LIBERTY MEDIA CORP /DE/, S-4/A, 2000-05-04

LIBERTY MEDIA CORP /DE/
S-4/A, 2000-05-04
CABLE & OTHER PAY TELEVISION SERVICES

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<PAGE>

As filed with the Securities and Exchange Commission on May 4, 2000

Registration No. 333-35562

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT

NO. 1

To
FORM S-4

REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

----------------
LIBERTY MEDIA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

4841 84-1288730

Delaware (Primary Standard (I.R.S. Employer
(State or Other Industrial Identification No.)
Jurisdiction of Classification Code
Incorporation or Number)
Organization)

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9197 South Peoria Street
Englewood, Colorado 80112
(720) 875-5400
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

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

Charles Y. Tanabe, Esq.
Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
(720) 875-5400
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

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Copy to:
Robert W. Murray Jr., Esq.
Baker Botts L.L.P.
599 Lexington Avenue
New York, New York 10022-6030
(212) 705-5000

Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this Registration Statement is declared effective.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.[_]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>

PROSPECTUS [LOGO]

Liberty Media Corporation

Offer to Exchange
$1,000,000,000
8 1/4% Senior Debentures due 2030
which have been registered under the
Securities Act of 1933
for any and all outstanding unregistered
8 1/4% Senior Debentures due 2030

The terms of the new debentures that we are offering in this prospectus are
substantially identical to the terms of the outstanding debentures, except
that the new debentures will be freely transferable and will not have
covenants regarding registration rights or additional interest.

Material Terms of the Exchange Offer

. The exchange offer will expire at 5:00 p.m., New York City time, on June
8, 2000, unless the offer is extended. We do not currently intend to
extend the exchange offer.

. We do not intend to apply for listing of the new debentures on any
securities exchange or to arrange for them to be quoted on any quotation
system.

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

Investing in the new debentures involves risks. See "Risk Factors" beginning
on page 10.

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

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.

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

The date of this prospectus is May 4, 2000.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 18
Capitalization........................................................... 19
Selected Historical Financial Data....................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Corporate History........................................................ 37
Business................................................................. 39
Management............................................................... 73
Relationship with AT&T and Certain Related Transactions.................. 88
The Exchange Offer....................................................... 97
Description of the Debentures............................................ 106
Certain United States Federal Income Tax Considerations.................. 124
Plan of Distribution..................................................... 125
Legal Matters............................................................ 126
Experts.................................................................. 126
Where to Find More Information........................................... 126
Index to Financial Statements............................................ F-1
</TABLE>

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

We have filed with the SEC a registration statement on Form S-4 under the
Securities Act with respect to the debentures offered by this prospectus. This
prospectus, which forms a part of the registration statement, does not contain
all the information included in the registration statement. You may read and
copy the registration statement, including all of its exhibits, as set forth
under "Where to Find More Information."

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

This prospectus is based on information provided by us and other sources that
we believe to be reliable. This prospectus summarizes certain documents and
other information and we refer you to them for a more complete understanding of
what we discuss in this prospectus.

This prospectus includes information concerning The News Corporation Limited,
Time Warner Inc., TV Guide, Inc., Gemstar International Group Limited, USA
Networks, Inc., Sprint Corporation, Telewest Communications plc, Motorola Inc.,
Todd-AO Corporation, Teligent, Inc., Cendant Corp., Antec Corporation, America
Online, Inc., ICG Communications, Inc., TCI Satellite Entertainment, Inc., IDT
Corporation, Ascent Entertainment Group, Inc., UnitedGlobalCom, Inc., Primedia
Inc., Corus Entertainment Inc. and On Command Corporation, all of which are
public companies that file reports and other information with the SEC in
accordance with the requirements of the Securities Act and the Securities
Exchange Act. Information contained in this prospectus concerning those
companies has been derived from the reports and other information filed by them
with the SEC. Liberty had no part in the preparation of those reports and other
information, nor are they incorporated by reference in this prospectus.You may
read and copy any reports and other information filed by those companies as set
forth under "Where to Find More Information."

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

You should rely only on the information contained in this prospectus or to
which we have referred you. We have not authorized any person to provide you
with different information. We are offering to exchange the old debentures for
new debentures only in jurisdictions where offers and sales are permitted.

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

ii
<PAGE>

NOTICE TO NEW HAMPSHIRE RESIDENTS

Neither the fact that a registration statement or an application for a
license has been filed under RSA 421-B with the state of New Hampshire nor the
fact that a security is effectively registered or a person is licensed in the
state of New Hampshire constitutes a finding by the secretary of state that any
document filed under RSA 421-B is true, complete and not misleading. Neither
any such fact nor the fact that an exemption or exception is available for a
security or a transaction means that the secretary of state has passed in any
way upon the merits or qualification of, or recommended or given approval to,
any person, security or transaction. It is unlawful to make or cause to be made
to any prospective purchaser, customer or client any representation
inconsistent with the provisions of this paragraph.

iii
<PAGE>

PROSPECTUS SUMMARY

The following summary highlights selected information from this prospectus to
help you understand Liberty and the debentures. For a more complete
understanding of Liberty and the debentures, we encourage you to read this
entire document, including the "Risk Factors" section. All references to
"Liberty," "we," "us" and words to similar effect refer to Liberty Media
Corporation and, unless the context indicates otherwise, its consolidated
subsidiaries.

Liberty Media Corporation

We are a leading media, entertainment and communications company with
interests in a diverse group of public and private companies that are market
leaders in their respective industries. Our subsidiaries and business
affiliates are engaged in a broad range of programming, communications,
technology and Internet businesses and have some of the most recognized and
respected brands. These brands include Encore, STARZ!, Discovery, TV Guide,
Fox, USA, QVC, CNN, TBS, Motorola and Sprint PCS.

The media, entertainment and communications industries are currently
undergoing tremendous changes due in part to the growth of new distribution
technologies, led by the Internet and the implementation of digital
compression. The growth in distribution technologies has, in turn, created
strong demand for an ever increasing array of multimedia products and services.
Liberty is working with its subsidiaries and business affiliates to extend
their established brands, quality content and networks across multiple
distribution platforms to keep them at the forefront of these ongoing changes.

The following table lists our principal subsidiaries and business affiliates
and our direct equity interests or indirect attributed equity interests, based
on ownership of capital stock. Our direct or attributed equity interest in a
particular company does not necessarily represent our voting interest in that
company. Our indirect attributed interest is determined by multiplying our
ownership interest in the holder of an equity interest by that equity holder's
ownership interest in the listed subsidiary or business affiliate. The
ownership percentages are approximate, calculated as of December 31, 1999, and,
in the case of convertible securities we hold, assume conversion to common
stock by us and, to the extent known by us, other holders. In some cases our
interest is subject to buy/sell procedures, rights of first refusal or other
obligations. See "Business."

<TABLE>
<CAPTION>
Subsidiary/Business Affiliate Attributed Ownership %
----------------------------- ----------------------
<S> <C>
Starz Encore Group LLC. ........................... 100%
Liberty Digital, Inc. ............................. 87%
Discovery Communications, Inc. .................... 49%
TV Guide, Inc. .................................... 44%
QVC Inc. .......................................... 43%
Flextech, plc...................................... 37%
Sprint PCS Group................................... 23%
Telewest Communications plc........................ 22%
USA Networks, Inc. ................................ 21%
Time Warner Inc. .................................. 9%
The News Corporation Limited....................... 8%
Motorola Inc. (successor to General Instrument
Corporation)...................................... 3%
</TABLE>

1
<PAGE>

Business Strategy

Our business strategy is to maximize the value of Liberty by (1) working with
the management teams of our existing subsidiaries and business affiliates to
grow their established businesses and create new businesses and (2) identifying
and executing strategic transactions that improve the value or optimize the
efficiency of Liberty's assets. Key elements of our business strategy include
the following:

. Promoting the internal growth of our subsidiaries and business
affiliates;

. Maintaining significant involvement in governance;

. Participating with experienced management and strategic partners; and

. Executing strategic transactions that optimize the efficiency of our
assets.

Relationship with AT&T Corp.

We have been a subsidiary of AT&T Corp. since March 9, 1999. On that date,
AT&T acquired by merger our parent company, the former Tele-Communications,
Inc., which has since been renamed AT&T Broadband LLC. As part of that merger,
AT&T issued AT&T common stock (NYSE: T) and Class A and Class B Liberty Media
Group common stock (NYSE: LMG.A and LMG.B). AT&T's Liberty Media Group common
stock is a tracking stock designed to reflect the economic performance of the
businesses and assets of AT&T attributed to the "Liberty Media Group." We are
included in the Liberty Media Group, and the businesses and assets of Liberty
and its subsidiaries constitute substantially all of the businesses and assets
of the Liberty Media Group. On April 27, 2000, AT&T effected the initial public
offering of its new AT&T Wireless Group tracking stock, which is designed to
reflect the economic performance of the wireless services businesses and assets
of AT&T attributed to the new AT&T Wireless Group. The AT&T common stock is
intended to reflect all other assets and businesses of AT&T, which we refer to
as the AT&T Common Stock Group. In addition, the AT&T Common Stock Group has
retained an approximately 84.4% economic interest in the AT&T Wireless Group.
For a more detailed description of the relationship between AT&T and Liberty,
see "Relationship with AT&T and Certain Related Transactions" starting on
page 88.

We have a substantial degree of managerial autonomy from AT&T as a result of
our corporate governance arrangement with AT&T. Our board of directors is
controlled by persons designated by TCI prior to its acquisition by AT&T, and
our board will continue to be controlled by those persons, or others chosen by
them, until at least 2006. Our management consists of individuals who managed
the businesses of Liberty prior to the AT&T merger. We have entered into
agreements with AT&T which provide us with a level of financial and operational
separation from AT&T, define our rights and obligations as a member of AT&T's
consolidated tax group, enable us to finance our operations separately from
those of AT&T and provide us with certain programming rights with respect to
AT&T's cable systems. See "Relationship with AT&T and Certain Related
Transactions" starting on page 88.

Our principal executive offices are located at 9197 South Peoria Street,
Englewood, Colorado 80112. Our main telephone number is (720) 875-5400.

2
<PAGE>

Relationship of Liberty Media Corporation to the Liberty Media Group

Liberty Media Corporation and its consolidated subsidiaries are attributed to
the Liberty Media Group. The businesses and assets of Liberty and its
subsidiaries currently constitute substantially all of the businesses and
assets of the Liberty Media Group. The following diagram illustrates the assets
of AT&T that are attributed to the Liberty Media Group, to the AT&T Wireless
Group and to the AT&T Common Stock Group. The following diagram also
illustrates the assets of Liberty, which is a holding company. For a more
complete description of the relationship of Liberty Media Corporation to AT&T
and the Liberty Media Group, see "Relationship with AT&T and Certain Related
Transactions" starting on page 88. For a discussion of Liberty's consolidated
subsidiaries and principal business affiliates, see "Business" starting on page
39.

[GRAPH]

3
<PAGE>

The Exchange Offer

On February 2, 2000, we completed the private offering of $1,000,000,000
aggregate principal amount of our 8 1/4% senior debentures due 2030. These
debentures were not registered under the Securities Act and, therefore, they
are subject to significant restrictions on resale. Accordingly, when we sold
these debentures, we entered into a registration rights agreement with the
initial purchasers that provides for the exchange offer. In the registration
rights agreement, we agreed to deliver to you this prospectus and to permit you
to exchange your old debentures for new debentures that have substantially
identical terms to the old debentures except that the new debentures will be
freely transferable and will not have covenants regarding registration rights
or additional interest. In order to exchange your old debentures, you must
properly tender them and we must accept your tender. We will exchange all old
debentures that are validly tendered and not validly withdrawn. The new
debentures will be issued under the same indenture under which the old
debentures were issued and, as a holder of new debentures, you will be entitled
to the same rights under the indenture that you had as a holder of old
debentures. The old debentures and the new debentures will be treated as a
single series of debt securities under the indenture.

Set forth below is a summary description of the terms of the exchange offer.
We refer you to "The Exchange Offer," beginning on page 97, for a more complete
description of the terms of the exchange offer.

Exchange Offer............. We are offering to exchange up to $1,000,000,000
aggregate principal amount of new debentures for a
like aggregate principal amount of old debentures.
Old debentures may be tendered only in integral
multiples of $1,000.

Resale of New Debentures... We believe that the new debentures issued in the
exchange offer may be offered for resale, resold
or otherwise transferred by you without compliance
with the registration and prospectus delivery
requirements of the Securities Act, provided that:

. you are acquiring the new debentures in the
ordinary course of your business;

. you have no arrangements or understandings with
any person to participate in the exchange offer
for the purpose of distributing the new
debentures; and

. you are not our "affiliate," within the meaning
of Rule 405 under the Securities Act.

If any of the statements above are not true and
you transfer any new debentures without delivering
a prospectus that meets the requirements of the
Securities Act or without an exemption from
registration of your new debentures from those
requirements, you may incur liability under the
Securities Act. We will not assume or indemnify
you against that liability.

Each broker-dealer that receives new debentures
for its own account in exchange for old debentures
that were acquired by such broker-dealer as a
result of market-making or other trading
activities may be a statutory underwriter and must
acknowledge that it will comply with the
prospectus delivery requirements of the Securities
Act in connection with any resale of the new
debentures. A broker-dealer may use this
prospectus for an offer to resell, resale or other
transfer of the new debentures. See "Plan of
Distribution."

4
<PAGE>

Consequences of Failure to
Exchange..................
If you do not exchange your old debentures for new
debentures, you will not be able to offer, sell or
otherwise transfer the old debentures except:

. in compliance with the registration requirements
of the Securities Act and any other applicable
securities laws;

. pursuant to an exemption from the securities
laws; or

. in a transaction not subject to the securities
laws.

Old debentures that remain outstanding after
completion of the exchange offer will continue to
bear a legend reflecting these restrictions on
transfer. In addition, upon completion of the
exchange offer, you will not be entitled to any
rights to have the resale of old debentures
registered under the Securities Act, and we
currently do not intend to register under the
Securities Act the resale of any old debentures
that remain outstanding after completion of the
exchange offer.

Expiration Date............
The exchange offer will expire at 5:00 p.m., New
York City time, on June 8, 2000, unless we extend
it. We do not currently intend to extend the
exchange offer.

Interest on the New Interest on the new debentures will accrue at the
Debentures................ rate of 8 1/4% from the date of the last periodic
payment of interest on the old debentures or, if
no interest has been paid, from the original issue
date of the old debentures. No additional interest
will be paid on old debentures tendered and
accepted for exchange.

Conditions to the Exchange The exchange offer is subject to customary
Offer..................... conditions, including that:

. the exchange offer does not violate applicable
law or any applicable interpretation of the SEC
staff;

. the old debentures are validly tendered in
accordance with the exchange offer; and

. no action or proceeding would impair our ability
to proceed with the exchange offer.

Procedures for Tendering
Old Debentures............
If you wish to accept the exchange offer, you must
complete, sign and date the letter of transmittal
and mail or otherwise deliver it, together with
your old debentures to be exchanged and any other
required documentation, to The Bank of New York,
as exchange agent, at the address specified on the
cover page of the letter of transmittal.
Alternatively, you can tender your old debentures
by following the procedures for book-entry
transfer, as described under "The Exchange Offer--
Book-Entry Transfer." Questions regarding the
tender of old debentures or the exchange offer
generally should be directed to the exchange agent
at one of its addresses specified in "The Exchange
Offer--Exchange Agent."

5
<PAGE>

Guaranteed Delivery If you wish to tender your old debentures and you
Procedures................ cannot get the required documents to the exchange
agent by the expiration date, you may tender your
old debentures according to the guaranteed
delivery procedures described under the heading
"The Exchange Offer--Guaranteed Delivery
Procedures."

Withdrawal Rights.......... You may withdraw the tender of your old debentures
at any time before 5:00 p.m., New York City time,
on the expiration date of the exchange offer. To
withdraw, you must send a written notice of
withdrawal to the exchange agent at one of its
addresses specified in "The Exchange Offer--
Exchange Agent" before 5:00 p.m., New York City
time, on the expiration date of the exchange
offer.

Acceptance of Old
Debentures and Delivery
of New Debentures.........
We will accept for exchange any and all old
debentures that are properly tendered in the
exchange offer before 5:00 p.m., New York City
time, on the expiration date, as long as all of
the terms and conditions of the exchange offer are
met. We will deliver the new debentures promptly
following the expiration date.

Certain Tax We believe that the exchange of old debentures for
Considerations............ new debentures should not be a taxable transaction
for U.S. federal income tax purposes, but you
should see the discussion under "Certain United
States Federal Income Tax Considerations"
beginning on page 124 for more information.

Exchange Agent............. The Bank of New York is serving as exchange agent
for the exchange offer.

Use of Proceeds............ We will not receive any proceeds from the issuance
of the new debentures. We are making the exchange
offer solely to satisfy our obligations under the
registration rights agreement.

6
<PAGE>

TERMS OF THE NEW DEBENTURES

Set forth below is a summary description of the terms of the new debentures.
We refer you to "Description of the Debentures," beginning on page 106, for a
more complete description of the terms of the new debentures.

<TABLE>
<C> <S>
Issuer.......................... Liberty Media Corporation
Securities Offered.............. $1,000,000,000 aggregate principal amount of
8 1/4% Senior Debentures due February 1,
2030
Maturity Date................... February 1, 2030
Interest Payment Dates.......... February 1 and August 1, commencing August
1, 2000
Form and Denominations of
Debentures..................... The new debentures will be issued in
denominations of $1,000 and integral
multiples thereof. The new debentures will
be in book-entry form and will be
represented by one or more global
debentures, deposited with, or on behalf of
The Depository Trust Company. Interests in
the global debentures will be shown on, and
transfers will be effected only through,
records maintained by DTC and its
participants. See "Description of the
Debentures--General" and
"--Form, Denomination and Registration."
Ranking......................... The new debentures will be unsecured general
obligations and will rank equally with all
of our existing and future unsecured and
unsubordinated indebtedness. The new
debentures will effectively rank junior to
all of our secured indebtedness with respect
to the value of our assets securing that
indebtedness and to all of the liabilities,
including trade payables, of our
subsidiaries.
Redemption...................... The debentures will not be subject to
redemption by us prior to maturity.
Certain Covenants............... The indenture governing the debentures
contains certain covenants, including
covenants with respect to:

. limitations on liens;

. limitations on sale and leasebacks;
and

. limitations on certain merger,
consolidation and similar
transactions.

These covenants are subject to a number of
important qualifications and exceptions. See
"Description of the Debentures--Certain
Covenants."
</TABLE>

7
<PAGE>

RISK FACTORS

An investment in the debentures involves risks. See "Risk Factors" beginning
on page 10 for a discussion of factors you should carefully consider before
deciding to invest in the debentures.

8
<PAGE>

Summary Historical Financial Data

In the table below we provide you with selected historical consolidated
financial data of Liberty. We derived the historical consolidated financial
data from our consolidated financial statements included elsewhere in this
prospectus.

Liberty has been a wholly owned subsidiary of TCI since August 1994. On March
9, 1999, AT&T acquired TCI in a merger transaction. For financial reporting
purposes, the merger of AT&T and TCI is deemed to have occurred on March 1,
1999. In connection with the merger, the assets and liabilities of Liberty were
adjusted to their respective fair values pursuant to the purchase method of
accounting. For periods prior to March 1, 1999, the assets and liabilities of
Liberty and the related consolidated results of operations are referred to
below as "Old Liberty," and for periods subsequent to February 28, 1999, the
assets and liabilities of Liberty and the related consolidated results of
operations are referred to as "New Liberty." In connection with the merger, TCI
effected an internal restructuring as a result of which certain assets and
approximately $5.5 billion in cash were contributed to Liberty.

The financial data presented below are not necessarily comparable from period
to period as a result of several transactions, including acquisitions and
dispositions of consolidated subsidiaries. For this and other reasons, you
should read the selected historical financial data provided below in
conjunction with our consolidated financial statements and accompanying notes
beginning on page F-1 and the discussion under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" beginning on
page 21.
<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ---------------------------------
Ten months Two months Year ended
ended ended December 31,
December 31, February 28, -------------------
1999 1999 1998 1997
------------ ----------------------- --------
(in millions, except ratios)
<S> <C> <C> <C> <C>
Operating Data:
Revenue....................... $ 729 235 1,359 1,225
Operating loss................ (2,214) (158) (431) (260)
Interest expense.............. (287) (25) (104) (40)
Share of losses of affiliates,
net.......................... (904) (66) (1,002) (785)
Gain on dispositions, net..... 4 14 2,449 406
Net income (loss)............. (1,975) (70) 622 (470)
Balance Sheet Data (at period
end):
Cash and cash equivalents..... $ 1,714 31 228 100
Short-term investments........ 378 125 159 248
Investments in affiliates..... 15,922 3,971 3,079 2,359
Investment in Time Warner,
Inc.......................... 8,202 7,361 7,083 3,538
Investment in Sprint
Corporation.................. 10,186 3,381 2,446 --
Total assets.................. 58,650 16,886 15,783 7,735
Debt including current
portion...................... 3,277 2,087 2,096 785
Stockholder's equity.......... 38,408 9,449 9,230 4,721
Other Data:
Ratio of earnings to fixed
charges (a).................. -- 5.12x 11.03x 2.06x
</TABLE>
- --------
(a) The ratio of earnings to fixed charges of Liberty was less than 1.00x for
the ten-month period ended December 31, 1999. Thus, earnings available for
fixed charges were inadequate to cover fixed charges for that period. The
amount of the coverage deficiencies for the ten-month period ended December
31, 1999, was $2,797 million. For the ratio calculations, earnings
available for fixed charges consist of earnings (losses) before income
taxes plus fixed charges, distributions from and losses of less than 50%-
owned affiliates with debt not guaranteed by Liberty (net of earnings not
distributed of less than 50%-owned affiliates) and minority interests in
(earnings) losses of consolidated subsidiaries. Fixed charges consist of:

. interest on debt, including interest related to debt guaranteed by
Liberty of less than 50%-owned affiliates where the investment in such
affiliates results in the recognition of a loss;
. Liberty's proportionate share of interest of 50%-owned affiliates;
. that portion of rental expense which Liberty believes to be
representative of interest (one-third of rental expense); and
. amortization of debt issuance costs.

9
<PAGE>

RISK FACTORS

An investment in the new debentures involves risk. You should carefully
consider the following factors as well as the other information included in
this prospectus before deciding to exchange your old debentures for new
debentures. Any of the following risks could have a material adverse effect on
our business, financial condition or results of operations or on the value of
the new debentures.

Our holding company structure could restrict access to funds of our
subsidiaries that may be needed to service the debentures. Creditors of those
companies have a claim on their assets that is senior to that of holders of the
debentures. Liberty is a holding company with no significant assets other than
its equity interests in its subsidiaries and cash, cash equivalents and
marketable securities. Liberty is the only company obligated to make payments
under the debentures. Our subsidiaries are separate and distinct legal entities
and they have no obligation, contingent or otherwise, to pay any amounts due
under the debentures or to make any funds available for any of those payments.
In addition, neither AT&T nor any of its subsidiaries other than Liberty have
any obligation to make payments under the debentures or to make any funds
available for those payments.

All of the liabilities of our subsidiaries effectively rank senior to the
debentures. A substantial portion of the consolidated liabilities of Liberty
consists of liabilities incurred by its subsidiaries. Moreover, the indenture
governing the debentures does not limit the amount of indebtedness that may be
incurred by Liberty's subsidiaries in the future. The rights of Liberty and of
its creditors, including holders of the debentures, to participate in the
distribution of assets of any subsidiary upon the latter's liquidation or
reorganization will be subject to prior claims of the subsidiary's creditors,
including trade creditors, except to the extent Liberty may itself be a
creditor with recognized claims against the subsidiary. Where Liberty is itself
a creditor of a subsidiary, its claims will still be subject to the prior
claims of any secured creditor of that subsidiary and to the claims of any
holder of indebtedness that is senior to the claim held by Liberty. As of
December 31, 1999, the aggregate amount of the total liabilities of our
consolidated subsidiaries was approximately $16.2 billion, of which
approximately $14.1 billion was deferred income taxes.

We could be unable in the future to obtain a sufficient amount of cash with
which to service our financial obligations. Our ability to meet our debt
service requirements, including those with respect to the debentures, is
dependent upon our ability to access cash. Liberty's sources of cash include
its available cash balances, net cash from the operating activities of its
subsidiaries, dividends and interest from its investments, availability under
credit facilities and proceeds from asset sales. Although at December 31, 1999,
Liberty had cash and cash equivalents of approximately $1,714 million and
short-term investments of approximately $378 million, there is no requirement
in the indenture governing the debentures that any of Liberty's cash or cash
equivalents or proceeds from the sale of any of its short-term investments be
reserved for the payment of Liberty's obligations under the debentures. We
cannot assure you that Liberty will maintain significant amounts of cash, cash
equivalents or marketable securities in the future.

Liberty obtained from one of its subsidiaries net cash of $5 million in 1998
and net cash of $6 million in 1999. Liberty did not obtain cash, in the form of
dividends, loans, advances or otherwise, from any of its other operating
subsidiaries during those periods. The ability of Liberty's operating
subsidiaries to pay dividends or to make other payments or advances to Liberty
depends on their individual operating results and any statutory, regulatory or
contractual restrictions to which they may be or may become subject. Some of
our subsidiaries are subject to loan agreements that restrict sales of assets
and prohibit or limit the payment of dividends or the making of distributions,
loans or advances to shareholders and partners.

Liberty generally does not receive cash, in the form of dividends, loans,
advances or otherwise, from its business affiliates. In this regard, we do not
have voting control over most of our business affiliates and cannot cause those
companies to pay dividends or make other payments or advances to their
shareholders or partners (including us).

10
<PAGE>

AT&T has no obligation to provide financing for our operations and we do not
expect AT&T to provide us with any financing during the term of the debentures.
In addition, AT&T does not guarantee any of our indebtedness, and it will have
no obligations to the holders of the debentures in the event of a payment
default or other default by Liberty.

We may secure future indebtedness of Liberty with the capital stock of our
subsidiaries or other securities, in which case that indebtedness will
effectively rank senior to the debentures. The indenture does not restrict the
ability of Liberty to pledge shares of capital stock or other securities that
it owns to secure indebtedness. To the extent Liberty pledges shares of capital
stock or other securities to secure indebtedness, the indebtedness so secured
will effectively rank senior to the debentures to the extent of the value of
the shares or other securities pledged. The indenture also does not restrict
the ability of Liberty's subsidiaries to pledge shares of capital stock or
other assets that they own to secure indebtedness.

We have entered into bank credit agreements that contain restrictions on how
we finance our operations and operate our business, which could impede our
ability to engage in transactions that would be beneficial for us. Liberty and
its subsidiaries are subject to significant financial and operating
restrictions contained in outstanding credit facilities. These restrictions
will affect, and in some cases significantly limit or prohibit, among other
things, our ability or the ability of our subsidiaries to:

. borrow more funds;

. pay dividends or make other distributions;

. make investments;

. engage in transactions with affiliates; or

. create liens.

The restrictions contained in these credit agreements could have the
following adverse effects on us, among others:

. we could be unable to obtain additional capital in the future to:

. fund capital expenditures or acquisitions that could improve the
value of Liberty;

. permit us to meet our loan and capital commitments to our business
affiliates or allow us to help fund their operating losses or future
development; or

. allow us to conduct necessary corporate activities;

. we could be unable to access the net cash of our subsidiaries to help
meet our own financial obligations;

. we could be unable to invest in companies in which we would otherwise
invest; and

. we could be unable to obtain lower borrowing costs that are available
from secured lenders or engage in advantageous transactions that
monetize our assets.

In addition, some of the credit agreements to which our subsidiaries are a
party require them to maintain financial ratios, including ratios of total debt
to operating cash flow and operating cash flow to interest expense. If Liberty
or its subsidiaries fail to comply with the covenant restrictions contained in
their credit agreements, that could result in a default which accelerates the
maturity of the indebtedness borrowed pursuant to those agreements. Such a
default could also result in indebtedness under other credit agreements and the
debentures becoming due and payable due to the existence of cross-default or
cross-acceleration provisions of our credit agreements and in the indenture
governing the debentures.

11
<PAGE>

We have agreements with AT&T that restrict our ability to incur debt and
impede our ability to use AT&T Liberty Media Group tracking stock to effect
acquisitions or engage in other transactions. Liberty has entered into an
Inter-Group Agreement with AT&T that restricts the amount of indebtedness that
Liberty may incur as a member of the Liberty Media Group. Under the Inter-Group
Agreement, no subsidiary of AT&T that is attributed to the Liberty Media Group
may incur any debt, other than the refinancing of debt without any increase in
amount, that would cause the total indebtedness of all the subsidiaries of AT&T
that are attributed to the Liberty Media Group at any time to be in excess of
25% of the total market capitalization of the Class A and Class B Liberty Media
Group tracking stock, unless the excess would not adversely affect the credit
rating of AT&T. See "Relationship with AT&T and Certain Related Transactions--
Relationship with AT&T--Inter-Group Agreement." To the extent we are unable to
incur additional debt due to this restriction, the effects set forth in the
preceding risk factor arising out of restrictions on our ability to borrow
funds will be exacerbated. The AT&T Liberty Media Group tracking stock is a
common stock of AT&T, and we cannot use that stock to effect acquisitions or
for any other purpose without the prior approval of the AT&T board of directors
or of a three person capital stock committee of the AT&T board of directors.
Only one member of that committee, Dr. Malone, is also a director of Liberty.
All of Liberty's common stock is owned by a subsidiary of AT&T.

We may make significant capital contributions and loans to our subsidiaries
and business affiliates to cover operating losses and fund development and
growth, which could limit the amount of cash available to pay Liberty's own
financial obligations. The development of video programming, communications,
technology and Internet businesses involves substantial costs and capital
expenditures. As a result, many of our business affiliates have incurred
operating and net losses to date and are expected to continue to incur
significant losses for the foreseeable future. Liberty's results of operations
include Liberty's and its consolidated subsidiaries' share of the net losses of
their affiliates. The share of net losses amounted to $785 million for 1997,
$1,002 million for 1998, $66 million for the two months ended February 28,
1999, and $904 million for the ten months ended December 31, 1999.

We may make significant capital contributions and loans to our existing and
future subsidiaries and business affiliates to help cover their operating
losses and fund the development and growth of their respective businesses and
assets. We have assisted, and may in the future assist, our subsidiaries and
business affiliates in their financing activities by guaranteeing bank and
other financial obligations. At December 31, 1999, we had guaranteed various
loans, notes payable, letters of credit and other obligations of certain of our
subsidiaries and business affiliates totaling $1,660 million. It is expected
that these commitments will be funded over the next two years.

To the extent Liberty makes loans and capital contributions to its
subsidiaries and business affiliates or Liberty is required to expend cash due
to a default by a subsidiary or business affiliate of any obligation guaranteed
by Liberty, there will be that much less cash available to Liberty with which
to pay its own financial obligations, including the debentures.

If we fail to meet required capital calls to a subsidiary or business
affiliate, we could be forced to sell our interest in that company, our
interest in that company could be diluted or we could forfeit important
rights. We are parties to shareholder and partnership agreements that provide
for possible capital calls on shareholders and partners. Our failure to meet a
capital call, or other commitment to provide capital or loans to a particular
company, may have adverse consequences to us. These consequences may include,
among others, the dilution of our equity interest in that company, the
forfeiture of our right to vote or exercise other rights, the right of the
other shareholders or partners to force us to sell our interest at less than
fair value, the forced dissolution of the company to which we have made the
commitment or, in some instances, a breach of contract action for damages
against us. Our ability to meet capital calls or other capital or loan
commitments is subject to our ability to access cash. See "--We could be unable
in the future to obtain a sufficient amount of cash with which to service our
financial obligations" above.

12
<PAGE>

We are a member of the Liberty Media Group of AT&T, and, as a result, we may
incur substantial financial obligations on behalf of other members of that
group. We have entered into agreements with AT&T pursuant to which we have
agreed, on a joint and several basis with each other member of the Liberty
Media Group, to indemnify AT&T against any liabilities arising from the
operations and businesses of any of the members of the Liberty Media Group.
Hence, we may be obligated to indemnify AT&T against liabilities incurred by
members of the Liberty Media Group other than Liberty Media Corporation and its
consolidated subsidiaries. Although we anticipate that if we were required to
indemnify AT&T against such a liability we would seek reimbursement or
contribution from the other members of the Liberty Media Group, we cannot
assure you that those members would be financially capable of making that
reimbursement or contribution or that any indemnification obligation that
Liberty ultimately is required to fund will not be substantial. Liberty is also
jointly and severally liable with the other members of the Liberty Media Group
for any amounts owed by members of the Liberty Media Group to AT&T under a tax
sharing agreement, and those amounts could be substantial. See "Relationship
with AT&T and Certain Related Transactions."

Some of our officers have managerial obligations to other members of the
Liberty Media Group, which may divert their attention from Liberty. Some of
the officers of Liberty Media Corporation are also officers of other members of
the Liberty Media Group. Hence, to the extent those officers devote attention
to the operations of the other members of the Liberty Media Group, that
attention may be diverted from the assets and businesses of Liberty Media
Corporation and its consolidated subsidiaries.

We may use our assets and management time to effect acquisitions that only
benefit other members of the Liberty Media Group. Although we anticipate that
acquisitions involving companies that are attributed to the Liberty Media Group
will be effected through Liberty Media Corporation or its consolidated
subsidiaries, it is possible that some of these acquisitions will be effected
through other members of the Liberty Media Group. In addition to the diversion
of management's attention from the assets and business of Liberty Media
Corporation, acquisitions outside of Liberty Media Corporation and its
consolidated subsidiaries could have important consequences to the holders of
the debentures, including the following:

. Liberty may provide cash or other assets with which to effect these
acquisitions; and

. Liberty may provide cash for the purpose of funding subsequent operating
losses or the development and growth of the businesses of the acquired
companies.

To the extent we use our cash or other assets for the foregoing purposes,
that cash and those assets, as well as the businesses acquired with them, will
not be available to satisfy our obligations under the debentures. Hence, in any
bankruptcy proceeding owners of the debentures will not have any claims against
those businesses or the cash or other assets used by Liberty to effect their
acquisition.

The liquidity and value of our interests in our business affiliates may be
adversely affected by shareholder agreements and similar agreements to which we
are a party. A significant portion of the equity securities we own is held
pursuant to shareholder agreements, partnership agreements and other
instruments and agreements that contain provisions that affect the liquidity,
and therefore the realizable value, of those securities. Most of these
agreements subject the transfer of the stock, partnership or other interests
constituting the equity security to consent rights or rights of first refusal
of the other shareholders or partners. In certain cases, a change in control of
Liberty or of the subsidiary holding our equity interest will give rise to
rights or remedies exercisable by other shareholders or partners, such as a
right to initiate or require the initiation of buy/sell procedures. Some of our
subsidiaries and business affiliates are parties to loan agreements that
restrict changes in ownership of the borrower without the consent of the
lenders. All of these provisions will restrict our ability to sell those equity
securities and may adversely affect the price at which those securities may be
sold. For example, in the event buy/sell procedures are initiated at a time
when we are not in a financial position to buy the initiating party's interest,
we could be forced to sell our interest at a price based on the value
established by the initiating party, and that price might be significantly less
than what we might otherwise obtain.

13
<PAGE>

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

Our business is subject to risks of adverse government regulation. In the
United States, the Federal Communications Commission regulates the providers of
satellite communications services and facilities for the transmission of
programming services, the cable television systems that carry such services,
and, to some extent, the availability of the programming services themselves
through its regulation of program licensing. Cable television systems and other
forms of video distribution in the United States are also regulated by
municipalities or other state and local government authorities. Cable
television companies are currently subject to federal rate regulation on the
provision of basic service, and continued rate regulation or other franchise
conditions could place downward pressure on the fees cable television companies
are willing or able to pay for programming services in which we have interests
and regulatory carriage requirements could adversely affect the number of
channels available to carry the programming services in which we have an
interest. In addition, Liberty's programming subsidiaries and business
affiliates may be limited in their ability to sell programming to AT&T's cable
television subsidiaries and affiliates as a result of federal regulations. See
"Business--Regulatory Matters."

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

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

The Internet companies in which we have interests are subject, both directly
and indirectly, to various laws and governmental regulations relating to their
respective businesses. Due to the increasing popularity and use of commercial
online services and the Internet, it is possible that a number of laws and
regulations may be adopted with respect to commercial online services and the
Internet. The adoption of such laws or regulations in the future may decrease
the growth of such services and the Internet, which could in turn decrease the
demand for the services and products of the Internet companies in which we have
interests and increase such companies' costs of doing business or otherwise
have an adverse effect on their businesses, operating results and financial
conditions.

14
<PAGE>

Our operations are subject to constraints imposed by the Investment Company
Act. Our operations are primarily conducted through subsidiaries and business
affiliates, and certain of our investments in those companies have been made
with strategic partners where we have a less than 50% voting interest. Under
the Investment Company Act of 1940, a company that is deemed to be an
"investment company," and which is not exempt from the provisions of the
Investment Company Act, is required to register as an investment company under
the Investment Company Act. Registered investment companies are subject to
extensive, restrictive and potentially adverse regulation relating to, among
other things, operating methods, management, capital structure, dividends and
transactions with affiliates. Registered investment companies are not permitted
to operate their business in the manner Liberty operates its business, nor are
registered investment companies permitted to have many of the relationships
that Liberty has with its affiliated companies.

Liberty's current holdings in its subsidiaries and business affiliates are
such that Liberty is not an "investment company" required to register under the
Investment Company Act, and Liberty intends to conduct its business in a manner
designed to avoid becoming subject to regulation under the Investment Company
Act. To avoid regulation under the Investment Company Act, Liberty's operations
will to an extent be limited by concerns that it acquire investments in
companies that assure to it majority ownership or primary control of a
magnitude sufficient to cause Liberty not to fall within the definition of an
investment company. These considerations could require Liberty to dispose of
otherwise desirable assets at disadvantageous prices, structure transactions in
a manner that assures Liberty has a majority interest or primary control,
irrespective of whether such a structure is the one that is most desirable, or
avoid otherwise economically desirable transactions, including the addition of
strategic partners in Liberty's current majority-owned subsidiaries and
business affiliates that it primarily controls. In addition, events beyond our
control, including significant appreciation in the market value of certain of
our publicly traded investments that may be deemed investment securities, could
result in our becoming an inadvertent investment company. If Liberty were to
become an inadvertent investment company, it would have one year to divest of a
sufficient amount of investment securities and/or acquire other assets
sufficient to cause Liberty to no longer be an investment company subject to
registration under the Investment Company Act.

If it were established that Liberty is an unregistered investment company,
there would be a risk, among other material adverse consequences, that we could
become subject to monetary penalties or injunctive relief, or both, in an
action brought by the SEC, that we would be unable to enforce contracts with
third parties or that third parties could seek to obtain rescission of
transactions with us undertaken during the period it was established that we
were an unregistered investment company.

We are dependent on a limited number of potential customers for carriage of
our programming services. The cable television and direct-to-home satellite
industries are currently undergoing a period of consolidation. As a result, the
number of potential buyers of our programming services and those of our
business affiliates is decreasing. AT&T's cable television subsidiaries and
affiliates, which as a group comprise one of the two largest operators of cable
television systems in the United States, are collectively the largest single
customer of Liberty's programming companies. With respect to some of our
programming services and those of our business affiliates, this is the case by
a significant margin. The existing agreements between AT&T's cable television
subsidiaries and affiliates and the program suppliers owned or affiliated with
Liberty were entered into prior to the AT&T merger. There can be no assurance
that our owned and affiliated program suppliers will be able to negotiate
renewal agreements with AT&T's cable television subsidiaries and affiliates.
Although AT&T has agreed to extend any existing affiliation agreement of
Liberty and its affiliates that expires on or before March 9, 2004 to a date
not before March 9, 2009, that agreement is conditioned on mutual most favored
nation terms being offered and the arrangements being consistent with industry
practice. For more information about our relationship with AT&T, see
"Relationship with AT&T and Certain Related Transactions."

The absence of a public market for the new debentures could limit
opportunities to sell your debentures in the future. The new debentures will
constitute a new issue of securities with no established trading market. If a
trading market does not develop or is not maintained, holders of the new
debentures may experience

15
<PAGE>

difficulty in reselling the new debentures or may be unable to sell them at
all. We cannot assure you that an active public or other market for the new
debentures will develop or be maintained. If a market for the new debentures
develops, it may be discontinued at any time. Although the initial purchasers
of the old debentures have advised us that they currently intend to make a
market in the new debentures, they are not obligated to do so and may
discontinue market-making activity at any time without notice. In addition, any
market-making activity by the initial purchasers will be subject to the limits
imposed by the Securities Act and the Securities Exchange Act and may be
limited during the exchange offer. We do not intend to apply for the listing of
the new debentures on any securities exchange or automated quotation system.

The liquidity of any market for the new debentures will depend upon the
number of holders of the new debentures, our operating performance, the
interest of securities dealers in making a market in the new debentures and
other factors. A liquid trading market may not develop for the new debentures.
Furthermore, the market price for the new debentures may be subject to
substantial fluctuations. Factors such as the following may have a significant
effect on the market price of the new debentures:

. actual or anticipated fluctuations in our operating results;

. our perceived business prospects;

. general economic conditions, including prevailing interest rates; and

. the market for similar securities.

The issuance of the new debentures may adversely affect the market for the
old debentures. If old debentures are tendered for exchange and accepted in the
exchange offer, the trading market, if any, for the untendered and tendered but
unaccepted old debentures could be adversely affected.

Your failure to participate in the exchange offer could limit opportunities
to sell your debentures in the future. We issued the old debentures in a
private offering exempt from the registration requirements of the Securities
Act. Accordingly, you may not offer, sell or otherwise transfer your old
debentures except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption from the securities laws, or in a transaction not subject to the
securities laws. If you do not exchange your old debentures for new debentures
in the exchange offer, or if you do not properly tender your old debentures in
the exchange offer, your old debentures will continue to be subject to these
transfer restrictions after the completion of the exchange offer. In addition,
after completion of the exchange offer, you will no longer be able to obligate
us to register the old debentures under the Securities Act.

Some persons who participate in the exchange offer must deliver a prospectus
in connection with resales of the new debentures. Based on certain no-action
letters issued by the SEC staff, we believe that, in general, you may offer for
resale, resell or otherwise transfer the new debentures without compliance with
the registration and prospectus delivery requirements of the Securities Act.
However, in some instances described in this prospectus under "The Exchange
Offer," you will remain obligated to comply with the registration and
prospectus delivery requirements of the Securities Act to transfer your new
debentures. In these instances, if you transfer any new debenture without
delivering a prospectus meeting the requirements of the Securities Act or
without an exemption from registration of your new debentures under the
Securities Act, you may incur liability under the Securities Act. We do not and
will not assume, or indemnify you against, this liability.

This prospectus contains forward-looking statements concerning future events
that are subject to risks, uncertainties and assumptions. Certain statements
made in this prospectus under the captions entitled "Prospectus Summary," "Risk
Factors," "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this prospectus are
forward-looking statements. These forward-looking statements are based on our
current expectations and projections about future events. When used in this
prospectus, the words "believe," "anticipate," "intend," "estimate,"

16
<PAGE>

"expect" and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain such words.
These forward-looking statements are subject to risks, uncertainties and
assumptions about us and our subsidiaries and business affiliates, including,
among other things, the following:

. general economic and business conditions and industry trends;

. the continued strength of the industries in which we are involved;

. uncertainties inherent in our proposed business strategies;

. our future financial performance, including availability, terms and
deployment of capital;

. availability of qualified personnel;

. changes in, or our failure or inability to comply with, government
regulations and adverse outcomes from regulatory proceedings;

. changes in the nature of key strategic relationships with partners and
business affiliates;

. uncertainties inherent in the change over to the year 2000;

. rapid technological changes;

. our inability to obtain regulatory or other necessary approvals of any
strategic transactions; and

. social, political and economic situations in foreign countries where we
do business.

Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. In light of
these risks, uncertainties and other assumptions, the forward-looking events
discussed in this prospectus might not occur.

17
<PAGE>

USE OF PROCEEDS

We will not receive any cash proceeds from the issuance of the new debentures
in exchange for the old debentures. We are making this exchange offer solely to
satisfy our obligations under the registration rights agreement. In
consideration for issuing the new debentures, we will receive old debentures in
an aggregate value equal to the value of the new debentures. The old debentures
surrendered in exchange for the new debentures will be retired and canceled.
Accordingly, the issuance of the new debentures will not result in any change
in our indebtedness.

We received approximately $983 million in net proceeds from the sale of the
old debentures, after deducting discounts but before deducting other offering
expenses. We used these net proceeds for general corporate purposes.

18
<PAGE>

CAPITALIZATION

The following table sets forth (i) our consolidated capitalization as of
December 31, 1999, (ii) as adjusted to give pro forma effect to our sale of the
old debentures on February 2, 2000, and our use of the net proceeds from that
sale, and (iii) as further adjusted to give pro forma effect to our sale of
$750 million principal amount of our 3 3/4% senior exchangeable debentures due
2030 on February 10, 2000, an additional $60 million principal amount of our 3
3/4% senior exchangeable debentures due 2030 on March 8, 2000, our incurrence
of $1,116 million at March 31, 2000, of obligations in a series of securities
lending transactions that we effected between January 7 and March 31 of this
year and our use of the net proceeds from the sales of the 3 3/4% debentures
and the securities lending transactions. This table should be read in
conjunction with Liberty's consolidated financial statements and the related
notes included elsewhere in this prospectus. See "Index to Financial
Statements."

<TABLE>
<CAPTION>
December 31, 1999
----------------------------
(in millions)
Pro Pro Forma
Actual Forma As Adjusted
<S> <C> <C> <C>
Cash and cash equivalents......................... $ 1,714 2,697 3,594
======= ====== ======
Marketable securities............................. 378 378 378
======= ====== ======
Cash collateral under securities lending
agreement........................................ -- -- 1,013(a)
======= ====== ======
Long-term debt (including current portion):
Bank credit facilities.......................... $ 963 963 963
Other debt...................................... 57 57 57
7 7/8% Senior Notes due 2009.................... 741 741 741
8 1/2% Senior Debentures due 2029............... 494 494 494
4% Senior Exchangeable Debentures due 2029...... 1,022 1,022 1,022
8 1/4% Senior Debentures due 2030............... -- 1,000 1,000
3 3/4% Senior Exchangeable Debentures due 2030.. -- -- 810
Obligations under securities lending agreement.. -- -- 1,116
------- ------ ------
Total debt.................................... $ 3,277 4,277 6,203
------- ------ ------
Stockholder's equity:
Common stock.................................... -- -- --
Additional paid-in capital...................... $33,838 33,838 33,838
Accumulated other comprehensive earnings, net of
taxes.......................................... 6,518 6,518 6,518
Retained earnings (deficit)..................... (1,975) (1,975) (1,975)
------- ------ ------
38,381 38,381 38,381
------- ------ ------
Due to related parties.......................... 27 27 27
------- ------ ------
Total stockholder's equity.................... 38,408 38,408 38,408
------- ------ ------
Total capitalization.......................... $41,685 42,685 44,611
======= ====== ======
</TABLE>
- --------
(a) The cash collateral under securities lending agreement is maintained in a
collateral account for our benefit by a third party. On March 31, 2000, we
could have drawn up to $790 million from this collateral account on demand.
The remaining $223 million would have been required to remain in the
collateral account. See "Management's Discussion and Analyses of Financial
Condition and Results of Operation--Liquidity and Capital Resources."

19
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ----------------------------------------
Ten months Two months
ended ended Year ended December 31,
December 31, February 28, ---------------------------
1999 1999 1998 1997 1996 1995
------------ ------------ ------ ----- ----- -----
(in millions, except ratios)
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenue................. $ 729 235 1,359 1,225 2,208 1,821
Operating loss.......... (2,214) (158) (431) (260) (66) (214)
Interest expense........ (287) (25) (104) (40) (53) (34)
Share of losses of
affiliates, net........ (904) (66) (1,002) (785) (332) (190)
Gain on dispositions,
net.................... 4 14 2,449 406 1,558 (78)
Net income (loss)....... (1,975) (70) 622 (470) 741 (56)

Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $ 1,714 31 228 100 434 179
Short-term investments.. 378 125 159 248 59 --
Investments in
affiliates............. 15,922 3,971 3,079 2,359 1,519 1,932
Investment in Time
Warner, Inc............ 8,202 7,361 7,083 3,538 2,017 945
Investment in Sprint
Corporation............ 10,186 3,381 2,446 -- -- --
Total assets............ 58,650 16,886 15,783 7,735 6,722 5,605
Debt including current
portion................ 3,277 2,087 2,096 785 555 516
Stockholder's equity.... 38,408 9,449 9,230 4,721 4,519 3,731

Other Data:
Ratio of earnings to
fixed charges (a)...... -- 5.12x 11.03x 2.06x 21.36x 3.86x
</TABLE>
- --------
(a) The ratio of earnings to fixed charges of Liberty was less than 1.00x for
the ten-month period ended December 31, 1999. Thus, earnings available for
fixed charges were inadequate to cover fixed charges for such period. The
amount of the coverage deficiencies for the ten-month period ended December
31, 1999, was $2,797 million. For the ratio calculations, earnings
available for fixed charges consist of earnings (losses) before income
taxes plus fixed charges, distributions from and losses of less than 50%-
owned affiliates with debt not guaranteed by Liberty (net of earnings not
distributed of less than 50%-owned affiliates) and minority interests in
(earnings) losses of consolidated subsidiaries. Fixed charges consist of:

. interest on debt, including interest related to debt guaranteed by
Liberty of less than 50%-owned affiliates where the investment in such
affiliates results in the recognition of a loss;

. Liberty's proportionate share of interest of 50%-owned affiliates;

. that portion of rental expense which Liberty believes to be
representative of interest (one-third of rental expense); and

. amortization of debt issuance costs.

