |        |                   |       
|Foreign currency translation adjustments                                 |                              | $                 | (8     | )                     | 3      |                   | (5    
|Reclassification adjustment for currency losses realized in net earnings |                              |                   | 503    |                       | (191   | )                 | 312   
|Unrealized holding losses on securities arising during period            |                              |                   | (1,808 | )                     | 687    |                   | (1,121
|Reclassification adjustment for holding gains realized in net earnings   |                              |                   | 350    |                       | (133   | )                 | 217   
|Reclass unrealized gain on AFS security                                  |                              |                   | (318   | )                     | 121    |                   | (197  
|                                                                         |                              |                   |        |                       |        |                   |       
|                                                                         | Other comprehensive loss     |                   | $      | (1,281                | )      | 487               |       
|                                                                         |                              |                   |        |                       |        |                   |       
|Year ended December 31, 2004:                                            |                              |                   |        |                       |        |                   |       
|Foreign currency translation adjustments                                 |                              | $                 | 38     |                       | (15    | )                 | 23    
|Unrealized holding losses on securities arising during period            |                              |                   | 2,443  |                       | (953   | )                 | 1,490 
|Reclassification adjustment for holding gains realized in net earnings   |                              |                   | (800   | )                     | 312    |                   | (488  
|                                                                         |                              |                   |        |                       |        |                   |       
|                                                                         | Other comprehensive earnings |                   | $      | 1,681                 |        | (656              | )     
|                                                                         |                              |                   |        |                       |        |                   |       
|Year ended December 31, 2003:                                            |                              |                   |        |                       |        |                   |       
|Foreign currency translation adjustments                                 |                              | $                 | 57     |                       | (22    | )                 | 35    
|Unrealized holding gains on securities arising during period             |                              |                   | 5,477  |                       | (2,136 | )                 | 3,341 
|Reclassification adjustment for holding gains realized in net loss       |                              |                   | (1,030 | )                     | 402    |                   | (628  
|                                                                         |                              |                   |        |                       |        |                   |       
|                                                                         | Other comprehensive earnings |                   | $      | 4,504                 |        | (1,756            | )     
|                                                                         |                              |                   |        |                       |        |                   |       

(16)Transactions with Related Parties

SEG pays Revolution Studios ("Revolution"), an equity affiliate, fees for the rights to exhibit films produced by Revolution. Payments aggregated
$84 million, $99 million and $91 million in 2005, 2004 and 2003, respectively.

(17)Commitments and Contingencies

Film Rights

SEG, a wholly-owned subsidiary of Liberty, provides premium video programming distributed by cable operators, direct-to-home satellite
providers and other distributors throughout the United States. SEG has entered into agreements with a number of motion picture producers which obligate SEG to pay fees ("Programming Fees") for the
rights to exhibit certain films that are released by these producers. The unpaid balance of Programming Fees for films that were available for exhibition by SEG at December 31, 2005 is
reflected as a liability in the accompanying consolidated balance sheet. The balance due as of December 31, 2005 is payable as follows: $191 million in 2006; $11 million in 2007;
and $13 million thereafter.

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SEG
has also contracted to pay Programming Fees for films that have been released theatrically, but are not available for exhibition by SEG until some future date. These amounts have not
been accrued at December 31, 2005. SEG's estimate of amounts payable under these agreements is as follows: $539 million in 2006; $178 million in 2007; $103 million in 2008;
$95 million in 2009; $75 million in 2010 and $52 million thereafter.

In
addition, SEG is also obligated to pay Programming Fees for all qualifying films that are released theatrically in the United States by studios owned by The Walt Disney Company
("Disney") through 2009, all qualifying films that are released theatrically in the United States by studios owned by Sony Pictures Entertainment ("Sony") through 2010 and all qualifying films
produced for theatrical release in the United States by Revolution through 2006. Films are generally available to SEG for exhibition 10-12 months after their theatrical release. The
Programming Fees to be paid by SEG are based on the quantity and the domestic theatrical exhibition receipts of qualifying films. As these films have not yet been released in theatres, SEG is unable
to estimate the amounts to be paid under these output agreements. However, such amounts are expected to be significant.

