<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

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

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)
{X}  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended  June 30, 2002
                                       OR

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

For the transition period from               to
                               -------------    --------------

                         Commission file number 1-14595

                          FOX ENTERTAINMENT GROUP, INC.
             (Exact Name of Registrant as Specified in its Charter)

                      DELAWARE                            95-4066193
            (State or Other Jurisdiction               (I.R.S. Employer
          of Incorporation or Organization)          Identification No.)

   1211 Avenue of the Americas, New York, New York          10036
      (Address of Principal Executive Offices)            (Zip Code)

Registrant's telephone number, including area code  (212) 852-7111

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

     Title of Each Class               Name of Each Exchange on Which Registered
     -------------------               -----------------------------------------
 Class A Common Stock, $.01 par value        New York Stock Exchange


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


         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes {X} No { }

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


<PAGE>


         As of August 23, 2002, the aggregate market value of common stock held
by non-affiliates of the registrant (based on the closing price on such date as
reported on the New York Stock Exchange - Composite Transactions) was
$2,789,168,250.

         As of August 23, 2002, 302,436,375 shares of Class A Common Stock, par
value $.01 per share, and 547,500,000 shares of Class B Common Stock, par value
$.01 per share, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of Fox Entertainment Group, Inc.'s Notice of 2002 Annual
Meeting and Proxy Statement to be filed with the Commission pursuant to
Regulation 14A of the Securities Exchange Act of 1934 are incorporated by
reference into Part III of this report.



                                       2

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

Background

         Fox Entertainment Group, Inc. (together with its direct and indirect
subsidiaries, and their respective predecessors, unless the context otherwise
requires, the "Company") is a multi-faceted entertainment company with
operations in four business segments: (i) Filmed Entertainment; (ii) Television
Stations; (iii) Television Broadcast Network; and (iv) Cable Network
Programming. For financial information regarding the Company's segments and
operations in geographic areas see "Item 8. Financial Statements and
Supplementary Data - Fox Entertainment Group, Inc. - Note 16 to the Consolidated
Financial Statements."

         The News Corporation Limited ("News Corporation") is the beneficial
owner of 177,636,375 shares of Class A Common Stock and 547,500,000 shares of
Class B Common Stock, which in the aggregate represent approximately 85.32% of
the equity and 97.84% of the voting power of the Company.

         The address of the Company's principal executive offices is 1211 Avenue
of the Americas, New York, New York 10036, and the telephone number is (212)
852-7111. The Company maintains a 52-53 week fiscal year ending on the Sunday
nearest to June 30 in each year. At June 30, 2002, the Company had approximately
12,800 full-time and part-time employees.

Special Note Regarding Forward-Looking Statements

         This document contains statements that constitute "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The
words "expect," "estimate," "anticipate," "predict," "believe" and similar
expressions and variations thereof are intended to identify forward-looking
statements. These statements appear in a number of places in this document and
include statements regarding the intent, belief or current expectations of the
Company, its directors or its officers with respect to, among other things,
trends affecting the Company's financial condition or results of operations. The
readers of this document are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties.
Those risks and uncertainties are discussed under the heading "Risk Factors" in
the Company's Registration Statement on Form S-3 (SEC file no. 333-85978) as
declared effective by the Securities and Exchange Commission on May 3, 2002, as
well as the information set forth below. The Company does not ordinarily make
projections of its future operating results and undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law. Readers
should carefully review the risk factors referred to above and the other
documents filed by the Company with the Securities and Exchange Commission. This
section should be read in conjunction with the audited consolidated condensed
financial statements of the Company and related notes set forth elsewhere
herein.



                                       3

<PAGE>

Business

Filmed Entertainment

         The Company engages in feature film and television production and
distribution principally through the following businesses: Fox Filmed
Entertainment ("FFE"), a producer and distributor of feature films; Twentieth
Century Fox Television ("TCFTV"), a producer of network television programming;
Twentieth Television, a producer and distributor of television programming; and
Fox Television Studios ("FtvS"), a producer of broadcast and cable programming.

         Fox Filmed Entertainment

         One of the world's largest producers and distributors of motion
pictures, FFE produces, acquires and distributes motion pictures throughout the
world under a variety of arrangements. During fiscal 2000, 2001 and 2002, FFE
placed 20, 20 and 22 films, respectively, in general release in the United
States. Those motion pictures were produced or acquired by the following units
of FFE: Twentieth Century Fox and Fox 2000, which produce motion pictures for
mainstream audiences; Fox Searchlight Pictures, which produces and acquires
specialized motion pictures; and Twentieth Century Fox Animation, which produces
feature length animated motion pictures. Successful motion pictures produced
and/or distributed by FFE in the United States and international territories
since the beginning of fiscal 2000 include Big Momma's House, Me, Myself &
Irene, X-Men, Cast Away (together with DreamWorks SKG), Moulin Rouge, Dr.
Dolittle 2, Ice Age, Planet of the Apes, Star Wars Episode II: Attack of the
Clones, Minority Report (together with DreamWorks SKG), and Road to Perdition
(together with DreamWorks SKG). The Company currently plans to release
approximately 25 films in the United States in fiscal 2003, including X-Men 2,
League of Extraordinary Gentlemen, Solaris and Dare Devil.

         In addition, pursuant to an agreement that became effective at the end
of May 1998 with Monarchy Enterprises Holdings B.V. ("MEH"), the parent company
of Regency Entertainment (USA), Inc. ("New Regency"), FFE will distribute
certain New Regency films and all films co-financed by the Company and New
Regency produced over a 15-year term in all media worldwide, excluding certain
international territories with respect to theatrical and home video rights and
most international territories with respect to television rights. Among its 2003
releases, the Company currently expects to release two New Regency films during
fiscal 2003, both of which were co-financed by the Company and New Regency. The
Company has also acquired a 20% interest in MEH. The parties also agreed to
enter into certain motion picture financing arrangements and formed Regency
Television, a 50/50 joint venture to produce television programming through a
partnership with FtvS.

         Due to increased competition and costs associated with film production,
film studios and the Company constantly evaluate the risks and rewards of
production. Various strategies are used to balance risk with capital needs,
including, among other methods, co-production, contingent profit participations,
acquisition of distribution rights only and insurance. In March 2001, the
Company entered into a new series of film rights agreements whereby a controlled
consolidated subsidiary of the Company, Cornwall Venture LLC ("NM2"), that holds
certain library film rights, funds the production or acquisition costs of all
eligible films, as defined, to be produced or acquired by Twentieth Century Fox
Film Corporation ("TCF"), a subsidiary of the Company, between 2001 and 2004
(these film rights agreements are collectively referred to as the "New
Millennium II Agreement"). NM2 is a separate legal entity from the Company and
TCF and has separate assets and liabilities. NM2 issued a preferred limited
liability membership interest ("Preferred Interest") to a third party to fund
the film financing, which is presented on the consolidated balance sheets as
Minority interest in



                                       4

<PAGE>

subsidiaries. The Preferred Interest has no fixed redemption rights but is
entitled to an allocation of the gross receipts to be derived by NM2 from the
distribution of each eligible film. This allocation, to the extent available
based on the gross receipts from the distribution of the eligible films,
consists of (i) a return on the Preferred Interest (the "Preferred Payments"),
based on certain reference rates (generally based on commercial paper rates or
LIBOR) prevailing on the respective dates of determination, and (ii) a
redemption of the Preferred Interest, based on a contractually determined
amortization schedule. The Preferred Interest has a preference in the event of a
liquidation of NM2 equal to the unredeemed portion of the investment plus any
accrued and unpaid Preferred Payments. As of June 30, 2002, there was $850
million of Preferred Interests outstanding, which is included in the
consolidated balance sheets as Minority interest in subsidiaries. For more
detail regarding this agreement, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - New Millennium II."

         Motion picture companies, such as FFE, typically seek to generate
revenues from various distribution channels. FFE derives its worldwide motion
picture revenues primarily from four basic sources (set forth in general
chronology of exploitation): (i) distribution of motion pictures for theatrical
exhibition in the United States and Canada and markets outside of the United
States and Canada ("International" markets); (ii) distribution of motion
pictures in various home media formats; (iii) distribution of motion pictures
for exhibition on pay-per-view and premium pay television programming services;
and (iv) distribution of motion pictures for exhibition on free television
networks, other broadcast program services, independent television stations and
basic cable programming services, including certain services which are
affiliates of the Company and News Corporation. The Company does not always have
rights in all media of exhibition to all motion pictures which it releases, and
does not necessarily distribute a given motion picture in all of the foregoing
media in all markets.

         The Company distributes and markets its films worldwide principally
through its own distribution and marketing companies. The Company believes that
the pre-release marketing of a feature film is an integral part of its motion
picture distribution strategy and generally begins marketing efforts three to
six months in advance of a film's release date in any given territory.

         Through Twentieth Century Fox Home Entertainment, Inc., the Company
distributes motion pictures and other programming produced by units of FFE, its
affiliates and other producers in the United States, Canada and International
markets in all home media formats, including the sale and rental of
videocassettes and DVDs. In fiscal 2002, the domestic home entertainment
division released or re-released over 100 produced and acquired titles,
including approximately 80 titles in DVD format. In International markets, the
Company distributes produced and acquired titles both directly and through
foreign distribution channels, with approximately 400 releases in fiscal 2002,
including 30 new FFE releases, nearly 200 catalog titles and approximately 100
television and non-theatrical releases. In addition, the Company has an
agreement with Metro-Goldwyn-Mayer ("MGM") to distribute its video product in
most International markets in return for certain fees. The Company released over
200 MGM Home Entertainment theatrical, catalog and television programs
internationally in fiscal 2002.

         Units of FFE license motion pictures and other programs in the United
States, Canada and International markets to various third parties and certain
affiliated subscription pay television services and pay-per-view services. The
license agreements reflecting the subscription pay television arrangements
generally provide for a specified number of exhibitions of the program during a
fixed term in exchange for a license fee which is based on a variety of factors,
including the box office performance of each program and the number of
subscribers to the service or system. The license



                                       5

<PAGE>

agreements reflecting the pay-per-view arrangements generally provide for a
minimum number of scheduled exhibitions of the program during a fixed term, for
a license fee based on a percentage of the licensee's gross receipts from the
pay-per-view exhibition of the program and, in some cases, a guaranteed minimum
fee. Among third-party license agreements that units of FFE have in place in the
United States for subscription pay television exhibition of its motion pictures
are exclusive agreements with Home Box Office ("HBO"), providing for the
licensing of films initially released for theatrical exhibition through the year
2009, as well as arrangements with Encore and American Movie Classics. Units of
FFE also license motion pictures in the United States to direct broadcast
satellite ("DBS") pay-per-view services operated by DIRECTV, Inc. and EchoStar
Communications Corporation, as well as cable pay-per-view and video-on-demand
services such as In Demand. In addition, in International markets, units of FFE
license motion pictures to leading third-party pay television services and
pay-per-view services as well as to programming services operated by various
affiliated entities.

         Units of FFE also license motion pictures to broadcast television
networks, including the Fox Broadcasting Company ("FOX"), independent broadcast
television stations and basic cable networks, pursuant to agreements which
generally allow a fixed number of telecasts of a motion picture over a stated
period of time in exchange for a specified license fee.