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information concerning our
results of operations and financial condition. This discussion should be read
in conjunction with our consolidated financial statements and accompanying
notes beginning on page F-1.

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

Liberty's consolidated subsidiaries at December 31, 1999, included Starz
Encore Group (formerly named Encore Media Group), Liberty Digital, Inc.
(formerly named TCI Music, Inc.), Pramer S.C.A. and Liberty Cablevision of
Puerto Rico. These businesses are majority or wholly owned and, accordingly,
the results of operations of these businesses are included in the consolidated
results of Liberty for the periods in which they were majority or wholly owned.

A significant portion of Liberty's operations are conducted through entities
in which Liberty holds a 20%-50% ownership interest. These businesses are
accounted for using the equity method of accounting and, accordingly, are not
included in the consolidated results of Liberty except as they affect Liberty's
interest in earnings or losses of affiliates for the period in which they were
accounted for using the equity method. Included in Liberty's investments in
affiliates at December 31, 1999, were USA Networks, Inc., Discovery
Communications, Inc., TV Guide, Inc. (formerly named United Video Satellite
Group, Inc.), QVC Inc. and Telewest Communications plc.

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

As a result of AT&T's acquisition of TCI by merger on March 9, 1999, the
shares of each series of TCI common stock were converted into shares of a class
of AT&T common stock, subject to applicable exchange ratios. The AT&T merger
has been accounted for using the purchase method. Accordingly, Liberty's assets
and liabilities have been recorded at their respective fair values therefore
creating a new cost basis. For financial reporting purposes the AT&T merger is
deemed to have occurred on March 1, 1999. Accordingly, for periods prior to
March 1, 1999, the assets and liabilities of Liberty and the related
consolidated financial statements are sometimes referred to herein as "Old
Liberty," and for periods subsequent to February 28, 1999, the assets and
liabilities of Liberty and the related consolidated financial statements are
sometimes referred to herein as "New Liberty." "Liberty" refers to both New
Liberty and Old Liberty.

Summary Of Operations

Liberty's programming businesses include Starz Encore Group, which provides
premium programming distributed by cable, direct-to-home satellite and other
distribution media throughout the United States. Additionally, Liberty Digital
is included in Liberty's financial results. Liberty Digital, through its
subsidiaries and affiliates, is principally engaged in programming,
distributing and marketing digital and analog music services to homes,
businesses and over the Internet. Also included in Liberty's financial results
through March 1, 1999, are those of TV Guide which, during the period it was
consolidated, was engaged in the

21
<PAGE>

business of providing satellite-delivered video, audio, data, and program
promotion services to cable television systems, direct-to-home satellite dish
users, radio stations and private network users throughout the United States.
Effective March 1, 1999, Liberty began accounting for its investment in TV
Guide under the equity method of accounting. To enhance the reader's
understanding, separate financial data has been provided below for the periods
in which they were consolidated for Starz Encore Group, Liberty Digital and TV
Guide due to the significance of those operations. The table sets forth, for
the periods indicated, certain financial information and the percentage
relationship that certain items bear to revenue. Liberty holds significant
equity investments, the results of which are not a component of operating
income, but are discussed below under "--Investments in Affiliates Accounted
for Under the Equity Method." Other items of significance are discussed
separately below.

General Information

Due to the consummation of the AT&T merger, Liberty's 1999 statements of
operations include information reflecting the ten month period ended December
31, 1999, and the two month period ended February 28, 1999. Also, prior to
March 1, 1999, Liberty consolidated the operations of TV Guide, and subsequent
to February 28, 1999, Liberty accounted for its ownership interests in TV Guide
under the equity method. (See note 7 to the accompanying consolidated financial
statements.) The following discussion of Liberty's results of operations
includes a section that addresses the combined operating results of "Old
Liberty" and "New Liberty," collectively "Combined Liberty."

<TABLE>
<CAPTION>
New Liberty Old Liberty
-------------------- --------------------------------------------------------------
Ten months Two months Year Year
ended % of ended % of ended % of ended % of
December 31, total February 28, total December 31, total December 31, total
1999 revenue 1999 revenue 1998 revenue 1997 revenue
------------ ------- ------------ ------- ------------ ------- ------------ -------
(dollar amounts in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Starz Encore Group
Revenue................ $ 539 100% $ 101 100% $ 541 100% $ 350 100%
Operating, selling,
general and
administrative........ 415 77 60 59 445 82 382 109
Stock compensation..... 283 53 3 3 58 11 60 17
Depreciation and
amortization.......... 148 27 1 1 8 1 4 1
------- ------ ----- --- ----- --- ----- ---
Operating income
(loss)................ $ (307) (57)% $ 37 37% $ 30 6% $ (96) (27)%
======= ====== ===== === ===== === ===== ===
Liberty Digital
Revenue................ $ 66 100% $ 15 100% $ 86 100% $ 23 100%
Operating, selling,
general and
administrative........ 62 94 14 93 85 99 14 61
Stock compensation..... 703 1,065 -- -- -- -- 1 4
Depreciation and
amortization.......... 30 45 4 27 25 29 6 26
------- ------ ----- --- ----- --- ----- ---
Operating income
(loss)................ $ (729) (1,104)% $ (3) (20)% $ (24) (28)% $ 2 9%
======= ====== ===== === ===== === ===== ===
TV Guide
Revenue................ $ -- -- $ 97 100% $ 598 100% $ 508 100%
Operating, selling,
general and
administrative........ -- -- 76 78 475 79 404 79
Depreciation and
amortization.......... -- -- 10 10 28 5 19 4
------- ------ ----- --- ----- --- ----- ---
Operating income....... $ -- -- $ 11 12% $ 95 16% $ 85 17%
======= ====== ===== === ===== === ===== ===
Other
Revenue................ $ 124 (a) $ 22 (a) $ 134 (a) $ 344 (a)
Operating, selling,
general and
administrative........ 119 38 138 266
Stock compensation..... 799 180 460 235
Depreciation and
amortization.......... 384 7 68 94
------- ----- ----- -----
Operating loss......... $(1,178) $(203) $(532) $(251)
======= ===== ===== =====
</TABLE>
- --------
(a) Not meaningful.

22
<PAGE>

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

<TABLE>
<CAPTION>
Combined Liberty
---------------------------------------------------------------
Year Year Year
ended % of ended % of ended % of
December 31, total December 31, total December 31, total
1999 revenue 1998 revenue 1997 revenue
------------ ------- ------------ ------- ------------ -------
(dollar amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Starz Encore Group
Revenue................ $ 640 100% $ 541 100% $ 350 100%
Operating, selling,
general and
administrative........ 475 74 445 82 382 109
Stock compensation..... 286 45 58 11 60 17
Depreciation and
amortization.......... 149 23 8 1 4 1
------- ---- ----- --- ----- ---
Operating income
(loss)................ $ (270) (42)% $ 30 6% $ (96) (27)%
======= ==== ===== === ===== ===
Liberty Digital
Revenue................ $ 81 100% $ 86 100% $ 23 100%
Operating, selling,
general and
administrative........ 76 94 85 99 14 61
Stock compensation..... 703 868 -- -- 1 4
Depreciation and
amortization.......... 34 42 25 29 6 26
------- ---- ----- --- ----- ---
Operating income
(loss)................ $ (732) (904)% $ (24) (28)% $ 2 9%
======= ==== ===== === ===== ===
TV Guide
Revenue................ $ 97 100% $ 598 100% $ 508 100%
Operating, selling,
general and
administrative........ 76 78 475 79 404 79
Depreciation and
amortization.......... 10 10 28 5 19 4
------- ---- ----- --- ----- ---
Operating income....... $ 11 12% $ 95 16% $ 85 17%
======= ==== ===== === ===== ===
Other
Revenue................ $ 146 (a) $ 134 (a) $ 344 (a)
Operating, selling,
general and
administrative........ 157 138 266
Stock compensation..... 979 460 235
Depreciation and
amortization.......... 391 68 94
------- ----- -----
Operating loss......... $(1,381) $(532) $(251)
======= ===== =====
</TABLE>
- --------
(a) Not meaningful.

Year ended December 31, 1999, compared to December 31, 1998

Consolidated Subsidiaries

Starz Encore Group. The majority of Starz Encore Group's revenue is derived
from the delivery of movies to subscribers under affiliation agreements between
Starz Encore Group and cable operators and satellite direct-to-home
distributors. Starz Encore Group entered into a 25-year affiliation agreement
in 1997 with TCI. TCI cable systems, subsequently acquired by AT&T in the AT&T
merger, operate under the name AT&T Broadband. Under this affiliation agreement
with AT&T Broadband, Starz Encore Group receives fixed monthly payments in
exchange for unlimited access to all of the existing Encore and STARZ!
services. The payment from AT&T Broadband is adjusted, in certain instances, if
AT&T acquires or disposes of cable systems or if Starz Encore Group's
programming costs increase above certain specified levels. Starz Encore Group's
other affiliation agreements generally provide for payments based on the number
of subscribers that receive Starz Encore Group's services.

23
<PAGE>

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

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

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

Starz Encore Group has granted phantom stock appreciation rights to certain
of its officers. Estimates of compensation relating to the phantom stock
appreciation rights have been recorded in Starz Encore Group's financial
statements based upon third-party appraisals, but are subject to future
adjustments based upon the appraised value of Starz Encore Group.

Liberty Digital. Liberty Digital's revenue is derived from its audio
business, which is engaged in programming, distributing and marketing a digital
music service, Digital Music Express(R) (DMX Service). This service provides
continuous, commercial free, CD-quality music programming to homes and
businesses. Liberty Digital's results of operations also include its
interactive media business, which is engaged in the development of interactive
television businesses and the management of investments in interactive
programming content and interactive television businesses.

Revenue decreased 6% to $81 million for 1999 from $86 million for 1998. The
decrease in revenue was primarily caused by reduced revenue due to the sale of
Liberty Digital's video business and certain Internet businesses offset by
increased residential and commercial subscribers in its audio business.
Additionally, revenue for 1999 included a $3 million settlement from PRIMESTAR,
Inc., a provider of digital satellite television programming services, for the
loss of future revenue after the DMX Service was terminated from distribution
to PRIMESTAR customers on April 28, 1999, as a result of the acquisition of
PRIMESTAR by Hughes Electronic Corp.

Operating, selling, general and administrative expenses decreased 11% to $76
million for 1999, from $85 million for 1998. The decrease in expenses was
primarily due to the sale of Liberty Digital's video and Internet businesses,
which was partially offset by increased affiliation fees and selling, general
and administrative expenses due to the audio business's expansion.

Depreciation and amortization increased 36% to $34 million for 1999, from $25
million for 1998. The increase was a result of the effects of purchase
accounting adjustments related to the AT&T merger.

24
<PAGE>

subject to future adjustment based on market price fluctuations and,
ultimately, on the final determination of market value when the rights are
exercised.

TV Guide. On March 1, 1999, United Video Satellite Group and News Corp.
completed a transaction whereby United Video Satellite Group acquired News
Corp.'s TV Guide properties in exchange for stock of United Video Satellite
Group and cash, creating a broader platform for offering television guide
services to consumers and advertisers. United Video Satellite Group was renamed
TV Guide. Upon consummation, Liberty began accounting for its interest in TV
Guide using the equity method of accounting and, accordingly, the results of
operations of TV Guide were no longer included in the consolidated financial
results of Liberty as of that date.

Other. Included in this information are the results of Liberty Media
International, Inc.'s consolidated subsidiaries, Liberty Cablevision of Puerto
Rico and Pramer, and corporate expenses of Liberty. Revenue increased 9% from
$134 million for 1998, to $146 million for 1999. The acquisition of Pramer in
August 1998 accounted for a $47 million increase in revenue in 1999. This
increase was partially offset by a decrease in revenue from the sale of Netlink
Wholesale, Inc. during January 1999 and the sale in February 1999 of
CareerTrack, Inc., a subsidiary that provided business and educational seminars
and related publications.

Operating, selling, general and administrative expenses increased 14% to $157
million for 1999, from $138 million for 1998. The increase in expenses was
primarily due to additional corporate expenses of $12 million in 1999
associated with the AT&T merger. The increase in expenses due to the
acquisition of Pramer was offset by the decrease in expenses as a result of the
sales of Netlink and CareerTrack.

Depreciation and amortization increased $323 million to $391 million for 1999
from $68 million during 1998. The increase was a result of the effects of
purchase accounting adjustments related to the AT&T merger.

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

Other Income and Expense. Interest expense was $287 million, $25 million and
$104 million for the ten month period ending December 31, 1999, the two month
period ending February 28, 1999, and the year ended December 31, 1998,
respectively. The increase in interest expense during the 1999 periods was a
result of increased borrowings by Liberty during 1999.

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

Aggregate gains from dispositions and issuance of equity by affiliates and
subsidiaries during the ten month period ended December 31, 1999, the two month
period ended February 28, 1999, and the year ended December 31, 1998 were $4
million, $386 million and $2,554 million, respectively. Liberty recognized a
gain of $372 million (before deducting deferred income taxes of $147 million)
during the two months ended February 28, 1999, in connection with the
acquisition by United Video Satellite Group of the TV Guide properties. Liberty
recorded a non-cash gain of $1.9 billion (before deducting deferred income tax
expenses of $647 million) during 1998 as a result of the exchange of its
interest in Sprint PCS and PhillieCo Partnership I, L.P. for shares of Sprint
PCS Group stock. Effective January 1, 1998, Time Warner acquired the business
of Southern Satellite from Liberty for $213 million in cash resulting in a $515
million pre-tax gain.

25
<PAGE>

Investments in Affiliates Accounted for Under the Equity Method

Liberty's share of losses of affiliates was $904 million, $66 million and
$1,002 million during the ten month period ending December 31, 1999, the two
month period ending February 28, 1999, and the year ending December 31, 1998,
respectively.

Discovery. Discovery's revenue increased $302 million or 28% from $1,094
million for 1998, to $1,396 million for 1999. The increase in revenue resulted
from increases in rates charged to affiliates and increases in advertising
rates due to higher ratings and a generally strong advertising sales market.
Subscriber growth at Discovery's international and developing networks also
contributed to the increase in revenue. Earnings before interest, taxes,
depreciation and amortization ("Operating Cash Flow") decreased by $2 million
or 2% from $110 million for 1998, to $108 million for 1999. The decrease in
Operating Cash Flow was due to increases in programming and marketing expenses
offset by the increase in revenue. Marketing expenses have increased as
Discovery continued the rollout of Animal Planet and launched other developing
networks. Discovery's net loss increased $175 million or 243% from $72 million
for 1998, to $247 million for 1999. The increase in the net loss is due to
increased interest expense and launch amortization due to the company's efforts
to increase launch support related to developing networks. Liberty's share of
Discovery's net loss was approximately $269 million, $8 million and $39 million
for the ten month period ended December 31, 1999, the two month period ended
February 28, 1999 and the year ended December 31, 1998, respectively. Liberty's
share of losses for the ten month period ended December 31, 1999, included $155
million in amortization related to purchase accounting adjustments associated
with Liberty's investment in Discovery in connection with the AT&T merger.

USA Networks, Inc. Revenue increased $602 million or 23% from $2,634 million
for 1998, to $3,236 million for 1999. The increase was due to increased
advertising revenue from the Networks and Television Production businesses of
USA Networks and higher continuity (off-air) sales, as well as the launch of
Home Shopping en Espanol in the electronic retailing sector. The inclusion of
revenue from the Hotel Reservations Network since its acquisition on May 10,
1999, also contributed to the increase in revenue. Operating Cash Flow
increased $109 million or 23% from $464 million for 1998, to $573 million for
1999. The increase in Operating Cash Flow was largely due to the increase in
revenue offset by increased cost of goods sold at the electronic retailing unit
due to the increased sales and increased Internet services expenses as USA
Networks continued to rollout new web sites. Net income decreased from $77
million for 1998, to a net loss of $28 million for 1999, representing a
decrease of $105 million. The decrease in net income is primarily due to an
increase in minority interests in earnings of subsidiaries due to ownership
changes at USA Networks, Inc. Liberty's share of USA Networks, Inc.'s net
earnings (loss) was approximately $(20) million, $10 million and $30 million
for the ten month period ended December 31, 1999, the two month period ended
February 28, 1999 and the year ended December 31, 1998, respectively. Liberty's
share of losses for the ten month period ended December 31, 1999, included $53
million in amortization related to purchase accounting adjustments associated
with Liberty's investment in USA Networks in connection with the AT&T merger.

QVC. Revenue increased by $444 million or 18% from $2,403 million for 1998,
to $2,847 million for 1999. The increase in revenue is due to increased
subscribers as well as increases in the average sales per home for each of
QVC's domestic, U.K. and German operations. Operating Cash Flow increased by
24% or $105 million from $434 million for 1998 to $539 million for 1999, due to
the revenue increase and the corresponding increase in cost of goods sold,
offset further by higher variable costs and additional costs associated with
QVC's expansion in the UK and Germany. Net income increased by $72 million or
48% to $221 million for 1999, as compared to $149 million for 1998. The
increase in net income was due to the increase in Operating Cash Flow offset by
increased income tax expense. Liberty's share of QVC's net earnings (loss) was
approximately $(11) million, $13 million and $64 million for the ten month
period ended December 31, 1999, the two month period ended February 28, 1999,
and the year ended December 31, 1998, respectively. Liberty's share of losses
for the ten month period ended December 31, 1999 included $92 million in
amortization related to purchase accounting adjustments associated with
Liberty's investment in QVC in connection with the AT&T merger.

26
<PAGE>

Fox/Liberty Networks. Liberty's share of Fox/Liberty Networks' net loss was
approximately $48 million, $1 million and $83 million for the ten month period
ended December 31, 1999, the two month period ended February 28, 1999 and the
year ended December 31, 1998, respectively. Liberty's share of losses for 1998
includes previously unrecognized losses of Fox/Liberty Networks of
approximately $64 million. Losses of Fox/Liberty Networks were not recognized
in prior periods due to the fact that Liberty's investment in Fox/Liberty
Networks was less than zero. On July 15, 1999, News Corp. acquired Liberty's
50% interest in Fox/Liberty Networks. See note 6 to the accompanying
consolidated financial statements.

Telewest. Revenue increased $375 million or 42%, from $896 million for 1998,
to $1,271 million for 1999. The increase was primarily due to the acquisition
of General Cable plc and Birmingham Cable Corporation Limited in September 1998
and increased cable penetration due to the success of Telewest's low-cost
bundled television and telephony services introduced during 1998. Operating
Cash Flow increased $96 million or 40% from $243 million for 1998, to $339
million for 1999. The increase in Operating Cash Flow was largely due to the
increase in revenue and economies of scale resulting from the enlarged
operations. Telewest's net loss increased $308 million or 56% from $553 million
for 1998, to $861 million for 1999. The increase in net loss was due to
increased interest expense, increased depreciation and amortization expense
resulting from acquisitions and increased foreign currency transaction losses.
Telewest experiences unrealized foreign currency transaction losses on its U.S.
dollar denominated debentures resulting from the translation of the debentures
into UK pounds sterling and the adjustment of a related foreign currency option
contract to market value. Liberty's share of Telewest's net losses was
approximately $222 million, $38 million and $134 million for the ten month
period ended December 31, 1999, the two month period ended February 28, 1999,
and the year ended December 31, 1998, respectively. Liberty's share of losses
for the ten month period ended December 31, 1999, included $73 million in
amortization related to purchase accounting adjustments associated with
Liberty's investment in Telewest in connection with the AT&T merger.

PCS Ventures. Liberty's share of losses from its investment in the PCS
Ventures was $629 million during 1998. At that time, the PCS Ventures included
Sprint Spectrum Holding Company, L.P. and MinorCo, L.P. (collectively, "Sprint
PCS") and PhillieCo Partnership I, L.P. The partners of each of the Sprint PCS
partnerships were subsidiaries of Sprint, Comcast Corporation, Cox
Communications, Inc. and Liberty. The partners of PhillieCo were subsidiaries
of Sprint, Cox and Liberty. Liberty had a 30% partnership interest in each of
the Sprint PCS partnerships and a 35% partnership interest in PhillieCo.

On November 23, 1998, Liberty, Comcast, and Cox exchanged their respective
interests in Sprint PCS and PhillieCo for shares of Sprint PCS Group stock,
which tracks the performance of Sprint's PCS Group (consisting initially of the
PCS Ventures and certain PCS licenses which were separately owned by Sprint).
Through November 23, 1998, Liberty accounted for its interest in the PCS
Ventures using the equity method of accounting; however, as a result of the
foregoing exchange, Liberty's less than 1% voting interest in Sprint and the
transfer of its Sprint Securities to a trust prior to the AT&T merger, Liberty
no longer exercises significant influence with respect to its investment in the
PCS Ventures. Accordingly, Liberty accounts for its investment in the Sprint
PCS Group stock as an available-for-sale security. See note 6 to the
accompanying consolidated financial statements.

Year Ended December 31, 1998, compared to December 31, 1997

Consolidated Subsidiaries

Starz Encore Group. Revenue generated from Starz Encore Group increased to
$541 million in 1998 from $350 million in 1997. This increase of $191 million,
or 55%, was primarily attributable to higher revenue from AT&T Broadband,
consistent with the terms of the affiliation agreement with AT&T Broadband, and
the increases in the distribution of Encore and STARZ! services to cable
operators other than AT&T Broadband and direct-to-home satellite providers
combined with increases in rates charged.

27
<PAGE>

Operating, selling, general and administrative expenses increased to $445
million in 1998 from $382 million in 1997. The increase of $63 million, or 16%,
is the result of an increase in the first run program license fees during 1998
compared to 1997.

Liberty Digital. Revenue increased 274% to $86 million in 1998 from $23
million in 1997. The increase in revenue was due to the acquisition of DMX in
July of 1997. Effective July 11, 1997, a subsidiary of Liberty Digital was
merged with and into DMX, Inc. As a result of the DMX merger, DMX's results of
operations have been included in the consolidated financial results of Liberty
as of the date of the merger. See note 8 to the accompanying consolidated
financial statements.

Operating, selling and general administrative expenses increased 507% to $85
million in 1998 from $14 million in 1997. The increase in expenses was due to
the inclusion of the operations of DMX since July of 1997.

Depreciation and amortization increased $19 million to $25 million in 1998
from $6 million in 1997. The increase was primarily attributable to increased
amortization of intangibles resulting from the acquisition of DMX.

TV Guide. Revenue increased 18% to $598 million in 1998 from $508 million in
1997. The increase in revenue was primarily due to the acquisition of Turner-
Vision's retail C-band operations and increased advertising and service fee
revenue. Effective February 1, 1998, Turner-Vision, Inc. contributed the
assets, obligations and operations of its retail C-band satellite business to
Superstar/Netlink Group LLC, a consolidated subsidiary of TV Guide, in exchange
for an approximate 20% ownership interest in Superstar/Netlink. As a result of
this transaction, Turner-Vision's results of operations have been included in
the consolidated financial results of TV Guide, and therefore the consolidated
results of Liberty, as of February 1, 1998. These increases were partially
offset by a decrease in commission revenue from Superstar/Netlink acting as a
service agent in the direct broadcast satellite market.

Operating, selling and general and administrative expenses consist primarily
of costs for programming content for the C-band operations and personnel costs.
Operating, selling, general and administrative expenses increased 18% to $475
million in 1998 from $404 million in 1997. The increase was primarily
attributable to additional expenses due to the inclusion of Turner-Vision,
increased personnel costs due to internal growth and increased legal fees
related to litigation and periodic filings with the SEC, and increased costs
associated with Prevue Channel's new format under the TV Guide Brand.

Depreciation and amortization increased $9 million to $28 million in 1998
from $19 million in 1997. The increase was attributable to the amortization of
intangibles resulting from the acquisition of Turner-Vision and increased
depreciation resulting from the acquisition of certain equipment to support the
various Prevue products.

Other. Included in this information are the results of Liberty Media
International, Southern Satellite Systems, Inc. and corporate expenses of
Liberty. Revenue decreased to $134 million in 1998 from $344 million in 1997.
Liberty Media International's revenue decreased from $220 million in 1997 to
$65 million in 1998. This $155 million decrease was attributable to the
deconsolidation of Cablevision in October 1997. Cablevision represented $173
million in revenue during 1997. Additionally, revenue decreased as a result of
the sale of the business of Southern Satellite. Effective January 1, 1998, Time
Warner exercised an option to acquire the business of Southern Satellite and
accordingly the results of operations of that business were no longer included
in the consolidated financial results of Liberty as of that date. The business
of Southern Satellite contributed $31 million to revenue during 1997. In August
1998, Liberty Media International purchased Pramer, which contributed an
additional $17 million in revenue from the date of acquisition to December 31,
1998.

Operating, selling, general and administrative expenses decreased to $138
million in 1998 from $266 million in 1997. The primary reason for this decrease
is the deconsolidation of Cablevision in October 1997. Cablevision accounted
for approximately $105 million of operating expenses in 1997.

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

Other Income and Expense. Interest expense was $104 million and $40 million
for 1998 and 1997, respectively. The increase in interest expense of $64
million was a result of additional borrowing on Liberty's credit facilities
during 1998.

Dividend and interest income was $65 million and $59 million for 1998 and
1997, respectively. Dividend and interest income for 1998 primarily represents
dividends received of approximately $21 million on a series of Time Warner
common stock designated as Series LMCN-V Common Stock and $31 million in
dividends received on a series of 30 year non-convertible 9% preferred stock of
Fox Kids Worldwide, Inc. During 1997 dividends received from the Time Warner
Series LMCN-V Common Stock and the Fox Kids Worldwide preferred stock amounted
to $19 million and $14 million, respectively. During 1997, Liberty also
recognized an additional $14 million in interest income relating to short-term
investments.

Aggregate gains from dispositions and issuance of equity by affiliates and
subsidiaries during 1998 and 1997 were $2,554 million and $406 million,
respectively. As a result of the exchange by Liberty of its investment in the
PCS Ventures for shares of Sprint PCS Group stock, Liberty recorded a non-cash
gain of $1.9 billion (before deducting deferred income tax expense of $647
million) during 1998. Additionally, Liberty recognized a $515 million pre-tax
gain in connection with the sale of Southern Satellite in 1998. Effective
September 1, 1998, Telewest and General Cable PLC consummated a merger in which
holders of General Cable received Telewest shares and cash for each share of
General Cable held. As a result of the merger, Liberty recognized a non-cash
gain of $60 million (excluding related tax expense of $21 million) during 1998.
Liberty recognized a gain of $38 million in 1998 from the increase in
Superstar/Netlink's equity, net of the dilution of its interest in
Superstar/Netlink, that resulted from the above described transaction with
Turner-Vision.

On August 1, 1997, Liberty IFE, Inc., a wholly owned subsidiary of Liberty,
which held non-voting Class C common stock of International Family
Entertainment, Inc. and $23 million of International Family Entertainment 6%
convertible secured notes due 2004, convertible into International Family
Entertainment Class C common stock, contributed its International Family
Entertainment Class C common stock and International Family Entertainment 6%
convertible secured notes to Fox Kids Worldwide in exchange for the Fox Kids
Worldwide preferred stock. As a result of the exchange, Liberty recognized a
pre-tax gain of approximately $304 million during 1997.

Investments in Affiliates Accounted for Under the Equity Method

Liberty's share of losses of affiliates was $1,002 million and $785 million
during 1998 and 1997, respectively.

Discovery. Revenue increased $234 million or 27% to $1,094 million in 1998
from $860 million in 1997. The increase in revenue was due to increases in the
number of subscribers at Discovery's various networks along with an increase in
the average per subscriber affiliate fee. Advertising revenue also contributed
to the increases due to the increase in subscribers combined with an increase
in ratings. Operating Cash Flow increased $80 million or 267% to $110 million
in 1998 from $30 million in 1997. The increase in Operating Cash Flow from 1998
to 1997 was due to the revenue growth at the developed domestic and
international networks offset by a smaller corresponding increase in operating
expenses at those networks. Discovery's net loss increased by $19 million or
36% to $72 million in 1998 from $53 million in 1997. The increase in the net
loss from 1997 to 1998 was due to the improvement in Operating Cash Flow offset
by an increase in interest

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expense, launch amortization and stock compensation as well as the write off of
Your Choice TV. Liberty's share of losses was $39 million and $29 million, for
each of 1998 and 1997, respectively.

USA Networks, Inc. Revenue increased $1,372 million or 109% to $2,634
million in 1998 from $1,262 million in 1997. The increase in revenue from 1997
to 1998 was due to the Universal and Ticketmaster transactions being completed
by USA Networks during 1998. See note 5 to the accompanying consolidated
financial statements. Operating Cash Flow increased $272 million to $464
million in 1998 from $192 million in 1997. The increase in Operating Cash Flow
from 1997 to 1998 was due to the Universal and Ticketmaster transactions. Net
income increased by $64 million to $77 million in 1998 from $13 million in
1997. The increase in net income from 1997 to 1998 was due to the increase in
Operating Cash Flow along with one-time transactional gains offset by
significant increases in depreciation, amortization, interest and income tax
expenses. Liberty's share of earnings (loss) of USA Networks and related
investments was $30 million and $5 million for 1998 and 1997, respectively.

QVC Inc. Revenue increased $321 million or 15% to $2,403 million in 1998
from $2,082 million in 1997. The increase in revenue for 1998 was primarily
attributable to the effects of a 5.6% increase in the average number of homes
receiving QVC services in the U.S. and an 11.8% increase in the average number
of homes receiving QVC services in the United Kingdom. Operating Cash Flow
increased $96 million or 28% to $434 million in 1998 from $338 million in 1997.
The increase in Operating Cash Flow was caused by the increase in revenue
offset by increased cost of goods sold and variable costs associated with the
increased sales. Start-up costs of QVC Germany also contributed $3 million to
the increase in offsetting costs for 1998. Net income increased 110% or $78
million to $149 million in 1998 from $71 million in 1997. The increases in net
income were due to the increases in Operating Cash Flow offset by increases in
depreciation, amortization and income tax expenses in each of the respective
periods presented. Liberty's share of earnings was $64 million and $30 million
for 1998 and 1997, respectively.

Fox/Liberty Networks. Revenue increased 39% or $183 million to $655 million
in 1998 from $472 million in 1997. A large portion of the increase in revenue
was due to the acquisition of Affiliated Regional Communications by Fox/Liberty
Networks on March 13, 1997 which increased the number of consolidated
subsidiaries and their respective operations. Had the acquisition of Affiliated
Regional Communications been completed for all periods presented, revenue would
have increased $128 million for 1998. The increase in revenue was attributable
to continued subscriber growth at the regional sports networks and the FX
network along with increased advertising revenue due to increased subscribers
and ratings. Operating Cash Flow increased $94 million to $79 million in 1998
from a deficit of $15 million in 1997. The increase in Operating Cash Flow was
caused by the revenue growth coupled with an increase in operating expenses.
The increase in operating expenses was due to an increase in the number of
professional events, primarily Major League Baseball games, as well as
increased programming rights fees of regional sports networks due to
renegotiated and newly entered into sports rights agreements. Fox/Liberty
Networks net loss decreased by $16 million or 21% to $62 million in 1998 from
$78 million in 1997. The decrease in the net loss was due to the improvement in
Operating Cash Flow offset primarily by interest expense. In 1998, interest
expense increased to $113 million from $49 million in 1997 due to additional
indebtedness that was entered into in the latter half of 1997. Liberty's share
of losses was $83 million for 1998 and zero for 1997, as Liberty's basis in the
investment was less than zero. See note 5 to the accompanying consolidated
financial statements.

PCS Ventures. Liberty's share of losses from its investment in the PCS
Ventures was $629 million and $493 million in 1998 and 1997, respectively. The
increase in the share of losses is attributed primarily to increases in:

. selling, general and administrative costs associated with Sprint PCS's
efforts to increase its customer base;

. depreciation expense resulting from capital expenditures made to expand
its PCS network; and

. interest expense associated with higher amounts of outstanding debt.

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Telewest. Telewest accounted for $134 million and $145 million of Liberty's
share of its affiliates' losses during 1998 and 1997, respectively. The
increase in the share of losses was primarily attributable to the net effects
of:

. changes in foreign currency transaction losses;

. an increase in Operating Cash Flow resulting from revenue growth; and

. an increase in interest expense.

Telewest issued debentures in connection with a previous merger transaction.
Changes in the exchange rate used to translate the Telewest debentures into
U.K. pounds sterling and the adjustment of a foreign currency option contract
to market value caused Telewest to experience foreign currency transaction
gains/losses that affected Liberty's share of Telewest's losses.

Liquidity and Capital Resources

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

In connection with the AT&T merger and other related transactions, Liberty
received approximately $5.5 billion in cash. Also, upon consummation of the
AT&T merger, through a new tax sharing agreement between Liberty and AT&T,
Liberty became entitled to the benefit of all of the net operating loss
carryforwards available to the entities included in TCI's consolidated income
tax return as of the date of the AT&T merger. In addition, under the tax
sharing agreement, Liberty will receive a cash payment from AT&T in periods
when it generates taxable losses and those taxable losses are utilized by AT&T
to reduce the consolidated income tax liability. Additionally, certain warrants
held by TCI were transferred to Liberty in exchange for $176 million in cash.

At December 31, 1999, Liberty and its consolidated subsidiaries had bank
credit facilities which provided for borrowings of up to $1.1 billion.
Borrowings under these facilities of $963 million were outstanding at December
31, 1999. Certain assets of Liberty's consolidated subsidiaries serve as
collateral for borrowings under these bank credit facilities. Also, these bank
credit facilities contain provisions which limit additional indebtedness, sale
of assets, liens, guarantees and distributions by the borrowers.

On July 7, 1999, Liberty received net cash proceeds of approximately $741
million and $494 million from the issuance of its 7 7/8% Senior Notes due 2009
and 8 1/2% Senior Debentures due 2029, respectively. The proceeds were used to
repay outstanding borrowings under certain of Liberty's credit facilities, two
of which were subsequently terminated. On January 13, 2000, Liberty completed
an exchange offer for the 7 7/8% Senior Notes due 2009 and 8 1/2% Senior
Debentures due 2029 that provided tendering holders with identical securities
registered under the Securities Act.

On November 16, 1999, Liberty received net cash proceeds of $854 million from
the issuance of its 4% Senior Exchangeable Debentures due 2029, in the
aggregate principal amount of $869 million. Each debenture has a $1,000 face
amount and is exchangeable at the holder's option for the value of 22.9486
shares of Sprint PCS Group stock (as adjusted for a two-for-one stock split).
This amount will be paid only in cash until the later of December 31, 2001 and
the date the direct and indirect ownership level of Sprint PCS Group stock
owned by Liberty falls below a designated level, after which at Liberty's
election, Liberty may pay the amount in cash, Sprint PCS Group stock or a
combination thereof. The carrying amount of the exchangeable debentures in
excess of the principal amount is based on the fair value of the underlying
Sprint PCS Group stock. On February 9, 2000, Liberty registered the resale of
these debentures under the Securities Act of 1933.

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On January 7, 2000, a trust, which holds Liberty's investment in Sprint,
entered into agreements to loan 18 million shares of Sprint PCS Group stock (as
adjusted for a two-for-one stock split) to a third party, as Agent, in exchange
for cash collateral equal to 100% of the market value of that stock. During the
period of the loan, which is terminable by either party at any time, the cash
collateral is to be marked-to-market daily. The trust has the use of 80% of the
cash collateral plus any interest earned thereon during the term of the loan,
and is required to pay a rebate fee equal to the Federal funds rate less 30
basis points to the borrower of the loaned shares.

On February 2, 2000, Liberty received net cash proceeds of $983 million from
the issuance of the old debentures.

On February 10, 2000, Liberty received net cash proceeds of $735 million from
the issuance of its 3 3/4% Senior Exchangeable Debentures due 2030. On March 8,
2000, Liberty received net cash proceeds of $59 million, including accrued
interest from February 10, 2000, from the issuance of an additional $60 million
principal amount of its 3 3/4% Senior Exchangeable Debentures due 2030.

There are restrictions on incurrence of debt of Liberty Media Group, and
therefore on Liberty, through an Inter-Group Agreement with AT&T. Liberty Media
Group may not incur any debt that would cause the total indebtedness of Liberty
Media Group at any time to be in excess of 25% of the total market
capitalization of the Liberty Media Group tracking stock ($19 billion at
December 31, 1999), if the excess would adversely affect the credit rating of
AT&T.

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

On April 8, 1999, substantially all of Liberty Media International's 4 1/2%
convertible subordinated debentures were converted into shares of Liberty Media
Group tracking stock. Since substantially all of the debenture holders elected
to convert, no payment of interest and no adjustment in respect of interest
were made.

Liberty holds shares of Time Warner Series LMCN-V common stock, which are
convertible into 114 million shares of Time Warner common stock. Holders of
Time Warner Series LMCN-V common stock are entitled to receive dividends
ratably with Time Warner common stock. Liberty has received approximately $5
million in cash dividends quarterly from Time Warner. On January 10, 2000, Time
Warner announced its proposed merger with America Online, Inc., pursuant to
which each share of Time Warner Series LMCN-V common stock would be converted
into 1.5 shares of an identical series of stock of the combined AOL Time
Warner. It is anticipated that AOL Time Warner will pay dividends on its common
stock and consequently that Liberty will receive dividends on the AOL Time
Warner Series LMCN-V common stock it holds. However, there can be no assurance
that such dividends will continue to be paid.

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

On July 15, 1999, News Corp. acquired Liberty's 50% interest in Fox/Liberty
Networks in exchange for 51.8 million News Corp. American Depository Receipts
("ADRs"), representing preferred limited voting ordinary shares of News Corp.
Liberty also acquired from News Corp. 28.1 million additional ADRs representing
preferred limited voting ordinary shares of News Corp. for approximately $695
million. As a result of these transactions and other open market transactions,
at December 31, 1999, Liberty owned

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approximately 81.7 million ADRs representing preferred limited voting shares of
News Corp. News Corp. has historically paid cash dividends on its common stock
and it is anticipated that it will continue to do so. Holders of the ADRs are
entitled to receive dividends ratably with News Corp. common stock, and,
consequently, Liberty receives cash dividends on the ADRs that it holds.
However, there can be no assurance that such dividends will continue to be
paid.

On January 5, 2000, Motorola, Inc. completed the acquisition of General
Instrument Corporation through a merger of General Instrument with a wholly
owned subsidiary of Motorola. In the merger, each outstanding share of General
Instrument common stock was converted into the right to receive 0.575 shares of
Motorola common stock. In connection with the merger Liberty received 18
million shares and warrants to purchase 12 million shares of Motorola common
stock in exchange for its holdings in General Instrument. Motorola has
historically paid cash dividends on its common stock and it is anticipated that
it will continue to do so. Consequently, Liberty expects to receive cash
dividends on its shares of Motorola common stock. However, there can be no
assurance that such dividends will continue to be paid.

Pursuant to a proposed final judgment agreed to by TCI, AT&T and the United
States Department of Justice on December 30, 1998, Liberty transferred all of
its beneficially owned securities of Sprint to a trust prior to the AT&T
merger. The final judgment, which was entered by the United States District
Court for the District of Columbia on August 23, 1999, requires the trustee, on
or before May 23, 2002, to dispose of a portion of the Sprint securities held
by the trust sufficient to cause Liberty to own beneficially no more than 10%
of the outstanding Sprint PCS Group stock that would be outstanding on a fully
diluted basis on such date. On or before May 23, 2004, the trustee must divest
the remainder of the Sprint securities held by the trust. The final judgment
requires the trustee to vote the Sprint securities beneficially owned by
Liberty in the same proportion as other holders of Sprint PCS Group stock so
long as such securities are held by the trust. The final judgment also
prohibits the acquisition by Liberty of additional Sprint securities, with
certain exceptions, without the prior written consent of the Department of
Justice.

During the ten month period ended December 31, 1999, the unrealized
appreciation, net of taxes, of the fair value of Liberty's shares of Time
Warner Series LMCN-V common stock was $224 million, based upon the market value
of the Time Warner common stock into which the Time Warner Series LMCN-V common
stock is convertible. During the ten month period ended December 31, 1999, the
unrealized appreciation, net of taxes, of the fair value of the Sprint PCS
Group stock held by Liberty was $3.9 billion based upon the market value of
such shares. During the ten month period ended December 31, 1999, the
unrealized appreciation, net of taxes, of the fair value of Liberty's interest
in General Instrument was $1.5 billion based upon the market value of the
General Instrument securities held.

Liberty has guaranteed notes payable and other obligations of certain
affiliates. At December 31, 1999, the U.S. dollar equivalent of the amounts
borrowed pursuant to these guaranteed obligations aggregated approximately $655
million.

Flextech has undertaken to finance the working capital requirements of a
joint venture that it has formed with BBC Worldwide Limited, and is obligated
to provide this joint venture with a primary credit facility of (Pounds)88
million and, subject to certain restrictions, a standby credit facility of
(Pounds)30 million. As of December 31, 1999, this joint venture had borrowed
(Pounds)53 million under the primary credit facility. If Flextech defaults in
its funding obligation to the joint venture and fails to cure the default
within 42 days after receipt of notice from BBC Worldwide, BBC Worldwide is
entitled, within the following 90 days, to require that Liberty assume all of
Flextech's funding obligations to the joint venture.

Liberty intends to continue to develop its entertainment and information
programming services and has made certain financial commitments related to the
acquisition of programming. As of December 31, 1999, Starz Encore Group's
future minimum obligation related to certain film licensing agreements was $900
million. The amount of the total obligation is not currently estimable because
such amount is dependent upon the number of qualifying films released
theatrically by certain motion picture studios as well as the domestic
theatrical

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exhibition receipts upon the release of such qualifying films. Continued
development may require additional financing and it cannot be predicted whether
Starz Encore Group will obtain such financing. If additional financing cannot
be obtained by Starz Encore Group, Starz Encore Group or Liberty could attempt
to sell assets but there can be no assurance that asset sales, if any, can be
consummated at a price and on terms acceptable to Liberty.

Cash Flows from Operating Activities

Cash flows from operating activities for the ten month period ended December
31, 1999 were $133 million. Cash flows used in operating activities for the two
month period ended February 28, 1999 were $107 million and cash flows from
operating activities for the years ended December 31, 1998 and 1997 were $26
million and $149 million, respectively. Improved Operating Cash Flow for Starz
Encore Group and increased dividend and interest income contributed to the
higher cash flows from operating activities for the ten month period ended
December 31, 1999. Dividends and interest income from the investment of the
$5.5 billion received in the AT&T merger contributed $178 million to cash flows
from operating activities during the ten month period ended December 31, 1999.
Cash used during the two month period ended February 28, 1999 included payments
related to stock appreciation rights of $126 million. Due to a number of
transactions during the two-year period ended December 31, 1998, the results of
operations, and consequently cash flows from operating activities, during this
period are not comparable from year to year. These transactions resulted in the
consolidation or deconsolidation of several entities, as discussed above in the
"Summary of Operations."

Cash Flows from Investing Activities

Investing cash flows were primarily used in the purchase of marketable
securities during the ten month period ended December 31, 1999. Liberty made
purchases of marketable securities of $7.8 billion and had sales and maturities
of marketable securities of $5.7 billion during the ten month period ended
December 31, 1999. Liberty is a holding company and as such it uses investing
cash flows to make contributions and investments in entities in which Liberty
holds a 50% or less ownership interest. Cash flows from investing activities
were used for investments in and loans to affiliates amounting to $2.6 billion,
$51 million, $1.4 billion and $580 million during the ten month period ended
December 31, 1999, the two month period ended February 28, 1999, and the years
ended December 31, 1998 and 1997, respectively. Additionally, Liberty had cash
proceeds from dispositions of $130 million, $43 million, $423 million and $268
million during the ten month period ended December 31, 1999, the two month
period ended February 28, 1999, and the years ended December 31, 1998 and 1997,
respectively. Liberty invested $109 million, $92 million and $41 million in
acquisitions during the ten months ended December 31, 1999 and the years ended
December 31, 1998 and 1997, respectively.

Cash Flows from Financing Activities

Liberty is primarily dependent on financing activities to generate sufficient
cash resources to meet its cash requirements. Financing cash flows consist
primarily of borrowings and repayments of debt. Liberty had borrowings of $3.2
billion, $155 million, $2.2 billion and $661 million and repayments of $2.2
billion, $145 million, $609 million and $341 million during the ten month
period ended December 31, 1999, the two month period ended February 28, 1999,
and the years ended December 31, 1998 and 1997, respectively. Cash transfers to
related parties during the ten months ended December 31, 1999 and the years
ended December 31, 1998 and 1997 were $159 million, $215 million and $428
million, respectively.

Accounting Standards

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values of derivative instruments are recognized immediately in earnings unless
those instruments qualify as hedges of the:

. fair values of existing assets, liabilities or firm commitments;

. variability of cash flows of forecasted transactions; or

. foreign currency exposures of net investments in foreign operations.

Although our management has not completed its assessment of the impact of
Statement 133 on Liberty's consolidated results of operations and financial
position, management does not expect that the impact of Statement 133 will be
significant, however, no assurances can be given that it will not be
significant.

Market Risk

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

Contributions to Liberty's foreign affiliates are denominated in foreign
currency. Liberty therefore is exposed to changes in foreign currency exchange
rates. Currently, Liberty does not hedge any foreign currency exchange risk
because of the long-term nature of its interests in foreign affiliates. Liberty
continually evaluates its foreign currency exposure (primarily the Argentine
Peso, British Pound Sterling, Japanese Yen and French Franc) based on current
market conditions and the business environment.

Liberty is exposed to changes in interest rates primarily as a result of its
borrowing and investment activities, which include fixed and floating rate
investments and borrowings used to maintain liquidity and fund its business
operations. The nature and amount of Liberty's long-term and short-term debt
are expected to vary as a result of future requirements, market conditions and
other factors. As of December 31, 1999, the majority of Liberty's debt was
composed of fixed rate debt resulting from the 1999 issuances of notes and
debentures for net proceeds of approximately $2.1 billion. The proceeds were
used to repay floating rate debt, which reduced Liberty's exposure to interest
rate risk associated with rising variable interest rates. Had market interest
rates been 1% higher throughout the years ended December 31, 1999 and 1998,
Liberty would have recorded approximately $16 million and $14 million of
additional interest expense for the years ended December 31, 1999 and 1998,
respectively. At December 31, 1999, the aggregate fair value of all of
Liberty's outstanding notes and debentures was $2.3 billion.

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

In order to illustrate the effect of changes in stock prices on Liberty we
provide the following sensitivity analysis. Had the stock price of our
investments accounted for as available-for-sale securities been 10% lower at
December 31, 1999, and 1998, the value of such securities would have been lower
by $2.4 billion and $1.0 billion, respectively. Our unrealized gains, net of
taxes would have also been lower by $1.5 billion and $622 million,
respectively. Had the stock price of our publicly traded investments accounted
for using the equity method been 10% lower at December 31, 1999 and 1998, there
would have been no impact on the carrying value of such investments. Had the
stock price of the Sprint PCS Group stock underlying Liberty's 4% Senior
Exchangeable Debentures due 2029 been 10% higher at December 31, 1999,
Liberty's total debt and correspondingly, Liberty's interest expense would have
been higher by $102 million.

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

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CORPORATE HISTORY

Liberty's former parent, TCI, began acquiring interests in programming
businesses in the late 1970s in an effort to ensure quality content for
distribution on its cable television systems. TCI's early programming interests
included those in Black Entertainment Television (since renamed BET Network),
Turner Broadcasting System (since acquired by Time Warner), Cable Educational
Network (since renamed Discovery Communications, Inc.), QVC Network, Inc.,
International Family Entertainment, Inc. (since reorganized as Fox Kids
Worldwide) and several regional sports networks.

