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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K/A

(Amendment No. 3)



(Mark One)



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2001



or



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



Commission file number 0-24218



GEMSTAR-TV GUIDE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)



|Delaware                                                       |  | 95-4782077                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



135
North Los Robles Avenue, Suite 800, Pasadena, California 91101

(Address of principal executive offices including zip
code)



(626) 792-5700

(Registrants telephone number, including area code)



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



None



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

Common Stock, par value $.01 per share

(Title of class)



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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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes ̈No  x



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 the 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.  x



As of February 28, 2002, there were 417.9 million shares of the registrants Common Stock outstanding. As of February 28, 2002, the aggregate market value of Common Stock held by non-affiliates of
the registrant was approximately $3.5 billion, based on the closing sale price of $18.29 per share as reported by the Nasdaq Stock Market. Shares of Common Stock held by officers, directors, and 5% holders have been excluded from this calculation
because such persons may be deemed to be affiliates. The determination of affiliate status is not a conclusive determination for other purposes.

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EXPLANATORY NOTE



This Amendment No. 3 to the Annual Report on Form 10-K/A (Amendment No. 3) for Gemstar-TV Guide
International, Inc. (the Company) for the fiscal year ended December 31, 2001, is being filed to amend and restate the items described below contained in the Companys Annual Report on Form 10-K originally filed with the Securities
and Exchange Commission (SEC) on April 1, 2002, as amended by Amendment No. 1 on Form 10-K/A (Amendment No. 1) filed with the SEC on April 30, 2002, and as amended by Amendment No. 2 on Form 10-K/A (Amendment No.
2) filed with the SEC on November 14, 2002.



This Amendment No. 3 makes changes to Item 6, Selected Financial Data, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, Item 8, Financial Statements and Supplementary Data, and Item
14, Exhibits, Financial Statement Schedules, and Reports on Form 8-K, for the following purposes:



| |  |  | To restate the Companys Consolidated Financial Statements as of December 31, 2001 and 2000 and for the year ended December 31, 2001, the nine months ended
December 31, 2000 and the year ended March 31, 2000 to reclassify or restate certain revenues and expenses, and to restate certain other transactions and make certain other adjustments, as more fully described in Note 2, Restatement, to
the Companys Consolidated Financial Statements included in Item 8 (the Consolidated Financial Statements);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To amend Item 6, Selected Financial Data, to take into account the effects of the restatement;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | To amend Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, to take into account the effects of the restatement;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To include in Note 16, Events Subsequent to Balance Sheet Date, to the Consolidated Financial Statements information with respect to events that occurred
subsequent to the original filing of the Annual Report on Form 10-K; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To furnish the certifications required by Section 906 of the Sarbanes-Oxley Act.
| | - |  | --------------------------------------------------------------------------------



In order to preserve the nature and character of the disclosures set forth in such Items as originally filed,
this Amendment No. 3 continues to speak as of the date of the original filing of the Annual Report on Form 10-K on April 1, 2002, as amended by Amendment No. 1 and Amendment No. 2, and the Company has not updated the disclosures in this report to
speak as of a later date (except for Note 12 Legal Proceedings and Note 16, Events Subsequent to Balance Sheet Date to the Consolidated Financial Statements with respect to subsequent events through the date of this
amendment). All information contained in this Amendment No. 3 is subject to updating and supplementing as provided in the Companys reports filed with the SEC, as amended, for periods subsequent to the date of the original filing of the Annual
Report on Form 10-K.



In the fourth quarter
of 2002, the Company announced that it had engaged a new independent accounting firm to audit the Consolidated Financial Statements included in this Amendment No. 3. Additionally, the Company announced that it would be reviewing its accounting
policies to ensure compliance with accounting principles generally accepted in the United States. On November 14, 2002, the Company filed Amendment No. 2 for the purpose of restating the Unaudited Consolidated Financial Statements included therein.
Because the restated Unaudited Consolidated Financial Statements included in Amendment No. 2 were not audited and did not comply with the requirements of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder,
the Companys new Chief Executive Officer and Acting Chief Financial Officer, who had been appointed on November 7, 2002, were unable to make the certifications required by Section 906 of the Sarbanes-Oxley Act.



The Company has completed its accounting policy review and its
new independent accounting firm has completed its audit of the Consolidated Financial Statements. This Amendment No. 3 is being filed to reflect the



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restatements described above, to file the Companys audited restated Consolidated Financial Statements and the related independent
auditors report and to furnish the certifications required by Section 906 of the Sarbanes-Oxley Act.



There are certain recent developments that have occurred between December 31, 2001 and the date of filing this Amendment No. 3, which
could have a material impact on the Companys business, results of operations and financial condition, as described in Note 16, Events Subsequent to Balance Sheet Date, to the Consolidated Financial Statements included in Item 8 of
this Amendment No. 3.



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PART II



ITEM 6.    SELECTED FINANCIAL DATA.



The following information should be read in conjunction with the Consolidated Financial Statements and
related Notes thereto, and Managements Discussion and Analysis of Financial Condition and Results of Operations. The selected financial data as of and for the year ended December 31, 2001, the nine months ended December 31, 2000 and the years
ended March 31, 2000, 1999 and 1998 has been restated. For additional information regarding the restatement, please refer to Note 2 to the Consolidated Financial Statements included in Item 8.



|                                                                                                                           |  | Restated                             
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------
|                                                                                                                           |  | Year ended December 31, 2001(1)      
|                                                                                                                           |  |                                      
|                                                                                                                           |  | (in thousands, except per share data)
|Statement of Operations Data:                                                                                              |  |                                      
|Revenues                                                                                                                   |  | $                                    
|Operating expenses:                                                                                                        |  |                                      
|Operating expenses, excluding stock compensation, depreciation and amortization,
impairment of goodwill and other expenses |  |                                      
|Stock compensation                                                                                                         |  |                                      
|Depreciation and amortization                                                                                              |  |                                      
|Impairment of goodwill                                                                                                     |  |                                      
|Other expenses(3)                                                                                                          |  |                                      
|                                                                                                                           |  |                                      
|                                                                                                                           |  |                                      
|                                                                                                                           |  |                                      
|Operating (loss) income                                                                                                    |  |                                      
|Interest expense                                                                                                           |  |                                      
|Other (expense) income, net                                                                                                |  |                                      
|                                                                                                                           |  |                                      
|(Loss) income before income taxes and extraordinary item                                                                   |  |                                      
|(Benefit) provision for income taxes                                                                                       |  |                                      
|                                                                                                                           |  |                                      
|(Loss) income before extraordinary item                                                                                    |  |                                      
|Extraordinary loss on debt extinguishment, net of tax                                                                      |  |                                      
|                                                                                                                           |  |                                      
|Net (loss) income                                                                                                          |  | $                                    
|                                                                                                                           |  |                                      
|(Loss) earnings per share(4):                                                                                              |  |                                      
|Basic                                                                                                                      |  | $                                    
|Diluted                                                                                                                    |  | $                                    
|Weighted average shares outstanding(4):                                                                                    |  |                                      
|Basic                                                                                                                      |  |                                      
|Diluted                                                                                                                    |  |                                      





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|                                                                   |  | Restated      
|------------------------------------------------------------------ |  | --------------
|                                                                   |  | December 31,  
|                                                                   |  | 2001(1)       
|                                                                   |  | (in thousands)
|Balance Sheet Data:                                                |  |               
|Working capital                                                    |  | $             
|Total assets                                                       |  |               
|Long-term debt and capital lease obligations, less current portion |  |               
|Total stockholders equity                                         |  |               

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|(1) |  | Effective July 18, 2001 and July 12, 2000, the Companys consolidated operating results include the operating results of SkyMall, Inc. (SkyMall) and
TV Guide, Inc. (TV Guide), respectively. SkyMall and TV Guide were acquired in transactions accounted for as purchases. Effective April 2001, the consolidated operating results exclude the operating results of the business that
distributes the WGN superstation signal, which was sold.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The Company completed mergers with NuvoMedia, Inc. (NuvoMedia) and SoftBook Press, Inc. (SoftBook) in January 2000. Both mergers were
accounted for under the pooling of interests method and accordingly, the Companys historical consolidated financial statements were restated for all periods prior to January 2000 to include the accounts and results of operations of NuvoMedia
and SoftBook.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Other expenses for the years ended March 31, 2000 and 1998 consisted of merger related costs incurred as a result of the mergers with NuvoMedia and SoftBook in
fiscal year 2000 and with StarSight Telecast, Inc. in fiscal year 1998. Other expenses for the year ended March 31, 1999 consisted of costs incurred in defending the Company against a hostile takeover.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | All share and per share data has been adjusted for the two-for-one stock splits effected in May 1999 and December 1999.
|--- |  | -----------------------------------------------------------------------------------------------------------------------



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ITEM 7.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS



The Consolidated Financial Statements as of December 31, 2001 and 2000 and for the year ended December 31, 2001, the nine months ended
December 31, 2000 and the year ended March 31, 2000 and the notes thereto included in this Amendment No. 3 have been restated. For additional information regarding the restatement, please refer to Note 2 to the Consolidated Financial Statements
included in Item 8. All applicable financial information presented in this Item 7 has been restated to take into account the effects of the restatements described in Note 2 to the Consolidated Financial Statements.



On November 28, 2000, the Board of Directors of the Company
approved a change of the Companys fiscal year end from March 31 to December 31. Accordingly, the financial statements of the Company present results of operations and cash flows for the year ended December 31, 2001, the nine months ended
December 31, 2000 and the year ended March 31, 2000. To enhance comparability, the following discussion of historical operating results compares the twelve months ended December 31, 2001 to the same period in the prior year as restated.
Additionally, the following discussion of historical operating results compares the nine-month period ended December 31, 2000 to the same period in 1999.



In addition to the change in the Companys fiscal year end in 2000, the Company completed several transactions during 2001 and 2000
that affect the comparability of the results of operations.



| |  |  | On July 12, 2000, the Company completed its merger with TV Guide. The merger was accounted for as a purchase. Accordingly, the Consolidated Financial Statements
include the results of operations of TV Guide from July 12, 2000.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In April 2001, the Company sold the business that distributes the WGN superstation signal. Accordingly, the Consolidated Financial Statements do not include the
results of operations of WGN subsequent to that date. No gain or loss was recognized as a result of this transaction.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On July 18, 2001, the Company acquired 100% of the outstanding common stock of SkyMall. The acquisition was accounted for as a purchase. Accordingly, the
Consolidated Financial Statements include the results of operations of SkyMall from July 18, 2001.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company also completed mergers with two electronic book companies, NuvoMedia and SoftBook, in January 2000. Both mergers were
accounted for under the pooling of interests method and, accordingly, the Companys historical consolidated financial statements were restated for all periods prior to that date to include the results of operations, financial position and cash
flows of NuvoMedia and SoftBook.





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Critical Accounting
Policies and Estimates



The following
discussion and analysis of our financial condition and results of operations are based on the Companys Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United
States. The preparation of the financial statements requires management to make estimates and assumptions in applying certain critical accounting policies. Certain accounting estimates are particularly sensitive because of their significance to the
Companys consolidated financial statements and because of the possibility that future events affecting the estimates could differ markedly from current expectations. The Company believes that the following are some of the more critical
judgment areas in the application of our accounting policies that affect our financial statements.



Revenue Recognition



General



The Company follows the provisions of SOP 97-2, Software Revenue Recognition (SOP 97-2) and Staff Accounting
Bulletin 101, Revenue Recognition in Financial Statements (SAB 101), for revenue recognition. Under SOP 97-2 and SAB 101, four conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an
arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable and (iv) collection is reasonably assured.



The Company has entered into various arrangements that contain multiple elements, including licensing fees
and advertising on various platforms, which may be in more than one of our segments (multiple-element arrangements). For example, a customer may license certain of the Companys technology and purchase an advertising package from
the Company to provide the customer with print advertising in TV Guide Magazine, an online platform or on the IPG platform. Multiple-element arrangements may include situations where the Company is both a vendor and a cooperative advertiser. See
Multiple-Element Arrangements below.



In November 2001, the Financial Accounting Standards Boards (FASBs) Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 01-09, Accounting for Consideration Given by a Vendor to
a Customer (Including a Reseller of the Vendors Products). EITF No. 01-09, which is effective for periods commencing after December 31, 2001, clarifies the income statement classification of costs incurred by a vendor for certain cooperative
advertising and product placement fees. As a result of the EITF consensus, certain of the Companys cooperative advertising and product placement costs previously classified as operating expenses will be reflected as a reduction of revenues
earned from that activity. Where applicable, amounts presented in prior periods will be reclassified to comply with the income statement classifications for the current period. The reclassification does not affect the Companys reported net
income and basic and diluted earnings per share.



License Fees



The Company
licenses its proprietary technologies to consumer electronics manufacturers and to service providers (including cable multiple system operators (MSOs) and other owners and operators of cable television systems, telephone networks,
Internet service providers, Internet websites, direct-to-home broadcast satellite providers, wireless systems and other multi-channel video programming distributors). It is the Companys normal practice to enter into written agreements with its
customers. The Company generally recognizes such license fees based on a per unit shipped model (with consumer electronics manufacturers) or a per subscriber model (with service providers). Revenues from per unit license fees are based on units
reported shipped in the period by the manufacturers. Revenues from per subscriber fees are recognized in the month services are provided by a licensee, as reported to us by the licensee. See Multiple-Element Arrangements below.



Revenues from annual and other license fees
generally are recognized based on the specific terms of the license agreements. For instance, the Company had an arrangement under which substantial flat fees were paid



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upfront in addition to ongoing per-unit license fees. In such cases, the pre-paid fees are deferred and recognized as revenue on a straight
line basis over the term of the agreement. In certain cases, the Company will license its technology for an unlimited number of units over a specified period of time and for which it has continuing obligations. The Company records the fees
associated with these arrangements on a straight line basis over the specified term. In addition, the Company has licensing arrangements with MSOs under which we share a portion of the interactive platform advertising revenue that is generated
through the MSO. In some cases, the Company guarantees that all or a significant portion of the MSOs license fees paid to us will be reimbursed to the MSO through the Companys ad-sharing obligation. To the extent the ad-sharing fees are
not sufficient to meet these guarantees, the Company is obligated to purchase advertising on the MSOs platform. Because the license fee is not fixed nor determinable until resolution of the sharing or advertising buyback, which is typically
settled quarterly, the advertising buyback guarantees and advertising sharing are netted against the license fees so that only a net license fee amount is recognized.



From time to time, the license agreement between the Company and a licensee may expire. While a new license
agreement is being negotiated, the licensee may continue to ship the same units or the same services may continue to be deployed containing our patented or proprietary technologies and the licensee continue to report units shipped or subscriber
information on a periodic basis. License and subscriber fees may continue to be received at the old contract rates and on a timely basis. In such cases, the Company continues to recognize license and subscriber fee revenue. However, revenue is not
recognized when collection is not reasonably assured and in no case when payment is not received for greater than ninety days (which is the longest standard customer payment term related to certain MSO contracts).



Multiple-Element Arrangements



In accounting for multiple-element arrangements, one of the
key judgments to be made is the accounting value that is attributable to the different contractual elements. The appropriate allocation of value not only impacts which segment is credited with the revenue, it also impacts the amount and timing of
revenue recorded in the consolidated statement of operations during a given period due to the differing methods of recognizing revenue by each of the segments, as discussed above.



Revenue is allocated to each element based on the accounting determination of the relative fair value of that
element to the aggregate fair value of all elements. The fair values must be reliable, verifiable and objectively determinable. When available, such determination is based principally on the pricing of similar cash arrangements with unrelated
parties that are not part of a multiple-element arrangement. When sufficient evidence of the fair values of the individual elements does not exist, revenue is not allocated among them until that evidence exists. Instead, the revenue is recognized as
earned using revenue recognition principles applicable to the entire arrangement as if it were a single-element arrangement. At this time, in all instances where IPG advertising is part of a multiple-element transaction, no revenue is allocated to
IPG advertising or the Interactive Platform Sector for accounting purposes, and all revenue is allocated to other elements of the transaction and other sectors. For accounting purposes, the Company expects to record IPG advertising associated with
multiple-element arrangements in this manner until such time as we conclude that we can determine the fair value of IPG advertising in a reliable, verifiable and objective manner.



Purchase Accounting



The Companys acquisitions of TV Guide and SkyMall have been accounted for under the purchase method of
accounting for business combinations.



The
judgments made in determining the estimated fair value and expected useful lives assigned to each class of assets and liabilities acquired can significantly impact net income. For example, different classes of assets will have useful lives that
differ. Consequently, to the extent a longer-lived asset is ascribed greater value under the purchase method than a shorter-lived asset, there may be less amortization expense recorded in a given period.



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Determining
the fair value of certain assets and liabilities acquired is judgmental in nature and often involves the use of significant estimates and assumptions. As permitted by the accounting rules, the Company used the one-year period following the
consummation of the acquisitions to obtain the information necessary to finalize estimates of the fair value of assets and liabilities acquired. One of the areas that requires more judgment in determining fair values and useful lives is intangible
assets. To assist in this process, the Company obtained appraisals from independent valuation firms for certain significant tangible and intangible assets and liabilities.



Impairment of Long-Lived Assets, Long-Lived Assets to Be Disposed Of and Intangible Assets



The Company reviews its long-lived assets
and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The value of our intangible assets, including goodwill, is exposed to future
adverse changes if we experience declines in operating results or experience significant negative industry or economic trends or if future performance is below historical trends. We periodically review intangible assets and goodwill for impairment
using the guidance of applicable accounting literature. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future operating cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.



The Company has a significant amount of property and equipment and intangible assets. The determination as to whether events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable involves
managements judgment. In addition, should we conclude that recoverability of an asset is in question, the estimate of undiscounted future operating cash flows is used to determine whether an asset is recoverable and, if not, the final
determination of the fair value of the asset is also based on the judgment of management. These judgments can be impacted by a variety of underlying assumptions, such as the general business climate, effectiveness of competition and supply and cost
of resources. Accordingly, actual results can differ significantly from the assumptions made by management in making its estimates. Future changes in managements estimates could result in indicators of impairment and actual impairment charges
where none exists as of the date of this report.



New accounting standards effective January 1, 2002, eliminate the impairment recoverability tests for certain other intangible assets with indefinite lives and require that such assets be valued at the lower of their carrying value
or fair value. Goodwill is no longer amortized but remains subject to an annual impairment test performed at the reporting unit level. Fair value is determined primarily using the estimated future cash flows associated with the asset under review,
discounted at a rate commensurate with the risk involved. Changes in estimates of future cash flows could result in a write-down of the asset in a future period. Absent any interim evidence of impairments, we will perform our annual impairment test
of goodwill and other indefinite lived intangibles for all reporting units on October 31 of each year.



Income Taxes



The Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. The Company records a valuation allowance, if necessary, to reduce deferred tax assets to an amount management believes is more likely than not to be realized.



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The Company
has income both from foreign and domestic sources. In the preparation of our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate, including estimating both our actual current tax
exposure and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. Assessment of our actual current tax exposure includes assessing tax strategies, the status of tax audits and open audit
periods with the taxing authorities. To the extent that we have deferred tax assets, we must assess the likelihood that our deferred tax assets will be recovered from taxable temporary differences, tax strategies or future taxable income and to the
extent that we believe that recovery is not likely, we must establish a valuation allowance. As of December 31, 2001, we have established a valuation allowance of $35.7 million against our deferred tax assets. In the future, we may adjust our
estimates of the amount of valuation allowance needed and such adjustment would impact our provision for income taxes in the period of such change.



Legal and Other Loss Contingencies



A significant amount of management estimation is required in determining when, or if, an accrual should be recorded for a contingent
matter and the amount of such accrual, if any. Due to the uncertainty of determining the likelihood of a future event occurring and the potential financial statement impact of such an event, it is possible that upon further development or resolution
of a contingent matter, a charge could be recorded in a future period that would be material to the Companys consolidated results of operations and financial position.



Allowance for Doubtful Accounts



The Company has significant amounts due from its customers. We continuously evaluate outstanding accounts
receivable for collectibility. This evaluation involves managements judgment in assessing the aging of the amounts due to us and in reviewing the credit-worthiness of each customer. Should a customers financial condition deteriorate in a
manner that could decrease the customers ability to pay amounts due to us, we might be required to provide additional allowance for doubtful accounts, which would reduce our earnings.



Investments



The Companys investments include investments
available-for-sale that are carried at fair value, investments accounted for using the cost method of accounting and investments accounted for using the equity method of accounting. A judgmental aspect of accounting for investments involves
determining whether an other-than-temporary decline in value of the investment has been sustained. If it has been determined that an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair
value, by a charge to earnings. Such evaluation is dependent on the specific facts and circumstances. Factors that are considered by the Company in determining whether an other-than-temporary decline in value has occurred include: the market value
of the security in relation to its cost basis; the financial condition of the subject investment; and the intent and ability to hold the investment for a sufficient period of time to allow for recovery in the market value of the investment.



For investments accounted for using the cost or
equity method of accounting, management evaluates information such as budgets, business plan or financial statements in addition to quoted market price, if any, in determining whether an other-than-temporary decline in value exists. Factors
indicative of an other-than-temporary decline include: recurring operating losses, credit defaults, and subsequent rounds of financings at an amount below the cost basis of the investment. This list is not all-inclusive and management weighs a
number of quantitative and qualitative factors in determining whether an other-than-temporary decline in the value of an investment is deemed to have occurred.



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The following
table sets forth certain financial information for the Company during the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000. To enhance comparability, the following table also includes certain
financial information for the Company for the year ended December 31, 2000 and the nine months ended December 31, 1999.



|                                                                                                                                    |  | Restated Year Ended December 31, |           |   | Restated Nine Months Ended December 31, |   |          | Restated Year Ended March 31, 2000 | 
|----------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | --------- | - | --------------------------------------- | - | -------- | ---------------------------------- | 
|                                                                                                                                    |  |                                  |           |   | Unaudited                               |   |          |                                    | 
|                                                                                                                                    |  | 2001(1)                          |           |   | 2000(4)                                 |   |          | 2000(1)(2)                         | 
|                                                                                                                                    |  |                                  |           |   |                                         |   |          | (in thousands)                     | 
|Statement of Operations Data:                                                                                                       |  |                                  |           |   |                                         |   |          |                                    | 
|Revenues                                                                                                                            |  | $                                | 1,172,558 |   |                                         | $ | 718,212  |                                    | 
|Operating expenses:                                                                                                                 |  |                                  |           |   |                                         |   |          |                                    | 
|Operating expenses, excluding stock compensation, depreciation and amortization,
impairment of goodwill and merger related expenses |  |                                  | 904,994   |   |                                         |   | 521,237  |                                    | 
|Stock compensation                                                                                                                  |  |                                  | 46,538    |   |                                         |   | 21,818   |                                    | 
|Depreciation and amortization                                                                                                       |  |                                  | 940,670   |   |                                         |   | 439,148  |                                    | 
|Impairment of goodwill                                                                                                              |  |                                  | 10,800    |   |                                         |   |         |                                    | 
|Merger related expenses                                                                                                             |  |                                  |          |   |                                         |   | 15,895   |                                    | 
|                                                                                                                                    |  |                                  |           |   |                                         |   |          |                                    | 
|                                                                                                                                    |  |                                  | 1,903,002 |   |                                         |   | 998,098  |                                    | 
|                                                                                                                                    |  |                                  |           |   |                                         |   |          |                                    | 
|Operating (loss) income                                                                                                             |  |                                  | (730,444  | ) |                                         |   | (279,886 | )                                  | 
|Interest expense                                                                                                                    |  |                                  | (27,375   | ) |                                         |   | (24,783  | )                                  | 
|Other (expense) income, net                                                                                                         |  |                                  | (168,171  | ) |                                         |   | 21,934   |                                    | 
|                                                                                                                                    |  |                                  |           |   |                                         |   |          |                                    | 
|(Loss) income before income taxes and extraordinary item                                                                            |  |                                  | (925,990  | ) |                                         |   | (282,735 | )                                  | 
|(Benefit) provision for income taxes                                                                                                |  |                                  | (177,414  | ) |                                         |   | (78,429  | )                                  | 
|                                                                                                                                    |  |                                  |           |   |                                         |   |          |                                    | 
|(Loss) income before extraordinary item                                                                                             |  |                                  | (748,576  | ) |                                         |   | (204,306 | )                                  | 
|Extraordinary loss on debt extinguishment, net of tax                                                                               |  |                                  | (2,100    | ) |                                         |   |         |                                    | 
|                                                                                                                                    |  |                                  |           |   |                                         |   |          |                                    | 
|Net (loss) income                                                                                                                   |  | $                                | (750,676  | ) |                                         | $ | (204,306 | )                                  | 
|                                                                                                                                    |  |                                  |           |   |                                         |   |          |                                    | 
|Other Financial Data:                                                                                                               |  |                                  |           |   |                                         |   |          |                                    | 
|Net cash provided by (used in):                                                                                                     |  |                                  |           |   |                                         |   |          |                                    | 
|Operating activities                                                                                                                |  | $                                | 118,264   |   |                                         | $ | 301,734  |                                    | 
|Investing activities                                                                                                                |  |                                  | 73,204    |   |                                         |   | (6,511   | )                                  | 
|Financing activities                                                                                                                |  |                                  | (328,958  | ) |                                         |   | (20,531  | )                                  | 
|EBITDA(3)                                                                                                                           |  |                                  | 267,564   |   |                                         |   | 196,975  |                                    | 

---

|(1) |  | Effective July 18, 2001 and July 12, 2000, the Companys consolidated operating results include the operating results of SkyMall and TV Guide, respectively.
SkyMall and TV Guide were acquired in transactions accounted for as purchases. Effective April 2001, the consolidated operating results exclude the operating results of the business that distributes the WGN superstation signal, which was sold.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | On November 28, 2000, the Board of Directors of the Company approved the change of the Companys fiscal year end from March 31 to December 31.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | EBITDA means operating (loss) income before stock compensation expense, depreciation and amortization, impairment of goodwill and merger related expenses, which
consist of costs incurred as a result of the mergers with NuvoMedia, Inc. and SoftBook Press, Inc. in fiscal year 2000. Due to purchase accounting related to the Companys merger with TV Guide on July 12, 2000, the results of operations for the
year ended December 31, 2001 and the nine months ended December 31, 2000, reflect significant increases in depreciation and amortization of goodwill and other intangible assets. Accordingly, the Companys business sectors are measured based on
EBITDA. The Company believes EBITDA to be relevant and useful information as EBITDA is the primary measure used by our management to measure the operating profits or losses of our business. EBITDA is one of several metrics used by our management to
measure the cash generated from our operations. EBITDA is presented supplementally, as we believe it is a standard measure commonly reported and widely used by analysts, investors and others associated with its industry. However, EBITDA does not
take into account substantial costs of doing business, such as income taxes and interest expense. While many in the financial community consider EBITDA to be an important measure of comparative operating performance, it 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 accounting principles generally accepted in the United States
that are presented in the financial statements included in this report. Additionally, our calculations of EBITDA may be different than the calculation used by other companies and, therefore, comparability may be affected. See Reconciliation of
EBITDA to Operating (Loss) Income below.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Reported results for the transition period from April 1, 2000 to December 31, 2000 have been combined with operating results for the three months ended March 31,
2000 to enhance comparability.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Operating results for the three months ended March 31, 2000 have been deducted from reported results for the year ended March 31, 2000 to present amounts for the
nine months ended December 31, 1999.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11



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Consolidated Results of
Operations



Year ended December 31, 2001 compared to the
year ended December 31, 2000



Revenues for
the year ended December 31, 2001 were $1.2 billion, an increase of $454.3 million compared to the same period in 2000. The increase in revenues was primarily due to $451.7 million of additional revenues attributable to TV Guide, which was acquired
by the Company on July 12, 2000.



The general
weakness in the advertising market during 2001 impacted most media companies in the United States, including the Company. For additional discussion of advertising revenues, see the Companys discussion of pro forma sector operating results
below.



Operating expenses, excluding stock
compensation, depreciation and amortization, impairment of goodwill and merger-related expenses were $905.0 million for the year ended December 31, 2001, an increase of $383.8 million when compared to the same period in 2000. The increase in
operating expenses was primarily due to increased operating costs of $329.1 million attributable to a full year of TV Guide operations.



Stock compensation expense reflects amortization of the portion of the purchase price of TV Guide assigned to unearned compensation for
unvested TV Guide stock options assumed by the Company in the TV Guide transaction. The unearned compensation is being amortized over the remaining vesting period of the options. No similar amortization expense existed in periods prior to the
acquisition of TV Guide. Stock compensation expense also included $14.8 million of additional unearned compensation amortization resulting from a senior executive officer that separated from the Company. Additionally, amortization of deferred
compensation arising from the issuance of options to the Companys former Chief Executive Officer totaled $1.8 million and $2.3 million in 2001 and 2000, respectively.



Depreciation and amortization during the year was $940.7 million, an increase of $501.5 million compared to
the same period in 2000. The increase in depreciation and amortization was attributable to a full year of amortization of intangible assets and other depreciation resulting from the acquisition of TV Guide.



The Company had impairment of goodwill relating to its
acquisition of Les Editions 00h00, an electronic publisher in Europe, of $10.8 million during 2001. No similar impairment charges were recorded in the twelve-month period ended December 31, 2000.