In
addition to the foregoing contractual film obligations, each of Disney and Sony has the right to extend its contract for an additional three years. If Sony elects to extend its
contract, SEG has agreed to pay Sony a total of $190 million in four annual installments of $47.5 million beginning in 2011. This option expires December 31, 2007. If made, SEG's
payments to Sony would be amortized ratably as programming expense over the extension period beginning in 2011. An extension of this agreement would also result in the payment by SEG of Programming
Fees for qualifying films released by Sony during the extension period. If Disney elects to extend its contract, SEG is not obligated to pay any amounts in excess of its Programming Fees for
qualifying films released by Disney during the extension period. The Disney option expires December 31, 2007.

Guarantees

Liberty guarantees SEG's obligations under certain of its studio output agreements. At December 31, 2005, Liberty's guarantees for obligations for films
released by such date aggregated $779 million. While the guarantee amount for films not yet released is not determinable, such amount is expected to be significant. As noted above, SEG has
recognized the liability for a portion of its obligations under the output agreements. As this represents a commitment of SEG, a consolidated subsidiary of Liberty, Liberty has not recorded a separate
liability for its guarantee of these obligations.

In
connection with agreements for the sale of certain assets, Liberty typically retains liabilities that relate to events occurring prior to its sale, such as tax, environmental,
litigation and employment matters. Liberty generally indemnifies the purchaser in the event that a third party asserts a claim against the purchaser that relates to a liability retained by Liberty.
These types of indemnification guarantees typically extend for a number of years. Liberty is unable to estimate the maximum potential liability for these types of indemnification guarantees as the
sale agreements typically do not specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this
time. Historically, Liberty has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with
respect to these indemnification guarantees.

II-71

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Operating Leases

Liberty leases business offices, has entered into satellite transponder lease agreements and uses certain equipment under lease arrangements. Rental expense under
such arrangements amounted to $52 million, $57 million and $36 million for the years ended December 31, 2005, 2004 and 2003, respectively.

A
summary of future minimum lease payments under noncancelable operating leases as of December 31, 2005 follows (amounts in millions):

Years ending December 31:2006

$
272007

$
222008

$
192009

$
162010

$
9Thereafter

$
13


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 lease
commitments will not be less than the amount shown for 2005.

Litigation

Liberty has contingent liabilities related to legal and tax 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.

Loss Contract

During the third quarter of 2005, a subsidiary of Liberty, TruePosition, Inc. ("TruePosition"), entered into an agreement with one of its major customers
whereby TruePosition will remove and replace certain location-based equipment supplied by another vendor and currently installed in the customer's network. TruePosition currently estimates that the
costs to provide this equipment and service will exceed the revenue earned and that it will incur a loss of approximately $18 million on the contract. Since this agreement is an executory
contract, TruePosition will recognize this loss during the term of the contract as material elements of the contract are delivered. TruePosition entered into this
agreement because it believes its appointment as the customer's exclusive provider of these services and the resulting future potential revenue earned from the customer's continuing network
build-out and expansion will exceed the loss computed on the contractual arrangement. However, no assurance can be given that future business from this customer will be sufficient to
offset the loss incurred on this portion of the contract.

(18)Information About Liberty's Operating Segments

Liberty is a holding company, which through its ownership of interests in subsidiaries and other companies, is primarily engaged in the electronic retailing,
media, communications and entertainment

II-72

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industries.
Each of these businesses is separately managed. Liberty has organized its businesses into two Groups based upon each businesses' services or products: Interactive Group and Capital Group.
Liberty's chief operating decision maker and management team review the combined results of operations of each of these Groups (including consolidated subsidiaries and equity method affiliates), as
well as the results of operations of each individual business in each Group.