TCI formed Liberty's predecessor, which we refer to as "LMC," for the purpose
of spinning off to TCI's shareholders, by means of an exchange offer, TCI's
interests in most of its cable television programming businesses and certain of
its affiliated cable television systems. TCI retained a significant interest in
LMC through its ownership of preferred stock. The spinoff was effected due to
concerns over proposals that were then pending before Congress that, if
enacted, would impose horizontal limits on the number of subscribers that could
be served by a single cable operator and vertical limits on the ownership by
cable operators of interests in cable programming services.

LMC began trading on March 28, 1991, with a fully diluted equity market
capitalization of approximately $190 million. At that time, its assets included
interests in cable television systems serving approximately 1.6 million
subscribers, regional sports networks and eight national programming services,
including QVC, Black Entertainment Television and The Family Channel. Over the
next three years LMC increased its programming assets by acquiring interests in
and developing companies that produced branded programming content, including
Encore Media Corporation, the Home Shopping Network and two national and
several regional sports networks.

On August 4, 1994, TCI reacquired the public's interest in LMC by means of a
merger, and LMC again became a wholly owned subsidiary of TCI. TCI reacquired
LMC largely because of the FCC's adoption in 1994 of vertical and horizontal
cable and programming regulations, which a combined TCI and LMC fit within. At
the time LMC was reacquired by TCI, LMC's fully diluted equity market
capitalization had grown to approximately $3.2 billion. At that time, Liberty
had interests in cable television systems serving approximately 3.2 million
subscribers, 11 national programming services, including Encore, STARZ! and QVC
and two national and 13 regional sports networks.

In the fourth quarter of 1994, TCI reorganized its businesses into four
divisions: (1) Domestic Cable and Communications, (2) Programming, (3)
International Cable and Programming and (4) Technology/Venture Capital. This
business-line reorganization was effected in an effort to better focus
management expertise in the various areas into which TCI had evolved, and to
gain greater market recognition of the value of TCI's four lines of businesses.
In an effort to further gain market recognition of what TCI believed to be
hidden values in its asset base, in August 1995, TCI divided its common stock
into two tracking stocks, with one series of tracking stock intended to reflect
the separate performance of a newly created "Liberty Media Group." The assets
attributed to the Liberty Media Group were comprised primarily of the assets of
TCI's Programming division. The other series of tracking stock was intended to
reflect the separate performance of the "TCI Group," which was comprised of the
three other divisions of TCI.

The Liberty Media Group tracking stock began trading on August 10, 1995, with
a fully diluted equity market capitalization of approximately $4.5 billion. At
that time, Liberty's assets included interests in more than 30 national cable
programming services, three national and 15 regional sports networks and
various other businesses involved in television programming production and
distribution. Over the course of the next three years, Liberty continued to
expand its interests in programming services and leveraged several of its
interests to obtain the benefits of scale and liquidity. This included
Liberty's acquisition of an approximately 9% interest in Time Warner in
exchange for its interest in Turner Broadcasting System and the exchange of its
shares in International Family Entertainment for a preferred stock interest in
Fox Kids Worldwide.

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<PAGE>

In August 1997, TCI created a third class of tracking stock intended to track
the separate performance of the "TCI Ventures Group," which was comprised of
the International Cable and Programming division and the Technology/Venture
Capital division of TCI.

On March 9, 1999, TCI was acquired by AT&T in a merger transaction in which
the holders of TCI Group tracking stock received AT&T common stock and holders
of Liberty Media Group tracking stock and TCI Ventures Group tracking stock
received shares of AT&T's Liberty Media Group tracking stock. In the merger
with AT&T, the holders of TCI's Liberty Media Group and TCI Ventures Group
tracking stocks received shares of AT&T's Liberty Media Group tracking stock
with a value of approximately $24 billion and $13 billion, respectively, based
on the closing price of AT&T's Liberty Media Group tracking stock on the NYSE
on March 10, 1999 (which was the first day of trading). At the time of the
merger, Liberty's assets included interests in more than 50 national cable
programming services, six national, 25 regional and six international sports
networks, 23 digital networks, ten Internet businesses, over 65 international
programming services, and cable and cable telephony systems in Europe, Latin
America and Japan.

As a result of the merger with AT&T, TCI and Liberty became subsidiaries of
AT&T. In connection with the merger, most of the assets formerly attributed to
the TCI Ventures Group were transferred to Liberty. Other assets that had been
attributed to the TCI Ventures Group were transferred to TCI in exchange for a
cash contribution of approximately $5.5 billion to Liberty. As a result of
these asset transfers, Liberty obtained interests in foreign distribution
companies, interests in certain foreign programming businesses and interests in
Internet and technology companies as well as approximately $5.5 billion cash
and the right to the U.S. federal income tax benefits of a net operating tax
loss carryforward possessed by TCI at the time of its merger with AT&T. In
addition, certain transaction agreements were entered into in connection with
the merger which provide Liberty with a level of financial and operational
separation from AT&T and certain programming rights with respect to AT&T's
cable systems. See "Relationship with AT&T and Certain Related Transactions."

On March 10, 2000, TCI was converted into a Delaware limited liability
company, of which AT&T is the sole member, and renamed AT&T Broadband LLC.

38
<PAGE>

BUSINESS

Overview

Our management team, led by Dr. John C. Malone, our Chairman, and Mr. Robert
R. Bennett, our President and Chief Executive Officer, has extensive expertise
in creating and developing new businesses and opportunities for our
subsidiaries and business affiliates and in building scale, brand power and
market leadership. This expertise dates back to the mid-1980s when members of
our management were instrumental in identifying and executing strategic
transactions to provide TCI, our former parent, with quality programming for
its cable television systems. Today, our management team continues to leverage
its expertise and industry relationships on behalf of our subsidiaries and
business affiliates to identify and execute strategic transactions that improve
the value of their businesses and that allow us to take full advantage of new
developments in consumer and technological trends.

Business Strategy

Promoting the internal growth of our subsidiaries and business affiliates. We
actively seek to foster the internal growth of our subsidiaries and business
affiliates by working with their management teams to expand their established
businesses and create new businesses, often by extending their existing brands
across multiple distribution platforms or effecting transactions that enhance
the scale of their operations. Our emphasis is on the creation and development
of multiple sources of revenue that enhance cash flow. We also seek to use our
extensive industry experience and relationships to provide our subsidiaries and
business affiliates with strategic alliances, greater visibility and improved
positioning in their respective markets. While the form of our participation in
our subsidiaries and business affiliates may change over time as a result of
acquisitions, mergers and other strategic transactions, we generally seek to
retain a significant long-term interest in their successors.

Maintaining significant involvement in governance. We seek to add
considerable value to our subsidiaries and business affiliates through our
strategic, operational and financial advice. To ensure Liberty can exert
significant influence over management where we own less than a majority voting
interest in a business affiliate, we often seek representation at the board of
directors level and contractual rights that assure our participation in
material decision making. These contractual rights will typically include
participation in budget decisions, veto rights over significant corporate
actions and rights of first refusal with respect to significant dispositions of
stock by management or strategic partners.

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<PAGE>

Participating with experienced management and strategic partners. We seek to
participate in companies with experienced management teams that are led by
strong entrepreneurs, and partner with strategic investors that are engaged in
complementary businesses with a demand for the products and services of our
subsidiaries and business affiliates. Our existing business affiliates are led
by such entrepreneurs as Barry Diller of USA Networks, Inc., Rupert Murdoch of
News Corp. and John Hendricks of Discovery Communications, Inc., while our
existing strategic partners include Comcast Corporation, News Corp. and Time
Warner.

Executing strategic transactions that optimize the efficiency of our
assets. We seek to identify and execute acquisitions, consolidations and other
strategic transactions that rationalize our participation in the businesses of
our subsidiaries and business affiliates. We often undertake transactions of
this nature to obtain the benefits of scale and liquidity as well as to further
diversify Liberty's businesses. In pursuing new acquisition opportunities, we
focus on businesses that have attractive growth characteristics and offer
strategic benefits to our existing subsidiaries and business affiliates. We
employ a conservative capital structure in managing our assets and
rationalizing our businesses. We also seek to enhance our financial flexibility
by utilizing multiple sources of capital and preserving liquidity through our
ownership of a mix of public and private assets.

Business Operations

Liberty is engaged principally in three fundamental areas of business:

. Programming, consisting principally of interests in video programming
services;

. Communications, consisting principally of interests in cable television
systems and other communications systems; and

. Internet services and technology.

Recent Developments

On December 10, 1999, Liberty entered into an agreement with The Todd-AO
Corporation with respect to a transaction pursuant to which the Liberty Media
Group would acquire approximately 60% of the outstanding equity and 94% of the
voting power of Todd in exchange for approximately 3 million shares of AT&T
Class A Liberty Media Group tracking stock. Todd provides sound, video and
ancillary post production and distribution services to the motion picture and
television industries in the United States and Europe. The transaction with
Todd is subject to the approval of Todd's shareholders, as well as other
customary closing conditions and is expected to close in the second quarter of
2000.

On December 30, 1999, Liberty entered into an agreement with Soundelux
Entertainment Group, Inc. with respect to a transaction pursuant to which the
Liberty Media Group would acquire approximately 55% of the outstanding equity
and 92% of the voting power of Soundelux in exchange for approximately 2
million shares of AT&T Class A Liberty Media Group tracking stock. Soundelux
provides video, audio, show production, design and installation services to
location-based entertainment venues and provides production and post-production
sound services, including content, editing, re-recording and music supervision,
to the motion picture, television and interactive gaming industries. The
transaction with Soundelux is subject to the approval of Soundelux's
shareholders and the closing of the Todd transaction, as well as other
customary closing conditions and is expected to close in the second quarter of
2000.

On April 10, 2000, Liberty Media Group acquired all of the outstanding common
stock of Four Media Company in exchange for approximately $123 million in cash,
the issuance of approximately 3.2 million shares of AT&T Class A Liberty Media
Group tracking stock and a warrant to purchase approximately 350,000 shares of
AT&T Class A Liberty Media Group tracking stock at an exercise price of $46.00
per share. Four Media is a provider of technical and creative services to
owners, producers and distributors of television programming, feature films and
other entertainment products both domestically and internationally.

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<PAGE>

Following the acquisitions of majority interests in Todd and Soundelux, and
subject to certain conditions, the Liberty Media Group has agreed to cause the
following additional transactions to occur: (i) contribution of the Liberty
Media Group's controlling interest in Todd to Soundelux, in exchange for
additional shares of voting stock of Soundelux; (ii) contribution by Soundelux
to Todd of 100% of the business and operations of Soundelux, in exchange for
additional shares of voting stock of Todd and the assumption by Todd of 100% of
the liabilities of Soundelux; and (iii) contribution by the Liberty Media Group
to Soundelux, and by Soundelux to Todd, of 100% of the stock of Four Media. As
a result of these transactions, the assets and operations now owned and
operated by Four Media, Soundelux and Todd would be consolidated within Todd,
which would change its name to Liberty Livewire, Inc. Liberty Livewire would be
a subsidiary of Liberty.

On January 14, 2000, Liberty Media Group acquired The Associated Group, Inc.
pursuant to a merger agreement among AT&T, Liberty and Associated Group. Under
the merger agreement, each share of Associated Group's Class A common stock and
Class B common stock was converted into 0.49634 shares of AT&T common stock and
1.20711 shares of AT&T Class A Liberty Media Group tracking stock. Prior to the
merger, Associated Group's primary assets were (1) approximately 19.7 million
shares of AT&T common stock, (2) approximately 23.4 million shares of AT&T
Class A Liberty Media Group tracking stock, (3) approximately 5.3 million
shares of AT&T Class B Liberty Media Group tracking stock, (4) approximately
21.4 million shares of common stock, representing approximately a 40% interest,
of Teligent, Inc., a full-service, facilities-based communications company, and
(5) all of the outstanding shares of common stock of TruePosition, Inc., which
provides location services for wireless carriers and users designed to
determine the location of any wireless transmitters, including cellular and PCS
telephones. Immediately following the completion of the merger, all of the
assets and businesses of Associated Group, other than its interest in Teligent,
were transferred to Liberty. Associated Group's interest in Teligent is held by
a member of the Liberty Media Group other than Liberty. All of the shares of
AT&T common stock, AT&T Class A Liberty Media Group tracking stock and AT&T
Class B Liberty Media Group tracking stock previously held by Associated Group
were retired by AT&T.

On February 7, 2000, Liberty purchased 18 million shares of Cendant
Corporation common stock and a warrant to purchase up to an additional
approximate 29 million shares of common stock at an exercise price of $23.00
per share (subject to anti-dilution adjustments), which resulted in Liberty
having an approximate 6.5% ownership interest in Cendant. Liberty paid $300
million in cash for the common stock and $100 million in cash for the warrant.
Cendant is primarily engaged in the consumer and business services industries,
with its principal operations in travel related services, real estate related
services and alliance marketing related services.

On March 16, 2000, Liberty purchased shares of cumulative preferred stock in
TCI Satellite Entertainment, Inc. (TSAT) in exchange for Liberty's economic
interest in 5,084,745 shares of Sprint Corporation PCS common stock, valued at
$300 million. Liberty received 150,000 shares of TSAT Series A 12% Cumulative
Preferred Stock and 150,000 shares of TSAT Series B 8% Cumulative Convertible
Voting Preferred Stock. The Series A preferred stock does not have voting
rights, while the Series B preferred stock gives Liberty approximately 85% of
the voting power of TSAT. Liberty and TSAT also formed a joint venture named
Liberty Satellite, LLC to hold and manage interests in entities engaged
globally in the distribution of internet data and other content via satellite
and related businesses. As part of this transaction, Liberty contributed its
interests in XM Satellite Radio Holdings, Inc., iSKY, Inc., Astrolink
International LLC and Sky Latin America in exchange for an approximately 89%
interest in the joint venture. TSAT contributed its interest in JATO
Communications Corp. and General Motors Class H Common Stock in exchange for an
approximately 11% interest in the joint venture which will be managed by TSAT.
In a related transaction, TSAT paid Liberty $60 million in the form of an
unsecured promissory note in exchange for an approximately 14% interest in a
limited liability company with holdings in Astrolink International LLC. The
remaining 86% of the limited liability company is held by Liberty Satellite,
LLC.

On March 27, 2000, Liberty announced that it had agreed to purchase 3,775,000
shares of common stock of IDT Corporation at a price of $34.50 per share. As a
result of this transaction, Liberty would own an

41
<PAGE>

approximately 9.9% equity interest in IDT and would have the right to nominate
a director for election to IDT's board of directors. IDT is a leading
facilities-based, multinational carrier that combines its position as an
international telecommunications operator with its experience as an Internet
service provider to provide a broad range of telecommunications services to its
wholesale and retail customers worldwide. The closing of this transaction is
subject to customary closing conditions, including regulatory approvals.

On March 28, 2000, Liberty announced that it had completed its cash tender
offer for the outstanding common stock of Ascent Entertainment Group, Inc. at a
price of $15.25 per share. Approximately 85% of the outstanding shares of
common stock of Ascent were tendered in the offer. If the remaining closing
conditions under the merger agreement entered into between Liberty and Ascent
on February 22, 2000, are satisfied or waived, Liberty will acquire the
remaining Ascent shares by merging a subsidiary into Ascent. If the merger is
effected, Liberty expects to pay approximately $460 million for the Ascent
stock. In addition, Ascent will have approximately $295 million in indebtedness
outstanding immediately after the merger. Ascent's principal business is
providing pay-per-view entertainment and information services through its
majority owned subsidiary, On Command Corporation. Ascent also provides
satellite service to the NBC television network and owns the National
Basketball Association's Denver Nuggets, the National Hockey League's Colorado
Avalanche and the Pepsi Center, Denver's new entertainment facility which is
home to both the Nuggets and the Avalanche. Ascent has agreed to sell its
interest in the Nuggets, the Avalanche and the Pepsi Center for approximately
$268 million in cash and the assumption of approximately $136 million in debt.
The closing of this sale is subject to customary closing conditions, including
regulatory approvals. This sale will not affect Liberty's 6.5% profits'
interests in each of the Nuggets and the Avalanche and its 6.5% interest in the
Pepsi Center.

On March 31, 2000, Liberty acquired 7,125,000 shares of Class B non-voting
common stock of Corus Entertainment Inc. at a purchase price of Canadian $28.05
per share, which resulted in Liberty having an approximate 19.9% ownership
interest in Corus. Corus is one of Canada's leading media companies with
interests in 14 radio stations, including The Edge, FOX and Country 105, and
specialty television networks, including YTV, CMT, Teletoon, Telelatino and The
Comedy Network.

On April 11, 2000, Liberty purchased for $500 million in cash (a) 500,000
shares of ICG Communications, Inc. convertible preferred stock, which are
initially convertible into 17,857,142 shares of ICG Communications common
stock, and (b) warrants to purchase 6,666,667 shares of ICG Communications
common stock at an initial exercise price of $34.00 per share. ICG
Communications is a telecommunications company with a nationwide voice and data
network serving more than 700 U.S. cities. It also is a competitive local
exchange carrier and broadband data communications company and a provider of
network infrastructure, facilities and management.

On April 19, 2000, Liberty purchased 8 million shares of common stock of
Primedia Inc. (representing an approximate 5% ownership interest in Primedia)
and warrants to purchase an additional 1.5 million shares of common stock of
Primedia at an exercise price of $25 per share, in exchange for $200 million in
cash. At the same time, Primedia acquired 625,000 shares of Liberty Digital
Series A common stock at a purchase price of $40 per share. In connection with
these transactions, Primedia has granted to Liberty an option, which Liberty
may transfer to Liberty Digital, to acquire a 12.5% ownership interest in
PRIMEDIA Broadband Video, LLC, which can be exercised in exchange for cash,
shares of AT&T Liberty Media Group tracking stock or shares of Liberty Digital
Series A common stock, on terms to be negotiated by the parties. Primedia is a
targeted media company, reaching consumer and business-to-business audiences
through print, Internet, live events, video and radio. PRIMEDIA Broadband
Video, LLC was recently established to exploit, for purposes of the consumer
marketplace, broadband distribution and interactive applications of Primedia's
substantial video resources.

Programming

Programming networks distribute their services through a number of
distribution technologies, including cable television, direct-to-home
satellite, broadcast television and the Internet. Programming services may be
delivered to subscribers as part of a video distributor's basic package of
programming services for a fixed monthly fee, or may be delivered as a
"premium" programming service for an additional monthly charge. Whether a
programming service is on a basic or premium tier, the programmer generally
enters into separate

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<PAGE>

multi-year agreements, known as "affiliation agreements," with those
distributors that agree to carry the service. Basic programming services derive
their revenues principally from the sale of advertising time on their networks
and from per subscriber license fees received from distributors. Premium
services do not sell advertising and primarily generate their revenues from
subscriber fees.

Consolidated Subsidiaries

Starz Encore Group LLC

Starz Encore Group LLC is a leading provider of cable and satellite-delivered
premium movie networks in the United States. It currently owns and operates 13
full-time domestic movie channels, including Encore, which airs first-run
movies and classic contemporary movies, STARZ!, a first-run premium movie
service, and MOVIEplex, a "theme by day" channel featuring a different Encore
or Encore Thematic Multiplex channel each day, on a weekly rotation. Through
the use of thematic multiplexing--that is, the creation of multiple channels of
programming by reorganizing the movies by theme--Starz Encore Group is well
positioned to take advantage of the increasing channel capacities created by
compressed digital distribution systems. In addition, Starz Encore Group
currently has agreements in place with most of the major program distributors
and many smaller distributors to carry its Encore Thematic Multiplex services
in digital packages. As digital service becomes more widely available, these
services will be available to most cable homes.

Starz Encore Group currently has access to approximately 5,700 movies through
long-term licensing agreements. In addition, it has licensed the exclusive
rights to first-run output from Disney's Hollywood Pictures, Touchstone and
Miramax, Universal Studios, New Line and Fine Line, Sony's Columbia Pictures
and Sony Classics and other major studios. Starz Encore Group also has
exclusive rights to first run output from four independent studios. The output
agreements expire between 2003 and 2011. Unlike vertically integrated
programmers, Starz Encore Group is not committed to or dependent on any one
source of film productions. As a result, it has affiliations with every major
Hollywood studio, either through long-term output agreements or library access
arrangements. Starz Encore Group also engages in original programming
production.

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<PAGE>

The table below sets forth certain information about each of Starz Encore
Group's domestic programming services.

<TABLE>
<CAPTION>
Liberty's
Attributed
Subscribers/Units/1/ Year Ownership %
Entity at 12/31/99 (000's) Launched at 3/31/00
- ------------------------------------- -------------------- -------- -----------
<S> <C> <C> <C>
Starz Encore Group LLC............... 100%
Encore............................. 13,745 1991
MOVIEplex.......................... 7,598 1995
Thematic Multiplex (aggregate
units)............................ 26,012/2/ 1994
Love Stories
Westerns
Mystery
Action
True Stories
WAM! America's Kidz Network
STARZ!............................. 10,240 1994
STARZ! Multiplex (aggregate
units)............................ 6,180/2/
STARZ! Theater................... 1996
STARZ! Family.................... 1999
STARZ! Cinema.................... 1999
BET Movies/STARZ!3............... 1997 88%
</TABLE>
- --------
(1) Each premium service to which a household subscribes is counted as one
"unit." For example, one household subscribing to four services would be
counted as four "units."
(2) Digital services.

Starz Encore Group's business objective is to be the premier provider of
movie services. Its strategies for achieving its objective include: (1)
continuing to strengthen its core business assets in an effort to promote the
premium television category and increase cash flow from operations, (2) driving
demand for digital services to enable cable operators and direct broadcast
satellite providers to position themselves as a viable alternative to video
stores through a combination of pay-per-view channels, thematic multiplexing
and multiple time scheduled feeds, and (3) leveraging the strength of its brand
by extending its franchises into other forms of media, including online
applications, such as e-commerce.

Ownership Interest. Liberty owns 100% of Starz Encore Group. Liberty's
ownership in Starz Encore Group began with an investment in its predecessor in
1991 when Encore was launched as a low-priced movie channel that cable
operators could offer individually or packaged with higher-priced services such
as HBO and Showtime. Since December 31, 1992, Encore's subscribers have grown
from approximately 3.5 million to almost 13.7 million at December 31, 1999, and
Starz Encore Group's program offerings have grown from one movie channel in
1991 to its current slate of 13 full-time movie channels.

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<PAGE>

Pramer S.C.A.

Pramer S.C.A. is the largest owner and distributor of cable television
programming services in Argentina. Pramer currently owns eight programming
services and distributes them throughout Argentina. Pramer also distributes
eight additional programming services, including two of Argentina's four
terrestrial broadcast stations, throughout Argentina. Of the 16 programming
services owned and/or distributed by Pramer, nine of them are distributed
throughout Latin America. Pramer intends to continue to develop and acquire
branded programming services and to further expand the carriage of its
programming to distribution networks outside Argentina. The table below sets
forth certain information about each of Pramer's owned programming services.

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

Business Affiliates

Discovery Communications, Inc.

Discovery Communications, Inc. is the largest originator of documentary,
nonfiction programming in the world. Since the 1985 launch of its flagship
domestic cable service and brand, Discovery Channel, Discovery has grown into a
global media enterprise with 1999 revenues exceeding $1.4 billion. It currently
operates programming services reaching more than 160 million people across six
continents.

Discovery's programming, products and services derive from the following four
business units:

. Discovery Networks, U.S., which is comprised of Discovery Channel, The
Learning Channel, Animal Planet, The Travel Channel and a package of six
digital services;

. Discovery Networks, International, which extends Discovery's programming
globally and currently reaches more than 85 million subscribers in 147
foreign countries in 24 languages; and

. Discovery Enterprises Worldwide, which includes Discovery's brand
extension business in retail, online, video, multimedia, publishing,
licensing and education.

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<PAGE>

Discovery's business objective is to be the premier global creator and
distributor of nonfiction entertainment content, including products, programs
and destination experiences, across all significant media platforms. Its
strategies for achieving its objective include:

. leveraging the strength of its brand by exploiting it over several
platforms, including television, retail and the Internet,

. capitalizing on the global reach of its programming business through the
introduction of additional branded products and services in foreign
markets,

. developing universally distributed networks that appeal strongly to
significant advertising categories (such as travel, health and youth),
and

. continuing to preserve and strengthen its core business assets.

The table below sets forth certain information about Discovery's programming
services.

<TABLE>
<CAPTION>
Liberty's
Subscribers Attributed
at 12/31/99 Year Ownership %
Entity (000's) Launched at 3/31/00
- --------------------------------------------- ----------- -------- -----------
<S> <C> <C> <C>
Discovery Communications, Inc................ 49%
Discovery Channel.......................... 77,829 1985
The Learning Channel....................... 72,175 1980
Animal Planet.............................. 54,018 1996
Discovery People........................... 8,200 1997
Travel Channel............................. 35,466 1987
Discovery Digital Services................. 5,026(/1/)
Discovery Civilization................... 1996
Discovery Health......................... 1998
Discovery Home & Leisure................. 1996
Discovery Kids........................... 1996
Discovery Science........................ 1996
Discovery Wings.......................... 1998
Discovery en Espanol..................... 1998
Animal Planet Asia......................... 6,445 1998 25%
Animal Planet Europe....................... 6,328 1998
Animal Planet Latin America................ 6,774 1998 25%
Discovery Asia............................. 37,712 1994
Discovery India............................ 14,100 1996
Discovery Japan............................ 1,542 1996
Discovery Europe........................... 19,155 1989
Discovery Turkey........................... 600 1997
Discovery Germany.......................... 1,206 1996 25%
Discovery Italy/Africa..................... 1,423 1996
Discovery Latin America.................... 12,145 1996
Discovery Latin America Kids Network....... 8,490 1996
People & Arts (Latin America).............. 9,453 1995 25%
Discovery.com, Inc......................... Online 1995
Discovery Home & Leisure (Europe).......... 5,911 -- --
Discovery Health Media, Inc. .............. N/A -- --
</TABLE>
- --------
(1) Digital services.

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

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<PAGE>

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

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

Flextech, plc

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

The table below sets forth certain information about each of Flextech's
programming services.

Flextech's business objective is to develop, package and market regionally
appealing television programming at the lowest practicable cost. To achieve its
objective, Flextech's strategy has been to spread production costs over
multiple revenue sources. Through co-management of several thematic programming
services, Flextech's programming channels have been able to share operating
costs, including those associated

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<PAGE>

with marketing, administration, affiliate relations, financial services and
technical operations. In addition, by acquiring interests in and creating
alliances with established content producers, Flextech has been able to secure
a steady supply of programming capable of being distributed over various
distribution platforms.

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

Terms of Ownership. Liberty has undertaken that it will not, subject to
certain exceptions, acquire an interest in excess of 20% in any entity that
competes with certain of the channels of two joint ventures that Liberty has
formed with BBC Worldwide Limited.

The News Corporation Limited

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

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

. television, satellite and cable broadcasting;

. publication of newspapers, magazines and books;

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

. development of digital broadcasting;

. development of conditional access and subscriber management systems; and

. the provision of computer information services.

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

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

Liberty's involvement in sports programming originated in 1988 when TCI began
to pursue a strategy of creating regional sports networks. In April 1996,
Liberty and News Corp. formed Fox/Liberty Networks, a joint venture to hold
Liberty's national and regional sports networks and News Corp.'s FX, a general
entertainment

48
<PAGE>

network which also carries various sporting events. Also in 1996, Liberty and
News Corp. formed an alliance to hold their respective international sports
interests. These include Fox Sports World Espanol, a Spanish language sports
network, distributed in the United States and in Latin America, as well as Fox
Sports Americas (Latin America) and Fox Sports Middle East. As part of their
agreement relating to the acquisition by News Corp. of Liberty's interest in
Fox/Liberty Networks, Liberty and News Corp. agreed that, during a specified
period following the second anniversary of the closing date of this
transaction, each will have the right to cause News Corp. to acquire and
Liberty to sell to News Corp. the international interests in exchange for News
Corp. ADRs with an aggregate value at April 1, 1999 of approximately $100
million plus an additional number of ADRs representing the aggregate number of
News Corp. shares which could have been purchased by reinvesting in ADRs each
cash dividend declared on such number of shares between the closing of the sale
of Liberty's interest in Fox/Liberty Networks and the sale of the international
interests. Between the closing of the sale of Liberty's interest in Fox/Liberty
Networks and the sale of the international interests, Liberty has further
agreed to make capital contributions in respect of the international interests
in the amount of $100 million, as and when requested by News Corp.

Terms of Ownership. In connection with the acquisition by News Corp. of
Liberty's interest in Fox/Liberty Networks, certain agreements were entered
into regarding Liberty's ability to transfer News Corp. shares and other
matters. Under these agreements, the ADRs and the underlying News Corp. shares
issued to Liberty are subject to a lock-up of either two years (as to 51.8
million ADRs) or nine months (as to 28.1 million ADRs), subject to certain
exceptions. Liberty is entitled to certain registration rights with respect to
its News Corp. shares. In addition, Liberty has agreed that it will not engage,
directly or indirectly, in any sports programming service in the United States
and its territories (excluding Puerto Rico) or in Canada, subject to certain
exceptions, until July 2004.

QVC Inc.

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

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

QVC has stated that it intends to continue introducing new products and
product lines and to recruit additional programming distributors in an effort
to enlarge both its audience and its sales.

The table below sets forth certain information about QVC's programming
interests.

49
<PAGE>

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

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

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

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

Time Warner Inc.

Time Warner is one of the largest media and entertainment companies in the
world. Time Warner classifies its business interests into four fundamental
areas:

. Cable Networks, consisting principally of interests in cable television
programming, including the following networks: CNN, Cartoon Network,
Headline News, TNT, Turner Classic Movies, TBS Superstation, CNNfn, HBO,
Cinemax, Comedy Central and TVKO;

. Publishing, consisting principally of interests in magazine publishing,
book publishing and direct marketing;

. Entertainment, consisting principally of interests in filmed
entertainment, television production, television broadcasting, recorded
music and music publishing; and

. Cable, consisting principally of interests in cable television systems
which, as of December 31, 1999, reached approximately 12.6 million
subscribers.

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

Ownership Interest. Liberty currently owns an approximate 9% interest in Time
Warner. Liberty's interest in Time Warner evolved from a 1987 transaction in
which TCI led a consortium of cable operators in providing Turner Broadcasting
System with an aggregate cash infusion of approximately $560 million. Motivated
by its belief that the continued development of quality cable programming was a
critical element in driving its cable distribution business, TCI invested
approximately $250 million in Turner Broadcasting System in exchange for two
series of preferred stock. The terms of the preferred stock and agreements
entered into in connection with the investment provided the holders with
significant control rights, including representation on the Turner Broadcasting
System board and veto rights over extraordinary transactions, and with rights
of first refusal on certain dispositions of Turner Broadcasting System stock
held by Ted Turner. In 1996, Time Warner acquired Turner Broadcasting System in
a merger transaction.

50
<PAGE>

In connection with the Turner Broadcasting System/Time Warner merger, Time
Warner, Turner Broadcasting System, TCI and Liberty entered into an Agreement
Containing Consent Order (the FTC Consent Decree) with the Federal Trade
Commission. The FTC Consent Decree effectively prohibits Liberty and its
affiliates from owning voting securities of Time Warner other than securities
that have limited voting rights. Pursuant to the FTC Consent Decree, among
other things, Liberty agreed to exchange the shares of Time Warner common stock
it was to receive in the Turner Broadcasting System/Time Warner combination for
shares of a separate series of Time Warner common stock with limited voting
rights designated as Series LMCN-V common stock. The Series LMCN-V common stock
entitles the holder to one one-hundredth (1/100th) of a vote for each share
with respect to the election of directors. Liberty holds approximately 114
million shares of such stock, which represent less than 1% of the voting power
of Time Warner's outstanding common stock. The Series LMCN-V common stock is
not transferable, except in limited circumstances, and is not listed on any
securities exchange. Each share of the Series LMCN-V common stock is
convertible at Liberty's option into one share of ordinary Time Warner common
stock, at any time when such conversion would not violate the federal
communications laws, subject to the FTC Consent Decree, and is mandatorily
convertible into ordinary Time Warner common stock upon transfer to a non-
affiliate of Liberty. Further, while shares of ordinary Time Warner common
stock are redeemable by action of the Time Warner board of directors under
certain circumstances, to the extent necessary to prevent the loss of certain
types of governmental licenses or franchises, shares of Series LMCN-V common
stock are not redeemable under these circumstances.

In March 1999, Liberty entered into a seven-year "cashless collar" with a
financial institution with respect to 15 million shares of Time Warner common
stock, secured by 15 million shares of its approximately 114 million shares of
Time Warner Series LMCN-V common stock. In effect, Liberty purchased a put
option that gives it the right to require its counterparty to buy 15 million
Time Warner shares from Liberty in approximately seven years for $67.45 per
share. Liberty simultaneously sold a call option giving the counterparty the
right to buy the same shares from Liberty in approximately seven years for
$158.33 per share. Since the purchase price of the put option was equal to the
proceeds from the sale of the call option, the collar transaction had no cash
cost to Liberty. As a result of this transaction, Liberty has effectively
locked in the value of these 15 million Time Warner shares at between $1
billion and $2.4 billion in the future, regardless of potential fluctuations in
the stock price.

On January 10, 2000, Time Warner and America Online, Inc. announced that they
had entered into an Agreement and Plan of Merger relating to the combination of
their businesses. Pursuant to this Agreement and Plan of Merger, Time Warner
and America Online would each merge with, and become wholly-owned subsidiaries
of, a newly-formed holding company called "AOL Time Warner Inc." According to
publicly available information, in this transaction each share of Series LMCN-V
common stock of Time Warner held by Liberty would be converted into 1.5 shares
of Series LMCN-V common stock, par value $0.01 per share, of AOL Time Warner
Inc. These securities of AOL Time Warner Inc. would have substantially the same
terms as the Series LMCN-V common stock of Time Warner currently held by
Liberty. This transaction is subject to several conditions, including the
approval of Time Warner's and America Online's stockholders, as well as
regulatory approvals.

TV Guide, Inc.

TV Guide, Inc., formerly known as United Video Satellite Group, Inc., is a
media and communications company and the market leader in the program listings
guide business. TV Guide is engaged predominantly in providing print, passive
and interactive program listings guides to households, distributing programming
to cable television systems and direct-to-home satellite providers, and
marketing satellite-delivered programming to C-band satellite dish owners. TV
Guide's Class A common stock trades on the National Market tier of The Nasdaq
Stock Market under the symbol "TVGIA."

TV Guide is organized into three primary business units:

. TV Guide Magazine Group;

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<PAGE>

. TV Guide Entertainment Group; and

. United Video Group.

The TV Guide Magazine Group publishes and distributes TV Guide magazine, the
most widely circulated paid weekly magazine in the United States, to households
and newsstands. In addition, the TV Guide Magazine Group provides customized
monthly television programming guides for cable and satellite operators in the
United States and internationally. The TV Guide Entertainment Group supplies
satellite-delivered on-screen program promotion and guide services, including
TV Guide Channel and Sneak Prevue, to cable television systems and other multi-
channel video programming distributors, both nationally and internationally.
The TV Guide Entertainment Group also offers interactive television technology
that allows television viewers to retrieve on demand continuously updated
program guide information through their cable television systems and provides
TV Guide Online, an Internet-based program listings guide. The United Video
Group provides direct-to-home satellite services, satellite distribution of
video entertainment services, software development and systems integration
services and satellite transmission services for private networks. This group
owns TV Guide's 80% interest in Superstar/Netlink Group LLC, which markets
satellite entertainment programming packages to C-band satellite dish owners in
North America. Its retail subscriber base was approximately one million at
December 31, 1999. The United Video Group also markets and distributes three
independent superstations--WGN (Chicago), KTLA (Los Angeles) and WPIX (New
York)--and six Denver-based broadcast television stations to cable television
systems and other multi-channel video programming distributors, and offers
programming packages to satellite master antenna television systems.

TV Guide's business objective is, among other things, to be the dominant
provider of program listings guides for traditional and emerging distribution
platforms. Its strategies for achieving its objective include:

. extending its brand by exploiting it over several platforms, including
home shopping, e-commerce and database marketing;

. capitalizing on the success of TV Guide Channel, TV Guide Interactive
and TV Guide Sneak Prevue through the introduction of customized
programming and service promotion on a localized platform;

. capitalizing on cross-platform advertising and promotion opportunities
by taking advantage of audience exposure across multiple platforms
(print, cable, satellite and Internet); and

. continuing to develop product and brand extensions that will leverage
its distribution footprint, including interactive services, home
shopping, e-commerce and data base marketing.

In October 1999, TV Guide announced that it had entered into a definitive
merger agreement with Gemstar International Group Limited, pursuant to which TV
Guide would become a wholly owned subsidiary of Gemstar. Under the merger
agreement, TV Guide shareholders would receive 0.6573 shares of Gemstar common
stock for each share of TV Guide common stock. TV Guide shareholders would, in
the aggregate, receive approximately 45% of the fully diluted shares of the
combined company. Consummation of the transaction is subject to limited
conditions, including approval by the shareholders of each company (which was
received on March 17, 2000) and the satisfaction of regulatory requirements. It
is anticipated that the transaction will close in the first half of 2000. Upon
consummation of the transaction, the company is expected to be renamed TV Guide
International Inc. and the board of directors will be expanded to twelve
members, of which 6 members will be persons designated by the board of
directors of TV Guide prior to the merger.

Gemstar develops, markets and licenses proprietary technologies and systems
that simplify and enhance consumers' interaction with electronics products and
other platforms that deliver video, programming information and other data.
Gemstar seeks to have its technologies widely licensed, incorporated and
accepted as the technologies and systems of choice by:

. consumer electronics manufacturers;

52
<PAGE>

. service providers such as owners or operators of cable systems,
telephone networks, Internet service providers, direct broadcast
satellite providers, wireless systems and other multi-channel video
programming distributors;

. software developers; and

. consumers.

Gemstar's first proprietary system, VCR Plus+, was introduced in 1990 and is
widely accepted as an industry standard for programming VCRs. VCR Plus+ enables
consumers to record a television program simply by entering a number--the
PlusCode number--into a VCR or television equipped with the VCR Plus+
technology. Gemstar is also a leading provider of interactive program guide
services, which allow a user to view a television program guide on screen,
obtain details about a program, sort programs by themes or categories, and
select programs for tuning or recording, all through the remote control.
Gemstar's common stock trades on the National Market tier of The Nasdaq Stock
Market under the symbol "GMST."

The table below sets forth certain information about TV Guide's programming
services and other assets.

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

53
<PAGE>

combining UVSG's passive and interactive electronic program listing guides with
TV Guide's well-recognized magazine and brand name, UVSG became a leading
provider of program listing guides. Following this transaction, UVSG changed
its name to TV Guide, Inc.

Terms of Ownership. Pursuant to a stockholders agreement between Liberty and
News Corp., each of them is entitled to designate one director to the ten-
member TV Guide board for each 12.5% of the outstanding shares of TV Guide
Class B common stock owned by such party, with the remaining directors being
designated by the TV Guide board. So long as Liberty or News Corp., as the case
may be, is entitled to designate at least one director to TV Guide's board of
directors, the other party is subject to certain restrictions on its ability to
sell any of its shares of TV Guide common stock or to convert any of its shares
of TV Guide Class B common stock (10 votes per share) into shares of TV Guide
Class A common stock (one vote per share) unless it first offers to sell the
stock to the other party. In addition, Liberty and News Corp. have mutual
rights of first refusal, tag-along rights on transfers of significant interests
and registration rights. Liberty and News Corp. have further agreed that, for
so long as they both are entitled to appoint at least one of TV Guide's
directors, TV Guide will be the exclusive vehicle through which they will each
conduct program guide businesses worldwide, subject to certain limited
exceptions.

USA Networks, Inc.

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

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

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

. Broadcasting, which owns and operates television stations;

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

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

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

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

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

54
<PAGE>

The table below sets forth certain information about USA Networks' assets.
Liberty's attributed ownership interest in USA Networks assumes the conversion
or exchange by Liberty of direct and indirect interests in various USA Networks
and HSN securities for USA Networks common stock, and the conversion or
exchange of certain securities owned by Universal Studios, Inc. and certain of
its affiliates for USA Networks common stock.

<TABLE>
<CAPTION>
Liberty's
Subscribers Attributed
at 12/31/99 Year Ownership %
Entity (000's) Launched at 3/31/00
- ---------------------------------------------- ----------- -------- -----------
<S> <C> <C> <C>
USA Networks, Inc. ........................... 21%
HSN......................................... 73,700/1/ 1985
America's Store............................. 6,800/1/ 1986
ISN......................................... Online 1995
HSN en Espanol.............................. 2,700 1998 11%
HOT (Germany)............................... 29,000 1996 9%
Shop Channel (Japan)........................ 6,800 1996 41%
SciFi Channel............................... 59,700 1992
USA Network................................. 77,200 1980
USA Broadcasting............................ 37,500/2/ 1986
Ticketmaster................................ N/A
Studios USA................................. N/A
USA Films................................... N/A
Hotel Reservations Network.................. Online 1991 21%
Ticketmaster Online-CitySearch.............. Online 1998 11%/3/
</TABLE>
- --------
(1) Includes broadcast households and cable subscribers.
(2) A group of UHF and low power television stations which operate in 12 of the
top 22 broadcast markets in the United States, including 7 of the top 10
markets which reach approximately 31% of television households in the
United States.
(3) Assumes consummation of pending transactions.

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

Liberty's ownership in USA Networks began in 1993 when it purchased a
controlling stake in Home Shopping Network, Inc., which at the time was
principally engaged in the sale of merchandise to viewers of its home shopping
programming. In connection with that acquisition, Liberty also obtained an
option to acquire a controlling interest in Silver King Communications, Inc.,
an owner and operator of broadcast television stations. In August 1995, Liberty
formed an alliance with Mr. Barry Diller that resulted in a significant shift
in Liberty's strategy for Home Shopping Network and Silver King. As part of
this alliance, Liberty contributed its control option relating to Silver King
to a new corporation in which it retained substantially all of the equity
interests and ceded control over the voting securities of Silver King held by
the corporation to Mr. Diller, except with respect to certain fundamental
matters. At the same time, Mr. Diller agreed to join Home Shopping Networks'
board of directors. In December 1996, Silver King and Home Shopping Network
were combined to form HSN, Inc., which also acquired Savoy Pictures
Entertainment, Inc., a television broadcasting and filmed entertainment
company, and Ticketmaster Group, Inc., a leading provider of automated
ticketing services. In

55
<PAGE>

February 1998, HSN, Inc. acquired certain assets from Universal USA Networks,
consisting of USA Network and Sci-Fi Channel, and the domestic television
production and distribution business of Universal. Following this transaction,
HSN, Inc. changed its name to USA Networks, Inc. In connection with this
transaction, Liberty contributed $300 million in cash to a subsidiary of USA
Networks (the "LLC") in exchange for equity shares of that subsidiary ("LLC
Shares") (which are generally exchangeable for USA Networks common stock on a
one-for-one basis). The LLC holds all of the assets acquired from Universal and
all of the businesses of HSN, Inc. and its subsidiaries, other than the
broadcasting business.

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

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

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

Liberty is subject to a number of agreements that limit or control its
ability to transfer its USA Network securities. As long as Mr. Diller is Chief
Executive Officer of USA Networks, Liberty generally cannot transfer shares of
USA Networks stock prior to August 24, 2000, subject to certain exceptions.
Each of Universal and Mr. Diller has a right of first refusal with respect to
certain sales of USA Networks securities by the other party. Liberty's rights
in this regard are secondary to any Universal right of refusal on transfers by
Mr. Diller. Each of Liberty and Mr. Diller also generally has a right of first
refusal with respect to certain transfers by the other party and tag-along sale
rights on certain sales of USA Networks stock by the transferring stockholder
and in the event Universal transfers a substantial amount of its USA Networks
stock. Liberty, Universal and Mr. Diller are each entitled to registration
rights relating to their USA Networks securities and have agreed to certain put
and call arrangements, pursuant to which one party has the right to sell (or
the other party has the right to acquire) shares of USA Networks stock held by
another party, at a price determined by an independent appraiser taking into
account a number of agreed upon factors.

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<PAGE>

Other Programming Assets

The table below sets forth certain information about some of Liberty's other
programming interests.

<TABLE>
<CAPTION>
Liberty's
Attributed
Subscribers Ownership
at 12/31/99 Year % at
Entity (000's) Launched 3/31/00 Partner(s)
- ------------------------ ----------- -------- ---------- ------------------------------
<S> <C> <C> <C> <C>
BET Holdings II, Inc.... 35% Robert Johnson
BET Cable Network...... 58,600 1980
BET Action Pay-Per-
View.................. 10,000/1/ 1990
BET on Jazz............ 7,000 1996
BET.com................ Online 1999 50%
Canales n............... 17/2/ 1998 100% --
Corus Entertainment
Inc. /3/ .............. 20%
Court TV................ 37,543 1991 50% Time Warner Inc.
E! Entertainment 59,318 1990 10% Comcast Corporation, The Walt
Television.............
Style.................. 4,630 1998 Disney Company, MediaOne
Group, Inc.
Fox Kids Worldwide, N/A N/A /4/ The News Corporation Limited,
Inc.................... former stockholders of Saban
Entertainment, Inc.
International
Channel/5/ ............ 8,558 1990 90% JJS II Communications, LLC
Jupiter Programming Co.,
Ltd. (Japan)........... 50% Sumitomo Corporation
Cable Soft Network..... 2,486 1989 50%
CNBC Japan/Nikkei...... N/A 1997 10%
Golf Network........... 2,076 1996 44%
Discovery Japan........ 1,542 1996 49%
J-Sports............... 697 1998 67%
Shop Channel........... 6,800 1996 41%
MultiThematiques,
S.A. .................. 30% Canal + S.A., Havas Images,
Canal Jimmy (France)... 2,285 1991 Part'Com
Canal Jimmy (Italy).... 700 1997
Cine Cinemas (France).. 729 1991
Cine Cinemas (Italy)... 144 1997
Cine Classics
(France).............. 631 1991
Cine Classics (Spain).. 225 1995 15%
Cine Classics (Italy).. 144 1997
Forum Planete
(France).............. 1,365 1997
Planete (France)....... 3,119 1988
Planete (Poland)....... 1,944 1996
Planete (Germany)...... 1,206 1997
Planete (Italy)........ 607 1997
Seasons (France)....... 106 1996
Seasons (Spain)........ 37 1997
Seasons (Germany)...... 35 1997
Seasons (Italy)........ 46 1997
</TABLE>

57
<PAGE>

<TABLE>
<CAPTION>
Liberty's
Attributed
Subscribers Ownership
at 12/31/99 Year % at
Entity (000's) Launched 12/31/99 Partner(s)
- ------------------------ ----------- -------- ---------- ------------------------------
<S> <C> <C> <C> <C>
Odyssey................. 26,920 1998 33%/6/ Hallmark Entertainment, The
Jim Henson Company, National
Interfaith Cable Coalition,
Inc.
Premium Movie 890 1995 20% Twentieth Century Fox Films,
Partnership Universal Studios, Paramount
(Australia)............ Pictures, Columbia TriStar
Sony Pictures Entertainment
Telemundo Network/7/ ... N/A N/A 50% Inc.
Telemundo Station N/A N/A 25% Sony Pictures Entertainment
Group/8/ .............. Inc., Station Partners, LLC
Torneos y Competencias,
S.A. (Argentina)/9/ ... N/A N/A 40% CEI CitiCorp Holdings S.A.
</TABLE>
- --------
(1) Number of subscribers to whom service is available.
(2) Digital services.
(3) Corus is one of Canada's leading media companies with interests in 14 radio
stations, including The Edge, FOX and Country 105, and specialty television
networks, including YTV, CMT, Teletoon, Telelatino and The Comedy Network.
(4) Liberty's interest consists of shares of 30-year 9% preferred stock which
have a stated aggregate value of $345 million and are not convertible into
common stock.
(5) International Channel provides news, sports, music, movies and general
entertainment programming from around the world in more than 20 different
languages.
(6) Odyssey will be contributed to Crown Media Holdings in exchange for an
approximate 18% in Crown Media Holdings.
(7) Telemundo Network is a 24-hour broadcast network serving 61 markets in the
United States, including the 37 largest Hispanic markets.
(8) Telemundo Station Group, Inc. owns and operates eight full power UHF
broadcast stations and 15 low power television stations serving some of the
largest Hispanic markets in the United States and Puerto Rico. Although
Liberty has an approximately 25% equity interest in Telemundo Station
Group, Inc., its voting power is less than 5% to meet certain regulatory
requirements.
(9) Torneos y Competencias, S.A. is Argentina's dominant sports programming
service. It also owns a minority interest in Telefe and Canal Azul, general
entertainment broadcast channels in Buenos Aires, Argentina. Canal Azul has
also become an international superchannel, providing programming to the
United States and, via cable, to outlying areas of Argentina.