         Twentieth Century Fox Television

         During the past three fiscal years, TCFTV produced television programs
for the Fox, ABC, CBS, NBC, UPN and WB broadcast television networks. TCFTV
currently produces or has orders to produce episodes of the following network
television series: The Practice for ABC; Charlie Lawrence, Judging Amy, Still
Standing and Yes, Dear (each co-produced with CBS Worldwide, Inc.) for CBS; 24,
Andy Richter Controls the Universe (a co-production with Paramount Pictures
Corporation), The Bernie Mac Show (a co-production with FtvS), Boston Public,
Cedric the Entertainer Presents, Firefly, Futurama, Girls Club, The Grubbs (a
co-production with Universal Studios), King of the Hill, Oliver Beene (a
co-production with DreamWorks SKG), The Pitts, Septuplets, and The Simpsons for
FOX; Buffy the Vampire Slayer for UPN; and Angel and Reba for WB. Generally, a
network will license a specified number of episodes for exhibition on the
network during the license period. All other distribution rights, including
international and off-network syndication rights, are typically retained by
TCFTV.

         Generally, television programs are produced under contracts that
provide for license fees which may cover only a portion of the anticipated
production costs. As these costs have increased in recent years, the resulting
deficit between production costs and license fees for domestic first-run
programming has also increased. Successful network television series are
licensed (i) for first-run exhibition in Canadian and International markets,
(ii) for off-network exhibition in the United States (including in syndication
or to cable programmers) and (iii) for syndication in International markets.
Such additional licensing is often critical to the financial success of a series
since the license fee paid by a network generally does not fully recover
production costs. Generally, a series must be broadcast for at least three to
four television seasons for there to be a sufficient number of episodes to offer
the series in syndication in the United States or to cable and DBS programmers
in the United States. The decision of a television network to continue a series
through an entire television season or to renew a series for another television
season depends largely on the series' audience ratings.



                                       6

<PAGE>

         Twentieth Television

         Twentieth Television licenses off-network television programming
produced by the Company; develops and produces original reality and first-run
television programming for the Fox Television Stations, national syndication,
FOX and basic cable networks; and sells national advertising units retained by
Twentieth Television in off-network and first-run syndicated television
programming. Twentieth Television derives revenue from its licensing of
off-network and first-run television programming in the form of cash license
fees paid by licensees and the sale of national advertising units retained by
Twentieth Television in the programs. Twentieth Television's current and future
off-network shows include The Simpsons, The X-Files, Malcolm in the Middle, King
of the Hill, Bernie Mac, M*A*S*H, The Practice and Buffy the Vampire Slayer.
Reality and first-run original programming includes America's Most Wanted, COPS,
Divorce Court, Good Day Live, Texas Justice and The Rob Nelson Show.

         Fox Television Studios

         Fox Television Studios (FtvS) is a program supplier to the major U.S.
broadcast and cable networks as well as a growing number of emerging and
international networks. FtvS produces or has orders to produce several U.S.
broadcast and cable series including Malcolm in the Middle (through Regency
Television, a co-venture with New Regency Enterprises), John Doe and The Bernie
Mac Show (a co-production with TCFTV) for FOX; The Shield (produced in
association with Columbia TriStar Domestic Television) and Son of the Beach for
FX and American Family for PBS. It also has or will produce a variety of made
for television movies including Prince William and Home Alone 4 for ABC, and the
miniseries Master Spy: The Life of Robert P. Hanssen for CBS. Its non-fictional
shows include A&E's Biography and Animal Planet's The Most Extreme. Its
international productions include 12 separate versions of Temptation Island as
well as a new Spanish-language adaptation for Telemundo. FtvS also produces a
variety of game shows and talk series, specials and other forms of programming
for top U.S. and international telecasters.

         Motion Picture and Television Libraries

         The Company's motion picture and television library (the "Fox Library")
consists of varying rights to over 3,250 previously released films, of which
approximately 350 have been released since 1980, and many well-known television
series. The motion pictures in the Fox Library include many successful and
well-known titles, such as The Sound of Music and Miracle on 34th Street, and
eight of the top 16 domestic box office grossing films of all time, which are
Titanic (together with Paramount Pictures Corporation), Star Wars Episode I: The
Phantom Menace, Independence Day, Star Wars, Return of the Jedi, The Empire
Strikes Back, Home Alone, and Star Wars Episode II: Attack of the Clones. The
Company earns significant revenues through the licensing of titles in the Fox
Library in many media, including television and home entertainment formats, and
through licensing and merchandising of films and characters in films.

          In addition, the Fox Library contains varying rights to certain
television series and made-for-television motion pictures. The television
library contains such classic series as Batman, The Mary Tyler Moore Show,
M*A*S*H, Hill Street Blues, Doogie Howser, M.D., L.A. Law, The Wonder Years,
Picket Fences, Room 222, Trapper John, M.D., Daniel Boone and The X-Files, as
well as such current hits as The Simpsons, NYPD Blue, The Practice, King of the
Hill, Buffy the Vampire Slayer, Judging Amy (together with CBS Worldwide, Inc.),
Malcolm in the Middle, The Bernie Mac Show, 24 and The Shield.



                                       7

<PAGE>

         Licensing and Merchandising

         Through its licensing and merchandising division, the Company exploits
its motion picture and television properties and characters by entering into
licensing agreements for merchandising, literary publishing and promotional
tie-ins. Television series and films which have experienced success throughout
the world in licensing and merchandising include The Simpsons, The X-Files,
Buffy the Vampire Slayer, Dark Angel, the Alien series of motion pictures,
Titanic, Planet of the Apes and Ice Age.

         Fox Interactive

         Fox Interactive produces entertainment computer software and video game
titles. Fox Interactive leverages the name recognition and popularity of Fox
Library films and television series such as The Simpsons, Buffy the Vampire
Slayer, Die Hard, The X-Files and the Alien and Predator series of motion
pictures through its line of interactive games.

         Fox Music and Music Publishing

         Fox Music produces and licenses for distribution through third parties
soundtracks of the Company's film and television productions. The Company's
successful film and television soundtracks include Cast Away, Moulin Rouge,
Titanic, Waiting to Exhale, Romeo + Juliet, Hope Floats, Ally McBeal, The
X-Files, Dr. Dolittle and Buffy the Vampire Slayer. In addition, Fox Music
Publishing generally owns the publishing rights for songs and scores
commissioned for the Company's film and television programming. Fox Music
Publishing licenses these rights to third parties for many uses in different
media.

Television Stations

         Fox Television Stations currently owns and operates 35 full power
stations located in nine of the top 10 largest designated market areas ("DMAs").
Fox Television Stations owns and operates two stations in nine DMAs, including
New York, Los Angeles, and Chicago, the first, second, and third largest DMAs,
respectively.

         Fox Television Stations now owns and operates stations that are
affiliated with the United Paramount Network ("UPN") in nine markets, including
eight of the top 10 DMAs. The affiliation agreements with UPN generally extend
through at least the 2003-04 season and may be extended at the option of the
stations through the 2005-06 season. UPN provides approximately 23 hours of
programming a week, including two hour prime time programming blocks five nights
a week, to its affiliates. The remaining stations owned by Fox Television
Stations are affiliates of FOX. For a description of FOX programming, see
"--Television Broadcast Network".



                                       8

<PAGE>

         The following table lists certain information as of August 23, 2002
about each Fox Television Station. Unless otherwise noted, all stations are
primary affiliates of FOX.

<TABLE>
<CAPTION>
                                                                                        PERCENTAGE OF U.S. TELEVISION
                  DMA/RANK               STATION                    CHANNEL/TYPE        HOUSEHOLDS REACHED (1)
                  --------               -------                    ------------        ----------------------

<S>                         <C>                                   <C>                                      <C>
New York, NY                1            WNYW                     5           VHF                          6.9%
                                         WWOR (2)                 9           VHF
Los Angeles, CA             2            KTTV                    11           VHF                          5.0%
                                         KCOP (2)                13           VHF
Chicago, IL                 3            WFLD                    32           UHF                          3.2%
                                         WPWR (2)                50           UHF
Philadelphia, PA            4            WTXF                    29           UHF                          2.7%
Boston, MA                  6            WFXT                    25           UHF                          2.3%
Dallas, TX                  7            KDFW                     4           VHF                          2.1%
                                         KDFI (3)                27           UHF
Washington, DC              8            WTTG                     5           VHF                          2.0%
                                         WDCA (2)                20           UHF
Atlanta, GA                 9            WAGA                     5           VHF                          1.9%
Detroit, MI                 10           WJBK                     2           VHF                          1.8%
Houston, TX                 11           KRIV                    26           UHF                          1.7%
                                         KTXH (2)                20           UHF
Minneapolis, MN             13           KMSP                     9           VHF                          1.5%
                                         WFTC (2)                29           UHF
Tampa, FL                   14           WTVT                    13           VHF                          1.5%
Phoenix, AZ                 16           KSAZ                    10           VHF                          1.5%
                                         KUTP (2)                45           UHF
Cleveland, OH               17           WJW                      8           VHF                          1.4%
Denver, CO (4)              18           KDVR                    31           UHF                          1.3%
Orlando, FL                 20           WOFL                    35           UHF                          1.1%
                                         WRBW (2)                65           UHF
St. Louis, MO               22           KTVI                     2           VHF                          1.1%
Baltimore, MD               24           WUTB (2)                24           VHF                          1.0%
Kansas City, MO             31           WDAF                     4           VHF                          0.8%
Milwaukee, WI               33           WITI                     6           VHF                          0.8%
Salt Lake City, UT          35           KSTU                    13           VHF                          0.7%
Birmingham, AL              39           WBRC                     6           VHF                          0.6%
Memphis, TN                 41           WHBQ                    13           VHF                          0.6%
Greensboro, NC              44           WGHP                     8           VHF                          0.6%
Austin, TX(5)               54           KTBC                     7           VHF                          0.5%
Gainesville                 164          WOGX                    51           UHF                          0.1%

Total:                                                                                                    44.7%
</TABLE>

Source: Nielsen Media Research, January 2002

        (1) VHF stations transmit on Channels 2 through 13 and UHF stations on
        Channels 14 through 69. UHF television stations in many cases have a
        weaker signal and therefore do not achieve the same coverage as VHF
        stations. To address this disparity, the FCC ownership rule applies a
        UHF discount (the "UHF Discount") which attributes only 50% of the
        television households in a local television market to the audience reach
        of a UHF station for purposes of calculating whether that station's
        owner complies with the 35% national audience reach cap imposed by FCC
        regulations. In addition, the coverage of two commonly owned stations in
        the same market is only counted once. The percentages listed are rounded
        and do not take into account the UHF Discount. See "- Regulation -
        Television Stations and Television Broadcast Network."
        (2) UPN affiliate.
        (3) Independent station and secondary FOX affiliate, carrying Fox
        children's programming.
        (4) The Company also owns and operates KFCT, Channel 22, Fort Collins,
        CO, as a satellite station of KDVR, Channel 31, Denver, CO.
        (5) The Company also owns and operates K13VC, Channel 13, Austin, TX, a
        LPTV (low power television) station. K13VC is an independent station and
        secondary FOX affiliate, carrying Fox children's programming.





                                       9

<PAGE>

         In July 2001, News Corporation completed its acquisitions of
Chris-Craft Industries, Inc. and its subsidiaries, BHC Communications, Inc. and
United Television, Inc., (together, "Chris-Craft") for approximately $2 billion
in cash and approximately $3 billion of News Corporation American Depositary
Receipts ("ADRs") representing preferred limited voting ordinary shares. As part
of this acquisition, News Corporation transferred all of the assets and
liabilities of Chris-Craft, except for cash and certain non-television related
assets and liabilities, to the Company in exchange for 122,244,272 shares of its
Class A common stock. Simultaneously with the receipt of these assets and
liabilities, the Company transferred title to the Federal Communications
Commission ("FCC") licenses of the 10 newly acquired television stations to Fox
Television Stations.