Interest expense was $27.4 million for the year ended December
31, 2001 compared to $24.8 million for the same period in 2000. The increase in interest expense was attributable to the debt and capital lease obligations assumed in the TV Guide transaction being outstanding for a full year in 2001, offset by
lower debt levels and interest rates. Prior to the acquisition of TV Guide, the Company had no debt.



Other income (expense), net was $(168.2) million for the year ended December 31, 2001 compared to $8.4 million for the same period in
2000. The decrease in other income (expense), net was due primarily to a $154.8 million write-down ($84.4 million during the fourth quarter) in 2001 of certain of the Companys technology investments and marketable securities, many of which
were acquired as part of the TV Guide merger and were recorded at values that existed for technology investments at that time, coupled with lower rates of return on cash investments during 2001 compared to 2000. Included in the amount is a charge of
$107.7 million reflecting the write-off of the carrying value of the Companys investment in an entity engaged in developing a satellite system. The entity experienced operating difficulties and a failed initial public offering. Management
concluded that the general weakness in the economy had impacted the fair value of these investments in a manner which was other than temporary, by delaying the deployment of underlying technologies, making it difficult for development stage
companies to access capital, and by causing sustained periods of depressed stock prices from previous prices.



12



---



The provision
for income tax benefit as a percentage of loss before income taxes and extraordinary item was 19% for the year ended December 31, 2001 compared to 28% for the same period in 2000. The overall effective tax rate reported by the Company in any single
period is impacted by, among other things, the country in which earnings or losses arise, applicable statutory tax rates and withholding tax requirements for particular countries, the availability of net operating loss carryforwards and the
availability of tax credits for taxes paid in certain jurisdictions, as well as the non-deductibility for income tax purposes of the amortization of purchased goodwill. Because of these factors, it is expected that the Companys future tax
expense as a percentage of income before income taxes may vary from year to year.



Nine months ended December 31, 2000 compared to nine months ended December 31, 1999



Revenues for the nine months ended December 31, 2000 were $669.9 million, an increase of $531.7 million compared to the same period in
1999. The increase in revenues was primarily due to $522.3 million of additional revenues attributable to the TV Guide acquisition on July 12, 2000.



Operating expenses, excluding stock compensation, depreciation and amortization, impairment of goodwill and merger related expenses, were
$493.1 million for the nine months ended December 31, 2000, an increase of $410.5 million when compared to the same period in 1999. The increase in operating expenses was primarily due to increased operating costs of $404.7 million attributable to
TV Guide.



Stock compensation expense reflects
amortization of the portion of the purchase price of TV Guide assigned to unearned compensation expense for unvested TV Guide stock options assumed by the Company in the TV Guide transaction. Additionally, amortization of deferred compensation
arising from the issuance of options to the Companys former Chief Executive Officer totaled $2.3 million and $5.3 million for the nine month periods ended December 31, 2000 and 1999, respectively.



Depreciation and amortization during the nine-month period
ended December 31, 2000 was $438.1 million, an increase of $434.8 million compared to the same period in 1999. The increase in depreciation and amortization was a result of amortization of goodwill and other intangible assets and other depreciation
resulting from the acquisition of TV Guide.



Interest expense was $24.8 million for the nine months ended December 31, 2000 compared to none for the same period in 1999. The interest expense in 2000 was attributable to the assumption of debt and capital lease obligations in the
TV Guide transaction. Prior to the acquisition of TV Guide, the Company had no debt.



The provision for income tax benefit as a percentage of loss before income taxes was 28% for the nine-month period ended 2000 compared to the provision for income tax expense as a percentage of income
before income taxes of 27% for the same period in 1999. The overall effective tax rate reported by the Company in any single period is impacted by, among other things, the country in which earnings or losses arise, applicable statutory tax rates and
withholding tax requirements for particular countries, the availability of net operating loss carryforwards and the availability of tax credits for taxes paid in certain jurisdictions as well as the

non deductibility for income tax purposes of the amortization of purchased goodwill. Because of these factors, it is expected that the Companys
future provision for income taxes as a percentage of income before income taxes may vary from year to year.



Pro Forma Sector Results of Operations



To enhance comparability, the following table sets forth certain financial information for the Companys business sectors on an unaudited pro forma basis for the twelve months ended December 31,
2001 compared to



13



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the twelve months ended December 31, 2000. This pro forma financial information reflects the merger with TV Guide, the acquisition of SkyMall
and sale of the WGN signal distribution business as though they had occurred on January 1, 2000. Due to purchase accounting, the results of operations for the year ended December 31, 2001 and for the nine-month period ended December 31, 2000,
reflect significant increases in amortization of goodwill and other intangible assets. Accordingly, the Companys business sectors are measured based on EBITDA (operating income before stock compensation expense, depreciation and amortization,
impairment of goodwill and merger related expenses). The Company believes pro forma results represent an appropriate supplemental analysis of revenues, expenses and EBITDA trends, as the pro forma presentation includes the results of operations of
the Companys significant businesses for all periods presented.



The Company categorizes its businesses into three principal business sectors: the Technology and Licensing Sector, which is responsible for the development, licensing and protection of intellectual property and proprietary
technologies (the Companys technology includes the VCR Plus+ system, IPGs marketed under the GUIDE Plus+ and TV Guide Interactive brands, and the eBook); the Interactive Platform Sector, which is responsible for advertising and electronic
commerce on the Companys proprietary interactive platforms and websites, and interactive wagering through the TVG Network; and the Media and Services Sector, which is responsible for the operations of TV Guide Magazine, TV Guide Channel, TVG
Network, SkyMall catalog sales, Superstar/Netlink Group (Superstar/Netlink), UVTV, SpaceCom and other non-interactive platforms and media properties. The Companys business sectors represent strategic business units that offer
different products and services and compete in different industries.



|                                  |  | Restated Unaudited Pro Forma Year Ended December
31, |          
|--------------------------------- |  | ---------------------------------------------------- | ---------
|                                  |  | 2001                                                 |          
|                                  |  | (in thousands)                                       |          
|Technology and Licensing Sector   |  |                                                      |          
|Revenues                          |  | $                                                    | 192,482  
|Operating expenses(1)             |  |                                                      | 135,200  
|                                  |  |                                                      |          
|EBITDA(2)                         |  | $                                                    | 57,282   
|                                  |  |                                                      |          
|Interactive Platform Sector       |  |                                                      |          
|Revenues                          |  | $                                                    | 38,510   
|Operating expenses(1)             |  |                                                      | 78,685   
|                                  |  |                                                      |          
|EBITDA(2)                         |  | $                                                    | (40,175  
|                                  |  |                                                      |          
|Media and Services Sector         |  |                                                      |          
|Revenues                          |  | $                                                    | 961,758  
|Operating expenses(1)             |  |                                                      | 719,185  
|                                  |  |                                                      |          
|EBITDA(2)                         |  | $                                                    | 242,573  
|                                  |  |                                                      |          
|Consolidated (after eliminations) |  |                                                      |          
|Revenues(3)                       |  | $                                                    | 1,188,617
|Operating expenses(1)(3)          |  |                                                      | 928,937  
|                                  |  |                                                      |          
|EBITDA(2)                         |  | $                                                    | 259,680  
|                                  |  |                                                      |          

---

|(1) |  | Operating expenses mean operating expenses, excluding stock compensation, depreciation and amortization, impairment of goodwill and merger related expenses.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | EBITDA means operating income before stock compensation expense, depreciation and amortization, impairment of goodwill and merger related expenses, which consist
of costs incurred as a result of the mergers with NuvoMedia and SoftBook in fiscal year 2000. Due to purchase accounting related to the Companys merger with TV Guide on July 12, 2000, the results of operations for the year ended December 31,
2001 and the nine months ended December 31, 2000, reflect significant increases in depreciation and amortization of goodwill and other intangible assets. Accordingly,
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



---

| | the Companys business sectors are measured based on EBITDA. The Company believes EBITDA to be relevant and useful information as EBITDA
is the primary measure used by our management to measure the operating profits or losses of our business. EBITDA is one of several metrics used by our management to measure the cash generated from our operations. EBITDA is presented supplementally
as we believe it is a standard measure commonly reported and widely used by analysts, investors and others associated with its industry. However, EBITDA does not take into account substantial costs of doing business, such as income taxes and
interest expense. While many in the financial community consider EBITDA to be an important measure of comparative operating performance, it 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 accounting principles generally accepted in the United States that are presented in the financial statements included in this report.
Additionally, our calculation of EBITDA may be different than the calculation used by other companies and, therefore, comparability may be affected. See Reconciliation of EBITDA to Operating (Loss) Income below.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Inter-segment eliminations consist of media and sales commissions reported as revenues by the Media and Services Sector and expenses by the Interactive Program
Sector.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following discussion
of each of the Companys segments is based on the unaudited pro forma financial information provided above.



Technology and Licensing SectorPro Forma



The Technology and Licensing Sector is responsible for the development, licensing and protection of intellectual property and proprietary
technologies. Revenues in this sector consist of license fees paid by third- party licensees for our proprietary technologies and patents primarily related to video recording, IPGs and electronic books. Our licensing activities include licenses for
consumer electronics, cable, satellite, Internet appliances, personal computers, and publications worldwide, with major consumer electronics manufacturers and others. Sector operations include research and development, and the creation, protection
and licensing of patents and proprietary technologies. This sector also includes the license revenues we derive from TVG Network.



For the twelve months ended December 31, 2001, pro forma revenues for the Technology and Licensing Sector were $192.5 million compared to
$196.0 million in the prior year. The decrease in revenues for this sector of $3.5 million, or 1.8%, was attributable to a decline in license fees from manufacturers of DSS set-top box devices due to lower unit growth and the expiration of a
significant agreement, partially offset by higher license fees from a manufacturer of cable set-top boxes and an increase in fees from service providers due to a number of new distribution agreements. During 2001, the Company entered into agreements
with new licensees for its technologies and increased the distribution base for its proprietary IPG platforms marketed under the GUIDE Plus+ and TV Guide Interactive brands.



In October 2000, the Company received $188.0 million in cash from a set-top box manufacturer to settle
outstanding arbitration and litigation proceedings. Of the $188.0 million cash received approximately $130.0 million was in prepayment of a 10-year technology licensing agreement. This prepayment is being accreted into income on a straight-line
basis over the life of the agreement. Revenues in the Technology and Licensing Sector for the years ended December 31, 2001 and 2000 include $13.0 million and $9.9 million, respectively, recognized in connection with this agreement. At December 31,
2001, $113.4 million remained to be recognized over the remaining term of the agreement.



Pro forma expenses in this sector for the twelve months ended December 31, 2001 were $135.2 million compared to $98.8 million in 2000. The increase in expense is primarily attributable to increased
legal costs of approximately $39.2 million primarily associated with the Companys proceedings before the International Trade Commission. (See Item 3, Legal Proceedings).



Interactive Platform SectorPro Forma



The Interactive Platform Sector is responsible for and derives recurring revenues from advertising and
electronic commerce on our interactive platforms and interactive wagering relating to TVG Network. Interactive



15



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Platform Sector activities also include the construction and operation of the infrastructure for the delivery of services and advertising to
the interactive platforms, media research, and the trafficking, tracking and billing of advertising. The Companys IPG platform currently is comprised of television sets incorporating the Gemstar GUIDE Plus+ IPG and digital cable set-top boxes
incorporating the TV Guide Interactive IPGs, as well as the on-line website www.tvguide.com. The Company collects revenue from interactive wagering activities related to our TVG network, and also conducts electronic commerce on our
www.skymall.com and www.tvguide.com websites.



For the twelve months ended December 31, 2001, pro forma revenues for the Interactive Platform Sector were $38.5 million compared to $23.0 million for the prior year, an increase of $15.5 million or 67%. Revenues in this sector are
comprised primarily of advertising revenues earned on the Companys proprietary platforms, including the IPGs and the online web site, www.tvguide.com as well as interactive wagering from the Companys TV Games subsidiary and online
interactive commerce revenue from the Companys Sky Mall subsidiary. The increase in revenues in this sector is primarily attributable to increased revenues from advertising on the online website, an increase in wagering activity at TV Games
network and an increase in advertising on the Companys IPG platform. The increase in IPG advertising revenues in this sector is primarily attributable to the launch of advertising enabled IPGs under the TV Guide Interactive brand during 2000
coupled with the increased penetration of such guides into the marketplace.



Pro forma expenses for this sector were $78.7 million for the year ended December 31, 2001 compared to $74.7 million for 2000, an increase of 5%. The increase in expenses is primarily attributable to
costs incurred to operate the expanding IPG base, including the new advertising enabled versions of the IPGs.



Media and Services SectorPro Forma



The Media and Services Sector is responsible for the operations of TV Guide Magazine, TV Guide Channel, SkyMall catalog sales, Superstar/Netlink, UVTV, SpaceCom and other non-interactive platforms and
media properties. Revenues in this sector are principally composed of subscription fees and advertising revenues of the TV Guide magazines and the TV Guide Channel and programming package revenues from C-band households. The Company sold the
business that distributes the WGN superstation signal in April 2001 and acquired SkyMall in July 2001. Accordingly, pro forma amounts for this sector which were previously presented have been restated for the impacts of the WGN superstation
disposition and SkyMall acquisition. This sector also includes the advertising revenues and operating costs associated with the TVG Network business.



For the twelve months ended December 31, 2001, pro forma revenues for the Media and Services Sector were $961.8 million compared to $1.1
billion for the prior year. Revenues in this sector decreased by $169.8 million, primarily due to decreased revenues earned by TV Guide Magazine and Superstar/Netlink. TV Guide Magazine continues to face declines in circulation due to slower new
subscriber growth, lower renewal rates and reduced newsstand sales. At December 31, 2001, TV Guide Magazine had a circulation of 9.0 million compared to 9.9 million at December 31, 2000. The C-band direct-to-home satellite market, in which
Superstar/Netlink operates, continues to decline due to the growth of the newer generation direct broadcast satellite systems and continued cable system expansions. During the year ended December 31, 2001, the number of C-band subscribers in the
industry decreased by 31% to approximately 823,000 subscribers. At December 31, 2001, Superstar/Netlink provided service to 549,000 of these subscribers, a decrease of 14% from the subscribers served by Superstar/Netlink at December 31, 2000. We
expect the declines in the circulation of TV Guide Magazine and the subscriber base of the C-band industry, and the resulting impacts on revenues in this sector, to continue. The impacts of the circulation and subscriber declines on revenue were
partially offset by an increase in the newsstand price of TV Guide Magazine, an increase in the price of programming packages offered by Superstar/Netlink and revenues earned from the subscriber conversion agreement with EchoStar Satellite
Corporation (EchoStar).



On November
2, 1999, Superstar/Netlink signed an agreement with EchoStar whereby Superstar/Netlink promotes and solicits orders for EchoStars direct broadcast subscription service, the DISH Network. In exchange, Superstar/Netlink receives an initial
commission for each current or past Superstar/Netlink subscriber



16



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who subscribes to the DISH Network and a monthly residual commission over the life of the agreement. This agreement has resulted in an
acceleration in the decline in the number of Superstar/Netlink subscribers and this effect is expected to continue.



Pro forma expenses for this sector were $719.2 million for 2001 compared to $888.5 million for 2000. A significant portion of the expenses
in this sector are those attributable to the paper, printing, and postage associated with TV Guide Magazine and programming acquired by Superstar/Netlink for programming packages sold to its customers. The decrease in expenses of $169.3 million in
this sector is primarily due to the decrease in circulation of TV Guide Magazine and reduced programming expenses associated with the decrease in the number of C-band subscribers.



For the twelve months ended December 31, 2001, pro forma EBITDA for this sector decreased by less than 1%
despite a 15% decline in revenues compared to the prior year.



The Company has traditionally operated a magazine distribution business which was responsible for distributing approximately 90 titles with a combined circulation of approximately 410 million copies per year in addition to the TV
Guide Magazine. Due to the change in business environment, and following the general approach of discontinuing non-core activities in order to focus on core business, the Company is considering business alternatives, including contracting with a
third party for distribution of TV Guide Magazine and assigning the existing distribution contracts to that same party. The distribution business generates approximately $12.6 million in revenue with no significant impact on EBITDA.



Liquidity and Capital Resources



For the twelve months ended December 31, 2001, net cash flows
from operating activities were $118.3 million. This cash flow, plus existing cash resources, proceeds from asset sales of $107.0 million and proceeds from the exercise of stock options of $20.3 million, was used to fund $249.8 million for repayment
of long-term debt, $71.1 million to repurchase substantially all of the remaining outstanding TV Guide 8 1/8% senior subordinated notes, $23.5 million for investments and acquisitions, $17.1 million for capital expenditures and $3.2 million for
additions to intangible assets.



At December 31,
2001, the Companys cash, cash equivalents and marketable securities classified as current assets aggregated $391.1 million.



Net cash flows from operating activities decreased $167.4 million for the year ended December 31, 2001 compared to $297.6 million
generated during the nine months ended December 31, 2000 due primarily to the fact that the 2000 period included cash flows resulting from the October 2000 settlement agreement with General Instrument/Motorola.



The Companys wholly owned subsidiary, TV Guide, has a
$300 million six-year revolving credit facility and a $300 million four-year amortizing term loan, both expiring in February 2005 with a group of banks. Borrowings under the credit facilities bear interest (2.9% at December 31, 2001) either at the
banks prime rate or LIBOR, both plus a margin based on a sliding scale tied to TV Guides leverage ratio, as defined in the facility. The credit facilities are guaranteed by certain subsidiaries of TV Guide and the stock of TV
Guides subsidiaries is pledged as collateral. The credit facilities impose restrictions on TV Guides ability to pay dividends to the Company tied to TV Guides leverage ratio. This restriction does not apply to the Companys
ability to pay dividends. As of December 31, 2001, TV Guide had available borrowing capacity under the six-year revolving credit facility of $146.6 million. Principal payments of $60 million in 2002, $90 million in 2003 and $23 million in 2004 are
due under the $300 million amortizing term loan. Outstanding borrowings under both credit facilities at December 31, 2001 and 2000 were $326.4 million and $568.7 million, respectively.



The Company is party to a loan guarantee to assist a printing services supplier in obtaining a line of credit
and term loans with a bank. The maximum expense to the Company created by this guarantee is $10.0 million.



17



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On June 18,
2001, the Company completed a tender offer in which it acquired substantially all of the outstanding 81/8%
senior subordinated notes of TV Guide at a price of $1,045 per $1,000 principal amount of notes tendered for an aggregate purchase price of $71.1 million plus accrued interest. In connection with the tender offer, the indenture for the notes was
amended to delete or modify most of the restrictive covenants. An extraordinary loss of $2.1 million, net of tax, was recognized as a result of this transaction.



The Company collects in advance a majority of its TV Guide Magazine subscription fees, Superstar/Netlink
Group subscription fees and certain of its UVTV superstation and TV Guide Channel revenues. In addition, the Company receives nonrefundable prepaid license fees from certain licensees. As of December 31, 2001, deferred revenue totaled $447.6
million. The Companys liability for prepaid magazine subscriptions is limited to the unearned prepayments in the event customers cancel their subscriptions. The Companys liability for other prepayments is limited to a refund of unearned
prepayments in the event that the Company is unable to provide service. No material refunds have been paid to date.



The Company does not have any material commitments for capital expenditures. The Company believes that the anticipated cash flows from
operations, and existing cash, cash equivalents and short-term marketable securities balances, will be sufficient to satisfy its expected working capital, capital expenditure and debt requirements in the foreseeable future.



A significant portion of the Companys receivables are
from a limited number of customers. The Company currently believes these receivables to be realizable; however, events may occur in the future which could cause the Company to change its assessment of the amount of recoverability.



In connection with the acquisition of TV Guide in 2000, The
News Corporation Limited (News Corporation) became a stockholder of the Company. As of December 31, 2001, News Corporation directly and indirectly owns approximately 42% of the Companys outstanding common stock and has the right to
designate six directors on the Companys board. The Company earned advertising revenues of $19.3 million and $10.4 million for the year ended December 31, 2001 and the period from the date of the TV Guide acquisition through December 31, 2000,
respectively, from entities controlled by News Corporation. During those same periods, the Company acquired programming from News Corporation controlled entities of $11.3 million and $7.8 million, respectively. Prior to its acquisition of TV Guide,
the Company did not have any significant transactions with News Corporation. As of December 31, 2001 and 2000, the Company had receivables due from News Corporation controlled entities totaling $4.6 million and $9.5 million, respectively, and
payables due to News Corporation controlled entities totaling $302,000 and $965,000, respectively. In addition, the Company purchases paper through a paper procurement arrangement with News Corporation at negotiated prices with paper suppliers based
on the combined paper requirements of the two organizations.



Liberty Media Corporation (Liberty Media), formerly an indirect wholly owned subsidiary of AT&T Corp., directly or indirectly owned approximately 21% of the issued and outstanding common stock of the Company from the
date of the acquisition of TV Guide in 2000 until May 2, 2001, the date Liberty Media sold its interest in the Company to News Corporation. For the period January 1, 2001 to May 2, 2001, the date Liberty Media ceased to be considered a related party
of the Company, and the period from the date of the TV Guide acquisition through December 31, 2000, the Company purchased programming from Liberty Media controlled affiliates of $4.5 million and $7.4 million, respectively. During those same periods,
the Company also sold video, program promotion and guide services and subscriber management services to AT&T Broadband and Internet Services (BIS) and its consolidated affiliates of $6.7 million and $8.4 million, respectively. In
addition, during those same periods, the Company purchased production services and was provided satellite transponder facilities and uplink services from BIS consolidated affiliates of $2.4 million and $3.9 million, respectively. BIS is also wholly
owned by AT&T Corp. Prior to its acquisition of TV Guide, the Company did not have any significant transactions with Liberty Media or BIS.



The Company has included in the amounts discussed above, transactions with News Corporation, BIS, and Liberty Media and all entities in
which BIS, Liberty Media and News Corporation have an interest greater than



18



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50%. In addition, the Company has transactions with entities in which BIS, Liberty Media and News Corporation own, directly or indirectly,
50% or less.



The Company, through a subsidiary,
leases approximately 18,887 square feet of office space from CMT Partners, LP. The two sons of Douglas Macrae, through the 1991 DBM Descendants Trust (DBM), own a 45% interest in CMT Partners, a privately held real estate partnership.
The remaining term of the current lease between the Company and CMT Partners is one year with a renewal option at the expiration of the term. The total amount paid by the Company to CMT Partners during the fiscal year was $397,000. DBM receives
distributions from CMT Partners, which include profits from the lease arrangement with the Company.



The Company has multiple transactions with Thomson multimedia, Inc. (Thomson), including Thomsons licensing of the
Companys VCR Plus+, GUIDE Plus+ and eBook technologies, Thomsons advertising on the Companys platforms, primarily the interactive program guide platforms, the Companys participation in marketing and promotion campaigns on
Thomson products carrying the Companys technology, and the two companies being joint venture partners in the sale of advertising on electronic program guides on televisions. During the year ended December 31, 2001, net revenues earned from the
relationship with Thomson were $49.6 million. As of December 31, 2001, the Company has receivables due from and a payable due to Thomson totaling $57.9 million and $21.2 million, respectively.



Recent Accounting Pronouncements



In November 2001, the Financial Accounting Standards
Boards (FASBs) Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products). EITF
No. 01-09 clarifies the income statement classification of costs incurred by a vendor for certain cooperative advertising and product placement paid to a vendors customers. As a result of the EITF consensus, certain of the Companys
cooperative advertising and product placement costs previously classified as operating expenses are to be reflected as a reduction of revenues earned from that activity. EITF No. 01-09 is effective commencing January 1, 2002 and requires, where
applicable, reclassification of amounts reported in prior periods to comply with the income statement classifications for the current period. Such reclassifications are not expected to exceed $60 million, $20 million and $10 million for the year
ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, respectively.



In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets.
Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually in accordance with the provisions of Statement 142. The Company adopted the provisions of Statement 141 effective July 1, 2001 and is required to adopt the provisions of Statement 142 effective
January 1, 2002. Pursuant to the transition provisions of Statement No. 142, any goodwill and any intangible asset determined to have an indefinite useful life that were acquired in a purchase business combination completed subsequent to June 30,
2001 were not amortized, but continued to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature through December 31, 2001.



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



19



---

loss will be measured as of the date of adoption. Furthermore, in connection with the transitional goodwill impairment evaluation, Statement
142 will require the Company to perform, within six months of adoption, an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Companys statement of operations.



As of December 31, 2001, the Company has unamortized goodwill in the amount of $5.6 billion and unamortized identifiable intangible assets with indefinite lives, primarily trademarks and publishing
rights, in the amount of approximately $795.3 million which will no longer be subject to amortization under the provisions of Statement 142. Amortization expense related to such assets was $495.3 million and $237.6 million for the year ended
December 31, 2001 and the nine months ended December 31, 2000, respectively. The Company is currently in the process of evaluating the potential impairment impacts of adopting Statement 142 on its financial statements. Based on the Companys
analysis completed to date, the Company expects to report transitional impairment losses of up to $5 billion upon adoption of Statement 142 in the first quarter of 2002. Pursuant to the provisions of Statement 142, any transitional impairment losses
will be reported as a cumulative effect of a change in accounting principle.



In October 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement replaces Statement 121. However, it retains the fundamental provisions
of Statement 121 for recognition and measurement of the impairment of long-lived assets to be held and used and for measurement of long-lived assets to be disposed of by sale. This statement applies to all long-lived assets, including discontinued
operations, and replaces the provisions of APB Opinion No. 30, Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, for the disposal of segments of a business. This statement requires that those long-lived
assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The Company is required to adopt this statement effective January 1, 2002. The Company does
not expect that the adoption of this statement will have a material impact on the consolidated financial statements.



Reconciliation of EBITDA to Consolidated Operating (Loss) Income



EBITDA means operating (loss) income excluding stock compensation, depreciation and amortization, impairment
of goodwill and merger related expenses. The Company believes EBITDA to be relevant and useful information as these are the primary measures used by our management to measure the operating profit or loss of our business. EBITDA is one of several
metrics used by our management to measure the cash generated from our operations. EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles
generally accepted in the United States. EBITDA, as we have defined them, may not be comparable to similarly titled measures reported by other companies.



Reconciliation of EBITDA to (loss) income before income taxes and extraordinary item:



|                                                          |  | Restated Year ended December 31, |          |   | Restated Nine months ended December 31, |   |          | Restated year ended March 31, 2000 | 
|--------------------------------------------------------- |  | -------------------------------- | -------- | - | --------------------------------------- | - | -------- | ---------------------------------- | 
|                                                          |  | 2001                             |          |   | 2000(1)                                 |   |          | 2000                               | 
|EBITDA                                                    |  | $                                | 267,564  |   |                                         | $ | 196,975  |                                    | 
|Stock compensation                                        |  |                                  | (46,538  | ) |                                         |   | (21,818  | )                                  | 
|Depreciation and amortization                             |  |                                  | (940,670 | ) |                                         |   | (439,148 | )                                  | 
|Impairment of intangible assets                           |  |                                  | (10,800  | ) |                                         |   |         |                                    | 
|Merger related expenses                                   |  |                                  |         |   |                                         |   | (15,895  | )                                  | 
|Interest expense                                          |  |                                  | (27,375  | ) |                                         |   | (24,783  | )                                  | 
|Other (expense) income, net                               |  |                                  | (168,171 | ) |                                         |   | 21,934   |                                    | 
|                                                          |  |                                  |          |   |                                         |   |          |                                    | 
|(Loss) income before income taxes and extraordinary item: |  | $                                | (925,990 | ) |                                         | $ | (282,735 | )                                  | 
|                                                          |  |                                  |          |   |                                         |   |          |                                    | 



20



---

---

|(1) |  | Reported results for the transition period from April 1, 2000 to December 31, 2000 have been combined with operating results for the three months ended March 31,
2000 to enhance comparability.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ITEM
8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



See the Index to Consolidated Financial Statements on page F-1.



21



---



PART IV



ITEM 14.    EXHIBITS, FINANCIAL
STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.



(a)(1) Financial Statements



The
financial statements listed in the Index to Consolidated Financial Statements on page F-1 are filed as part of this Form 10-K/A.



(a)(2) Exhibits



The exhibits listed in the Exhibit Index following the Consolidated Financial Statements are incorporated herein by reference or are filed
with this Form 10-K/A as indicated.



(b) Reports
on Form 8-K



There were no reports filed on Form
8-K in the fourth quarter of 2001.



22



---



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.



|                      |  |  |  | GEMSTAR-TV GUIDE INTERNATIONAL, INC.
(Registrant)
|--------------------- |  |  |  | -------------------------------------------------
|                     
|Date:  March 31, 2003 |  |  |  | By:                                              
|                      |  |  |  |                                                  



|                     
|---------------------
|Date:  March 31, 2003
|                     



23



---



10-K/A
CERTIFICATION



Gemstar-TV Guide
International, Inc.

SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATION



I, Jeff Shell, certify that:



|1. |  | I have reviewed this amendment to the annual report on Form 10-K/A of Gemstar-TV Guide International, Inc.;
|-- |  | -----------------------------------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                     
|---------------------
|Date:  March 31, 2003
|                     













24



---



10-K/A
CERTIFICATION



Gemstar-TV Guide
International, Inc.

SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATION



I, Paul Haggerty, certify that:



|1. |  | I have reviewed this amendment to the annual report on Form 10-K/A of Gemstar-TV Guide International, Inc.;
|-- |  | -----------------------------------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                     
|---------------------
|Date:  March 31, 2003
|                     



25



---





GEMSTAR-TV GUIDE INTERNATIONAL, INC.



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                                                           |  | Page
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                          
|Report of Independent Auditors                                                                                                                                             |  | F-2 
|                                                                                                                                                                          
|Consolidated Balance Sheets (Restated) as of December 31, 2001 and 2000                                                                                                    |  | F-3 
|                                                                                                                                                                          
|Consolidated Statements of Operations (Restated) for the year ended December 31, 2001,
the nine months ended December 31, 2000 and the year ended March 31, 2000           |  | F-4 
|                                                                                                                                                                          
|Consolidated Statements of Stockholders Equity (Restated) for the year ended
December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000 |  | F-5 
|                                                                                                                                                                          
|Consolidated Statements of Cash Flows (Restated) for the year ended December 31, 2001,
the nine months ended December 31, 2000 and the year ended March 31, 2000           |  | F-6 
|                                                                                                                                                                          
|Notes to Consolidated Financial Statements (Restated)                                                                                                                      |  | F-7 



All
schedules are either included in the Notes to Consolidated Financial Statements or are omitted because they are not applicable.



F-1



---



REPORT OF
INDEPENDENT AUDITORS



To the Board of Directors and
Stockholders of

Gemstar-TV Guide International, Inc.



We have audited the accompanying consolidated balance sheets (restated) of Gemstar-TV Guide International,
Inc. as of December 31, 2001 and 2000, and the related consolidated statements of operations (restated), stockholders equity (restated), and cash flows (restated) for the year ended December 31, 2001, the nine-month period ended December 31,
2000 and the year ended March 31, 2000. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with auditing standards
generally accepted in the 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Gemstar-TV Guide International, Inc. at December 31, 2001 and
2000, and the consolidated results of its operations and its cash flows for the year ended December 31, 2001, the nine-month period ended December 31, 2000, and the year ended March 31, 2000 in conformity with accounting principles generally
accepted in the United States.



ERNST & YOUNG LLP



Los Angeles, California

March 25, 2003





F-2



---



GEMSTAR-TV
GUIDE INTERNATIONAL, INC.



CONSOLIDATED
BALANCE SHEETS

(In thousands, except per share data)



|                                                                                                                                                                                                                             |  | Restated December 31, 2001 |           |   | Restated December 31, 2000 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | - | -------------------------- | -
|ASSETS                                                                                                                                                                                                                       |  |                            |           |   |                            |  
|Current assets:                                                                                                                                                                                                              |  |                            |           |   |                            |  
|Cash and cash equivalents                                                                                                                                                                                                    |  | $                          | 349,250   |   |                            | $
|Marketable securities                                                                                                                                                                                                        |  |                            | 41,940    |   |                            |  
|Receivables, net                                                                                                                                                                                                             |  |                            | 278,947   |   |                            |  
|Deferred taxes                                                                                                                                                                                                               |  |                            | 28,500    |   |                            |  
|Other current assets                                                                                                                                                                                                         |  |                            | 31,117    |   |                            |  
|                                                                                                                                                                                                                             |  |                            |           |   |                            |  
|Total current assets                                                                                                                                                                                                         |  |                            | 729,754   |   |                            |  
|Property and equipment, net                                                                                                                                                                                                  |  |                            | 86,070    |   |                            |  
|Intangible assets, net                                                                                                                                                                                                       |  |                            | 8,362,617 |   |                            |  
|Marketable securities and other investments                                                                                                                                                                                  |  |                            | 102,025   |   |                            |  
|Other assets                                                                                                                                                                                                                 |  |                            | 61,047    |   |                            |  
|                                                                                                                                                                                                                             |  |                            |           |   |                            |  
|                                                                                                                                                                                                                             |  | $                          | 9,341,513 |   |                            | $
|                                                                                                                                                                                                                             |  |                            |           |   |                            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                         |  |                            |           |   |                            |  
|Current liabilities:                                                                                                                                                                                                         |  |                            |           |   |                            |  
|Accounts payable and accrued expenses                                                                                                                                                                                        |  | $                          | 172,378   |   |                            | $
|Current portion of long-term debt and capital lease obligations                                                                                                                                                              |  |                            | 62,201    |   |                            |  
|Current portion of deferred revenue                                                                                                                                                                                          |  |                            | 254,824   |   |                            |  
|                                                                                                                                                                                                                             |  |                            |           |   |                            |  
|Total current liabilities                                                                                                                                                                                                    |  |                            | 489,403   |   |                            |  
|Deferred taxes                                                                                                                                                                                                               |  |                            | 1,008,670 |   |                            |  
|Long-term debt and capital lease obligations, less current portion                                                                                                                                                           |  |                            | 271,029   |   |                            |  
|Deferred revenue, less current portion                                                                                                                                                                                       |  |                            | 192,746   |   |                            |  
|Other liabilities                                                                                                                                                                                                            |  |                            | 5,411     |   |                            |  
|Commitments and contingencies                                                                                                                                                                                                |  |                            |           |   |                            |  
|Stockholders equity:                                                                                                                                                                                                        |  |                            |           |   |                            |  
|Preferred stock, par value $.01 per share. Authorized 150,000 shares, none
issued                                                                                                                                            |  |                            |          |   |                            |  
|Common stock, par value $.01 per share. Authorized 2,350,000 shares; 417,867 shares
issued and 414,748 shares outstanding at December 31, 2001 and 413,749 shares issued and 410,960 shares outstanding at December 31, 2000 |  |                            | 4,179     |   |                            |  
|Additional paid-in capital                                                                                                                                                                                                   |  |                            | 8,387,761 |   |                            |  
|Accumulated deficit                                                                                                                                                                                                          |  |                            | (982,666  | ) |                            |  
|Accumulated other comprehensive income, net of tax                                                                                                                                                                           |  |                            | 25,011    |   |                            |  
|Unearned compensation                                                                                                                                                                                                        |  |                            | (25,188   | ) |                            |  
|Treasury stock, at cost; 3,119 shares at December 31, 2001 and 2,789 shares at December
31, 2000                                                                                                                             |  |                            | (34,843   | ) |                            |  
|                                                                                                                                                                                                                             |  |                            |           |   |                            |  
|Total stockholders equity                                                                                                                                                                                                   |  |                            | 7,374,254 |   |                            |  
|                                                                                                                                                                                                                             |  |                            |           |   |                            |  
|                                                                                                                                                                                                                             |  | $                          | 9,341,513 |   |                            | $
|                                                                                                                                                                                                                             |  |                            |           |   |                            |  





See accompanying Notes to Consolidated Financial Statements.



F-3



---



GEMSTAR-TV
GUIDE INTERNATIONAL, INC.



CONSOLIDATED
STATEMENTS OF OPERATIONS

(In thousands, except per share data)



|                                                                                                                                    |  | Restated Year ended December 31, 2001 |           |   | Restated Nine months ended December 31, 2000 |   |          | Restated Year ended March 31, 2000
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | --------- | - | -------------------------------------------- | - | -------- | ----------------------------------
|Revenues                                                                                                                            |  | $                                     | 1,172,558 |   |                                              | $ | 669,904  |                                   
|Operating expenses:                                                                                                                 |  |                                       |           |   |                                              |   |          |                                   
|Operating expenses, excluding stock compensation, depreciation and amortization,
impairment of goodwill and merger related expenses |  |                                       | 904,994   |   |                                              |   | 493,133  |                                   
|Stock compensation                                                                                                                  |  |                                       | 46,538    |   |                                              |   | 20,635   |                                   
|Depreciation and amortization                                                                                                       |  |                                       | 940,670   |   |                                              |   | 438,059  |                                   
|Impairment of goodwill                                                                                                              |  |                                       | 10,800    |   |                                              |   |         |                                   
|Merger related expenses                                                                                                             |  |                                       |          |   |                                              |   |         |                                   
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|                                                                                                                                    |  |                                       | 1,903,002 |   |                                              |   | 951,827  |                                   
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|Operating (loss) income                                                                                                             |  |                                       | (730,444  | ) |                                              |   | (281,923 | )                                 
|Interest expense                                                                                                                    |  |                                       | (27,375   | ) |                                              |   | (24,783  | )                                 
|Other (expense) income, net                                                                                                         |  |                                       | (168,171  | ) |                                              |   | 8,441    |                                   
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|(Loss) income before income taxes and extraordinary item                                                                            |  |                                       | (925,990  | ) |                                              |   | (298,265 | )                                 
|(Benefit) provision for income taxes                                                                                                |  |                                       | (177,414  | ) |                                              |   | (82,807  | )                                 
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|(Loss) income before extraordinary item                                                                                             |  |                                       | (748,576  | ) |                                              |   | (215,458 | )                                 
|Extraordinary loss on debt extinguishment, net of tax                                                                               |  |                                       | (2,100    | ) |                                              |   |         |                                   
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|Net (loss) income                                                                                                                   |  | $                                     | (750,676  | ) |                                              | $ | (215,458 | )                                 
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|Basic (loss) earnings per share:                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|(Loss) income before extraordinary item                                                                                             |  | $                                     | (1.82     | ) |                                              | $ | (0.64    | )                                 
|Extraordinary loss on debt extinguishment, net                                                                                      |  |                                       |          |   |                                              |   |         |                                   
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|Net (loss) income                                                                                                                   |  | $                                     | (1.82     | ) |                                              | $ | (0.64    | )                                 
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|Diluted (loss) earnings per share:                                                                                                  |  |                                       |           |   |                                              |   |          |                                   
|(Loss) income before extraordinary item                                                                                             |  | $                                     | (1.82     | ) |                                              | $ | (0.64    | )                                 
|Extraordinary loss on debt extinguishment, net                                                                                      |  |                                       |          |   |                                              |   |         |                                   
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|Net (loss) income                                                                                                                   |  | $                                     | (1.82     | ) |                                              | $ | (0.64    | )                                 
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|Weighted average shares outstanding                                                                                                 |  |                                       | 412,389   |   |                                              |   | 334,804  |                                   
|Dilutive effect of:                                                                                                                 |  |                                       |           |   |                                              |   |          |                                   
|Stock options                                                                                                                       |  |                                       |          |   |                                              |   |         |                                   
|Warrants                                                                                                                            |  |                                       |          |   |                                              |   |         |                                   
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   
|Weighted average shares outstanding, assuming dilution                                                                              |  |                                       | 412,389   |   |                                              |   | 334,804  |                                   
|                                                                                                                                    |  |                                       |           |   |                                              |   |          |                                   



See
accompanying Notes to Consolidated Financial Statements.



F-4



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(In thousands)



|                                                       |  | Common Stock |  | Additional paid-in capital |       | (Accumulated deficit) retained earnings |   |           | Accumulated other comprehensive income (loss) |        |          | Unearned compensation |        |   | Treasury stock |   |  | Total stockholders equity |        
|------------------------------------------------------ |  | ------------ |  | -------------------------- | ----- | --------------------------------------- | - | --------- | --------------------------------------------- | ------ | -------- | --------------------- | ------ | - | -------------- | - |  | -------------------------- | -------
|                                                       |  | Shares       |  | Amount                     |       |                                         |   |           |                                               | Shares |          |                       | Amount |   |               
|Balances at April 1, 1999 (restated)                   |  | 204,724      |  | $                          | 2,047 |                                         | $ | 275,066   |                                               | $      | (77,391  | )                     |        | $ | (228           | ) |  | $                          | (9,668 
|Comprehensive income:                                  |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Net income (restated)                                  |  |             |  |                            |      |                                         |   |          |                                               |        | 63,021   |                       |        |   |               |   |  |                            |       
|Unrealized gains on marketable securities              |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   | 37,206         |   |  |                            |       
|Foreign currency translation adjustments               |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   | 489            |   |  |                            |       
|                                                       |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Total comprehensive income (restated)                  |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Issuance of common stock                               |  | 1,590        |  |                            | 16    |                                         |   | 30,479    |                                               |        |         |                       |        |   |               |   |  |                            |       
|Exercise of stock options                              |  | 4,164        |  |                            | 41    |                                         |   | 19,896    |                                               |        |         |                       |        |   |               |   |  |                            |       
|Tax benefit associated with stock options              |  |             |  |                            |      |                                         |   | 33,090    |                                               |        |         |                       |        |   |               |   |  |                            |       
|Exercise of warrants                                   |  | 65           |  |                            | 1     |                                         |   | 124       |                                               |        |         |                       |        |   |               |   |  |                            |       
|Amortization of unearned compensation (restated)       |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   |               |   |  |                            | 5,318  
|Adjustment for change in SoftBook Press, Inc. year end |  |             |  |                            |      |                                         |   |          |                                               |        | (2,162   | )                     |        |   |               |   |  |                            |       
|                                                       |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Balances at March 31, 2000 (restated)                  |  | 210,543      |  |                            | 2,105 |                                         |   | 358,655   |                                               |        | (16,532  | )                     |        |   | 37,467         |   |  |                            | (4,350 
|Comprehensive loss:                                    |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Net loss (restated)                                    |  |             |  |                            |      |                                         |   |          |                                               |        | (215,458 | )                     |        |   |               |   |  |                            |       
|Unrealized losses on marketable securities             |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   | (7,707         | ) |  |                            |       
|Foreign currency translation adjustments               |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   | (423           | ) |  |                            |       
|                                                       |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Total comprehensive loss (restated)                    |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Issuance of common stock for acquisitions              |  | 200,556      |  |                            | 2,006 |                                         |   | 7,875,737 |                                               |        |         |                       |        |   |               |   |  |                            |       
|Exercise of stock options                              |  | 2,650        |  |                            | 26    |                                         |   | 22,307    |                                               |        |         |                       |        |   |               |   |  |                            |       
|Tax benefit associated with stock options              |  |             |  |                            |      |                                         |   | 61,400    |                                               |        |         |                       |        |   |               |   |  |                            |       
|Unearned stock option compensation                     |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   |               |   |  |                            | (88,011
|Amortization of unearned compensation                  |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   |               |   |  |                            | 20,635 
|                                                       |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Balances at December 31, 2000 (restated)               |  | 413,749      |  |                            | 4,137 |                                         |   | 8,318,099 |                                               |        | (231,990 | )                     |        |   | 29,337         |   |  |                            | (71,726
|Comprehensive loss:                                    |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Net loss (restated)                                    |  |             |  |                            |      |                                         |   |          |                                               |        | (750,676 | )                     |        |   |               |   |  |                            |       
|Unrealized losses on marketable securities (restated)  |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   | (3,834         | ) |  |                            |       
|Foreign currency translation adjustments               |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   | (492           | ) |  |                            |       
|                                                       |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Total comprehensive loss (restated)                    |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Exercise of stock options                              |  | 3,377        |  |                            | 34    |                                         |   | 20,239    |                                               |        |         |                       |        |   |               |   |  |                            |       
|Tax benefit associated with stock options              |  |             |  |                            |      |                                         |   | 21,580    |                                               |        |         |                       |        |   |               |   |  |                            |       
|Issuance of common stock for acquisition.              |  | 741          |  |                            | 8     |                                         |   | 27,843    |                                               |        |         |                       |        |   |               |   |  |                            |       
|Amortization of unearned compensation                  |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   |               |   |  |                            | 46,538 
|Purchase of treasury stock                             |  |             |  |                            |      |                                         |   |          |                                               |        |         |                       |        |   |               |   |  |                            |       
|                                                       |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        
|Balances at December 31, 2001 (restated)               |  | 417,867      |  | $                          | 4,179 |                                         | $ | 8,387,761 |                                               | $      | (982,666 | )                     |        | $ | 25,011         |   |  | $                          | (25,188
|                                                       |  |              |  |                            |       |                                         |   |           |                                               |        |          |                       |        |   |                |   |  |                            |        



See
accompanying Notes to Consolidated Financial Statements.



F-5



---



GEMSTAR-TV
GUIDE INTERNATIONAL, INC.



CONSOLIDATED
STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                         |  | Restated Year ended December 31, 2001 |          |   | Restated Nine months ended December 31, 2000 |   |          | Restated Year ended March 31, 2000 | 
|---------------------------------------------------------------------------------------- |  | ------------------------------------- | -------- | - | -------------------------------------------- | - | -------- | ---------------------------------- | 
|Cash flows from operating activities:                                                    |  |                                       |          |   |                                              |   |          |                                    | 
|Net (loss) income                                                                        |  | $                                     | (750,676 | ) |                                              | $ | (215,458 | )                                  | 
|Adjustments to reconcile net (loss) income to net cash provided by operating
activities: |  |                                       |          |   |                                              |   |          |                                    | 
|Depreciation and amortization                                                            |  |                                       | 940,670  |   |                                              |   | 438,059  |                                    | 
|Deferred income taxes                                                                    |  |                                       | (158,456 | ) |                                              |   | (166,821 | )                                  | 
|Tax benefit associated with stock options                                                |  |                                       | 21,580   |   |                                              |   | 61,400   |                                    | 
|Stock compensation expense                                                               |  |                                       | 46,538   |   |                                              |   | 20,635   |                                    | 
|Impairment of goodwill                                                                   |  |                                       | 10,800   |   |                                              |   |         |                                    | 
|Investment write down                                                                    |  |                                       | 154,701  |   |                                              |   |         |                                    | 
|Changes in operating assets and liabilities, net of the effect of
acquisitions:          |  |                                       |          |   |                                              |   |          |                                    | 
|Receivables                                                                              |  |                                       | (27,862  | ) |                                              |   | 104,903  |                                    | 
|Other assets                                                                             |  |                                       | 4,919    |   |                                              |   | 11,230   |                                    | 
|Accounts payable, accrued expenses and other liabilities                                 |  |                                       | (117,922 | ) |                                              |   | (53,268  | )                                  | 
|Deferred revenue                                                                         |  |                                       | (6,028   | ) |                                              |   | 96,950   |                                    | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Net cash provided by operating activities                                                |  |                                       | 118,264  |   |                                              |   | 297,630  |                                    | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Cash flows from investing activities:                                                    |  |                                       |          |   |                                              |   |          |                                    | 
|Investments and acquisitions                                                             |  |                                       | (23,519  | ) |                                              |   | (96,831  | )                                  | 
|Cash acquired in acquisitions                                                            |  |                                       | 2,361    |   |                                              |   | 99,075   |                                    | 
|Purchases of marketable securities                                                       |  |                                       | (104,388 | ) |                                              |   | (68,413  | )                                  | 
|Sales and maturities of marketable securities                                            |  |                                       | 112,061  |   |                                              |   | 65,172   |                                    | 
|Sale of assets                                                                           |  |                                       | 107,011  |   |                                              |   | 1,381    |                                    | 
|Additions to property, plant and equipment                                               |  |                                       | (17,135  | ) |                                              |   | (22,730  | )                                  | 
|Additions to intangible assets                                                           |  |                                       | (3,187   | ) |                                              |   | (500     | )                                  | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Net cash provided by (used in) investing activities                                      |  |                                       | 73,204   |   |                                              |   | (22,846  | )                                  | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Cash flows from financing activities:                                                    |  |                                       |          |   |                                              |   |          |                                    | 
|(Repayments) borrowings under bank credit facilities, net                                |  |                                       | (249,750 | ) |                                              |   | 298,448  |                                    | 
|Repayment of senior subordinated notes                                                   |  |                                       | (71,134  | ) |                                              |   | (331,864 | )                                  | 
|Repayment of capital lease obligations                                                   |  |                                       | (2,674   | ) |                                              |   | (2,044   | )                                  | 
|Issuance of common stock                                                                 |  |                                       |         |   |                                              |   |         |                                    | 
|Proceeds from exercise of stock options and warrants                                     |  |                                       | 20,273   |   |                                              |   | 22,333   |                                    | 
|Purchases of treasury stock                                                              |  |                                       | (6,404   | ) |                                              |   |         |                                    | 
|Other                                                                                    |  |                                       | (19,269  | ) |                                              |   | (11,425  | )                                  | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Net cash (used in) provided by financing activities                                      |  |                                       | (328,958 | ) |                                              |   | (24,552  | )                                  | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Effect of exchange rate changes on cash and cash equivalents                             |  |                                       | (322     | ) |                                              |   | (216     | )                                  | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Net (decrease) increase in cash and cash equivalents                                     |  |                                       | (137,812 | ) |                                              |   | 250,016  |                                    | 
|Cash and cash equivalents at beginning of period                                         |  |                                       | 487,062  |   |                                              |   | 237,046  |                                    | 
|Adjustment for change in SoftBook Press, Inc. year end                                   |  |                                       |         |   |                                              |   |         |                                    | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Cash and cash equivalents at end of period                                               |  | $                                     | 349,250  |   |                                              | $ | 487,062  |                                    | 
|                                                                                         |  |                                       |          |   |                                              |   |          |                                    | 
|Supplemental disclosures of cash flow information:                                       |  |                                       |          |   |                                              |   |          |                                    | 
|Cash paid for income taxes                                                               |  | $                                     | 91,161   |   |                                              | $ | 6,620    |                                    | 
|Cash paid for interest                                                                   |  |                                       | 31,169   |   |                                              |   | 33,597   |                                    | 



See
accompanying Notes to Consolidated Financial Statements.





F-6



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Restated)





(1)    Description of Business and Summary of Significant Accounting Policies



Description of Business



Gemstar-TV Guide International, Inc. is a leading Media and technology company that develops, licenses, markets and distributes
technologies, products and services targeted at the television guidance and home entertainment needs of consumers worldwide. On July 12, 2000, the Company completed its merger with TV Guide, Inc. (TV Guide). The merger was accounted for
under the purchase method. Accordingly, the consolidated financial statements include the results of operations and cash flows of TV Guide from July 12, 2000.



The Company has three major business sectors: the Technology and Licensing Sector, which is responsible for the development, licensing and
protection of intellectual property and proprietary technologies; the Interactive Platform Sector, which is responsible for advertising and e-commerce on the Companys proprietary interactive platforms and web sites, and interactive wagering
relating to TVG Network; and the Media and Services Sector, which is responsible for the operations of TV Guide Magazine, TV Guide Channel, TVG Network, SkyMall catalog sales, Superstar/Netlink Group (Superstar/Netlink), UVTV, SpaceCom
and other non-interactive platforms and media properties. The Companys business sectors represent strategic business units that offer different products and services to customers and compete in different industries.



Change in Year End



In November 2000, the Board of Directors of the Company
approved the change of the Companys fiscal year end from March 31 to December 31.



Domestication



In February 2000, the Company adopted a new certificate of incorporation and bylaws and effected a domestication from the British Virgin Islands to the State of Delaware. The number of authorized shares of common stock was
increased from 500 million to 2.35 billion. In addition, the number of authorized shares of preferred stock was increased from 50 million to 150 million.



Principles of Consolidation



The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and entities in which it has a
controlling financial interest and exercises control over operations (collectively, Subsidiaries). All material intercompany balances and transactions have been eliminated in consolidation.



Investments



Investments of 50% or less in entities that the Company has
the ability to exercise significant influence over operations are accounted for using the equity method. Investments in corporate joint ventures are accounted for under the equity method due to the Companys ability to exercise significant
influence over their operations. All other equity investments are accounted for under the cost method.



Use of Estimates



The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Significant areas requiring the use of management estimates relate to revenue recognition, allowances for doubtful accounts, establishing the fair value of tangible and intangible assets and liabilities and the
allocation thereof in purchase accounting for purchase business combinations, determining whether other than temporary declines in the fair value of our investments exist, impairment of goodwill and other indefinite-lived identifiable intangibles
and long-lived assets, accruals for litigation matters, depreciation and amortization, and income taxes. Actual results could differ materially from those estimates.



F-7



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





Cash
and Cash Equivalents



Cash and cash
equivalents include all highly liquid investments with original maturities of three months or less.



Marketable Securities



Marketable securities include certificates of deposit, equity investments, and municipal and corporate debt securities. Management
determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization and
accretion is included in other income (expense). Interest on securities classified as held-to-maturity is included in other income.



Marketable equity securities and debt securities not classified as held-to-maturity are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in other comprehensive income. The Companys marketable securities are reviewed each reporting period for declines in value that
are considered to be other-than temporary and, if appropriate, written down to their estimated fair value. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other
income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in other income.



Credit Risk



Financial instruments which potentially subject the Company to a concentration of credit risk principally consist of cash, cash
equivalents, marketable securities and trade receivables. The Company invests the majority of its cash in money market funds, certificates of deposit, municipal and corporate debt securities and equities. These investments are diversified among
high-grade issues and are maintained with several high credit quality financial institutions. As part of its cash management process, the Company performs periodic evaluations of the relative credit ratings of these financial institutions. The
Company has established guidelines relative to diversification and maturities that attempt to maintain safety and liquidity. These guidelines are reviewed periodically and modified to take advantage of trends in yields and interest rates. The
Company has not experienced any credit losses on its cash, cash equivalents or marketable securities.



There is a concentration of credit risk associated with wholesale distributors of print products and consumer electronics which may be
affected by changes in economic and industry conditions. Concentration of credit risk with respect to programming trade receivables is limited since a substantial number of the Companys customers pay in advance, providing for receipt of funds
prior to service being rendered, or provide letters of credit as security. For other customers, service is generally terminated in the event payment is not received within 30-60 days of service. Credit losses have been within managements
expectations.



Property and Equipment



Property and equipment are recorded at cost
and depreciated using the straight-line method over the estimated useful lives of the assets. Assets acquired under capital lease arrangements are recorded at the present



F-8



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



value of the minimum lease payments and are amortized over the shorter of the lease term or useful life of the leased asset. Estimated useful
lives are as follows:



|Machinery and equipment    |  | 2 to 15 years
|-------------------------- |  | -------------
|Leased transponders        |  | 9 to 12 years
|Buildings and improvements |  | 2 to 32 years



Intangible Assets



Intangible assets are recorded at cost and amortized using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows:



|Customer lists         |  | 3 to 5 years 
|---------------------- |  | -------------
|Contracts              |  | 5 to 10 years
|Trademarks and patents |  | 5 to 40 years
|Publishing rights      |  | 15 years     
|Goodwill               |  | 5 to 15 years



The
Company assesses goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of goodwill is assessed by determining whether the carrying value of goodwill can be
recovered through undiscounted future operating cash flows. The amount of goodwill impairment, if any, is measured based on a projected discounted cash flow model using a discounted rate commensurate with the risk inherent in the Companys
current business model. The assessment of the recoverability of goodwill will be impacted if estimated future operating cash flows are not achieved. The Company recorded a $10.8 million impairment charge in the year ended December 31, 2001 to reduce
the carrying value of goodwill associated with certain international electronic publishing assets. No similar impairment charges were required in the nine months ended December 31, 2000 or in the year ended March 31, 2000.



Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of



The Company reviews its
long-lived tangible assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to the undiscounted future operating cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No impairment charges were recorded during the year ended
December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000. However, future events or changes in circumstances could result in indicators of impairment and actual impairment charges where none exist today.



Accounting for Stock Options



The Company accounts for its stock option
plan under the provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation (Statement 123) by electing to continue to apply the provisions of Accounting
Principles Board (APB) Opinion No. 25, Accounting for



F-9



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



Stock Issued to Employees, and related interpretations, and providing pro forma disclosures regarding net income (loss) and earnings
(loss) per share as if the fair value method defined in Statement 123 had been applied.



Stock Splits



On May 14, 1999, the Company effected a two-for-one stock split in the form of a stock dividend to holders of record as of April 30, 1999. On December 13, 1999, the Company effected a two-for-one stock split in the form of a
stock dividend to holders of record as of November 29, 1999. All share, per share, stock option and warrant amounts herein have been restated to reflect the effects of these splits.



Accumulated Other Comprehensive Income



The components of accumulated other comprehensive income at December 31, 2001 and 2000 are as follows:



|                                                                                                         |  | 2001           |         |   | 2000 |  
|-------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | -
|                                                                                                         |  | (in thousands) |        
|Unrealized gains on marketable securities (net of tax of$16.8 million in
2001 and $19.3 million in 2000) |  |                | $25,665 |   |      |  
|Foreign currency translation adjustments (net of tax of$0.4 million in 2001 and $0.1
million in 2000)    |  |                | (654    | ) |      |  
|                                                                                                         |  |                |         |   |      |  
|                                                                                                         |  | $              | 25,011  |   |      | $
|                                                                                                         |  |                |         |   |      |  



Foreign Currency Translation



The financial statements of foreign subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using the exchange rate at the balance sheet date for assets and liabilities and the average
exchange rate for the period for income and expense items. Gains and losses resulting from translation are accumulated as a separate component of comprehensive loss within stockholders equity until the investment in the foreign entity is sold
or liquidated. The Companys transactions are predominantly denominated in U.S. dollars.