Communications

Cable television systems deliver multiple channels of television programming
to subscribers who pay a monthly fee for the service. Video, audio and data
signals are received over-the-air or via satellite delivery by antennas,
microwave relay stations and satellite earth stations and are modulated,
amplified and distributed over a network of coaxial and fiber optic cable to
the subscribers' television sets. Cable television providers in most markets
are currently upgrading their cable systems to deliver new technologies,
products and services to their customers. These upgraded systems allow cable
operators to expand channel offerings, add new digital video services, offer
high-speed data services and, where permitted, provide telephony services. The
implementation

58
<PAGE>

of digital technology significantly enhances the quantity and quality of
channel offerings, allows the cable operator to offer video-on-demand,
additional pay-per-view offerings, premium services and incremental niche
programming. Upgraded systems also enable cable networks to transmit data and
gain access to the Internet at significantly faster speeds, up to 100 times
faster, than data can be transmitted over conventional dial-up connections.
Lastly, cable providers have been developing the capability to provide
telephony services to residential and commercial users at rates well below
those offered by incumbent telephone providers. Each of these businesses
represents a significant opportunity for cable providers to increase their
revenue and operating cash flow from the traditional pay television services
currently offered today.

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

Consolidated Subsidiaries

Liberty Cablevision of Puerto Rico, Inc.

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

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

At December 31, 1999, approximately 85% of Liberty Cablevision of Puerto
Rico's network had been rebuilt utilizing 550 MHz bandwidth capacity, with the
remainder consisting of 450 MHz. At December 31, 1999, Liberty Cablevision of
Puerto Rico operated from five headends, and provided subscribers with 63
channels.

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

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<PAGE>

Business Affiliates

Sprint PCS Group

Sprint Corporation operates the only 100% digital PCS wireless network in the
United States with licenses to provide service nationwide utilizing a single
frequency band and a single technology. Sprint owns licenses to provide service
to the entire United States population, including Puerto Rico and the U.S.
Virgin Islands. At December 31, 1999, Sprint, together with certain affiliates,
operated PCS systems in the majority of the metropolitan areas in the U.S.
Sprint attributes this business and its assets to Sprint's "Sprint PCS Group."
The Sprint PCS stock is a tracking stock intended to reflect the performance of
the Sprint PCS Group. The Sprint PCS stock trades on the NYSE under the symbol
"PCS."

The business objective of the Sprint PCS Group is to expand network coverage
and increase market penetration by aggressively marketing competitively priced
PCS products and services under the "Sprint" and "Sprint PCS" brand names.

On October 5, 1999, Sprint announced that it had entered into a definitive
merger agreement with MCI WorldCom, Inc. Under the merger agreement, each share
of Sprint's FON common stock would be exchanged for $76.00 of MCI WorldCom
common stock, subject to a collar, and each share of Series 1 Sprint PCS stock,
Series 2 Sprint PCS stock and Series 3 Sprint PCS stock would be exchanged for
one share of a new MCI WorldCom PCS tracking stock of the corresponding series
and 0.116025 shares of MCI WorldCom common stock. The terms of each series of
MCI WorldCom PCS tracking stock would be equivalent to those of the
corresponding Sprint security and would track the performance of the PCS
business of the surviving company. The merger would be tax free to stockholders
of Sprint and accounted for as a purchase. Consummation of the merger is
subject to the approvals of the stockholders of Sprint and MCI WorldCom as well
as customary regulatory approvals. Upon consummation of the merger, the company
is expected to be renamed WorldCom and its board of directors will have 16
members, 10 from MCI WorldCom and 6 from Sprint.

Ownership Interest. Liberty owns approximately 23% (on a fully diluted basis)
of the Sprint PCS stock through its ownership of shares of Series 2 Sprint PCS
stock (which have limited voting rights) and certain warrants and shares of
convertible preferred stock exercisable for or convertible into these shares.

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

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

The trust agreement grants the trustee the sole right to sell the Sprint
securities beneficially owned by Liberty and provides that all decisions
regarding such divestiture will be made by the trustee without discussion or
consultation with AT&T or Liberty; however, the trustee is required to consult
with the board of directors of

60
<PAGE>

Liberty (other than AT&T representatives and John C. Malone) regarding such
divestiture. The trustee has the power and authority to accomplish such
divestiture only in a manner reasonably calculated to maximize the value of the
Sprint securities beneficially owned by Liberty.

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

Terms of Ownership. Liberty was granted registration rights with respect to
its Sprint PCS holdings. These registration rights are currently exercisable by
the trustee. If Liberty's shares of Series 2 Sprint PCS stock are transferred,
the transferred shares become shares of full voting Series 1 Sprint PCS stock.

Telewest Communications plc

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

Telewest owns and operates 41 cable franchises and has a minority equity
interest in an affiliated company which owns and operates four affiliated
franchises. At December 31, 1999, these owned and operated and affiliated
franchises covered approximately 34% of the homes in the United Kingdom in
areas for which cable franchises have been awarded. At that date, these
franchises together included approximately 6.1 million homes and over 400,000
businesses. At December 31, 1999, the network in these franchises passed
approximately 4.7 million homes (approximately 4.4 million of which had been
passed and marketed) and Telewest had approximately 1.2 million cable
television customers, 1.6 million residential telephone lines and 306,000
business telephone lines. According to Telewest, approximately 62% of its
customers subscribe for both cable television and cable telephony services.

Telewest believes that it is well positioned in key growth markets and will
benefit from the growing demand for voice, video, data and Internet services.
Telewest's business objective is to be the premier provider of telephony,
television, multimedia, data, Internet and e-commerce services in the United
Kingdom. Its strategies for achieving its objective include:

. leveraging the scale and scope of its business to provide new content
and services,

. increasing market share and generating additional revenue from existing
customers through the development of innovative and targeted products
and the launch of digital services and high-speed Internet service
delivered via cable modem technology, and

. capitalizing on the growing demand for advanced business voice and data
services, digital television and high-speed Internet access through its
high capacity local networks and its national backbone network.

In April 2000, Telewest acquired Flextech at a purchase price of
approximately (Pounds)2.76 billion. As a result, each share of Flextech was
exchanged for 3.78 new Telewest shares. Prior to the acquisition, Liberty owned
approximately a 37% equity interest in Flextech and a 22% equity interest in
Telewest. As a result of the acquisition, the business of Flextech described
under "--Programming--Business Affiliates--Flextech plc" above has become part
of Telewest's business.

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<PAGE>

Ownership Interest. As a result of Telewest's recent acquisition of Flextech,
Liberty now owns approximately a 24.6% interest in Telewest, a portion of which
is attributed to a limited liability company owned 50% by Liberty and 50% by
MediaOne Group, Inc., and MediaOne now owns approximately a 23% interest in
Telewest.

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

Terms of Ownership. Liberty and MediaOne have been granted preemptive rights
on share issuances by Telewest which enable them to collectively maintain a
majority of the voting rights in Telewest. Liberty and MediaOne have agreements
with respect to the voting of shares of Telewest beneficially owned by them and
the manner in which they will cause their designees to the Telewest board of
directors to vote. In general, Liberty and MediaOne have agreed that, on any
matter requiring shareholder approval, they will vote their Telewest shares
together in such manner as may be agreed by them. As a result, Liberty and
MediaOne together generally will be able to influence materially the outcome of
any matter requiring shareholder approval, provided that they are not
disqualified from voting on a particular matter due to conflicts of interest.
In addition, each of Liberty and MediaOne has veto rights with respect to
certain fundamental matters affecting Telewest for so long as each holds 15% or
more of the outstanding Telewest ordinary shares. Further, for so long as each
of them beneficially owns at least 15% of the outstanding Telewest ordinary
shares, each is entitled to appoint three members to the 16-member Telewest
board of directors, and they have agreed that on any matter requiring board
approval, they will cause the directors designated by them to vote together as
agreed by them.

Each of Liberty and MediaOne has agreed that any proposed transfer of its
Telewest shares will be subject to rights of first refusal in favor of the
other party, in each case subject to certain exceptions. In addition, each of
Liberty and MediaOne has the right to trigger a put/call procedure in the event
the other is deemed to undergo a change of control.

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

In May 1999, as part of a series of agreements entered into with AT&T in
connection with AT&T's proposed acquisition of MediaOne, Microsoft Corporation
agreed to purchase MediaOne's interest in Telewest through a tax-free exchange
of Microsoft shares, subject to certain conditions, including the closing of
the proposed business combination between AT&T and MediaOne. It is expected
that if this purchase is completed, Microsoft will succeed to all of MediaOne's
rights and obligations set forth above, subject to certain modifications agreed
to in connection with Telewest's acquisition of Flextech.

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<PAGE>

Other Communications Assets

The table below sets forth certain information about Liberty's other
communications assets. In the table below:

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

. "Homes Passed" refers to the homes that can be connected to a cable
distribution system without further extension of the distribution
network.

. "Basic Subscribers" refers to subscribers to a cable or other
television distribution system who receive the basic television service
and who are usually charged a flat monthly rate for a specific number of
channels.

<TABLE>
<CAPTION>
Homes in Liberty's
Service Homes Basic Attributed
Area at Passed at Subscribers Ownership
12/31/99 12/31/99 at 12/31/99 % at
Entity (000's) (000's) (000's) 12/31/99 Partner(s)
- ----------------------------------- -------- --------- ----------- ---------- --------------------------------
<S> <C> <C> <C> <C> <C>
Metropolis-Intercom, S.A. (Chile).. 1,600 1,092 269 30% Cordillera Communicaciones,
Ltda, Compania de
Telecomunicaciones de Chile S.A.

Cablevision S.A. (Argentina)....... 4,000 3,386 1,453 28%/1/ CEI CitiCorp Holdings S.A.,
Telefonica Internacional S.A.

Jupiter Telecommunications
Co., Ltd. (Japan)................. 4,830 3,709 536 40% Sumitomo Corporation
Princes Holdings Limited
(Ireland)......................... 497 387 163 50% Independent Newspapers plc
Sky Latin America LLC/2/ .......... N/A N/A 761 10% Organizacoes Globo, Grupo
Televisa, S.A., News Corp.
</TABLE>
- --------
(1) Liberty Media International, Hicks, Muse, Tate & Furst, Incorporated,
which controls CEI CitiCorp Holdings S.A., and Telefonica Internacional
S.A. have entered into certain agreements that, if consummated in
accordance with their terms, would result in Telefonica ceasing to be a
shareholder of CableVision and each of Liberty Media International and
Hicks, Muse indirectly owning a 50% interest in CableVision.
(2) Satellite-delivered television platform currently serving Mexico, Brazil,
Chile and Columbia.

Internet Services and Technology

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

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<PAGE>

Consolidated Subsidiaries

Liberty Digital, Inc.

Liberty Digital, Inc. (formerly known as TCI Music, Inc.) is a diversified
new media company with investments in Internet content and interactive
television businesses, as well as music services delivered to commercial and
residential customers via cable, satellite, the Internet and other platforms.
Liberty Digital's Series A common stock trades on the National Market tier of
The Nasdaq Stock Market under the symbol "LDIG."

As of March 31, 2000, the assets of Liberty Digital consisted primarily of
the following:

<TABLE>
<CAPTION>
Liberty
Digital's
Ownership
Entity % Business
- -------------------------------- ---------- -------------------------------------------------
<S> <C> <C>
AT&T Access Agreement........... N/A Certain programming rights with respect to AT&T's
cable systems

ACTV, Inc.
(Nasdaq: IATV).................. 16%/1/ Producer of tools for interactive programming for
television and Internet platforms

BET.com......................... 5% Web site with content directed towards African
Americans

CarsDirect.com, Inc. ........... 1% Online car retailer

DMX, Inc. ...................... 100% Programs, markets and distributes the premium
digital audio service, Digital Music Express

Drugstore.com, Inc.
(Nasdaq: DSCM).................. 1% Online pharmacy and sundries

HomeGrocer.com, Inc.
(Naxdaq: HOMG).................. 1% Online grocery store

iBeam Broadcasting Corporation.. 8% Satellite delivery of streaming media from
programmers to Internet service providers

iFilm, Inc. .................... 1% Metamediary for making, distributing and
consuming film entertainment

Interactive Pictures Corporation
4% Interactive photographic technology for the
(Nasdaq: IPIX).................. Internet

iVillage, Inc.
(Nasdaq: IVIL).................. 3% Internet and on-line provider of branded
communications and information services for adult
women

Kaleidoscope Interactive, LLC... 50% Online provider of information and services
related to health concerns and disabilities

Kaleidoscope Network, Inc....... 12% 24-hour cable network that provides video
programming related to health concerns and
disabilities

KPCB Java Fund, L.P. ........... 6% Investor in Java application development

Lifescape, LLC.................. 15% Online provider of information concerning
substance abuse, addictions and health problems

The Lightspan Partnership, Inc.
(Nasdaq: LSPN).................. 10% Developer of educational programming

</TABLE>

64
<PAGE>

<TABLE>
<CAPTION>
Liberty
Digital's
Ownership
Entity % Business
- --------------------------------- ---------- -------------------------------------------------
<S> <C> <C>
MedScholar Digital Network, LLC.. 50% Provider of continuous medical education services
to healthcare professionals
MTVN Online L.P. ................ 10% Online music venture with MTV Networks
netLibrary, Inc. ................ 2% Electronic library
Online Retail Partners........... 21% Create e-commerce partnerships with brick-and-
mortar retailers
OpenTV Inc.
(Nasdaq: OPTV)................... 4% Provider of software to enable interactive
television
OrderTrust, Inc. ................ 9% Provider of total order life cycle management
services
OurHouse.com..................... 3% Ace Hardware co-branded vertical portal for
online home improvement products, services and
information
pogo.com, Inc.................... 19% Online game service targeting family Internet
game players
priceline.com Incorporated
(Nasdaq: PCLN)................... 2% E-commerce service allowing consumers to make
offers on products and services
Quokka Sports, Inc.
(Nasdaq: QKKA)................... 3% Internet provider of live digital sports
entertainment
ReplayTV, Inc. .................. 1%/2/ Producer of technology that allows customers to
customize television viewing
Sportsline USA, Inc.
(Nasdaq: SPLN)................... 3% Internet provider of branded interactive sports
information, programming and merchandise
TiVo Inc.
(Nasdaq: TIVO)................... 1% Producer of technology that allows customers to
customize television viewing
UGO Networks, Inc. .............. 4% Online provider of underground entertainment news
and video games
</TABLE>
- --------
(1) Liberty Digital also holds warrants to purchase additional shares of ACTV,
Inc. common stock, which it may exercise over a period of one to five
years. Exercise of these warrants would increase Liberty Digital's
ownership to approximately 24%.
(2) Discovery, Starz Encore Group and TV Guide each owns an additional 1% of
Replay.

Ownership Interest. Liberty owns an approximately 86% interest in Liberty
Digital, and a member of the Liberty Media Group that is not part of Liberty
Media Corporation or its consolidated subsidiaries owns an additional
approximately 8% interest in Liberty Digital.

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

65
<PAGE>

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

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

Business Affiliates

Motorola Inc. (successor to General Instrument Corporation)

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

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

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

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

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

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

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

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<PAGE>

Ownership Interest. Liberty currently holds a 2.5% interest in Motorola,
excluding vested warrants to purchase common stock in Motorola. Liberty also
holds warrants to purchase approximately 12.3 million additional shares of
Motorola common stock at $24.78 per share. The warrants vest at specified
dates, with the number of warrants vesting on each such date relating to the
number of advanced digital set-top terminals purchased by AT&T and certain of
its affiliates. If the warrants do not vest on the specified date, the warrants
will terminate. If any warrants terminate solely because AT&T fails to purchase
the required number of advanced digital set-top terminals, AT&T will pay to
Liberty an amount equal to $14.35 for each warrant terminated, adjusted as
appropriate for any changes in the capitalization of Motorola. Warrants to
purchase 6.1 million shares are currently vested, and assuming Liberty's
exercise of such vested warrants, its ownership interest in Motorola would
increase to 3.3%.

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

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

. the license of certain related software to GI;

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

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

In connection with the AT&T merger, the shares of GI common stock and the note
payable were contributed to Liberty. In April 1999, Liberty acquired an
additional 10 million shares of GI from Forstmann Little & Co. for $280
million. This purchase by Liberty increased Liberty's ownership in GI to
approximately 18% and made Liberty the largest stockholder of GI.

Other Assets

Liberty also holds an approximately 19% interest in Antec Corporation, an
international communications technology company specializing in the design and
engineering of hybrid fiber/coaxial broadband networks and the development and
distribution of products for these broadband networks. Antec provides its
customers, primarily cable system operators, with products and services that
enable reliable, high-speed, two-way broadband transmission of video,
telephony, and data. In addition, Antec has developed a full line of
technologically advanced fiber optic products to capitalize on current and
future upgrades of cable systems employing hybrid fiber/coaxial technology
capable of providing state-of-the-art video, voice and data services. Antec's
common stock trades on the National Market tier of The Nasdaq Stock Market
under the symbol "ANTC."

In connection with our acquisition of Ascent Entertainment Group, Inc.,
Liberty acquired an approximate 57% ownership interest in On Command
Corporation, a leading provider of in-room interactive entertainment, Internet
access, business information and guest services for the lodging industry. On
Command's common stock trades on the National Market tier of The Nasdaq Stock
Market under the symbol "ONCO."

Regulatory Matters

Domestic Programming

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

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

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

Regulation of Ownership. The 1992 Cable Act required the FCC, among other
things, (a) to prescribe rules and regulations establishing reasonable limits
on the number of channels on a cable system that will be allowed to carry
programming in which the owner of such cable system has an attributable
interest and (b) to consider the necessity and appropriateness of imposing
limitations on the degree to which multi-channel video programming distributors
(including cable operators) may engage in the creation or production of video
programming. In 1993, the FCC adopted regulations limiting carriage by a cable
operator of national programming services in which that operator holds an
attributable interest to 40% of the first 75 activated channels on each of the
cable operator's systems. The rules provide for the use of two additional
channels or a 45% limit, whichever is greater, provided that the additional
channels carry minority-controlled programming services. The regulations also
grandfather existing carriage arrangements that exceed the channel limits, but
require new channel capacity to be devoted to unaffiliated programming services
until the system achieves compliance with the regulations. These channel
occupancy limits apply only up to 75 activated channels on the cable system,
and the rules do not apply to local or regional programming services. These
rules may limit carriage of the programming companies in which Liberty has
interests on certain systems of affiliated cable operators. In the same
rulemaking, the FCC concluded that additional restrictions on the ability of
multi-channel distributors to engage in the creation or production of video
programming were then unwarranted.

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

Regulation of Carriage of Broadcast Stations. The 1992 Cable Act granted
broadcasters a choice of must carry rights or retransmission consent rights.
The rules adopted by the FCC generally provided for mandatory carriage by cable
systems of all local full-power commercial television broadcast signals
selecting must carry rights and, depending on a cable system's channel
capacity, non-commercial television broadcast signals. Such statutorily
mandated carriage of broadcast stations coupled with the provisions of the
Cable Communications Policy Act of 1984, which require cable television systems
with 36 or more "activated"

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channels to reserve a percentage of such channels for commercial use by
unaffiliated third parties and permit franchise authorities to require the
cable operator to provide channel capacity, equipment and facilities for
public, educational and government access channels, could adversely affect some
or substantially all of the programming companies in which Liberty has
interests by limiting the carriage of such services in cable systems with
limited channel capacity. The FCC recently initiated a proceeding asking to
what extent cable operators must carry all digital signals transmitted by
broadcasters. The imposition of such additional must carry regulation, in
conjunction with the current limited cable system channel capacity, would make
it likely that cable operators will be forced to drop cable programming
services, which may have an adverse impact on the programming companies in
which Liberty has interests.

Closed Captioning and Video Description Regulation. The Telecommunications
Act of 1996 also required the FCC to establish rules and an implementation
schedule to ensure that video programming is fully accessible to the hearing
impaired through closed captioning. The rules adopted by the FCC will require
substantial closed captioning over an eight to ten year phase-in period with
only limited exemptions. As a result, the programming companies in which
Liberty has interests are expected to incur significant additional costs for
closed captioning. In November 1999, the FCC also issued a notice of proposed
rulemaking that would require certain broadcasters and the largest national
video programming services to begin to provide audio descriptions of visual
events for the visually impaired on the secondary audio program. Depending upon
the final requirements of any rule, increased costs for programmers may result.

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

Satellites and Uplink. In general, authorization from the FCC must be
obtained for the construction and operation of a communications satellite. The
FCC authorizes utilization of satellite orbital slots assigned to the United
States by the World Administrative Radio Conference. Such slots are finite in
number, thus limiting the

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number of carriers that can provide satellite transponders and the number of
transponders available for transmission of programming services. At present,
however, there are numerous competing satellite service providers that make
transponders available for video services to the cable industry.

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

Domestic Telephony and Satellite Systems

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

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

Liberty also has investments in domestic satellite systems that are licensed
and regulated by the FCC. Among other things, the FCC issues authorizations to
construct, launch and operate communications satellites utilizing orbital
locations assigned to the United States by the World Administrative Radio
Conference and monitors the progress of construction and launch of such
satellites.

International Cable, Telephony and Programming

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

Internet Services

The Internet companies in which we have interests are subject, both directly
and indirectly, to various laws and governmental regulations relating to their
respective businesses. There are currently few laws or regulations directly
applicable to access to or commerce on commercial online services or the
Internet. For example, the Digital Millennium Copyright Act, enacted into law
in 1998, protects certain qualifying online service

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providers from copyright infringement liability, the Internet Tax Freedom Act,
also enacted in 1998, placed a three year moratorium on new state and local
taxes on Internet access and commerce, and under the Communications Decency
Act, an Internet service provider will not be treated as the publisher or
speaker of any information provided by another information content provider.
However, due to the increasing popularity and use of commercial online services
and the Internet, it is possible that a number of laws and regulations may be
adopted with respect to commercial online services and the Internet. Such laws
and regulations may cover issues such as user privacy, defamatory speech,
copyright infringement, pricing and characteristics and quality of products and
services. The adoption of such laws or regulations in the future may slow the
growth of commercial online services and the Internet, which could in turn
cause a decline in the demand for the services and products of the Internet
companies in which we have interests and increase such companies' costs of
doing business or otherwise have an adverse effect on their businesses,
operating results and financial conditions. Moreover, the applicability to
commercial online services and the Internet of existing laws governing issues
such as property ownership, libel, personal privacy and taxation is uncertain
and could expose these companies to substantial liability.

Broadcasters

Liberty also has nonattributable minority ownership interests in group owners
of broadcast television and radio stations. The FCC extensively regulates the
ownership and operation of such stations through a variety of rules.

Competition

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

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

In addition, there is substantial competition in the domestic wireless
telecommunications industry, and it is expected that such competition will
intensify as a result of the entrance of new competitors and the increasing
pace of development of new technologies, products and services. Each of the
markets in which the Sprint PCS Group competes is served by other two-way
wireless service providers, including cellular and PCS operators and resellers.
A majority of the markets will have five or more commercial mobile radio
service providers and

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each of the top 50 metropolitan markets have at least one other PCS competitor
in addition to two cellular incumbents. Many of these competitors have been
operating for a number of years and currently service a significant subscriber
base.

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

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

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

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

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

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

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

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

Employees

As of December 31, 1999, Liberty had approximately 40 employees and Liberty's
consolidated subsidiaries had an aggregate of approximately 1,629 employees.
None of our employees are represented by a labor union or covered by a
collective bargaining agreement. We believe that our employee relations are
good.

Properties

With the exception of its corporate offices in Englewood, Colorado (which
Liberty leases), Liberty does not own or lease any real or personal property
other than through its interests in its subsidiaries and business affiliates.
Liberty's subsidiaries and business affiliates own or lease the fixed assets
necessary for the operation of their respective businesses, including office
space, transponder space, headends, cable television and telecommunications
distribution equipment, telecommunications switches and customer equipment
(including converter boxes). Liberty's management believes that its current
facilities are suitable and adequate for its business operations for the
foreseeable future.

Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine
litigation incidental to Liberty's business, to which Liberty or any of its
subsidiaries is a party or of which any of their property is subject.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information concerning our directors
and executive officers.

<TABLE>
<CAPTION>
Date of
Name Birth Position
---- --------- --------
<S> <C> <C>
John C. Malone.......... 3/7/41 Chairman of the Board and Director

Robert R. Bennett....... 4/19/58 President, Chief Executive Officer and Director

Gary S. Howard.......... 2/22/51 Executive Vice President, Chief Operating Officer and Director

David B. Koff........... 12/26/58 Senior Vice President

Charles Y. Tanabe....... 11/27/51 Senior Vice President and General Counsel

Carl E. Vogel........... 10/18/57 Senior Vice President

Peter N. Zolintakis..... 7/10/57 Senior Vice President

Vivian J. Carr.......... 12/13/47 Vice President and Secretary

Kathryn Scherff......... 3/5/65 Vice President and Controller

David J.A. Flowers...... 5/17/54 Vice President and Treasurer

Paul A. Gould........... 9/27/45 Director

Jerome H. Kern.......... 6/1/37 Director

John C. Petrillo........ 4/30/49 Director

Larry E. Romrell........ 12/30/39 Director

Daniel E. Somers........ 12/9/47 Director

John D. Zeglis.......... 5/2/47 Director
</TABLE>

The following is a five-year employment history for our directors and
executive officers, including any directorships held in public companies.

John C. Malone has served as Chairman of the Board and one of our directors
since 1990. Dr. Malone has also served, since December 1996, as Chairman of the
Board and a director of TCI Satellite Entertainment, Inc. Dr. Malone served as
Chairman of the Board of TCI from November 1996 to March 1999, as Chief
Executive Officer of TCI from January 1994 to March 1999, and as President of
TCI from January 1994 to March 1997. Dr. Malone served as Chief Executive
Officer of TCI Communications, Inc., the domestic cable subsidiary of TCI prior
to the AT&T merger ("TCIC"), from March 1992 to October 1994, and as President
of TCIC from 1973 to October 1994. Dr. Malone is also a director of AT&T, The
Bank of New York, TCI Satellite Entertainment, Inc., USANi LLC, At Home
Corporation, United GlobalCom, Inc. and Cendant Corporation.

Robert R. Bennett has served as our President and Chief Executive Officer and
one of our directors since April 1997. Mr. Bennett served as Executive Vice
President of TCI from April 1997 to March 1999. Mr. Bennett served as our
Executive Vice President and Chief Financial Officer, Secretary and Treasurer
from June 1995 through March 1997, and as our Senior Vice President from
September 1991 to June 1995. Mr. Bennett also served as acting Chief Financial
Officer of Liberty Digital, Inc. from June 1997 to July 1997. Mr. Bennett is a
director of TV Guide, Inc., USANi LLC, Teligent, Inc., Telewest Communications
plc and Chairman of the Board of Liberty Digital, Inc.

Gary S. Howard has served as our Executive Vice President, Chief Operating
Officer and one of our directors since July 1998. Mr. Howard has also served as
Chief Executive Officer of TCI Satellite

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Entertainment, Inc. since December 1996. Mr. Howard served as Executive Vice
President of TCI from December 1997 to March 1999; as Chief Executive Officer,
Chairman of the Board and a director of TV Guide, Inc. from June 1997 to March
1999; and as President and Chief Executive Officer of TCI Ventures Group, LLC
from December 1997 to March 1999. Mr. Howard served as President of TV Guide,
Inc. from June 1997 to September 1997; as President of TCI Satellite
Entertainment, Inc. from February 1995 through August 1997; as Senior Vice
President of TCIC from October 1994 to December 1996; and as Vice President of
TCIC from December 1991 through October 1994. Mr. Howard is a director of TV
Guide, Inc., Liberty Digital, Inc., TCI Satellite Entertainment, Inc.,
Teligent, Inc. and ICG Communications.

David B. Koff has served as a Senior Vice President of Liberty since February
1998. Mr. Koff has also served as Vice President and Assistant Secretary of
Liberty Digital, Inc. since January 1998. Mr. Koff served as Vice President--
Corporate Development of Liberty from August 1994 to February 1998, and as
special counsel to Liberty from March 1993 to August 1994. Mr. Koff also served
as interim President and Chief Executive Officer of Liberty Digital, Inc. from
May 1997 to January 1998. Mr. Koff is a director of Liberty Digital, Inc.

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

Carl E. Vogel has served as Senior Vice President of Liberty since December
1999. Mr. Vogel served as Executive Vice President/Chief Operating Officer of
Field Operations for AT&T Broadband from June 1999 until joining Liberty. He
served as Chairman and Chief Executive Officer of Primestar, Inc. from June
1998 to June 1999. From October 1997 to June 1998, Mr. Vogel was Chief
Executive Officer of Star Choice Communications. From March 1994 to March 1997,
he served first as Executive Vice President and Chief Operating Officer and
later as President of EchoStar Communications Corporation. Mr. Vogel began his
career at Arthur Andersen & Co. and subsequently held several senior financial
and operating positions at Jones Intercable, Inc. Mr. Vogel is a director of
Canadian Satellite Communications and ICG Communications.
Peter N. Zolintakis has served as Senior Vice President of Tax Strategy of
Liberty since November 1998. Prior to joining Liberty, Mr. Zolintakis was a
partner of PricewaterhouseCoopers, where he specialized, for more than five
years, in the tax issues relating to corporate mergers, acquisitions,
divestitures and restructurings for clients primarily in the cable television
and high technology industries.

Vivian J. Carr has served as a Vice President of Liberty since June 1993 and
was appointed Secretary of Liberty in August 1994. Ms. Carr served as Director
of Investor Relations of Liberty from March 1991 to June 1993.

Kathryn Scherff has served as a Vice President of Liberty since September
1997 and as Controller of Liberty since September 1993. Ms. Scherff served as
Accounting Manager of Liberty from October 1991 to September 1993.

David J.A. Flowers has served as a Vice President and Treasurer of Liberty
since April 1997. Mr. Flowers served as Vice President--Portfolio Manager of
Liberty from June 1995 to April 1997. Prior to joining Liberty, Mr. Flowers
held several positions at Toronto Dominion Bank from August 1989 to June 1995,
including Managing Director in its Media Finance Group.

Paul A. Gould has served as one of our directors since March 1999. Mr. Gould
has also served as a Managing Director and Executive Vice President of Allen &
Company Incorporated, an investment banking services company, for more than the
last five years. Mr. Gould served as a director of TCI from December 1996 to
March 1999 and of Liberty from November 1992 to August 1994. Mr. Gould is a
director of Ascent Entertainment Group, Inc. and Sunburst Hospitality
Corporation.

Jerome H. Kern has served as one of our directors since March 1999. Mr. Kern
served as Vice Chairman and as a consultant of TCI from June 1998 to March
1999. Prior to joining TCI, Mr. Kern was Special Counsel

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with the law firm of Baker Botts L.L.P. from July 1996 to June 1998, and a
senior partner of Baker Botts L.L.P. from September 1992 to July 1996. Mr. Kern
served as a director of TCIC from December 1993 to August 1994. Mr. Kern is the
Chief Executive Officer and Chairman of the board of directors of On Command
Corporation. He is also a director of TCI Pacific Communications Inc.

John C. Petrillo has served as one of our directors since March 1999. Mr.
Petrillo has served as Executive Vice President of Corporate Strategy and
Business Development for AT&T since May 1996. Mr. Petrillo was the President of
AT&T's Business Communications Services from 1993 to 1995 and also served as
AT&T Vice President of Strategic Planning from 1991 to 1993, AT&T Vice
President of Business Communications Services in 1990, AT&T Services Vice
President in 1987 and AT&T Director of Personnel in 1986. Mr. Petrillo is a
director of At Home Corporation.

Larry E. Romrell has served as one of our directors since March 1999. Mr.
Romrell has also served as a consultant to Liberty since March 1999. Mr.
Romrell served as Executive Vice President of TCI from January 1994 to March
1999 and since March 1999 has served as a consultant to AT&T Broadband. Mr.
Romrell also served, from December 1997 to March 1999, as Executive Vice
President and Chief Executive Officer of TCI Business Alliance and Technology
Co., a subsidiary of TCI prior to the AT&T merger that oversaw and developed
TCI's technology activities; from December 1997 to March 1999, as Senior Vice
President of TCI Ventures Group, LLC; and, from September 1994 to October 1997,
as President of TCI Technology Ventures, Inc., a subsidiary of TCI prior to the
AT&T merger that invested in and developed companies engaged in advancing
telecommunications technology. Mr. Romrell served as Senior Vice President of
TCIC from 1991 to October 1994. Mr. Romrell is a director of TV Guide, Inc. and
General Communication, Inc.

Daniel E. Somers has served as one of our directors since March 1999. Mr.
Somers has also served as Acting Co-Chief Executive Officer of AT&T Broadband
since October 6, 1999 and as Senior Executive Vice President and Chief
Financial Officer of AT&T since May 1997. Prior to joining AT&T, Mr. Somers
served as Chairman and Chief Executive Officer of Bell Cablemedia, plc from
1995 to 1997, and as Executive Vice President and Chief Financial Officer of
Bell Canada International, Inc. from 1992 to 1995. Mr. Somers is a member of
AT&T's Executive Council and Operations Group. He is also a director of
Lubrizol Corporation, Cablevision, Inc. and Chase Manhattan Advisory Board.

John D. Zeglis has served as one of our directors since October 11, 1999. Mr.
Zeglis has also served as Chairman and Chief Executive Officer of AT&T Wireless
Group since December 1999 and as President of AT&T since November 1997. Mr.
Zeglis served as Vice Chairman of AT&T from June to November 1997, General
Counsel and Senior Executive Vice President of AT&T from 1996 to 1997, and
Senior Vice President and General Counsel of AT&T from 1986 to 1996. He is also
a director of AT&T, Helmerich and Payne Corporation, Sara Lee Corporation and
Illinova Corporation.

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

Board Composition

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

75
<PAGE>

The Class A Directors, whose terms expire at the annual meeting of
stockholders in 2000, are John D. Zeglis, Daniel E. Somers and John C.
Petrillo. The Class B Directors, whose terms expire at the annual meeting of
stockholders in 2006, are Larry E. Romrell, Jerome H. Kern and Gary S. Howard.
The Class C Directors, whose terms expire at the annual meeting of stockholders
in 2009, are John C. Malone, Paul A. Gould and Robert R. Bennett. At each
annual meeting of our stockholders, the successors of that class or classes of
directors whose term(s) expire at that meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held, in the case of
the Class A Directors, in the following year, in the case of the Class B
Directors, in the seventh year following the year of such election and, in the
case of the Class C Directors, in the tenth year following the year of such
election. The directors of each class will hold office until their respective
death, resignation or removal and until their respective successors are elected
and qualified.

Committees of the Board

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

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

Compensation of Directors

No member of our board of directors receives any compensation for serving on
our board. However, all members of our board are reimbursed for travel expenses
incurred to attend any meetings of our board or any committee thereof.

Compensation of Executive Officers

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

. our Chief Executive Officer;

. our four other most highly compensated executive officers for the fiscal
year ended December 31, 1999; and

. one additional executive officer who would have been included above but
for the fact that he was not serving as an executive officer of Liberty
for the full fiscal year ended December 31, 1999.

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

76
<PAGE>

Summary Compensation Table. The following table sets forth information
concerning the compensation paid to the named executive officers by Liberty for
the two years ended December 31, 1999. Compensation for Mr. Vogel reflects the
annual compensation that would have been paid to him had he been serving as an
executive officer of Liberty since the beginning of 1999 based on his 2000
annual compensation. Mr. Vogel became an executive officer of Liberty on
December 4, 1999.

Summary Compensation Table

<TABLE>
<CAPTION>
Annual
Compensation Long-Term Compensation
--------------- ---------------------------------------------
Securities
Restricted Underlying
Stock Award Options/SARs All Other
Name and Principal Bonus ($ in (# in Compensation
Position with Liberty Year Salary ($) ($) thousands) thousands) ($)
- ------------------------ ---- ---------- ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Bennett....... 1999 $1,000,000 $ -- $ -- -- $47,013(5)(6)
President and Chief
Executive Officer 1998 $ 559,354 $ -- $7,738(1) 6,000(3) $36,540(5)(6)
Gary S. Howard.......... 1999 $ 750,000 $23,210 $ -- -- $15,000(6)
Executive Vice President
and Chief Operating
Officer 1998 $ 533,769 $ -- $ -- 5,000(3) $15,000(6)
Charles Y. Tanabe....... 1999 $ 492,308 $ -- $ -- -- $15,000(6)
Senior Vice President
and General Counsel 1998 $ -- $ -- $ -- 1,200(3) $ --
Peter N. Zolintakis..... 1999 $ 496,865 $ -- $ -- -- $15,000(6)
Senior Vice President 1998 $ 76,946 $ -- $1,978(2) 1,200(3) $ --
David B. Koff........... 1999 $ 375,000 $ -- $ -- -- $15,000(6)
Senior Vice President 1998 $ 275,000 $ -- $ -- 1,200(3) $14,985(6)
Carl E. Vogel........... 1999 $ 500,000 $ -- $ -- 500(4) $15,000(6)
Senior Vice President 1998 $ -- $ -- $ -- -- $ --
</TABLE>
- --------
(1) On June 23, 1998, pursuant to the Tele-Communications, Inc. 1998 Incentive
Plan (the "1998 Incentive Plan"), Mr. Bennett was granted 200,000
restricted shares of Series A TCI Group tracking stock. These restricted
shares, as adjusted for the AT&T merger and a subsequent AT&T stock split,
became 232,710 restricted shares of AT&T common stock. The restricted
shares vest as to 50% of the shares in June 2002 and as to the remaining
50% in June 2003. At the end of 1999, the restricted shares had an
aggregate value of $11,824,577, based upon the closing sales price per
share of AT&T common stock on the New York Stock Exchange (the "NYSE") on
December 31, 1999. Cash dividends on the restricted shares of AT&T common
stock are paid to Mr. Bennett.

(2) On November 15, 1998, pursuant to the 1998 Incentive Plan, Mr. Zolintakis
was granted 50,000 restricted shares of Series A TCI Group tracking stock.
These restricted shares, as adjusted for the AT&T merger and a subsequent
AT&T stock split, became 58,177 restricted shares of AT&T common stock. All
of the restricted shares vest in November 2000. At the end of 1999, the
restricted shares had an aggregate value of $2,956,119, based upon the
closing sales price per share of AT&T common stock on the NYSE on December
31, 1999. Cash dividends on the restricted shares of AT&T common stock are
paid to Mr. Zolintakis.

(3) On December 29, 1998, pursuant to the 1998 Incentive Plan, these executive
officers were granted options in tandem with SARs to acquire shares of
TCI's Series A Liberty Media Group tracking stock. In the AT&T merger,
those options and tandem SARs were converted into options and rights with
respect to AT&T Class A Liberty Media Group tracking stock at an exercise
price of $21.62 per share, as adjusted for a subsequent two-for-one stock
split. The options and tandem SARs vest evenly over five years on each
anniversary of the date of grant. The options and tandem SARs expire on
December 29, 2008, subject to earlier termination in certain events.
Notwithstanding the vesting schedule as set forth in the option agreements,
the options and SARs will immediately vest and become exercisable if the
grantee's employment with Liberty terminates by reason of disability or the
grantee dies while employed by Liberty.

77
<PAGE>

(4) Consists of SARs granted to Mr. Vogel on November 2, 1999, which vest and
become exercisable ratably over a five-year term, commencing on each
anniversary of the date of the grant. The SARs expire on November 2, 2009,
subject to earlier termination in certain events. Upon the valid exercise
of SARs, Mr. Vogel shall be entitled to receive from Liberty cash equal to
the excess of the fair value of each share of AT&T Class A Liberty Media
Group tracking stock with respect to which such SARs have been exercised
over $37.25 per share. Notwithstanding the vesting schedule as set forth
in the option agreements, the SARs will immediately vest and become
exercisable if the grantee's employment with Liberty terminates by reason
of disability or the grantee dies while employed by Liberty.

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

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

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

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

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

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

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

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

78
<PAGE>

Option and SAR Grants in Last Fiscal Year. The following table sets forth
information regarding free-standing SARs granted to the executive officer
named in the table below during the year ended December 31, 1999 (numbers of
underlying securities and dollar amounts present value in thousands). No other
named executive officer was granted stock options or SARs during the year
ended December 31, 1999.

Option and SAR Grants in the Last Fiscal Year

<TABLE>
<CAPTION>
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base Grant
Options Employees in Price Expiration Date Present
Name Granted (1) 1998 ($/Sh)(2) Date Value (3)
- ---- ----------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Carl E. Vogel....... 500 90% $37.25 11/02/09 $21,765
</TABLE>
- --------
(1) Consists of SARs granted to Mr. Vogel on November 2, 1999, which vest and
become exercisable ratably over a five-year term, commencing on each
anniversary of the date of the grant. The SARs expire on November 2,
2009, subject to earlier termination in certain events. Upon the valid
exercise of SARs, Mr. Vogel shall be entitled to receive from Liberty
cash equal to the excess of the fair value of each share of AT&T Class A
Liberty Media Group tracking stock with respect to which such SARs have
been exercised over $37.25 per share. Notwithstanding the vesting
schedule as set forth in the option agreements, the SARs will immediately
vest and become exercisable if the grantee's employment with Liberty
terminates by reason of disability or the grantee dies while employed by
Liberty.

(2) Liberty used the low sales price per share of AT&T Class A Liberty Media
Group tracking stock on the NYSE on the date of the grant in determining
the grant-date market price of the security underlying the free-standing
SARs.

(3) The value shown is based on the Black-Scholes model and is stated in
current annualized dollars on a present value basis. The key assumptions
used in the model for purposes of this calculation include the following:

. a 6.73% discount rate;

. a volatility factor based upon the historical trading pattern of
AT&T Class A Liberty Media Group tracking stock;

. the 10-year option term; and

. the closing price of AT&T Class A Liberty Media Group tracking
stock on December 31, 1999.

The actual value the executive may realize will depend upon the extent to
which the stock price exceeds the exercise price on the date the option is
exercised. Accordingly, the value, if any, realized by the executive would
not necessarily be the value determined by the model.

Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values. The
following table sets forth information concerning exercises of stock options
and SARs by the named executive officers during the year ended December 31,
1999 (numbers of securities and dollar amounts in thousands).

79
<PAGE>

Aggregated Option/SAR Exercises in the Last Fiscal Year and
Fiscal Year-End Option/SAR Values

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired Value December 31, 1999 (#) December 31, 1999
on Exercise Realized Exercisable/ ($) Exercisable/
Name (#)(1) ($) Unexercisable Unexercisable
- ---- ----------- -------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Robert R. Bennett
Exercisable
AT&T Class A Liberty
Media Group .......... 935 $43,081 3,091 $130,861
AT&T common stock...... -- -- 25 $ 941
TCI Group Series A
(2)................... 191 $10,985 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 6,006 $228,723
AT&T common stock...... -- -- 45 $ 1,685
Gary S. Howard
Exercisable
AT&T Class A Liberty
Media Group .......... 256 $13,017 1,014 $ 29,876
AT&T common stock...... 39 $ 1,604 47 $ 1,797
TCI Group Series A
(2)................... 116 $ 5,852 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 4,019 $141,702
AT&T common stock...... -- -- 23 $ 895
Charles Y. Tanabe
Exercisable
AT&T Class A Liberty
Media Group .......... 240 $ 8,011 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 960 $ 33,785
Peter N. Zolintakis
Exercisable
AT&T Class A Liberty
Media Group .......... 240 $ 7,861 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 960 $ 33,785
David B. Koff
Exercisable
AT&T Class A Liberty
Media Group .......... -- -- 623 $ 26,517
AT&T common stock...... -- -- 4 $ 157
TCI Group Series A
(2)................... 4 $ 187 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 1,131 $ 42,315
Carl E. Vogel
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 500 $ 9,781
</TABLE>
- --------
(1) Represents the number of shares underlying SARs which were exercised in
1999.
(2) Represents the number of shares of TCI Group Series A tracking stock
exercised and value realized prior to the AT&T merger.

80
<PAGE>

Employment Contracts

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

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

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

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

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

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

Liberty pays a portion of the annual premiums on three whole-life insurance
policies of which Dr. Malone is the insured and trusts for the benefit of
members of his family are the owners. The portion that Liberty pays is equal to
the "PS-58" costs, which represent the costs to buy one-year term insurance
coverage as set forth in IRS Pension Service Table No. 58. For the year ending
December 31, 1999, such amount will be $447,931. Liberty is the designated
beneficiary of the proceeds of such policies less an amount equal to the
greater of the cash surrender value thereof at the time of Dr. Malone's death
and the amounts of the premiums paid by the policy owners.

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

81
<PAGE>

Liberty Media 401(k) Savings Plan

Liberty maintains an employee benefit plan known as the Liberty Media 401(k)
Savings Plan. This plan is intended to be a qualified employee plan under
Sections 401(a) and 401(k) of the Internal Revenue Code of 1986. An employee
must be an employee of Liberty or of an employer owned 80% or more by Liberty
(a "Participating Employer") and must complete three months of continuous
employment and be at least 18 years of age to participate in the plan. Credit
will be given for service with TCI, Liberty and their affiliates for
eligibility and vesting service under the plan. The employee will commence
participation as of the first payroll period following the employee's
completion of the eligibility requirements and his or her enrollment in the
plan.

Upon commencing participation, the participant may elect to make pre-tax
contributions, after-tax contributions, or both to the plan. All participant
contributions are made by payroll deduction and all participant contributions
may not exceed 10% of the participant's wages from the Participating Employer.
Pre-tax participant contributions are not subject to income tax when
contributed to the plan, but will be subject to FICA taxes when contributed to
the plan. Those pre-tax participant contributions (and earnings) will be taxed
to the participant when the participant receives a distribution from the plan.
Pre-tax participant contributions are limited to $10,000 for each year (as
adjusted for cost of living increases). After-tax participant contributions are
subject to income taxes and FICA taxes when contributed to the plan, but
earnings on those contributions will not be taxed to the participant until the
participant receives a distribution from the plan.

A participant may change the amount of his or her participant contributions
as of any prospective payroll period. Participant contributions always are 100%
vested. The participant may direct the investment of his or her participant
contributions, and earnings on those amounts, into a variety of investment
options, including the AT&T Class A Liberty Media Group Common Stock Fund and
the AT&T Common Stock Fund (the "Employer Stock Funds").

Only the first $160,000 (as adjusted in 2000 and thereafter for cost of
living increases) of any participant's wages is taken into account for all
purposes under the plan, as required by law.

Generally, Liberty will make a matching contribution to the plan for each
plan year equal to 100% of each participant's participant contributions to the
plan, unless Liberty, in its discretion, decides upon a different percentage
for the matching contribution. All Liberty contributions to the plan are
invested solely in the AT&T Class A Liberty Media Group Common Stock Fund.

Liberty contributions to the plan become 33% vested after one year of
service, 66% vested after two years of service, and 100% vested after three
years of service. Generally, a year of service will be credited for each
twelve-month period of employment completed by the participant. In addition, a
participant will be 100% vested in his or her Liberty contributions upon
attaining normal retirement age (age 65), upon becoming totally disabled, or
upon the participant's death while employed with a Participating Employer.

Liberty contributions to the plan (and earnings on those contributions) on
behalf of a participant are not taxable to the participant until those amounts
are distributed from the plan. Liberty receives a deduction for the amounts it
contributes to the plan.

A participant can withdraw his or her participant contributions and Liberty
contributions while he or she remains employed only in the following limited
circumstances: upon attaining age 59 1/2, the participant may request a
withdrawal of all or any portion of his or her Liberty contributions account
(including earnings on such contributions) and his or her pre-tax participant
contributions account (including earnings on such contributions). A participant
may withdraw any portion of his or her after-tax participant contributions at
any time. Upon experiencing a financial hardship, a participant may request a
withdrawal of his or her pre-tax participant contributions (but not the
earnings on such contributions) in an amount necessary to meet the financial
need. A participant who takes a hardship withdrawal may not contribute to the
plan for 12 months after the withdrawal, and there are limitations on the
maximum salary reduction amounts that may be made in the year following the
year of the hardship withdrawal.

82
<PAGE>

Upon terminating employment with Liberty, the participant may receive a
distribution of his or her entire vested account in the plan. If the vested
account equals $5,000 or less, the distribution will be made as soon as
administratively reasonable after the participant's termination of employment
occurs. If the participant's vested account exceeds $5,000, the participant
must consent to the distribution and such distribution will be made as soon as
administratively reasonable after the participant's consent to the distribution
is received. The participant must commence distributions from the plan by April
1 of the year following the year in which occurs the later of the participant's
attainment of age 70 1/2 or the participant's retirement.

Distributions will be made in cash, however, the participant may elect to
receive that portion of his or her vested account which is invested in the
Employer Stock Funds in whole shares of those Employer Stocks. Any qualified
distribution from the plan may be rolled over to an IRA or other qualified plan
upon the election of the participant.

A 10% federal penalty tax may be imposed on the taxable amount of certain
early distributions from the plan. The early distribution penalty tax does not
apply to distributions made on account of: the death or disability of the
participant, the participant's attainment of age 55 and separation from
service, the participant's payment of certain medical expenses, payment to an
alternate payee under a qualified domestic relations order, or the
participant's attainment of age 59 1/2.