Liberty
identifies its reportable segments as (A) those consolidated subsidiaries that represent 10% or more of its consolidated revenue, earnings before income taxes or total
assets and (B) those equity method affiliates whose share of earnings represent 10% or more of Liberty's pre-tax earnings. The segment presentation for prior periods has been
conformed to the current period segment presentation. Liberty evaluates performance and makes decisions about allocating resources to its Groups and operating segments based on financial measures such
as revenue, operating cash flow, gross margin, average sales price per unit, number of units shipped and revenue or sales per customer equivalent.

Liberty
defines operating cash flow as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock compensation). Liberty believes
this is an important indicator of the operational strength and performance of its businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure
allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes
depreciation and amortization, stock compensation, litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP.
Accordingly, operating cash flow 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 GAAP. Liberty generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

For
the year ended December 31, 2005, Liberty has identified the following consolidated subsidiaries as its reportable segments:



Liberty's
reportable segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies,
distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated subsidiaries are the same as those described in the summary of significant policies.

II-73

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Performance Measures

|                     |  | Years ended December 31, |      
|-------------------- |  | ------------------------ | -----
|
|
|
|QVC                  |  | $                        | 6,501
|SEG                  |  |                          | 1,004
|Corporate and other  |  |                          | 455  
|                     |  |                          |      
|Consolidated Liberty |  | $                        | 7,960
|                     |  |                          |      

Balance Sheet Information

December 31,2005

2004Total
assets

Investments
in affiliates

Total
assets

Investments
in affiliatesamounts in millionsQVC

$
15,602

2

14,314

78SEG


2,966

45

2,945

52Corporate and other


23,384

1,861

27,234

654Discontinued operations






5,716

Consolidated Liberty

$
41,952

1,908

50,209

784


The
following table provides a reconciliation of segment operating cash flow to earnings (loss) from continuing operations before income taxes and minority interest:

Years ended December 31,2005

2004

2003amounts in millionsConsolidated segment operating cash flow

$
1,588

1,439

725Stock compensation


(52
)
(98
)
91Litigation settlement




42

Depreciation and amortization


(639
)
(658
)
(394
)Impairment of long-lived assets






(1,362
)Interest expense


(623
)
(615
)
(508
)Realized and unrealized gains (losses) on derivative instruments, net


257

(1,284
)
(661
)Gains (losses) on dispositions, net


(365
)
1,406

1,126Nontemporary declines in fair value of investments


(449
)
(129
)
(22
)Other, net


119

121

118Earnings (loss) from continuing operations before income taxes and minority interest

$
(164
)
224

(887
)


II-74

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Revenue by Geographic Area

Revenue by geographic area based on the location of customers is as follows:

Years ended December 31,2005

2004

2003amounts in millionsUnited States

$
6,015

5,424

2,741Germany


781

643

151Other foreign countries


1,164

984

338Consolidated Liberty

$
7,960

7,051

3,230


Long-lived Assets by Geographic Area

December 31,2005

2004amounts in millionsUnited States

$
747

768Germany


204

203Other foreign countries


180

162Consolidated Liberty

$
1,131

1,133


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(19)Quarterly Financial Information (Unaudited)