         In October 2001, Fox Television Stations exchanged two television
stations, KTVX (ABC) in Salt Lake City and KMOL (NBC) in San Antonio, with Clear
Channel Communications Inc. for television station WFTC (FOX) in Minneapolis. In
addition, in November 2001, Fox Television Stations exchanged television station
KBHK (UPN) in San Francisco with Viacom Inc. for WDCA (UPN) in Washington, D.C.
and KTXH (UPN) in Houston. On June 17, 2002, Fox Television Stations exchanged
KPTV (UPN) in Portland for Meredith Corporation's WOFL (FOX) in Orlando and WOGX
(FOX) in the Gainesville DMA. Also, on August 21, 2002, Fox Television Stations
acquired WPWR (UPN), in the Chicago DMA, from Newsweb Corporation for $425
million in cash.


         Regulatory approval of the Chris-Craft acquisition required the Company
to divest sufficient stations to come into compliance with the FCC's national
station ownership cap. To comply with this requirement, Fox Television Stations
is required to file with the FCC the license assignment applications necessary
to come into compliance with the cap prior to August 7, 2003, unless there is
further judicial review, or the FCC modifies the national station ownership cap.
For more detail regarding the FCC's national ownership cap, see "- Regulation -
Television Stations and Television Broadcast Network." Each of the Clear
Channel, Viacom and Meredith transactions reduced the national audience reach of
Fox Television Stations and, therefore, assisted the Company in complying with
the FCC's national station ownership cap.

         The Fox Television Stations derive substantially all of their revenues
from national spot and local advertising. Advertising rates are determined by
each Fox Television Station based on market conditions in the area which it
serves. In addition to cash sales, the Fox Television Stations enter into
customary barter agreements with syndicators, pursuant to which the Fox
Television Stations acquire programming and the rights to sell a specified
amount of advertising time for use in national spot and local advertising
markets in exchange for allowing the syndicator to retain a specified amount of
advertising time for sale in the national advertising market in lieu of cash
consideration.

Television Broadcast Network

          FOX has 188 affiliated stations, including 25 full power television
stations that are owned by subsidiaries of the Company, which reach, along with
Fox Net, a Company-owned cable service which reaches areas not served by an
over-the-air Fox affiliate, approximately 98% of all U.S. television households.
In general, each week FOX regularly delivers to its affiliates 15 hours of prime
time programming, one hour of late-night programming on Saturday and one hour of
Sunday morning news programming. FOX's prime time programming features such
series as The Simpsons, King of the Hill, That 70's Show, Malcolm in the Middle,
Boston Public, 24, Bernie Mac, Grounded for Life and various movies and
specials. In addition, a significant component of FOX's programming consists of
sports programming, with FOX providing to its affiliates live coverage
(including post-season) of the National Football Conference of the National
Football League ("NFL") and Major League Baseball ("MLB") and live coverage of
the premiere racing series (the Winston Cup and the Busch series) of


                                       10

<PAGE>


the National Association of Stock Car Auto Racing ("NASCAR").
In January 2002, FOX entered into an agreement allowing 4Kids Entertainment, a
children's entertainment company, to program a four hour block of children's
programming on Saturday mornings, starting in the 2002-2003 broadcast season and
continuing for four years, with an option of 4Kids to extend for an additional
two years. This replaces the children's programming which had been provided by
Fox Family Worldwide, Inc., a former affiliate of the Company.

         FOX derives its revenues from sales in the national advertising
marketplace of commercial advertising time. FOX's programming line-up is
intended to appeal primarily to target audiences of 18 to 49-year old adults,
the demographic group that advertisers seek to reach most often. During the
2001-2002 broadcast season, FOX ranked second in prime time programming based on
viewership of adults aged 18-49 (NBC had a 5.3 rating and 14 share, FOX had a
4.0 rating and a 11 share, CBS had a 3.9 rating and a 10 share and ABC had a 3.6
rating and 10 share). The median age of the FOX viewer is 35 years, as compared
to 45 years for NBC, 45 years for ABC and 51 years for CBS.

         The Company obtains programming for FOX from major television studios
and independent television production companies pursuant to license agreements.
The terms of such agreements generally provide the Company with the right to
broadcast a television series for a minimum of four seasons. FOX licenses its
film programming from major film studios and independent film production
companies and licenses made-for-television films from a number of sources.
National sports programming, such as NFL, MLB and NASCAR programming, is
obtained under license agreements with professional sports leagues or
organizations. The Company's current licenses with the NFL, MLB, and NASCAR
extend until the 2005/2006 NFL season, the 2006 MLB season, and the 2008 NASCAR
season, respectively, assuming no early terminations.

         FOX provides programming to its television station affiliates in
accordance with affiliation agreements of varying durations, which grant to each
affiliate the right to broadcast network television programming on the
affiliated station (the "Fox Affiliates"). Such agreements typically run three
or more years and have staggered expiration dates. These affiliation agreements
generally require FOX's full-time television station affiliates to carry FOX
programming in all time periods in which FOX programming is offered to such
affiliates, subject to certain exceptions stated in affiliation agreements. In
1999, FOX entered into an arrangement with most of its television station
affiliates relating to the amount of commercial advertising time in FOX
programming that FOX provides to each affiliate for the affiliate to sell to
advertisers ("local commercial advertising time"). This arrangement expired in
June 2002. New agreements, under which affiliates will continue to pay FOX for
additional local commercial advertising time, are currently being re-negotiated,
with agreements with most of the affiliates already completed.

Cable Network Programming

         The Company holds interests in cable network programming businesses in
the areas of news, sports, general entertainment and movies. The Fox Cable
Networks Group includes all of the Company's cable network programming
businesses other than the Fox News Channel.

         Fox News Channel ("Fox News")

         Fox News is a 24-hour all news cable channel which is currently
available to approximately 80 million U.S. cable and DBS households.



                                       11

<PAGE>

         Fox News also produces a weekend political commentary show, Fox News
Sunday, for broadcast on FOX. Fox News, through its Fox News Edge service,
licenses news feeds to Fox Affiliates and other subscribers to use as part of
local news broadcasts.

         Fox Sports Networks

         Fox Sports Networks operates two principal business units: (i) sports
programming operations and (ii) FX Network, a general entertainment network.

         Sports programming operations. Fox Sports Net, Inc. ("FSN") is the
largest regional sports network ("RSN") programmer in the United States,
focusing on live professional and major collegiate home team sports events.
FSN's sports programming business consists primarily of ownership interests in
21 RSNs (the "Fox Sports RSNs") and National Sports Partners, a 50/50
partnership between FSN and Rainbow Media Sports Holdings, Inc. ("Rainbow"), an
indirect subsidiary of Cablevision Systems Corporation ("Cablevision"), which
operates Fox Sports Net, a national sports programming service. Fox Sports Net
provides its affiliated RSNs with 24-hour national sports programming featuring
original and licensed sports-related programming and live and replay sporting
events.

         FSN owns an equity interest in, or through Fox Sports Net is affiliated
with, 24 RSNs. These RSNs reach approximately 73 million households and,
together with FSN, have rights to telecast live games of 70 professional sports
teams in the MLB, National Basketball Association ("NBA") and National Hockey
League ("NHL") (out of a total of 80 such teams in the United States) and
numerous collegiate conferences and sports teams. FSN's strategy is to utilize
its RSNs and Fox Sports Net to build a national cable sports network under the
Fox brand name.

         FSN owns a 40% interest in Regional Programming Partners ("RPP"), a
partnership with Rainbow which owns various interests in RSNs (including two in
which FSN owns 50% interests), the New York Knickerbockers NBA franchise, the
New York Rangers NHL franchise, the Madison Square Garden entertainment complex,
and Radio City Music Hall. For a discussion of purchase and sale rights related
to the investment in RPP, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Contingencies - Regional
Programming Partners."

         In January 2002, the Company acquired an approximate 23.3% interest in
the Sunshine Network ("Sunshine") for approximately $23.3 million, increasing
the Company's ownership percentage in Sunshine to approximately 83.3%. In
February 2002, the Company acquired an additional approximate 0.4% interest in
Sunshine, increasing the Company's ownership interest in Sunshine to
approximately 83.7%.

         FX Network. Launched in June 1994, FX Networks LLC ("FX") currently
reaches approximately 77.8 million U.S. cable and DBS households. FX is a
general entertainment network that combines original programming with acquired
television series and feature films. In addition, FX carries sports programming
with live coverage of certain NASCAR events. FX's line-up for the Fall 2002
season includes the following syndicated hits from TCFTV: Ally McBeal, The
Practice, and Buffy the Vampire Slayer; and original programming, including the
Emmy nominated drama, The Shield, a new half-hour comedy, Lucky, Son of the
Beach, and The Toughman World Championship series.



                                       12

<PAGE>

         Fox Cable Network Ventures

         In July 2001, as a result of the exercise of rights by existing
shareholders, the Company acquired an additional 53.44% of Speedvision Network
LLC, relaunched as "Speed Channel" in January 2002, for approximately $401
million, increasing the Company's ownership in Speed Channel to approximately
85.46%. In October 2001, the Company acquired the remaining 14.54% minority
interest in Speed Channel for approximately $111 million. The Speed Channel
focuses exclusively on the world of racing, including cars, motorcycles,
airplanes and boats. The Speed Channel currently reaches approximately 52.5
million U.S. cable and DBS households.

         In July 2001, as a result of the exercise of rights by existing
shareholders, the Company acquired 50.23% of Outdoor Life Network LLC for
approximately $309 million. The acquisition resulted in the Company owning
approximately 83.18% of Outdoor Life. In October 2001, a shareholder of Outdoor
Life acquired the Company's entire ownership interest in Outdoor Life for
approximately $512 million in cash.

         Fox Cable Network Ventures owns a 40% interest in an entity that owns
and operates the Staples Center, a sports and entertainment complex in downtown
Los Angeles, California. The Staples Center is the home of the Los Angeles Kings
NHL franchise and the Los Angeles Lakers and the Los Angeles Clippers NBA
franchises.

         Fox Sports International

         On July 15, 2001, Liberty Media Corporation ("Liberty") exercised its
right, under a pre-existing option, to cause its subsidiary to sell its 50%
interest in International Sports Programming Partners ("Fox Sports
International") to News Corporation in exchange for 3,673,183 ADRs of News
Corporation. Under the terms of this transaction, in December 2001 News
Corporation transferred the acquired interest in Fox Sports International to the
Company for 3,632,269 shares of Class A common stock.

         Fox Sports International holds an interest in Fox Sports World, a U.S.
programming service in the English language devoted to international sports such
as soccer, rugby and cricket, which service is available to 14.9 million cable
and DBS subscribers, and Fox Sports World-Middle East, an English-language
sports network which airs in the Middle East.

         On February 5, 2002, the Company entered into a joint venture with
Liberty and Hicks, Muse, Tate & Furst Incorporated ("HMTF") primarily for the
purpose of developing and operating Spanish-language television services in the
United States, Canada, Spain and Latin America that are comprised predominantly
of sports programming. In exchange for an approximately 38% interest in a new
entity called Fox Pan American Sports LLC ("FPAS"), the Company contributed its
existing Spanish-language sports businesses, including the Fox Sports Latin
America network (a Spanish language sports network distributed to subscribers in
certain Central and South American nations outside of Brazil) and Fox Sports
World Espanol (a Spanish-language sports network serving 4.6 million subscribers
in the U.S.), and a cash investment. The Company also entered into agreements
with FPAS to provide certain support services including advertising and
affiliate sales, corporate, personnel and production and technical services,
primarily in the United States.