Security Ownership of Management

The following table sets forth information with respect to the ownership by
each director and each of the named executive officers of Liberty and by all
directors and executive officers of Liberty as a group of shares of AT&T common
stock and Class A and Class B Liberty Media Group tracking stock, all of which
are equity securities of AT&T Corp., which is the sole member of AT&T Broadband
LLC, which in turn indirectly owns 100% of the outstanding common stock of
Liberty. The table also sets forth information with respect to the ownership by
each director and each of the named executive officers of Liberty and by all
directors and executive officers of Liberty as a group of shares of Series A
common stock of Liberty Digital, Inc., a subsidiary of Liberty. Shares of Class
B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock of the former
TCI owned by certain directors and named executive officers of Liberty at
December 31, 1999, were redeemed on February 22, 2000, and have, therefore,
been excluded from the following table. The AT&T Liberty Media Group tracking
stock is intended to reflect the separate performance of the businesses and
assets attributed to the Liberty Media Group. Liberty is included in the
Liberty Media Group, and the businesses and assets of Liberty and its
subsidiaries constitute substantially all of the businesses and assets of the
Liberty Media Group. See "Relationship with AT&T and Certain Related
Transactions--Relationship with AT&T."

The AT&T charter provides that, except as otherwise required by New York law
or any special voting rights of AT&T preferred stock, the holders of AT&T
common stock, AT&T Liberty Media Group tracking stock and AT&T preferred stock,
if any, entitled to vote with the common shareholders, vote together as one
class. No separate class vote is required for the approval of any matter except
as described in the next sentence. The following circumstances require the
separate class approval of the AT&T Liberty Media Group tracking stock:
. any amendment to the AT&T charter that would change the total number of
authorized shares or the par value of AT&T Liberty Media Group tracking
stock or that would adversely change the rights of AT&T Liberty Media
Group tracking stock;
. a Covered Disposition, which generally includes a sale or transfer by
AT&T of its equity interest in Liberty or Liberty Media Group LLC or a
grant of a pledge or other security interest in the equity interest of
AT&T in Liberty or Liberty Media Group LLC; and
. any merger or similar transaction in which AT&T Liberty Media Group
tracking stock is converted, reclassified or changed into or otherwise
exchanged for any consideration unless specified requirements are met
that are generally intended to ensure that the rights of the holders are
not materially altered and the composition of the holders is not
changed.

83
<PAGE>

In a separate shareholder vote with respect to any of the foregoing matters,
the ownership of AT&T Class A Liberty Media Group and AT&T Class B Liberty
Media Group tracking stock indicated in the table below as beneficially owned
by (1) Dr. Malone would entitle him to cast 43.38% of the votes on such matter
and (2) by all directors and executive officers as a group would entitle them
to cast, in the aggregate, 43.72% of the votes on such matter. No other person
named in the table below had the right, at December 31, 1999, to cast 1% or
more of the votes on any such matter.

The following information is given as of December 31, 1999, and, in the case
of percentage ownership information, is based on 3,196,524,356 shares of AT&T
common stock, 1,156,778,730 shares of AT&T Class A Liberty Media Group tracking
stock, 108,421,114 shares of AT&T Class B Liberty Media Group tracking stock
and 26,507,489 shares of Liberty Digital Series A common stock outstanding on
that date. Shares of AT&T common stock, AT&T Class A and Class B Liberty Media
Group tracking stock and Liberty Digital, Inc. Series A common stock issuable
upon exercise or conversion of convertible securities are deemed to be
outstanding for the purpose of computing the percentage ownership and overall
voting power of persons beneficially owning such convertible securities, but
have not been deemed to be outstanding for the purpose of computing the
percentage ownership or overall voting power of any other person. So far as is
known to Liberty, the persons indicated below have sole voting power with
respect to the shares indicated as owned by them except as otherwise stated in
the notes to the table. In April 2000, Liberty's board of directors approved a
two-for-one split of the AT&T Liberty Media Group Class A and Class B tracking
stock, subject to stockholder approval. The information included in this
prospectus does not give effect to the stock split, which, if approved, is
expected to occur in June 2000.

<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Ownership of Voting
Name of Beneficial Owner Title of Class (in thousands) Class Power
- ------------------------ -------------- -------------- ------- ------
<S> <C> <C> <C> <C>
John C. Malone.......... AT&T common stock 32,625(/1/)(/2/) 1.02% 3.11%
Class A Liberty Media Group 3,220(/1/)(/2/) *
Class B Liberty Media Group 97,546(/1/)(/2/)(/3/) 89.01%
Liberty Digital Series A 0

Robert R. Bennett....... AT&T common stock 273(/4/)(/5/) * *
Class A Liberty Media Group 3,133(/4/) *
Class B Liberty Media Group 0
Liberty Digital Series A 60(/6/) * *

Gary S. Howard.......... AT&T common stock 61(/7/)(/8/) * *
Class A Liberty Media Group 1,063(/7/)(/8/) *
Class B Liberty Media Group 0
Liberty Digital Series A 20(/9/) * *

Paul A. Gould........... AT&T common stock 0 *
Class A Liberty Media Group 765(/10/) *
Class B Liberty Media Group 214 *
Liberty Digital Series A 0

Jerome H. Kern.......... AT&T common stock 906(/11/)(/12/)(/13/) * *
Class A Liberty Media Group 1,178(/11/)(/12/)(/13/) *
Class B Liberty Media Group 0
Liberty Digital Series A 0

John C. Petrillo........ AT&T common stock 378(/14/) * *
Class A Liberty Media Group 0
Class B Liberty Media Group 0
Liberty Digital Series A 0

Larry E. Romrell........ AT&T common stock 325(/15/)(/16/) * *
Class A Liberty Media Group 1,250(/15/)(/16/) *
Class B Liberty Media Group 2 *
Liberty Digital Series A 0
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Ownership of Voting
Name of Beneficial Owner Title of Class (in thousands) Class Power
- ------------------------ -------------- -------------- ------- ------
<S> <C> <C> <C> <C>
Daniel E. Somers........ AT&T common stock 176(/17/) * *
Class A Liberty Media Group 0
Class B Liberty Media Group 0
Liberty Digital Series A 0

David B. Koff........... AT&T common stock 4 * *
Class A Liberty Media Group 618(/18/) *
Class B Liberty Media Group 0
Liberty Digital Series A 0

Charles Y. Tanabe....... AT&T common stock 1 * *
Class A Liberty Media Group 2 *
Class B Liberty Media Group 0
Liberty Digital Series A 0

Carl E. Vogel........... AT&T common stock 0 *
Class A Liberty Media Group 9 *
Class B Liberty Media Group 0
Liberty Digital Series A 0

Peter N. Zolintakis..... AT&T common stock 58(/19/) * *
Class A Liberty Media Group 8 *
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

John D. Zeglis.......... AT&T common stock 1,162(/20/) * *
Class A Liberty Media Group 0
Class B Liberty Media Group 0
Liberty Digital Series A 0

All directors and
executive officers as a
group (16 persons)..... AT&T common stock 35,970(/21/)(/22/) 1.12% 3.23%
Class A Liberty Media Group 11,662(/3/)(/21/)(/22/) *
Class B Liberty Media Group 97,762(/21/) 89.21%
Liberty Digital Series A 80(/23/) * *
</TABLE>
- --------
* Less than one percent

(1) Includes beneficial ownership of the following shares which may be acquired
within 60 days pursuant to stock options granted in tandem with stock
appreciation rights: (a) 162,897 shares of AT&T common stock; (b) 3,194,600
shares of AT&T Class A Liberty Media Group tracking stock; and (c)
1,164,800 shares of AT&T Class B Liberty Media Group tracking stock.

(2) Includes 1,004,622 shares of AT&T common stock, 25,452 shares of AT&T Class
A Liberty Media Group tracking stock and 1,704,718 shares of AT&T Class B
Liberty Media Group tracking stock held by Dr. Malone's wife, Mrs. Leslie
Malone, as to which Dr. Malone has disclaimed beneficial ownership.

(3) In connection with the AT&T merger, TCI assigned to Liberty its rights
under a call agreement with Dr. Malone and Dr. Malone's wife (the
"Malones") and a call agreement with the Estate of Bob Magness, the Estate
of Betsy Magness, Gary Magness (individually and in certain representative
capacities) and Kim Magness (individually and in certain representative
capacities) (collectively, the "Magness Group"). As a result, Liberty has
the right, under certain circumstances, to acquire the AT&T Class B Liberty
Media Group tracking stock owned by the Malones and the Magness Group.
Further, in connection with the AT&T merger, TCI assigned to Liberty its
rights under a shareholders agreement with the Magness Group and the
Malones, pursuant to which, among other things, Dr. Malone has an

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<PAGE>

irrevocable proxy, under certain circumstances, to vote the AT&T Class B
Liberty Media Group tracking stock or any super voting class of equity
securities issued by Liberty held by the Magness Group. See "Relationship
with AT&T and Certain Related Transactions--Other Related Party
Transactions--Certain Rights to Purchase Liberty Media Group Tracking
Stock," for additional information related to the call agreements and the
shareholders' agreement.

As a result of certain provisions of the shareholders' agreement referred
to above, Dr. Malone's beneficial ownership of AT&T Class B Liberty Media
Group tracking stock includes 47,791,166 shares held by the Magness Group.

(4) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 23,620 shares of AT&T common stock; and (b)
3,091,162 shares of AT&T Class A Liberty Media Group tracking stock.

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

(6) Assumes the exercise in full of stock options to acquire 60,000 shares of
Liberty Digital Series A common stock, all of which are currently
exercisable.

(7) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 45,835 shares of AT&T common stock; and (b)
1,013,530 shares of AT&T Class A Liberty Media Group tracking stock.

(8) Includes 5,551 restricted shares of AT&T common stock and 5,675 restricted
shares of AT&T Class A Liberty Media Group tracking stock, none of which
are currently vested.

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

(10) Includes beneficial ownership of 68,550 shares of AT&T Class A Liberty
Media Group tracking stock which may be acquired within 60 days pursuant
to stock options granted in tandem with stock appreciation rights.

(11) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 383,972 shares of AT&T common stock; and
(b) 797,576 shares of AT&T Class A Liberty Media Group tracking stock.

(12) Includes 481,267 restricted shares of AT&T common stock and 75,670
restricted shares of AT&T Class A Liberty Media Group tracking stock,
none of which are currently vested.

(13) Includes 12,798 shares of AT&T common stock and 40,200 shares of AT&T
Class A Liberty Media Group tracking stock held by Mr. Kern's wife, Mary
Rossick Kern, as to which Mr. Kern has disclaimed beneficial ownership.

(14) Includes beneficial ownership of 376,047 shares of AT&T common stock
which may be acquired within 60 days pursuant to stock options.

(15) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 169,412 shares of AT&T common stock; and
(b) 1,074,252 shares of AT&T Class A Liberty Media Group tracking stock.

(16) Includes 134,650 restricted shares of AT&T common stock and 37,634
restricted shares of AT&T Class A Liberty Media Group tracking stock,
none of which are currently vested.

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<PAGE>

(17) Includes beneficial ownership of 174,498 shares of AT&T common stock which
may be acquired within 60 days pursuant to stock options.

(18) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 4,073 shares of AT&T common stock; and (b)
613,724 shares of AT&T Class A Liberty Media Group tracking stock.

(19) Includes 58,177 restricted shares of AT&T common stock, none of which are
currently vested.

(20) Includes beneficial ownership of 1,153,716 shares of AT&T common stock
which may be acquired within 60 days pursuant to stock options granted in
tandem with stock appreciation rights.

(21) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 2,494,070 shares of AT&T common stock; (b)
10,244,794 shares of AT&T Class A Liberty Media Group tracking stock; and
(c) 1,164,800 shares of AT&T Class B Liberty Media Group tracking stock.

(22) Includes 912,355 restricted shares of AT&T common stock and 118,979
restricted shares of AT&T Class A Liberty Media Group tracking stock, none
of which are currently vested.

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

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<PAGE>

RELATIONSHIP WITH AT&T AND CERTAIN RELATED TRANSACTIONS

Relationship with AT&T

Liberty is a wholly owned subsidiary of AT&T Broadband, LLC, of which AT&T is
the sole member. The businesses and assets of Liberty and its subsidiaries
constitute substantially all of the businesses and assets of AT&T's Liberty
Media Group, which was created in connection with the AT&T merger. The assets
attributed to the Liberty Media Group that are not also currently assets of
Liberty consist of approximately 21.4 million shares of common stock of
Teligent, Inc., which are held indirectly by AGI LLC, and interests in each of
the "Covered Entities" and their respective properties and assets. The Covered
Entities are the following subsidiaries of AT&T: Liberty AGI, Inc., Liberty SP,
Inc. and LMC Interactive, Inc. At such time as all of the equity in, or all of
the assets of, a company identified as a Covered Entity are held by Liberty,
that company will cease to be a Covered Entity.

The Liberty Media Group also includes any proceeds of issuances or sales of
AT&T's Liberty Media Group tracking stock and any dividends or distributions
from Liberty or a Covered Entity.

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

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

On April 27, 2000, AT&T effected the initial public offering of a new
tracking stock intended to reflect the performance of the new AT&T Wireless
Group. The relationship between the Liberty Media Group and the AT&T Wireless
Group will be substantially similar to the relationship between the Liberty
Media Group and the AT&T Common Stock Group described below.

Liberty Organizational Documents. The Liberty Charter provides that Liberty
will have three classes of directors, each of which is to have the same number
of directors, as follows:

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

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

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

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

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

The officers of Liberty include the executive officers who were formerly in
charge of overseeing the businesses of TCI's former Liberty Media Group and TCI
Ventures Group. See "Management." The Liberty Charter provides that officers of
Liberty may only be removed by the Liberty board by the affirmative vote
described above. Similar governance arrangements were instituted with respect
to each of the Covered Entities.

Contribution Agreement. Liberty is a party to a Contribution Agreement
entered into immediately prior to the AT&T merger. The Contribution Agreement
provides that, in the event of a Triggering Event, Liberty will be obligated to
transfer all of its assets and liabilities to Liberty Media Group LLC, an
entity controlled by

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<PAGE>

Liberty's current management through Liberty Management LLC, the managing
member, unless the Triggering Event is waived by Liberty Management LLC. The
subsidiary of AT&T that holds the stock of the Covered Entities and Liberty is
also a party to the Contribution Agreement and is obligated under the same
circumstances to contribute the Contributed Entities or their assets to Liberty
Media Group LLC. A Triggering Event will occur if the incumbent Class B and
Class C directors, and their successors, cease to constitute a majority of the
Liberty board, or Liberty Management LLC reasonably determines that such event
is reasonably likely to occur.

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

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

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

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

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

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

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

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

. otherwise to assist the other group.

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

Inter-Group Agreement. AT&T, for itself and on behalf of the members of the
AT&T Common Stock Group, on the one hand, and Liberty, Liberty Media Group LLC
and each Covered Entity, for themselves and on behalf of the members of the
Liberty Media Group, on the other hand, entered into the Inter-Group Agreement,
in connection with the AT&T merger. A summary of the material provisions of the
Inter-Group Agreement is set forth below.

Neither the AT&T Common Stock Group Nor the Liberty Media Group Is Required
to Offer Financial Support or Corporate Opportunities to the Other. In general,
neither the AT&T Common Stock Group nor

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<PAGE>

the Liberty Media Group will have any obligation or responsibility to provide
financial support or offer corporate opportunities to the other group or to
otherwise assist the other group. Generally, neither group will have any rights
to the tradenames, trademarks or other intellectual property rights of the
other group.

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

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

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

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

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

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

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

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

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

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

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

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

except that the foregoing will not apply to:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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otherwise incur under the tax sharing agreement for periods subsequent to the
AT&T merger on March 9, 1999. In general, with respect to the TCI Affiliated
Group, for periods ending on or prior to March 9, 1999:

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

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

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

Facilities and Services Agreement. TCI and Liberty entered into a facilities
and services agreement effective upon the consummation of the AT&T merger.
Pursuant to the agreement, AT&T Broadband (formerly TCI) provides Liberty with
administrative and operational services necessary for the conduct of its
business, including, but not limited to, such services as are generally
performed by AT&T Broadband's accounting, finance, corporate, legal and tax
departments. In addition, the agreement provides Liberty with office space at
AT&T Broadband's facilities, permits Liberty to obtain certain liability,
property and casualty insurance under AT&T Broadband's policies and allows for
the reciprocal use by AT&T Broadband and Liberty of each other's aircraft.
Pursuant to the agreement, Liberty reimburses AT&T Broadband for all direct
expenses incurred by AT&T Broadband in providing services thereunder and a pro
rata share of all indirect expenses incurred by AT&T Broadband in connection
with the rendering of such services, including a pro rata share of rental
expenses for the office space of AT&T Broadband used by Liberty. The
obligations of AT&T Broadband to provide services under the Agreement will
continue in effect (A) until terminated by Liberty at any time on not less than
180 days' notice to AT&T Broadband, or by AT&T Broadband at any time after
December 31, 2001, on not less than six months' notice to Liberty; or (B) until
December 31, 2001 with respect to all other services. Liberty was allocated
less than $1 million, $2 million and $13 million, respectively, in corporate
and general and administrative costs by AT&T Broadband, for the ten months
ended December 31, 1999, the two months ended February 28, 1999 and the year
ended December 31, 1998.

Other Related Party Transactions

Affiliation Agreements. AT&T Broadband is party to affiliation agreements
pursuant to which it purchases programming from subsidiaries and affiliates of
Liberty. Certain of these agreements provide for penalties and charges in the
event the supplier's programming is not carried on AT&T Broadband's cable
systems or not delivered to a contractually specified number of customers.
Charges to AT&T Broadband for such programming is generally based on customary
rates and often provide for payments to AT&T Broadband by Liberty's
subsidiaries and business affiliates for marketing support. In July 1997, AT&T
Broadband's predecessor, TCI, entered into a 25 year affiliation agreement with
Starz Encore Group (formerly Encore Media Group) pursuant to which AT&T
Broadband is obligated to pay monthly fixed amounts in exchange for unlimited
access to Encore and STARZ! programming. Also in 1997, in connection with the
merger of Liberty Digital and DMX, AT&T Broadband's predecessor, TCI
transferred to Liberty Digital the right to receive all revenue from sales of
DMX music services to AT&T Broadband's residential and commercial subscribers,
net of an amount equal to 10% of revenue from such sales to residential
subscribers and net of the revenue otherwise payable to DMX as license fees
under AT&T Broadband's existing affiliation agreements. Liberty received $180
million, $43 million and $162 million in revenue for programming services
provided to AT&T Broadband for the ten months ended December 31, 1999, the two
months ended February 28, 1999 and the year ended December 31, 1998,
respectively.

Business Relationships with Directors. In connection with the AT&T merger,
Liberty paid Jerome H. Kern, a director of Liberty, the sum of $10 million for
his services in negotiating the merger agreement and

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completing the merger. Liberty also paid Paul A. Gould, a director of Liberty,
the sum of $1 million for his services on the special committee of the board of
directors of AT&T Broadband's predecessor, TCI, in evaluating the AT&T merger
and the consideration to be received by TCI's stockholders.

From time to time, Liberty retains Peter Kern and/or Gemini Associates, Inc.,
a company controlled by Peter Kern, to act as an advisor on certain business
transactions. Peter Kern is the son of Jerome H. Kern, a director of Liberty.
In connection with these engagements, Peter Kern and Gemini Associates received
approximately $1.0 million from Liberty in each of 1998 and 1999, and
approximately $300,000 from TCI in 1998.

Mr. Kern was Special Counsel with the law firm of Baker Botts L.L.P. from
July 1996 to June 1998. Liberty has retained Baker Botts to perform various
legal services from time to time for Liberty and certain of its subsidiaries
and business affiliates during its last fiscal year as well as its current
fiscal year.

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

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

Also in February 1998, TCI, the Magness Group and the Malones entered into a
shareholders' agreement which provides for, among other things, certain
participation rights by the Magness Group with respect to transactions by Dr.
Malone, and certain "tag-along" rights in favor of the Magness Group and
certain "drag-along" rights in favor of the Malones, with respect to
transactions in the High-Voting Stock. Such agreement also provides that a
representative of Dr. Malone and a representative of the Magness Group will
consult with each other on all matters to be brought to a vote of TCI's
shareholders, but if a mutual agreement on how to

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vote cannot be reached, Dr. Malone will vote the High-Voting Stock owned by the
Magness Group pursuant to an irrevocable proxy granted by the Magness Group.

In connection with the AT&T merger, Liberty became entitled to exercise TCI's
rights and became subject to its obligations under the call agreement and the
shareholders' agreement with respect to the AT&T Liberty Media Group Class B
tracking stock acquired by the Malones and the Magness Group as a result of the
AT&T merger. If Liberty were to exercise its call right under the call
agreement with the Malones or the Magness Group, it may also be required to
purchase High-Voting Shares of the other group if such group exercises its
"tag-along" rights under the shareholders' agreement.

Other Transactions. National Digital Television Center, a subsidiary of AT&T
Broadband ("NDTC"), leases transponder facilities to certain Liberty
subsidiaries. Charges by NDTC for such arrangements were $20 million for the
ten months ended December 31, 1999, $4 million for the two months ended
February 28, 1999 and $25 million for the year ended December 31, 1998.

In addition, effective as of December 16, 1997, NDTC, on behalf of TCI and
other cable operators that may be designated from time to time by NDTC, entered
into an agreement (the "Digital Terminal Purchase Agreement") with General
Instrument Corporation, which has since merged with Motorola Inc., to purchase
advanced digital set-top terminals during the calendar years 1998, 1999 and
2000. In connection with the Digital Terminal Purchase Agreement, GI granted to
NDTC warrants to purchase shares of GI common stock, a portion of which become
exercisable each year if a sufficient number of set-top terminals is purchased
during that year. The 1998 purchase commitment of 1.5 million set-top terminals
was met, resulting in warrants to purchase 4,928,000 shares of GI common stock
vesting on January 1, 1999. The 1999 purchase commitment of 1,750,000 set-top
terminals was met, resulting in warrants to purchase 5,750,000 shares of GI
common stock vesting on January 1, 2000. As a result of the merger of GI and
Motorola on January 5, 2000, Liberty's vested warrants are exercisable for
approximately 6.1 million shares of Motorola common stock. The purchase
commitment for 2000 is 3,250,000 set-top terminals, which, if satisfied, will
result in warrants to purchase approximately 6.2 million shares of Motorola
common stock vesting on January 1, 2001. In connection with the AT&T merger,
these warrants were transferred to Liberty in exchange for approximately $176
million in cash. The AT&T Common Stock Group has agreed to pay the Liberty
Media Group $14.35, adjusted as appropriate for any change in the
capitalization of Motorola, for each warrant that does not vest as a result of
any purchase commitment not having been met. In addition, no member of the AT&T
Common Stock Group may amend or modify the Digital Terminal Purchase Agreement
without the prior written consent of the Liberty Media Group.

On January 14, 2000, the Liberty Media Group completed its acquisition of The
Associated Group, Inc. pursuant to an Amended and Restated Agreement and Plan
of Merger, dated October 28, 1999, among AT&T, A-Group Merger Corp., a wholly
owned subsidiary of AT&T, Liberty and Associated Group. In this transaction,
Associated Group was acquired by and became a member of the Liberty Media Group
through the merger of A-Group Merger Corp into Associated Group. In the merger,
each share of Associated Group's Class A common stock and Class B common stock
was converted into 0.49634 shares of AT&T common stock and 1.20711 shares of
AT&T Class A Liberty Media Group tracking stock. Prior to the merger,
Associated Group was principally engaged in the ownership and operation of
interests in various communications-related businesses. Associated Group's
primary assets were:

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

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

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

. approximately 21.4 million shares of common stock, representing
approximately a 40% interest, of Teligent, Inc., a full-service,
facilities-based communications company; and

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

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

Pursuant to an asset purchase agreement with CSG Systems International, Inc.,
a member of the former TCI Ventures Group acquired warrants to purchase shares
of common stock of CSG, related registration rights and a right to receive a
contingent cash payment of $12 million. In connection with the AT&T merger,
these warrants and rights were transferred to a subsidiary of Liberty. On April
13, 1999, the CSG warrants were exercisable for 3 million shares of common
stock of CSG, and AT&T purchased these warrants for $25.075 per share, or an
aggregate purchase price of $75.2 million. The related registration rights were
also assigned to AT&T on that date. The vesting of the CSG warrants is
contingent on AT&T meeting certain subscriber commitments to CSG. If any
warrants do not vest, a Liberty subsidiary must repurchase the unvested
warrants from AT&T, with interest at 6% from April 12, 1999. Liberty has
guaranteed the obligation of its subsidiary to repurchase any unvested
warrants.

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THE EXCHANGE OFFER

Purpose of the Exchange Offer

We issued and sold the old debentures on February 2, 2000, in a private
placement. In connection with that issuance and sale, we entered into a
registration rights agreement with the initial purchasers of the old
debentures. In the registration rights agreement we agreed to:

. file with the SEC a registration statement by May 2, 2000, relating to
an offer to exchange the old debentures for the new debentures;

. use our reasonable best efforts to cause the registration statement to
be declared effective under the Securities Act by July 31, 2000;

. use our best efforts to keep the registration statement effective until
the closing of the exchange offer; and

. use our best efforts to cause the exchange offer to be completed by
August 30, 2000.

The exchange offer being made by this prospectus is intended to satisfy our
obligations under the registration rights agreement. If we fail to timely
comply with these obligations, we will be required to pay additional interest
to holders of old debentures until we have complied with these obligations.
See "Description of the Debentures--Registration Rights; Additional Interest."

Once the exchange offer is complete, we will have no further obligation to
register any of the old debentures not tendered to us in the exchange offer.
See "Risk Factors--Your failure to participate in the exchange offer could
limit opportunities to sell your debentures in the future."

Effect of the Exchange Offer

Based on interpretations by the SEC staff set forth in Exxon Capital
Holdings Corporation (available April 13, 1989), Morgan Stanley & Co.
Incorporated (available June 5, 1991), Shearman & Sterling (available July 7,
1993) and other no-action letters issued to third parties, we believe that you
may offer for resale, resell and otherwise transfer the new debentures issued
to you in the exchange offer without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided:

. you are acquiring the new debentures in the ordinary course of your
business;

. you have no arrangements or understandings with any person to
participate in the new offer for the purpose of distributing the new
debentures; and

. you are not our "affiliate," within the meaning of Rule 405 under the
Securities Act.

If you are not able to make these representations, you are a "restricted
holder." As a restricted holder, you will not be able to participate in the
exchange offer, you may not rely on the interpretations of the SEC staff set
forth in the no-action letters referred to above and you may only sell your
old debentures in compliance with the registration and prospectus delivery
requirements of the Securities Act or under an exemption from the registration
requirements of the Securities Act or in a transaction not subject to the
Securities Act.

In addition, each broker-dealer that is not a restricted holder that
receives new debentures for its own account in exchange for old debentures
that it acquired as a result of market-making activities or other trading
activities may be a statutory underwriter and must acknowledge in the letter
of transmittal that it will deliver a prospectus meeting the requirements of
the Securities Act upon any resale of such new debentures. This prospectus may
be used by those broker-dealers to resell new debentures they receive pursuant
to the exchange offer. We have agreed that, for a period of 90 days after the
completion of the exchange offer, we will make this prospectus available to
any broker-dealer for use by the broker-dealer in any resale. By acceptance of
this

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exchange offer, each broker-dealer that receives new debentures under the
exchange offer agrees to notify us prior to using this prospectus in a sale or
transfer of new debentures. See "Plan of Distribution."

Except as described above, this prospectus may not be used for an offer to
resell, resale or other transfer of new debentures.

To the extent old debentures are tendered and accepted in the exchange offer,
the principal amount of old debentures that will be outstanding will decrease
with a resulting decrease in the liquidity in the market for the old
debentures. Old debentures that are still outstanding following the completion
of the exchange offer will continue to be subject to transfer restrictions.

Terms of the Exchange Offer

Upon the terms and subject to the conditions of the exchange offer described
in this prospectus and in the accompanying letter of transmittal, we will
accept for exchange all old debentures validly tendered and not withdrawn
before 5:00 p.m., New York City time, on the expiration date. We will issue
$1,000 principal amount of new debentures in exchange for each $1,000 principal
amount of old debentures accepted in the exchange offer. You may tender some or
all of your old debentures pursuant to the exchange offer. However, old
debentures may be tendered only in integral multiples of $1,000 principal
amount.

The new debentures will be substantially identical to the old debentures,
except that:

. the offering of the new debentures has been registered under the Act;

. the new debentures will not be subject to transfer restrictions; and

. the new debentures will be issued free of any covenants regarding
registration rights and free of any provision for additional interest.

The new debentures will evidence the same debt as the old debentures and will
be issued under and be entitled to the benefits of the same indenture under
which the old debentures were issued. The old debentures and the new debentures
will be treated as a single series of debt securities under the indenture. For
a description of the terms of the indenture and the new debentures, see
"Description of the Debentures."

The exchange offer is not conditioned upon any minimum aggregate principal
amount of old debentures being tendered for exchange. As of the date of this
prospectus, an aggregate of $1 billion principal amount of old debentures is
outstanding. This prospectus is being sent to all registered holders of old
debentures. There will be no fixed record date for determining registered
holders of old debentures entitled to participate in the exchange offer.

We intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Act and the Securities Exchange Act and the
rules and regulations of the SEC. Holders of old debentures do not have any
appraisal or dissenters rights under law or under the indenture in connection
with the exchange offer. Old debentures that are not tendered for exchange in
the exchange offer will remain outstanding and continue to accrue interest and
will be entitled to the rights and benefits their holders have under the
indenture relating to the old debentures.

We will be deemed to have accepted for exchange validly tendered old
debentures when we have given oral or written notice of the acceptance to the
exchange agent. The exchange agent will act as agent for the tendering holders
of old debentures for the purposes of receiving the new debentures from us and
delivering the new debentures to the tendering holders. Subject to the terms of
the registration rights agreement, we expressly reserve the right to amend or
terminate the exchange offer, and not to accept for exchange any old debentures
not previously accepted for exchange, upon the occurrence of any of the
conditions specified below under "--Conditions." All old debentures accepted
for exchange will be exchanged for new debentures promptly

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following the expiration date. If we decide for any reason to delay for any
period our acceptance of any old debentures for exchange, we will extend the
expiration date for the same period.

If we do not accept for exchange any tendered old debentures because of an
invalid tender, the occurrence of certain other events described in this
prospectus or otherwise, such unaccepted old debentures will be returned,
without expense, to the holder tendering them or the appropriate book-entry
will be made, in each case, as promptly as practicable after the expiration
date.

We are not making, nor is our board of directors making, any recommendation
to you as to whether to tender or refrain from tendering all or any portion of
your old debentures in the exchange offer. No one has been authorized to make
any such recommendation. You must make your own decision whether to tender in
the exchange offer and, if you decide to do so, you must also make your own
decision as to the aggregate amount of old debentures to tender after reading
this prospectus and the letter of transmittal and consulting with your
advisers, if any, based on your own financial position and requirements.

Expiration Date; Extensions; Amendments

The term "expiration date" means 5:00 p.m., New York City time, on June 8,
2000, unless we, in our sole discretion, extend the exchange offer, in which
case the term "expiration date" shall mean the latest date and time to which
the exchange offer is extended.

If we determine to extend the exchange offer, we will notify the exchange
agent of any extension by oral or written notice. We will notify the
registered holders of old debentures of the extension no later than 9:00 a.m.,
New York City time, on the business day immediately following the previously
scheduled expiration date.

We reserve the right, in our sole discretion:

. to delay accepting for exchange any old debentures;

. to extend the exchange offer or to terminate the exchange offer and to
refuse to accept old debentures not previously accepted if any of the
conditions set forth below under "--Conditions" have not been satisfied
by the expiration date; or

. subject to the terms of the registration rights agreement, to amend the
terms of the exchange offer in any manner.

Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the
registered holders of old debentures. If we amend the exchange offer in a
manner that we determine to constitute a material change, we will promptly
disclose the amendment in a manner reasonably calculated to inform the holders
of the old debentures of the amendment.

Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the exchange offer, we will have no obligation to publish, advertise or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.

During any extension of the exchange offer, all old debentures previously
tendered will remain subject to the exchange offer, and we may accept them for
exchange. We will return any old debentures that we do not accept for exchange
for any reason without expense to the tendering holder as promptly as
practicable after the expiration or earlier termination of the exchange offer.

Interest on the New Debentures and the Old Debentures

Any old debentures not tendered or accepted for exchange will continue to
accrue interest at the rate of 8 1/4% per annum in accordance with their
terms. The new debentures will accrue interest at the rate of 8 1/4% per

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annum from the date of the last periodic payment of interest on the old
debentures or, if no interest has been paid, from the original issue date of
old debentures. Interest on the new debentures and any old debentures not
tendered or accepted for exchange will be payable semi-annually in arrears on
February 1 and August 1 of each year, commencing on August 1, 2000.

Procedures for Tendering

Only a registered holder of old debentures may tender those debentures in the
exchange offer. To tender in the exchange offer, a holder must complete, sign
and date the letter of transmittal, have the signatures thereon guaranteed if
required by the letter of transmittal, and mail or otherwise deliver such
letter of transmittal, together with all other documents required by the letter
of transmittal, to the exchange agent at one of the addresses set forth below
under "--Exchange Agent," before 5:00 p.m., New York City time, on the
expiration date. In addition, either:

. the exchange agent must receive, before the expiration date, a timely
confirmation of a book-entry transfer of the tendered old debentures
into the exchange agent's account at The Depository Trust Company ("DTC"
or the "depositary") according to the procedure for book-entry transfer
described below; or

. the holder must comply with the guaranteed delivery procedures described
below.

A tender of old debentures by a holder that is not withdrawn prior to the
expiration date will constitute an agreement between that holder and us in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.

The method of delivery of old debentures, letters of transmittal and all
other required documents to the exchange agent, including delivery through DTC,
is at the holder's election and risk. Instead of delivery by mail, we recommend
that holders use an overnight or hand delivery service. If delivery is by mail,
we recommend that holders use certified or registered mail, properly insured,
with return receipt requested. In all cases, holders should allow sufficient
time to assure delivery to the exchange agent before the expiration date.
Holders should not send letters of transmittal or other required documents to
us. Holders may request their respective brokers, dealers, commercial banks,
trust companies or other nominees to effect the above transactions for them.

Any beneficial owner whose old debentures are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender those debentures should contact the registered holder promptly and
instruct it to tender on the beneficial owner's behalf.

We will determine, in our sole discretion, all questions as to the validity,
form, eligibility (including time of receipt), acceptance of tendered old
debentures and withdrawal of tendered old debentures, and our determination
will be final and binding. We reserve the absolute right to reject any and all
old debentures not properly tendered or any old debentures the acceptance of
which would, in the opinion of us or our counsel, be unlawful. We also reserve
the absolute right to waive any defects or irregularities or conditions of the
exchange offer as to any particular old debentures either before or after the
expiration date. Our interpretation of the terms and conditions of the exchange
offer as to any particular old debentures either before or after the expiration
date, including the instructions in the letter of transmittal, will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of old debentures for exchange must be cured within
such time as we shall determine. Although we intend to notify holders of any
defects or irregularities with respect to tenders of old debentures for
exchange, neither we nor the exchange agent nor any other person shall be under
any duty to give such notification, nor shall any of them incur any liability
for failure to give such notification. Tenders of old debentures will not be
deemed to have been made until all defects or irregularities have been cured or
waived. Any old debentures received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holders or, in
the case of old debentures delivered by book-

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entry transfer within DTC, will be credited to the account maintained within
DTC by the participant in DTC which delivered such old debentures, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.

In addition, we reserve the right in our sole discretion (a) to purchase or
make offers for any old debentures that remain outstanding after the
expiration date, (b) as set forth below under "--Conditions," to terminate the
exchange offer and (c) to the extent permitted by applicable law, purchase old
debentures in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the
terms of the exchange offer.

By signing, or otherwise becoming bound by, the letter of transmittal, each
tendering holder of old debentures (other than certain specified holders) will
represent to us that:

. it is acquiring the new debentures in the ordinary course of its
business;

. it has no arrangements or understandings with any person to participate
in the exchange offer for the purpose of distributing the new
debentures; and

. it is not our "affiliate," within the meaning of Rule 405 under the
Securities Act, or, if it is our affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable.

If the tendering holder is a broker-dealer that will receive new debentures
for its own account in exchange for old debentures that were acquired as a
result of market-making activities or other trading activities, it may be
deemed to be an "underwriter" within the meaning of the Securities Act. Any
such holder will be required to acknowledge in the letter of transmittal that
it will deliver a prospectus in connection with any resale of these new
debentures. However, by so acknowledging and by delivering a prospectus, the
holder will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

Book-Entry Transfer

The exchange agent will establish a new account or utilize an existing
account with respect to the old debentures at DTC promptly after the date of
this prospectus, and any financial institution that is a participant in DTC's
systems may make book-entry delivery of old debentures by causing DTC to
transfer these old debentures into the exchange agent's account in accordance
with DTC's procedures for transfer. However, the exchange for the old
debentures so tendered will only be made after timely confirmation of this
book-entry transfer of old debentures into the exchange agent's account, and
timely receipt by the exchange agent of an agent's message and any other
documents required by the letter of transmittal. The term "agent's message"
means a message transmitted by DTC to, and received by, the exchange agent and
forming a part of a book-entry confirmation, that states that DTC has received
an express acknowledgment from a participant in DTC tendering old debentures
that are the subject of the book-entry confirmation stating (1) the aggregate
principal amount of old debentures that have been tendered by such
participant, (2) that such participant has received and agrees to be bound by
the terms of the letter of transmittal and (3) that we may enforce such
agreement against the participant.

Although delivery of old securities must be effected through book-entry
transfer into the exchange agent's account at DTC, the letter of transmittal,
properly completely and validly executed, with any required signature
guarantees, or an agent's message in lieu of the letter of transmittal, and
any other required documents, must be delivered to and received by the
exchange agent at one of its addresses listed below under "--Exchange Agent,"
before 5:00 p.m., New York City time, on the expiration date, or the
guaranteed delivery procedure described below must be complied with.

Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.

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All references in this prospectus to deposit or delivery of old debentures
shall be deemed to also refer to DTC's book-entry delivery method.

Guaranteed Delivery Procedures

Holders who wish to tender their old debentures and (1) whose old debentures
are not immediately available or (2) who cannot deliver a confirmation of book-
entry transfer of old debentures into the exchange agent's account at DTC, the
letter of transmittal or any other required documents to the exchange agent
prior to the expiration date or (3) who cannot complete the procedure for book-
entry transfer on a timely basis, may effect a tender if:

. the tender is made through an eligible institution;

. before the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery, by facsimile transmission, mail or hand delivery,
listing the principal amount of old debentures tendered, stating that
the tender is being made thereby and guaranteeing that, within three New
York Stock Exchange, Inc. trading days after the expiration date, a duly
executed letter of transmittal together with a confirmation of book-
entry transfer of such old debentures into the exchange agent's account
at DTC, and any other documents required by the letter of transmittal
and the instructions thereto, will be deposited by such eligible
institution with the exchange agent; and

. the properly completed and executed letter of transmittal and a
confirmation of book-entry transfer of all tendered old debentures into
the exchange agent's account at DTC and all other documents required by
the letter of transmittal are received by the exchange agent within
three New York Stock Exchange, Inc. trading days after the expiration
date.

Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old debentures according to the
guaranteed delivery procedures described above.

Withdrawal of Tenders

Except as otherwise provided in this prospectus, tenders of old debentures
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date.

For a withdrawal to be effective, the exchange agent must receive a written
or facsimile transmission notice of withdrawal at one of its addresses set
forth below under "--Exchange Agent." Any notice of withdrawal must:

. specify the name of the person who tendered the old debentures to be
withdrawn;

. identify the old debentures to be withdrawn, including the principal
amount of such old debentures;

. be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the old debentures were tendered and
include any required signature guarantees; and

. specify the name and number of the account at DTC to be credited with
the withdrawn old debentures and otherwise comply with the procedures of
DTC.

We will determine, in our sole discretion, all questions as to the validity,
form and eligibility (including time of receipt) of any notice of withdrawal,
and our determination shall be final and binding on all parties. Any old
debentures so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer and no new debentures will be
issued with respect thereto unless the old debentures so withdrawn are validly
retendered. Properly withdrawn old debentures may be retendered by following
one of the procedures described above under "--Procedures for Tendering" at any
time prior to the expiration date.

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Any old debentures that are tendered for exchange through the facilities of
DTC but that are not exchanged for any reason will be credited to an account
maintained with DTC for the old debentures as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer.

Conditions

Despite any other term of the exchange offer, we will not be required to
accept for exchange, or to issue new debentures in exchange for, any old
debentures, and we may terminate the exchange offer as provided in this
prospectus prior to the expiration date, if:

. the exchange offer, or the making of any exchange by a holder of old
debentures, would violate applicable law or any applicable
interpretation of the SEC Staff; or

. the old debentures are not tendered in accordance with the exchange
offer; or

. you do not represent that you are acquiring the new debentures in the
ordinary course of your business and that you have no arrangement or
understanding with any person to participate in a distribution of the
new debentures and you do not make any other representations as may be
reasonably necessary under applicable SEC rules, regulations or
interpretations to render available the use of an appropriate form for
registration of the new debentures under the Securities Act; or

. any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer.

These conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any of these conditions or may
be waived by us, in whole or in part, at any time and from time to time in our
reasonable discretion. Our failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of the right and each right shall be deemed
an ongoing right which may be asserted at any time and from time to time.

If we determine in our reasonable judgment that any of the conditions are not
satisfied, we may:

. refuse to accept and return to the tendering holder any old debentures
or credit any tendered old debentures to the account maintained within
DTC by the participant in DTC which delivered the old debentures; or

. extend the exchange offer and retain all old debentures tendered before
the expiration date, subject to the rights of holders to withdraw the
tenders of old debentures (see "--Withdrawal of Tenders" above); or

. waive the unsatisfied conditions with respect to the exchange offer
prior to the expiration date and accept all properly tendered old
debentures that have not been withdrawn or otherwise amend the terms of
the exchange offer in any respect as provided under "--Expiration Date;
Extensions; Amendments." If a waiver constitutes a material change to
the exchange offer, we will promptly disclose the waiver by means of a
prospectus supplement that will be distributed to the registered
holders, and we will extend the exchange offer for a period of five to
ten business days, depending upon the significance of the waiver and the
manner of disclosure to the registered holders, if the exchange offer
would otherwise expire during such five to ten business day period.

In addition, we will not accept for exchange any old debentures tendered, and
we will not issue new debentures in exchange for any of the old debentures, if
at that time any stop order is threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939.

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Exchange Agent

The Bank of New York has been appointed as the exchange agent for the
exchange offer. All signed letters of transmittal and other documents required
for a valid tender of your old debentures should be directed to the exchange
agent at one of the addresses set forth below. Questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for notices of guaranteed delivery should be
directed to the exchange agent addressed as follows:

BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT DELIVERY:

The Bank of New York The Bank of New York
101 Barclay Street, Floor 7E 101 Barclay Street, Floor 7E
New York, New York 10286 Corporate Trust Services Window
New York, New York 10286
Attention: Carolle Montreuil
Reorganization Section Attention: Carolle Montreuil

BY FACSIMILE (for Eligible Institutions only):

(212) 815-6339
The Bank of New York

Attention: Carolle Montreuil
Confirm by Telephone: (212) 815-5920
For Information Call: (212) 815-5920

Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.

Fees and Expenses

We will bear the expenses of soliciting tenders. We have not retained any
dealer-manager in connection with the exchange offer and will not make any
payments to brokers, dealers or others soliciting acceptance of the exchange
offer. The principal solicitation is being made by mail; however, additional
solicitation may be made by facsimile, telephone or in person by our officers
and employees.

We will pay the expenses to be incurred in connection with the exchange
offer. These expenses include fees and expenses of the exchange agent and the
trustee, accounting and legal fees, printing costs, and related fees and
expenses.

Transfer Taxes

Holders who tender their old debentures for exchange will not be obligated to
pay any transfer taxes in connection with the exchange offer.

Accounting Treatment

We will record the new debentures in our accounting records at the same
carrying values as the old debentures on the date of the exchange. Accordingly,
we will recognize no gain or loss, for accounting purposes, as a result of the
exchange offer. The expenses of the exchange offer and the unamortized expenses
relating to the issuance of the old debentures will be amortized over the term
of the new debentures.

Consequences of Failure to Exchange

Holders of old debentures who do not exchange their old debentures for new
debentures pursuant to the exchange offer will continue to be subject to the
restrictions on transfer of the old debentures as set forth in the legend
printed thereon as a consequence of the issuance of the old debentures pursuant
to an exemption from the Securities Act and applicable state securities laws.
Old debentures not exchanged pursuant to the exchange

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offer will continue to accrue interest at 8 1/4% per annum, and the old
debentures will otherwise remain outstanding in accordance with their terms.
Holders of old debentures do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law in connection with the exchange offer.

In general, the old debentures may not be offered or sold unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. Upon completion of the exchange offer, holders of old debentures will not
be entitled to any rights to have the resale of old debentures registered under
the Securities Act, and we currently do not intend to register under the
Securities Act the resale of any old debentures that remain outstanding after
completion of the exchange offer.

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DESCRIPTION OF THE DEBENTURES

We issued the old debentures and will issue the new debentures under an
indenture dated as of July 7, 1999, between Liberty, as issuer, and The Bank of
New York, as trustee, as supplemented by a third supplemental indenture dated
as of February 2, 2000, between Liberty and the trustee. The indenture and
third supplemental indenture are collectively referred to in this prospectus as
the "indenture." The old debentures and the new debentures have substantially
identical terms and will constitute a single series of securities under the
indenture. The difference between the old debentures and the new debentures is
that the offer and sale of the new debentures have been registered under the
Securities Act and, therefore, the new debentures will not bear legends
restricting their transfer and will not be entitled to registration under the
Securities Act or other rights relating to such registration. If the exchange
offer is completed, holders of any remaining old debentures will vote together
with holders of the applicable new debentures for all relevant purposes under
the indenture.

Upon the issuance of the new debentures, the indenture will be subject to and
governed by the Trust Indenture Act of 1939. The terms of the new debentures
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act. A copy of the indenture has been filed as
an exhibit to the registration statement of which this prospectus is a part.
Capitalized terms used and not otherwise defined in this section have the
meanings ascribed to them in the indenture.

General

The indenture does not limit the aggregate principal amount of senior debt
securities that may be issued under the indenture and provides that Liberty may
issue senior debt securities from time to time in one or more series. The
senior debt securities that Liberty may issue under the indenture, including
the debentures, are collectively referred to in this section as the "senior
debt securities."

The old debentures and the new debentures together constitute a single series
of senior debt securities under the indenture. If the exchange offer is
consummated, holders of old debentures who do not exchange their old debentures
for new debentures will vote together as a separate series of senior debt
securities with holders of the new debentures for all relevant purposes under
the indenture. In that regard, the indenture requires that certain actions by
the holders under the debentures (including acceleration following an event of
default), must be taken, and certain rights must be exercised, by specified
minimum percentages of the aggregate principal amount of the debentures
outstanding. In determining whether holders of the requisite percentage in
principal amount have given any notice, consent or waiver or taken any other
action permitted under the indenture, any old debentures which remain
outstanding after the exchange offer will be aggregated with the new
debentures, and the holders of the old debentures and the new debentures will
vote together as a single series for all purposes. Accordingly, all references
in this section to specified percentages in aggregate principal amount of the
outstanding senior debt securities of a series will be deemed to mean, at any
time after the exchange offer is consummated, the percentages in aggregate
principal amount of the old debentures and the new debentures then outstanding.

The debentures are unsecured senior obligations of Liberty and are initially
limited to an aggregate principal amount of $1,000,000,000 of debentures.
Liberty may "reopen" any security series and issue additional securities of
that series. The debentures bear interest at 8 1/4% per annum from the date of
original issuance or from the most recent date to which interest has been paid
or duly provided for, payable semiannually on February 1 and August 1 of each
year, each of which is referred to in this prospectus as an "interest payment
date," commencing August 1, 2000, to the persons in whose names the debentures
are registered at the close of business on the January 15 or July 15 next
preceding the interest payment date. Interest payable on August 1, 2000 with
respect to each $1,000 principal amount of debentures will be $41.0208.
Interest payable at maturity, or upon any earlier date of redemption, will be
payable to the person to whom principal shall be payable on that date. Interest
on the debentures will be calculated on the basis of a 360-day year of twelve
30-day months. The maturity date for the debentures is February 1, 2030. If any
interest payment date or the maturity date would otherwise be a day that is not
a business day, the related payment of

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principal and interest will be made on the next succeeding business day as if
it were made on the date the payment was due, and no interest will accrue on
the amounts so payable for the period from and after the interest payment date
or the maturity date, as the case may be, to the next succeeding business day.
A business day means a day other than a Saturday, Sunday or other day on which
banking institutions in New York, New York are authorized or obligated by law,
regulation or executive order to close. The debentures will not be subject to
redemption by Liberty prior to maturity. For a discussion of the circumstances
in which the interest rate on the debentures may be adjusted, see "--
Registration Rights; Additional Interest."