|      |                                                                                | 1st
Quarter |   | 2nd
Quarter |   | 3rd
Quarter |   | 4th
Quarter |  
|----- | ------------------------------------------------------------------------------ | ----------- | - | ----------- | - | ----------- | - | ----------- | -
|
|2005: |                                                                                |             |   |             |   |             |   |             |  
|      | Revenue                                                                        |             | $ | 1,821       |   | 1,839       |   | 1,850       |  
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Operating income                                                               |             | $ | 203         |   | 188         |   | 179         |  
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Earnings (loss) from continuing operations                                     |             | $ | 239         |   | (126        | ) | (87         | )
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Net earnings (loss)                                                            |             | $ | 254         |   | (107        | ) | (94         | )
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Basic and diluted earnings (loss) from continuing operations per common shares |             | $ | .09         |   | (.04        | ) | (.03        | )
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Basic and diluted net earnings (loss) per common share                         |             | $ | .09         |   | (.04        | ) | (.03        | )
|      |                                                                                |             |   |             |   |             |   |             |  
|2004: |                                                                                |             |   |             |   |             |   |             |  
|      | Revenue                                                                        |             | $ | 1,606       |   | 1,641       |   | 1,632       |  
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Operating income                                                               |             | $ | 210         |   | 178         |   | 152         |  
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Earnings (loss) from continuing operations                                     |             | $ | 71          |   | (334        | ) | 359         |  
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Net earnings (loss)                                                            |             | $ | (10         | ) | (314        | ) | 372         |  
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Basic and diluted earnings (loss) from continuing operations per common share  |             | $ | .02         |   | (.11        | ) | .13         |  
|      |                                                                                |             |   |             |   |             |   |             |  
|      | Basic and diluted net earnings (loss) per common share                         |             | $ |            |   | (.11        | ) | .13         |  
|      |                                                                                |             |   |             |   |             |   |             |  

II-76

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PART III.

The following required information is incorporated by reference to our definitive proxy statement for our 2006 Annual Meeting of Shareholders presently scheduled
to be held in the second quarter of 2006:

|Item 10. |  | Directors and Executive Officers of the Registrant                                            
|-------- |  | ----------------------------------------------------------------------------------------------
|Item 11. |  | Executive Compensation                                                                        
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|Item 13. |  | Certain Relationships and Related Transactions                                                
|Item 14. |  | Principal Accounting Fees and Services                                                        

We
will file our definitive proxy statement for our 2006 Annual Meeting of shareholders with the Securities and Exchange Commission on or before April 30, 2006.

III-1

---





PART IV.

Item 15. Exhibits and Financial Statement Schedules.

(a)(1)Financial Statements

Included
in Part II of this Report:

|                           |                                                                                                        |  | Page No.
|-------------------------- | ------------------------------------------------------------------------------------------------------ |  | --------
|Liberty Media Corporation: |                                                                                                        | 
|                           | Report of Independent Registered Public Accounting Firm                                                |  | II-28   
|                           | Consolidated Balance Sheets,
December 31, 2005 and 2004                                                |  | II-29   
|                           | Consolidated Statements of Operations,
Years ended December 31, 2005, 2004 and 2003                    |  | II-31   
|                           | Consolidated Statements of Comprehensive Earnings (Loss),
Years ended December 31, 2005, 2004 and 2003 |  | II-32   
|                           | Consolidated Statements of Cash Flows,
Years Ended December 31, 2005, 2004 and 2003                    |  | II-33   
|                           | Consolidated Statements of Stockholders' Equity,
Years ended December 31, 2005, 2004 and 2003          |  | II-34   
|                           | Notes to Consolidated Financial Statements,
December 31, 2005, 2004 and 2003                           |  | II-35   

(a)(2)Financial Statement Schedules



(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                                                                           
|3.2                                                                           
|4Instruments Defining the Rights of Securities Holders, including Indentures:
|4.1                                                                           
|4.2                                                                           
|                                                                              

IV-1

---



|4.3                    |  | Indenture, dated as of July 7, 1999, between the Registrant and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 of Liberty Media Corporation (File No. 333-86491) as filed on
September 3, 1999).                                                                                                                                                                                                                                                                         
|---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.4                    |  | 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                   |  | 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
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").                                                                                                                          
|10.2                   |  | Ninth Supplement to Inter-Group Agreement dated as of June 14, 2001, between and among AT&T Corp., on the one hand, and Liberty Media Corporation, Liberty Media Group LLC, AGI LLC, Liberty SP, Inc., LMC Interactive, Inc. and Liberty AGI,
Inc., on the other hand (incorporated by reference to Exhibit 10.25 to the Registration Statement on Form S-1 of Liberty Media Corporation (File No. 333-66034) as filed on July 27, 2001).                                                                                          
|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)).
|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).                                                                                                                            
|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

