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6800000'a1'3HCI c Discovery Holding Co-A Cox transaction review On May 14, Discovery Communications cmpleted ts previously announced transaction with Cox Communications, in which Cox redeemed its 25% interest in DCL for %1.28bnin cash and 100% of the interest in the Travel Channel (est value $880mn-i.lbn) and Travel Channel.com. The only change involved Discovery's museum audio tour business, Antenna Audio. which initially was included in the transaction but later excluded by mutual agreement. DHC now owns 66.7% of Discovery and A/N holds the remaining 33%. However, although OHC would own the majority of Disoovety. the company will still account for Discovery as an equity investment as most material governance and budgetary matters require an 80% vole. effectively giving AIN blocking rights. We estimate post tiansactiin net debt for Discovery of $3.6bn with a net leverage ratio of 4.3~.We estimate theoretical value for DHC at low to mid S20dshare based on our sum-of-the-parts and DCF valuation. We anticipate the Cox transaction resulting in greater transparency to Investors will be a sgnlflcant positive, as. in our view. the current lack of information at DHC has been a negative for the stock until the very recent past (when mreinformtiin has been released at various presentations). The Cox transaction may ako increase the likelihood that AdvanceNewhouse contributes its post-closing 3% interest in Discovery into publicly traded DHC or alternatively exits Diswvery in a similar fashion as Cox, which could be a material positive for DHC. Investment Conclusion We believe DHCs shares are fairly valued at currenttrading prices and we therefore are maintaining our Neutral rating on DISCA. However, we note ratings continue to improve this season, the adveltising market has been parlicularly strong in the scaner market and the company is undergoing a thorough revkw of its operations and wst structure, with estimate changes biased to the upsae for US networks. 4 DIIC.I.D.0000090 s Discovery Holding Ca.A 18 June 2007 nant DHC.1 D.0000092 Discovery Holding CO-A Analyst Certification I. Jessica Reif Cohen, hereby certify that the viem expressed in this research report accuralely refiecl my personal view about Me subject recurties and issuers. I alw certify that no part of my mmpemation was, is, or will be. directly or indirectly. related to the specific recommendations or view expressed in this research report mmatm Net Om Operalq Pol Expeas4 5Yea CAGR Fmm Laterl Acdlal CashflwFran Operabrns-TcMCapex 7 DHC.I.D.0000093 %9161 %S9 OE %W oc iuauad Yo0 SE %cs E2 %C3 61 iuaaad Discovery Holding Co-A 18 June 2001 ~- One or more anaiysts rsponsble lor mering the secunh in this d mms such securities: Discow HM I~, ~ ._ ~ .... _., . The wmpany 6 or was, wlhin the lad-I2 &nlb a &uriti& business dient Iin.i&&bnenit;;nkiral -. of MLPF&S andlor one OT more of ib affiliates: Dscwery Hotd. The analyst(s) responsible tor covering fhe secutilies in this repalt receive maemadon bared upon,among olhm tadm, the overallprofitabwy of Mwriii Lynch, including profits derivsd tom investment banking revenues. Other Important Disclosures UK raaders: MWF&S a an afflIMe is a QIM~povider lor the securik disclased in this repcrt lnfwmdion rebting to NonUS. affiliates of Menlll Ly&, Pierce, FEMW h Smith lnco orated (ULFfaS). MLPF&S diulributes msearchrepotia dthe folbwing rum.US affiliates in hUS (shat name:%galneme): Merrilliynch (France): Menil Lynch ?tal Mapls (France) SAS: Menill Lynch (Fmrkfurt): Merrill Lynch lnternatbwl Bank Ltd, Frankhd Branch; Menlil Lymh (SouthAfrlca): Memll Lynch Soulh Ah( b) Lld. Mwrill Lmch fMilant: Menill Lvnch lnternatial Bank Limited: MLPFES IUKI: Menil Lmh Pierce. Fenner & Smih Limild Menill Lvrrh tA~aImliatMerrill t vnch Lyrich Canaoa) Maril ynch Calada mc. MehLyh Mer&) Mkl. ynch Mexm. SA de CI 'kcmdae-&sa kml .p'm (Aige&) Meml ~fl~ Arqerlka SA;Mw1.r lyr&(JapanJ Man.lL)nch.apan!kumerCo LM Ueil Ljnch(Seal1 Meirll L)PCnlnlemaimI nmrpcrated(SmoJBranch] &tmdl rvnch IlaMaiI Manl Lvmn GODa tiaiuan' Limnm OS? Menill Lwnilndab DSP V.erlll Lrncn L med. 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Past pertumarce 6 101 necessady a guoc lo hm!e perloimam hy i?&malon rela ICme lax slatus 01 I nanclal nsrurrenls 3ms~herein s mt ntenoed b pmeetax amor to be seo a, anyone to povoa lax amm nwon are q"iosmk laa aance madoi weir pancuar c rct.mtaIIcBs kom an mdepanaant tax prot~s~o~l Faalgn ammi !ales of excrwge ma) adveney akitne vaw, pice c( inmed any %.Ii or rcatm mwmew mentone? In ths reporf In aomon nresrn in secunles s.m 8s ADRs. mkvabs ate imJenced DY me currency d Ihe unaeny q sec~ity.elfeclbe y wume c.nenq I sk O~ce~ofM~PF~S0~~0~~ed.lsa~~~ies~otheimani~a~a~~sisl~~vea~~~~~~~1ms~~fl~~llhe~s~s)a~n~fla~ nve sun en I s Yanili Lynch Research wllciss relslino to connib of intwnl ire descrlbed a1 htt~:lhmwml.c~rnedlM33h7.od 9 Discovery Holding Company Third Quarter Earnings Release Englewood, Colorado - On November 9, 2005, Discovery Holding Company (“DHC”) filed its Form 10- Q with the Securities and Exchange Commission for the three months ended September 30, 2005. The following release is being provided to supplement the information provided to investors in DHC’s Form 10-Q as filed with the SEC. On July 21, 2005, Liberty Media Corporation (“Liberty”) distributed all the shares (“the Spin-off’) of its newly formed subsidiary, Discovery Holding Company, to Liberty Media shareholders. Immediately following the Spin-off, DHC’s assets were comprised of its 100% ownership interest in Ascent Media Group LLC (“Ascent Media” or “AMG’), a 50% ownership interest in Discovery Communications, Inc. (DCI) and $200 million in cash. As a supplement to DHC’s consolidated statements of operations, the following is a presentation of financial information on a stand-alone basis for the two privately held entities owned by or in which DHC held an interest at September 30, 2005: Ascent Media, a consolidated, whollyvwned subsidiary; and DCI, a 50% owned equity affiliate.