The indenture does not contain any provision that would limit the ability of
Liberty to incur indebtedness or to substantially reduce or eliminate Liberty's
assets or that would afford the holders of the debentures protection in the
event of a decline in Liberty's credit quality or a takeover, recapitalization
or highly leveraged or similar transaction involving Liberty. In addition,
subject to the limitations set forth under "--Successor Corporation," Liberty
may, in the future, enter into certain transactions, including the sale of
substantially all of its assets or the merger or consolidation of Liberty, that
would increase the amount of Liberty's indebtedness or substantially reduce or
eliminate Liberty's assets, which may have an adverse effect on Liberty's
ability to service its indebtedness, including the debentures.

Each debenture will be issued in book-entry form (a "book-entry debenture")
in minimum denominations of $1,000 and integral multiples thereof. Each book-
entry debenture will be represented by one or more global debentures in fully
registered form, registered in the name of The Depository Trust Company, which
is referred to in this prospectus as "DTC" or the "depositary," or its nominee.
Beneficial interest in the global debentures will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. See "--Form, Denomination and Registration." Except in the
limited circumstances described in this prospectus, book-entry debentures will
not be exchangeable for debentures issued in fully registered form
("certificated debentures").

Book-entry debentures may be transferred or exchanged only through the
depositary. See "--Form, Denomination and Registration." Registration of
transfer or exchange of certificated debentures will be made at the office or
agency, maintained by Liberty for this purpose in the Borough of Manhattan, The
City of New York, currently the office of the trustee at 101 Barclay Street,
New York, N.Y. 10286. Neither Liberty nor the trustee will charge a service
charge for any registration of transfer or exchange of debentures, but Liberty
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with the transfer or exchange (other
than exchanges pursuant to the indenture not involving any transfer).

Liberty will make payments of principal and interest on book-entry debentures
through the trustee to the depositary. See "--Form, Denomination and
Registration." In the case of certificated debentures, Liberty will pay the
principal due on the maturity date in immediately available funds upon
presentation and surrender by the holder of the securities at the office or
agency maintained by Liberty for this purpose at the Borough of Manhattan, The
City of New York, currently the office of the trustee at 101 Barclay Street,
New York, N.Y. 10286. Liberty will pay interest due on the maturity date of a
certificated debenture to the person to whom payment of the principal will be
made. Liberty will pay interest due on a certificated debenture on any interest
payment date other than the maturity date by check mailed to the address of the
holder entitled to the payment as the address shall appear in the security
register of Liberty. Notwithstanding the foregoing, a holder of $10 million or
more in aggregate principal amount of certificated debentures (whether having
identical or different terms and provisions) will be entitled to receive
interest payments, if any, on any interest payment date other than the maturity
date by wire transfer of immediately available funds if appropriate wire
transfer instructions have been received in writing by the trustee not less
than 15 calendar days prior to the interest payment date. Any wire transfer
instructions received by the trustee will remain in effect until revoked by the
holder. Any interest not punctually paid or duly provided for on a certificated
debenture on any interest payment date other than the maturity date will cease
to be payable to the holder of the debenture as of the close of business on the
related record date and may either be paid (1) to the person in whose name the
certificated debenture is registered at the close of business on a special
record date for the payment of the defaulted interest that is fixed

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by Liberty, written notice of which will be given to the holders of the
debentures not less than 30 calendar days prior to the special record date, or
(2) at any time in any other lawful manner.

All moneys paid by Liberty to the trustee or any paying agent for the payment
of principal and interest on any debenture which remains unclaimed for two
years after the principal or interest is due and payable may be repaid to
Liberty and, after that payment, the holder of the debenture will look only to
Liberty for payment.

Ranking and Holding Company Structure

The debentures are unsecured senior indebtedness of Liberty and rank equally
with Liberty's existing and future unsubordinated unsecured indebtedness and
senior in right of payment to all subordinated indebtedness of Liberty. The
debentures are effectively subordinated to all secured indebtedness of Liberty
with respect to the assets securing the indebtedness and are effectively
subordinated to all liabilities of Liberty's subsidiaries. As of December 31,
1999, on a pro forma basis after giving effect to the issuance and sale of the
old debentures and our use of the net proceeds from that issuance our
consolidated subsidiaries had outstanding $16.2 billion of liabilities, all of
which would have effectively ranked senior to the debentures. At the same date
and using the same assumption, we had outstanding no secured indebtedness and
$3.3 billion of unsecured and unsubordinated indebtedness, all of which would
have ranked equally with the debentures.

Liberty is a holding company and is largely dependent on dividends,
distributions and other payments from its subsidiaries and business affiliates
and other investments to meet its financial obligations, and is dependent on
those payments to meet its obligations under the debentures. Liberty's
subsidiaries and business affiliates, as well as AT&T and its subsidiaries
other than Liberty, have no obligation, contingent or otherwise, to pay any
amounts due under the debentures or to make any funds available for any of
those payments. In addition, neither AT&T nor any of its subsidiaries other
than Liberty has any obligation to make payments under the debentures or to
make any funds available for those payments. See "Risk Factors--Our holding
company structure could restrict access to funds of our subsidiaries that may
be needed to service the debentures. Creditors of those companies have a claim
on their assets that is senior to that of holders of the debentures" and
"Relationship with AT&T and Certain Related Transactions."

Redemption

The debentures will not be subject to redemption by Liberty prior to
maturity.

Form, Denomination and Registration

The debentures will initially be issued in the form of one or more global
debentures in definitive, fully registered book-entry form, without interest
coupons that will be deposited with, or on behalf of, the depository or its
nominee.

So long as the depositary, which initially will be DTC, or its nominee is the
registered owner of a global debenture, the depositary or its nominee, as the
case may be, will be the sole holder of the debentures represented by the
global debenture for all purposes under the indenture. Except as otherwise
provided in this section, the beneficial owners of the global debentures
representing the debentures will not be entitled to receive physical delivery
of certificated debentures and will not be considered the holders of the
debentures for any purpose under the indenture, and no global debenture
representing the book-entry debentures will be exchangeable or transferable.
Accordingly, each beneficial owner must rely on the procedures of the
depositary and, if the beneficial owner is not a participant of the depositary,
then the beneficial owner must rely on the procedures of the participant
through which the beneficial owner owns its interest in order to exercise any
rights of a holder under the global debentures or the indenture. The laws of
some jurisdictions may require that certain purchasers of debentures take
physical delivery of the debentures in certificated form. Such limits and laws
may impair the ability to transfer beneficial interests in a global debenture
representing the debentures.

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The global debentures representing the debentures will be exchangeable for
certificated debentures of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if:

. the depositary notifies Liberty that it is unwilling or unable to
continue as depositary for the global debentures;

. the depositary ceases to be a clearing agency registered under the
Securities Exchange Act;

. Liberty in its sole discretion determines that the global debentures
shall be exchangeable for certificated debentures; or

. there shall have occurred and be continuing an event of default under
the indenture with respect to the debentures; provided that interests
in the temporary Regulation S global debentures will not be
exchangeable for certificated debentures until expiration of the 40-day
distribution compliance period and receipt of certification of non-U.S.
beneficial ownership as described above.

Upon any exchange, the certificated debentures shall be registered in the
names of the beneficial owners of the global debentures representing the
debentures, which names shall be provided by the depositary's relevant
participants (as identified by the depositary) to the trustee.

Cross-Market Transfers. Subject to compliance with the transfer restrictions
applicable to any new debentures and the certification and other requirements
set forth in the indenture, any cross-market transfer between participants in
the depositary, on the one hand, and participants in the Euroclear System or
Clearstream, Luxembourg (formerly Cedelbank), on the other hand, will be
effected in the depositary's book-entry system on behalf of Euroclear or
Clearstream, Luxembourg, as the case may be, in accordance with the rules of
the depositary. However, these cross-market transfers will require delivery of
instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by
the counterparty in such system in accordance with its rules and procedures
and within its established deadlines. Euroclear or Clearstream, Luxembourg, as
the case may be, will, if the transfer meets its settlement requirements,
deliver instructions to its respective depositary to take action to effect
final settlement on its behalf by delivering or receiving the beneficial
interests in the applicable global debenture in the depositary, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to the depositary. Participants in Euroclear or
Clearstream, Luxembourg may not deliver instructions directly to the
depositaries for Euroclear or Clearstream, Luxembourg, as the case may be.

Because of time zone differences, the securities account of a Euroclear or
Clearstream, Luxembourg participant purchasing a beneficial interest in a
global debenture from a depositary participant will be credited during the
securities settlement processing day, which must be a business day for
Euroclear or Clearstream, Luxembourg, as applicable, immediately following the
depositary's settlement date. Credit of a transfer of a beneficial interest in
a global debenture settled during that processing day will be reported to the
applicable Euroclear or Clearstream, Luxembourg participant on that day. Cash
received in Euroclear or Clearstream, Luxembourg as a result of a transfer of
a beneficial interest in a global debenture by or through a Euroclear or
Clearstream, Luxembourg participant to a depositary participant will be
received with value on the depositary's settlement date but will be available
in the applicable Euroclear or Clearstream, Luxembourg cash account only as of
the business day following settlement in the depositary.

Any beneficial interest in a global debenture that is transferred for a
beneficial interest in another global debenture will, upon transfer, cease to
be an interest in the original global debenture and will become an interest in
the other global debenture and, accordingly, will be subject to all transfer
restrictions and other procedures applicable to beneficial interests in the
other global debenture for as long as it remains a beneficial interest in that
global debenture.

In order to insure the availability of Rule 144(k) under the Securities Act,
the indenture provides that all debentures, other than the new debentures,
which are redeemed, purchased or otherwise acquired by Liberty or any of its
subsidiaries or "affiliates," as defined in Rule 144 under the Securities Act,
may not be resold or otherwise transferred and will be delivered to the
trustee for cancellation.

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Information Relating to the Depositary. The following is based on information
furnished by the depositary:

The depositary will act as the depositary for the debentures. The debentures
will be issued as fully registered senior debt securities registered in the
name of Cede & Co., which is the depositary's partnership nominee. Fully
registered global debentures will be issued for the debentures initially sold
to qualified institutional buyers and subsequent transferees, directly or
indirectly, of such debentures, and will be deposited with the depositary.

The depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The depositary holds debentures that its participants deposit with the
depositary. The depositary also facilitates the settlement among participants
of securities transactions, including transfers and pledges, in deposited
debentures through electronic computerized book-entry changes to participants'
accounts, thereby eliminating the need for physical movement of senior debt
securities certificates. Direct participants of the depositary include
securities brokers and dealers, including the initial purchasers of the
debentures, banks, trust companies, clearing corporations and certain other
organizations. The depositary is owned by a number of its direct participants,
including the initial purchasers of the debentures and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association
of Securities Dealers, Inc. Access to the depositary's system is also available
to indirect participants, which includes securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship
with a direct participant, either directly or indirectly. The rules applicable
to the depositary and its participants are on file with the SEC.

Purchases of debentures under the depositary's system must be made by or
through direct participants, which will receive a credit for the debentures on
the depositary's record. The ownership interest of each beneficial owner, which
is the actual purchaser of each debenture, represented by global debentures, is
in turn to be recorded on the direct and indirect participants' records.
Beneficial owners will not receive written confirmation from the depositary of
their purchase, but beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participants through
which the beneficial owner entered into the transaction. Transfers of ownership
interests in the global debentures representing the debentures are to be
accomplished by entries made on the books of participants acting on behalf of
beneficial owners. Beneficial owners of the global debentures representing the
debentures will not receive certificated debentures representing their
ownership interests therein, except in the event that use of the book-entry
system for the debentures is discontinued.

To facilitate subsequent transfers, all global debentures representing the
debentures which are deposited with, or on behalf of, the depositary are
registered in the name of the depositary's nominee, Cede & Co. The deposit of
global debentures with, or on behalf of, the depositary and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
depositary has no knowledge of the actual beneficial owners of the global
debentures representing the debentures; the depositary's records reflect only
the identity of the direct participants to whose accounts the debentures are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.

Conveyance of notices and other communications by the depositary to direct
participants, by direct participants to indirect participants, and by direct
and indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.

Neither the depositary nor Cede & Co. will consent or vote with respect to
the global debentures representing the debentures. Under its usual procedure,
the depositary mails an omnibus proxy to Liberty as

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soon as possible after the applicable record date. The omnibus proxy assigns
Cede & Co.'s consenting or voting rights to those direct participants to whose
accounts the debentures are credited on the applicable record date (identified
in a listing attached to the omnibus proxy).

Principal and/or interest payments on the global debentures representing the
debentures will be made to the depositary. The depositary's practice is to
credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the depositary's records
unless the depositary has reason to believe that it will not receive payment on
the date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with debentures
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of the participant and not of the
depositary, the trustee or Liberty, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and/or
interest to the depositary is the responsibility of Liberty or the trustee,
disbursement of the payments to direct participants will be the responsibility
of the depositary, and disbursement of the payments to the beneficial owners
will be the responsibility of direct and indirect participants.

The depositary may discontinue providing its services as securities
depositary with respect to the debentures at any time by giving reasonable
notice to Liberty or the trustee. Under such circumstances, in the event that a
successor securities depositary is not obtained, certificated debentures are
required to be printed and delivered.

Liberty may decide to discontinue use of the system of book-entry transfers
through the depositary or a successor securities depositary. In that event,
certificated debentures will be printed and delivered.

Although the depositary, Euroclear and Clearstream, Luxembourg have agreed to
the procedures described above in order to facilitate transfers of interests in
the global debentures among participants of the depositary, Euroclear and
Clearstream, Luxembourg, they are under no obligation to perform or continue to
perform these procedures, and these procedures may be discontinued at any time.
Neither the trustee nor Liberty will have any responsibility for the
performance by the depositary, Euroclear or Clearstream, Luxembourg or their
respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.

Trading. Except for trades involving Euroclear and Clearstream, Luxembourg
participants, beneficial interests in the global debentures will trade in the
depositary's same-day funds settlement System until maturity or earlier
redemption, and secondary market trading activity in the global debentures will
therefore settle in immediately available funds, subject in all cases to the
rules and operating procedures of the depositary. Transfers between
participants in the depositary will be effected in the ordinary way in
accordance with the depositary's rules and operating procedures and will be
settled in same-day funds, while transfers between participants in Euroclear
and Clearstream, Luxembourg will be effected in the ordinary way in accordance
with their respective rules and operating procedures.

The information in this subsection "--Form, Denomination and Registration"
concerning the depositary, Euroclear and Clearstream, Luxembourg and their
respective book-entry systems has been obtained from sources that Liberty
believes to be reliable, but Liberty takes no responsibility for its accuracy.

Certain Covenants

The indenture provides that the covenants set forth below will be applicable
to Liberty and its Subsidiaries.

Limitation on Liens. Liberty will not, and will not permit any Restricted
Subsidiary to, create, incur or assume any Lien, except for Permitted Liens, on
any Principal Property to secure the payment of Funded Indebtedness of Liberty
or any Restricted Subsidiary if, immediately after the creation, incurrence or

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assumption of such Lien, the sum of (A) the aggregate outstanding principal
amount of all Funded Indebtedness of Liberty and the Restricted Subsidiaries
that is secured by Liens (other than Permitted Liens) on any Principal Property
and (B) the Attributable Debt relating to any Sale and Leaseback Transaction
which would otherwise be subject to the provisions of clause 2(A)(i) of the
"Limitation on Sale and Leaseback" covenant would exceed 15% of the
Consolidated Asset Value, unless effective provision is made whereby the
debentures (together with, if Liberty shall so determine, any other Funded
Indebtedness ranking equally with the debentures, whether then existing or
thereafter created) are secured equally and ratably with (or prior to) such
Funded Indebtedness (but only for so long as such Funded Indebtedness is so
secured).

The foregoing limitation on Liens shall not apply to the creation, incurrence
or assumption of the following Liens ("Permitted Liens"):

(1) Any Lien which arises out of a judgment or award against Liberty or
any Restricted Subsidiary with respect to which Liberty or such Restricted
Subsidiary at the time shall be prosecuting an appeal or proceeding for
review (or with respect to which the period within which such appeal or
proceeding for review may be initiated shall not have expired) and with
respect to which it shall have secured a stay of execution pending such
appeal or proceedings for review or with respect to which Liberty or such
Restricted Subsidiary shall have posted a bond and established adequate
reserves (in accordance with generally accepted accounting principles) for
the payment of such judgment or award;

(2) Liens on assets or property of a person existing at the time such
person is merged into or consolidated with Liberty or any Restricted
Subsidiary or becomes a Restricted Subsidiary; provided, that such Liens
were in existence prior to the contemplation of such merger, consolidation
or acquisition and do not secure any property of Liberty or any Restricted
Subsidiary other than the property and assets subject to the Liens prior to
such merger, consolidation or acquisition;

(3) Liens existing on the date of original issuance of the debentures;

(4) Liens securing Funded Indebtedness (including in the form of
Capitalized Lease Obligations and purchase money indebtedness) incurred for
the purpose of financing the cost (including without limitation the cost of
design, development, site acquisition, construction, integration,
manufacture or acquisition) of real or personal property (tangible or
intangible) which is incurred contemporaneously therewith or within 60 days
thereafter; provided (i) such Liens secure Funded Indebtedness in an amount
not in excess of the cost of such property (plus an amount equal to the
reasonable fees and expenses incurred in connection with the incurrence of
such Funded Indebtedness) and (ii) such Liens do not extend to any property
of Liberty or any Restricted Subsidiary other than the property for which
such Funded Indebtedness was incurred;

(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;

(6) Liens to secure the debentures;

(7) Liens granted in favor of Liberty; and

(8) Any Lien in respect of Funded Indebtedness representing the
extension, refinancing, renewal or replacement (or successive extensions,
refinancings, renewals or replacements) of Funded Indebtedness secured by
Liens referred to in clauses (2), (3), (4), (5), (6) and (7) above,
provided that the principal of the Funded Indebtedness secured thereby does
not exceed the principal of the Funded Indebtedness secured thereby
immediately prior to such extension, renewal or replacement, plus any
accrued and unpaid interest or capitalized interest payable thereon,
reasonable fees and expenses incurred in connection therewith, and the
amount of any prepayment premium necessary to accomplish any refinancing;
provided, that such extension, renewal or replacement shall be limited to
all or a part of the property (or interest therein) subject to the Lien so
extended, renewed or replaced (plus improvements and construction on such
property).

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Limitation on Sale and Leaseback. Liberty will not, and will not permit any
Restricted Subsidiary to, enter into any Sale and Leaseback Transaction;
provided, that Liberty or any Restricted Subsidiary may enter into a Sale and
Leaseback Transaction if:

(1) the gross cash proceeds of the Sale and Leaseback Transaction are at
least equal to the fair market value, as determined in good faith by the
Board of Directors and set forth in a board resolution delivered to the
trustee, of the Principal Property that is the subject of the Sale and
Leaseback Transaction, and

(2) either

(A) Liberty or the Restricted Subsidiary, as applicable, either (i)
could have incurred a Lien to secure Funded Indebtedness in an amount
equal to the Attributable Debt relating to such Sale and Leaseback
Transaction pursuant to the "Limitation on Liens" covenant, or (ii)
makes effective provision whereby the debentures (together with, if
Liberty shall so determine, any other Funded Indebtedness ranking
equally with the debentures, whether then existing or thereafter
created) are secured equally and ratably with (or prior to) the
obligations of Liberty or the Restricted Subsidiary under the lease of
the Principal Property that is the subject of the Sale and Leaseback
Transaction, or

(B) within 180 days, Liberty or the Restricted Subsidiary either (i)
applies an amount equal to the fair market value of the Principal
Property that is the subject of the Sale and Leaseback Transaction to
purchase the debentures or to retire other Funded Indebtedness, or (ii)
enters into a bona fide commitment to expend for the acquisition or
improvement of a Principal Property an amount at least equal to the
fair market value of such Principal Property.

Designation of Restricted Subsidiaries. Liberty may designate an Unrestricted
Subsidiary as a Restricted Subsidiary or designate a Restricted Subsidiary as
an Unrestricted Subsidiary at any time, provided that (1) immediately after
giving effect to such designation, Liberty and its Restricted Subsidiaries
would have been permitted to incur at least $1.00 of additional Funded
Indebtedness secured by a Lien pursuant to the "Limitation on Liens" covenant,
(2) no default or event of default shall have occurred and be continuing, and
(3) an Officers' Certificate with respect to such designation is delivered to
the trustee within 75 days after the end of the fiscal quarter of Liberty in
which such designation is made (or, in the case of a designation made during
the last fiscal quarter of Liberty's fiscal year, within 120 days after the end
of such fiscal year), which Officers' Certificate shall state the effective
date of such designation; Liberty has made the initial designation of all of
its Subsidiaries as Restricted Subsidiaries and will deliver the required
Officers' Certificate with respect thereto to the trustee, on or prior to the
date of initial issuance of the debentures.

Successor Corporation

Liberty may not consolidate with or merge into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets
and the properties and assets of its Subsidiaries (taken as a whole) to, any
entity or entities (including limited liability companies) unless (1) the
successor entity or entities, each of which shall be organized under the laws
of the United States or a State thereof, shall assume by supplemental indenture
all the obligations of Liberty under the debentures and the indenture and (2)
immediately after giving effect to the transaction or series of transactions,
no default or event of default shall have occurred and be continuing.
Thereafter, all such obligations of Liberty shall terminate.

Events of Default

The term "event of default" means any one of the following events with
respect to any series of senior debt securities, including the debentures:

(1) default in the payment of any interest on any senior debt security
of the series, or any additional amounts payable with respect thereto, when
the interest becomes or the additional amounts become due and payable, and
continuance of the default for a period of 30 days;

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(2) default in the payment of the principal of or any premium on any
senior debt security of the series, or any additional amounts payable with
respect thereto, when the principal or premium becomes or the additional
amounts become due and payable at their maturity;

(3) failure of Liberty to comply with any of its obligations described
above under "--Successor Corporation";

(4) default in the deposit of any sinking fund payment when and as due
by the terms of a senior debt security of the series;

(5) default in the performance, or breach, of any covenant or warranty
of Liberty in the indenture or the senior debt securities (other than a
covenant or warranty a default in the performance or the breach of which is
elsewhere in the indenture specifically dealt with or which has been
expressly included in the indenture solely for the benefit of a series of
senior debt securities other than the relevant series), and continuance of
the default or breach for a period of 60 days after there has been given,
by registered or certified mail, to Liberty by the trustee or to Liberty
and the trustee by the holders of at least 25% in principal amount of the
outstanding senior debt securities of the series, a written notice
specifying the default or breach and requiring it to be remedied and
stating that the notice is a "Notice of Default" under the indenture;

(6) if any event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any Indebtedness of Liberty, whether the Indebtedness
now exists or shall hereafter be created, shall happen and shall result in
Indebtedness in aggregate principal amount (or, if applicable, with an
issue price and accreted original issue discount) in excess of $100 million
becoming or being declared due and payable prior to the date on which it
would otherwise become due and payable, and (i) the acceleration shall not
be rescinded or annulled, (ii) such Indebtedness shall not have been paid
or (iii) Liberty shall not have contested such acceleration in good faith
by appropriate proceedings and have obtained and thereafter maintained a
stay of all consequences that would have a material adverse effect on
Liberty, in each case within a period of 30 days after there shall have
been given, by registered or certified mail, to Liberty by the trustee or
to Liberty and the trustee by the holders of at least 25% in principal
amount of the outstanding senior debt securities of the series then
outstanding, a written notice specifying the default or breaches and
requiring it to be remedied and stating that the notice is a "Notice of
Default" or other notice as prescribed in the indenture; provided, however,
that if after the expiration of such period, such event of default shall be
remedied or cured by Liberty or be waived by the holders of such
Indebtedness in any manner authorized by such mortgage, indenture or
instrument, then the event of default with respect to such series of senior
debt securities or by reason thereof shall, without further action by
Liberty, the trustee or any holder of senior debt securities of such
series, be deemed cured and not continuing;

(7) the entry by a court having competent jurisdiction of:

(a) a decree or order for relief in respect of Liberty or any
Material Subsidiary in an involuntary proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law and the
decree or order shall remain unstayed and in effect for a period of 60
consecutive days;

(b) a decree or order adjudging Liberty or any Material Subsidiary
to be insolvent, or approving a petition seeking reorganization,
arrangement, adjustment or composition of Liberty or any Material
Subsidiary and the decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or

(c) a final and non-appealable order appointing a custodian,
receiver, liquidator, assignee, trustee or other similar official of
Liberty or any Material Subsidiary or of any substantial part of the
property of Liberty or any Material Subsidiary or ordering the winding
up or liquidation of the affairs of Liberty;

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(8) the commencement by Liberty or any Material Subsidiary of a
voluntary proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or of a voluntary proceeding seeking to
be adjudicated insolvent or the consent by Liberty or any Material
Subsidiary to the entry of a decree or order for relief in an involuntary
proceeding under any applicable bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any insolvency proceedings
against it, or the filing by Liberty or any Material Subsidiary of a
petition or answer or consent seeking reorganization or relief under any
applicable law, or the consent by Liberty or any Material Subsidiary to the
filing of the petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or similar official of
Liberty or any Material Subsidiary or any substantial part of the property
of Liberty or any Material Subsidiary or the making by Liberty or any
Material Subsidiary of an assignment for the benefit of creditors, or the
taking of corporate action by Liberty or any Material Subsidiary in
furtherance of any such action; or

(9) any other event of default provided in or pursuant to the indenture
with respect to senior debt securities of the series.

If an event of default with respect to senior debt securities of any series
at the time outstanding (other than an event of default specified in clause (7)
or (8) above) occurs and is continuing, then the trustee or the holders of not
less than 25% in principal amount of the outstanding senior debt securities of
the series may declare the principal of all the senior debt securities of the
series, or such lesser amount as may be provided for in the senior debt
securities of the series, to be due and payable immediately, by a notice in
writing to Liberty (and to the trustee if given by the holders), and upon any
declaration the principal or such lesser amount shall become immediately due
and payable. If an event of default specified in clause (7) or (8) above
occurs, all unpaid principal of and accrued interest on the outstanding senior
debt securities of that series (or such lesser amount as may be provided for in
the senior debt securities of the series) shall become and be immediately due
and payable without any declaration or other act on the part of the trustee or
any holder of any senior debt security of that series.

At any time after a declaration of acceleration or automatic acceleration
with respect to the senior debt securities of any series has been made and
before a judgment or decree for payment of the money due has been obtained by
the trustee, the holders of not less than a majority in principal amount of the
outstanding senior debt securities of the series, by written notice to Liberty
and the trustee, may rescind and annul the declaration and its consequences if:

(1) Liberty has paid or deposited with the trustee a sum of money
sufficient to pay all overdue installments of any interest on all
senior debt securities of the series and additional amounts payable
with respect thereto and the principal of and any premium on any senior
debt securities of the series which have become due otherwise than by
the declaration of acceleration and interest on the senior debt
securities; and

(2) all events of default with respect to senior debt securities of the
series, other than the non-payment of the principal of, any premium and
interest on, and any additional amounts with respect to senior debt
securities of the series which shall have become due solely by the
acceleration, shall have been cured or waived.

No rescission shall affect any subsequent default or impair any right
consequent thereon.

Certain Definitions

The following are certain of the terms defined in the indenture:

"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at
the time of determination, the present value of the obligation of the lessee
for net rental payments during the

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remaining term of the lease included in such Sale and Leaseback Transaction
including any period for which such lease has been extended or may, at the
option of the lessor, be extended. Such present value shall be calculated
using a discount rate equal to the rate of interest implicit in such
transaction, determined in accordance with generally accepted accounting
principles.

"Capitalized Lease Obligation" of any person means any obligation of such
person to pay rent or other amounts under a lease with respect to any property
(whether real, personal or mixed) acquired or leased by such person and used
in its business that is required to be accounted for as a liability on the
balance sheet of such person in accordance with generally accepted accounting
principles and the amount of such Capitalized Lease Obligation shall be the
amount so required to be accounted for as a liability.

"Closing Price" means, with respect to any security on any date of
determination, the closing sale price (or, if no closing sale price is
reported, the last reported sale price) of such security on the NYSE on such
date or, if such security is not listed for trading on the NYSE on such date,
as reported in the composite transactions (or comparable system) for the
principal United States national or regional securities exchange on which such
security is so listed or a recognized international securities exchange, or,
if such security is not listed on a U.S. national or regional securities
exchange or on a recognized international securities exchange, as reported by
the Nasdaq Stock Market, or, if such security is not so reported, the last
quoted bid price for such security in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or, if such bid
price is not available, the market value of such security on such date as
determined by a nationally recognized independent investment banking firm
retained for this purpose by Liberty; provided that, (1) with respect to
options, warrants and other rights to purchase Marketable Securities, the
Closing Price shall be the value based on the Closing Price of the underlying
Marketable Security minus the exercise price and (2) with respect to
securities exchangeable for or convertible into Marketable Securities, the
Closing Price shall be the Closing Price of the exchangeable or convertible
security or, if it has no Closing Price, the fully converted value based upon
the Closing Price of the underlying Marketable Security.

"Consolidated Asset Value" shall mean, with respect to any date of
determination, the sum of:

(A) the amount of cash of Liberty and its Restricted Subsidiaries on the
last day of the preceding month, plus the following assets owned by Liberty
and its Restricted Subsidiaries on the last day of the preceding month that
have the indicated ratings and maturities no greater than 270 days:

. the aggregate principal amount of certificates of deposit and
bankers' acceptances rated A/2 or P/2 or higher by the Rating
Agencies;

. the aggregate principal amount of participations in loans with
obligors with short-term ratings of A/2 or P/2 or higher by the
Rating Agencies or long-term ratings of Baa1or BBB+ or higher by the
Rating Agencies;

. the aggregate principal amount of repurchase agreements of
securities issued by the U.S. government or any agency thereof with
counterparties with short-term ratings of A/2 or P/2 or higher by
the Rating Agencies or long-term ratings of Baa1or BBB+ or higher by
the Rating Agencies; and

. the aggregate principal amount at maturity of commercial paper rated
A/2 or P/2 or higher by the Rating Agencies;

(B) the aggregate value of all Marketable Securities owned by Liberty
and its Restricted Subsidiaries based upon the Closing Price of each
Marketable Security on the last day of the preceding month, or if such day
is not a Trading Day, on the immediately preceding Trading Day; and

(C) the arithmetic mean of the aggregate market values (or the midpoint
of a range of values) of the assets of Liberty and its Restricted
Subsidiaries having a value in excess of $200 million, other than the
assets referred to in clauses (A) and (B) above, as of a date within 90
days of the date of determination (or

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to the extent the research reports referred to below have not been issued
within such 90-day period, as of a date within 180 days of the date of
determination) as evidenced either:

. by research reports issued by three nationally recognized
independent investment banking firms selected by Liberty; or

. if three such research reports have not been issued within 180 days
prior to the date of determination, by an appraisal by two
nationally recognized independent investment banking or appraisal
firms retained by Liberty for this purpose.

"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length transaction, for cash, between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Fair market value shall be determined
by the Board of Directors of Liberty acting in good faith evidenced by a board
resolution thereof delivered to the trustee.

"Funded Indebtedness" of any person means, as of the date as of which the
amount thereof is to be determined, without duplication, all Indebtedness of
such person and all Capitalized Lease Obligations of such person, which by the
terms thereof have a final maturity, duration or payment date more than one
year from the date of determination thereof (including, without limitation, any
balance of such Indebtedness or obligation which was Funded Indebtedness at the
time of its creation maturing within one year from such date of determination)
or which has a final maturity, duration or payment date within one year from
such date of determination but which by its terms may be renewed or extended at
the option of such person for more than one year from such date of
determination, whether or not theretofore renewed or extended; provided,
however, "Funded Indebtedness" shall not include (1) any Indebtedness of
Liberty or any Subsidiary to Liberty or another Subsidiary, (2) any guarantee
by Liberty or any Subsidiary of Indebtedness of Liberty or another Subsidiary,
provided that such guarantee is not secured by a Lien on any Principal
Property, (3) any guarantee by Liberty or any Subsidiary of the Indebtedness of
any person (including, without limitation, a business trust), if the obligation
of Liberty or such Subsidiary under such guaranty is limited in amount to the
amount of funds held by or on behalf of such person that are available for the
payment of such Indebtedness, (4) liabilities under interest rate swap,
exchange, collar or cap agreements and all other agreements or arrangements
designed to protect against fluctuations in interest rates or currency exchange
rates, and (5) liabilities under commodity hedge, commodity swap, exchange,
collar or cap agreements, fixed price agreements and all other agreements or
arrangements designed to protect against fluctuations in prices. For purposes
of determining the outstanding principal amount of Funded Indebtedness at any
date, the amount of Indebtedness issued at a price less than the principal
amount at maturity thereof shall be equal to the amount of the liability in
respect thereof at such date determined in accordance with generally accepted
accounting principles.

"Indebtedness" of any person means:

(1) any indebtedness of such person (i) for borrowed money or (ii)
evidenced by a note, debenture or similar instrument (including a purchase
money obligation) given in connection with the acquisition of any property
or assets, including securities;

(2) any guarantee by such person of any indebtedness of others described
in the preceding clause (1); and

(3) any amendment, renewal, extension or refunding of any such
indebtedness or guarantee.

"Liberty" means Liberty Media Corporation, a Delaware corporation, until a
successor replaces it pursuant to the applicable provisions of the indenture
and thereafter means the successor.

"Lien" means any mortgage, pledge, lien, security interest, or other similar
encumbrance.

"Marketable Securities" means any securities listed on a U.S. national
securities exchange or reported by the Nasdaq Stock Market or listed on a
recognized international securities exchange or traded in the over-the-counter
market and quoted by at least two broker-dealers as reported by the National
Quotation Bureau or similar organization, including as Marketable Securities
options, warrants and other rights to purchase, and securities exchangeable for
or convertible into, Marketable Securities.

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"Material Subsidiary" means, at any relevant time, any Subsidiary that meets
any of the following conditions:

(1) Liberty's and its other Subsidiaries' investments in and advances to
the Subsidiary exceed 10% of the total consolidated assets of Liberty and
its Subsidiaries; or

(2) Liberty's and its other Subsidiaries' proportionate share of the
total assets (after intercompany eliminations) of the Subsidiary exceeds
10% of the total consolidated assets of Liberty and its Subsidiaries; or

(3) Liberty's and its other Subsidiaries' proportionate share of the
total revenues (after intercompany eliminations) of the Subsidiary exceeds
10% of the total consolidated revenue of Liberty and its Subsidiaries; or

(4) Liberty's and its other Subsidiaries' equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of the Subsidiary
exceeds 10% of such income of Liberty and its Subsidiaries;

all as calculated by reference to the then latest fiscal year-end accounts (or
consolidated fiscal year-end accounts, as the case may be) of such Subsidiary
and the then latest audited consolidated fiscal year-end accounts of Liberty
and its Subsidiaries. Based on the 1998 fiscal year-end accounts, as of the
date of this prospectus, the only Material Subsidiary of Liberty is Starz
Encore Group LLC.

"Nasdaq Stock Market" means The Nasdaq Stock Market, a subsidiary of the
National Association of Securities Dealers, Inc.

"Principal Property" means, as of any date of determination, (a) any cable
system or manufacturing or production facility, including land and buildings
and other improvements thereon and equipment located therein, owned by Liberty
or a Restricted Subsidiary and used in the ordinary course of its business and
(b) any executive offices, administrative buildings, and research and
development facilities, including land and buildings and other improvements
thereon and equipment located therein, of Liberty or a Restricted Subsidiary,
other than any such property which, in the good faith opinion of the Board of
Directors, is not of material importance to the business conducted by Liberty
and its Restricted Subsidiaries taken as a whole.

"Rating Agencies" means (i) Standard & Poors, a division of The McGraw-Hill
Companies, Inc. and (ii) Moody's Investors Service, Inc. and (iii) if S&P or
Moody's or both shall not make a rating publicly available, a nationally
recognized United States securities rating agency or agencies, as the case may
be, selected by Liberty, which shall be substituted for S&P or Moody's or both,
as the case may be.

"Restricted Subsidiary" means, as of any date of determination, a corporation
a majority of whose voting stock is owned by Liberty and/or one or more
Restricted Subsidiaries, which corporation has been, or is then being,
designated a Restricted Subsidiary in accordance with the "Designation of
Restricted Subsidiaries" covenant, unless and until designated an Unrestricted
Subsidiary in accordance with such covenant.

"Sale and Leaseback Transaction" means any arrangement providing for the
leasing to Liberty or a Restricted Subsidiary of any Principal Property (except
for temporary leases for a term, including renewals, of not more than three
years) which has been or is to be sold by Liberty or such Restricted Subsidiary
to the lessor.

"Subsidiary" means any corporation, association, limited liability company,
partnership or other business entity of which a majority of the total voting
power of the capital stock or other interests (including partnership interests)
entitled (without regard to the incurrence of a contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned,
directly or indirectly, by (i) Liberty, (ii) Liberty and one or more of its
Subsidiaries or (iii) one or more Subsidiaries of Liberty.

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"Trading Day" means, with respect to any security the Closing Price of which
is being determined, a day on which there is trading on the principal United
States national or regional securities exchange or recognized international
securities exchange, in the Nasdaq Stock Market or in the over-the-counter
market used to determine such Closing Price.

"Unrestricted Subsidiary" means, as of any date of determination, any
Subsidiary of Liberty that is not a Restricted Subsidiary.

Modification and Waiver

Modification and amendments of the indenture may be made by Liberty and the
trustee with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding senior debt securities of each
series affected thereby; provided, however, that no modification or amendment
may, without the consent of the holder of each outstanding senior debt security
affected thereby,

(1) change the stated maturity of the principal of, or any premium or
installment of interest on, or any additional amounts with respect to,
any senior debt security;

(2) reduce the principal amount of, or the rate (or modify the calculation
of the rate) of interest on, or any additional amounts with respect to,
or any premium payable upon the redemption of, any senior debt
security;

(3) change the redemption provisions of any senior debt security or
adversely affect the right of repayment at the option of any holder of
any senior debt security;

(4) change the place of payment or the coin or currency in which the
principal of, any premium or interest on or any additional amounts with
respect to any senior debt security is payable;

(5) impair the right to institute suit for the enforcement of any payment
on or after the stated maturity of any senior debt security (or, in the
case of redemption, on or after the redemption date or, in the case of
repayment at the option of any holder, on or after the date for
repayment);

(6) reduce the percentage in principal amount of the outstanding senior
debt securities, the consent of whose holders is required in order to
take certain actions;

(7) reduce the requirements for quorum or voting by holders of senior debt
securities as provided in the indenture;

(8) modify any of the provisions in the indenture regarding the waiver of
past defaults and the waiver of certain covenants by the holders of
senior debt securities except to increase any percentage vote required
or to provide that certain other provisions of the indenture cannot be
modified or waived without the consent of the holder of each senior
debt security affected thereby; or

(9) modify any of the above provisions.

The holders of at least a majority in aggregate principal amount of the
senior debt securities of any series may, on behalf of the holders of all
senior debt securities of the series, waive compliance by Liberty with certain
restrictive provisions of the indenture. The holders of not less than a
majority in aggregate principal amount of the outstanding senior debt
securities of any series may, on behalf of the holders of all senior debt
securities of the series, waive any past default and its consequences under the
indenture with respect to the senior debt securities of the series, except a
default:

. in the payment of principal (or premium, if any), or any interest on or
any additional amounts with respect to senior debt securities of the
series; or

. in respect of a covenant or provision of the indenture that cannot be
modified or amended without the consent of the holder of each senior
debt security of any series.

119
<PAGE>

Under the indenture, Liberty is required to furnish the trustee annually a
statement as to performance by Liberty of certain of its obligations under the
indenture and as to any default in the performance. Liberty is also required to
deliver to the trustee, within five days after becoming aware thereof, written
notice of any event of default or any event which after notice or lapse of time
or both would constitute an event of default.

Discharge, Defeasance and Covenant Defeasance

Liberty may discharge certain obligations to holders of any series of senior
debt securities that have not already been delivered to the trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
depositing with the trustee, in trust, funds in U.S. dollars in an amount
sufficient to pay the entire indebtedness on the senior debt securities with
respect to principal (and premium, if any) and interest to the date of the
deposit (if the senior debt securities have become due and payable) or to the
maturity thereof, as the case may be.

The indenture provides that, unless the provisions of Section 402 thereof are
made inapplicable to the senior debt securities of or within any series
pursuant to Section 301 thereof, Liberty may elect either:

. to defease and be discharged from any and all obligations with respect
to the senior debt securities (except for, among other things, the
obligation to pay additional amounts, if any, upon the occurrence of
certain events of taxation, assessment or governmental charge with
respect to payments on the senior debt securities and other obligations
to register the transfer or exchange of the senior debt securities, to
replace temporary or mutilated, destroyed, lost or stolen senior debt
securities, to maintain an office or agency with respect to the senior
debt securities and to hold moneys for payment in trust) ("defeasance");
or

. to be released from its obligations with respect to the senior debt
securities under the covenants described under "--Certain Covenants"
above or, if provided pursuant to Section 301 of the indenture, its
obligations with respect to any other covenant, and any omission to
comply with the obligations shall not constitute a default or an event
of default with respect to the senior debt securities ("covenant
defeasance").

Defeasance or covenant defeasance, as the case may be, shall be conditioned
upon the irrevocable deposit by Liberty with the trustee, in trust, of an
amount in U.S. dollars at stated maturity, or Government Obligations, which is
defined below, or both, applicable to the senior debt securities which through
the scheduled payment of principal and interest in accordance with their terms
will provide money in an amount sufficient to pay the principal of (and
premium, if any) and interest on the senior debt securities on the scheduled
due dates therefor.

Such a trust may only be established if, among other things:

. the applicable defeasance or covenant defeasance does not result in a
breach or violation of, or constitute a default under, the indenture or
any other material agreement or instrument to which Liberty is a party
or by which it is bound; and

. Liberty has delivered to the trustee an Opinion of Counsel (as specified
in the indenture) to the effect that the holders of the senior debt
securities will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of the defeasance or covenant defeasance
and will be subject to U.S. federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if the
defeasance or covenant defeasance had not occurred, and the Opinion of
Counsel, in the case of defeasance, must refer to and be based upon a
letter ruling of the Internal Revenue Service received by Liberty, a
Revenue Ruling published by the Internal Revenue Service or a change in
applicable U.S. federal income tax law occurring after the date of the
indenture.

"Government Obligations" means senior debt securities which are:

(1) direct obligations of the United States of America or the government or
the governments in the confederation which issued the Currency in which
the senior debt securities of a particular series are payable, for the
payment of which its full faith and credit is pledged; or

120
<PAGE>

(2) obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America or such other
government or governments, the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government or governments,

which, in the case of clauses (1) and (2), are not callable or redeemable at
the option of the issuer or issuers thereof, and shall also include a
depositary receipt issued by a bank or trust company as custodian with respect
to the Government Obligation or a specific payment of interest on or principal
of or any other amount with respect to the Government Obligation held by the
custodian for the account of the holder of the depositary receipt, provided
that (except as required by law) the custodian is not authorized to make any
deduction from the amount payable to the holder of the depositary receipt from
any amount received by the custodian with respect to the Government Obligation
or the specific payment of interest on or principal of or any other amount with
respect to the Government Obligation evidenced by the depositary receipt.

In the event Liberty effects covenant defeasance with respect to any senior
debt securities and the senior debt securities are declared due and payable
because of the occurrence of any event of default other than an event of
default with respect to sections 1005 and 1006 of the indenture (which sections
would no longer be applicable to the senior debt securities after the covenant
defeasance) or with respect to any other covenant as to which there has been
covenant defeasance, the amount in the Currency in which the senior debt
securities are payable, and Government Obligations on deposit with the trustee,
will be sufficient to pay amounts due on the senior debt securities at the time
of the stated maturity but may not be sufficient to pay amounts due on the
senior debt securities at the time of the acceleration resulting from the event
of default. However, Liberty would remain liable to make payment of the amounts
due at the time of acceleration.

Governing Law

The indenture and the debentures will be governed by, and construed in
accordance with, the laws of the State of New York.

Regarding the Trustee

The trustee is permitted to engage in other transactions with Liberty and its
subsidiaries from time to time, provided that if the trustee acquires any
conflicting interest it must eliminate the conflict upon the occurrence of an
event of default, or else resign.

Registration Rights; Additional Interest

Holders of new debentures are not entitled to any registration rights with
respect to the new debentures. Holders of old debentures are entitled to
certain registration rights pursuant to the registration rights agreement.

In the registration rights agreement, we agreed to keep this exchange offer
open for not less than 20 business days (or longer if required by applicable
law) after the date notice of this exchange offer is mailed to the holders of
the old debentures. See "The Exchange Offer." We further agreed that:

. if we determine, after consultation with counsel, that any changes in
law, SEC rules or regulations or applicable interpretations thereof by
the SEC staff do not permit us to consummate the exchange offer,

. if for any other reason, the exchange offer is not consummated by August
30, 2000, which is 210 days after the original issue date of the old
debentures,

. if any initial purchaser requests with respect to debentures
representing an unsold allotment from the original sale of the old
debentures, or

121
<PAGE>

. if any holder of old debentures notifies us within 30 days after the
commencement of the exchange offer that (1) due to a change in law or
policy it is not entitled to participate in the exchange offer, (2) due
to a change in law or policy it is not permitted to resell the new
debentures to the public without delivering a prospectus and this
prospectus is not appropriate or available, or (3) it is a broker-dealer
and owns old debentures acquired directly from us or our affiliate;

we will, in lieu of effecting the registration of the new debentures pursuant
to the registration statement of which this prospectus is a part:

. as promptly as practicable, file with the SEC a shelf registration
statement covering resales of the old debentures;

. use our reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act not later
than August 30, 2000, which is 210 days after the original issue date of
the old debentures;

. use our reasonable best efforts to keep effective the shelf registration
statement until February 2, 2002, which is two years after the original
issue date of the old debentures, or until all of the old debentures
covered by the shelf registration statement have been sold or otherwise
cease to be "Registrable Securities" within the meaning of the
registration rights agreement; and

. use our reasonable best efforts to ensure that:

. the shelf registration statement and any amendment thereto and any
prospectus included therein complies in all material respects with
the Securities Act; and

. the shelf registration statement and any amendment thereto and any
prospectus included therein does not, when it becomes effective,
contain an untrue statement of a material fact.

We will, in the event of the filing of a shelf registration statement,
provide to each holder of old debentures that are covered by the shelf
registration statement copies of the prospectus which is a part of the shelf
registration statement and notify each such holder when the shelf registration
statement has become effective. A holder of old debentures that sells the old
debentures pursuant to the shelf registration statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with the sales and
will be bound by the provisions of the registration rights agreement which are
applicable to the holder (including certain indemnification obligations).

Each old debenture contains a legend to the effect that the holder of that
debenture, by its acceptance thereof, has agreed to be bound by the provisions
of the registration rights agreement. In that regard, if a holder receives
notice from Liberty that any event which:

. makes any statement in the prospectus which is part of the shelf
registration statement (or, in the case of participating broker-dealers,
this prospectus) untrue in any material respect; or

. requires the making of any changes in the prospectus to make the
statements therein not misleading; or

. is specified in the registration rights agreement

occurs, the holder (or participating broker-dealer, as the case may be) will
suspend the sale of debentures pursuant to that prospectus until Liberty has

. either:

. amended or supplemented the prospectus to correct the misstatement
or omission; and

. furnished copies of the amended or supplemented prospectus to the
holder (or participating broker-dealer, as the case may be); or,

. given notice that the sale of the debentures may be resumed, as the case
may be.

122
<PAGE>

If a registration default occurs, which means that the exchange offer is not
consummated or a shelf registration statement with respect to the debentures is
not declared effective on or prior to August 30, 2000, which is 210 days after
the original issue date of the old debentures, then the interest rate borne by
the securities that are affected by the registration default with respect to
the first 90-day period, or portion thereof, will be increased by an additional
interest of 0.25% per annum upon the occurrence of each registration default.
The amount of additional interest will increase by an additional 0.25% each 90-
day period, or portion thereof, while a registration default is continuing
until all registration defaults have been cured, provided that the maximum
aggregate increase in the interest rate will in no event exceed one percent
(1%) per annum. Upon:

. the consummation of the exchange offer;

. the effectiveness of the shelf registration statement after August 30,
2000; or

. the date on which all new debentures are saleable pursuant to Rule
144(k) under the Securities Act or any successor provision;

the interest rate on the debentures will be reduced to 8 1/4%, if Liberty is
otherwise in compliance with this paragraph. If after any such reduction in
interest rate, a different event specified above occurs, the interest rate will
again be increased pursuant to the foregoing provisions.