IV-2

---



|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 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 |  | 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 (collectively, the "Malone Employment Agreement") (incorporated by reference to Exhibit 10.6 to the Liberty S-4 Registration Statement).                                                                            
|10.15 |  | Second Amendment to Malone Employment Agreement effective January 1, 2003 (incorporated by reference to Exhibit 10.15 to Liberty's Annual Report on Form 10-K for the year ended December 31, 2003, Commission File
No. 001-16615).                                                                                                                                                                                                                                                                      
|10.16 |  | Liberty Media Corporation 2000 Incentive Plan (As Amended and Restated Effective April 19, 2004), (incorporated by reference to Exhibit 10.16 to Liberty's Annual Report on Form 10-K for the year ended December 31, 2004, Commission
File No. 001-16615, the "Liberty 2004 Form 10-K").                                                                                                                                                                                                                
|10.17 |  | Form of Non-Qualified Stock Option Agreement under the Liberty Media Corporation 2000 Incentive Plan (As Amended and Restated Effective April 19, 2004), (incorporated by reference to Exhibit 10.17 to the Liberty 2004
Form 10-K).                                                                                                                                                                                                                                                                     
|10.18 |  | Form of Stock Appreciation Rights Agreement under the Liberty Media Corporation 2000 Incentive Plan (As Amended and Restated Effective April 19, 2004), (incorporated by reference to Exhibit 10.18 to the Liberty 2004
Form 10-K).                                                                                                                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

IV-3

---



|10.19 |  | Form of Restricted Stock Award Agreement under the Liberty Media Corporation 2000 Incentive Plan (As Amended and Restated Effective April 19, 2004), (incorporated by reference to Exhibit 10.19 to the Liberty 2004
Form 10-K).                                                                                                                   
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20 |  | Liberty Media Corporation 2002 Nonemployee Director Incentive Plan (incorporated by reference to Exhibit 10.17 to Liberty's Annual Report on Form 10-K for the year ended December 31, 2002, Commission File
No. 001-16615).                                                                                                                       
|10.21 |  | Form of Stock Appreciation Rights Agreement under the Liberty Media Corporation 2002 Nonemployee Director Incentive Plan (incorporated by reference to Exhibit 10.21 to the Liberty 2004 Form 10-K).                                                                                                                                               
|10.22 |  | Letter Agreement, dated as of May 8, 2003, between Robert R. Bennett and Liberty regarding Mr. Bennett's personal use of Liberty's aircraft (incorporated by reference to Exhibit 10.19 to Liberty's Annual Report on Form 10-K for
the year ended December 31, 2003, Commission File No. 001-16615).                                              
|10.23 |  | Deferred Compensation Agreement, dated as of January 1, 2004 (the "January 2004 Bennett Agreement"), between Liberty and Robert R. Bennettsubsequently amended and restated (incorporated by reference to Exhibit 10.23 to the
Liberty 2004 Form 10-K).                                                                                           
|10.24 |  | Deferred Compensation Agreement, dated as of October 15, 2004 (the "October 2004 Bennett Agreement"), between Liberty and Robert R. Bennettsubsequently amended and restated (incorporated by reference to Exhibit 10.24 to the
Liberty 2004 Form 10-K).                                                                                          
|10.25 |  | Time Sharing Agreement regarding personal use of Liberty's aircraft, dated as of March 29, 2005, between Robert R. Bennett and Liberty (incorporated by reference to Exhibit 10.1 to Liberty's Quarterly Report on Form 10-Q for the period
ended March 31, 2005, Commission File No. 001-16615, the "Liberty First Quarter 2005 10-Q").           
|10.26 |  | Letter Agreement regarding personal use of the Liberty's aircraft, dated as of May 4, 2005, between Robert R. Bennett and Liberty (incorporated by reference to Exhibit 10.2 to the Liberty First Quarter 2005 10-Q).                                                                                                                              
|10.27 |  | Employment Agreement, dated as of December 28, 2005, between Liberty and Mr. Bennett (incorporated by reference to Exhibit 99.1 to Liberty's Current Report on Form 8-K filed on December 30, 2005, Commission File
No. 001-16615 (the "Liberty December 2005 8-K")).                                                                              
|10.28 |  | Amended and Restated Deferred Compensation Agreement, dated as of December 28, 2005, between Liberty and Mr. Bennett (amending and restating the January 2004 Bennett Agreement) (incorporated by reference to Exhibit 99.2 to the
Liberty December 2005 8-K).                                                                                     
|10.29 |  | Amended and Restated Deferred Compensation Agreement, dated as of December 28, 2005, between Mr. Bennett and Liberty (amending and restating the October 2004 Bennett Agreement) (incorporated by reference to Exhibit 99.3 to the
Liberty December 2005 8-K).                                                                                     
|10.30 |  | Deferred Compensation Agreement, dated as of July 1, 2005, between Mr. Bennett and Liberty (incorporated by reference to Exhibit 99.4 to the Liberty December 2005 8-K).                                                                                                                                                                           
|10.31 |  | Call Agreement, dated as of February 9, 1998 (the "Call Agreement"), between Liberty (as assignee of Tele-Communications, Inc.) and the Malone Group (incorporated by reference to Exhibit 7(n) to Mr. Malone's Amendment No. 8 to
Schedule 13D filed in respect of Tele-Communications, Inc. on February 19, 1998, Commission File No. 005-44063).
|      |  |                                                                                                                                                                                                                                                                                                                                                    