Fair Value of Financial Instruments



Carrying amounts of certain of the Companys financial instruments including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value
because of their short maturities. Held-to-maturity marketable securities are reported at amortized cost, which approximates their fair value. Available-for-sale marketable securities are reported at their fair value based on quoted market prices.
The carrying amount of the Companys outstanding debt approximates its fair value due to the debts variable rate of interest.



Revenue Recognition



General



The Company follows the provisions of SOP 97-2, Software Revenue Recognition (SOP 97-2), and Staff Accounting
Bulletin 101, Revenue Recognition in Financial Statements (SAB 101), for revenue recognition. Under SOP 97-2 and SAB 101, four conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an
arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable and (iv) collection is reasonably assured.



The Company has entered into various arrangements that contain multiple elements, including licensing fees
and advertising on various platforms, which may be in more than one of the Companys segments (multiple-



F-10



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



element arrangements). For example, a customer may license certain of the Companys technology and an advertising package from the
Company to provide the customer with print advertising in TV Guide Magazine, an online platform or on the IPG platform. Multiple-element arrangements may include situations where the Company is both a vendor and a cooperative advertiser. See
Multiple-Element Arrangements below.



License
Fees



The Company licenses its proprietary
technologies to consumer electronics manufacturers and to service providers (including cable multiple system operators (MSOs) and other owners and operators of cable television systems, telephone networks, Internet service providers,
Internet websites, direct-to-home broadcast satellite providers, wireless systems and other multi-channel video programming distributors). It is the Companys normal practice to enter into written agreements with its customers. The Company
generally recognizes such license fees based on a per unit shipped model (with consumer electronics manufacturers) or a per subscriber model (with service providers). The Companys recognition of revenues from per unit license fees is based on
units reported shipped in the period by the manufacturers. Revenues from per subscriber fees are recognized in the month services are provided by a licensee, as reported to us by the licensee. See Multiple-Element Arrangements below.



Revenues from annual and other license fees are recognized
based on the specific terms of the license agreements. For instance, the Company has arrangements under which substantial flat fees are paid upfront in addition to ongoing per-unit license fees. In such cases, the pre-paid fees are deferred and
recognized as revenue on a straight line basis over the term of the agreement. In certain cases, the Company will license its technology for an unlimited number of units over a specified period of time and for which it has continuing obligations.
The Company records the fees associated with these arrangements on a straight line basis over the specified term. In addition, the Company has licensing arrangements with MSOs under which it shares a portion of the interactive platform advertising
revenue that the Company generates through the MSO. In some cases, the Company guarantees that or a substantial portion of the MSOs license fees will be reimbursed through its ad-sharing obligation to the cable MSOs. To the extent the
ad-sharing fees are not sufficient to meet these guarantees, the Company is obligated to purchase advertising on the MSOs platform. Because the license fee is not fixed nor determinable until resolution of the sharing or advertising buyback,
which is typically settled quarterly, the advertising buyback guarantees and advertising sharing are netted against the license fees so that only a net license fee amount is recognized.



From time to time, the license agreement between the Company and a licensee may expire. While a new license
agreement is being negotiated, the licensee may continue to ship the same units or the same services may continue to be deployed containing the Companys patented or proprietary technologies and the licensee continues to report units shipped or
subscriber information on a periodic basis. License and subscriber fees may continue to be received at the old contract rates and on a timely basis. In such cases, the Company continues to recognize license and subscriber fee revenue. However,
revenue is not recognized when collection is not reasonably assured and in no case when payment is not received for greater than 90 days (which is the longest standard customer payment term related to certain MSO contracts).



Programming Services



The Company operates a cable network, TV Guide Channel, and a
C-band satellite program provider, Superstar/Netlink, from which it earns monthly per subscriber fees from MSOs and subscribing C-band households, respectively. The Company recognizes revenue in the month the services are provided. Payments received
in advance for subscription services are deferred until the month earned, at which time revenue is recognized. The Companys liability is limited to the unearned prepayments in the event that the Company is



F-11



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



unable to provide service. In addition, the Company has entered into an agreement with a satellite provider to convert existing
Superstar/Netlink customers to this other service provider. The agreement requires a nonrefundable upfront payment as well as a per subscriber conversion fee and a residual monthly fee. The Company recognizes the upfront payment on a straight-line
basis over the term of the contract and the other fees at the later of when the conversion occurs or the refund obligations lapse.



Magazine Sales



Subscription revenue is recognized as magazines are delivered to subscribers on a straight-line basis over the term of the contract.
Marketing fees paid to acquire both circulation are netted against subscription revenue. Newsstand revenues are recognized based on the on-sale dates of magazines. Allowances for estimated returns are recorded based upon historical experience. The
Companys liability for prepaid magazine subscriptions is limited to the unearned prepayments in the event customers cancel their subscriptions.



Advertising



The Company generates advertising revenue on four main platforms; TV Guide Magazine, its IPGs, TV Guide Channel and TV Guide Online.
Magazine advertising is recognized upon release of magazines for sale to consumers. The Company recognizes advertising revenue for the remaining media when the related advertisement is aired. All advertising is stated net of agency commissions and
discounts. See Multiple-Element Arrangements below.



The Company enters into transactions that exchange advertising for advertising. Such transactions are recorded at the estimated fair value of the advertising received or given in accordance with the provisions of EITF Issue No.
99-17, Accounting for Advertising Barter Transactions. In addition, the Company enters into transactions that exchange advertising for products and services, which are accounted for similarly. Revenue from barter transactions is
recognized when advertising is provided, and services received are charged to expense when used. Barter transactions are not material to the Companys consolidated statement of operations for all periods presented.



Merchandise Sales and Placement Fees



In connection with the Companys SkyMall and eBook
operations, the Company recognizes merchandise sales in accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent and in accordance with EITF 00-10, Accounting for Shipping and Handling Fees and
Costs. When the Company is acting as a principal, revenue is recognized upon delivery of product to its customers either by the Company or participating merchants, net of estimated returns and allowances. When the Company is acting as an
agent, only the net margin on the sale is reported as revenue. Placement fees represent amounts paid to the Company by participating merchants for inclusion of their products in the Companys media channels. Placement fee revenue is recognized
on a straight-line basis over the circulation period of the media channel, generally three months. The Company records shipping and handling fees as a component of revenue and its related costs in operating expenses.



Multiple-Element Arrangements



In accounting for multiple-element arrangements, one of the
key judgments to be made is the accounting value that is attributable to the different contractual elements. The appropriate allocation of value not only impacts which segment is credited with the revenue, it also impacts the amount and timing of
revenue recorded in the consolidated statement of operations during a given period due to the differing methods of recognizing revenue by each of the segments, as discussed previously.



F-12



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





For
multiple-element arrangements the Company follows the guidance contained in SAB 101: Frequently Asked Questions and Answers (SAB 101 FAQ) and for the license of intellectual property the Company follows the guidance contained in SOP
97-2. SAB 101 FAQ requires that in circumstances where multiple-elements are being sold, for elements that have a separate earnings process, revenue should be allocated to each element based on the accounting determination of the relative fair value
of that element to the aggregate fair value of all elements. The fair values must be reliable, verifiable and objectively determinable. When available, such determination is based principally on the pricing of similar cash arrangements with
unrelated parties that are not part of a multiple-element arrangement. When sufficient evidence of the fair values of the individual elements does not exist, revenue is not allocated among them until that evidence exists. Instead, the revenue is
recognized as earned using revenue recognition principles applicable to the entire arrangement as if it were a single-element arrangement. SOP 97-2 requires sufficient vendor-specific objective evidence (VSOE) of fair value to exist for
the allocation of revenue to the various elements of the arrangement, otherwise all revenue is deferred until the earlier of the point at which a) such VSOE does exist or b) all elements of the arrangement have been delivered, with certain allowable
exceptions such as if the arrangement is in substance a subscription, then the entire fee would be recognized ratably over the contract term. At this time, in all instances in which IPG advertising is part of a multiple-element transaction, no
revenue is allocated to IPG advertising or the Interactive Platform Sector for accounting purposes, and all revenue is allocated to other elements of the transaction and other sectors. For accounting purposes, the Company expects to record IPG
advertising associated with multiple-element arrangements in this manner until such time as we conclude that we can determine the fair value of IPG advertising in a reliable, verifiable and objective manner.



Research and Development Costs



Research and development costs relate to the design,
development and testing of new systems, applications and technologies, and are charged to expense as incurred. Research and development costs of $31.8 million, $19.9 million and $24.6 million for the year ended December 31, 2001, the nine months
ended December 31, 2000 and the year ended March 31, 2000, respectively, are included in operating expenses.



Advertising Costs



Advertising costs are charged to expense as incurred and totaled $41.1 million, $28.4 million and $0.4 million for the year ended December
31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, respectively. Advertising costs are included in operating expenses.



Patent Prosecution and Litigation Costs



The Companys accounting policy with respect to patent prosecution and litigation costs incurred to protect and enforce the
Companys intellectual property rights is to expense such costs as incurred.



Merger Related Expenses



In connection with its mergers with NuvoMedia, Inc. (NuvoMedia) and SoftBook Press, Inc. (SoftBook), the Company recorded merger related costs totaling $15.9 million in the year
ended March 31, 2000. These costs were comprised of fees for financial advisors, attorneys and accountants, charges for inventory write-down and purchase commitment losses and other transaction costs.



Income Taxes



Income taxes are accounted for under the liability method.
Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carry- forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and



F-13



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is
recorded, if necessary, to reduce deferred tax assets to an amount management believes is more likely than not to be realized.



(Loss) Earnings Per Share



Basic (loss) earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted
(loss) earnings per share is computed using the combination of dilutive common share equivalents and the weighted average number of common shares outstanding during the period. Diluted loss per share for the year ended December 31, 2001 and the nine
months ended December 31, 2000 are computed using only the weighted average number of common shares outstanding during the period, as the inclusion of 38.3 million and 46.2 million, respectively, of common share equivalents would have been
antidilutive.



Recent Accounting
Pronouncements



In November 2001, the
Financial Accounting Standards Boards (FASBs) Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller
of the Vendors Products). EITF No. 01-09 clarifies the income statement classification of costs incurred by a vendor for certain cooperative advertising and product placement paid to a vendors customers. As a result of the EITF
consensus, certain of the Companys cooperative advertising and product placement costs previously classified as operating expenses are to be reflected as a reduction of revenues earned from that activity. EITF No. 01-09 is effective commencing
January 1, 2002 and requires, where applicable, reclassification of amounts reported in prior periods to comply with the income statement classifications for the current period. Such reclassifications are not expected to exceed $60 million, $20
million and $10 million for the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, respectively.



In July 2001, the FASB issued Statement No. 141, Business Combinations (Statement 141), and Statement No. 142,
Goodwill and Other Intangible Assets (Statement 142). Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 142 requires that goodwill and
other intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of Statement 142. The Company adopted the provisions of Statement 141 effective
July 1, 2001 and is required to adopt the provisions of Statement 142 effective January 1, 2002. Pursuant to the transition provisions of Statement No. 142, any goodwill and any other intangible asset determined to have an indefinite useful life
that were acquired in a purchase business combination completed subsequent to June 30, 2001 were not amortized, but continued to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature through December
31, 2001.



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



F-14



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



impairment evaluation, Statement 142 will require the Company to perform, within six months of adoption, an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Companys statement of operations.



As of December 31, 2001, the Company has unamortized goodwill
in the amount of $5.6 billion and unamortized identifiable intangible assets with indefinite lives, primarily trademarks and publishing rights, in the amount of approximately $888.0 million which will no longer be subject to amortization under the
provisions of Statement 142. Amortization expense related to such assets was $486.4 million and $231.3 million for the year ended December 31, 2001 and the nine months ended December 31, 2000, respectively. The Company is currently in the process of
evaluating the potential impairment impacts of adopting Statement 142 on its financial statements. Based on the Companys analysis completed to date, the Company expects to report transitional impairment losses upon adoption of Statement 142 in
the first quarter of 2002. Pursuant to the provisions of Statement 142, any transitional impairment losses will be reported as a cumulative effect of a change in accounting principle.



In October 2001, the FASB issued Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. This statement replaces Statement 121. However, it retains the fundamental provisions of Statement 121 for recognition and measurement of the impairment of long-lived assets
to be held and used and for measurement of long-lived assets to be disposed of by sale. This statement applies to all long-lived assets, including discontinued operations, and replaces the provisions of APB Opinion No. 30, Reporting Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, for the disposal of segments of a business. This statement requires that those long-lived assets be measured at the lower of carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued operations. The Company is required to adopt this statement effective January 1, 2002. The Company does not expect that the adoption of this statement will have a material impact on
the consolidated financial statements.



(2)    Restatement



On November 14, 2002, the Company restated certain of its previously filed consolidated financial statements, as reflected in filings with the SEC on such date and as described below in Previous Restatements.



Following the recommendation of management and
the concurrence of the Audit Committee of the Board of Directors and of the Board of Directors, the Company made a determination to further restate its previously filed consolidated financial statements as of December 31, 2001 and 2000 and for the
year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000. An aggregate of approximately $90.0 million of previously recognized revenues which were reversed as a result of the restatements are expected
to be recognized in future periods. The restated transactions which the Company believes are the more significant are described in detail below and have been grouped under headings for convenience only:



Revenues



| |  |  | During the year ended December 31, 2001 and the nine months ended December 31, 2000, certain customers were charged for IPG advertising and were provided with
advertising of approximately equal value on the Companys print or online platforms at no additional cost. Significant portions of the revenue associated with these transactions were recorded as revenue in the Interactive Platform sector. The
Company has determined that these revenues should be reclassified as revenues of other sectors, primarily Media and Services, to more accurately reflect the substance of these transactions and to
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-15



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



comply with multi-element accounting principles under SAB No. 101. In addition, previously recorded barter revenue which did not meet the
requirements of EITF No. 99-17 Accounting for Advertising Barter Transactions was reversed, as were certain other transactions where there was an insufficient basis to recognize revenue. As a result of the reclassifications, revenues in
the Interactive Platform sector have decreased by $3.3 million and $1.9 million, revenues in the Media and Services sector have increased by $2.9 million and $0.1 million for the year ended December 31, 2001 and the nine months ended December 31,
2000, respectively.



| |  |  | In connection with the sale of the WGN Superstation distribution business in April 2001, the Company secured a six year $100.0 million advertising commitment
pursuant to which the Company will be required to run advertising until 2007. The WGN Superstation distribution business was originally acquired in July 2000 as a part of the acquisition of TV Guide, Inc. Because the transaction included the
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

sale of assets and an advertising revenue commitment, the accounting for this multiple-element transaction was
covered by both APB 16, Business Combinations and our revenue recognition policy on multiple-element arrangements. As a result, $10.0 million has been ascribed to the magazine advertising element and will be recognized as the advertising
is run, the remainder of the value ($75.0 million on a discounted basis) has been ascribed to the assets sold, and $15.0 million will be recognized as interest income over the six year contract term. As there is no persuasive or objective evidence
of change in economic value of the asset sold during the period of its ownership by Gemstar, there is no gain or loss from the disposal recorded through Gemstars income statement and the adjusted distribution asset value is recorded as part of
the purchase price allocation of the TV Guide transaction for accounting purposes. As a result of this restatement, revenues in the Interactive Platform sector have decreased by $12.0 million and pre-tax income has decreased by $4.8 million during
the year ended December 31, 2001.



| |  |  | During the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, the Company recognized licensing revenues under
expired license agreements with certain consumer electronic manufacturing licensees. The Company has determined that there is insufficient contemporaneous evidence of such licensees intent to pay to satisfy the collectibility criteria of SAB
No. 101. Therefore, the revenues should be recorded in the periods that the related cash was received by the Company. As a result of this restatement, revenues and pre-tax income in the Technology and Licensing sector have decreased by $9.5 million,
$1.2 million and $4.7 million for the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, respectively.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended December 31, 2001, the Company recognized licensing revenues in connection with a license agreement under which the scope and application of
certain terms are in dispute and the licensee has not made any payments. The Company has determined that, due to the insufficient evidence of intent to pay under SAB No. 101, these revenues should not be recognized. As a result of this restatement,
revenues in the Technology and Licensing sector have decreased by $11.3 million during the year ended December 31, 2001.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended March 31, 2000, the Company won a binding arbitration award against a cable set-top box manufacturer. The Company was awarded $58.0
million, which included damages of $16.0 million and recovery of legal and interest expenses of $11.0 million. The Company recognized $40.0 million in revenue during the year ended March 31, 2000, and an additional $6.0 million in revenue between
April 1, 2000 and the date of the October 2000 settlement described below. The Company has subsequently determined that its gain contingency under Statement of Financial Accounting Standards (SFAS) No. 5 was realized upon the date of the
binding arbitration ruling, with consideration of the other partys ability to pay, and that an estimate of the entire award should be recognized as of
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-16



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



| | such date and classified in the statement of operations in accordance with the award. As a result of this restatement, revenues in the
Technology and Licensing sector have decreased by $8.5 million and pre-tax income in the Licensing and Technology sector has increased by $18.3 million during the year ended March 31, 2000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In October 2000, the Company entered into an agreement to
settle all other outstanding claims with the same cable set-top box manufacturer. The Company received a cash payment of $188 million, which included payment of the $58.0 million arbitration award described above. Of this amount, $117.5 million was
recorded as a prepayment of a 10-year technology licensing agreement, $17.5 million was recorded as a prepayment of a commitment to advertise on the Companys IPG platform, and $53 million was determined to be in payment for damages for the
above-mentioned settlement. The cash payment, to the extent not previously recognized as revenue, was recorded as deferred revenue on the settlement date. Of the $117.5 million licensing payment, an aggregate of $51.2 million and $12.7 million was
recognized as licensing revenue during the year ended December 31, 2001, and the nine months ended December 31, 2000, respectively. The Company has determined that the licensing revenue should be recognized based on a straight-line method over the
10-year term of the license for each period because the Company has continuing obligations under the contract. Of the $17.5 million advertising payment, $14.4 million was recognized as revenue during the year ended December 31, 2001 as the
advertising was run. The Company has determined that the advertisement component and the licensing component were subject to multi-element accounting under SAB No. 101, and that the $17.5 million in advertising payments should be combined with the
technology licensing component and recognized as licensing revenue over the 10-year term of the license agreement. Accordingly, as a result of these restatements, revenues in the Technology and Licensing sector have decreased by $38.3 million and
$9.5 million for the year ended December 31, 2001 and the nine months ended December 31, 2000, respectively. Additionally, revenues in the Interactive Platform sector have decreased by $14.4 million for the year ended December 31, 2001. Pre-tax
income decreased by $9.5 million for the nine months ended December 31, 2000, and $52.7 million for the year ended December 31, 2001, respectively.



| |  |  | During the nine months ended December 31, 2000, pursuant to a cross license agreement with TV Guide entered into in connection with the Companys merger with TV
Guide, the Company recognized $3.4 million in licensing revenue and $1.3 million in advertising revenue in the interactive Platform Sector in a period prior to the closing of the merger. The Company has determined that the revenue should be reversed
because there was insufficient basis to recognize the revenue in the pre-merger period. As a result of this restatement, revenues in the Technology and Licensing sector have decreased by $3.4 million and revenues in the Interactive Platform sector
have decreased by $1.3 million during the nine months ended December 31, 2000.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended December 31, 2001, the Company recognized $2.2 million in IPG advertising revenues from SkyMall, a company it acquired in July 2001. The
Company has determined that the facts and circumstances do not support revenue recognition, due to SkyMalls unwillingness to pay, and the uncertainty of collectibility of the revenue, in the absence of the closing of the acquisition. As a
result of this restatement, revenues in the Interactive Platform sector have decreased by $2.2 million for the year ended December 31, 2001.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the nine months ended December 31, 2000, the Company recognized revenues of $5.0 million under a licensing agreement with a software provider. The Company has
determined that SAB No. 101 was not satisfied at the time the revenue was accrued because of a dispute regarding whether delivery had occurred or service was rendered and insufficient evidence of intent to pay. As a result of this restatement,
revenues in the Technology and Licensing sector have decreased by $5.0 million during the nine months ended December 31, 2000.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-17



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





| |  |  | In January 1998 and May 1999, the Company entered into eight-year and twenty-year license agreements with two customers, respectively, under which the Company
received upfront license fees of $47.5 million in the aggregate. As of December 31, 2001, all of the pre-paid license fees had been recognized as revenue. The Company has determined that such license fees should be recognized over the term of the
agreements on a straight-line basis because of the Companys continuing performance obligations under both agreements. As a result of this restatement, revenues in the Technology and Licensing sector have decreased by $28.0 million during the
year ended March 31, 2000, and increased by $1.1 million and $4.1 million during the nine months ended December 31, 2000 and the year ended December 31, 2001, respectively.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended December 31, 2001, the Company recorded the advertising sold on its behalf by a customer as revenue and recorded the customers share of
such revenue, pursuant to the terms of a revenue sharing arrangement, as an operating expense. The Company has determined that the customers share of such revenue should be netted against the corresponding revenue under EITF No. 99-19,
Reporting Revenue Gross as a Principal versus Net as an Agent. As a result of this restatement, revenues in the Interactive Platform sector have decreased by $1.5 million and operating expense has decreased by $1.5 million during the
year ended December 31, 2001.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the nine months ended December 31, 2000 and the year ended December 31, 2001, the Company classified certain ad sharing payments to, and advertising purchases
from, certain MSOs as expenses in the Interactive Platform sector. The Company has determined that these expenses should be classified as reductions in revenues in the Technology and Licensing sector in accordance with SAB No. 101, because the
expenses constituted an essential element of the license fee paid by the MSO, and consequently the license fee was not fixed or determinable until the ad sharing payments and advertising purchases were made. As a result of this reclassification,
during the nine months ended December 31, 2000 and the year ended December 31, 2001, expenses in the Interactive Platform sector have decreased by $2.7 million and $15.0 million, respectively, and revenues in the Technology and Licensing sector have
decreased correspondingly. Revenues in the Technology and Licensing sector have decreased by $2.7 million and $15.0 million for the nine months ended December 31, 2000 and the year ended December 31, 2001, respectively.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended March 31, 2000 and the nine months ended December 31, 2000, the Company recognized $1.5 million and $0.5 million, respectively, in IPG
advertising revenue from a consumer electronics manufacturer with whom the Company had a licensing arrangement. Under SOP 97-2 and SAB No. 101 governing multiple-element arrangements, the Company has determined that the revenue should be
reclassified as licensing revenue.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During the year ended December 31, 2001, the Company recognized $8.8 million in IPG advertising revenue from the same manufacturer, and recognized an aggregate of $8.8 million in marketing expenses which were paid by the Company to
the manufacturer. Under SOP 97-2 and SAB No. 101 governing multiple-element arrangements, the Company has determined that the IPG advertising revenue should not be recognized and that such revenues should be recorded as a reduction in the marketing
expenses paid by the Company to the manufacturer.



During the year ended December 31, 2001, the Company also purchased certain assets from the same manufacturer for a purchase price of $11.6 million. At the same time, the manufacturer agreed to purchase $6.8 million in IPG
advertising, of which the Company recognized aggregate revenue of approximately $2.2 million during 2001. The Company has determined that (i) the fair value of the assets acquired was $4.8 million and (ii) the IPG revenues should not be recognized
in 2001 because the barter accounting criteria of EITF No. 99-17, Accounting for Advertising Barter Transactions, were not met. As a result of this restatement, revenues in the Interactive Platform sector have decreased by $2.2 million
during the year ended December 31, 2001.





F-18



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



| |  |  | During the three months ending March 31, 2001, the Company entered into a multi-year licensing agreement with a certain consumer electronics manufacturer, which also
required the manufacturer to purchase IPG advertising over a four-year period. The Company, following guidance from SOP 97-2 and SAB No. 101 governing multiple element arrangements, has determined that IPG advertising revenue should not be
recognized and that such revenues should be recorded as a reduction in marketing expenses related to the licensing agreement. As a result, during the year ended December 31, 2001, revenue in the Interactive Platform sector decreased by $0.6 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Expenses



| |  |  | In allocating the purchase price for the acquisition of TV Guide, the Company recorded approximately $12.6 million in deferred subscription acquisition costs related
to TV Guide magazine as an asset on the July 2000 purchase date. The Company deferred subscription acquisition costs in future periods and amortized such costs over a one year period. The Company has determined that such costs did not meet the
criteria for capitalization under Statement of Position (SOP) 93-7, Reporting on Advertising Costs, and should not have been capitalized. As a result of this restatement, the Company has (i) reversed the $12.6 million
recorded on the opening balance sheet resulting in an increase to goodwill as of the acquisition date, and (ii) written off advertising costs as incurred subsequent to that date. Pre-tax income has decreased by $6.3 million in the nine months ended
December 31, 2000 and increased by $6.5 million for the year ended December 31, 2001.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended December 31, 2001, the Company recorded accruals of $8.7 million to fund future marketing initiatives. The Company has determined that there
was no basis for recording the liability and no amounts had been paid. The Company has also determined that no expense should have been recorded in the period and has reversed the $8.7 million accrued during the year ended December 31, 2001.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended December 31, 2001, the nine months ended December 31, 2000, and the year ended March 31, 2000, the Company capitalized patent prosecution costs
and patent litigation costs. During the same periods, the Company recognized expenses relating to the amortization of patent prosecution costs and patent litigation costs. The Company has determined that it should not capitalize any patent
prosecution or litigation costs and that such costs should be expensed as incurred. With respect to patent prosecution costs, the Company has determined that its underlying accounting records for patent prosecution costs were not sufficient to
maintain accountability for the recorded assets or to make assessments relative to useful lives or potential impairment on individual patents or patent groups. With respect to patent litigation costs, the Companys previous policy was to
expense patent litigation costs as incurred. During the year ended March 31, 2000, the Company changed to a method to capitalize and amortize such costs over estimated useful lives, which constituted a discretionary change to a less preferable
accounting method. The Company has expensed all such previously capitalized costs in the periods in which such costs were incurred. As a result of this restatement, operating expenses increased by $3.0 million, $8.4 million, and $45.1 million during
the year ended March 31, 2000, the nine months ended December 31, 2000, and the year ended December 31, 2001, respectively.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended December 31, 2001 and the nine months ended December 31, 2000, the Company accrued a liability for certain retailer promotion expenses of $7.2
million and $1.0 million, respectively. The Company has determined that there was insufficient substantiation for the amounts accrued and that the expenses should have been recorded at the time they were paid. As a result of this restatement,
pre-tax income has increased by $7.2 million and $1.0 million during the year ended December 31, 2001 and the nine months ended December 31, 2000, respectively.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended March 31, 2000, the Company reversed an accrual from a prior period, for which there was an insufficient basis to record. The reversal
resulted in a reduction of operating expenses
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F-19



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



| | totaling $4.0 million. As a result of this restatement pre-tax income decreased $4.0 million in the year ended March 31, 2000.
| | ------------------------------------------------------------------------------------------------------------------------------



Stock Compensation



| |  |  | In January 1998, the Company granted options to purchase the Companys common stock to its former CEO which were subject to stockholder approval. The approval
was obtained in March 1998. On the date of stockholder approval, the market price of the underlying stock exceeded the exercise price of the options by approximately $24.4 million. The Company has determined, under APB No. 25, that the excess
constituted unearned compensation expense as of the date of stockholder approval. As a result of this restatement, $1.8 million, $2.3 million and $5.3 million in compensation expense has been recorded during the year ended December 31, 2001, the
nine months ended December 31, 2000 and the year ended March 31, 2000, respectively.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Investments



| |  |  | In June 2001, the Company wrote down the value assigned to an investment acquired by the Company as part of its acquisition of TV Guide in July 2000. The write-down
was recorded as a $69.6 million reduction in goodwill through an adjustment to the purchase price allocation for TV Guide. The Company subsequently recognized an other-than-temporary impairment charge of $48.1 million on this same investment. The
Company has determined that the $69.6 million write-down should have been charged against earnings, not goodwill, because the charge reflected an impairment in the value of the asset that occurred subsequent to the acquisition date. In addition, the
Company has restated its accounting for the warrant portion of the investment, which was overvalued by $7.0 million, by adjusting goodwill in purchase accounting. Accordingly, the Company has recorded the $69.6 million as a charge for the year ended
December 31, 2001 and has adjusted amortization expense for all periods subsequent to the TV Guide acquisition to reflect the offsetting increase to goodwill. As a result of this restatement, pre-tax income has decreased by $59.3 million for the
year ended December 31, 2001.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In May 2001, the Company entered into an agreement pursuant to which it received warrants to purchase an equity interest in the other party, in exchange for a
long-term content and patent license expiring in 2019. The Company has exercised one of the warrants for a de minimus exercise price and owns approximately 17% of the equity of the other party. The Company retains warrants to purchase up to 51% of
equity of the other party for an aggregate exercise price of $41.1 million. The warrants were recorded under the cost method at $10.8 million with an offset to deferred revenue. In subsequent years, the investment was written down as a result of an
other-than-temporary decline in its value. The Company shares in certain revenues and other fees earned by the other party, and has the right to representation on its board of directors. The Company has determined that, as it had the ability to
exercise significant influence at the time of the transaction, the equity method should be applied and the investment should be recorded based on the consideration paid, which was de minimus. Accordingly, the initial entry to record the $10.8
million investment and related deferred revenue, and subsequent entry to write-off $5.2 million of carrying value in the investment in the warrants and to recognize license fee revenue over the term of the agreement have been reversed. As a result
of this restatement, pre-tax income has increased by $4.9 million for the year ended December 31, 2001.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2001, the Company received restricted shares from a licensee and did not record them. The Company has determined that it should record an investment for such
shares and should subsequently record an other-than-temporary impairment of these shares and of its other investment in the licensee. As a result of this restatement, pretax income decreased $0.6 million during the year ended December 31, 2001.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-20