If the shelf registration statement is unusable by the holders for any reason
for more than 30 days, then the interest rate borne by the debentures will be
increased by 0.25% per annum of the principal amount of the securities for the
first 90-day period (or portion thereof) beginning on the 31st day that the
shelf registration statement ceased to be usable. This interest rate will be
increased by an additional 0.25% per annum of the principal amount of the
debentures at the beginning of each subsequent 90-day period, provided that the
maximum aggregate increase in the interest rate will in no event exceed one
percent (1%) per annum. Any amounts payable under this paragraph shall also be
deemed "additional interest" for purposes of the registration rights agreement.
Upon the shelf registration statement once again becoming usable, the interest
rate borne by the debentures will be reduced to the original interest rate if
Liberty is otherwise in compliance with the registration rights agreement at
such time. Additional interest shall be computed based on the actual number of
days elapsed in each 90-day period in which the shelf registration statement is
unusable.

Liberty shall notify the trustee within three business days of an event date,
which is each and every date on which an event occurs in respect of which
additional interest is required to be paid. Additional interest shall be paid
by depositing with the trustee, in trust, for the benefit of the holders of
Registrable Securities, on or before the applicable semiannual interest payment
date, immediately available funds in sums sufficient to pay the additional
interest then due. The additional interest due shall be payable on each
interest payment date to the record holder of debentures entitled to receive
the interest payment to be paid on such date as set forth in the indenture.
Each obligation to pay additional interest shall be deemed to accrue from and
including the day following the applicable event date.

123
<PAGE>

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a summary of the material United States federal
income tax consequences to holders of old debentures who exchange their old
debentures for new debentures in the exchange offer. This discussion is based
on currently existing provisions of the Internal Revenue Code, the applicable
Treasury Regulations promulgated and proposed thereunder, judicial authority
and current administrative rulings and practice, all of which are subject to
change, possibly with retroactive effect, or different interpretation. There
can be no assurance that the Internal Revenue Service will not challenge one or
more of the conclusions described herein, and Liberty has not obtained, nor
does it intend to obtain, a ruling from the Internal Revenue Service or an
opinion of counsel with respect to the United States federal income tax
consequences of the exchange of old debentures for new debentures. This
discussion is limited to holders of old debentures who hold the old debentures
as capital assets, within the meaning of section 1221 of the Internal Revenue
Code. Moreover, this discussion is for general information only and does not
address all of the tax consequences that may be relevant to holders of old
debentures and new debentures in light of their personal circumstances or to
some types of holders of old debentures and new debentures including financial
institutions, insurance companies, tax exempt entities, dealers in debentures
or persons who have hedged the risk of owning a debenture. In addition, this
discussion does not address any tax consequences arising under the laws of any
state, locality or foreign jurisdiction, or any estate or gift tax
considerations.

The exchange of old debentures for new debentures pursuant to the exchange
offer should not be treated as a taxable exchange for United States federal
income tax purposes. Accordingly, a holder should have the same adjusted tax
basis and holding period in the new debentures as it had in the old debentures
immediately before the exchange.

124
<PAGE>

PLAN OF DISTRIBUTION

Each broker-dealer that receives new debentures for its own account under the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the new debentures. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new debentures received in exchange for old debentures where
the old debentures were acquired as a result of market-making activities or
other trading activities. We have agreed that, for a period of 90 days after
the expiration date, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.

We will not receive any proceeds from any sale of new debentures by broker-
dealers or any other holder of new debentures. New debentures received by
broker-dealers for their own account under the exchange offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the new debentures
or a combination of these methods of resale, at market prices prevailing at the
time of resale, at prices related to the prevailing market prices or at
negotiated prices. The resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any of these broker-dealers and/or the
purchasers of any such new debentures. Any broker-dealer that resells new
debentures that were received by it for its own account in the exchange offer
or participates in a distribution of the new debentures may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on their
resale of new debentures and any commissions or concessions received by them
may be deemed to be underwriting compensation under the Securities Act. The
letter of transmittal states that by acknowledging that it will deliver a
prospectus and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.

For a period of 90 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests these documents in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer,
including the reasonable expenses of one counsel for the holders of the old
debentures, other than commissions or concessions of any brokers or dealers. In
addition, we will indemnify the holders of the old debentures (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.

125
<PAGE>

LEGAL MATTERS

The validity of the new debentures offered hereby will be passed upon for us
by Baker Botts L.L.P., New York, New York.

EXPERTS

The consolidated financial statements of Liberty Media Corporation and
subsidiaries ("New Liberty" or "Successor") as of December 31, 1999, and of
Liberty Media Corporation ("Old Liberty" or "Predecessor") as of December 31,
1998, and for the periods from March 1, 1999 to December 31, 1999 (Successor
period) and from January 1, 1999 to February 28, 1999 and for each of the years
in the two-year period ended December 31, 1998 (Predecessor periods), have been
included in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

The report of KPMG LLP, dated February 29, 2000, contains an explanatory
paragraph that states that effective March 9, 1999, AT&T Corp., the owner of
assets comprising New Liberty, acquired Tele-Communications, Inc., the owner of
the assets comprising Old Liberty, in a business combination accounted for as a
purchase. As a result of the acquisition, the consolidated financial
information for the periods after the acquisition is presented on a different
basis than that for the periods before the acquisition and, therefore, is not
comparable.

WHERE TO FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-4 under the
Securities Act with respect to the new debentures offered by this prospectus.
This prospectus, which forms a part of the registration statement, does not
contain all the information included in the registration statement. You should
refer to the registration statement, including its exhibits and schedules, for
further information about us or the new debentures offered by this prospectus.
Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete, and, where any contract or other
document is an exhibit to the registration statement, we refer you to that
exhibit for a more complete description of the matter involved.

We are subject to the informational requirements of the Securities Exchange
Act of 1934. Accordingly, we file reports and other information with the SEC.
In addition, AT&T files annual, quarterly and special reports, proxy statements
and other information with the SEC, and such reports, proxy statements and
other information may contain important information about us. AT&T has agreed,
pursuant to the Inter-Group Agreement, that for so long as AT&T Liberty Media
Group tracking stock is outstanding, AT&T will prepare and include in its SEC
filings consolidated financial statements of AT&T and combined financial
statements of the Liberty Media Group (of which we are the primary operating
unit).

You may read and copy the registration statement and the reports and other
information we file and any reports and other information AT&T files at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings and AT&T's SEC
filings are also available to the public from commercial document retrieval
services and at the Internet world wide web site maintained by the SEC at
www.sec.gov.

Additionally, we have agreed that, even if we are not required to file
periodic reports and information with the SEC, for so long as any new
debentures remain outstanding we will furnish to you the information that would
be required to be furnished by us under Section 13 of the Securities Exchange
Act.

126
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Liberty Media Corporation
Audited Consolidated Financial Statements
Independent Auditors' Report.......................................... F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998.......... F-3
Consolidated Statements of Operations and Comprehensive Earnings for
the years ended
December 31, 1999, 1998 and 1997..................................... F-5
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1999, 1998 and 1997..................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.................................................. F-7
Notes to Consolidated Financial Statements............................ F-8
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Liberty Media Corporation:

We have audited the accompanying consolidated balance sheets of Liberty Media
Corporation and subsidiaries ("New Liberty" or "Successor") as of December 31,
1999, and of Liberty Media Corporation and subsidiaries ("Old Liberty" or
"Predecessor") as of December 31, 1998, and the related consolidated statements
of operations and comprehensive earnings, stockholders' equity, and cash flows
for the periods from March 1, 1999 to December 31, 1999 (Successor period) and
from January 1, 1999 to February 28, 1999 and for each of the years in the two-
year period ended December 31, 1998 (Predecessor periods). These consolidated
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the aforementioned Successor consolidated financial
statements present fairly, in all material respects, the financial position of
New Liberty as of December 31, 1999, and the results of their operations and
their cash flows for the Successor period, in conformity with generally
accepted accounting principles. Further, in our opinion, the aforementioned
Predecessor consolidated financial statements present fairly, in all material
respects, the financial position of Old Liberty as of December 31, 1998, and
the results of their operations and their cash flows for the Predecessor
periods, in conformity with generally accepted accounting principles.

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

KPMG LLP

Denver, Colorado
February 29, 2000

F-2
<PAGE>

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

CONSOLIDATED BALANCE SHEETS

December 31, 1999 and 1998

<TABLE>
<CAPTION>
New Liberty Old Liberty
1999 1998
----------- -----------
(note 2)
amounts in millions
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents........................... $ 1,714 228
Short-term investments.............................. 378 159
Trade and other receivables, net.................... 116 142
Prepaid expenses and committed program rights....... 405 263
Deferred income tax assets.......................... 750 216
Other current assets................................ 5 21
------- ------
Total current assets.............................. 3,368 1,029
------- ------
Investments in affiliates, accounted for under the
equity method, and related receivables (note 5)...... 15,922 3,079
Investments in available-for-sale securities and
others (note 6)...................................... 28,593 10,539

Property and equipment, at cost....................... 162 279
Less accumulated depreciation....................... 19 124
------- ------
143 155
------- ------
Intangible assets:
Excess cost over acquired net assets................ 9,966 940
Franchise costs..................................... 273 99
------- ------
10,239 1,039
Less accumulated amortization..................... 454 140
------- ------
9,785 899
------- ------
Other assets, at cost, net of accumulated
amortization......................................... 839 82
------- ------
Total assets...................................... $58,650 15,783
======= ======
</TABLE>

F-3
<PAGE>

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

CONSOLIDATED BALANCE SHEETS--(Continued)

December 31, 1999 and 1998

<TABLE>
<CAPTION>
New Old
Liberty Liberty
1999 1998
------- -------
(note 2)
amounts in
millions
<S> <C> <C>
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable............................................ $ 44 49
Accrued liabilities......................................... 201 199
Accrued stock compensation.................................. 2,405 126
Program rights payable...................................... 166 156
Customer prepayments........................................ -- 124
Current portion of debt..................................... 554 184
------- ------
Total current liabilities................................. 3,370 838
------- ------
Long-term debt (note 9)....................................... 2,723 1,912
Deferred income tax liabilities (note 10)..................... 14,103 3,582
Other liabilities............................................. 23 89
------- ------
Total liabilities......................................... 20,219 6,421
------- ------
Minority interests in equity of subsidiaries (notes 7 and 8).. 23 132
Stockholder's equity (note 11):
Preferred stock, $.0001 par value. Authorized 100,000
shares; no shares issued and outstanding................... -- --
Class A common stock $.0001 par value. Authorized 1,000,000
shares; issued and outstanding 1,000 shares ............... -- --
Class B common stock $.0001 par value. Authorized 1,000,000
shares; issued and outstanding 1,000 shares ............... -- --
Class C common stock, $.0001 par value. Authorized 1,000,000
shares; issued and outstanding 1,000 shares ............... -- --
Additional paid-in capital.................................. 33,838 4,682
Accumulated other comprehensive earnings, net of taxes (note
13)........................................................ 6,518 3,186
Accumulated (deficit) earnings.............................. (1,975) 952
------- ------
38,381 8,820
Due to related parties...................................... 27 410
------- ------
Total stockholder's equity................................ 38,408 9,230
------- ------
Commitments and contingencies (note 14)
Total liabilities and stockholder's equity................ $58,650 15,783
======= ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

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

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ --------------------------
Ten months Two months Years ended
ended ended December 31,
December 31, February 28, -------------
1999 1999 1998 1997
------------ ------------ ------ -----
amounts in millions(note 2)
<S> <C> <C> <C> <C>
Revenue:
Unaffiliated parties................ $ 549 192 1,197 1,070
Related parties (note 11)........... 180 43 162 155
------- ---- ------ -----
729 235 1,359 1,225
------- ---- ------ -----
Operating costs and expenses:
Operating........................... 343 95 713 627
Selling, general and
administrative..................... 229 87 387 342
Charges from related parties (note
11)................................ 24 6 43 97
Stock compensation (note 12)........ 1,785 183 518 296
Depreciation and amortization....... 562 22 129 123
------- ---- ------ -----
2,943 393 1,790 1,485
------- ---- ------ -----
Operating loss.................... (2,214) (158) (431) (260)
Other income (expense):
Interest expense.................... (287) (25) (104) (40)
Interest expense to related parties,
net (note 11)...................... (1) (1) (9) (15)
Dividend and interest income........ 242 10 65 59
Share of losses of affiliates, net
(note 5)........................... (904) (66) (1,002) (785)
Minority interests in losses
(earnings) of subsidiaries......... 92 4 13 (10)
Gains on dispositions, net (notes 5
and 6)............................. 4 14 2,449 406
Gains on issuance of equity by
affiliates and subsidiaries (notes
5 and 7)........................... -- 372 105 --
Other, net............................ (4) (9) (3) --
------- ---- ------ -----
(858) 299 1,514 (385)
------- ---- ------ -----
Earnings (loss) before income
taxes............................ (3,072) 141 1,083 (645)
Income tax benefit (expense) (note
10).................................. 1,097 (211) (461) 175
------- ---- ------ -----
Net earnings (loss)............... $(1,975) (70) 622 (470)
------- ---- ------ -----
Other comprehensive earnings, net of
taxes:
Foreign currency translation
adjustments........................ 60 (15) 2 (23)
Unrealized holding gains arising
during the period, net of
reclassification adjustments....... 6,458 885 2,417 747
------- ---- ------ -----
Other comprehensive earnings
(loss)............................. 6,518 870 2,419 724
------- ---- ------ -----
Comprehensive earnings (note 13)...... $ 4,543 800 3,041 254
======= ==== ====== =====
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

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

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
Accumulated
other
Common stock Additional comprehensive Accumulated Due to Total
Preferred ----------------------- paid-in earnings, (deficit) related stockholder's
stock Class A Class B Class C captial net of taxes earnings parties equity
--------- ------- ------- ------- ---------- ------------- ----------- ------- -------------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... $-- -- -- -- 3,495 43 800 177 4,515
Net loss............... -- -- -- -- -- -- (470) -- (470)
Foreign currency
translation
adjustments........... -- -- -- -- -- (23) -- -- (23)
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 747 -- -- 747
Excess of consideration
paid over carryover
basis of net assets
acquired from related
party................. -- -- -- -- (86) -- -- -- (86)
Gains in connection
with issuances of
stock of affiliates
and subsidiaries (note
5).................... -- -- -- -- 85 -- -- -- 85
Excess of cash received
over carryover basis
of SUMMITrak Assets... -- -- -- -- 30 -- -- -- 30
Contribution to equity
from related party for
acquisitions.......... -- -- -- -- 30 -- -- -- 30
Other transfers from
(to) related parties,
net................... -- -- -- -- 56 -- -- (163) (107)
---- --- --- --- ------ ----- ------ ------ ------
Balance at December 31,
1997................... -- -- -- -- 3,610 767 330 14 4,721
Net earnings........... -- -- -- -- -- -- 622 -- 622
Foreign currency
translation
adjustments........... -- -- -- -- -- 2 -- -- 2
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 2,417 -- -- 2,417
Payments for call
agreements............ -- -- -- -- (140) -- -- -- (140)
Gains in connection
with issuances of
stock of affiliates
and subsidiaries (note
5).................... -- -- -- -- 70 -- -- -- 70
Transfers from related
party due to
acquisitions of
minority interests
(note 7).............. -- -- -- -- 772 -- -- -- 772
Assignment of option
from related party.... -- -- -- -- 16 -- -- (16) --
Transfer from related
party for acquisition
of cost investment ... -- -- -- -- 354 -- -- -- 354
Other transfers from
related parties, net.. -- -- -- -- -- -- -- 412 412
---- --- --- --- ------ ----- ------ ------ ------
Balance at December 31,
1998................... -- -- -- -- 4,682 3,186 952 410 9,230
Net loss............... -- -- -- -- -- -- (70) -- (70)
Foreign currency
translation
adjustments........... -- -- -- -- -- (15) -- -- (15)
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 885 -- -- 885
Other transfers from
(to) related parties,
net................... -- -- -- -- 430 -- -- (1,011) (581)
---- --- --- --- ------ ----- ------ ------ ------
Balance on February 28,
1999................... -- -- -- -- 5,112 4,056 882 (601) 9,449
---- --- --- --- ------ ----- ------ ------ ------
Balance at March 1,
1999................... -- -- -- -- 33,468 -- -- 197 33,665
Net loss............... -- -- -- -- -- -- (1,975) -- (1,975)
Foreign currency
translation
adjustments........... -- -- -- -- -- 60 -- -- 60
Recognition of
previously unrealized
losses on available-
for-sale securities,
net................... -- -- -- -- -- 7 -- -- 7
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 6,451 -- -- 6,451
Transfer from related
party for redemption
of debentures......... -- -- -- -- 354 -- -- -- 354
Gains in connection
with issuances of
stock of affiliates
and subsidiaries (note
8).................... -- -- -- -- 104 -- -- -- 104
Utilization of net
operating losses of
Liberty by AT&T (note
10)................... -- -- -- -- (88) -- -- -- (88)
Other transfers to
related parties, net.. -- -- -- -- -- -- -- (170) (170)
---- --- --- --- ------ ----- ------ ------ ------
Balance at December 31,
1999................... $-- -- -- -- 33,838 6,518 (1,975) 27 38,408
==== === === === ====== ===== ====== ====== ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ----------------------------
Ten months Two months
ended ended Years ended
December 31, February 28, December 31,
1999 1999 1998 1997
------------ ------------ ------- ------
amounts in millions (note 4)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss).................. $(1,975) (70) 622 (470)
Adjustments to reconcile net earnings
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization........ 562 22 129 123
Stock compensation................... 1,785 183 518 296
Payments of stock compensation....... (111) (126) (58) (75)
Share of losses of affiliates, net... 904 66 1,002 785
Deferred income tax (benefit)
expense............................. (1,025) 212 546 11
Intergroup tax allocation............ (75) (1) (89) (189)
Cash payment from AT&T pursuant to
tax sharing agreement............... 1 -- -- --
Minority interests in (losses)
earnings of subsidiaries............ (92) (4) (13) 10
Gains on issuance of equity by
affiliates and subsidiaries......... -- (372) (105) --
Gains on disposition of assets,
net................................. (4) (14) (2,449) (406)
Noncash interest..................... 153 -- -- --
Other noncash charges................ 3 18 -- 32
Changes in operating assets and
liabilities, net of the effect of
acquisitions and dispositions:
Change in receivables............... 7 33 (56) 6
Change in prepaid expenses and
committed program rights........... (119) (23) (65) (1)
Change in payables, accruals and
customer prepayments............... 119 (31) 44 27
------- ---- ------- -----
Net cash provided (used) by
operating activities.............. 133 (107) 26 149
------- ---- ------- -----
Cash flows from investing activities:
Cash paid for acquisitions........... (109) -- (92) (41)
Capital expended for property and
equipment........................... (40) (15) (60) (110)
Cash balances of deconsolidated
subsidiaries........................ -- (53) -- (39)
Investments in and loans to
affiliates and others............... (2,596) (51) (1,404) (580)
Purchases of marketable securities... (7,757) (3) -- --
Sales and maturities of marketable
securities.......................... 5,725 9 -- --
Return of capital from affiliates.... 7 -- 12 5
Collections on loans to affiliates
and others.......................... -- -- -- 133
Cash proceeds from dispositions...... 130 43 423 268
Other, net........................... (18) (9) -- (6)
------- ---- ------- -----
Net cash used by investing
activities........................ (4,658) (79) (1,121) (370)
------- ---- ------- -----
Cash flows from financing activities:
Borrowings of debt................... 3,187 155 2,199 661
Repayments of debt................... (2,211) (145) (609) (341)
Net proceeds from issuance of stock
by subsidiaries..................... 123 -- -- --
Payments for call agreements......... -- -- (140) --
Cash transfers (to) from related
parties............................. (159) 31 (215) (428)
Repurchase of stock of subsidiary.... -- (45) -- --
Other, net........................... (20) (7) (12) (5)
------- ---- ------- -----
Net cash provided (used) by
financing activities.............. 920 (11) 1,223 (113)
------- ---- ------- -----
Net increase (decrease) in cash and
cash equivalents.................. (3,605) (197) 128 (334)
Cash and cash equivalents at
beginning of year................ 5,319 228 100 434
------- ---- ------- -----
Cash and cash equivalents at end
of year.......................... $ 1,714 31 228 100
======= ==== ======= =====
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999, 1998 and 1997

(1) Basis of Presentation

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

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

(2) Merger with AT&T

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

F-8
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

<TABLE>
<CAPTION>
Old New
Liberty Liberty
------- -------
amounts in
millions
<S> <C> <C>
Assets:
Cash and cash equivalents.................................. $ 31 5,319
Other current assets....................................... 410 434
Investments in affiliates.................................. 3,971 17,116
Investment in Time Warner.................................. 7,361 7,832
Investment in Sprint....................................... 3,381 3,681
Other investments.......................................... 1,232 1,540
Property and equipment, net................................ 111 125
Intangibles and other assets............................... 389 11,159
------- ------
$16,886 47,206
======= ======
Liabilities and Equity:
Current liabilities........................................ $ 1,051 1,675
Long-term debt............................................. 2,087 1,845
Deferred income taxes...................................... 4,147 9,963
Other liabilities.......................................... 90 19
------- ------
Total liabilities........................................ 7,375 13,502
------- ------
Minority interests in equity of subsidiaries............... 62 39
Stockholder's equity....................................... 9,449 33,665
------- ------
$16,886 47,206
======= ======
</TABLE>

The following table reflects the recapitalization resulting from the AT&T
Merger (amounts in millions):

<TABLE>
<S> <C>
Stockholder's equity of Old Liberty................................ $ 9,449
Purchase accounting adjustments.................................... 24,216
-------
Initial stockholder's equity of New Liberty subsequent to the AT&T
Merger............................................................ $33,665
=======
</TABLE>

The following unaudited condensed results of operations for the years ended
December 31, 1999 and 1998 were prepared assuming the AT&T Merger occurred on
January 1, 1998. These pro forma amounts are not necessarily indicative of
operating results that would have occurred if the AT&T Merger had occurred on
January 1, 1998.

<TABLE>
<CAPTION>
Years ended
December 31,
--------------
1999 1998
------- -----
amounts in
millions
<S> <C> <C>
Revenue...................................................... $ 964 1,359
Net loss..................................................... $(2,201) (306)
</TABLE>

F-9
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(3) Summary of Significant Accounting Policies

Cash and Cash Equivalents

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

Receivables

Receivables are reflected net of an allowance for doubtful accounts. Such
allowance at December 31, 1999 and 1998 was not material.

Program Rights

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

Investments

All marketable equity securities held by the Company are classified as
available-for-sale and are carried at fair value. Unrealized holding gains and
losses on securities classified as available-for-sale are carried net of taxes
as a component of accumulated other comprehensive earnings in stockholder's
equity. Realized gains and losses are determined on a specific-identification
basis.

Other investments in which the ownership interest is less than 20% and are
not considered marketable securities are carried at the lower of cost or net
realizable value. For those investments in affiliates in which the Company's
voting interest is 20% to 50%, the equity method of accounting is generally
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's share of net earnings or losses of the
affiliates as they occur rather then as dividends or other distributions are
received, limited to the extent of the Company's investment in, advances to and
commitments for the investee. The Company's share of net earnings or losses of
affiliates includes the amortization of the difference between the Company's
investment and its share of the net assets of the investee. Recognition of
gains on sales of properties to affiliates accounted for under the equity
method is deferred in proportion to the Company's ownership interest in such
affiliates.

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

Property and Equipment

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

F-10
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Excess Cost Over Acquired Net Assets

Excess cost over acquired net assets consists of the difference between the
cost of acquiring non-cable entities and amounts assigned to their tangible
assets. Such amounts are generally amortized on a straight-line basis over 20
years.

Franchise Costs

Franchise costs generally include the difference between the cost of
acquiring cable companies and amounts allocated to their tangible assets. Such
amounts are amortized on a straight-line basis over 40 years.

Impairment of Long-lived Assets

The Company periodically reviews the carrying amounts of property, plant and
equipment and its intangible assets to determine whether current events or
circumstances warrant adjustments to such carrying amounts. If an impairment
adjustment is deemed necessary, such loss is measured by the amount that the
carrying value of such assets exceeds their fair value. Considerable management
judgment is necessary to estimate the fair value of assets, accordingly, actual
results could vary significantly from such estimates. Assets to be disposed of
are carried at the lower of their financial statement carrying amount or fair
value less costs to sell.

Minority Interests

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

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

Foreign Currency Translation

The functional currency of the Company is the United States ("U.S.") dollar.
The functional currency of the Company's foreign operations generally is the
applicable loacl currency for each foreign subsidiary and foreign equity method
investee. In this regard, the functional currency of certain of the Company's
foreign subsidiaries and foreign equity investees is the Argentine peso, the
United Kingdom ("UK") pound sterling ("(Pounds)" or "pounds"), the French franc
("FF") and the Japanese yen ("(Yen)"). Assets and liabilities of foreign
subsidiaries and foreign equity investees are translated at the spot rate in
effect at the applicable reporting date, and the consolidated statements of
operations and the Company's share of the results of operations of its foreign
equity affiliates are translated at the average exchange rates in effect during
the applicable period. The resulting unrealized cumulative translation
adjustment, net of applicable income taxes, is recorded as a component of
accumulated other comprehensive earnings in stockholder's equity.

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

F-11
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Unless otherwise indicated, convenience translations of foreign currencies
into U.S. dollars are calculated using the applicable spot rate at December 31,
1999, as published in The Wall Street Journal.

Derivative Instruments and Hedging Activities

Liberty has entered into "cashless collar" transactions with respect to
certain securities held by Liberty. The cashless collar provides Liberty with a
put option that gives it the right to require its counterparty to buy
designated shares at a designated price per share and simultaneously provides
the counterparty a call option giving it the right to buy the same number of
shares at a designated price per share.

As Liberty's cashless collars are designated to specific shares of stock held
by Liberty and the changes in the fair value of the cashless collars are
correlated with changes in the fair value of the underlying securities, the
cashless collars function as hedges. Accordingly, changes in the fair value of
the cashless collars designated to specific shares which are accounted for as
available-for-sale securities are reported as a component of comprehensive
earnings (in unrealized gains) along with the changes in the fair value of the
underlying securities.

During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, ("Statement 133"), which is effective for all fiscal
years beginning after June 15, 2000. Statement 133 establishes accounting and
reporting standards for derivative instruments and hedging activities by
requiring that all derivative instruments be reported as assets or liabilities
and measured at their fair values. Under Statement 133, changes in the fair
values of derivative instruments are recognized immediately in earnings unless
those instruments qualify as hedges of the (1) fair values of existing assets,
liabilities, or firm commitments, (2) variability of cash flows of forecasted
transactions, or (3) foreign currency exposure of net investments in foreign
operations. Although the Company's management has not completed its assessment
of the impact of Statement 133 on its consolidated results of operations and
financial position, management does not expect that the impact of Statement 133
will be significant, however, there can be no assurances that the impact will
not be significant.

Revenue Recognition

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

Stock Based Compensation

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

Reclassifications

Certain prior period amounts have been reclassified for comparability with
the 1999 presentation.

F-12
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

(4) Supplemental Disclosures to Consolidated Statements of Cash Flows

Cash paid for interest was $93 million, $32 million, $103 million and $41
million for the ten months ended December 31, 1999, the two months ended
February 28, 1999 and the years ended December 31, 1998 and 1997, respectively.
Cash paid for income taxes during the ten months ended December 31, 1999 and
the two months ended February 28, 1999 was not material. Cash paid for income
taxes during the years ended December 31, 1998 and 1997 was $29 million and $35
million, respectively.

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ---------------------------
Ten months Two months Years ended
ended ended December 31,
December 31, February 28, --------------
1999 1999 1998 1997
------------ ------------ ------ ------
amounts in millions
<S> <C> <C> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired... $122 -- 162 260
Net liabilities assumed......... (13) -- (107) (72)
Debt issued to related parties
and others..................... -- -- -- (128)
Deferred tax asset recorded in
acquisition.................... -- -- -- 14
Minority interest in equity of
acquired subsidiaries.......... -- -- 39 (119)
Excess consideration paid over
carryover basis of net assets
acquired from related party.... -- -- -- 86
Gain in connection with the
issuance of stock by
subsidiary..................... -- -- (2) --
---- --- ------ ------
Cash paid for acquisitions.... $109 -- 92 41
==== === ====== ======
</TABLE>

F-13
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant noncash investing and financing activities are as follows:

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ---------------------------
Ten months Two months Years ended
ended ended December 31,
December 31, February 28, --------------
1999 1999 1998 1997
------------ ------------ ------ ------
amounts in millions
<S> <C> <C> <C> <C>
Exchange of subsidiaries for
limited partnership interest...... $135 -- -- --
==== === ====== =====
Noncash acquisitions of minority
interests in equity of
subsidiaries (note 7):
Fair value of assets............. $-- -- (741) (29)
Deferred tax liability recorded.. -- -- 154 --
Minority interests in equity of
subsidiaries.................... -- -- (185) (1)
Contribution to equity from
related party for acquisitions.. -- -- 772 30
---- --- ------ -----
$-- -- -- --
==== === ====== =====
Common stock received in exchange
for option (note 6)............... $-- -- -- 306
==== === ====== =====
Preferred stock received in
exchange for common stock and note
receivable (note 6)............... $-- -- -- 371
==== === ====== =====
</TABLE>

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

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

F-14
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Liberty ceased to include TV Guide, Inc. ("TV Guide") in its consolidated
financial results and began to account for TV Guide using the equity method of
accounting, effective March 1, 1999 (see note 78). Liberty ceased to include
Flextech p.l.c. ("Flextech") and Cablevision S.A. ("Cablevision") in its
consolidated financial results and began to account for Flextech and
Cablevision using the equity method of accounting, effective January 1, 1997
and October 1, 1997, respectively. The effects of changing the method of
accounting for Liberty's ownership interests in these investments from the
consolidation method to the equity method are summarized below:

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

Liberty has various investments accounted for under the equity method. The
following table includes Liberty's carrying amount and percentage ownership of
the more significant investments in affiliates at December 31, 1999 and the
carrying amount at December 31, 1998:

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------------- ------------
December 31,
December 31, 1999 1998
------------------- ------------
Percentage Carrying Carrying
Ownership Amount Amount
---------- -------- ------------
amounts in millions
<S> <C> <C> <C>
USA Networks, Inc. ("USAI") and related
investments.............................. 21% $ 2,699 1,042
Telewest Communications plc ("Telewest").. 22% 1,996 515
Discovery Communications, Inc.
("Discovery")............................ 49% 3,441 49
TV Guide.................................. 44% 1,732 --
QVC Inc. ("QVC").......................... 43% 2,515 197
Flextech.................................. 37% 727 320
UnitedGlobalCom, Inc.
("UnitedGlobalCom")...................... 10% 505 --
Jupiter Telecommunications Co., Ltd.
("Jupiter").............................. 40% 399 143
Various foreign equity investments (other
than Telewest, Flextech and Jupiter) .... various 1,064 518
Other .................................... various 844 295
------- -----
$15,922 3,079
======= =====
</TABLE>

F-15
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table reflects Liberty's share of earnings (losses) of
affiliates:

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ----------------------------
Ten months Two months Years ended
ended ended December 31,
December 31, February 28, ---------------
1999 1999 1998 1997
------------ ------------ ------- ------
amounts in millions
<S> <C> <C> <C> <C>
USAI and related investments...... $ (20) 10 30 5
Telewest.......................... (222) (38) (134) (145)
Discovery......................... (269) (8) (39) (29)
TV Guide.......................... (46) -- -- --
QVC............................... (11) 13 64 30
Flextech.......................... (41) (5) (21) (16)
Fox/Liberty Networks LLC
("Fox/Liberty Networks")......... (48) (1) (83) --
UnitedGlobalCom................... 23 -- -- --
Jupiter........................... (54) (7) (26) (23)
Other foreign investments......... (113) (15) (99) (80)
Sprint Spectrum Holding Company,
L.P., MinorCo, L.P. and PhillieCo
Partnership I, L.P. (the "PCS
Ventures") (note 6).............. -- -- (629) (493)
Other............................. (103) (15) (65) (34)
----- --- ------- -----
$(904) (66) (1,002) (785)
===== === ======= =====
</TABLE>

Summarized unaudited combined financial information for affiliates is as
follows:

<TABLE>
<CAPTION>
December 31,
--------------
1999 1998
------- ------
amounts in
millions
<S> <C> <C>
Combined Financial Position
Investments................................................. $ 1,415 2,003
Property and equipment, net................................. 8,885 8,147
Other intangibles, net...................................... 19,778 14,395
Other assets, net........................................... 9,207 7,553
------- ------
Total assets.............................................. $39,285 32,098
======= ======
Debt........................................................ $17,210 15,264
Other liabilities........................................... 12,645 11,620
Owners' equity.............................................. 9,430 5,214
------- ------
Total liabilities and equity.............................. $39,285 32,098
======= ======
</TABLE>

F-16
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ----------------------------
Ten months Two months Years ended
ended ended December 31,
December 31, February 28, ---------------
1999 1999 1998 1997
------------ ------------ ------- ------
amounts in millions
<S> <C> <C> <C> <C>
Combined Operations
Revenue................... $10,492 2,341 14,062 6,613
Operating expenses........ (9,066) (1,894) (13,092) (7,163)
Depreciation and
amortization............. (1,461) (353) (2,629) (997)
------- ------ ------- ------
Operating income (loss)... (35) 94 (1,659) (1,547)
Interest expense.......... (886) (281) (1,728) (540)
Other, net................ (151) (127) (166) (469)
------- ------ ------- ------
Net loss................ $(1,072) (314) (3,553) (2,556)
======= ====== ======= ======
</TABLE>

USAI owns and operates businesses in network and television production,
television broadcasting, electronic retailing, ticketing operations, and
internet services. At December 31, 1999, Liberty directly and indirectly held
66.5 million shares of USAI's common stock (as adjusted for a subsequent two-
for-one stock split). Liberty also held shares directly in certain subsidiaries
of USAI which are exchangeable into 79.0 million shares of USAI common stock
(as adjusted for the two-for-one stock split). Liberty's direct ownership of
USAI is currently restricted by Federal Communications Commission ("FCC")
regulations. The exchange of these shares can be accomplished only if there is
a change to existing regulations or if Liberty obtains permission from the FCC.
If the exchange of subsidiary stock into USAI common stock was completed at
December 31, 1999, Liberty would own 145.5 million shares (as adjusted for the
two-for-one stock split) or approximately 21% (on a fully-diluted basis) of
USAI common stock. USAI's common stock had a closing market value of $27.63 per
share (as adjusted for the two-for-one stock split) on December 31, 1999.
Liberty accounts for its investments in USAI and related subsidiaries on a
combined basis under the equity method.

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

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

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

Telewest currently operates and constructs cable television and telephone
systems in the UK. At December 31, 1999 Liberty indirectly owned 506 million of
the issued and outstanding Telewest ordinary shares. The reported closing price
on the London Stock Exchange of Telewest ordinary shares was $5.34 per share at
December 31, 1999.

F-17
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

The Class A common stock of TV Guide is publicly traded. At December 31,
1999, Liberty held 58 million shares of TV Guide Class A common stock (as
adjusted for a two-for-one stock split) and 75 million shares of TV Guide Class
B common stock (as adjusted for a two-for-one stock split). See note 7. The TV
Guide Class B common stock is convertible, one-for-one, into TV Guide Class A
common stock. The closing price for TV Guide Class A common stock was $43.00
per share on December 31, 1999.

Flextech develops and sells a variety of television programming in the UK. At
December 31, 1999, Liberty indirectly owned 58 million Flextech ordinary
shares. The reported closing price on the London Stock Exchange of the Flextech
ordinary shares was $18.58 per share at December 31, 1999.

In April 1997, Flextech and BBC Worldwide Limited ("BBC Worldwide") formed
two separate joint ventures (the "BBC Joint Ventures") and entered into certain
related transactions. The consummation of the BBC Joint Ventures and related
transactions resulted in, among other things, a reduction of Liberty's economic
ownership interest in Flextech from 46.2% to 36.8%. Liberty continues to
maintain a voting interest in Flextech of approximately 50%. As a result of
such dilution, Liberty recorded a $152 million increase to the carrying amount
of Liberty's investment in Flextech, a $53 million increase to deferred income
tax liability, a $66 million increase to additional paid-in-capital and a $33
million increase to minority interests in equity of subsidiaries. No gain was
recognized in the consolidated statement of operations and comprehensive
earnings due primarily to certain contingent obligations of Liberty with
respect to one of the BBC Joint Ventures (see note 14).

Liberty and The News Corporation Limited ("News Corp.") each previously owned
50% of Fox/Liberty Networks which operates national and regional sports
networks. Prior to the first quarter of 1998, Liberty had no obligation, nor
intention, to fund Fox/Liberty Networks. During 1998, Liberty made the
determination to provide funding to Fox/Liberty Networks based on specific
transactions consummated by Fox/Liberty Networks. Consequently, Liberty's share
of losses of Fox/Liberty Networks for the year ended December 31, 1998 included
previously unrecognized losses of Fox/Liberty Networks of approximately $64
million. Losses for Fox/Liberty Networks were not recognized in prior periods
due to the fact that Liberty's investment in Fox/Liberty Networks was less than
zero. During 1999, News Corp. acquired Liberty's 50% interest in Fox/Liberty
Networks (see note 6).

On September 30, 1999, Liberty purchased 9.9 million class B shares of
UnitedGlobalCom for approximately $493 million in cash. UnitedGlobalCom is the
largest global broadband communications provider of video, voice and data
services with operations in over 20 countries throughout the world. At December
31, 1999, Liberty owned an approximate 10% economic ownership interest
representing an approximate 36% voting interest in UnitedGlobalCom. The closing
price for UnitedGlobalCom Class A

F-18
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

common stock was $70.63 per share on December 31, 1999. The UnitedGlobalCom
Class B common stock is convertible, on a one-for-one basis, into
UnitedGlobalCom Class A common stock.

On October 9, 1997, Liberty sold a portion of its 51% interest in Cablevision
to unaffiliated third parties. In connection with such sale and certain related
transactions, Liberty recognized a gain of $49 million. Liberty's equity
interest in Cablevision was 28% at December 31, 1999.

The $13 billion aggregate excess of Liberty's aggregate carrying amount in
its affiliates over Liberty's proportionate share of its affiliates' net assets
is being amortized over estimated useful life of 20 years.

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

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

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

<TABLE>
<CAPTION>
New Liberty Old Liberty
----------- -----------
December 31,
-----------------------
1999 1998
----------- -----------
amounts in millions
<S> <C> <C>
Sprint Corporation ("Sprint")(a)................... $10,186 2,446
Time Warner, Inc. ("Time Warner")(b)............... 8,202 7,083
News Corp.(c)...................................... 2,403 --
General Instrument(d).............................. 3,430 396
Other available-for-sale securities................ 3,765 315
Other investments, at cost, and related
receivables(e).................................... 985 458
------- ------
28,971 10,698
Less short-term investments...................... 378 159
------- ------
28,593 10,539
======= ======
</TABLE>
- --------
(a) Pursuant to a final judgment (the "Final Judgment") agreed to by Liberty,
AT&T and the United States Department of Justice (the "DOJ") on December
31, 1998, Liberty transferred all of its beneficially owned securities (the
"Sprint Securities") of Sprint to a trustee (the "Trustee") prior to the
AT&T Merger. The Final Judgment, which was entered by the United States
District Court for the District of Columbia on August 23, 1999, would
require the Trustee, on or before May 23, 2002, to dispose of a portion of
the Sprint Securities sufficient to cause Liberty to beneficially own no
more than 10% of the outstanding Series 1 PCS Stock of Sprint on a fully
diluted basis on such date. On or before May 23, 2004, the Trustee must
divest the remainder of the Sprint Securities beneficially owned by
Liberty.

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

The PCS Ventures included Sprint Spectrum Holding Company, L. P. and
MinorCo, L.P. (collectively, "Sprint PCS") and PhillieCo Partnership I,
L.P. ("PhillieCo"). The partners of each of the Sprint PCS partnerships
were subsidiaries of Sprint, Comcast Corporation ("Comcast"), Cox
Communications, Inc. ("Cox") and Liberty. The partners of PhillieCo were
subsidiaries of Sprint, Cox and Liberty. Liberty had

F-19
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

a 30% partnership interest in each of the Sprint PCS partnerships and a 35%
partnership interest in PhillieCo.

On November 23, 1998, Liberty, Comcast, and Cox exchanged their respective
interests in Sprint PCS and PhillieCo (the "PCS Exchange") for shares of
Sprint PCS Group Stock, which tracks the performance of Sprint's then newly
created PCS Group (consisting initially of the PCS Ventures and certain PCS
licenses which were separately owned by Sprint). The Sprint PCS Group Stock
collectively represents an approximate 17% voting interest in Sprint. As a
result of the PCS Exchange, Liberty, through the trust established pursuant
to the Final Judgment, holds the Sprint Securities which consists of shares
of Sprint PCS Group Stock, as well as certain additional securities of
Sprint exercisable for or convertible into such securities, representing
approximately 24% of the equity value of Sprint attributable to its PCS
Group and less than 1% of the voting interest in Sprint. Through November
23, 1998, Liberty accounted for its interest in the PCS Ventures using the
equity method of accounting; however, as a result of the PCS Exchange,
Liberty's less than 1% voting interest in Sprint and the Final Judgment,
Liberty no longer exercises significant influence with respect to its
investment in the PCS Ventures. Accordingly, Liberty accounts for its
investment in the Sprint PCS Group Stock as an available-for-sale security.

As a result of the PCS Exchange, Liberty recorded a non-cash gain of $1.9
billion (before deducting deferred income taxes of $647 million) during the
fourth quarter of 1998 based on the difference between the carrying amount
of Liberty's interest in the PCS Ventures and the fair value of the Sprint
Securities received.

In September 1999, a trust for Liberty's benefit entered into a four and
one-half year "cashless collar" with a financial institution with respect
to 35 million shares of Sprint PCS Group Stock (as adjusted for a two-for-
one stock split), secured by 35 million shares of such stock (as adjusted
for a two-for-one stock split). The collar provides the trust with a put
option that gives it the right to require its counterparty to buy 35
million shares of Sprint PCS Group Stock from the trust in five tranches in
approximately four and one-half years for a weighted average price of
$27.62 per share (as adjusted for a two-for-one stock split). Liberty
simultaneously sold a call option giving the counterparty the right to buy
the same shares of stock from the trust in five tranches in approximately
four and one-half years for a weighted average price of $57.42 per share
(as adjusted for a two-for-one stock split).

Additionally, on December 15, 1999, the trust entered into a "cashless
collar" with a financial institution with respect to 18 million shares of
Sprint PCS Group Stock (as adjusted for a two-for-one stock split). The
collar consists of a put option that gives the trust the right to require
its counterparty to buy 18 million shares of Sprint PCS Group Stock (as
adjusted for a two-for-one stock split) from the trust in three tranches in
approximately two years for $50.00 per share (as adjusted for a two-for-one
stock split). The counterparty has a call option giving the counterparty
the right to buy the same shares from the trust in three tranches in
approximately two years for $65.23 per share (as adjusted for a two-for-one
stock split). The put and the call options of each of these collars were
equally priced, resulting in no cash cost to the trust or Liberty.

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

On June 24, 1997, Liberty granted Time Warner an option to acquire the
business of Southern Satellite Systems, Inc. (the "Southern Business") from
Liberty. Liberty received 6.4 million shares of TW Exchange Stock valued at
$306 million in consideration for the grant. Pursuant to the option, Time
Warner acquired the Southern Business, effective January 1, 1998, for $213
million in cash. Liberty recognized a $515 million pre-tax gain in
connection with such transaction in the first quarter of 1998.

F-20
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In March 1999, Liberty entered into a seven-year "cashless collar" with a
financial institution with respect to 15 million shares of Time Warner
common stock, secured by 15 million shares of its TW Exchange Stock. This
cashless collar provides Liberty with a put option that gives it the right
to require its counterparty to buy 15 million Time Warner shares from
Liberty in approximately seven years for $67.45 per share. Liberty
simultaneously sold a call option giving the counterparty the right to buy
the same number of Time Warner shares from Liberty in approximately seven
years for $158.33 per share. The put and the call options were equally
priced, resulting in no cash cost to Liberty.

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

(d) On July 17, 1998, TCI acquired 21.4 million shares of restricted stock of
General Instrument in exchange for (i) certain of the assets of the
National Digital Television Center, Inc.'s ("NDTC") set-top authorization
business, (ii) the license of certain related software to General
Instrument, (iii) a $50 million promissory note from TCI to General
Instrument and (iv) a nine year revenue guarantee from TCI in favor of
General Instrument. In connection therewith, NDTC also entered into a
service agreement pursuant to which it will provide certain postcontract
services to General Instrument's set-top authorization business. Such
shares of General Instrument stock and the promissory note were contributed
to Liberty. The 21.4 million shares of General Instrument common stock
were, in addition to other transfer restrictions, originally restricted as
to their sale by Liberty for a three year period. Liberty recorded its
investment in such shares at fair value which included a discount
attributable to the above-described liquidity restriction. The $396 million
fair value of General Instrument common stock received net of the $42
million present value of the promissory note due from Liberty to General
Instrument, has been reflected as an increase in additional paid-in
capital.

On January 5, 2000, Motorola, Inc. completed the acquisition of General
Instrument through a merger of General Instrument with a wholly owned
subsidiary of Motorola. In the merger, each outstanding share of General
Instrument common stock was converted into the right to receive 0.575
shares of Motorola common stock. In connection with the merger Liberty
received 18 million shares and warrants to purchase 12 million shares of
Motorola common stock in exchange for its holdings in General Instrument.
Subsequent to the merger, the Motorola securities are no longer subject to
the three year restriction and accordingly, Liberty accounted for its
investment in General Instrument as an available-for-sale security at
December 31, 1999. Liberty has agreed not to transfer or encumber the
Motorola securities for a specified period which is less than one year.

Liberty's ability to exercise warrants to purchase 6.1 million shares of
Motorola common stock are subject to AT&T satisfying the terms of a
purchase commitment in 2000. AT&T has agreed to pay Liberty $14.35 for each
warrant that does not vest as a result of the purchase commitment not being
met.

(e) On August 1, 1997, Liberty IFE, Inc., a wholly-owned subsidiary of Liberty,
which held non-voting Class C common stock of International Family
Entertainment, Inc. ("IFE") ("Class C Stock") and $23 million of IFE 6%
convertible secured notes due 2004, convertible into Class C Stock
("Convertible Notes"),

F-21
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

contributed its Class C Stock and Convertible Notes to Fox Kids Worldwide,
Inc. ("FKW") in exchange for a new series of 30 year non-convertible 9%
preferred stock of FKW with a stated value of $345 million. As a result of
the exchange, Liberty recognized a pre-tax gain of approximately $304
million during the third quarter of 1997.

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

<TABLE>
<CAPTION>
New Liberty Old Liberty
----------- -----------
December 31,
-----------------------
1999 1998
----------- -----------
amounts in millions
<S> <C> <C>
Equity securities:
Fair value......................................... $24,464 9,721
Gross unrealized holding gains..................... 11,453 3,998
Gross unrealized holding losses.................... (646) --
Debt securities:
Fair value......................................... $ 1,995 --
Gross unrealized holding losses.................... (22) --
</TABLE>

Management of Liberty estimates the market value, calculated using a variety
of approaches including multiple of cash flow, per subscriber value, a value
of comparable public or private businesses or publicly quoted market prices,
of all of Liberty's investments in available-for-sale securities and others
aggregated $29.2 billion and $11.2 billion at December 31, 1999 and December
31, 1998, respectively. No independent appraisals were conducted for those
assets.

(7) Acquisitions and Dispositions

During July 1997, the 10% minority interest in Encore Media Corporation
("EMC") was purchased by TCI for approximately 2.4 million shares of Liberty
Media Group Series A Stock. Such 10% interest in EMC was simultaneously
contributed to Liberty and was accounted for as an acquisition of a minority
interest and resulted in an increase of $30 million in additional paid-in-
capital.

On January 12, 1998, TCI acquired from a minority shareholder of TV Guide,
formerly named United Video Satellite Group, Inc. ("UVSG"), 49.6 million
shares of UVSG Class A common stock (as adjusted for a two-for-one stock
split) in exchange for shares of TCI stock. The aggregate value assigned to
the shares issued by TCI was based upon the market value of such shares at the
time the transaction was announced. Such transaction was accounted for as an
acquisition of minority interest. Simultaneously, TCI contributed such UVSG
shares of common stock to Liberty. As a result of such transaction, Liberty
increased its ownership in the equity of UVSG to approximately 73% and the
voting power increased to 93%. The purchase price of $346 million in TCI stock
was recorded as an increase in additional paid-in-capital by Liberty.