                                       13

<PAGE>

         Fox Family Worldwide

         During fiscal 2001, Fox Family Worldwide, Inc. ("FFW"), a family and
children's entertainment company, was owned 49.5% by FEG and 49.5% by Haim Saban
and certain limited partnerships controlled by Mr. Saban. In October 2001, the
Company, Haim Saban and the other stockholders of FFW sold FFW to The Walt
Disney Company ("Disney") for total consideration of approximately $5.2 billion
(including the assumption of certain debt) of which approximately $1.6 billion
was in consideration of the Company's interest in FFW.

         National Geographic Channels

         The Company, NBC and National Geographic Television ("NGT") each own
approximately 50%, 25% and 25% interests, respectively, in NGC Network
International, LLC ("NGCI"), which produces the National Geographic Channel for
distribution in various international markets, including certain countries in
Europe, Asia and Latin America. The National Geographic Channel is currently
shown in approximately 133 countries internationally, as well as the United
States. National Geographic programming is provided in Australia, certain
countries in Europe and Scandinavia by a partnership in which British Sky
Broadcasting Limited, NBC and NGT are currently partners.

         In January 2001, the Company and NGT launched the National Geographic
Channel in the United States. The National Geographic Channel currently reaches
approximately 33.2 million U.S. cable and DBS households. The Company holds a
non-controlling 66.67% interest in NGC Network US, LLC, the producer of the U.S.
channel, with NGT holding the remainder. The National Geographic Channel airs
documentary programming on such topics as natural history, adventure, science,
exploration and culture.

         Fox Movie Channel

         Launched in November 1994 and currently reaching approximately 16.1
million U.S. cable and DBS households, Fox Movie Channel ("FMC"), which is
wholly-owned by the Company, is Hollywood's first and only studio-based movie
network. FMC showcases commercial-free contemporary hits and classics from the
Fox Library.

         Los Angeles Dodgers

         The Company owns substantially all of the Los Angeles Dodgers MLB
franchise (the "Dodgers") and Dodger Stadium. The Company acquired its interest
in the Los Angeles Dodgers, Inc. in April 1998. The Dodgers are currently in
their 112th year in the National League and in each of the last five seasons
have achieved attendance of over three million fans at Dodger Stadium.

         Canal Fox

         The Company, through its subsidiary Fox Latin American Channel, Inc.,
operates Canal Fox, a general entertainment cable and satellite service for
Latin America covering Mexico, Central and South America. Canal Fox broadcasts
in the Portuguese language in Brazil and in the Spanish language in the rest of
the territory. The channel's programming line-up consists of movies, series and
music specials.



                                       14

<PAGE>

         LAPTV

         Fox LAPTV, L.L.C., a subsidiary of the Company, owns a 20.2% equity
interest in LAPTV, a partnership which distributes three premium pay television
channels (Movie City East and West, Cinecanal East and West and its multiplex
channel Cinecanal 2) and one basic television channel (The Film Zone East and
West) in Latin America (excluding Brazil). Such channels primarily feature
theatrical motion pictures of the Company and three other studio partners in the
English language with Spanish subtitles.

         Telecine

         The Company, through its subsidiary Fox Latin America, Inc., owns a
12.5% equity interest in Telecine, LLC, which distributes five premium pay
television channels (Telecine Premium, Telecine Action, Telecine Emotion,
Telecine Happy and Telecine Classic) in Brazil. Such channels primarily feature
theatrical motion pictures of the Company and three other studio partners in the
English language with Portuguese subtitles.

Competition

         The Company faces competition from companies within the motion picture
and television industry and alternative forms of leisure and entertainment
activities. The entertainment industry is also subject to rapid developments in
technology and shifting consumer tastes.

Filmed Entertainment

         Motion picture and television production and distribution are highly
competitive businesses. The Company competes with other film studios,
independent production companies and others for the acquisition of artistic
properties, the services of creative and technical personnel, exhibition outlets
and the public's interest in its products. The number of films released by the
Company's competitors, particularly the other major film studios, in any given
period may create an oversupply of product in the market, and that may reduce
the Company's shares of gross box office admissions and may make it more
difficult for the Company's films to succeed.

         The commercial success of the motion pictures produced and/or
distributed by the Company is substantially affected by the public's often
unpredictable response to the motion pictures produced and distributed by it. In
addition, television networks are now producing more programs internally and
thus may reduce such networks' demand for programming from other parties.

         Competitive risks affecting the Company's home entertainment business
include competition among home video formats (e.g., DVD) and with other methods
of distribution, such as video-on-demand, as well as risks associated with
controlling copying and unauthorized distribution of the Company's programs.

Television Stations and Television Broadcast Network

         The network television broadcasting business is highly competitive. FOX
directly competes for programming and for viewers with ABC, NBC, CBS, and the WB
and UPN networks. ABC, NBC and CBS each broadcasts a significantly greater
number of hours of programming than FOX and accordingly, may be able to
designate or change time periods in which programming is to be broadcast with
greater flexibility than FOX. FOX also competes with other non-network sources
of



                                       15

<PAGE>

television service, including cable television and DBS services. Other sources
of competition may include home video exhibition, the Internet and home computer
usage. In addition, future technological developments may affect competition
within the television marketplace.

         FOX competes for advertising revenues with the other broadcast
networks, as well as with all other forms of advertising. Each of ABC, NBC and
CBS has a greater number of affiliates with VHF signals, which are generally
considered to have greater reach in their markets and, therefore, more appealing
to advertisers.

         In addition, each of the Fox Television Stations competes for audiences
and advertising revenues with radio and television stations and cable systems in
its market area and with other advertising media such as newspapers, magazines,
outdoor advertising, direct mail and Internet websites. All of the Fox
Television Stations are located in highly competitive markets. Additional
elements which are material to the competitive position of television stations
include management experience, authorized power and assigned frequency.
Competition for sales of broadcast advertising time is based primarily on the
anticipated and actually delivered size and demographic characteristics of
audiences as determined by various rating services, price, the time of day when
the advertising is to be broadcast, competition from the other broadcast
networks, cable television systems, DBS services and other media and general
economic conditions. Competition for audiences is based primarily on the
selection of programming, the acceptance of which is dependent on the reaction
of the viewing public which is often difficult to predict.

Cable Network Programming

         General

         The cable network programming business is another highly competitive
field. Cable programming services compete for distribution and, when
distribution is obtained, compete for viewers and advertisers with over-the-air
broadcast television, radio, print media, motion picture theaters,
videocassettes and other sources of information and entertainment. Important
competitive factors are the prices charged for programming, the quantity,
quality and variety of programming offered and the effectiveness of marketing
efforts. More generally, the Company's cable networks compete with various other
leisure-time activities such as home videos, movie theaters, personal computers
and other alternative sources of entertainment and information.

         Sports Programming

         A number of basic and pay television programming services (such as
ESPN) as well as free over-the-air stations and broadcast networks provide
programming that targets the Fox Sports RSNs' audience. Fox Sports Net is
currently the only programming service distributing a full range of sports
programming on both a national and regional level. On a national level, Fox
Sports Net's primary competitor is ESPN, and to a lesser extent, ESPN2. In
regional markets, the Company's RSNs compete with other regional sports
networks, including those operated by team owners and other sports programming
providers and distributors.

         In addition, the Fox Sports RSNs and Fox Sports Net compete, to varying
degrees, for sports programming rights. The Fox Sports RSNs compete for local
and regional rights with local broadcast television stations, other local and
regional sports networks and the owners of distribution outlets such as cable
television systems. Fox Sport Net competes for national rights principally with
the national broadcast television networks, a number of national cable services
that specialize in or carry



                                       16

<PAGE>

sports programming, and television "superstations," which distribute sports and
other programming to cable television systems by satellite, and with independent
syndicators that acquire and resell such rights nationally, regionally and
locally. The owners of distribution outlets such as cable television systems may
also contract directly with the sports teams in their service area for the right
to distribute a number of such teams' games on their systems. The owners of
teams may also launch their own regional sports network and contract with cable
television systems for carriage. In certain markets, the owners of distribution
outlets, such as cable television systems, also own one or more of the
professional teams in the region, increasing their ability to launch competing
networks and thereby limiting the professional sports rights available for
acquisition by the Company's RSNs.

         FX

         A number of basic and pay television programming services (such as USA
Network and Turner Network Television) as well as free over-the-air broadcast
networks provide programming that targets the same viewing audience as FX. FX
faces competition in the acquisition of distribution rights to programming.

         Fox News Channel

         Fox News Channel's primary competition comes from cable networks CNN,
MSNBC, CNBC and Headline News. Fox News also competes for viewers and
advertisers within a broad spectrum of television networks, including other
cable networks and over-the-air broadcast television.

Regulation

Filmed Entertainment

        FFE is subject to the provisions of so-called "trade practice laws" in
effect in 25 states relating to theatrical distribution of motion pictures.
These laws substantially restrict the licensing of motion pictures unless
theater owners are first invited to attend a screening of such motion pictures
and, in certain instances, also prohibit payment of advances and guarantees to
motion picture distributors by exhibitors. Further, pursuant to various consent
judgments, FFE and certain other motion picture companies are subject to certain
restrictions on their trade practices in the U.S., including a requirement to
offer motion pictures for exhibition to theaters on a theater-by-theater basis
and, in some cases, a prohibition against the ownership of theaters.

Television Stations and Television Broadcast Network

        In general, the television broadcast industry in the U.S. is highly
regulated by Federal laws and regulations issued and administered by various
Federal agencies, including the FCC. The FCC regulates television broadcast
stations pursuant to the Communications Act of 1934, as amended (the
"Communications Act"). The Communications Act permits the operation of
television broadcast stations only in accordance with a license issued by the
FCC upon a finding that grant of the license would serve the public interest,
convenience and necessity. The FCC grants television broadcast station licenses
for specific periods of time and, upon application, may renew the licenses for
additional terms. Under the Communications Act, television broadcast licenses
may be granted for a maximum permitted term of eight years. Generally, the FCC
renews broadcast licenses upon finding that (i) the television station has
served the public interest, convenience and necessity, (ii) there have been no
serious violations by the licensee of the Communications Act or FCC rules and
regulations; and (iii) there have been no other violations by the licensee of
the Communications Act or FCC rules and regulations which, taken together,
indicate a pattern of abuse. After considering these factors, the



                                       17

<PAGE>

        FCC may grant the license renewal application with or without
conditions, including renewal for a term shorter than the maximum otherwise
permitted, or hold an evidentiary hearing.

        In February 1998, the FCC adopted a final table of digital channel
allotments and rules for the implementation of digital television ("DTV")
service (including high-definition television) in the United States. The digital
table of allotments provides each existing full power television station
licensee or permittee, including the 35 Fox Television Stations, with a second
broadcast channel in order to facilitate a transition from analog to digital
transmission, conditioned upon the surrender of one of the channels at the end
of the DTV transition period. Thirty-three of the Fox Television Stations have
launched digital facilities. The FCC granted the remaining 2 Fox Television
Stations an extension until May 1, 2003 to complete and launch their digital
facilities. Under FCC rules, television stations may use their second channel to
broadcast either one or two streams of "high definition" digital programming or
to "multicast" several streams of standard definition digital programming or a
mixture of both. Broadcasters may also deliver data over these channels,
provided that such supplemental services do not derogate the mandated, free
over-the-air program service. The Company is currently formulating plans for use
of its digital channels. It is difficult to assess how digital television will
affect the Company's broadcast business with respect to other broadcasters and
video program providers.