IV-4

---



|10.32 |  | Letter, dated as of March 5, 1999, from Tele-Communications, Inc. and Liberty addressed to Mr. Malone and Leslie Malone relating to the Call Agreement (incorporated by reference to Exhibit 7(f) to Mr. Malone's Schedule 13D
filed in respect of AT&T, as filed on March 30, 1999, Commission File No. 005-32542).                                                                   
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.33 |  | $2,000,000,000 Credit Agreement, dated as of May 20, 2005, among QVC, Inc., as Borrower, the lenders named therein, JPMorgan Chase Bank, N.A., as Administrative Agent, and Wachovia Capital Markets, LLC, as Syndication Agent (incorporated by
reference to Exhibit 10 to Liberty's Quarterly Report on Form 10-Q for the period ended June 30, 2005, Commission File No. 001-16615).
|21    |  | Subsidiaries of Liberty Media Corporation, filed herewith.                                                                                                                                                                                                                                                                                                                             
|23    |  | Consent of KPMG LLP, filed herewith.                                                                                                                                                                                                                                                                                                                                                   
|31.1  |  | Rule 13a-14(a)/15d-14(a) Certification, filed herewith.                                                                                                                                                                                                                                                                                                                                
|31.2  |  | Rule 13a-14(a)/15d-14(a) Certification, filed herewith.                                                                                                                                                                                                                                                                                                                                
|31.3  |  | Rule 13a-14(a)/15d-14(a) Certification, filed herewith.                                                                                                                                                                                                                                                                                                                                
|32    |  | Section 1350 Certification, filed herewith.                                                                                                                                                                                                                                                                                                                                            

IV-5

---





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 8, 2006 |  | By:                      

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.

|Signature                                   |  | Title                                                               |  | Date         
|------------------------------------------- |  | ------------------------------------------------------------------- |  | -------------
|/s/JOHN C. MALONEJohn C. Malone             |  | Chairman of the Board and Director                                  |  | March 8, 2006
|/s/GREGORY B. MAFFEIGregory B. Maffei       |  | Director, Chief Executive Officer and President                     |  | March 8, 2006
|/s/ROBERT R. BENNETTRobert R. Bennett       |  | Director                                                            |  | March 8, 2006
|/s/DONNE F. FISHERDonne F. Fisher           |  | Director                                                            |  | March 8, 2006
|/s/PAUL A. GOULDPaul A. Gould               |  | Director                                                            |  | March 8, 2006
|/s/DAVID E. RAPLEYDavid E. Rapley           |  | Director                                                            |  | March 8, 2006
|/s/M. LAVOY ROBISONM. LaVoy Robison         |  | Director                                                            |  | March 8, 2006
|/s/LARRY E. ROMRELLLarry E. Romrell         |  | Director                                                            |  | March 8, 2006
|/s/DAVID J.A. FLOWERSDavid J.A. Flowers     |  | Senior Vice President and Treasurer (Principal Financial Officer)   |  | March 8, 2006
|/s/CHRISTOPHER W. SHEANChristopher W. Shean |  | Senior Vice President and Controller (Principal Accounting Officer) |  | March 8, 2006