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





Other



| |  |  | During the nine months ended December 31, 2000, the Company recorded an account receivable relating to a loan to a third party in the amount of $3.4 million. During
the year ended December 31, 2001, the Company recorded a reserve against the receivable. The Company has determined that there was sufficient evidence that the loan was impaired during the nine months ended December 31, 2000, and that the reserve
should have been recorded at the time that the loan was impaired. As a result of the restatement, pre-tax income included in the Technology and Licensing sector has decreased by $3.4 million in the nine months ended December 31, 2000 and has
increased by $3.4 million during the year ended December 31, 2001.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended March 31, 2000, the Company expensed $2.0 million with respect to investment banking services rendered but not paid for, in connection with two
transactions that closed during the year, which were accounted for as pooling of interests. In 2001, in connection with another acquisition accounted for as a purchase, the Company re-characterized the fees as a direct cost of the later acquisition.
The Company has determined that no re-characterization should have occurred and has reversed the $2.0 million credit to income recorded in the year ended December 31, 2001 and reduced goodwill by the same amount, thereby decreasing pre-tax income by
$2.0 million for the year ended December 31, 2001.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As part of the Companys purchase price allocation for its TV Guide acquisition consummated on July 18, 2000, with the assistance of an outside valuation
expert, the Company allocated the purchase price to the acquired net assets, including identifiable intangibles and goodwill. The Company has determined that restatements are required to reflect a) certain of the restatements that impact the values
of the assets acquired and liabilities assumed in the acquisition, and b) adjustments to the methodology used to determine the fair value of certain identifiable intangible assets. As a result of this restatement, goodwill increased by $277.5
million and identifiable intangible assets decreased by $387.0 million as of the acquisition date. Accordingly, amortization expense (increased/decreased) by $1.4 million for the year ended December 31, 2001 and $5.3 million for the period from July
12 to December 31, 2000.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company has adjusted its income tax accounts to reflect appropriate amounts of its various tax liabilities, as well as to reflect the tax impacts of the
restatement adjustments described in this footnote. As a result, the tax benefit increased by $44.9 million and $53.2 million for the year ended December 31, 2001 and the nine month period ended December 31, 2001 and the tax provision decreased by
$15.5 for the year ended March 31, 2000, respectively, and the tax liability recorded as part of the TV Guide acquisition has been increased by $69.0 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company has determined that as of December 31, 2001 and 2000 and for the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended
March 31, 2000, certain restatements should also be made for numerous other items that are individually not material to the periods presented. These items include certain adjustments to accruals, reserves and timing changes in the recording of
transactions and are reflected in the consolidated financial statements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-21



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



The consolidated financial statements as of December 31, 2001 and 2000 and for the
year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000 and notes thereto have been restated to include the items described above. The following financial statement line items were impacted:



Consolidated Balance Sheets (in thousands)



|                                                   |  | Restated December 31, 2001 |           |   | As previously Reported December 31, 2001(1) Unaudited |   |           | Restated December 31, 2000 |  |   | As previously Reported December 31, 2000(1) Unaudited |  
|-------------------------------------------------- |  | -------------------------- | --------- | - | ----------------------------------------------------- | - | --------- | -------------------------- |  | - | ----------------------------------------------------- | -
|Cash and cash equivalents                          |  | $                          | n/a       |   |                                                       | $ | n/a       |                            |  | $ | 487,062                                               |  
|Marketable securities                              |  |                            | 41,940    |   |                                                       |   | 42,212    |                            |  |   | n/a                                                   |  
|Receivables, net                                   |  |                            | 278,947   |   |                                                       |   | 285,076   |                            |  |   | 255,724                                               |  
|Deferred taxes                                     |  |                            | 28,500    |   |                                                       |   | 14,957    |                            |  |   | 30,153                                                |  
|Other current assets                               |  |                            | 31,117    |   |                                                       |   | 38,391    |                            |  |   | 36,851                                                |  
|Total current assets                               |  |                            | 729,754   |   |                                                       |   | 729,886   |                            |  |   | 873,215                                               |  
|Property and equipment, net                        |  |                            | 86,070    |   |                                                       |   | 87,950    |                            |  |   | 92,180                                                |  
|Intangible assets, net                             |  |                            | 8,362,617 |   |                                                       |   | 8,621,735 |                            |  |   | 9,382,622                                             |  
|Marketable securities and other investments        |  |                            | 102,025   |   |                                                       |   | 110,289   |                            |  |   | 263,357                                               |  
|Other assets                                       |  |                            | 61,047    |   |                                                       |   | 23,168    |                            |  |   | 9,930                                                 |  
|Total assets                                       |  |                            | 9,341,513 |   |                                                       |   | 9,573,028 |                            |  |   | 10,621,304                                            |  
|Accounts payable and accrued expenses              |  |                            | 172,378   |   |                                                       |   | 285,761   |                            |  |   | 206,244                                               |  
|Current portion of deferred revenue                |  |                            | 254,824   |   |                                                       |   | 261,420   |                            |  |   | 271,837                                               |  
|Total current liabilities                          |  |                            | 489,403   |   |                                                       |   | 609,382   |                            |  |   | 540,755                                               |  
|Deferred taxes                                     |  |                            | 1,008,670 |   |                                                       |   | 1,086,724 |                            |  |   | 1,249,115                                             |  
|Deferred revenue, less current portion             |  |                            | 192,746   |   |                                                       |   | 109,507   |                            |  |   | 213,742                                               |  
|Other liabilities                                  |  |                            | 5,411     |   |                                                       |   | 6,286     |                            |  |   | 11,789                                                |  
|Additional paid-in capital                         |  |                            | 8,387,761 |   |                                                       |   | 8,360,289 |                            |  |   | 8,318,099                                             |  
|Accumulated deficit                                |  |                            | (982,666  | ) |                                                       |   | (838,638  | )                          |  |   | (231,990                                              | )
|Accumulated other comprehensive income, net of tax |  |                            | 25,011    |   |                                                       |   | 24,101    |                            |  |   | 29,337                                                |  
|Unearned compensation                              |  |                            | (25,188   | ) |                                                       |   | (24,988   | )                          |  |   | (71,726                                               | )
|Total stockholders equity                         |  |                            | 7,374,254 |   |                                                       |   | 7,490,100 |                            |  |   | 8,019,418                                             |  
|Total liabilities and stockholders equity         |  |                            | 9,341,513 |   |                                                       |   | 9,573,028 |                            |  |   | 10,621,304                                            |  

---

|n/a |  | means the line item was not impacted by the restatement.
|--- |  | --------------------------------------------------------

|(1) |  | Reflects previous restatements that were included in filings with the SEC on November 14, 2002 and are described below under Previous Restatements. Some of these
previous restatements have been further adjusted in the current restatements reflected above.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-22



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



Consolidated Statements Of Operations (In thousands, except per share data)



|                                                                                                                                    |  | Restated Year ended December 31, 2001 |           |   | As previously Reported Year Ended December 31, 2001(1)
Unaudited |   |           | Restated Nine months Ended December 31, 2000 |  |   | As previously Reported Nine months Ended December 31, 2000(1) Unaudited |   |  | Restated Year ended March 31, 2000 |          | As previously Reported Year ended March 31, 2000(1)
Unaudited
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | --------- | - | ---------------------------------------------------------------- | - | --------- | -------------------------------------------- |  | - | ----------------------------------------------------------------------- | - |  | ---------------------------------- | -------- | -------------------------------------------------------------
|Revenues                                                                                                                            |  | $                                     | 1,172,558 |   |                                                                  | $ | 1,288,918 |                                              |  | $ | 669,904                                                                 |   |  | $                                  | 694,610  |                                                              
|Operating expenses, excluding stock compensation, depreciation and amortization,
impairment of goodwill and merger related expenses |  |                                       | 904,994   |   |                                                                  |   | 910,934   |                                              |  |   | 493,133                                                                 |   |  |                                    | 488,939  |                                                              
|Stock compensation                                                                                                                  |  |                                       | 46,538    |   |                                                                  |   | 44,729    |                                              |  |   | 20,635                                                                  |   |  |                                    | 18,294   |                                                              
|Depreciation and amortization                                                                                                       |  |                                       | 940,670   |   |                                                                  |   | 942,060   |                                              |  |   | 438,059                                                                 |   |  |                                    | 443,312  |                                                              
|Total operating expenses                                                                                                            |  |                                       | 1,903,002 |   |                                                                  |   | 1,908,523 |                                              |  |   | 951,827                                                                 |   |  |                                    | 950,545  |                                                              
|Operating (loss) income                                                                                                             |  |                                       | (730,444  | ) |                                                                  |   | (619,605  | )                                            |  |   | (281,923                                                                | ) |  |                                    | (255,935 | )                                                            
|Interest expense                                                                                                                    |  |                                       | (27,375   | ) |                                                                  |   | (27,298   | )                                            |  |   | n/a                                                                     |   |  |                                    | n/a      |                                                              
|Other (expense) income, net                                                                                                         |  |                                       | (168,171  | ) |                                                                  |   | (119,126  | )                                            |  |   | 8,441                                                                   |   |  |                                    | 15,021   |                                                              
|(Loss) income before income taxes and extraordinary item                                                                            |  |                                       | (925,990  | ) |                                                                  |   | (766,029  | )                                            |  |   | (298,265                                                                | ) |  |                                    | (265,697 | )                                                            
|(Benefit) provision for income taxes                                                                                                |  |                                       | (177,414  | ) |                                                                  |   | (132,471  | )                                            |  |   | (82,807                                                                 | ) |  |                                    | (29,570  | )                                                            
|(Loss) income before extraordinary item                                                                                             |  |                                       | (748,576  | ) |                                                                  |   | (633,558  | )                                            |  |   | (215,458                                                                | ) |  |                                    | (236,127 | )                                                            
|Net (loss) income                                                                                                                   |  |                                       | (750,676  | ) |                                                                  |   | (635,658  | )                                            |  |   | (215,458                                                                | ) |  |                                    | (236,127 | )                                                            
|Basic (loss) earnings per share:                                                                                                    |  |                                       |           |   |                                                                  |   |           |                                              |  |   |                                                                         |   |  |                                    |          |                                                              
|(Loss) income before extraordinary item                                                                                             |  |                                       | (1.82     | ) |                                                                  |   | (1.54     | )                                            |  |   | (0.64                                                                   | ) |  |                                    | (0.71    | )                                                            
|Net (loss) income                                                                                                                   |  |                                       | (1.82     | ) |                                                                  |   | (1.54     | )                                            |  |   | (0.64                                                                   | ) |  |                                    | (0.71    | )                                                            
|Diluted (loss) earnings per share:                                                                                                  |  |                                       |           |   |                                                                  |   |           |                                              |  |   |                                                                         |   |  |                                    |          |                                                              
|(Loss) income before extraordinary item                                                                                             |  |                                       | (1.82     | ) |                                                                  |   | (1.54     | )                                            |  |   | (0.64                                                                   | ) |  |                                    | (0.71    | )                                                            
|Net (loss) income                                                                                                                   |  |                                       | (1.82     | ) |                                                                  |   | (1.54     | )                                            |  |   | (0.64                                                                   | ) |  |                                    | (0.71    | )                                                            

---

|(1) |  | Reflects previous restatements that were included in filings with the SEC on November 14, 2002 and are described below under Previous Restatements. Some of these
previous restatements have been further adjusted in the current restatements reflected above.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-23



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



Consolidated Statements Of
Stockholders Equity (In thousands)



|                                                                          |  | Additional Paid-In Capital |           | Accumulated Deficit (Retained Earnings) |   |           | Accumulated Other Comprehensive Income (Loss) |   |                                       | Unearned Compensation |  |          | Total Stockholders Equity |  
|------------------------------------------------------------------------- |  | -------------------------- | --------- | --------------------------------------- | - | --------- | --------------------------------------------- | - | ------------------------------------- | --------------------- |  | -------- | -------------------------- | -
|                                                                          |  | Restated                   |           | As Previously Reported(1) (Unaudited)   |   | Restated  |                                               |   | As Previously Reported(1) (Unaudited) |                       |  | Restated |                            |  
|Balances at April 1, 1999                                                 |  | $                          | 275,066   |                                         | $ | 250,078   |                                               | $ | (77,391                               | )                     |  | $        | (38,298                    | )
|Comprehensive income:                                                     |  |                            |           |                                         |   |           |                                               |   |                                       |                       |  |          |                            |  
|Net income (year ended March 31, 2000)                                    |  |                            | n/a       |                                         |   | n/a       |                                               |   | 63,021                                |                       |  | $        | 73,607                     |  
|Total comprehensive income (year ended March 31, 2000)                    |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Amortization of unearned compensation                                     |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Balances at March 31, 2000                                                |  |                            | 358,655   |                                         |   | 333,667   |                                               |   | (16,532                               | )                     |  |          | 33,147                     |  
|Comprehensive loss:                                                       |  |                            |           |                                         |   |           |                                               |   |                                       |                       |  |          |                            |  
|Net loss (year ended December 31, 2000)                                   |  |                            | n/a       |                                         |   | n/a       |                                               |   | (215,458                              | )                     |  |          | (236,127                   | )
|Unrealized losses on marketable securities                                |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Total comprehensive loss (year ended December 31,
2000)                   |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Issuance of common stock for acquisitions                                 |  |                            | 7,875,737 |                                         |   | 7,873,253 |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Amortization of unearned compensation                                     |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Balances at December 31, 2000                                             |  |                            | 8,318,099 |                                         |   | 8,290,627 |                                               |   | (231,990                              | )                     |  |          | (202,980                   | )
|Comprehensive loss:                                                       |  |                            |           |                                         |   |           |                                               |   |                                       |                       |  |          |                            |  
|Net loss (year ended December 31, 2001)                                   |  |                            | n/a       |                                         |   | n/a       |                                               |   | (750,676                              | )                     |  |          | (635,658                   | )
|Unrealized losses on marketable securities (year ended December 31,
2001) |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Foreign currency translation adjustments                                  |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Total comprehensive loss (year ended December 31, 2001)                   |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Amortization of unearned compensation                                     |  |                            | n/a       |                                         |   | n/a       |                                               |   | n/a                                   |                       |  |          | n/a                        |  
|Balances at December 31, 2001                                             |  |                            | 8,387,761 |                                         |   | 8,360,289 |                                               |   | (982,666                              | )                     |  |          | (838,638                   | )

---

|n/a |  | means the line item was not impacted by the restatement.
|--- |  | --------------------------------------------------------

|(1) |  | Reflects previous restatements that were included in filings with the SEC on November 14, 2002 and are described below under Previous Restatements. Some of these
previous restatements have been further adjusted in the current restatements reflected above.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-24



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



Consolidated Statements Of Cash Flows (In thousands)



|                                                                                        |  | Restated Year ended December 31, 2001 |          |   | As previously Reported Year ended December 31, 2001(1)
(Unaudited) |   |          | Restated Nine months ended December 31, 2000 |  |   | As previously Reported Nine months ended December 31, 2000(1)
(Unaudited) |   |  | Restated Year ended March 31, 2000 |          |   | As previously Reported Year ended March 31, 2000(1) (Unaudited) |  
|--------------------------------------------------------------------------------------- |  | ------------------------------------- | -------- | - | ------------------------------------------------------------------ | - | -------- | -------------------------------------------- |  | - | ------------------------------------------------------------------------- | - |  | ---------------------------------- | -------- | - | --------------------------------------------------------------- | -
|Cash flows from operating activities:                                                   |  |                                       |          |   |                                                                    |   |          |                                              |  |   |                                                                           |   |  |                                    |          |   |                                                                 |  
|Net (loss) income                                                                       |  | $                                     | (750,676 | ) |                                                                    | $ | (635,658 | )                                            |  | $ | (215,458                                                                  | ) |  | $                                  | (236,127 | ) |                                                                 | $
|Adjustment to reconcile net (loss) income to net cash provided by operating
activities: |  |                                       |          |   |                                                                    |   |          |                                              |  |   |                                                                           |   |  |                                    |          |   |                                                                 |  
|Depreciation and amortization                                                           |  |                                       | 940,670  |   |                                                                    |   | 942,060  |                                              |  |   | 438,059                                                                   |   |  |                                    | 443,312  |   |                                                                 |  
|Deferred income taxes                                                                   |  |                                       | (158,456 | ) |                                                                    |   | (185,996 | )                                            |  |   | (166,821                                                                  | ) |  |                                    | (110,829 | ) |                                                                 |  
|Stock Compensation Expense                                                              |  |                                       | 46,538   |   |                                                                    |   | 44,729   |                                              |  |   | 20,635                                                                    |   |  |                                    | 18,294   |   |                                                                 |  
|Investment write down                                                                   |  |                                       | 154,701  |   |                                                                    |   | 109,149  |                                              |  |   | n/a                                                                       |   |  |                                    | n/a      |   |                                                                 |  
|Changes in operating assets and liabilities, net of the effect of
acquisitions:         |  |                                       |          |   |                                                                    |   |          |                                              |  |   |                                                                           |   |  |                                    |          |   |                                                                 |  
|Receivables                                                                             |  |                                       | (27,862  | ) |                                                                    |   | (35,664  | )                                            |  |   | 104,903                                                                   |   |  |                                    | 89,327   |   |                                                                 |  
|Other assets                                                                            |  |                                       | 4,920    |   |                                                                    |   | 9,898    |                                              |  |   | 11,230                                                                    |   |  |                                    | 2,601    |   |                                                                 |  
|Accounts payable, accrued expenses and other liabilities                                |  |                                       | (117,922 | ) |                                                                    |   | (4,937   | )                                            |  |   | (53,268                                                                   | ) |  |                                    | (46,679  | ) |                                                                 |  
|Deferred revenue                                                                        |  |                                       | (6,028   | ) |                                                                    |   | (89,478  | )                                            |  |   | 96,950                                                                    |   |  |                                    | 91,193   |   |                                                                 |  
|Net cash provided by operating activities                                               |  |                                       | 118,264  |   |                                                                    |   | 186,483  |                                              |  |   | 297,630                                                                   |   |  |                                    | 312,492  |   |                                                                 |  
|Cash flows from investing activities:                                                   |  |                                       |          |   |                                                                    |   |          |                                              |  |   |                                                                           |   |  |                                    |          |   |                                                                 |  
|Investments and acquisitions                                                            |  |                                       | (23,519  | ) |                                                                    |   | (38,019  | )                                            |  |   | (96,831                                                                   | ) |  |                                    | (101,331 | ) |                                                                 |  
|Cash acquired in acquisitions                                                           |  |                                       | n/a      |   |                                                                    |   | n/a      |                                              |  |   | 99,075                                                                    |   |  |                                    | 100,033  |   |                                                                 |  
|Additions to property, plant and equipment                                              |  |                                       | (17,135  | ) |                                                                    |   | (18,880  | )                                            |  |   | (22,730                                                                   | ) |  |                                    | (22,959  | ) |                                                                 |  
|Additions to intangible assets                                                          |  |                                       | (3,187   | ) |                                                                    |   | (56,145  | )                                            |  |   | (500                                                                      | ) |  |                                    | (10,607  | ) |                                                                 |  
|Net cash (used in) provided by investing activities                                     |  |                                       | 73,204   |   |                                                                    |   | 4,001    |                                              |  |   | (22,846                                                                   | ) |  |                                    | (36,724  | ) |                                                                 |  
|Net (decrease) increase in cash and cash equivalents                                    |  |                                       | (137,812 | ) |                                                                    |   | (138,796 | )                                            |  |   | 250,016                                                                   |   |  |                                    | 251,000  |   |                                                                 |  
|Cash and cash equivalents at beginning of period                                        |  |                                       | 487,062  |   |                                                                    |   | 488,046  |                                              |  |   | n/a                                                                       |   |  |                                    | n/a      |   |                                                                 |  
|Cash and cash equivalents at end of period                                              |  |                                       | n/a      |   |                                                                    |   | n/a      |                                              |  |   | 487,062                                                                   |   |  |                                    | 488,046  |   |                                                                 |  

---

|n/a |  | means the line item was not impacted by the restatement.
|--- |  | --------------------------------------------------------

|1) |  | Reflects previous restatements that were included in filings with the SEC on November 14, 2002 and are described below under Previous Restatements. Some of these
previous restatements have been further adjusted in the current restatements reflected above.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Previous Restatements



In addition to the restated transactions described above in this Note 2, on November 14, 2002, the Company restated its historical financial statements through certain filings with the SEC to reflect
the following restated transactions.



| |  | The Company recognized $113.5 million in licensing revenues from January 1, 2000 through March 31, 2002 under an expired license agreement with
Scientific-Atlanta, Inc. (Scientific-Atlanta). The Company determined that it had misapplied the collectibility criteria of SAB 101, as there was insufficient
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-25



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



| | contemporaneous evidence of Scientific-Atlantas intent to pay. Accordingly, the Company restated its previously filed financial
statements for the periods ended June 30, 2002 and March 31, 2002, the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000 for the reversal of licensing revenues related to Scientific-Atlanta.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company entered into a transaction comprised of a series of agreements beginning in the first quarter of 2001 and completed in the second quarter of 2001, in
which the Company (1) acquired the intellectual property of a private company in exchange for $750,000 cash and advertising with a stated value of $20 million and (2) paid $2 million in exchange for an option to purchase certain assets of the
private company at a price of $3 million (the Option). The sellers of the intellectual property have the right to require the exercise of the Option if certain performance criteria are met. Additionally, the Company was conditionally
obligated to pay $250,000 upon the successful transfer of certain patents to the Company. The $250,000 was paid in the third quarter of 2002. During 2001, the Company recognized $20 million of advertising revenue as it was used by the sellers and
fully amortized the $20.75 million of intellectual property. Notwithstanding the contractual terms of the transaction, the Company did not find sufficient contemporaneous evidence to justify the $20.75 million valuation for the intellectual property
received. The intellectual property was not appraised at the time of the transaction. Given the substance of the negotiations considered as a whole, the Company concluded that the most reliable evidence of the valuation of the intellectual property
was the cash component of the transaction negotiated and agreed upon by the parties. Consequently, the Company determined that the best evidence of the fair value of the intellectual property was $6 million, which was the total amount of cash
consideration that the sellers had requested and could receive under the terms of the transaction.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company reclassified approximately $2.7 million of multi-platform advertising revenue recorded during the third and fourth quarters of 2001 from the Interactive
Platform Sector to the Media and Services Sector.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company discovered that a clerical error had been made in the calculation of the value of warrants that were received in connection with a licensing transaction
in the second quarter of 2001. The effect of correcting the error was to reduce the value of the warrants and related deferred revenue by $11.8 million at the date of the transaction. In addition, deferred revenue accreted into earnings over an
18-year period was reduced in 2001 by $338,000 as a result of the corrected warrant valuation. During the fourth quarter of 2001, the write-down of the fair value of the investment in the warrants decreased from $10.4 million as originally recorded
to $5.2 million as adjusted.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company determined that one of its equity affiliates incorrectly accounted for warrants of one of its investees. Specifically, the equity affiliate incorrectly
accounted for these warrants under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, instead of under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The impact of the restatement is to
record an adjustment of $9.1 million that was previously recorded as other comprehensive income within stockholders equity as a charge to other income (expense).
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(3)    Business Combinations and Dispositions



SkyMall Transaction



On July 18, 2001, the Company acquired all of the outstanding
common stock of SkyMall. Under the terms of the agreement, SkyMalls stockholders received 0.03759 shares of Gemstar common stock and $1.50 for each share of SkyMall common stock outstanding. The consolidated financial statements include the
results of operations of SkyMall from July 18, 2001. SkyMall is a specialty retailer that provides a large selection of



F-26



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



premium-quality products and services to consumers from a wide variety of merchants and partners.



The aggregate purchase price of the SkyMall Transaction was
$50.1 million, which included cash of $22.2 million and approximately 741,000 shares of Gemstar common stock issued to SkyMall stockholders at $36.58 per share, the average price of the Companys common stock over the two-day period before and
after the SkyMall Transaction was agreed to and announced. The purchase price also included $0.8 million, representing the fair value of unexercised SkyMall options and warrants assumed by Gemstar and certain transaction costs.



The following table summarizes the estimated fair values of
the assets acquired and liabilities assumed at the date of acquisition (in thousands). The Company is in the process of finalizing the allocation of the purchase price, which is subject to adjustment; however, the Company does not expect any
significant adjustments to the reported amounts as a result of the final purchase price allocation. The preliminary purchase price allocation includes $1.3 million in provisions for exit and separation costs, all of which are included in liabilities
at December 31, 2001. The Company expects the provisions for exit and separation costs to be expended during 2002.



|Assets                 |  |   |       
|---------------------- |  | - | ------
|Current assets         |  | $ | 8,464 
|Property and equipment |  |   | 7,207 
|Intangible assets      |  |   | 2,000 
|Other assets           |  |   | 23    
|Goodwill               |  |   | 66,355
|                       |  |   |       
|                       |  |   | 84,049
|Liabilities:           |  |   |       
|Current liabilities    |  |   | 33,961
|                       |  |   |       
|Net purchase price     |  | $ | 50,088
|                       |  |   |       



The
Company allocated $2.0 million of the purchase price to the fair value of the acquired trade name. The trade name is considered an indefinite lived intangible asset and is not subject to amortization.



F-27



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





The
Company has not yet completed the allocation of $66.4 million of goodwill to its reporting units in accordance with Statement 142. Goodwill generated in this transaction is not subject to amortization in accordance with Statement 142 and is not
expected to be deductible for tax purposes.



TV Guide Transaction



On
July 12, 2000, the Company acquired all of the outstanding common stock of TV Guide by issuing 0.6573 shares of Gemstar common stock for each share of TV Guide Class A and B common stock outstanding, or approximately 200 million shares of Gemstar
common stock. The TV Guide Transaction was accounted for as a purchase. Accordingly, the consolidated financial statements include the results of operations of TV Guide from July 12, 2000.



The purchase price for the TV Guide Transaction was $7.9 billion, consisting of shares of Gemstar common
stock issued to the TV Guide stockholders at $38.21 per share, the average market price of the Companys common stock for two days before and after the agreement on the TV Guide Transaction was reached and announced, and certain transaction
costs.



The purchase price was allocated to
identifiable tangible and intangible assets and liabilities as follows, with the excess of the purchase price over such identifiable assets and liabilities allocated to goodwill (in thousands).



|Assets                      |  |   |           
|--------------------------- |  | - | ----------
|Current assets              |  | $ | 426,657   
|Property and equipment      |  |   | 80,404    
|Intangible assets           |  |   | 9,795,342 
|Other assets                |  |   | 138,287   
|                            |  |   |           
|                            |  |   | 10,440,690
|Liabilities:                |  |   |           
|Current liabilities         |  |   | 510,175   
|Deferred tax liability      |  |   | 1,381,226 
|Other long-term liabilities |  |   | 747,610   
|                            |  |   |           
|                            |  |   | 2,639,011 
|Unearned compensation       |  |   | 88,011    
|                            |  |   |           
|Net purchase price          |  | $ | 7,889,690 
|                            |  |   |           



Included
in the purchase price allocation were $42.5 million in provisions for contract termination and separation costs. During 2001, $9.6 million of this reserve was reversed against goodwill. As of December 31, 2001, approximately $15.6 million ($12.3
million in contract termination costs and $3.3 million in separation costs) had been charged against the allowance. The Company expects that the remaining provisions for contract termination and separation costs will be expended during 2002.



Intangible assets recorded as a result of the TV
Guide Transaction are comprised of the following amounts and lives (in thousands):



|Customer lists         |  | $ | 709,000   |  | 3-5 years 
|---------------------- |  | - | --------- |  | ----------
|Contracts              |  |   | 1,651,000 |  | 5-10 years
|Trademarks and patents |  |   | 799,000   |  | 5-40 years
|Publishing rights      |  |   | 164,000   |  | 15 years  
|Goodwill               |  |   | 6,470,000 |  | 5-15 years



F-28



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





The
following unaudited pro forma financial information reflects the Companys results of operations for the year ended December 31, 2001 and the nine months ended December 31, 2000 as though the TV Guide and SkyMall transactions had been completed
as of April 1, 2000 (in thousands, except per share amounts):



|                                 |  | Restated Year ended December 31, 2001 |           |   | Restated Nine months ended December 31, 2000 |  
|-------------------------------- |  | ------------------------------------- | --------- | - | -------------------------------------------- | -
|Revenues                         |  | $                                     | 1,188,617 |   |                                              | $
|Net loss                         |  |                                       | (758,560  | ) |                                              |  
|Basic and diluted loss per share |  |                                       | (1.83     | ) |                                              |  



Pooling Transactions



In
January 2000, the Company completed mergers with two electronic-book companies, NuvoMedia and SoftBook. Both mergers were accounted for under the pooling of interests method and, accordingly, the consolidated financial statements for periods prior
to the mergers have been restated to include the results of operations, financial position and cash flows of NuvoMedia and SoftBook.