        Under the Communications Act, a broadcast license may not be granted to
or held by any corporation that has more than one-fifth of its capital stock
owned or voted by non-U.S. citizens or entities or their representatives, by
foreign governments or their representatives, or by non-U.S. corporations. The
Communications Act further provides that no FCC broadcast license may be granted
to any corporation directly or indirectly controlled by any other corporation of
which more than one-fourth of its capital stock is owned of record or voted by
non-U.S. citizens if the FCC finds the public interest will be served by the
refusal of such license. In 1995, the FCC acknowledged that News Corporation
owns the vast preponderance of equity of the corporate parent of the Fox
Television Stations. The FCC also concluded that Mr. K. Rupert Murdoch, Chairman
and Chief Executive of News Corporation, a U.S. citizen, controls the corporate
licensee and thus found the level of alien equity to be consistent with the
public interest. Mr. Murdoch has 76% voting control of Fox Television Holdings,
Inc., the corporate parent of the Fox Television Stations, and News Corporation
will continue to hold indirectly stock representing the majority of equity of
the corporate licensee. The Restated Certificate of Incorporation of Fox
Television Holdings, Inc. provides that the voting capital stock of the company
shall only be owned by persons who are citizens of, or incorporated entities
formed in, the United States, or would not otherwise disqualify such company or
any subsidiary of such company from being issued a television broadcast license
by the FCC.

         In 1999 the FCC relaxed the rules that govern the ownership of two
television stations, or a television station and a radio station, located in the
same market (the "Local Restriction") to (i) permit the ownership of two
television stations with overlapping coverage areas if the stations are in
separate DMAs; (ii) permit common ownership of two stations in the same DMA if
their Grade B coverage areas do not overlap or if eight independently owned full
power television stations will remain after the stations which had been
independently owned become commonly owned (which is referred to by the FCC as a
"merger"), and one of the merged stations is not among the top four-ranked
stations in the market, based on audience share. The FCC also relaxed the Local
Restriction to permit some degree of same-market radio and television joint
ownership. These changes in the FCC ownership restrictions permitted Fox
Television Stations to acquire second television stations in nine markets,
including in New York, Los Angeles and Chicago.

        FCC rules permit a party to have an attributable ownership interest in
an unlimited number of television stations nationally so long as the audience
reach of such stations does not exceed, in the



                                       18

<PAGE>

aggregate and after application of the UHF Discount, 35% of U.S. television
households (the "National Restriction"). Pursuant to Congressional directive,
the FCC conducted a formal review of all its broadcast ownership rules and on
June 20, 2000, released a decision in which it refused to modify the National
Restriction and retained the UHF Discount. Fox Television Stations successfully
appealed the FCC's decision to retain the National Restriction and the Court
remanded the rule to the FCC for further review. The FCC has announced it will
reevaluate the National Restriction, as well as the Local Restriction, the dual
network rule and the newspaper/broadcast cross-ownership rule, as part of an
omnibus FCC review of all its media ownership restrictions that is scheduled to
commence in September 2002. It is not possible to predict the timing or outcome
of the omnibus proceeding or effect of other changes in FCC rules or policies
pursuant to the 1996 Telecom Act or pending FCC proceedings.

        On July 21, 2000, the FCC adopted a rule requiring broadcasters and
multichannel video programming distributors ("MVPDs") to supply "video
descriptions" of their programming. The rule became effective on April 1, 2002.
Video descriptions, which are transmitted on a separate audio channel and are
accessible through a decoding device attached to TV sets, are narrative
descriptions of a program's visual aspects and are intended for the visually
impaired. The FCC's rules require stations located in the top 25 DMAs and
affiliated with one of the major television networks, including Fox, to provide
video descriptions for at least 50 hours of prime time and/or children's
programming per calendar quarter. The rules also require MVPDs with 50,000 or
more subscribers to provide 50 hours per calendar quarter of prime time and/or
children's programming with video descriptions on each of the top five national
non-broadcast networks they carry. Every two years beginning in 2000, FCC
regulations also require increased amounts of closed captioning.

        FCC regulations implementing the 1992 Cable Act require each television
broadcaster to elect, at three-year intervals, either to (i) require carriage of
its signal by cable systems in the station's market ("must carry") or (ii)
negotiate the terms on which such broadcast station would permit transmission of
its signal by the cable systems within its market ("retransmission consent").
The FCC has initiated a rulemaking proceeding to determine carriage requirements
for digital broadcast television signals on cable systems, including carriage
during the period of transition from analog to digital transmission. The
Satellite Home Viewer Improvement Act of 1999 ("SHVIA") requires satellite
carriers, by January 1, 2002, to carry upon request all television stations
located in markets in which the satellite carrier retransmits at least one local
station pursuant to the statutory copyright license provided by SHVIA. FCC
regulations implementing this statutory provision require affected stations to
either elect mandatory carriage at the same three year intervals applicable to
cable must carry or to negotiate carriage terms with satellite operators.

        Federal legislation enacted in 1990 limits the amount of commercial
matter that may be broadcast during programming designed for children 12 years
of age and younger. In addition, under FCC license renewal processing
guidelines, television stations are generally required to broadcast a minimum of
three hours per week of programming, which, among other requirements, must have,
as a "significant purpose," the educational and informational needs of children
16 years of age and under. A television station found not to have complied with
the programming requirements or commercial limitations could face sanctions,
including monetary fines and the possible non-renewal of its license. The FCC
has indicated its intent to enforce its children's television rules strictly.

        The FCC continues to enforce strictly its regulations concerning
"indecent" programming, political advertising, environmental concerns, technical
operating matters and antenna tower maintenance. In addition, FCC regulations
governing network affiliation agreements mandate that television broadcast
station licensees retain the right to reject or refuse network programming in
certain circumstances or to substitute programming that the licensee reasonably
believes to be of


                                       19

<PAGE>

greater local or national importance. Violation of FCC regulations can result in
substantial monetary forfeitures, periodic reporting conditions, short-term
license renewals and, in egregious cases, denial of license renewal or
revocation of license.

Cable Network Programming

         FCC regulations adopted pursuant to the 1992 Cable Act prevent a cable
operator that has an attributable interest (including voting or non-voting stock
ownership of 5% or more or limited partnership equity interests of 5% or more)
in a programming vendor from exercising undue or improper influence over the
vendor in its dealings with competitors to cable. The regulations also prohibit
a cable programmer in which a cable operator has an attributable interest from
entering into exclusive contracts with any cable operator or from discriminating
among competing multichannel program distributors in the price, terms and
conditions of sale or delivery of programming. With respect to cable systems
having channel capacity of less than 76 channels, the FCC's regulations limit to
40% the number of programming channels that may be occupied by video programming
services in which the cable operator has an attributable interest. As a result
of Liberty's ownership interest in News Corporation, cable networks operated by
the Fox Cable Networks Group and Fox News Channel are subject to these
requirements. Similarly, Cablevision is deemed to have an attributable interest
in RPP. The FCC's program access and non-discrimination regulations therefore
restrict the ability of these cable programming services to enter into exclusive
contracts. The rules also permit multichannel video programming distributors
(such as multi-channel multi-point distribution services ("MMDS"), satellite
master antenna televisions ("SMATV"), DBS and direct-to-home operators) to bring
complaints against the Company to the FCC charging they are unable to obtain the
affected programming networks on nondiscriminatory terms. While cable systems
are expanding their capacity, there may be instances in which a Cablevision
cable system with 75 channels or less will not be able to carry an RPP channel
or will have to remove another affiliated channel.

         The FCC's regulations concerning the commercial limits in children's
programs and political advertising also apply to certain cable television
programming services carried by cable system operators. The Company must provide
program ratings information and increased closed captioning of its cable
programming services to comply with FCC regulations, which could increase its
operating expenses.

Internet

         The Children's Online Privacy Protection Act of 1998 ("COPPA")
prohibits web sites from collecting personally identifiable information online
from children under age 13 without prior parental consent. Online services
provided by the Company may be subject to COPPA requirements. Congress and
individual states may also consider online privacy legislation that would apply
to personal information collected from teens and adults.

ITEM 2.  PROPERTIES

         The Company maintains executive offices and certain of its operations
in each of its business segments, at 1211 Avenue of the Americas, New York, New
York. These offices cover approximately 284,000 square feet and are provided by
News Corporation, which maintains executive offices at such location.

          The Company owns the Fox Studios Lot at 10201 West Pico Boulevard, Los
Angeles, California, which consists of approximately 54 acres containing 15
sound stages, production facilities,


                                       20

<PAGE>

administrative, technical and dressing room structures, screening theaters and
machinery equipment facilities and three restaurants. The Company also leases
approximately 320,000 square feet of office space at Fox Plaza, located adjacent
to the Fox Studios Lot. Each of the Company's business segments, other than the
Television Stations segment, utilizes space at the Fox Studios Lot and Fox
Plaza. The Company owns a studio facility in Rosarito, Mexico, which consists of
approximately 37 acres containing office space, production facilities and the
largest fresh and saltwater tanks used in motion picture production in the
world. Fox Studios Australia has a lease expiring in 2036, with an option to
renew for 10 years, over a 35 acre film and television production facility with
industry related commercial office space in Sydney, Australia. Adjacent to that
facility is a cinema and retail complex of approximately 25 acres which is
leased by a 50/50 joint venture between the Company and Lend Lease Corporation
for the same term.

         The Company owns Dodger Stadium, which is situated on approximately 275
acres in Los Angeles. The Company is a party to a sale-leaseback arrangement
with civic authorities for Dodgertown, the Dodgers' 64 acre spring training
facility, and has entered into agreements to sell most of the adjacent 400 acre
property in Vero Beach, Florida.

         The Company also owns and leases office space, broadcast and production
facilities and other ancillary support properties in various cities in the
United States and several countries around the world for its businesses. The
Company considers its properties adequate for its present needs.

ITEM 3.  LEGAL PROCEEDINGS

         The Company experiences routine litigation in the normal course of its
business. The Company believes that none of its pending litigation will have a
material adverse effect on its consolidated financial condition, future results
of operations or liquidity.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  Not applicable.



                                       21

<PAGE>

                 Directors and Executive Officers of the Company

         Set forth below is certain information concerning the directors and
executive officers of the Company as of September 18, 2002, which information is
hereby included in Part I of this report.

The Directors and Executive Officers of the Company are as follows:

         Name         Age                         Position
         ----         ---                         --------
K. Rupert Murdoch     71       Director, Chairman and Chief Executive Officer
Peter Chernin         51       Director, President, Chief Operating Officer
David F.  DeVoe       55       Director, Senior Executive Vice President,
                               Chief Financial Officer

Lachlan K. Murdoch    30       Director
Arthur M. Siskind     63       Director, Senior Executive Vice President,
                               General Counsel
Christos M. Cotsakos  54       Director
Thomas W. Jones       53       Director

         All of the Executive Officers of the Company are also executive
officers of News Corporation. As executive officers of News Corporation, the
Executive Officers of the Company continue to render services to News
Corporation.

     There is no family relationship between any Director or Executive Officer
of the Company and any other Director or Executive Officer of the Company except
that Lachlan K. Murdoch is a son of K. Rupert Murdoch.