IV-6

---



EXHIBIT INDEX

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                                                                           
|3.2                                                                           
|4Instruments Defining the Rights of Securities Holders, including Indentures:
|4.1                                                                           
|4.2                                                                           
|4.3                                                                           
|4.4                                                                           
|10Material Contracts:                                                        
|10.1                                                                          
|10.2                                                                          
|10.3                                                                          
|10.4                                                                          
|10.5                                                                          
|                                                                              

---



|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)).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 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 |  | 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 (collectively, the "Malone Employment Agreement") (incorporated by reference to Exhibit 10.6 to the Liberty S-4 Registration Statement).                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---



|10.15 |  | Second Amendment to Malone Employment Agreement effective January 1, 2003 (incorporated by reference to Exhibit 10.15 to Liberty's Annual Report on Form 10-K for the year ended December 31, 2003, Commission File
No. 001-16615).                                                                                                     
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.16 |  | Liberty Media Corporation 2000 Incentive Plan (As Amended and Restated Effective April 19, 2004), (incorporated by reference to Exhibit 10.16 to Liberty's Annual Report on Form 10-K for the year ended December 31, 2004, Commission
File No. 001-16615, the "Liberty 2004 Form 10-K").                                               
|10.17 |  | Form of Non-Qualified Stock Option Agreement under the Liberty Media Corporation 2000 Incentive Plan (As Amended and Restated Effective April 19, 2004), (incorporated by reference to Exhibit 10.17 to the Liberty 2004
Form 10-K).                                                                                                    
|10.18 |  | Form of Stock Appreciation Rights Agreement under the Liberty Media Corporation 2000 Incentive Plan (As Amended and Restated Effective April 19, 2004), (incorporated by reference to Exhibit 10.18 to the Liberty 2004
Form 10-K).                                                                                                     
|10.19 |  | Form of Restricted Stock Award Agreement under the Liberty Media Corporation 2000 Incentive Plan (As Amended and Restated Effective April 19, 2004), (incorporated by reference to Exhibit 10.19 to the Liberty 2004
Form 10-K).                                                                                                        
|10.20 |  | Liberty Media Corporation 2002 Nonemployee Director Incentive Plan (incorporated by reference to Exhibit 10.17 to Liberty's Annual Report on Form 10-K for the year ended December 31, 2002, Commission File
No. 001-16615).                                                                                                            
|10.21 |  | Form of Stock Appreciation Rights Agreement under the Liberty Media Corporation 2002 Nonemployee Director Incentive Plan (incorporated by reference to Exhibit 10.21 to the Liberty 2004 Form 10-K).                                                                                                                                    
|10.22 |  | Letter Agreement, dated as of May 8, 2003, between Robert R. Bennett and Liberty regarding Mr. Bennett's personal use of Liberty's aircraft (incorporated by reference to Exhibit 10.19 to Liberty's Annual Report on Form 10-K
for the year ended December 31, 2003, Commission File No. 001-16615).                                   
|10.23 |  | Deferred Compensation Agreement, dated as of January 1, 2004 (the "January 2004 Bennett Agreement"), between Liberty and Robert R. Bennettsubsequently amended and restated (incorporated by reference to Exhibit 10.23 to the
Liberty 2004 Form 10-K).                                                                                
|10.24 |  | Deferred Compensation Agreement, dated as of October 15, 2004 (the "October 2004 Bennett Agreement"), between Liberty and Robert R. Bennettsubsequently amended and restated (incorporated by reference to Exhibit 10.24 to the
Liberty 2004 Form 10-K).                                                                               
|10.25 |  | Time Sharing Agreement regarding personal use of Liberty's aircraft, dated as of March 29, 2005, between Robert R. Bennett and Liberty (incorporated by reference to Exhibit 10.1 to Liberty's Quarterly Report on Form 10-Q for the period
ended March 31, 2005, Commission File No. 001-16615, the "Liberty First Quarter 2005 10-Q").
|10.26 |  | Letter Agreement regarding personal use of the Liberty's aircraft, dated as of May 4, 2005, between Robert R. Bennett and Liberty (incorporated by reference to Exhibit 10.2 to the Liberty First Quarter 2005 10-Q).                                                                                                                   
|10.27 |  | Employment Agreement, dated as of December 28, 2005, between Liberty and Mr. Bennett (incorporated by reference to Exhibit 99.1 to Liberty's Current Report on Form 8-K filed on December 30, 2005, Commission File
No. 001-16615 (the "Liberty December 2005 8-K")).                                                                   
|10.28 |  | Amended and Restated Deferred Compensation Agreement, dated as of December 28, 2005, between Liberty and Mr. Bennett (amending and restating the January 2004 Bennett Agreement) (incorporated by reference to Exhibit 99.2 to the
Liberty December 2005 8-K).                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                         