WGN Superstation Transaction



In April 2001, the Company sold the business that distributes the WGN Superstation signal for $106 million in cash. Concurrent with this
transaction, the Company received a $100.0 million advertising commitment for the magazine and its other platforms over a six-year period pursuant to which the Company will be required to run advertising until 2007. The WGN Superstation signal
distribution business was originally acquired by the Company in July 2000, as a part of its acquisition of TV Guide. Because the April 2001 transaction included the sale of assets and an advertising revenue commitment, this multiple-element
transaction was covered by both APB 16, Business Combination, and our revenue recognition policy on multiple-element arrangements. As a result, $10.0 million has been ascribed to the magazine advertising element and will be recognized as
the advertising is run, the remainder of the value ($75.0 million on a discounted basis) has been ascribed to the assets sold and $15.0 million will be recognized as interest income over the six-year contract term. As there is no persuasive or
objective evidence of change in economic value of the assets sold during the period of ownership by the Company, there is no gain or loss from the disposal recorded through the Companys income statement and the adjusted distribution asset
value is recorded as part of the purchase price allocation of the TV Guide transaction for accounting purposes. During 2001, the Company recorded $3.7 million of interest income. At December 31, 2001, the Company had receivables related to this
transaction of $16.9 included in accounts receivable and $50.4 in other assets.



F-29



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





(4)    Selected Balance Sheet Accounts



Marketable Securities



The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of available-for-sale and held-to-maturity marketable securities by major security type and class of
security as of December 31, 2001 and 2000, were as follows (in thousands):



|                                                        |  | Amortized cost |        | Gross unrealized holding gains |   | Gross unrealized holding losses |  |   | Fair value
|------------------------------------------------------- |  | -------------- | ------ | ------------------------------ | - | ------------------------------- |  | - | ----------
|As of December 31, 2001:                                |  |                |        |                                |   |                                 |  |   |           
|Available-for-sale:                                     |  |                |        |                                |   |                                 |  |   |           
|Corporate debt securities                               |  | $              | 11,102 |                                | $ | 9                               |  | $ |          
|U.S. government securities                              |  |                | 48,720 |                                |   | 212                             |  |   | (63       
|Equity securities                                       |  |                | 13,060 |                                |   | 18,816                          |  |   | (42       
|                                                        |  |                |        |                                |   |                                 |  |   |           
|                                                        |  | $              | 72,882 |                                | $ | 19,037                          |  | $ | (105      
|                                                        |  |                |        |                                |   |                                 |  |   |           
|Included in marketable securities                       |  | $              | 41,807 |                                | $ | 175                             |  | $ | (42       
|Included in marketable securities and other investments |  |                | 31,075 |                                |   | 18,862                          |  |   | (63       
|                                                        |  |                |        |                                |   |                                 |  |   |           
|                                                        |  | $              | 72,882 |                                | $ | 19,037                          |  | $ | (105      
|                                                        |  |                |        |                                |   |                                 |  |   |           
|As of December 31, 2000:                                |  |                |        |                                |   |                                 |  |   |           
|Available-for-sale:                                     |  |                |        |                                |   |                                 |  |   |           
|Corporate debt securities                               |  | $              | 14,334 |                                | $ | 18                              |  | $ | (1        
|U.S. government securities                              |  |                | 9,635  |                                |   | 2                               |  |   |          
|Equity securities                                       |  |                | 23,141 |                                |   | 33,706                          |  |   | (9,356    
|                                                        |  |                |        |                                |   |                                 |  |   |           
|                                                        |  | $              | 47,110 |                                | $ | 33,726                          |  | $ | (9,357    
|                                                        |  |                |        |                                |   |                                 |  |   |           
|Held-to-maturity:                                       |  |                |        |                                |   |                                 |  |   |           
|Corporate debt securities                               |  | $              | 18,550 |                                | $ | 17                              |  | $ | (1        
|U.S. government securities                              |  |                | 25,090 |                                |   | 14                              |  |   | (31       
|                                                        |  |                |        |                                |   |                                 |  |   |           
|                                                        |  | $              | 43,640 |                                | $ | 31                              |  | $ | (32       
|                                                        |  |                |        |                                |   |                                 |  |   |           
|Included in marketable securities                       |  | $              | 63,407 |                                | $ | 51                              |  | $ | (33       
|Included in marketable securities and other investments |  |                | 27,343 |                                |   | 33,706                          |  |   | (9,356    
|                                                        |  |                |        |                                |   |                                 |  |   |           
|                                                        |  | $              | 90,750 |                                | $ | 33,757                          |  | $ | (9,389    
|                                                        |  |                |        |                                |   |                                 |  |   |           



As of
December 31, 2001, available-for-sale debt securities with an amortized cost and fair value of $19.8 million were due in one to two years. All remaining debt securities as of December 31, 2001 were due within one year.



During the year ended December 31, 2001, the Company wrote
down the carrying value of certain of its available-for-sale equity securities by $10.2 million as the decline in the fair value of the securities (determined by reference to prices on quoted stock exchanges) was deemed to be other than temporary.



Receivables



Receivables consist of the following (in thousands):



|                                |  | Restated December 31, 2001 |         |   | Restated December 31, 2000 |  
|------------------------------- |  | -------------------------- | ------- | - | -------------------------- | -
|Receivables                     |  | $                          | 309,450 |   |                            | $
|Allowance for doubtful accounts |  |                            | (30,503 | ) |                            |  
|                                |  |                            |         |   |                            |  
|Receivables, net                |  | $                          | 278,947 |   |                            | $
|                                |  |                            |         |   |                            |  



F-30



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





Allowance
for doubtful accounts and related activity consist of the following (in thousands):



|                                    |  | Balance at Beginning of Period |        | Charged to Expense |   | Charged to Other Accounts |  |   | Deductions |     | Balance at End of Period
|----------------------------------- |  | ------------------------------ | ------ | ------------------ | - | ------------------------- |  | - | ---------- | --- | ------------------------
|Allowances for doubtful accounts:   |  |                                |        |                    |   |                           |  |   |            |     |                         
|Year ended December 31, 2001        |  | $                              | 32,815 |                    | $ | 17,506                    |  | $ | 3,614      | (1) |                         
|Nine months ended December 31, 2000 |  |                                | 1,550  |                    |   | 18,129                    |  |   | 15,403     | (2) |                         
|Year ended March 31, 2000           |  |                                | 155    |                    |   | 1,396                     |  |   |           |     |                         



| | (1) |  | Amount represents the allowance for doubtful accounts acquired as part of the assets and liabilities acquired in the SkyMall Transaction. | 
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------- | 

| | (2) |  | Amount represents the allowance for doubtful accounts acquired as part of the assets and liabilities acquired in the TV Guide Transaction. | 
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------ | 



A significant portion of the Companys receivables are due from a limited number of customers. The Company currently believes these receivables to be realizable; however, events may occur in the future which could cause the
Company to change its assessment of the amount of recoverability.



Property and Equipment



Property and equipment, at cost, consist of the following (in thousands):



|                                               |  | December 31, 2001 |         |   | December 31, 2000 |  
|---------------------------------------------- |  | ----------------- | ------- | - | ----------------- | -
|Machinery and equipment                        |  | $                 | 116,015 |   |                   | $
|Leased transponders                            |  |                   | 7,554   |   |                   |  
|Buildings and improvements                     |  |                   | 16,511  |   |                   |  
|                                               |  |                   |         |   |                   |  
|                                               |  |                   | 140,080 |   |                   |  
|Less accumulated depreciation and amortization |  |                   | (54,010 | ) |                   |  
|                                               |  |                   |         |   |                   |  
|Property and equipment, net                    |  | $                 | 86,070  |   |                   | $
|                                               |  |                   |         |   |                   |  



Depreciation and expense was $27.7 million, $15.2 million and $2.4 million for the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, respectively. Amortization of property and
equipment under capital lease was $2.3 million, $1.7 million and zero for those same respective periods.



Intangible Assets



Intangible assets consist of the following (in thousands):



|                              |  | Restated December 31, 2001 |            |   | Restated December 31, 2000 |  
|----------------------------- |  | -------------------------- | ---------- | - | -------------------------- | -
|Goodwill                      |  | $                          | 6,337,437  |   |                            | $
|Contracts                     |  |                            | 1,641,000  |   |                            |  
|Patents and trademarks        |  |                            | 817,701    |   |                            |  
|Customer lists                |  |                            | 732,780    |   |                            |  
|Publishing rights             |  |                            | 164,000    |   |                            |  
|                              |  |                            |            |   |                            |  
|                              |  |                            | 9,692,918  |   |                            |  
|Less accumulated amortization |  |                            | (1,330,301 | ) |                            |  
|                              |  |                            |            |   |                            |  
|Intangible assets, net        |  | $                          | 8,362,617  |   |                            | $
|                              |  |                            |            |   |                            |  



F-31



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





Amortization expense was $910.7 million, $423.2 million and $1.9 million for the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, respectively.



Investments



The Company had investments in equity instruments of
privately held and public companies which amounted to $52.2 million and $214.2 million as of December 31, 2001 and 2000, respectively. These investments are accounted for using either the cost or equity method and consist of common stock, preferred
stock and warrants for common stock.



The Company
has an interest in three related joint ventures that are each accounted for under the equity method of accounting. During the year ended December 31, 2001, one of these joint ventures experienced an other-than temporary decline in the value of its
available for sale equity investments. As the result of this decline, the Company recorded a charge of $10.9 million, representing the Companys share of this decline. This charge was recorded in other expense. At December 31, 2001, the
Companys carrying value of this investment was $50.9 million.



The Company has an investment in an entity engaged in developing a satellite system. The entity experienced operating difficulties and a failed initial public offering. Because of these and other pertinent circumstances, the
Company determined that its investment realized a decline in value that was other than temporary, and that the recoverability of this investment was not likely. As a result, in 2001 the Company recorded a charge of $107.7 million to write-off the
carrying value of this investment. This charge was recorded as other expense.



The Company owns approximately 17% of the equity of an entity that provides online live event sports entertainment and wagering. The Company also holds a warrant to purchase up to 51% of the equity for
an aggregate exercise price of $41.1 million. This warrant expires in September 2004. These investments were received in exchange for a license and content agreement with the Company. The Company shares in certain revenues and other fees earned by
this entity. The Company also has the right to representation on the entitys board of directors. As the Company had the ability to exercise significant influence over the entitys operations at the time of the transaction, the Company
accounts for this investment under the equity method of accounting. Because this investment was received in exchange for a licensing agreement and a deminimus fee, the Companys carrying value of this investment was recorded at zero.



The Company holds various other investments that
are accounted for under either the equity method or the cost method of accounting. During the year ended December 31, 2001, certain of these investments experienced significant declines in value and the carrying values were deemed by management to
be unrecoverable, and thus were written-off, resulting in charges of approximately $36.8 million.



Accounts Payable and Accrued Expenses



Accounts payable and accrued expenses consist of the following (in thousands):



|                                               |  | Restated December 31, 2001 |         | Restated December 31, 2000
|---------------------------------------------- |  | -------------------------- | ------- | --------------------------
|Accounts payable                               |  | $                          | 86,084  |                           
|Accrued liabilities:                           |  |                            |         |                           
|Accrued payroll                                |  |                            | 22,756  |                           
|Acquisition related reserves                   |  |                            | 28,846  |                           
|Other                                          |  |                            | 34,692  |                           
|                                               |  |                            |         |                           
|Total accounts payable and accrued liabilities |  | $                          | 172,378 |                           
|                                               |  |                            |         |                           



F-32



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





Deferred Revenue



The
Company receives upfront payments for license fees from manufacturers who incorporate the Companys patented proprietary technologies and for advertising. In addition, certain of the Companys customers that subscribe to the Companys
magazine and programming services prepay subscription fees for periods of up to one year. Prepayment amounts which have not yet been recognized as revenues under the Companys accounting policies are recorded as deferred revenues.



Deferred revenue consists of the following (in thousands):



|                          |  | Restated December 31, 2001 |         | Restated December 31, 2000
|------------------------- |  | -------------------------- | ------- | --------------------------
|Licensing fees            |  | $                          | 153,382 |                           
|Magazine subscriptions    |  |                            | 205,605 |                           
|Programming subscriptions |  |                            | 76,718  |                           
|Other                     |  |                            | 11,865  |                           
|                          |  |                            |         |                           
|Total deferred revenue    |  |                            | 447,570 |                           
|Less current portion      |  |                            | 254,824 |                           
|                          |  |                            |         |                           
|                          |  | $                          | 192,746 |                           
|                          |  |                            |         |                           



(5)    Credit Arrangements



The Companys wholly owned subsidiary, TV Guide, has a $300 million six-year revolving credit facility and a $300 million four-year amortizing term loan, both expiring in February, 2005 with a group of banks. Borrowings
under the credit facilities bear interest (2.9% at December 31, 2001) either at the banks prime rate or LIBOR, both plus a margin based on a sliding scale tied to TV Guides leverage ratio, as defined in the facility. The credit
facilities are guaranteed by certain subsidiaries of TV Guide and the stock of TV Guides subsidiaries is pledged as collateral. The credit facilities impose restrictions on TV Guides ability to pay dividends to the Company tied to TV
Guides leverage ratio. This restriction does not apply to the Companys ability to pay dividends. In addition, the Company is required to maintain certain financial covenants. As of December 31, 2001, the Company was in compliance with
its covenants. As of December 31, 2001, TV Guide had available borrowing capacity under the six-year revolving credit facility of $146.6 million. Principal payments of $60 million in 2002, $90 million in 2003 and $23 million in 2004 are due under
the $300 million amortizing term loan. The facility restricts the transfer of certain assets to Gemstar. Outstanding borrowings under both credit facilities at December 31, 2001 and 2000 were $326.4 million and $568.7 million, respectively.



On September 15, 2000, TV Guide repurchased for
cash $328.6 million of its outstanding $400 million in  81/8% senior subordinated notes at 101% of the
principal amount of the notes plus accrued interest. The offer to repurchase the notes was required pursuant to the terms of the indenture governing the notes as a result of the change in control of TV Guide by reason of its acquisition by Gemstar.
The repurchase was funded through a combination of available cash and borrowings under the bank credit facilities.



On June 18, 2001, the Company completed a tender offer in which it acquired substantially all of the remaining outstanding 81/8% senior subordinated notes of TV Guide at a price of $1,045 per $1,000 principal amount of notes tendered for an
aggregate purchase price of $71.1 million plus accrued interest. In connection with the tender offer, the indenture for the notes was amended to delete or modify most of the restrictive covenants. An extraordinary loss of $2.1 million, net of tax,
was recognized as a result of this transaction.



F-33



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





The
Company is a party to a loan guaranty to assist a printing services supplier in obtaining a line of credit and term loans with a bank. The maximum exposure to the Company created by this guarantee is $10.0 million.



(6)    Leases



The Company leases operating and office premises and
satellite transponders. The terms of certain of the agreements provide for an option to cancel the agreements after a period of time, subject to cancellation charges and/or meeting certain conditions. One satellite transponder is under a long-term
lease arrangement that is accounted for as a capital lease. The remainder of the satellite transponder leases is accounted for as operating leases.



Future minimum lease payments under capital and noncancelable operating leases at December 31, 2001 are as follows (in thousands):



|                                        |  | Capital Leases |        |   | Operating Leases |  
|--------------------------------------- |  | -------------- | ------ | - | ---------------- | -
|Year ending December 31:                |  |                |        |   |                  |  
|2002                                    |  | $              | 2,400  |   |                  | $
|2003                                    |  |                | 2,400  |   |                  |  
|2004                                    |  |                | 2,000  |   |                  |  
|2005                                    |  |                |       |   |                  |  
|2006                                    |  |                |       |   |                  |  
|Thereafter                              |  |                |       |   |                  |  
|                                        |  |                |        |   |                  |  
|Total future minimum lease payments     |  |                | 6,800  |   |                  |  
|Less amount representing interest at 7% |  |                | (486   | ) |                  |  
|Less sublease revenues                  |  |                |       |   |                  |  
|                                        |  |                |        |   |                  |  
|Net future minimum lease payments       |  |                | 6,314  |   |                  | $
|                                        |  |                |        |   |                  |  
|Less current portion                    |  |                | (2,021 | ) |                  |  
|                                        |  |                |        |   |                  |  
|                                        |  | $              | 4,293  |   |                  |  
|                                        |  |                |        |   |                  |  



Rent
expense, net of sublease revenues, under operating leases was $29.8 million, $16.4 million and $2.5 million for the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, respectively.



(7)    Income Taxes



The Companys (loss) income before income taxes and
extraordinary item for the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000 consisted of the following components (in thousands):



|         |  | Restated Year ended December 31, |          |   | Restated Nine months ended December 31, |   |          | Restated Year ended March 31,
|-------- |  | -------------------------------- | -------- | - | --------------------------------------- | - | -------- | -----------------------------
|         |  | 2001                             |          |   | 2000                                    |   |          | 2000                         
|Domestic |  | $                                | (910,925 | ) |                                         | $ | (363,332 | )                            
|Foreign  |  |                                  | (15,065  | ) |                                         |   | 65,067   |                              
|         |  |                                  |          |   |                                         |   |          |                              
|         |  | $                                | (925,990 | ) |                                         | $ | (298,265 | )                            
|         |  |                                  |          |   |                                         |   |          |                              



F-34



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





The
(benefit) provision for income taxes consists of the following (in thousands):



|          |  | Restated Year ended December 31, |          |   | Restated Nine months ended December 31, |   |          | Restated Year ended March 31, | 
|--------- |  | -------------------------------- | -------- | - | --------------------------------------- | - | -------- | ----------------------------- | 
|          |  | 2001                             |          |   | 2000                                    |   |          | 2000                          | 
|Current:  |  |                                  |          |   |                                         |   |          |                               | 
|Federal   |  | $                                | 23,149   |   |                                         | $ | 229,287  |                               | 
|State     |  |                                  | 2,976    |   |                                         |   | 29,480   |                               | 
|Foreign   |  |                                  | 6,171    |   |                                         |   | 5,961    |                               | 
|          |  |                                  |          |   |                                         |   |          |                               | 
|          |  |                                  | 32,296   |   |                                         |   | 264,728  |                               | 
|Deferred: |  |                                  |          |   |                                         |   |          |                               | 
|Federal   |  |                                  | (185,819 | ) |                                         |   | (307,942 | )                             | 
|State     |  |                                  | (23,891  | ) |                                         |   | (39,593  | )                             | 
|          |  |                                  |          |   |                                         |   |          |                               | 
|          |  |                                  | (209,710 | ) |                                         |   | (347,535 | )                             | 
|          |  |                                  |          |   |                                         |   |          |                               | 
|Total     |  | $                                | (177,414 | ) |                                         | $ | (82,807  | )                             | 
|          |  |                                  |          |   |                                         |   |          |                               | 



A
reconciliation of the expected income tax (benefit) provision using the U.S. statutory rate of 35 percent to the (benefit) provision for income taxes is as follows (in thousands):



|                                        |  | Restated Year ended December 31, |          |   | Restated Nine months ended December 31, |   |          | Restated Year ended March 31, | 
|--------------------------------------- |  | -------------------------------- | -------- | - | --------------------------------------- | - | -------- | ----------------------------- | 
|                                        |  | 2001                             |          |   | 2000                                    |   |          | 2000                          | 
|Expected income tax (benefit) provision |  | $                                | (324,097 | ) |                                         | $ | (104,393 | )                             | 
|State taxes, net of federal effect      |  |                                  | (19,185  | ) |                                         |   | (10,593  | )                             | 
|Nondeductible amortization              |  |                                  | 166,576  |   |                                         |   | 142,090  |                               | 
|Foreign tax impact                      |  |                                  | 4,403    |   |                                         |   | (47,971  | )                             | 
|Change in valuation allowance           |  |                                  | (5,111   | ) |                                         |   | (61,940  | )                             | 
|Other                                   |  |                                  |          |   |                                         |   |          |                               | 
|                                        |  |                                  |          |   |                                         |   |          |                               | 
|Total                                   |  | $                                | (177,414 | ) |                                         | $ | (82,807  | )                             | 
|                                        |  |                                  |          |   |                                         |   |          |                               | 



F-35



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





Deferred
taxes arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. The tax effects of temporary differences that give rise to significant portions of deferred
tax assets and liabilities are presented below (in thousands):



|                                                   |  | Restated December 31, 2001 |            |   | Restated December 31, 2000 |  
|-------------------------------------------------- |  | -------------------------- | ---------- | - | -------------------------- | -
|Deferred tax assets:                               |  |                            |            |   |                            |  
|Net operating loss carryforwards                   |  | $                          | 35,668     |   |                            | $
|Write down of investments and other assets         |  |                            | 45,047     |   |                            |  
|Unrealized losses on marketable securities         |  |                            | 3,951      |   |                            |  
|Expense items                                      |  |                            | 23,870     |   |                            |  
|Other                                              |  |                            | 948        |   |                            |  
|Deferred revenue                                   |  |                            | 36,431     |   |                            |  
|                                                   |  |                            |            |   |                            |  
|Total deferred tax assets                          |  |                            | 145,915    |   |                            |  
|Valuation allowance on deferred tax assets         |  |                            | (35,668    | ) |                            |  
|                                                   |  |                            |            |   |                            |  
|Net deferred tax assets                            |  |                            | 110,247    |   |                            |  
|                                                   |  |                            |            |   |                            |  
|Deferred tax liabilities:                          |  |                            |            |   |                            |  
|Tax versus financial depreciation and amortization |  |                            | (835,246   | ) |                            |  
|Tax liability provided on intercompany income      |  |                            | (254,345   | ) |                            |  
|Other                                              |  |                            | (826       | ) |                            |  
|                                                   |  |                            |            |   |                            |  
|Total deferred tax liabilities                     |  |                            | (1,090,417 | ) |                            |  
|                                                   |  |                            |            |   |                            |  
|Net deferred tax liabilities                       |  | $                          | (980,170   | ) |                            | $
|                                                   |  |                            |            |   |                            |  



In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income in specific tax jurisdictions during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and tax planning strategies in
making this assessment. Based upon the this analysis, management has concluded that it is more likely than not that the Company will realize the benefits of these deductible differences at December 31, 2001, net of the valuation allowance
established.



As of December 31, 2001, the
Company had available net operating loss carryforwards aggregating approximately $90 million to offset future United States income taxes expiring through fiscal year 2020. As a result of previous transactions which involved an ownership change as
defined in the applicable section of the Internal Revenue Code, the Company will be subject to limitations on the use of its net operating loss carryforwards.



(8)    Stock Option Plans



In connection with various acquisitions, the Company has assumed four stock option plans. These assumed stock option plans along with the
Companys stock option plan are collectively referred to as the Plans. The Companys Compensation Committee may grant stock options to purchase common stock of the Company to  employees of the Company (including executive
officers) and certain other persons (including directors and consultants) who are eligible to participate in the Plans. Subject to early termination or acceleration provisions, a stock option generally will be exercisable, in whole or in part, from
the date specified in the related award agreement until the expiration date determined by the Compensation Committee. In no event, however, is a stock option exercisable after ten years from its date of grant.



F-36



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





The
Company generally grants stock options under the Plans at exercise prices equal to the market value of the Companys stock on the dates of grant, resulting in no compensation expense. The only exceptions to this policy are as follows:



| | (i) |  | In January 1998, the Company awarded stock options to its CEO, subject to shareholder approval. The exercise price for the award was set at the market price of the
Companys stock on the date of the award. The measurement date, however, was determined to be the date of shareholder approval (which was not a formality), at which date the market value of the underlying stock exceeded the exercise price by
$25 million. Stock compensation expense related to this award of $1.8 million, $2.3 million and $5.3 million was recognized using the accelerated method during the year ended December 31, 2001, the nine months ended December 31, 2000 and the year
ended March 31, 2000, respectively;
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) |  | In recording the July 2000 TV Guide acquisition, a portion of the purchase price was assigned to unearned compensation expense for unvested TV Guide stock options
assumed by the Company. Stock compensation expense of $44.7 million and $18.3 million during the year ended December 31, 2001 and the nine months ended December 31, 2000, respectively, reflects the amortization of unearned compensation recorded in
the TV Guide transaction.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Plans allow for the issuance of stock options to purchase a maximum of 118 million shares of the Companys Common Stock. As of December 31, 2001, there were 36.6 million shares available for future option grants under the Plans.



The following table summarizes information about stock option
transactions (shares in thousands):



|                                     |  | Year ended December 31, 2001 |   | Nine months ended December 31, 2000 |                                  | Year ended March 31, 2000
|------------------------------------ |  | ---------------------------- | - | ----------------------------------- | -------------------------------- | -------------------------
|                                     |  | Number of Shares             |   |                                     | Weighted- Average Exercise Price |                          
|Outstanding at beginning of period   |  | 59,885                       |   |                                     | $                                | 12.86                    
|Granted                              |  | 3,426                        |   |                                     |                                  | 38.54                    
|Exercised                            |  | (3,377                       | ) |                                     |                                  | 6.05                     
|Cancelled                            |  | (558                         | ) |                                     |                                  | 34.59                    
|Assumed options                      |  | 7                            |   |                                     |                                  | 187.73                   
|                                     |  |                              |   |                                     |                                  |                          
|Outstanding at end of period         |  | 59,383                       |   |                                     |                                  | 14.55                    
|                                     |  |                              |   |                                     |                                  |                          
|Options exercisable at end of period |  | 36,048                       |   |                                     |                                  | 6.96                     
|                                     |  |                              |   |                                     |                                  |                          



The
following table summarizes information about the Companys stock options outstanding as of December 31, 2001 (shares in thousands):



|                         |  | Stock Options Outstanding |  | Stock Options Exercisable                            
|------------------------ |  | ------------------------- |  | -----------------------------------------------------
|Range of Exercise Prices |  | Number of Shares          |  | Weighted- Average Remaining Years of Contractual Life
|$0.18-$5.00              |  | 13,514                    |  | 3.8                                                  
|$5.01-$10.00             |  | 23,461                    |  | 6.0                                                  
|$10.01-$15.00            |  | 5,301                     |  | 6.4                                                  
|$15.01-$30.00            |  | 5,470                     |  | 7.3                                                  
|$30.01-$45.00            |  | 7,902                     |  | 8.2                                                  
|$45.01-$314.25           |  | 3,735                     |  | 8.4                                                  
|                         |  |                           |  |                                                      
|Total                    |  | 59,383                    |  | 6.2                                                  
|                         |  |                           |  |                                                      



F-37



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





The per
share weighted-average fair value of stock options granted during the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000, was $31.04, $34.22 and $23.93, respectively. The fair value of each option
was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



|                        |  | Year ended December 31, 2001 |   |  | Nine months ended December 31, 2000 |   |  | Year ended March 31, 2000 |  
|----------------------- |  | ---------------------------- | - |  | ----------------------------------- | - |  | ------------------------- | -
|Risk-free interest rate |  | 5.2                          | % |  | 6.2                                 | % |  | 5.8                       | %
|Volatility              |  | 76                           | % |  | 71                                  | % |  | 73                        | %
|Expected life (years)   |  | 9.4                          |   |  | 8.7                                 |   |  | 8.9                       |  
|Expected dividend yield |  |                             | % |  |                                    | % |  |                          | %



The
Company applies APB Opinion No. 25, and related interpretations, in accounting for its Plans. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Companys net
income (loss) would have been changed to the pro forma amounts indicated below (in thousands, except per share data):



|                                   |  | Restated Year ended December 31, 2001 |          |   | Restated Nine months ended
December 31, 2000 |   |          | Restated Year ended March 31, 2000
|---------------------------------- |  | ------------------------------------- | -------- | - | -------------------------------------------- | - | -------- | ----------------------------------
|Net (loss) income:                 |  |                                       |          |   |                                              |   |          |                                   
|As reported                        |  | $                                     | (750,676 | ) |                                              | $ | (215,458 | )                                 
|Pro forma                          |  |                                       | (815,963 | ) |                                              |   | (262,722 | )                                 
|Basic (loss) earnings per share:   |  |                                       |          |   |                                              |   |          |                                   
|As reported                        |  |                                       | (1.82    | ) |                                              |   | (0.64    | )                                 
|Pro forma                          |  |                                       | (1.98    | ) |                                              |   | (0.78    | )                                 
|Diluted (loss) earnings per share: |  |                                       |          |   |                                              |   |          |                                   
|As reported                        |  |                                       | (1.82    | ) |                                              |   | (0.64    | )                                 
|Pro forma                          |  |                                       | (1.98    | ) |                                              |   | (0.78    | )                                 



Because
additional option grants are expected to be made each year, the above pro forma disclosures are not likely to be representative of pro forma effects on reported net income (loss) for future years.



(9)    Warrants



In connection with the acquisition of SkyMall, the Company
has reserved 90,402 shares of the Companys common stock for issuance upon the exercise of outstanding warrants to acquire SkyMall common stock. Valued using the Black-Scholes option pricing model at $671,000 at the date of acquisition, the
outstanding warrants are exercisable at prices ranging from $53 to $383 and expire at various dates through June 2005. As of December 31, 2001, none of these warrants have been exercised.