         The Senior Executives of the Company (in addition to persons identified
as Executive Officers above) are as follows:

         Name          Age                        Position
         ----          ---                        --------
Roger Ailes            62     Chairman and Chief Executive Officer of Fox
                              News Channel
James N. Gianopulos    50     Chairman of Fox Filmed Entertainment
Sandy Grushow          42     Chairman of the Fox Television Entertainment Group
David Hill             56     Chairman and Chief Executive Officer of Fox
                              Sports Television Group

Thomas E. Rothman      47     Chairman of Fox Filmed Entertainment
Mitchell Stern         48     Chairman and Chief Executive Officer of Fox
                              Television Stations

Anthony J. Vinciquerra 48     President and Chief Executive Officer of the Fox
                              Networks Group

Backgrounds of Directors, Executive Officers and Senior Executives

     K. Rupert Murdoch has been a Director of the Company since 1985, Chairman
since 1992 and Chief Executive Officer of the Company since 1995. Mr. Murdoch
has been Chairman of the Board of Directors of News Corporation since 1991, and
Director and Chief Executive of News Corporation


                                       22

<PAGE>

since its formation in 1979. Mr. Murdoch has served as a Director of News
Limited, News Corporation's principal subsidiary in Australia, since 1953, a
Director of News International plc, News Corporation's principal subsidiary in
the United Kingdom, since 1969, and a Director of News America Incorporated,
News Corporation's principal subsidiary in the United States ("NAI"), since
1973. Mr. Murdoch has served as a Director of STAR since 1993 and as Chairman
from 1993 to 1998, as a Director of British Sky Broadcasting Group plc ("BSkyB")
since 1990 and Chairman since June 1999. Mr. Murdoch is also a member of the
board of directors of Gemstar-TV Guide International, Inc. ("Gemstar") and China
Netcom Corporation (Hong Kong) Limited.

         Peter Chernin has been a Director and President and Chief Operating
Officer of the Company since 1998. Mr. Chernin has been a Director, President
and Chief Operating Officer of News Corporation and a Director, Chairman and
Chief Executive Officer of NAI, since 1996. Mr. Chernin was Chairman and Chief
Executive Officer of FFE from 1994 until 1996, Chairman of Twentieth Century Fox
Film Corporation from 1992 until 1994 and President of FOX from 1989 until 1992.
Mr. Chernin served as a Director of TV Guide, Inc. from 1999 until July 2000 and
has served as a director of Gemstar since April 2002. Mr. Chernin has served on
the Advisory Board of PUMA AG since 1999, and as a Director of E*TRADE Group,
Inc. since 1999.

         David F. DeVoe has been a Director of the Company since 1991 and Senior
Executive Vice President and Chief Financial Officer of the Company since 1998.
Mr. DeVoe has been a Director, Chief Financial Officer and Finance Director of
News Corporation since 1990 and Senior Executive Vice President of News
Corporation since 1996. Mr. DeVoe was an Executive Vice President of News
Corporation from 1990 until 1996. Mr. DeVoe has been a Director of NAI since
1991 and a Senior Executive Vice President since January 1998. Mr. DeVoe served
as Executive Vice President of NAI from 1991 to 1998. Mr. DeVoe has been a
Director of Gemstar since 2001, NDS Group plc since 1996, STAR since 1993 and
BSkyB since 1994.

         Lachlan K. Murdoch has been a Director of the Company since February
2002. Mr. Murdoch has been an Executive Director of News Corporation since 1996
and Deputy Chief Operating Officer since 2000. Mr. Murdoch served as a Senior
Executive Vice President of News Corporation from 1999 until 2000. Mr. Murdoch
has been a Director of News Limited since 1995, Chairman since 1997 and served
as Chief Executive from 1997 to 2000, Managing Director from 1996 until 1997 and
Deputy Chief Executive from 1995 to 1996. Mr. Murdoch has served as Chairman of
Queensland Press Limited since 1996 and a Director since 1994. Mr. Murdoch has
been Deputy Chairman of STAR since 1995. Mr. Murdoch has been a Director of NDS
Group since February 2002, a Director of Gemstar since 2001, a Director of
Beijing PDN Xiren Information Technology Co. Ltd. since 1996 and a Director of
FOXTEL Management since 1998.

         Arthur M. Siskind has been a Director and Senior Executive Vice
President and General Counsel of the Company since 1998. Mr. Siskind has been a
Director and Group General Counsel of News Corporation since 1991 and a Senior
Executive Vice President of News Corporation since 1996. Mr. Siskind served as
Executive Vice President of News Corporation from 1991 until 1996. Mr. Siskind
has been a Director of NAI since 1991 and a Senior Executive Vice President
since 1998. Mr. Siskind served as an Executive Vice President of NAI from 1991
to 1998. Mr. Siskind has been a Director of NDS Group plc since 1996, STAR since
1993 and BSkyB since 1992. Mr. Siskind has been a member of the Bar of the State
of New York since 1962.

         Christos M. Cotsakos has been a Director of the Company since 1999. Dr.
Cotsakos has been President, Chief Executive Officer and a Director of E*TRADE
Group, Inc. since 1996 and Chairman if its Board of Directors since 1998. Prior
to joining E*TRADE Group, Inc., he served as President,


                                       23

<PAGE>

Co-Chief Executive Officer, Chief Operating Officer and a
Director of A.C Nielsen, Inc. from 1995 to 1996, as President and Chief
Executive Officer of Nielsen International from 1993 to 1995, and as President
and Chief Operating Officer of Nielsen Europe, Middle East and Africa from 1992
to 1993.

         Thomas W. Jones has served as a Director of the Company since 2001. Mr.
Jones has been the Chairman and Chief Executive Officer of Citigroup Global
Investment Management since 1999. He is also Chairman and Chief Executive
Officer of Citigroup Asset Management. Mr. Jones served as Executive Vice
President of Finance and Planning, and Chief Financial Officer for TIAA-CREF
between 1989 and1993, President and Chief Operating Officer from 1993 to 1997
and Vice Chairman and Director from 1995 to 1997, when he joined Travelers Group
as Vice Chairman and Director. He is also a Director of Federal Home Loan
Mortgage Corporation, Philip Morris Companies Inc. and a Trustee of Cornell
University.

         Roger Ailes has served as Chairman and Chief Executive Officer of Fox
News Channel since 1996. Prior to joining Fox News in 1996, Mr. Ailes was
President of CNBC since 1993 and also served as President of America's Talking,
an information talk channel that later became MSNBC.

         James N. Gianopulos has been Chairman of FFE since July 2000. He shares
the position with Thomas E. Rothman. Mr. Gianopulos was President of Twentieth
Century Fox International from 1994 until July 2000 overseeing both the
Theatrical and the Home Entertainment units. Mr. Gianopulos was President of
International and Pay Television for Twentieth Century Fox from 1992 to 1994.
Mr. Gianopulos serves on the boards of the USC Entertainment Technology
Committee and KCRW for National Public Radio.

         Sandy Grushow has served as Chairman of the Fox Television
Entertainment Group, overseeing both the FOX broadcast network and Twentieth
Century Fox Television since 1999. Mr. Grushow served as President of Twentieth
Century Fox Television from 1997 until 1999. From 1995 to 1997, Mr. Grushow was
President of TELE-TV, an interactive television and broadband programming
service. Prior to joining TELE-TV, Mr. Grushow was President of the Fox
Television Network Entertainment Group from 1992 until 1994.

         David Hill has served as Chairman and Chief Executive Officer of Fox
Sports Television Group since 1999. Mr. Hill served as Chairman and Chief
Executive Officer of FOX from 1997 until 1999 and served as President of Fox
Sports, a division of Fox Television, from 1993 to 1999. From 1996 until 1997,
Mr. Hill has served as Chief Operating Officer of Fox Television. In addition,
Mr. Hill has served as Chairman of Fox Sports Networks since 1996. From 1996
through 1997, Mr. Hill also served as the Chief Executive Officer of Fox Sports
Networks.

         Thomas E. Rothman has been Chairman of FFE since July 2000. He shares
the position with James N. Gianopulos. Mr. Rothman previously served as
President of Twentieth Century Fox Film Group from January to August 2000, and
was President of Twentieth Century Fox Production from 1995 to 2000. In 1994, he
was the founder and first President of Fox Searchlight Pictures. Mr. Rothman
also serves as a member of the board of directors of the Sundance Institute.

         Mitchell Stern has been Chairman and Chief Executive Officer of Fox
Television Stations since 1998. Mr. Stern was President and Chief Operating
Officer of Fox Television Stations, Inc. from 1993 to 1998.

         Anthony J. Vinciquerra has served as President and Chief Executive
Officer of the Fox Networks Group since June 2002. Mr. Vinciquerra joined the
Company in December 2001 as


                                       24

<PAGE>

         President of the FOX Television Network. Prior to joining the Company,
Mr. Vinciquerra served as Executive Vice President and Chief Operating Officer
of Hearst-Argyle Television since 1999. Mr. Vinciquerra joined Hearst
Corporation's broadcasting group as Group Executive in 1997 and became Executive
Vice President of Hearst-Argyle later that year.

PART II

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS

         The Company's Class A Common Stock is listed and traded on the New York
Stock Exchange under the symbol "FOX". As of August 23, 2002, there were
approximately 877 holders of record of the Company's Class A Common Stock.

         The following table sets forth, for the periods indicated, the high and
low closing sale prices per share of the Company's Class A Common Stock.

  Fiscal 2001                                High                 Low
  -----------                                ----                 ---
   First Quarter                             $ 34.00            $ 25.88
   Second Quarter                            $ 25.25            $ 15.81
   Third Quarter                             $ 24.15            $ 17.88
   Fourth Quarter                            $ 29.28            $ 19.20

   Fiscal 2002                               High               Low
   -----------                               ----               ---
   First Quarter                             $ 27.95            $ 18.00
   Second Quarter                            $ 27.25            $ 18.73
   Third Quarter                             $ 26.70            $ 20.10
   Fourth Quarter                            $ 26.97            $ 20.27

   Fiscal 2003                               High               Low
   -----------                               ----               ---
   First Quarter (through August 23, 2002)   $ 23.05            $ 17.10

         The Company has never declared or paid cash dividends on its Class A
Common Stock and it is the Company's present intention to retain earnings to
finance the expansion of its business.



                                       25

<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

         The selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the related Notes
thereto and the other financial information included elsewhere herein.