---



|10.29 |  | Amended and Restated Deferred Compensation Agreement, dated as of December 28, 2005, between Mr. Bennett and Liberty (amending and restating the October 2004 Bennett Agreement) (incorporated by reference to Exhibit 99.3 to the
Liberty December 2005 8-K).                                                                                                                         
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.30 |  | Deferred Compensation Agreement, dated as of July 1, 2005, between Mr. Bennett and Liberty (incorporated by reference to Exhibit 99.4 to the Liberty December 2005 8-K).                                                                                                                                                                                                               
|10.31 |  | Call Agreement, dated as of February 9, 1998 (the "Call Agreement"), between Liberty (as assignee of Tele-Communications, Inc.) and the Malone Group (incorporated by reference to Exhibit 7(n) to Mr. Malone's Amendment No. 8 to
Schedule 13D filed in respect of Tele-Communications, Inc. on February 19, 1998, Commission File No. 005-44063).                                    
|10.32 |  | Letter, dated as of March 5, 1999, from Tele-Communications, Inc. and Liberty addressed to Mr. Malone and Leslie Malone relating to the Call Agreement (incorporated by reference to Exhibit 7(f) to Mr. Malone's Schedule 13D
filed in respect of AT&T, as filed on March 30, 1999, Commission File No. 005-32542).                                                                   
|10.33 |  | $2,000,000,000 Credit Agreement, dated as of May 20, 2005, among QVC, Inc., as Borrower, the lenders named therein, JPMorgan Chase Bank, N.A., as Administrative Agent, and Wachovia Capital Markets, LLC, as Syndication Agent (incorporated by
reference to Exhibit 10 to Liberty's Quarterly Report on Form 10-Q for the period ended June 30, 2005, Commission File No. 001-16615).
|21    |  | Subsidiaries of Liberty Media Corporation, filed herewith.                                                                                                                                                                                                                                                                                                                             
|23    |  | Consent of KPMG LLP, filed herewith.                                                                                                                                                                                                                                                                                                                                                   
|31.1  |  | Rule 13a-14(a)/15d-14(a) Certification, filed herewith.                                                                                                                                                                                                                                                                                                                                
|31.2  |  | Rule 13a-14(a)/15d-14(a) Certification, filed herewith.                                                                                                                                                                                                                                                                                                                                
|31.3  |  | Rule 13a-14(a)/15d-14(a) Certification, filed herewith.                                                                                                                                                                                                                                                                                                                                
|32    |  | Section 1350 Certification, filed herewith                                                                                                                                                                                                                                                                                                                                             

---