(10)    Stock Repurchase Program



On September 19, 2001, the Companys board of directors authorized the repurchase of up to $300 million
of the Companys common stock. As of December 31, 2001, the Company has repurchased 330,000 shares for approximately $6.4 million under the stock repurchase program. Shares repurchased under the stock repurchase program are included in treasury
stock on the accompanying consolidated balance sheets.



F-38



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





(11)    Employee Benefit Plans



The Company has defined contribution plans which provide most of its employees with the ability to defer a percentage of their annual compensation subject to certain limitations. The Company will match
the employees deferrals based on certain percentages of the employees deferrals. The Company made contributions of $3.2 million, $1.7 million and $79,000 to these plans during the year ended December 31, 2001, the nine months ended
December 31, 2000 and the year ended March 31, 2000, respectively.



(12)    Legal Proceedings (also see note 16)



On December 1, 1998, the Company filed a patent infringement action against Pioneer Electronics Corp., Pioneer North America, Inc. and Pioneer New Media Technologies, Inc. (collectively
Pioneer) in the U.S. District Court for the Central District of California. The suit seeks damages and injunctive relief based upon the alleged infringement of two patents by Pioneers interactive program guide. Pioneer alleges the
Company violated federal antitrust laws and misused certain patents.



On December 3, 1998, Scientific-Atlanta, Inc. (SA) filed an action against the Company in the U.S. District Court for the Northern District of Georgia. The action alleges the Company violated federal antitrust
laws and misused its patents. SA seeks damages, injunctive relief and a declaration that certain patents are unenforceable, not infringed or invalid.



On December 4, 1998, the Company filed a patent infringement action against SA in the U.S. District Court for the Central District of
California. The suit seeks damages and injunctive relief based upon the alleged infringement of two patents by SAs interactive program guide.



On April 23, 1999, SA filed an action against the Company in the U.S. District Court for the Northern District of Georgia, alleging
infringement of three patents and seeking damages and injunctive relief. This case has been coordinated for pretrial purposes with the July 23, 1999 action described below filed by SA against StarSight Telecast, Inc. (StarSight), a
wholly owned subsidiary of the Company.



On April
26, 1999, the Judicial Panel on Multi-District Litigation ordered that the Pioneer and SA federal lawsuits noted above which were pending outside the Northern District of Georgia be transferred to the Northern District of Georgia for coordinated or
consolidated pretrial proceedings with the December 3, 1998 action pending in that district (the MDL Transfer Order).



On June 25, 1999, SA filed an action against StarSight in the U.S. District Court for the Northern District of Georgia, seeking a
declaratory judgment of invalidity and non-infringement of two patents. On August 2, 1999, StarSight answered the complaint as to one of the patents and counterclaimed against SA for infringement of this patent, seeking damages and injunctive
relief. On September 18, 2001, the Court allowed StarSight to amend its answer to assert an additional counterclaim against SA for infringement of the other patent at issue.



On July 23, 1999, SA filed an action against StarSight in the U.S. District Court for the Northern District
of Georgia, alleging infringement of three patents and seeking damages and injunctive relief. This case has been coordinated for pretrial purposes with the action filed by SA against the Company on April 23, 1999. The parties are in pretrial
proceedings.



On January 18, 2000, StarSight
filed a patent infringement action against TiVo Inc. (TiVo) in the U.S. District Court for the Northern District of California. The suit claims, among other matters, that TiVo willfully infringed certain StarSight intellectual property
by virtue of TiVos deployment, marketing, offers to sell and sale of personalized video recorder devices containing an unlicensed interactive program guide. StarSight is seeking



F-39



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



an injunction and monetary damages. On February 25, 2000, TiVo answered StarSights Complaint, and also filed counterclaims against the
Company and StarSight alleging, among others, that the Company has violated federal antitrust law and the California unfair business practices act. In its counterclaims, TiVo seeks, among other relief, damages and an injunction.



On October 23, 2000, StarSight filed a patent infringement
suit against EchoStar Communications Corp., EchoStar Satellite Corp. and EchoStar Technologies Corp. (collectively EchoStar) in the United States District Court for the Western District of North Carolina. The suit claims, among other
matters, that EchoStar willfully infringed certain StarSight intellectual property by virtue of EchoStars deployment, marketing, offers to sell and sale of direct broadcast satellite receivers containing an unlicensed interactive program guide
and by EchoStars operation of transmission systems to such receivers. StarSight, among other relief, is seeking an injunction and monetary damages. This lawsuit has now been stayed pending completion of the ITC proceedings discussed below.



On November 17, 2000, Pioneer Digital
Technologies, Inc. filed suit against the Company and various of its subsidiaries in Los Angeles County Superior Court. On January 12, 2001, Pioneer Digital Technologies filed its first amended complaint which claims, among other matters, that the
Company and certain of its subsidiaries have violated state antitrust and unfair competition laws. Pioneer Digital Technologies is seeking damages and injunctive relief against the Company. The parties are in pretrial proceedings.



On December 5, 2000, EchoStar filed an antitrust action
against the Company and several of its subsidiaries in the U.S. District Court for the District of Colorado. The action alleges the Company and several of its subsidiaries violated federal and state antitrust laws. EchoStar seeks, among other
relief, damages and an injunction. On September 17, 2001, the MDL Panel affirmed its Conditional Transfer Order transferring the case to U.S. District Court for the Northern District of Georgia. This case has been coordinated with the actions
subject to the MDL Transfer Order.



On February
9, 2001, the Company and StarSight Telecast, Inc., filed four separate patent infringement actions against: (1) Scientific-Atlanta, Inc.; (2) Pioneer Corporation, Pioneer Digital Technologies, Inc., Pioneer North America, Inc. and Pioneer New Media
Technologies, Inc.; (3) SCI Systems, Inc.; and (4) EchoStar Communications Corporation in the U.S. District Court for the Northern District of Georgia. Each of these actions has been stayed by the Court pending completion of the ITC proceedings
discussed immediately below.



On February 14,
2001, the Company and StarSight Telecast, Inc. filed a complaint requesting that the United States International Trade Commission (ITC) commence an investigation pursuant to Section 337 of the Tariff Act of 1930, as amended, 19 U.S.C.
Section 1337 (Section 337), regarding imports of certain set-top boxes and components thereof. The complaint alleges that Pioneer Corporation, Pioneer Digital Technologies, Inc., Pioneer North America, Inc., Pioneer New Media
Technologies, Inc., Scientific-Atlanta, Inc., EchoStar Communications Corporation and SCI Systems, Inc. (collectively Respondents), are violating Section 337 by their unlawful importation into the United States, sale for importation into
the United States, and/or sale in the United States after importation, of set-top boxes and/or components that infringe, directly, contributorily or by inducement, of certain patents owned by the Company. The complaint requests an order excluding
from entry



F-40



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



into the United States all imported set-top boxes and components that infringe, directly, contributorily or by inducement, any claims of the
patents in suit, and directing Respondents to cease and desist from importing, marketing, advertising, demonstrating, warehousing, distributing, selling and/or using set-top boxes or components that so infringe. On or about March 16, 2001, the ITC
instituted the requested investigation referred to asIn the Matter of Certain Set-Top Boxes and Components Thereof, Investigation No. 337-TA-454 (ITC). An administrative hearing was held during December 2001.



On March 23, 2001, Gemstar Development Corporation, a wholly
owned subsidiary of the Company, was added as a third-party defendant in the lawsuit of SuperGuide Corporation v. DirecTV Enterprises, Inc., et al., which is currently pending in the U.S. District Court for the Western District of North
Carolina. The original claims brought by SuperGuide Corporation against the defendants in this lawsuit are for patent infringement with respect to three patents (the SuperGuide Patents). In 1993, Gemstar Development Corporation received
a license to the SuperGuide Patents from SuperGuide Corporation within certain defined fields of use. Defendants asked the Court to join Gemstar Development Corporation to these proceedings as a necessary party. After it was added as a party,
Gemstar Development Corporation brought claims for declaratory relief and breach of contract against SuperGuide in this lawsuit relating to the 1993 license agreement between SuperGuide and Gemstar Development Corporation. In addition, Gemstar
Development Corporation asserted claims against EchoStar for infringing the SuperGuide Patents within Gemstars defined fields of use.



On November 2, 2001, Thomson multimedia, Inc. sought leave to add the Company and certain subsidiaries into a case captioned Pegasus
Development Corporation and Personalized Media Communications, L.L.C. v. DirecTV, Inc., Hughes Electronics Corporation, Thomson Consumer Electronics, Inc. and Philips Electronics North America Corporation; Thomson multimedia, Inc. v. Pegasus
Development Corporation, Personalized Media Communications, L.L.C., TVG-PMC, Inc., StarSight Telecast, Inc., and Gemstar-TV Guide International, Inc.,United States District Court for the District of Delaware, Case No. 00-1020 (GMS). At
that time, Thomson asserted a declaratory judgment claim against the Gemstar parties seeking a declaration of noninfringement and invalidity of certain patents as to which the Company is a licensee. In addition to its claim for declaratory relief
(discussed above), Thomson also added a claim for antitrust violations under federal and state law. On February 1, 2002, the Gemstar parties filed a motion to dismiss Thomsons claims. At the same time, the Gemstar parties filed a motion, in
the alternative, to bifurcate or sever Thomsons antitrust claims.



On November 30, 2001, Thomson multimedia, Inc. (Thomson, Inc.) initiated an arbitration with the American Arbitration Association against the Company. The Statement of Claims filed by Thomson, Inc. alleges that
the Company has breached certain obligations under a group of agreements signed by the parties as of December 31, 1999 relating to a joint venture between the parties for revenue sharing of advertising on electronic programming guides. On January 7,
2002, the Company filed an Answering Statement and Counterclaim, inter alia, denying all allegations of the claims filed by Thomson, Inc. and the Company, in addition, asserted counterclaims against Thomson, Inc. and Thomson
multimedia, S.A. (Thomson S.A.) alleging, inter alia, that Thomson S.A. had breached certain of its obligations under one of the agreements signed by the parties as of December 31, 1999 relating to the introduction of electronic
programming guides in Europe.



On October 18,
1999, a former employee of ODS Technologies, L.P. (ODS), now a majority owned subsidiary of the Company, filed a complaint against ODS and TV Guide in the U.S. District Court for the Southern District of Florida, which complaint was
amended on November 12, 1999, asserting causes of action for violations of certain federal statutes governing pension plans and for equitable estoppel. The amended complaint seeks an unspecified amount of damages for benefits allegedly due to the
plaintiff under his employment agreement with ODS. ODS currently has pending a motion for summary judgment to dismiss the lawsuit and the time set by the Court to complete discovery now has expired. Plaintiff has moved to re-open discovery, which



F-41



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



motion the Company has opposed. On November 1, 2001 the Court heard argument on the motion for summary judgment.



On May 3, 2000, a complaint was filed in the U.S. District
Court for the Southern District of New York against Murdoch Magazines Distribution, Inc. (now named TV Guide Distribution, Inc. and a wholly owned subsidiary of the Company) and other parties by United Magazine Company, Inc. (Unimag) and
related entities. The complaint alleges claims against Murdoch Magazines for violation of the Robinson-Patman Act, breach of implied covenants of good faith and fair dealing, promissory estoppel, breach of fiduciary duty, misappropriation of
business property and trade secrets, tortious destruction of business, breach of confidential relationship and violation of federal and state antitrust laws. The complaint seeks monetary damages, plus treble and punitive damages, attorneys
fees and costs. On August 31, 2000, Unimag filed an amended complaint,  (i) adding TV Guide Distribution, Inc. as a named defendant, (ii) adding six other national distributors as defendants, and (iii) adding claims for unjust enrichment and
violation of the New York Franchise Sales Act. The Company filed a motion to dismiss all of the claims asserted against it. On May 1, 2001, the Court heard oral argument on the Companys motion to dismiss, and an Opinion and Order was issued on
May 31, 2001, dismissing all fifteen counts in Unimags Amended Complaint, most with prejudice and some with leave to replead. On June 21, 2001, Unimag and the other plaintiffs filed a Second Amended Complaint, in essence alleging violations of
the Robinson-Patman Act, breach of fiduciary duties and confidential relationships by the national distributor defendants and Murdoch Magazines, along with tort and statutory claims. All defendants, including Murdoch Magazines, have filed motions to
dismiss portions of the Second Amended Complaint. By Opinion and Order dated December 17, 2001, the Court granted the motions in part and denied them in part. The claims for breach of fiduciary duties and confidential relationships against the
national distributor defendants and Murdoch Magazines were dismissed with prejudice. The Robinson-Patman claims remain, along with certain statutory claims.



During July and August 2000, TV Guide was served with more than 20 class action complaints filed primarily in the U.S. District Court for
the Southern District of New York on behalf of magazine subscribers. These complaints, which have been consolidated into a single action, allege that TV Guide, the Magazine Publishers Association (MPA), and 12 other publishers of
consumer magazines have violated federal antitrust laws by conspiring to limit the discounting of magazine subscription prices by means of rules adopted by the MPA and the Audit Bureau of Circulation. The plaintiffs seek injunctive relief,
unspecified damages (trebled), and attorneys fees and costs. Plaintiffs have filed a motion for partial summary judgment which is pending before the Court. After oral argument was heard on January 10, 2001, the parties entered into settlement
discussions. The Court was notified by letter dated June 19, 2001, that the parties were engaged in settlement discussions.



The Company is also a party to certain other claims, actions and proceedings incidental to its business, none of which is expected to have
a material adverse effect on the business, financial position or results of operations of the Company.



Litigation is uncertain, and the outcome of individual cases is not predictable with any assurance. The Company has established loss
provisions for matters in which losses are probable and can be reasonably estimated. Some of the matters pending against the Company involve potential compensatory, punitive or treble damage claims, or sanctions, that if granted, could require the
Company to pay damages or make other expenditures in amounts that could have a material adverse effect on the Companys financial position or results of operations. At this time, except as expressly noted herein, management has not reached a
determination that any of the matters listed above or the Companys other litigation are expected to result in liabilities that will have a material adverse effect on the Companys financial position or results of operations, after taking
into account the loss provisions that have been established as of the date hereof.



F-42



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





(13)    Related Party Transactions and Other Significant Relationships



In connection with the acquisition of TV Guide in 2000, The News Corporation Limited (News Corporation) became a stockholder
of the Company. As of December 31, 2001, News Corporation directly and indirectly owns approximately 42% of the Companys outstanding common stock and has the right to designate six directors on the Companys board. The Company earned
advertising revenues of $19.3 million and $10.4 million for the year ended December 31, 2001 and the period from the date of the TV Guide acquisition through December 31, 2000, respectively, from entities controlled by News Corporation. During those
same periods, the Company acquired programming from News Corporation controlled entities of $11.3 million and $6.7 million, respectively. Prior to its acquisition of TV Guide, the Company did not have any significant transactions with News
Corporation As of December 31, 2001 and 2000, the Company had receivables due from News Corporation controlled entities totaling $5.2 million and $9.5 million, respectively, and payables due to News Corporation controlled entities totaling $320,000
and $965,000, respectively. In addition, the Company purchases paper through a paper procurement arrangement with News Corporation at negotiated prices with paper suppliers based on the combined paper requirements of the two organizations.



Liberty Media Corporation (Liberty
Media), formerly an indirect wholly owned subsidiary of AT&T Corp., directly or indirectly owned approximately 21% of the issued and outstanding common stock of the Company from the date of the acquisition of TV Guide in 2000 until May 2,
2001, the date Liberty Media sold its interest in the Company to News Corporation. For the period January 1, 2001 to May 2, 2001, the date Liberty Media ceased to be considered a related party of the Company, and the period from the date of the TV
Guide acquisition through December 31, 2000, the Company purchased programming from Liberty Media controlled affiliates of $4.5 million and $7.4 million, respectively. During those same periods, the Company also sold video, program promotion and
guide services and subscriber management services to AT&T Broadband and Internet Services (BIS) and its consolidated affiliates of $6.7 million and $8.4 million, respectively. In addition, during those same periods, the Company
purchased production services and was provided satellite transponder facilities and uplink services from BIS consolidated affiliates of $2.4 million and $3.9 million, respectively. BIS is also wholly owned by AT&T Corp. Prior to its acquisition
of TV Guide, the Company did not have any significant transactions with Liberty Media or BIS.



The Company has included in the amounts discussed above, transactions with News Corporation, BIS, and Liberty Media and all entities in which BIS, Liberty Media and News Corporation have an interest
greater than 50%. In addition, the Company has transactions with entities in which BIS, Liberty Media and News Corporation own, directly or indirectly, 50% or less.



The Company has multiple transactions with Thomson multimedia, Inc., including Thomsons licensing of
the Companys VCR Plus+, GUIDE Plus+ and eBook technologies, Thomsons advertising on the Companys platforms, primarily the interactive program guide platforms, the Companys participation in marketing and promotion campaigns on
Thomson products carrying the Companys technology, and the two companies being joint venture partners in the sale of advertising and electronic program guides on televisions. During the year ended December 31, 2001, the nine months ended
December 31, 2000 and the year ended March 31, 2000, net revenues earned from the relationship with Thomson were $49.6 million, $46.1 million and $19.8 million, respectively. In accordance with the Companys revenue recognition policy, revenues
from Thomson are recorded net of amounts paid to Thomson for market development arrangements. As of December 31, 2001, the Company has receivables due from and a payable due to Thomson totaling $57.9 million and $21.2 million, respectively.



(14)    Segment and Geographical
Information



The Company organizes its
businesses into three groups which also represent its reportable business segments: the Technology and Licensing Sector, which is responsible for the development, licensing and



F-43



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



protection of intellectual property and proprietary technologies (the Companys technologies include the interactive program guides
(IPG) marketed under the GUIDE Plus+ and TV Guide Interactive brands, the VCR Plus+ system and the electronic book (eBook)); the Interactive Platform Sector, which derives recurring income from advertising, interactive
services and e-commerce on the Companys proprietary interactive platforms; and the Media and Services Sector, which operates TV Guide Magazine, TV Guide Channel, TVG Network, SkyMall catalog sales, Superstar/Netlink Group and other
non-interactive platforms and media properties. Segment information reported in prior years has been reclassified to conform with the current year presentation.



The Companys reportable segments are strategic business units that offer different products and
services and compete in different industries. Due to purchase accounting, the results of operations for the year ended December 31, 2001 and the nine months ended December 31, 2000, reflect significant increases in depreciation and amortization of
goodwill and other intangible assets. Accordingly, the Companys chief operating decision maker uses EBITDA (operating income before stock compensation expense, depreciation and amortization, impairment of goodwill and nonrecurring expenses) to
evaluate the performance of the three segments. Inter-segment eliminations consist of media and sales commissions reported as revenues by the Media and Services Sector and expenses by the Interactive Program Sector amounting to $4.1 million and $4.0
million in the year ended December 31, 2001 and the nine months ended December 31, 2000, respectively. The Company accounts for inter-segment sales as if the sales were made to third parties at market prices. Assets of the reportable segments are
not relevant for management of the businesses.



Segment information for the year ended December 31, 2001, the nine months ended December 31, 2000 and the year ended March 31, 2000 is as follows (in thousands):



|                                                         |  | Restated Year ended December 31, 2001(1) |           |   | Restated Nine months ended December 31, 2000 (1) |   |          | Restated Year ended March 31, 2000 | 
|-------------------------------------------------------- |  | ---------------------------------------- | --------- | - | ------------------------------------------------ | - | -------- | ---------------------------------- | 
|Technology and Licensing Sector:                         |  |                                          |           |   |                                                  |   |          |                                    | 
|Revenues                                                 |  | $                                        | 192,482   |   |                                                  | $ | 146,774  |                                    | 
|Expenses(2)                                              |  |                                          | 135,200   |   |                                                  |   | 72,107   |                                    | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 
|EBITDA(3)                                                |  | $                                        | 57,282    |   |                                                  | $ | 74,667   |                                    | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 
|Interactive Platform Sector:                             |  |                                          |           |   |                                                  |   |          |                                    | 
|Revenues                                                 |  | $                                        | 33,747    |   |                                                  | $ | 11,161   |                                    | 
|Expenses(2)                                              |  |                                          | 75,922    |   |                                                  |   | 42,906   |                                    | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 
|EBITDA(3)                                                |  | $                                        | (42,175   | ) |                                                  | $ | (31,745  | )                                  | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 
|Media and Services Sector:                               |  |                                          |           |   |                                                  |   |          |                                    | 
|Revenues                                                 |  | $                                        | 950,462   |   |                                                  | $ | 515,945  |                                    | 
|Expenses(2)                                              |  |                                          | 698,005   |   |                                                  |   | 382,096  |                                    | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 
|EBITDA(3)                                                |  | $                                        | 252,457   |   |                                                  | $ | 133,849  |                                    | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 
|Consolidated (after eliminations)                        |  |                                          |           |   |                                                  |   |          |                                    | 
|Revenues                                                 |  | $                                        | 1,172,558 |   |                                                  | $ | 669,904  |                                    | 
|Expenses(2)                                              |  |                                          | 904,994   |   |                                                  |   | 493,133  |                                    | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 
|EBITDA(3)                                                |  |                                          | 267,564   |   |                                                  |   | 176,771  |                                    | 
|Stock compensation                                       |  |                                          | (46,538   | ) |                                                  |   | (20,635  | )                                  | 
|Depreciation and amortization                            |  |                                          | (940,670  | ) |                                                  |   | (438,059 | )                                  | 
|Impairment of goodwill                                   |  |                                          | (10,800   | ) |                                                  |   |         |                                    | 
|Merger related expenses                                  |  |                                          |          |   |                                                  |   |         |                                    | 
|Interest expense                                         |  |                                          | (27,375   | ) |                                                  |   | (24,783  | )                                  | 
|Other (expense) income, net                              |  |                                          | (168,171  | ) |                                                  |   | 8,441    |                                    | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 
|(Loss) income before income taxes and extraordinary item |  | $                                        | (925,990  | ) |                                                  | $ | (298,265 | )                                  | 
|                                                         |  |                                          |           |   |                                                  |   |          |                                    | 



F-44



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



---

|(1) |  | Effective July 18, 2001 and July 12, 2000, the Companys consolidated operating results include the operating results of SkyMall and TV Guide, respectively.
SkyMall and TV Guide were acquired in transactions accounted for as purchases.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Expenses mean operating expenses, excluding stock compensation, depreciation and amortization, impairment of goodwill and nonrecurring expenses.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | EBITDA means operating income before stock compensation expense, depreciation and amortization, impairment of goodwill and merger related expenses, which consist of
costs incurred as a result of the mergers with NuvoMedia, Inc. and SoftBook Press, Inc. in fiscal year 2000. Due to purchase accounting related to the Companys merger with TV Guide on July 12, 2000, the results of operations for the year ended
December 31, 2001 and the nine months ended December 31, 2000, reflect significant increases in depreciation and amortization of goodwill and other intangible assets. Accordingly, the Companys business sectors are measured based on EBITDA. We
believe EBITDA to be relevant and useful information as EBITDA is the primary measure used by our management to measure the operating profits or losses of our business. EBITDA is one of several metrics used by our management to measure the cash
generated from our operations. EBITDA is presented supplementally as we believe it is a standard measure commonly reported and widely used by analysts, investors and others associated with its industry. However, EBITDA does not take into account
substantial costs of doing business, such as income taxes and interest expense. While many in the financial community consider EBITDA to be an important measure of comparative operating performance, it 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 accounting principles generally accepted in the United States that are presented in
the financial statements included in this report. Additionally, our calculations of EBITDA may be different than the calculation used by other companies and, therefore, comparability may be affected. (See Item, 7 Managements Discussion
and Analysis of Financial Condition and Results of OperationsReconciliation of EBITDA to Consolidated Operating (Loss) Income.)
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A summary of the Companys revenues, operating (loss) income and identifiable assets by geographic area is as follows (in thousands):



|                             |  | Restated Year ended December 31, 2001 |           |   | Restated Nine months ended December 31,
2000 |   |            | Restated Year ended March 31, 2000 | 
|---------------------------- |  | ------------------------------------- | --------- | - | -------------------------------------------- | - | ---------- | ---------------------------------- | 
|Revenues:                    |  |                                       |           |   |                                              |   |            |                                    | 
|United States                |  | $                                     | 1,135,439 |   |                                              | $ | 582,250    |                                    | 
|Foreign(1)                   |  |                                       | 37,119    |   |                                              |   | 87,654     |                                    | 
|                             |  |                                       |           |   |                                              |   |            |                                    | 
|Total                        |  | $                                     | 1,172,558 |   |                                              | $ | 669,904    |                                    | 
|                             |  |                                       |           |   |                                              |   |            |                                    | 
|Operating (loss) income (2): |  |                                       |           |   |                                              |   |            |                                    | 
|United States                |  | $                                     | (734,471  | ) |                                              | $ | (352,314   | )                                  | 
|Foreign                      |  |                                       | 4,027     |   |                                              |   | 70,391     |                                    | 
|                             |  |                                       |           |   |                                              |   |            |                                    | 
|Total                        |  | $                                     | (730,444  | ) |                                              | $ | (281,923   | )                                  | 
|                             |  |                                       |           |   |                                              |   |            |                                    | 
|                            
|                             |  | Restated                              |          
|                             |  | December 31, 2001                     |           |   | December 31, 2000                            |   |            | March 31, 2000                     | 
|Identifiable assets:         |  |                                       |           |   |                                              |   |            |                                    | 
|United States                |  | $                                     | 9,150,948 |   |                                              | $ | 10,544,297 |                                    | 
|Foreign(3)                   |  |                                       | 190,565   |   |                                              |   | 77,007     |                                    | 
|                             |  |                                       |           |   |                                              |   |            |                                    | 
|Total                        |  | $                                     | 9,341,513 |   |                                              | $ | 10,621,304 |                                    | 
|                             |  |                                       |           |   |                                              |   |            |                                    | 



F-45



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



---

|(1) |  | Revenues and operating income included in foreign are principally earned by entities in the British Virgin Islands.
|--- |  | -------------------------------------------------------------------------------------------------------------------

|(2) |  | Operating (loss) income consists of total revenues less operating expenses and does not include other (expense) income.
|--- |  | -----------------------------------------------------------------------------------------------------------------------

|(3) |  | Identifiable assets included in foreign are principally held by entities in the British Virgin Islands.
|--- |  | -------------------------------------------------------------------------------------------------------



No single customer accounted for more than 10% of total
revenues for the year ended December 31, 2001 or for the nine months ended December 31, 2000. The Company had revenues attributed to individual customers in excess of 10% of total revenues for the year ended March 31, 2000:



|           |  | Restated Year ended March 31, 2000 |  
|---------- |  | ---------------------------------- | -
|Customer A |  | 17                                 | %
|Customer B |  | 12                                 | %
|Customer C |  | 11                                 | %



(15)    Quarterly Information (unaudited)



|                                                                                                                                                             |  | Quarter ended                         |         
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------- | --------
|                                                                                                                                                             |  | March 31,                             |         
|                                                                                                                                                             |  | (in thousands, except per share data) |         
|2001 (Restated)                                                                                                                                              |  |                                       |         
|Revenues                                                                                                                                                     |  | $                                     | 316,596 
|Operating loss                                                                                                                                               |  |                                       | (159,442
|Net loss                                                                                                                                                     |  |                                       | (161,073
|Basic and diluted loss per share                                                                                                                             |  | $                                     | (0.39   
|                                                                                                                                                            
|2000 (Restated)(1)                                                                                                                                           |  |                                       |         
|Revenues                                                                                                                                                     |  | $                                     | 48,308  
|Operating income (loss)                                                                                                                                      |  |                                       | 2,037   
|Net income (loss)                                                                                                                                            |  |                                       | 11,152  
|Basic earnings (loss) per share                                                                                                                              |  | $                                     | (0.05   
|Diluted earnings (loss) per share                                                                                                                            |  | $                                     | (0.04   
|(1)    Reported results for the transition period from April 1, 2000 to December 31, 2000 did not include results for the three months ended March 31, 2000.



Effective July 18, 2001 and July 12, 2000, the Companys consolidated operating results include the operating results of SkyMall and TV Guide, respectively. SkyMall and TV Guide were acquired in transactions accounted for as a
purchases. See Note 3.



Operating results for the
fourth quarter of 2001 include $14.8 million of additional unearned compensation amortization resulting from a senior executive officer that separated from the Company, impairment of goodwill of $10.8 million and a $84.4 million write-down of
certain of the Companys technology investments and marketable securities.



F-46



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





(16)    Events Subsequent to Balance Sheet Date



Management Restructuring



On November 7, 2002, the Company entered into various management restructuring agreements with Dr. Yuen and Ms Leung (the Former Executives). Dr. Yuen resigned from his duties as Chief
Executive Officer, and Ms. Leung, as Co-Chief Operating Officer and Chief Financial Officer, and both became non-executive officers of a new wholly owned international-focused business unit. The Former Executives terminated their existing employment
agreements and replaced them with new five- and three-year employment agreements, respectively, which provide for annual salaries totaling $2.5 million and certain other benefits. Under Dr. Yuens new employment agreement, Dr. Yuen assigned to
the Company all intellectual property related to the business of the Company that he previously developed. Dr. Yuen has the contractual right to serve as a non-executive chairman of the Board of Directors during the term of his employment agreement
and Ms. Leung currently serves as a non-executive member of the Board of Directors and has agreed to resign effective as of the end of her current term. In addition, Dr. Yuen entered into a Patent Rights Agreement granting the Company the option to
acquire certain inventions of Dr. Yuen and requiring certain payments by the Company and other obligations more fully described below.