<TABLE>
<CAPTION>
                                                                              FOR THE YEAR ENDED JUNE 30,
                                                            ------------------------------------------------------------
                                                                2002 (2)    2001 (3)    2000 (4)     1999 (5)   1998 (5)
                                                            ----------- ----------- ----------- ----------- ------------
<S>                                                      <C>         <C>          <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:                                            (in millions, except per share data)

  Revenues /1/                                              $  9,725    $  8,414    $  8,517    $   8,013   $  6,990

  Operating (loss) income                                       (103)        652         656          716        663
  Income before cumulative effect of accounting
   change                                                        607         206         145          205        176

  Net income (loss)                                              581        (288)        145          205        176

  Basic and diluted earnings per share before
   cumulative effect of accounting change                   $   0.72    $   0.28    $   0.20    $    0.33   $   0.32
  Basic and diluted earnings (loss) per share               $   0.69    $  (0.40)   $   0.20    $    0.33   $   0.32



                                                                                     AS OF JUNE 30
                                                            ------------------------------------------------------------
                                                                2002        2001        2000         1999       1998
                                                            ----------- ----------- ----------- ----------- ------------
BALANCE SHEET DATA:                                                                  (in millions)
  Cash and cash equivalents                                 $     56    $     66    $    114    $     121   $    101
  Total assets                                                22,876      17,856      17,930       13,163     12,630
  Due to affiliates of News Corporation                        1,413       2,866       2,739        1,389      3,702
  Borrowings                                                     942       1,032         974           53        375
  Shareholders' equity                                        12,095       7,968       8,246        6,668      3,941
</TABLE>



   FOOTNOTES:

(1)  In January 2002, the Company adopted Emerging Issues Task Force No.
     01-09, "Accounting for the Consideration Given by a Vendor to a
     Customer or a Reseller of the Vendor's Products," which was effective
     for the Company as of January 1, 2002. As required, the Company has
     reclassified the amortization of cable distribution investments
     against revenues for all periods presented. The amortization of cable
     distribution investments had previously been included in Depreciation
     and amortization. Operating income, Net income and Earnings per share
     are not affected by this reclassification. This reclassification
     affects the Company's and the Cable Network Programming segment's
     revenues. The effect of the reclassification on the Company's
     revenues is as follows:
<TABLE>
<CAPTION>
                                                                           For the year ended June 30,
                                                       -----------------------------------------------------------
                                                         2002        2001        2000         1999       1998
                                                      ----------- ----------- ----------- ----------- -----------
                                                                        (in millions)
<S>                                                 <C>         <C>         <C>      <C>        <C>
     Gross Revenues                                   $  9,841    $  8,504    $  8,589    $  8,057    $  7,023
     Amortization of cable distribution
      investments                                         (116)        (90)        (72)        (44)        (33)
                                                      ----------- ----------- ----------- ----------- -----------
     Revenues                                         $  9,725    $  8,414    $  8,517    $  8,013    $  6,990
                                                      =========== =========== =========== =========== ===========
</TABLE>

(2)  Fiscal 2002 includes the operating results of Chris-Craft Industries, Inc.,
     which was acquired in July 2001, and the $909 million write-down on the
     Company's national sports contracts. Also included in Fiscal 2002 Net
     income (loss) and Basic and diluted earnings (loss) per share is the
     pre-tax gain of $1.4 billion on the sale of the Company's interest in Fox
     Family Worldwide, Inc. ("FFW") and the Company's $26 million share of FFW's
     after-tax cumulative effect of accounting change relating to the adoption
     of Statement of Position No. ("SOP") 00-2.

(3)  Fiscal 2001 Net income (loss) and Basic and diluted earnings (loss) per
     share include the impact of the after-tax charge of $494 million for the
     cumulative effect of accounting change relating to the Company's adoption
     of SOP 00-2.

                                       26

<PAGE>

(4)  Fiscal 2000 includes the operating results of Fox Sports Networks, LLC,
     which was fully acquired in July 1999.


(5)  The financial statements prior to November 11, 1998 were presented on a
     combined basis. The financial statements presented subsequent to November
     11, 1998 are consolidated to reflect the Reorganization (as defined in Note
     1 of the Notes to the Consolidated Financial Statements). For reporting
     purposes, the financial statements for all periods are collectively
     referred to as Consolidated Financial Statements.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

General

The following discussion and analysis of the Fox Entertainment Group, Inc.'s
(the "Company") financial condition and results of operations should be read in
conjunction with the Consolidated Financial Statements and the related Notes
thereto included elsewhere herein.

The Company manages and reports its businesses in four segments: Filmed
Entertainment, which principally consists of the production and acquisition of
live-action and animated motion pictures for distribution and licensing in all
formats in all entertainment media worldwide and the production of original
television programming; Television Stations, which principally consist of the
operation of broadcast television stations; Television Broadcast Network, which
principally consists of the broadcasting of network programming; and Cable
Network Programming, which principally consists of the production and licensing
of programming distributed through cable television systems and direct broadcast
satellite ("DBS") operators and professional sports team ownership.

In the first quarter of fiscal 2002, management redefined its Filmed
Entertainment segment to reflect a change in how the business is analyzed and
evaluated. The redefined segment includes all activities previously included in
the Filmed Entertainment segment along with the activity of the former Other
Television Businesses segment, primarily comprised of divisions, which produce
and distribute television programming and also distribute feature motion
pictures. Prior year segments have been reclassified to conform to the current
year presentation.

Sources of Revenue

Filmed Entertainment. The Filmed Entertainment segment derives revenue from
theatrical distribution, home video and DVD sales and distribution through
pay-per-view, pay television services and broadcast television. The revenues and
operating results of the Filmed Entertainment segment are significantly affected
by the timing of the Company's theatrical, home video and DVD releases, the
number of its original and returning television series that are aired by
television networks and the number of its television series on off-network
syndication. Theatrical release dates are determined by several factors,
including timing of vacation and holiday periods and competition in the
marketplace. Each motion picture is a separate and distinct product, and its
financial success depends upon many factors, including public acceptance.

Television Stations and Television Broadcast Network. The two reportable
television segments derive their revenues principally from the sale of
advertising time. Generally, advertising time is sold to national advertisers by
the Fox Broadcasting Company ("FOX") and to national "spot" and local
advertisers by the Company's group of 34 owned and operated full power
television broadcast stations ("O&Os"), as of June 30, 2002, in their respective
markets. The sale of advertising time is affected by viewer demographics,
program ratings and general market conditions. Adverse changes in the general
market conditions for advertising may affect revenues.

Cable Network Programming. The Cable Network Programming segment derives
revenues from monthly affiliate fees based on the number of subscribers, net of
the amortization of cable distribution investments, as well as from the sale of
advertising time. Monthly affiliate fees are dependent on maintenance of
carriage arrangements with cable television systems and DBS operators. The sale
of advertising time is affected by viewer demographics, program ratings and
general market conditions.

                                       27

<PAGE>

Adverse changes in general market conditions for advertising may affect
revenues.

In November 2001, the Financial Accounting Standards Board ("FASB") issued
Emerging Issues Task Force No. ("EITF") 01-09, "Accounting for the Consideration
Given by a Vendor to a Customer or a Reseller of the Vendor's Products," which
was effective for the Company as of January 1, 2002. This EITF, among other
things, codified the issues and examples of EITF No. 00-25, "Vendor Income
Statement Characterization of Consideration Paid to a Reseller of the Vendor's
Products." EITF No. 00-25 states that customer incentives which consist of the
amortization of cable distribution investments (capitalized fees paid to a cable
or DBS operator to facilitate the launch of a cable network), should be
presented as a reduction in revenue. As required, the Company has reclassified
the amortization of cable distribution investments against revenues for all
periods presented. The amortization of cable distribution investments had
previously been included in Depreciation and amortization. Operating income, Net
income and Earnings per share are not affected by this reclassification. This
reclassification affects the Company's and the Cable Network Programming
segment's revenues. The effect of the reclassification on the Company's revenues
is as follows:
<TABLE>
<CAPTION>
                                                            For the year ended June 30,
                                                      ------------------------------------
                                                          2002         2001        2000
                                                      ------------  ----------  ----------
                                                                  (in millions)
<S>                                                   <C>         <C>         <C>
Gross Revenues                                          $   9,841   $   8,504   $   8,589
Amortization of cable distribution investments               (116)        (90)        (72)
                                                      ------------  ----------  ----------
Revenues                                                $   9,725   $   8,414   $   8,517
                                                      ============  ==========  ==========
</TABLE>

Components of Expenses

Filmed Entertainment. Operating costs incurred by the Filmed Entertainment
segment include exploitation costs, primarily prints and advertising; the
amortization of capitalized production, overhead and interest costs; and
participations and talent residuals. Selling, general and administrative
expenses include salaries, employee benefits, rent and other routine overhead.

Television Stations, Television Broadcast Network and Cable Network Programming.
Operating expenses of the two reportable television segments and the Cable
Network Programming segment include expenses related to acquiring programming
and rights to programming. Operating expenses also typically include production
and technical expenses related to operating the technical facilities of the
broadcaster or cable network. Selling, general and administrative expenses
include all promotional expenses related to improving the market visibility and
awareness of the broadcaster or cable network and sales commissions paid to the
in-house sales force involved in the sale of advertising as well as salaries,
employee benefits, rent and other routine overhead. Depreciation and
amortization expense includes the amortization of acquired intangible assets.

Other Operating Charge. The Company has several multi-year sports rights
agreements, including a contract with the National Football League ("NFL")
through fiscal year 2006, contracts with the National Association of Stock Car
Auto Racing ("NASCAR") through fiscal year 2013 and a contract with Major League
Baseball ("MLB") through fiscal year 2007. These contracts provide the Company
with the broadcast rights to certain national sporting events during their
respective terms. The NFL and NASCAR contracts contain certain early termination
clauses that are exercisable by the NFL and NASCAR.

The Company continually evaluates the recoverability of the rights costs against
the revenues directly associated with the program material and related direct
expenses over the expected contract lives. At December 31, 2001, the Company
recorded an Other operating charge of $909 million. This charge related to a
change in accounting estimate on the Company's national sports rights agreements
caused by the downturn in the advertising market, which caused the Company to
write off programming costs inventory and to provide for estimated losses on
these contracts over their estimated terms. This evaluation considered the
severe downturn in sports-related advertising, the lack of any sustained

                                       28

<PAGE>

advertising rebound subsequent to September 11th and the industry-wide reduction
of projected long-term advertising growth rates, all of which resulted in the
Company's estimate of future directly attributable revenues associated with
these contracts being lower than previously anticipated. Because the vast
majority of costs incurred under these contracts are fixed, such as the rights
costs and production costs, the results of these lower revenue estimates
indicated that the Company would generate a loss over the estimated remaining
term of the sports contracts.

In accordance with Accounting Principles Board ("APB") Opinion No. 20,
"Accounting Changes," the Company has determined that the impact of the charge
on Basic and diluted earnings (loss) per share, net of tax benefit of $346
million, for the year ended June 30, 2002 is $0.67 loss per share.

The costs of these sports contracts are charged to expense based on the ratio of
each period's operating profits to estimated total operating profit of the
contract. Considering the provision of $909 million for estimated losses and
absent a difference between the actual future revenues and costs as compared to
the estimated future revenues and costs, no operating profit or loss will be
recognized by the Company over the estimated remaining term of the sports
contracts.

The profitability of these long-term national sports contracts as discussed
above is based on the Company's best estimates at June 30, 2002, of directly
attributable revenues and costs; such estimates may change in the future, and
such changes may be significant. Should revenues decline from estimates applied
at June 30, 2002, an additional loss will be recorded. Should revenues improve
as compared to estimated revenues, then none of the recorded loss will be
restored, but the Company will have a positive operating profit, which will be
recognized over the estimated remaining contract term.

As of June 30, 2002, there have been no significant changes in the Company's
estimates from those employed as of December 31, 2001.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements require us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosures of commitments and contingencies. On
an ongoing basis, the Company evaluates its estimates which are based on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances. The result of these evaluations forms the
basis for making judgments about the carrying values of assets and liabilities
and the reported amount of revenue and expenses that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions. The following accounting policies require significant
management judgments and estimates.

Filmed entertainment and television programming costs. Accounting for the
production and distribution of motion pictures and television programming is in
accordance with SOP 00-2, "Accounting by Producers or Distributors of Films"
("SOP 00-2"), which requires management's judgment as it relates to total
revenues to be received and costs to be incurred throughout the life of each
program or its license period. These judgments are used to determine the
amortization of capitalized filmed entertainment and television programming
costs associated with revenues earned and any fair value adjustments.

Filmed Entertainment and television programming costs are amortized in the
statement of operations in the direct proportion that revenues currently
recognized bears to management's estimate of total revenues to be received
throughout the life of each motion picture or television program. Estimates of
revenues are reviewed and reassessed periodically on a title-by-title basis.