Effective February 1, 1998, Turner-Vision, Inc. ("Turner Vision")
contributed the assets, obligations and operations of its retail C-band
satellite business to Superstar/Netlink Group LLC ("SNG") in exchange for an
approximate 20% interest in SNG. As a result of such transaction, Liberty's
ownership interest in SNG decreased to approximately 80%. In connection with
the increase in SNG's equity, net of the dilution of Liberty's ownership
interest in SNG, that resulted from such transaction, Liberty recognized a
gain of $38 million (before deducting deferred income taxes of $15 million).
Turner Vision's contribution to SNG was accounted for as a purchase and the
$61 million excess of the purchase price over the fair value of the net assets
acquired was recorded as excess cost and is being amortized over five years.

F-22
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

On November 19, 1998, TCI exchanged, in a merger transaction, 10.1 million
shares of TCI common stock for shares of Tele-Communications International,
Inc. ("TINTA") common stock not beneficially owned by TCI. Such transaction was
accounted for by Liberty as an acquisition of minority interest in equity of
subsidiaries. The aggregate value assigned to the shares issued by TCI was
based upon the market value of the common stock at the time the merger was
announced. In connection with the contribution to Liberty of the TINTA shares
in such merger transaction, Liberty recorded the total purchase price of $426
million as an increase to additional paid-in-capital.

On March 1, 1999, UVSG and News Corp. completed a transaction whereby UVSG
acquired News Corp.'s TV Guide properties, creating a broader platform for
offering television guide services to consumers and advertisers, and UVSG was
renamed TV Guide. News Corp. received total consideration of $1.9 billion
including $800 million in cash, 22.5 million shares of UVSG's Class A common
stock and 37.5 million shares of UVSG's Class B common stock valued at an
average of $18.65 per share. In addition, News Corp. purchased approximately
6.5 million additional shares of UVSG Class A common stock for $129 million in
order to equalize its ownership with that of Liberty. As a result of these
transactions, and another transaction completed on the same date, News Corp,
Liberty and TV Guide's public stockholders own on an economic basis
approximately 44%, 44% and 12%, respectively, of TV Guide. Following such
transactions, News Corp. and Liberty each have approximately 49% of the voting
power of TV Guide's outstanding stock. In connection with the increase in TV
Guide's equity, net of dilution of Liberty's ownership interest in TV Guide,
Liberty recognized a gain of $372 million (before deducting deferred income
taxes of $147 million). Upon consummation, Liberty began accounting for its
interest in TV Guide under the equity method of accounting.

(8) Liberty Digital, Inc.

Effective July 11, 1997, a wholly-owned subsidiary of Liberty Digital (then
named TCI Music) was merged with and into DMX, Inc. with DMX as the surviving
corporation (the "DMX Merger"). As a result of the DMX Merger, stockholders of
DMX became stockholders of TCI Music.

In connection with the DMX Merger, TCI granted to each stockholder who became
a stockholder of TCI Music pursuant to the DMX Merger, one right (a "Right")
with respect to each whole share of TCI Music Series A common stock acquired by
such stockholder in the DMX Merger pursuant to the terms of a Rights Agreement
among TCI, TCI Music and the rights agent (the "Rights Agreement").

Each Right entitled the holder to require TCI to purchase from such holder
one share of TCI Music Series A common stock for $8.00 per share, subject to
reduction by the aggregate amount per share of any dividend and certain other
distributions, if any, made by TCI Music to its stockholders, and, payable at
the election of TCI, in cash, a number of shares of TCI Group Series A stock,
having an equivalent value or a combination thereof, if during the one-year
period beginning on the effective date of the DMX Merger, the price of TCI
Music Series A common stock did not equal or exceed $8.00 per share for a
period of at least 20 consecutive trading days.

Effective with the DMX Merger, TCI beneficially owned approximately 45.7% of
the outstanding shares of TCI Music Series A common stock and 100% of the
outstanding shares of TCI Music Series B common

F-23
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

stock, which represented 89.6% of the equity and 98.7% of the voting power of
TCI Music. Simultaneously with the DMX Merger, Liberty acquired the TCI-owned
TCI Music common stock by agreeing to reimburse TCI for any amounts required to
be paid by TCI pursuant to TCI's contingent obligation under the Rights
Agreement to purchase up to 15 million shares (7 million of which were owned by
Liberty) of TCI Music Series A common stock and issuing an $80 million
promissory note (the "Music Note") to TCI. Liberty recorded its contingent
obligation to purchase such shares under the Rights Agreement as a component of
minority interest in equity of subsidiaries in the accompanying consolidated
financial statements. TCI Music was included in the consolidated financial
results of Liberty as of the date of the DMX Merger. Due to the related party
nature of the transaction, the $86 million excess of the consideration paid
over the carryover basis of the TCI Music common stock acquired by Liberty from
TCI was reflected as a decrease in additional paid-in-capital. The Music Note
was repaid during 1999.

Prior to the July 1998 expiration of the Rights, Liberty was notified of the
tender of 4.9 million shares of TCI Music Series A common stock and associated
Rights. On August 27, 1998, Liberty paid $39 million to satisfy TCI's
obligation under the Rights Agreement. Such transaction was recorded as an
acquisition of minority interest in equity of subsidiaries.

On September 9, 1999, Liberty and TCI Music completed a transaction (the
"Liberty Digital Transaction") pursuant to which Liberty contributed to TCI
Music substantially all of its directly held internet content and interactive
television assets, its rights to provide interactive video services on AT&T's
cable television systems and a combination of cash and notes receivable equal
to $150 million. In exchange, TCI Music issued common stock and convertible
preferred stock to Liberty and was renamed Liberty Digital, Inc.

During 1999, Liberty Digital issued approximately 4.8 million shares of
common stock in connection with the conversion of its preferred stock and
approximately 2.8 million shares of common stock in connection with the
exercise of certain employee stock options. In connection with the increase in
Liberty Digital's equity, net of the dilution of Liberty's interest in Liberty
Digital, that resulted from such stock issuances, Liberty recorded a $102
million increase to additional paid-in-capital.

F-24
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(9) Long-Term Debt

Debt is summarized as follows:

<TABLE>
<CAPTION>
Weighted
average
interest December 31,
rate ------------
1999 1999 1998
-------- ------ -----
amounts in
millions
<S> <C> <C> <C>
Parent company debt:
Bank credit facilities.............................. 5.7% $ 390 116
Senior notes (a).................................... 7.875% 741 --
Senior debentures (a)............................... 8.5% 494 --
Senior exchangeable debentures (b).................. 4.0% 1,022 --
------ -----
2,647 116
Debt of subsidiaries:
Bank credit facilities.............................. 6.2% 573 1,513
Convertible subordinated debentures (note 11)....... -- -- 345
Other debt, at varying rates........................ 57 122
------ -----
630 1,980
------ -----
Total debt.......................................... 3,277 2,096
Less current maturities............................... 554 184
------ -----
Total long-term debt................................ $2,723 1,912
====== =====
</TABLE>
- --------
(a) On July 7, 1999, Liberty received net cash proceeds of approximately $741
million and $494 million from the issuance of 7 7/8% Senior Notes due 2009
(the "Senior Notes") and 8 1/2% Senior Debentures due 2029 (the "Senior
Debentures"), respectively. The Senior Notes, which are stated net of
unamortized discount of $9 million, have an aggregate principal amount of
$750 million and the Senior Debentures, which are stated net of unamortized
discount of $6 million, have an aggregate principal amount of $500 million.
Interest on the Senior Notes and the Senior Debentures is payable on
January 15 and July 15 of each year. The proceeds were used to repay
outstanding borrowings under certain of Liberty's credit facilities, which
were subsequently canceled.

(b) On November 16, 1999, Liberty received net cash proceeds of $854 million
from the issuance of 4% Senior Exchangeable Debentures due 2030. The
exchangeable debentures have an aggregate principal amount of $869 million.
Each debenture has a $1,000 face amount and is exchangeable at the holder's
option for the value of 22.9486 shares of Sprint PCS Group Stock (as
adjusted for a two-for-one stock split). This amount will be paid only in
cash until the later of December 31, 2001 and the date the direct and
indirect ownership level of Sprint PCS Group Stock owned by Liberty falls
below a designated level, after which at Liberty's election, Liberty may
pay the amount in cash, Sprint PCS Group Stock or a combination thereof.
Interest on these exchangeable debentures is payable on May 15 and November
15 of each year. The carrying amount of the exchangeable debentures in
excess of the principal amount (the "Contingent Portion) is based on the
fair value of the underlying Sprint PCS Group Stock. The increase or
decrease in the Contingent Portion is recorded as an increase or decrease
to interest expense in the consolidated statement of operations and
comprehensive earnings.

At December 31, 1999, Liberty had approximately $160 million in unused lines
of credit under its bank credit facilities. The bank credit facilities of
Liberty generally contain restrictive covenants which require, among other
things, the maintenance of certain financial ratios, and include limitations on
indebtedness, liens,

F-25
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

encumbrances, acquisitions, dispositions, guarantees and dividends. Liberty was
in compliance with its debt covenants at December 31, 1999. Additionally,
Liberty pays fees ranging from .15% to .375% per annum on the average
unborrowed portions of the total amounts available for borrowings under bank
credit facilities.

The U.S. dollar equivalent of the annual maturities of Liberty's debt for
each of the next five years are as follows: 2000: $554 million; 2001: $72
million; 2002: $80 million; 2003: $99 million and 2004: $145 million.

Based on quoted market prices, the fair value of Liberty's debt at December
31, 1999 is as follows (amounts in millions):

<TABLE>
<S> <C>
Senior Notes.......................................................... $ 742
Senior Debentures..................................................... 506
4% Senior Exchangeable Debentures..................................... 1,088
</TABLE>

Liberty believes that the carrying amount of the remainder of its debt
approximated its fair value at December 31, 1999.

(10) Income Taxes

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

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

In periods when Liberty generates federal taxable income, AT&T has agreed to
satisfy such tax liability on Liberty's behalf up to a certain amount. The
reduction of such computed tax liabilities will be accounted for by Liberty as
an addition to additional paid-in-capital. The total amount of future federal
tax liabilities of Liberty which AT&T will satisfy under the AT&T Tax Sharing
Agreement is approximately $512 million, which represents the tax effect of the
net operating loss carryforward reflected in TCI's final federal income tax
return, subject to IRS adjustments. Thereafter, Liberty is required to make
cash payments to AT&T for federal tax liabilities of Liberty.

To the extent AT&T utilizes existing net operating losses of Liberty, such
amounts will be accounted for by Liberty as a reduction of additional paid-in-
capital. During the ten month period ending December 31, 1999, AT&T utilized
net operating losses of Liberty with a tax effected carrying value of $88
million.

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

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

F-26
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Liberty's obligation under the 1995 TCI Tax Sharing Agreement of
approximately $139 million (subject to adjustment), which is included in "due
to related parties," shall be paid at the time, if ever, that Liberty
deconsolidates from the AT&T income tax return. Liberty's receivable under the
1997 TCI Tax Sharing Agreement of approximately $220 million was forgiven in
the AT&T Tax Sharing Agreement and recorded as an adjustment to additional
paid-in-capital by Liberty in connection with the AT&T Merger.

Income tax benefit (expense) consists of:

<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
amounts in millions
<S> <C> <C> <C>
Ten months ended December 31, 1999:
State and local income tax (expense) benefit,
including intercompany tax allocation........... $ (3) 152 149
Federal income tax benefit, including
intercompany tax allocation..................... 75 873 948
---- ----- -----
$ 72 1,025 1,097
==== ===== =====
----------------------------------------------------------------------------
Two months ended February 28, 1999:
State and local income tax expense, including
intercompany tax allocation..................... $-- (44) (44)
Federal income tax benefit (expense), including
intercompany tax allocation..................... 1 (168) (167)
---- ----- -----
$ 1 (212) (211)
==== ===== =====
Year ended December 31, 1998:
State and local income tax expense, including
intercompany tax allocation..................... $ (4) (109) (113)
Federal income tax benefit (expense), including
intercompany tax allocation..................... 89 (437) (348)
---- ----- -----
$ 85 (546) (461)
==== ===== =====
Year ended December 31, 1997:
State and local income tax expense, including
intercompany tax allocation..................... $ (3) (25) (28)
Federal income tax benefit, including
intercompany tax allocation..................... 189 14 203
---- ----- -----
$186 (11) 175
==== ===== =====
</TABLE>

F-27
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ---------------------------
Ten months Two months Years ended
ended ended December 31,
December 31, February 28, --------------
1999 1999 1998 1997
------------ ------------ ------ ------
amounts in millions
<S> <C> <C> <C> <C>
Computed expected tax benefit
(expense)........................ $1,075 (49) (379) 226
Dividends excluded for income tax
purposes......................... 11 2 13 8
Minority interest in equity of
subsidiaries..................... 32 -- (5) 4
Amortization not deductible for
income tax purposes.............. (122) (4) (21) (10)
State and local income taxes, net
of federal income taxes.......... 97 (29) (74) (18)
Recognition of difference in
income tax basis of investments
in subsidiaries.................. -- (130) -- (25)
Other, net........................ 4 (1) 5 (10)
------ ---- ------ -----
$1,097 (211) (461) 175
====== ==== ====== =====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1999 and 1998 are presented below:

<TABLE>
<CAPTION>
New Liberty Old Liberty
----------- -----------
December 31,
-----------------------
1999 1998
----------- -----------
amounts in millions
<S> <C> <C>
Deferred tax assets:
Net operating and capital loss carryforwards...... $ 43 99
Future deductible amount attributable to accrued
stock compensation and deferred compensation..... 749 218
Other future deductible amounts due principally to
non-deductible accruals.......................... 37 33
------- -----
Deferred tax assets............................... 829 350
Less valuation allowance.......................... 50 42
------- -----
Net deferred tax assets........................... 779 308
------- -----
Deferred tax liabilities:
Investments in affiliates, due principally to the
application of purchase accounting and losses of
affiliates recognized for income tax purposes in
excess of losses recognized for financial
statement purposes............................... 13,912 3,637
Intangibles, principally due to differences in
amortization..................................... 200 3
Other, net........................................ 20 34
------- -----
Deferred tax liabilities.......................... 14,132 3,674
------- -----
Net deferred tax liabilities........................ $13,353 3,366
======= =====
</TABLE>

At December 31, 1999, Liberty had net operating and capital loss
carryforwards for income tax purposes aggregating approximately $94 million
which, if not utilized to reduce taxable income in future periods, will

F-28
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

expire as follows: 2004: $18 million; 2005: $14 million; 2006: $14 million;
2007: $13 million; 2008: $12 million; and $23 million between 2009 and 2010.
These net operating losses are subject to certain rules limiting their usage.

(11) Stockholder's Equity

Preferred Stock

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

Common Stock

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

As of December 31, 1999, all of the issued and outstanding common stock of
Liberty was held by AT&T.

Transactions with Officers and Directors

In connection with the AT&T Merger, Liberty paid two of its directors and one
other individual, all three of whom were directors of TCI, an aggregate of $12
million for services rendered in connection with the AT&T Merger. Such amount
is included in operating, selling, general and administrative expenses for the
two months ended February 28, 1999 in the accompanying consolidated statements
of operations and comprehensive earnings.

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

F-29
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Transactions with AT&T (formerly transactions with TCI) and Other Related
Parties

Certain AT&T corporate general and administrative costs are charged to
Liberty at rates set at the beginning of the year based on projected
utilization for that year. Management believes this allocation method is
reasonable. During the ten months ended December 31, 1999, the two months ended
February 28, 1999 and the years ended December 31, 1998 and 1997 Liberty was
allocated less than $1 million, $2 million, $13 million and $13 million,
respectively, in corporate general and administrative costs by AT&T. These
costs are included in charges from related parties in the accompanying
consolidated statements of operations and comprehensive earnings.

Subsidiaries of Liberty lease satellite transponder facilities from a
subsidiary of AT&T. Charges for such arrangements and other related operating
expenses for the ten months ended December 31, 1999, two months ended February
28, 1999 and the years ended December 31, 1998 and 1997 aggregated $20 million,
$4 million, $25 million and $65 million, respectively, and are included in
charges from related parties in the accompanying consolidated statements of
operations and comprehensive earnings.

During 1999, 1998 and 1997, Liberty made marketing support payments to AT&T.
Charges by AT&T for such arrangements for the ten months ended December 31,
1999, the two months ended February 28, 1999 and the years ended December 31,
1998 and 1997 aggregated $4 million, less than $1 million, $5 million and $19
million, respectively, and are included in charges from related parties in the
accompanying consolidated statements of operations and comprehensive earnings.

The Puerto Rico Subsidiary purchases programming services from AT&T. The
charges, which approximate AT&T's cost and are based on the aggregate number of
subscribers served by the Puerto Rico Subsidiary, aggregated $6 million and $1
million during the ten months ended December 31, 1999, the two months ended
February 28, 1999, respectively, and $6 million for each of the years ended
December 31, 1998 and 1997, and are included in operating expenses in the
accompanying consolidated statements of operations and comprehensive earnings.

In connection with the AT&T Merger, warrants to buy 3 million shares of
common stock of CSG Systems International, Inc. ("CSG") and related
registration rights were transferred to Liberty. On April 13, 1999, AT&T
purchased these warrants from Liberty for an aggregate purchase price of $75
million along with the related registration rights. The vesting of the CSG
warrants is contingent on AT&T meeting certain subscriber commitments to CSG.
If any warrants do not vest, Liberty must repurchase the unvested warrants from
AT&T, with interest at 6% from April 12, 1999. Accordingly, Liberty has
recorded the unvested CSG warrants as deferred income until such time as the
CSG warrants vest.

On April 8, 1999, Liberty redeemed all of its outstanding 4 1/2% convertible
subordinated debentures due February 15, 2005. The debentures were convertible
into shares of AT&T Liberty Media Group Class A tracking stock at a conversion
price of $23.54, or 42.48 shares per $1,000 principal amount. Certain holders
of the debentures had exercised their rights to convert their debentures and
14.6 million shares of AT&T Liberty Media Group tracking stock were issued to
such holders. In connection with such issuance of AT&T Liberty Media Group
tracking stock, Liberty recorded an increase to additional paid-in-capital of
$354 million.

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

Cablevision purchases programming services from certain Liberty affiliates.
The related charges generally are based upon the number of Cablevision's
subscribers that receive the respective services. During the year

F-30
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ended December 31, 1997, such charges aggregated $12 million. Additionally,
certain of Cablevision's general and administrative functions are provided by
Liberty. The related charges, which generally are based upon the respective
affiliate's cost of providing such functions, aggregated $2 million during the
year ended December 31, 1997. The above-described programming and general and
administrative charges were included in operating costs in the accompanying
consolidated statements of operations and comprehensive earnings.

During July 1997, AT&T entered into a 25 year affiliation agreement with
Starz Encore Group (the "EMG Affiliation Agreement") pursuant to which AT&T
will pay monthly fixed amounts in exchange for unlimited access to all of the
existing Encore and STARZ! services.

Liberty Digital and AT&T entered into an Amended and Restated Contribution
Agreement to be effective as of July 11, 1997 which provides, among other
things, for AT&T to deliver, or cause certain of its subsidiaries to deliver to
Liberty Digital fixed monthly payments (subject to inflation and other
adjustments) through 2017.

During the third quarter of 1997, Liberty sold certain assets (the "SUMMITrak
Assets") to CSG for cash consideration of $106 million, plus five-year warrants
to purchase up to 1.5 million shares of CSG common stock at $24 per share and
$12 million in cash, once certain numbers of TCI affiliated customers are being
processed on a CSG billing system. In connection with the sale of the SUMMITrak
Assets, TCI committed to purchase billing services from CSG through 2012. In
light of such commitment, Liberty has reflected the $30 million excess (after
deducting deferred income taxes of $17 million) of the cash received over the
book value of the SUMMITrak Assets as an increase to additional paid-in-
capital.

During the fourth quarter of 1997, Liberty's remaining assets in TCI
SUMMITrak of Texas, Inc. and TCI SUMMITrak L.L.C. were transferred to TCI in
exchange for a $19 million reduction of the amount owed by Liberty to TCI. Such
transfer was accounted for at historical cost due to the related party nature
of the transaction.

Due to Related Parties

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

<TABLE>
<CAPTION>
New Liberty Old Liberty
----------- -----------
December 31,
-----------------------
1999 1998
----------- -----------
amounts in millions
<S> <C> <C>
Notes payable to TCI, including accrued interest... $-- 141
Intercompany account............................... 27 269
---- ---
$ 27 410
==== ===
</TABLE>

The non-interest bearing intercompany account includes certain stock
compensation allocations (in Old Liberty) and income tax allocations that are
to be settled at some future date. Stock compensation liabilities of New
Liberty are classified as a separate component of current liabilities. All
other amounts included in the intercompany account are to be settled within
thirty days following notification.

Amounts outstanding at December 31, 1998 under notes payable to TCI had
varying rates of interest. During the second quarter of 1998, TCI made a
contribution to Liberty of $5 million, which was used to reduce the amount due
under the Music Note.

F-31
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(12) Stock Options and Stock Appreciation Rights

Certain officers and other key employees of Liberty had been granted
restricted stock awards and/or options with tandem stock appreciation rights
("SARs") to acquire certain series of TCI stock. In connection with the AT&T
Merger, all series of TCI stock were converted to classes of AT&T stock. As a
result of the AT&T Merger, each stock option and SAR to purchase TCI Group
Series A tracking stock was converted into a stock option and SAR to purchase
0.7757 of a share of AT&T common stock at an exercise price divided by 0.7757,
each stock option and SAR to purchase TCI Ventures Group Series A tracking
stock was converted into a stock option and SAR to purchase 0.52 of a share of
AT&T Liberty Media Group Class A tracking stock at an exercise price divided by
0.52 and each option and SAR to purchase Liberty Media Group Series A tracking
stock was converted into a stock option and SAR to purchase one share of AT&T
Liberty Media Group Class A tracking stock at an unchanged exercise price.
Certain officers and employees of Liberty hold options with tandem SARs to
acquire AT&T common stock and AT&T Liberty Media Group Class A tracking stock
as well as restricted stock awards of AT&T common stock and AT&T Liberty Media
Group Class A tracking stock. Estimates of compensation relating to SARs
granted to such employees of Liberty have been recorded in the accompanying
consolidated financial statements pursuant to APB Opinion No. 25. Such
estimates are subject to future adjustment based upon vesting of the related
stock options and SARs and the market value of AT&T common stock and AT&T
Liberty Media Group Class A tracking stock and, ultimately, on the final
determination of market value when the rights are exercised. Had Liberty
accounted for its stock based compensation pursuant to the fair value based
accounting method in Statement 123, the amount of compensation would not have
been significantly different from what has been reflected in the accompanying
consolidated financial statements due to substantially all of Liberty's stock
option plans having tandem SARs, which are treated as liabilities for financial
statement purposes and require periodic remeasurement under both APB Opinion
No. 25 and Statement 123. The following descriptions of stock options and/or
SARs have been adjusted to reflect the AT&T Merger and any subsequent stock
splits.

F-32
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

<TABLE>
<CAPTION>
AT&T Liberty
AT&T Media Group
common Class A
stock WAEP stock WAEP
------ ----- ------------ ------
amounts in thousands, except for
WAEP
<S> <C> <C> <C> <C>
Outstanding at January 1, 1997............ 8,033 $9.14 18,836 $19.62
Adjustment for TCI Ventures Exchange.... (2,500) 12.27 4,470 7.43
Adjustment for transfer of employees.... 265 10.38 (8) 46.73
Granted................................. 692 12.93 2,495 8.96
Exercised............................... (2,827) 8.43 (1,469) 10.71
Canceled................................ (35) 9.24 (46) 21.34
------ ------
Outstanding at December 31, 1997.......... 3,628 10.38 24,278 16.84
Granted................................. 137 22.10 16,681 86.22
Exercised............................... (1,549) 8.90 (4,769) 13.25
Canceled................................ (27) 12.82 (23) 8.79
------ ------
Outstanding at December 31, 1998.......... 2,189 12.06 36,167 49.32
Granted................................. -- -- 69 32.72
Exercised............................... (316) 11.65 (3,755) 10.03
Adjustment for transfer of employees.... (1,140) 8.14 (579) 13.39
------ ------
Outstanding at December 31, 1999.......... 733 13.23 31,902 13.89
====== ======
Exercisable at December 31, 1999.......... 389 14,341
====== ======
Vesting period.......................... 5 yrs 5yrs
</TABLE>

On November 2, 1999, the Company granted 500,000 free-standing SARs to an
officer of the Company. The SARs vest and become exercisable ratably over a
five-year term, commencing on each anniversary of the date of the grant. The
SARs expire on November 2, 2009, subject to earlier termination in certain
events. Upon the valid exercise of SARs, the officer shall be entitled to
receive from Liberty cash equal to the excess of the fair value of each share
of AT&T Class A Liberty Media Group tracking stock with respect to which such
SARs have been exercised over $37.25 per share.

On December 16, 1997, the Company granted options in tandem with SARs to
acquire 2,912,000 shares of AT&T Liberty Media Group Class B tracking stock to
an officer and director of the Company. The options in tandem with SARs have an
exercise price of $9.97 and vest ratably over five years with such vesting
period beginning December 16, 1997, first became exercisable on December 16,
1998 and expire on December 16, 2007.

Liberty Digital, Inc. Stock Incentive Plan. During 1997, 1998 and 1999,
Liberty Digital granted stock options with tandem SARs to employees under the
Liberty Digital 1997 Stock Inventive Plan ( the "Stock Plan") which is
authorized to issue up to 4,000,000 shares. Options granted under the Stock
Plan expire ten years from the date of grant. In addition, Liberty Digital
granted stock options with tandem SARs to the board of directors and employees
in connection with the DMX Merger. Options issued under the Stock Plan and in
connection with the DMX Merger vest annually in 20% cumulative increments.

On December 11, 1998, Liberty Digital re-priced the stock options with tandem
SARs at $4.00 for all grants to executive officers and employees of Liberty
Digital and its subsidiaries.

F-33
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table presents the number and WAEP of options in tandem with
SARs to purchase Liberty Digital Series A Common Stock, for 1997, 1998 and
1999.

<TABLE>
<CAPTION>
Liberty Digital
Stock Options
Tandem SARs WAEP
--------------- -----
amounts in millions,
except for WAEP
<S> <C> <C>
Outstanding at July 1, 1997
Granted............................................. 3,609 $5.75
------
Outstanding at December 31, 1997...................... 3,609 5.75
Granted............................................. 1,771 4.00
Exercised........................................... (21) 4.00
Canceled............................................ (311) 4.00
------
Outstanding at December 31, 1998...................... 5,048 5.25
Granted............................................. 1,038 10.10
Exercised........................................... (2,708) 5.60
Canceled............................................ (864) 4.00
------
Outstanding at December 31, 1999...................... 2,514 7.32
======
Exercisable at December 31, 1999...................... 563
======
</TABLE>

Exercise prices for options outstanding at the end of year for 1999, 1998 and
1997 ranged from $4.00 to $22.13, $4.00 to $6.25, and $5.75, respectively. The
1999, 1998, and 1997 year-end weighted average remaining contractual life of
such options is 8.2 years, 8.7 years and 9.5 years, respectively.

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

There are 19,295,193 shares subject to this plan all of which were granted in
1999 at an effective exercise price of $2.46 and a weighted average remaining
life of 4 years at year end. The deferred compensation and SARs components vest
20% annually beginning with the first vesting date of December 15, 1999. Fully
vested options total 3,859,038 at year-end. No options were exercised,
cancelled or expired during 1999. This plan terminates on December 15, 2003.

F-34
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(13) Other Comprehensive Earnings

Accumulated other comprehensive earnings included in Liberty's consolidated
balance sheets and consolidated statements of stockholder's equity reflect the
aggregate of foreign currency translation adjustments and unrealized holding
gains and losses on securities classified as available-for-sale. The change in
the components of accumulated other comprehensive earnings, net of taxes, is
summarized as follows:

<TABLE>
<CAPTION>
Accumulated
Foreign other
currency Unrealized comprehensive
translation gains on earnings, net
adjustments securities of taxes
----------- ---------- -------------
amounts in millions
<S> <C> <C> <C>
Balance at January 1, 1997............. $ 26 17 43
Other comprehensive earnings (loss).... (23) 747 724
---- ----- -----
Balance at December 31, 1997........... 3 764 767
Other comprehensive earnings........... 2 2,417 2,419
---- ----- -----
Balance at December 31, 1998........... 5 3,181 3,186
Other comprehensive earnings (loss).... (15) 885 870
---- ----- -----
Balance at February 28, 1999........... $(10) 4,066 4,056
==== ===== =====
-----------------------------------------------------------------------------
Balance at March 1, 1999............... $-- -- --
Other comprehensive earnings........... 60 6,458 6,518
---- ----- -----
Balance at December 31, 1999........... $ 60 6,458 6,518
==== ===== =====
</TABLE>

F-35
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The components of other comprehensive earnings are reflected in Liberty's
consolidated statements of operations and comprehensive earnings, net of taxes
and reclassification adjustments for gains realized in net earnings (loss). The
following table summarizes the tax effects and reclassification adjustments
related to each component of other comprehensive earnings.

<TABLE>
<CAPTION>
Tax
Before-tax (expense) Net-of-tax
amount benefit amount
---------- --------- ----------
amounts in millions
<S> <C> <C> <C>
Ten months ended December 31, 1999:
Foreign currency translation adjustments....... $ 99 (39) 60
------- ------ -----
Unrealized gains on securities:
Unrealized holding gains arising during
period...................................... 10,671 (4,220) 6,451
Less: reclassification adjustment for losses
realized in net loss........................ 12 (5) 7
------- ------ -----
Net unrealized gains......................... 10,683 (4,225) 6,458
------- ------ -----
Other comprehensive earnings................... $10,782 (4,264) 6,518
======= ====== =====
- -------------------------------------------------------------------------------
Two months ended February 28, 1999:
Foreign currency translation adjustments....... $ (25) 10 (15)
Unrealized gains on securities:
Unrealized holding gains arising during
period...................................... 1,464 (579) 885
------- ------ -----
Other comprehensive earnings................... $ 1,439 (569) 870
======= ====== =====
Year ended December 31, 1998:
Foreign currency translation adjustments....... $ 3 (1) 2
Unrealized gains on securities:
Unrealized holding gains arising during
period...................................... 3,998 (1,581) 2,417
------- ------ -----
Other comprehensive earnings................... $ 4,001 (1,582) 2,419
======= ====== =====
Year ended December 31, 1997:
Foreign currency translation adjustments....... $ (38) 15 (23)
Unrealized gains on securities:
Unrealized holding gains arising during
period...................................... 1,236 (489) 747
------- ------ -----
Other comprehensive earnings................... $ 1,198 (474) 724
======= ====== =====
</TABLE>

(14) Commitments and Contingencies

Starz Encore Group, a wholly owned subsidiary of Liberty, provides premium
programming distributed by cable, direct satellite, TVRO and other distributors
throughout the United States. Starz Encore Group is obligated to pay fees for
the rights to exhibit certain films that are released by various producers
through 2017 (the "Film Licensing Obligations"). Based on customer levels at
December 31, 1999, these agreements require minimum payments aggregating
approximately $900 million. The aggregate amount of the Film Licensing
Obligations under these license agreements is not currently estimable because
such amount is dependent upon the number of qualifying films released
theatrically by certain motion picture studios as well as the domestic
theatrical exhibition receipts upon the release of such qualifying films.
Nevertheless, required aggregate payments under the Film Licensing Obligations
could prove to be significant.

Flextech has undertaken to finance the working capital requirements of a
joint venture (the "Principal Joint Venture") formed with BBC Worldwide, and is
obligated to provide the Principal Joint Venture with a

F-36
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

primary credit facility of (Pounds)88 million and, subject to certain
restrictions, a standby credit facility of (Pounds)30 million. As of December
31, 1999, the Principal Joint Venture had borrowed (Pounds)53 million under the
primary credit facility. If Flextech defaults in its funding obligation to the
Principal Joint Venture and fails to cure within 42 days after receipt of
notice from BBC Worldwide, BBC Worldwide is entitled, within the following 90
days, to require that Liberty assume all of Flextech's funding obligations to
the Principal Joint Venture.

Liberty has guaranteed various loans, notes payable, letters of credit and
other obligations (the "Guaranteed Obligations") of certain affiliates. At
December 31, 1999, the Guaranteed Obligations aggregated approximately $655
million. Currently, Liberty is not certain of the likelihood of being required
to perform under such guarantees.

Liberty leases business offices, has entered into pole rental and transponder
lease agreements and uses certain equipment under lease arrangements. Rental
expense under such arrangements amounts to $30 million, $9 million, $27 million
and $20 million for the ten months ended December 31, 1999, the two months
ended February 28, 1999 and the years ended December 31, 1998 and 1997,
respectively.

A summary of future minimum lease payments under noncancelable operating
leases as of December 31, 1999 follows (amounts in millions):

<TABLE>
<S> <C>
Years ending December 31:
2000.............................................................. $21
2001.............................................................. 18
2002.............................................................. 16
2003.............................................................. 16
2004.............................................................. 13
Thereafter........................................................ 21
</TABLE>

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

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

(15) Information about Liberty's Operating Segments

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

For the ten months ended December 31, 1999, Liberty had three operating
segments: Starz Encore Group, Liberty Digital and Other. Starz Encore Group
owns and operates cable and satellite-delivered premium movie networks in the
United States. Starz Encore Group is wholly owned and consolidated by Liberty.
Liberty Digital is primarily engaged in programming, distributing and marketing
a digital music service delivered to homes and businesses. Liberty Digital is
majority owned and consolidated by Liberty. Other includes Liberty's

F-37
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

investments, primarily in cable television programming entities, corporate and
other consolidated businesses not representing separately reportable segments.

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

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

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

<TABLE>
<CAPTION>
Starz
Encore Liberty
Group Digital Other Total
------ ------- ------ ------
amounts in millions
<S> <C> <C> <C> <C>
Ten months ended December 31, 1999
Segment revenue from external customers
including intersegment revenue................. $ 539 66 124 729
Segment operating cash flow..................... 124 4 5 133
- ------------------------------------------------------------------------------
Two months ended February 28, 1999
Segment revenue from external customers
including intersegment revenue................. $ 101 15 119 235
Segment operating cash flow..................... 41 1 5 47
Year ended December 31, 1998
Segment revenue from external customers
including intersegment revenue................. 541 86 732 1,359
Segment operating cash flow..................... 96 1 119 216
Year ended December 31, 1997
Segment revenue from external customers
including intersegment revenue................. 350 23 852 1,225
Segment operating cash flow (deficit)........... (32) 9 182 159
As of December 31, 1999
Segment assets.................................. 2,636 1,728 54,286 58,650
Investments in affiliates....................... -- -- 15,922 15,922
As of December 31, 1998
Segment assets.................................. 355 200 15,228 15,783
Investments in affiliates....................... -- -- 3,079 3,079
</TABLE>

F-38
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ -------------------------
Year ended
Ten months Two months December
ended ended 31,
December 31, February 28, ------------
1999 1999 1998 1997
------------ ------------ ------ ----
(amounts in millions)
<S> <C> <C> <C> <C>
Segment operating cash flow........ $ 133 47 216 159
Stock compensation................. (1,785) (183) (518) (296)
Depreciation and amortization...... (562) (22) (129) (123)
Interest expense, including amounts
to related parties................ (288) (26) (113) (55)
Segment equity in losses of
affiliates........................ (904) (66) (1,002) (785)
Gains on dispositions, net......... 4 14 2,449 406
Gain on issuance of equity by
affiliates and subsidiaries....... -- 372 105 --
Other, net......................... 330 5 75 49
------- ---- ------ ----
Earnings (loss) before income
taxes............................. $(3,072) 141 1,083 (645)
======= ==== ====== ====
</TABLE>

(16) Quarterly Financial Information (Unaudited)

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

<TABLE>
<CAPTION>
Old Liberty
-------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
amounts in millions
<S> <C> <C> <C> <C>
1998:
Revenue.................................... $ 313 334 358 354
===== ==== ==== ====
Operating income (loss).................... $(135) (92) 39 (243)
===== ==== ==== ====
Net earnings (loss)........................ $ 126 (251) (135) 882
===== ==== ==== ====
</TABLE>

F-39
<PAGE>

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

$1,000,000,000

[LOGO OF LIBERTY MEDIA CORPORATION]

Liberty Media Corporation

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

OFFER TO EXCHANGE

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

$1,000,000,000
8 1/4% Senior Debentures due 2030
for
any and all of its
outstanding unregistered
8 1/4% Senior Debentures due 2030

Prospectus

The Bank of New York, as Exchange Agent
101 Barclay Street
New York, New York 10286

May 4, 2000

---------------------------------------------------------------------------
---------------------------------------------------------------------------
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law ("DGCL") provides,
generally, that a corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (except actions by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation against all expenses,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. A corporation may similarly indemnify
such person for expenses actually and reasonably incurred by such person in
connection with the defense or settlement of any action or suit by or in the
right of the corporation, provided such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, in the case of claims, issues and matters as
to which such person shall have been adjudged liable to the corporation,
provided that a court shall have determined, upon application, that, despite
the adjudication of liability but in view of all of the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.

Section 102(b)(7) of the DGCL provides, generally, that the certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision may not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under section 174
of Title 8 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. No such provision
may eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision became effective.

Article V, Section E of the Restated Certificate of Incorporation, as amended
("Liberty Charter"), of Liberty Media Corporation, a Delaware corporation
("Liberty"), provides as follows:

"1.Limitation on Liability.

To the fullest extent permitted by the DGCL as the same exists or
may hereafter be amended, a director of the Corporation shall not be
liable to the Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or
modification of this subparagraph 1 shall be prospective only and shall
not adversely affect any limitation, right or protection of a director
of the Corporation existing at the time of such repeal or modification.

2.Indemnification.

(a) Right to Indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "proceeding") by reason of the fact that he, or a
person for whom he is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, limited liability company, joint
venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against

II-1
<PAGE>

all liability and loss suffered and expenses (including attorneys'
fees) reasonably incurred by such person. Such right of indemnification
shall inure whether or not the claim asserted is based on matters which
antedate the adoption of this Section E. The Corporation shall be
required to indemnify a person in connection with a proceeding (or part
thereof) initiated by such person only if the proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.

(b) Prepayment of Expenses. The Corporation shall pay the expenses
(including attorneys' fees) incurred by a director or officer in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a director or officer
in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this
subparagraph 2 or otherwise.

(c) Claims. If a claim for indemnification or payment of expenses
under this subparagraph 2 is not paid in full within 60 days after a
written claim therefor has been received by the Corporation, the
claimant may file suit to recover the unpaid amount of such claim and,
if successful in whole or in part, shall be entitled to be paid the
expense of prosecuting such claim. In any such action the Corporation
shall have the burden of proving that the claimant was not entitled to
the requested indemnification or payment of expenses under applicable
law.

(d) Non-Exclusivity of Rights. The rights conferred on any person by
this subparagraph 2 shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision
of this Certificate, the Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.

(e) Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a
director, officer, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust,
enterprise or nonprofit entity shall be reduced by any amount such
person may collect as indemnification from such other corporation,
partnership, limited liability company, joint venture, trust,
enterprise or nonprofit entity.

3.Amendment or Repeal.

Any repeal or modification of the foregoing provisions of this
Section E shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the
time of such repeal or modification."

Item 21. Exhibits and Financial Statement Schedules

(a) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement:

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

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

4.1 Indenture dated as of July 7, 1999, between Liberty and The Bank of
New York (incorporated by reference to Exhibit 4.1 to the Liberty S-4
Registration Statement).

4.2 Third Supplemental Indenture dated as of February 2, 2000, between
Liberty and The Bank of New York (incorporated by reference to
Exhibit 4.8 to the Annual Report on Form 10-K of Liberty Media
Corporation for the year ended December 31, 1999, as files on March
27, 2000 (the "Liberty 10-K").

</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
Exhibits Description
-------- -----------
<C> <S>
4.3 Registration Rights Agreement dated as of February 2, 2000, among
Liberty, Lehman Brothers Inc. and Salomon Smith Barney Inc.
(incorporated by reference to Exhibit 4.9 to the Liberty 10-K).

4.4 Form of 8 1/4% Senior Debenture due 2030 (incorporated by reference
to Exhibit 4.10 to the Liberty 10-K).

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

Opinion of Baker Botts L.L.P. with respect to legality of debentures
5 being registered.

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

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

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

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

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

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

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

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

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

</TABLE>

II-3
<PAGE>

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

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

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

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

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

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

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

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

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

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

</TABLE>

II-4
<PAGE>

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

10.21 Restated and Amended Employment Agreement dated November 1, 1992,
between Tele-Communications, Inc. and John C. Malone (assumed by
Liberty as of March 9, 1999), and the amendment thereto dated June
30, 1999 and effective as of March 9, 1999, between Liberty and John
C. Malone (incorporated by reference to Exhibit 10.6 to the Liberty
S-4 Registration Statement).
12 Computation of Ratio of Earnings to Fixed Charges.*
21 Subsidiaries of Liberty Media Corporation.*
23.1 Consent of KPMG LLP.
23.2 Consent of Baker Botts L.L.P. (included in Exhibit 5).
24 Powers of Attorney.*
25 Statement of Eligibility of Trustee.*
99.1 Form of Letter of Transmittal with respect to Exchange Offer.*
99.2 Form of Notice of Guaranteed Delivery.*
</TABLE>

- --------

* Previously filed.

(b) Financial Statement Schedules. Schedules not listed above have been
omitted because the information to be set forth therein is not material, not
applicable or is shown in the financial statements or notes thereto.

Item 22. Undertakings

(a) Liberty hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of the prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

II-5
<PAGE>

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

(4) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.

(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
became effective, provided, in the case of a transaction that (but for the
possibility of integration with other transactions) would itself qualify for an
exemption from registration, that (i) such transaction by itself or when
aggregated with other such transactions made since the filing of the most
recent audited financial statements of Liberty would have a material financial
effect upon Liberty and (ii) the information required to be supplied in a post-
effective amendment by this paragraph 6 is not contained in periodic reports
filed by Liberty pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Liberty pursuant to the foregoing provisions or otherwise, Liberty has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Liberty of
expenses incurred or paid by a director, officer or controlling person of
Liberty in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, Liberty will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.

II-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the county of Douglas, state of
Colorado, on May 4, 2000.

LIBERTY MEDIA CORPORATION

/s/ Charles Y. Tanabe
By: _________________________________

Name: Charles Y. Tanabe
Title: Senior Vice President
and General Counsel

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons (which persons
constitute a majority of the Board of Directors) in the capacities and on the
dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
* Chairman of the Board and
______________________________________ Director
John C. Malone

* President, Chief Executive
______________________________________ Officer and Director
Robert R. Bennett (Principal Executive
Officer)

* Executive Vice President,
______________________________________ Chief Operating Officer
Gary S. Howard and Director

Director
______________________________________
Paul A. Gould
</TABLE>

II-7
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
* Director
______________________________________
Jerome H. Kern

Director
______________________________________
John C. Petrillo

* Director
______________________________________
Larry E. Romrell

Director
______________________________________
Daniel E. Somers

Director
______________________________________
John D. Zeglis

* Vice President and
______________________________________ Controller (Principal
Kathryn Scherff Financial Officer and
Principal Accounting
Officer)

*By: /s/ Robert W. Murray Jr. May 4, 2000
______________________________________
Robert W. Murray Jr.
Attorney-in-Fact
</TABLE>

II-8
<PAGE>

EXHIBIT INDEX

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

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

4.1 Indenture dated as of July 7, 1999, between Liberty and The Bank of
New York (incorporated by reference to Exhibit 4.1 to the Liberty S-4
Registration Statement).

4.2 Third Supplemental Indenture dated as of February 2, 2000, between
Liberty and The Bank of New York (incorporated by reference to Exhibit
4.8 to the Annual Report on Form 10-K of Liberty Media Corporation for
the year ended December 31, 1999, as files on March 27, 2000 (the
"Liberty 10-K").

4.3 Registration Rights Agreement dated as of February 2, 2000, among
Liberty, Lehman Brothers Inc. and Salomon Smith Barney Inc.
(incorporated by reference to Exhibit 4.9 to the Liberty 10-K).

4.4 Form of 8 1/4% Senior Debenture due 2030 (incorporated by reference to
Exhibit 4.10 to the Liberty 10-K).

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

Opinion of Baker Botts L.L.P. with respect to legality of debentures
5 being registered.

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

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

</TABLE>

<PAGE>

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

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

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

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

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

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

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

</TABLE>

<PAGE>

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

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

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

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

10.21 Restated and Amended Employment Agreement dated November 1, 1992,
between Tele-Communications, Inc. and John C. Malone (assumed by
Liberty as of March 9, 1999), and the amendment thereto dated June 30,
1999 and effective as of March 9, 1999, between Liberty and John C.
Malone (incorporated by reference to Exhibit 10.6 to the Liberty S-4
Registration Statement).
12 Computation of Ratio of Earnings to Fixed Charges.*
21 Subsidiaries of Liberty Media Corporation.*
23.1 Consent of KPMG LLP.
23.2 Consent of Baker Botts L.L.P. (included in Exhibit 5).
24 Powers of Attorney.*
25 Statement of Eligibility of Trustee.*
99.1 Form of Letter of Transmittal with respect to Exchange Offer.*
99.2 Form of Notice of Guaranteed Delivery.*
</TABLE>
- --------

* Previously filed.

<PAGE>

EXHIBIT 5

Baker Botts L.L.P.
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 705-5000
Facsimile: (212) 705-5125

May 4, 2000

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112

Ladies and Gentlemen:

We have acted as counsel to Liberty Media Corporation, a Delaware
corporation ("Liberty"), in connection with Liberty's offer (the "Exchange
Offer") to exchange up to an aggregate principal amount of $1,000,000,000 of its
8 1/4% Senior Debentures due 2030 ("New Debentures") for an equal
principal amount of its outstanding unregistered 8 1/4% Senior Debentures due
2030 ("Old Debentures").

We have examined originals or copies, certified or otherwise identified to
our satisfaction as being copies of originals, of such documents, corporate
records, certificates of public officials and other instruments as we have
deemed necessary or advisable for the purpose of rendering this opinion. In
rendering this opinion, we have relied, to the extent we deem such reliance
appropriate, on certificates of officers of Liberty as to factual matters. We
have assumed the authenticity of all documents submitted to us as originals and
the conformity to authentic original documents of all documents submitted to us
as certified, conformed or reproduction copies, and the accuracy and
completeness of all records made available to us by Liberty and its
subsidiaries. We have further assumed that there will be no changes in
applicable law between the date of this opinion and the time that the New
Debentures are exchanged for Old Debentures.

Upon the basis of the foregoing and, assuming the due execution and
delivery of the New Debentures, we are of the opinion that the New Debentures,
when executed, authenticated and delivered in exchange for the Old Debentures in
accordance with the Exchange Offer, will be valid and binding obligations of
Liberty, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and similar laws affecting creditors' rights
generally and equitable principles.

<PAGE>

-2-

We hereby consent to the filing of this opinion as Exhibit 5 to the
registration statement relating to the Exchange Offer and to the reference to us
contained therein under the caption "Legal Matters." In giving the foregoing
consent, we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.

This opinion is rendered to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by or furnished to any other person without our prior written consent; provided,
--------
however, that all holders of New Debentures may rely upon this opinion.
- -------

Very truly yours,

/s/ BAKER BOTTS L.L.P.

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors
Liberty Media Corporation:

We consent to the use, in the registration statement on Form S-4, Amendment
No. 1 related to the 8 1/4% Senior Debentures due 2030, of our report dated
February 29, 2000, relating to the consolidated balance sheets of Liberty Media
Corporation ("New Liberty" or "Successor") as of December 31, 1999, and of
Liberty Media Corporation ("Old Liberty" or "Predecessor") as of December 31,
1998, and the related consolidated statements of operations and comprehensive
earnings, stockholders' equity and cash flows for the period from March 1, 1999
to December 31, 1999 (Successor period) and from January 1, 1999 to February 28,
1999 and for each of the years in the two-year period ended December 31, 1998
(Predecessor periods), included herein and to the reference to our firm under
the heading "Experts" in the registration statement.

The report of KPMG LLP, dated February 29, 2000, contains an explanatory
paragraph that states that effective March 9, 1999, AT&T Corp., the owner of the
assets comprising New Liberty, acquired Tele-Communications, Inc., the owner of
the assets comprising Old Liberty, in a business combination accounted for as a
purchase. As a result of the acquisition, the consolidated financial information
for the periods after the acquisition is presented on a different basis than
that for the periods before the acquisition and, therefore, is not comparable.

KPMG LLP

Denver, Colorado
May 3, 2000