In connection with the above agreements, the Former Executives:



| |  |  | cancelled 20.2 million stock options, which represents all options granted after March 1998. In accordance with their 1998 employment agreements, their remaining
33.2 million options vested in full and became exercisable for their full remaining term. In 1998 a new measurement date occurred and no additional compensation expense was required for the vesting modification, however the extension modification
resulted in a potential compensation charge of up to $34 million. Compensation expense is recognized only to the extent the individuals actually benefit from this modification and that amount would be charged as compensation expense over the
remaining vesting period. As of December 31, 2002, the Company does not believe it is probable that the Former Executives will benefit from this modification and therefore have not recognized any compensation expense. The Company will continue to
evaluate whether the Former Executives will benefit from this modification, which would occur should the Former Executives cease to be employees prior to the expiration of the 33.2 million options;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | will be issued 7.9 million shares of restricted stock upon amendment to the Stock Incentive Plan (SIP), which requires shareholder approval to allow for
issuance of restricted stock. If the approval is not obtained, the Company will issue stock units with similar terms and rights. Each share or unit will cliff-vest one-third annually beginning on November 7, 2003. The aggregate market value of the
restricted stock was $31.2 million and consistent with the Companys past policy is recorded as unearned compensation and charged to expense using the accelerated method over the vesting period. Stock compensation expense related to this award
of $2.9 million was recognized during the year ended December 31, 2002;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | may be reimbursed for potential tax consequences, as defined in an umbrella agreement, related to the delayed issuance of the restricted stock until shareholder
approval is obtained. At December 31, 2002, this contingency is limited to $1.3 million and as the liability is not probable, no amount is accrued for this contingent liability as of this date;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | will be granted an aggregate of 8.7 million options on certain dates after May 7, 2003 at the market price on the date of grant. Once granted, the options will vest
one-third on the date of grant, one-third on the first anniversary and one-third on the second anniversary, except for 0.2 million options which vest on the grant date and except for 333,333 options for Ms. Leung which will be granted on November 7,
2004 and will vest one-third on the date of grant and two-thirds on the first anniversary of such grant; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | will be paid an aggregate termination fee of $29.4 million and accrued and unpaid salary, bonus and vacation totaling $8.2 million, of which $0.5 million was
paid out through December 31, 2002 in
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-47



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



| | accordance with the agreement. The Company has deposited $37.1 million into a segregated interest bearing account (identified as Restricted
Cash on the consolidated balance sheet as of December 31, 2002) equal to the sum of the termination fee, unpaid salaries, bonuses and vacation. These funds will remain the property of the Company until the earlier of May 6, 2003 or an agreement
between the SEC and the Former Executives.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The vesting of the restricted stock and options is contingent on continued employment under the new employment agreement and no material breach of intellectual property provisions in the termination and new employment agreements. In
addition, all options will be granted and will fully vest in the event of disability, death, termination without cause or constructive termination and change of control, as defined in the agreement.



Pursuant to the Patent Rights Agreement, the Company has the
option to acquire certain of Dr. Yuens inventions during the period commencing upon the expiration (November 7, 2007) or earlier termination of his employment agreement and ending on November 7, 2009. The Company agreed to grant the Dr. Yuen a
license to use any acquired inventions outside of certain specified fields of use and Dr. Yuen agreed not to compete with the Company within the fields of interactive program guides and interactive televisions. In addition to a standard purchase
amount for each invention acquired by the Company, the Dr. Yuen will receive (i) annual compensation of $0.3 million, (ii) an acquisition fee of $0.3 million for each acquired invention, (iii) a 2% royalty on net sales generated during the term of
the patent rights agreement from the sale of specified products and services with a guaranteed minimum of $1.3 million and a maximum of $2.8 million annually and (iv) 200,000 stock options per year at the market price on the date of grant during the
term of this agreement.



Securities &
Exchange Commission Investigation



On
October 17, 2002, the United States Securities and Exchange Commission (SEC) issued a formal order of investigation to determine whether there have been violations of the federal securities laws by the Company and/or others involved with
the Company. As previously disclosed, the Audit Committee of the Board of Directors conducted an internal review of the Companys revenue recognition practices relating to certain transactions. The Company previously disclosed that it has been
in discussions with the SEC regarding this internal review and the Companys and the Audit Committees ongoing review of its accounting policies and the application of those policies to various transactions. The Company intends to continue
to fully cooperate with the SEC as it moves forward in its investigation.



Nasdaq Delisting Proceeding



On August 19, 2002, the Company received a Nasdaq Staff Determination that its securities are subject to delisting from the Nasdaq Stock Market because the Company failed to file its Form 10-Q for the quarter ended June 30, 2002, on
or before August 14, 2002. On November 8, 2002, the Nasdaq Listing Qualifications Panel granted the Companys request for an exception to continue its listing on the Nasdaq Stock Market, subject to certain conditions. The Company has satisfied
these conditions. However, in order to fully comply with the terms of the exception, the Company must be able to demonstrate compliance with all requirements for continued listing on the Nasdaq Stock Market.



Significant Patent Litigation Rulings



On June 21, 2002, an Administrative Law Judge issued a Final
Initial Determination in a United States International Trade Commission (ITC) proceeding denying the Companys request for an exclusionary order to prevent further importation of certain set-top boxes containing IPGs which the
Company believes infringe some of its patents. The ITC determined not to review this decision on August 29, 2002. On October 25, 2002, the



F-48



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



Company filed a notice of appeal of the ITC determination to the United States Court of Appeals for the Federal Circuit. On March 6, 2003,
the Company filed its opening appellate brief to the Federal Circuit.



On July 2, 2002, the United States District Court for the Western District of North Carolina in the legal proceeding SuperGuide Corporation v. DirecTV Enterprises, Inc., et al. (the SuperGuide Case) ruled
that certain of the defendants products did not infringe the SuperGuide patents, and on July 25, 2002, the court dismissed all remaining claims in the case. The Company was a third-party defendant in this matter and had joined in
SuperGuides infringement allegations against one of the defendants, EchoStar Communications Corporation. The Company has filed a notice of appeal to the Federal Circuit. Briefing of the appeal to the Federal Circuit has recently concluded. The
Company expects that the next step in the proceeding will be oral argument before the Federal Circuit.



The Company is a party to certain proceedings consolidated in the United States District Court for the Northern District of Georgia by the
Judicial Panel on Multi-District Litigation against Scientific-Atlanta Inc. (SA) and Pioneer, among other parties and involving several patents. On August 30, 2002, the Company received an order from that Court finding that two of the
patents involved in these cases were not infringed by certain digital set-top box products produced by SA and Pioneer. On November 4, 2002, the Court ruled that the remaining SA and Pioneer products at issue in this proceeding were not infringed by
the two patents that were the subject of the August 30thruling. The Company intends to seek review of these
decisions at the appropriate juncture.



The MDL
proceedings also involve three patents which were involved in the SuperGuide Case. The non-infringement rulings on July 2, 2002 and July 25, 2002 were based in part on a previous ruling of that Court interpreting the scope of the patents at issue.
On October 25, 2002, the Georgia Court hearing the MDL cases ruled that it was obligated to accept the North Carolina Courts ruling on the scope of the patents at issue without deciding whether the underlying ruling was correct as a matter of
law. The Georgia Court has not ruled on SAs infringement of these patents under this interpretation. The remaining issues in the MDL cases are in pre-trial proceedings.



Share Repurchase Program



In April 2002, the Companys Board of Directors authorized an extension of its authorization granted in
September 2001 to repurchase up to $300 million of the Companys outstanding shares of common stock. The authorization permitted the Company to purchase shares in the open market at prevailing prices, or in privately negotiated transactions at
then prevailing prices. The extension expired on September 18, 2002. During the period subsequent to the date the extension was authorized through June 30, 2002, the Company repurchased 6.9 million of its shares of its common stock for an aggregate
price of $63.4 million.



Intangible Asset
Impairment



The Company completed its
intangible asset impairment tests during 2002. The Company recorded an impairment charge of $481.6 million related to its indefinite-lived intangible assets, $5.0 billion related to goodwill and $1.3 billion related to finite lived intangible
assets.





F-49



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)





Other
Legal Proceedings



In addition to the
significant patent rulings described above, there have been certain other material developments in legal proceedings to which the Company is a party:



On October 18, 1999, a former employee of ODS Technologies, L.P. (ODS), now a majority owned subsidiary of the Company, filed
a complaint against ODS and TV Guide in a Florida federal court, which complaint was amended on November 12, 1999, asserting causes of action for violations of certain federal statutes governing pension plans and for equitable estoppel. The amended
complaint sought an unspecified amount of damages for benefits allegedly due to the plaintiff under his employment agreement with ODS. On April 22, 2002, the Court granted ODS and TV Guide summary judgment dismissing the case. The former employee
appealed the grant of summary judgment, but the appeal subsequently was dismissed. The plaintiff has filed a motion for reinstatement and this case is currently pending on appeal.



With respect to the patent infringement action filed by the Companys Star Sight subsidiary against TiVo
in the U.S. District Court for the Northern District of California, on August 5, 2002, the Court entered a stipulation at the parties request to stay the proceeding pending resolution of the investigation before the ITC, described above, and
the Court has accepted that agreement. After the resolution of any and all appeals stemming from the ITC investigation, we expect the Court will be notified of this fact and expect the case to be re-activated at that point.



With respect to the class action complaints against TV Guide
filed primarily in the U.S. District Court for the Southern District of New York on behalf of magazine subscribers, in April 2002, the defendants submitted final settlement documents to plaintiffs for their approval. Subsequently, the parties signed
a settlement agreement, and on July 3, 2002, plaintiffs filed a motion for preliminary approval of the settlement. On August 29, 2002, the court held a hearing at which the pending motion was discussed. The Court entered an order on September 20,
2002, granting the motion for preliminary approval. Between December and March, notices are being sent out to potential class members to give them an opportunity to object to the settlement or to opt-out. A hearing has been set for May 27, 2003, to
determine whether to certify the proposed settlement class, whether the proposed settlement is fair and reasonable and whether a final judgment should be entered dismissing the action as to class members.



With respect to the suit against the Company filed by Pioneer
Digital Technologies, Inc., the parties are in pretrial proceedings. Trial in this matter is currently scheduled to begin on September 8, 2003.



With respect to the case captioned Pegasus Development Corporation and Personalized Media Communications, L.L.C. v. DirecTV, Inc.,
Hughes Electronics Corporation, Thomson Consumer Electronics, Inc. and Philips Electronics North America Corporation; Thomson multimedia, Inc. v. Pegasus Development Corporation, Personalized Media Communications, L.L.C. TVG-PMC, Inc., StarSight
Telecast, Inc. and Gemstar-TV Guide International, Inc., on April 22, 2002, Thomson filed a tag-along notice with the MDL Panel requesting that this entire action be transferred to Georgia for coordinated pretrial proceedings with the MDL
proceedings. On June 3, 2002, the MDL Panel issued a Conditional Transfer Order and Simultaneous Separation and Remand of Certain Claims conditionally transferring Thomsons antitrust claims to Georgia, but separating and remanding the balance
of the claims in this case to Delaware. In response, Thomson filed a motion with the MDL Panel to transfer the entire case to Georgia. On October 16, 2002, the MDL Panel issued an Order of Transfer and Simultaneous Separation and Remand of Certain
Claims in which it denied Thomsons motion to



F-50



---

GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



transfer the entire case to Georgia. In so ruling, the MDL Panel adopted its decision in the June 3, 2002 Conditional Transfer Order and
transferred Thomsons antitrust claims to Georgia, but separated and remanded the balance of the claims in the case to Delaware. On November 21, 2002, the Company filed its answer and asserted causes of action against PMC for declaratory
judgment and breach of contract. The parties are in pretrial proceedings.



With respect to the arbitration initiated by Thomson against the Company, May 2002, the Company signed a Letter of Intent with Thomson, and the arbitration was dismissed without prejudice by the American Arbitration
Association.



In April and May 2002, the Company
and certain of its executive officers and directors were served with a number of complaints, filed in the United States District Court for the Central District of California, alleging violations of the Securities Exchange Act of 1934 (the 1934
Act) and the Securities Act of 1933 (the 1933 Act). Also named in several of the complaints is The News Corporation Limited (News Corporation), a shareholder of the Company. The complaints name some or all of the same
parties as defendants, and purport to state claims on behalf of all persons who purchased the Companys common stock during various periods, the broadest of which is August 11, 1999 through April 4, 2002. More particularly, the alleged claims
are brought under Sections 10(b) and 20(a) of the 1934 Act, Section 11 of the 1933 Act and SEC Rule 10b-5. The essence of the allegations is that the defendants allegedly intentionally failed to properly account for revenue accrued from
Scientific-Atlanta; failed to properly account for a non-monetary transaction, pursuant to which intellectual property rights were obtained, in exchange for cash and advertising credits; and failed to properly record the fair value of technology
investments and marketable securities acquired in connection with the Companys acquisition of TV Guide, Inc. Plaintiffs allege that this had the effect of materially overstating the Companys reported financial results. Pursuant to the
parties stipulation, the District Court has consolidated all of the lawsuits (and any subsequently filed lawsuits) into one case known asIn re Gemstar-TV Guide International Securities Litigation, Master File No. 02-2775, NM (PLAx)
(C.D. Cal.) Several groups of plaintiffs and their counsel filed motions to be appointed lead plaintiff and lead plaintiffs counsel. Pursuant to an amended order dated August 9, 2002, the Court appointed the Teachers Retirement System of
Louisiana and the General Retirement System of the City of Detroit as co-lead plaintiffs, and appointed Bernstein, Litowitz, Berger & Grossman, L.L.P., as lead plaintiffs counsel. The Georgica Advisors plaintiff group has filed a petition
with the United States Court of Appeals for the Ninth Circuit seeking a writ mandating that the district court reverse the lead plaintiff determination. The Ninth Circuit has determined that the Georgica Advisors petition warrants a response and has
directed the current co-lead plaintiffs to file a response by March 31, 2003. The current co-lead plaintiffs filed an amended, consolidated complaint on December 12, 2002, naming the Company, Henry Yuen and Elsie Leung as defendants. The
consolidated complaint alleges claims under the federal securities laws. The Companys response to the complaint is currently due on May 2, 2003. The Company intends to defend these actions vigorously.



In addition, an Oklahoma limited partnership filed a lawsuit
in the United States District Court for the Northern District of Oklahoma on October 7, 2002 against the Company, Dr. Yuen, Ms. Leung and KPMG, LLP, based on the same core allegations and purported causes of action alleged in the consolidated class
action. The Company has not yet been served with this action. In January 2003, the Company was served with a complaint brought by the Investment Division of the State of New Jersey in California Superior Court against the Company, Dr. Yuen and Ms.
Leung, alleging violations of Federal Securities laws, state corporations laws including California Business Professions Code §§ 17200 et seq, and common law torts. The Companys response to this complaint is currently due on
April 7, 2003.. The lawsuit alleges state law based derivative claims, including those based on various breaches of fiduciary duty. The Company intends to defend these actions vigorously.



In April and May 2002, the Company, along with its directors and several of its executive officers, were sued
in four purported shareholder derivative actions. Three of these actions were filed in the Superior Court of



F-51



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



the State of California for the County of Los Angeles and one action was filed in the Court of Chancery of the State of Delaware, County of
New Castle. These purported derivative lawsuits allege various breaches of fiduciary duty and violations of the California Corporations Code based upon the same general set of alleged facts and circumstances as the federal shareholder suits.
Pursuant to the parties stipulation, the California actions have been consolidated into one case before a single judge. Plaintiffs are required to file their consolidated amended complaint by late December 2002. On October 31, 2002, the
Company was served with another purported shareholder derivative action, this one in the United States District Court for the Central District of California, based upon the same general set of alleged facts and circumstances. Pursuant to the
parties stipulation and court order, no response is due to the federal derivative complaint until 30 days after a ruling on any motion to dismiss in the federal shareholder class action described above. The Company intends to defend the
actions vigorously.



On September 6, 2002, TV
Guide Distribution, Inc. (TV Guide Distribution), together with six other plaintiffs comprising national distributors of magazines, filed an action entitled TV Guide Distribution, Inc. et al. v. Ronald E. Scherer et al., in the
Court of Common Pleas, Franklin County, Ohio (Case No. 02CVH099891). The complaint named more than thirty defendants, made up of principals and shareholders of United Magazine Company, Inc. (Unimag) and their affiliates, regional
wholesalers of magazines that went out of business in September 1999, leaving more than $100 million of outstanding receivables due and owing to the national distributor plaintiffs. The complaint alleges that defendants engaged in a course of
conduct that violated Ohio statutes prohibiting fraudulent conveyances and other unlawful payments designed to hinder, delay or defraud TV Guide Distribution and the other plaintiffs, Unimags creditors. (Unimag is not a party to this action.)
Defendants have moved to dismiss the complaint on various grounds. The Court issued an Amended Case Schedule on January 30, 2003, setting forth some key dates, including a trial date of September 7, 2004.



On May 22, 2002, the Company entered into an Asset Purchase
Agreement with DIVA, a provider of server-based technology and software systems for cable television, to acquire substantially all of its assets for approximately $40 million as part of a bankruptcy proceeding. The transaction has not been
completed. The Company is currently engaged in litigation over the Asset Purchase Agreement related to the DIVA transaction. The Company believes that it is probable that it will incur a liability in connection with the Asset Purchase Agreement.



On November 6, 2002, SA and PowerTV, Inc.
(Power TV) filed a counterclaim against the Company in a case captioned Personalized Media Communications, L.L.C. v. Scientific-Atlanta, Inc. and PowerTV, Inc., United States District Court for the Northern District of Georgia,
Atlanta Division, Civil Action No. 02-CV-824 (CAP). At that time, SA and Power TV asserted declaratory relief claims against the Gemstar parties seeking a declaration of noninfringement, invalidity and unenforceability of certain patents as to which
the Company is a licensee. On November 6, 2002, SA and Power TV also filed a motion with the MDL Panel to transfer this action to Delaware for consolidation of pretrial proceedings with the Pegasus Development Corporation, et al. v. DirecTV,
Inc., et al. matter discussed above. On February 21, 2003, the Company answered SAs and Power TVs counterclaims and asserted causes of action against PMC for declaratory relief and breach of contract. The MDL Panel has yet to rule on
SAs and Power TVs motion to transfer this matter to Delaware.



On February 6, 2003, the United States Department of Justice (DOJ) filed a complaint against the Company relating to the DOJs belief that the Company engaged in unlawful coordination of activities prior to
the merger between the Companys predecessor, Gemstar International Group Limited, & TV Guide on July 12, 2000. Simultaneously, the Company and the DOJ entered into a settlement with regard to the matter. This settlement included a
stipulated final judgment, but did not include an admission of wrongdoing by the Company. Also as part of the settlement, the Company has agreed to pay the government a civil penalty in the amount of $5.7 million. The Company has also agreed to
implement an antitrust compliance program and to



F-52



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GEMSTAR-TV GUIDE INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Restated)(Continued)



refrain from prohibited pre-merger conduct in the future. In addition, the Company has agreed to offer eight small service providers that
entered into interactive program guide agreements with TV Guide between June 10, 1999 and July 12, 2000 the option to terminate those agreements without penalty. The settlement is expected to become final after a 60-day public comment period.



On February 28, 2003, the Company received a
letter from a senior executive of one of its subsidiaries asserting a variety of claims relating generally to the executives acquisition of the Companys stock in connection with the Companys acquisition of that subsidiary. The
Company is not aware of any legal proceeding that has been filed against the Company by this executive. If any such proceedings are filed, the Company intends to defend them vigorously.



F-53



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EXHIBIT
INDEX



|Exhibit Number |  | Document Description                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              
|2.1            |  | Agreement and Plan of Merger dated as of October 4, 1999 among Gemstar International
Group Limited, G Acquisition Subsidiary Corp. and TV Guide, Inc., as amended on February 7, 2000 (Incorporated by reference to Gemstars Form S-4 Registration Statement (333-96407), filed February 8, 2000)                                                                                                                                                          
|              
|3.1            |  | Certificate of Incorporation of Gemstar International Group Limited (Incorporated by
reference to Gemstars Form S-4 Registration Statement (333-96407), filed February 8, 2000)                                                                                                                                                                                                                                                                            
|              
|3.2            |  | Amended and Restated Bylaws of Gemstar-TV Guide International, Inc. (Incorporated by
reference to Gemstars Amendment No. 1 on Form 10-K/A, filed April 30, 2002)                                                                                                                                                                                                                                                                                           
|              
|4.1            |  | Second Amended and Restated Rights Agreement, effective as of July 12, 2000, between
Gemstar and American Stock Transfer & Trust Company (Incorporated by reference to Gemstars Form8-K filed July 12, 2000)                                                                                                                                                                                                                                               
|              
|4.2            |  | Indenture dated as of March 1, 1999, between TV Guide, Inc. and The Bank of New York
Company, Inc. (Incorprated by reference to TV Guide Inc.s Form S-4 Registration Statement (333-78535), filed May 14, 1999)                                                                                                                                                                                                                                            
|              
|4.3            |  | Supplemental Indenture dated as of May 15, 2001, between TV Guide, Inc. and The Bank
of New York                                                                                                                                                                                                                                                                                                                                                            
|              
|10.1           |  | Gemstar-TV Guide International, Inc. 1994 Stock Incentive Plan, as amended and
restated (Formerly the Gemstar International Group Limited 1994 Stock Incentive Plan; Composite Plan Document Reflecting Stock Splits and Plan Amendments Through 2001) (Incorporated by reference to Gemstars Amendment No. 1 on Form 10-K/A,
filed April 30, 2002)                                                                                                        
|              
|10.2           |  | TV Guide, Inc. Equity Incentive Plan (Incorporated by reference to Gemstars
Post Effective Amendment No. 2 on Form S-8 to Form S-4 Registration Statement (333-96407), filed August 30, 2000)                                                                                                                                                                                                                                                              
|              
|10.3           |  | Gemstar International Group Limited Deferred Compensation Plan, effective as of
January 30, 2000. (Incorporated by reference to Gemstars Form 10-K for the year ended March 31, 2000)                                                                                                                                                                                                                                                                      
|              
|10.4           |  | Trust under the Deferred Compensation Plan (Rabbi Trust) of Gemstar International
Group Limited, effective as of January 30, 2000, by and between Gemstar International Group Limited and any appointed Subsidiary and Merrill Lynch Trust Company of California. (Incorporated by reference to Gemstars Form 10-K for the year ended
March 31, 2000)                                                                                                      
|              
|10.5           |  | SERP Deferred Compensation Plan (a continuation and restatement of the United Video
Management, Inc. and Affiliates Employers SERP Deferred Compensation Plan); Trust under SERP Deferred Compensation Plan dated September 29, 1995 (Incorporated by reference to Form 10-Q of TV Guide, Inc. for the quarter ended September 30,
1995)                                                                                                                   
|              
|10.6           |  | Amended and Restated Employment Agreement, effective as of January 7, 1998, among
Gemstar International Group Limited, Gemstar Development Corporation and Henry C. Yuen (Incorporated by reference to Gemstars Form 10-K/A for the year ended March 31, 1998, filed November 17, 1998) (Certain information in this exhibit has been
omitted pursuant to a request for Confidential Treatment which was filed with the Securities and Exchange Commission)
|              
|10.7           |  | Amendment No. 1 to Amended and Restated Employment Agreement, dated as of October 4,
1999, by and among Gemstar International Group Limited, Gemstar Development Corporation and Henry C. Yuen (Incorporated by reference to Gemstars Form 8-K, filed February 8, 2000)                                                                                                                                                                                    
|              
|10.8           |  | Amended and Restated Employment Agreement, dated as of March 31, 1998, among Gemstar
International Group Limited, Gemstar Development Corporation and Elsie Leung (Incorporated by reference to Gemstars Form 10-K/A for the year ended March 31, 1998, filed November 17, 1998) (Certain information in this exhibit has been omitted
pursuant to a request for Confidential Treatment which was filed with the Securities and Exchange Commission)       



---

|Exhibit Number      |  | Document Description                                                                                                                                                                                                                                                                                                                                              
|------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   
|10.9                |  | Amendment to Amended and Restated Employment Agreement, dated as of April 13, 2000,
among Gemstar-TV Guide International, Inc., Gemstar Development Corporation and Elsie Leung (Incorporated by reference to Gemstars Amendment No. 1 to Form 10-K/A, filed April 30, 2002)                                                                                     
|10.10               |  | Employment Agreement, entered into as of January 3, 2001, between Gemstar Development
Corporation and Jonathan Orlick (Incorporated by reference to Gemstars Amendment No. 1 on Form 10-K, filed April 30, 2002)                                                                                                                                                 
|                   
|10.11               |  | Employment Agreement, entered into as of March 1, 1999, between TV Guide, Inc. and
Peter C. Boylan III (Incorporated by reference to Gemstars Form 8-K, filed February 8, 2000)                                                                                                                                                                                  
|                   
|10.12               |  | Separation and Consulting Agreement, entered into as of March 4, 2002, between
Gemstar-TV Guide International, Inc. and Peter C. Boylan III (Incorporated by reference to Gemstars Amendment No. 1 on Form 10-K/A, filed April 30, 2002)                                                                                                                         
|                   
|10.13               |  | Employment Agreement, dated August 1995, between Gemstar International Group Limited
and Thomas L.H. Lau (Incorporated by reference to Gemstars Form F-1 Registration Statement (33-79016), which was declared effective on October 10, 1995)                                                                                                                    
|                   
|10.14               |  | Separation and Consulting Agreement, entered into as of November 27, 2001, between
Gemstar-TV Guide International, Inc. and Joachim Kiener (Incorporated by reference to Gemstars Amendment No. 1 on Form 10-K/A, filed April 30, 2002)                                                                                                                          
|                   
|10.15               |  | Stockholders Agreement, dated as of October 4, 1999, by and among The News
Corporation Limited, a South Australia, Australia corporation, Liberty Media Corporation, a Delaware corporation, Henry C. Yuen and Gemstar International Group Limited, a British Virgin Islands corporation (Incorporated by reference to
Gemstars Form 8-K, filed February 8, 2000)
|                   
|10.16               |  | Facility A Loan Agreement for $300,000,000 Revolving Credit Facility among TV Guide,
Inc. and various Financial Institutions, dated as of March 1, 1999 (Incorporated by reference to Form 10-Q of TV Guide, Inc. for the quarter ended March 31, 1999)                                                                                                           
|                   
|10.17               |  | First Amendment and Waiver to Facility A Loan Agreement among TV Guide, Inc. and
various Financial Institutions, dated as of February 25, 2000 (Incorporated by reference to Form 10-K of TV Guide, Inc. for the year ended December 31, 1999)                                                                                                                    
|                   
|10.18               |  | Second Amendment to Facility A Loan Agreement among TV Guide, Inc. and various
Financial Institutions, dated as of February 9, 2001 (Incorporated by reference to Form 10-K of TV Guide, Inc. for the year ended December 31, 2000)                                                                                                                               
|                   
|10.19               |  | Facility B Loan Agreement for $300,000,000 364-day Credit Facility among TV Guide,
Inc. and various Financial Institutions, dated as of March 1, 1999 (Incorporated by reference to Form 10-Q of TV Guide, Inc. for the quarter ended March 31, 1999)                                                                                                             
|                   
|10.20               |  | First Amendment and Waiver to Facility B Loan Agreement among TV Guide, Inc. and
various Financial Institutions, dated as of February 25, 2000 (Incorporated by reference to Form 10-K of TV Guide, Inc. for the year ended December 31, 1999)                                                                                                                    
|                   
|10.21               |  | Second Amendment to Facility B Loan Agreement among TV Guide, Inc. and various
Financial Institutions, dated as of February 9, 2001 (Incorporated by reference to Form 10-K of TV Guide, Inc. for the year ended December 31, 2000)                                                                                                                               
|                   
|10.22               |  | Lock-Up Agreement between Gemstar and Robert M. Worsley, Christi M. Worsley and The
Robert Merrill Worsley Family Revocable Trust, dated July 28, 1998 (Incorporated by reference to Gemstars Form S-4 Registration Statement (333-62986), filed June 14, 2001)                                                                                                  
|                   
|10.23               |  | Amendment No. 2 to the Amended and Restated Employment Agreement, dated as of May 4,
2001, between the Company and Henry C. Yuen (Incorporated by reference to Form 8-K, filed November 12, 2002)                                                                                                                                                                 
|                   
|21.1                |  | List of Subsidiaries                                                                                                                                                                                                                                                                                                                                              
|                   
|23.1                |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                                      
|                   
|Additional Exhibits |  |                                                                                                                                                                                                                                                                                                                                                                   
|                   
|99.1                |  | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                                                                                                                                                                                                                       
|                   
|99.2                |  | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002