The Television Broadcast segment amortizes the costs of multi-year sports
contracts based on the ratio of each period's operating profit earned on the
contract to the estimated total operating profit expected to be

                                       29

<PAGE>

earned over the life of the contract from all segments. Estimates of total
operating profit to be earned over the life of the contract are reviewed
periodically and amortization is adjusted as necessary. Management's estimates
of total operating profit over the life of the contract are primarily dependent
upon their projections of the revenue to be derived from selling advertising
spots in the games and other directly attributed revenue sources as well as
direct selling costs and the direct costs associated with broadcasting the games
or events. At the inception of these contracts and periodically thereafter, the
Company evaluates the recoverability of the costs associated therewith against
the revenues directly associated with the program material and related expenses.

Sales Returns. At the time of sale, the Company records as a reduction of
revenue, the estimated impact of returns, rebates and other incentives. In
determining the estimate of home entertainment product sales that will be
returned, management analyzes historical returns, current economic trends and
changes in customer demand and acceptance of the Company's product. Based on
this information, management reserves a percentage of each dollar of product
sales that provide the customer with the right of return.

Accounts Receivable. The Company continuously monitors its customers' payment
profile and maintains a provision for estimated losses based on its historical
experience and any specific customer issues that have been identified.

Intangible Assets. The Company has a significant amount of intangible assets,
including goodwill, FCC licenses, sports franchises, and other copyright
products and trademarks. Intangible assets acquired in business combinations are
recorded at their estimated fair market value at the date of acquisition.
Goodwill is recorded as the difference between the cost of acquiring an entity
as compared to estimated amounts assigned to their tangible and identifiable
intangible net assets. The judgments made in determining the estimated fair
value assigned to each class of intangible assets acquired as well as their
useful lives can significantly impact net income.

The Company accounts for its business acquisitions under the purchase method of
accounting. The total cost of acquisitions is allocated to the underlying net
assets, based on their respective estimated fair values. The excess of the
purchase price over the estimated fair values of the tangible net assets
acquired is recorded as intangibles. Determining the fair value of assets
acquired and liabilities assumed requires management's judgment and often
involves the use of significant estimates and assumptions, including assumptions
with respect to future cash inflows and outflows, discount rates, asset lives,
and market multiples, among other items.

The Company assesses potential impairment of long-lived assets and identifiable
intangibles under the guidance of Statement of Financial Accounting Standard
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The Company will adopt SFAS No. 142,
"Goodwill and other Intangible Assets", in the first quarter of fiscal year 2003
and does not expect a transitional impairment that will be material to its
consolidated statement of operations.

Income Taxes. The Company has not recorded a valuation allowance to reduce the
amount of our deferred tax assets, as the Company believes that it is more
likely than not that such assets will be realized. In making this estimate,
management has considered future taxable income and ongoing tax planning
strategies in assessing the need for the valuation allowance. In the event that
management determines that it would not be able to realize all or part of the
net deferred tax asset in the future, a valuation allowance would be recorded
against the deferred tax asset with a corresponding charge to income recognized
in the period such determination was made.

Employee Costs. Pension and other postretirement benefits costs and obligations
are dependent on assumptions used in calculating such amounts. These assumptions
include discount rates, health care cost trend rates, benefits earned, interest
cost, expected return on plan assets, mortality rates and other factors. In
accordance with accounting principles generally accepted in the United States,
differences between actual results and assumptions are accumulated and amortized
as part of net periodic pension costs over future periods and, therefore,
generally affect recognized expense and the recorded obligation in future
periods. While management believes that the assumptions used are appropriate,
differences in
                                       30

<PAGE>

actual experience or changes in assumptions may affect the Company's pension and
other postretirement obligations and future expense.

Industry Accounting Practices

Revenue Recognition. Revenues from theatrical distribution of feature films are
recognized on the dates of exhibition. Revenues from home video and DVD
distribution, net of a reserve for estimated returns, together with related
costs, are recognized in the period in which the product is made widely
available for sale by retailers. Revenues from television distribution are
recognized when the motion picture or television program is made available to
the licensee for broadcast. Television advertising revenue is recognized as the
commercials are aired, net of agency commissions. Subscriber fees received from
cable systems and DBS operators are recognized as revenue in the period that
services are provided, net of amortization of cable distribution investments.
Revenues from professional team ownership are recognized on a game-by-game
basis.

Operating Expenses. In accordance with generally accepted accounting principles
("GAAP"), the Company amortizes filmed entertainment and television programming
costs using the individual-film-forecast method. Under the
individual-film-forecast method, such programming costs are amortized for each
film or television program in the ratio that revenue earned in the current
period for such title bears to management's estimate of the total revenues to be
earned over a six year period or operating profits to be realized from all media
and markets for such title. The costs of multi-year national sports contracts
for the Television Broadcast Network segment are charged to expense based on the
ratio of each period's operating profit to estimated total operating profit of
the contract. The costs of sports contracts for the Cable Network Programming
segment and program rights for entertainment programs for the Television
Stations segment are amortized primarily on a straight-line basis, generally
based on the usage of the program or term of the license. Original cable
programming is amortized on an accelerated basis. Management regularly reviews,
and revises when necessary, its total revenue estimates on a title-by-title and
contract basis, which may result in a change in the rate of amortization and/or
a writedown of the film or television asset to fair value.

At the beginning of fiscal 2001, the Company adopted SOP 00-2, which established
new accounting standards for producers and distributors of films and supersedes
SFAS No. 53. SOP 00-2 establishes new accounting standards for, among other
things, marketing and development costs. The Company recorded a one-time,
non-cash charge of $494 million, net of $302 million tax, as a cumulative effect
of accounting change as of July 1, 2000. This charge primarily reflects the
elimination of marketing and certain development costs, which were previously
capitalized under SFAS No. 53 and are no longer capitalizable under SOP 00-2.
Subsequent to the adoption of SOP 00-2, the Company's accounting policy is to
expense marketing and certain development costs as incurred.

Use of Operating Income Before Depreciation and Amortization

Management believes that an appropriate measure for evaluating the operating
performance of the Company's business segments is Operating Income Before
Depreciation and Amortization. Operating Income Before Depreciation and
Amortization provides a basis to measure liquidity and operating performance of
each business segment. Although historical results, including Operating Income
Before Depreciation and Amortization, may not be indicative of future results
(as operating performance is highly contingent on many factors including
customer tastes and preferences), Operating Income Before Depreciation and
Amortization provides management a measure to analyze operating performance
against historical and competitors' data. Operating Income Before Depreciation
and Amortization eliminates the uneven effect across business segments of
considerable amounts of depreciation and amortization primarily resulting from
the value of intangible assets acquired in business combinations accounted for
by the purchase method of accounting. Operating Income Before Depreciation and
Amortization is defined as operating income (loss) plus depreciation and
amortization and the amortization of cable distribution investments.
Depreciation and amortization expense includes the

                                       31

<PAGE>

depreciation of property, plant and equipment, as well as amortization of
acquired intangible assets. Amortization of cable distribution investments
represents a reduction against revenues over the term of a carriage arrangement
and as such it is excluded from Operating Income Before Depreciation and
Amortization. The following comparative discussion of the results of operations
of the Company includes, among other factors, an analysis of changes in business
segment Operating Income Before Depreciation and Amortization. However,
Operating Income Before Depreciation and Amortization should be considered in
addition to, not as a substitute for, operating income (loss), net income
(loss), cash flow and other measures of financial performance reported in
accordance with GAAP. Operating Income Before Depreciation and Amortization does
not reflect cash available to fund requirements, and the items excluded from
Operating Income Before Depreciation and Amortization, such as depreciation and
amortization, are significant components in assessing the Company's financial
performance.

Pro Forma Results

In order to enhance comparability, the following discussion of the Company's
results of operations is supplemented by pro forma financial information that
assumes the acquisition of the Acquired Stations (as defined below) and Midwest
Sports Channel ("RSN North") and the acquisition of the controlling interest in
Speed Channel, Inc., formerly Speedvision Networks, LLC, ("Speed Channel"), Fox
Sports International and the Sunshine Network ("Sunshine") had occurred July 1,
2000. The pro forma results are presented for informational purposes only and
are not indicative of the operating results that would have occurred had the
transactions actually occurred at July 1, 2000, nor are they necessarily
indicative of future operating results.

                                       32

<PAGE>

Results of Operations - Fiscal 2002 versus Fiscal 2001

The following table sets forth the Company's operating results, by segment, for
fiscal 2002 as compared to fiscal 2001.
<TABLE>
<CAPTION>
                                                                       For the year ended June 30,
                                                            ----------------------------------------------
                                                               2002        2001      Change     % Change
                                                            ---------   ---------   ---------   ----------
Revenues /(1)/:                                                              (in millions)
<S>                                                         <C>        <C>         <C>          <C>
  Filmed Entertainment                                      $  4,048    $  3,676    $    372          10%
  Television Stations                                          1,875       1,550         325          21%
  Television Broadcast Network                                 2,048       1,823         225          12%
  Cable Network Programming                                    1,754       1,365         389          28%
                                                            ---------   ---------   ---------   ---------
 Total revenues                                             $  9,725    $  8,414    $  1,311          16%
                                                            =========   =========   =========   =========
Operating (loss) income:
  Filmed Entertainment                                      $    485    $    277    $    208          75%
  Television Stations                                            598         499          99          20%
  Television Broadcast Network                                  (283)        (65)       (218)      (335)%
  Cable Network Programming                                        6         (59)         65         110%
  Other operating charge                                        (909)          -        (909)          -
                                                            ---------   ---------   ---------   ---------
 Total operating (loss) income                                  (103)        652        (755)      (116)%
                                                            ---------   ---------   ---------   ---------
Interest expense, net                                           (241)       (345)        104          30%
Equity losses of affiliates                                     (144)        (92)        (52)       (57)%
Minority interest in subsidiaries                                (37)        (14)        (23)      (164)%
Other, net                                                     1,540         190       1,350         711%
                                                            ---------   ---------   ---------   ---------
Income before provision for income taxes and cumulative
  effect of accounting change                                  1,015         391         624         160%
Provision for income tax expense on a stand-alone basis         (408)       (185)       (223)      (121)%
                                                            ---------   ---------   ---------   ---------
Income before cumulative effect of accounting change             607         206         401         195%
Cumulative effect of accounting change, net of tax               (26)       (494)        468          95%
                                                            ---------   ---------   ---------   ---------
Net income (loss)                                           $    581    $   (288)   $    869         302%
                                                            =========   =========   =========   =========
Other data:
Operating Income Before Depreciation and Amortization /2)/
  Filmed Entertainment                                      $    544    $    342    $    202          59%
  Television Stations                                            798         683         115          17%
  Television Broadcast Network                                  (263)        (45)       (218)       (484)%
  Cable Network Programming                                      243         149          94          63%
  Other operating charge                                        (909)          -        (909)          -
                                                            ---------   ---------   ---------   ---------
 Total Operating Income Before Depreciation and
  Amortization                                              $    413    $  1,129    $   (716)        (63)%
                                                            =========   =========   =========   =========
Depreciation and amortization:
  Filmed Entertainment                                      $     59    $     65    $     (6)   $     (9)%
  Television Stations                                            200         184          16           9%
  Television Broadcast Network                                    20          20           -           -
  Cable Network Programming                                      121         118           3           3%
                                                            ---------   ---------   ---------   ---------
 Total Depreciation and amortization                        $    400    $    387    $     13           3%
                                                            =========   =========   =========   =========
</TABLE>

                                       33

<PAGE>






FOOTNOTE:

     (1)  In January 2002, the Company adopted EITF 01-09, "Accounting for the
          Consideration Given by a Vendor to a Customer or a Reseller of the
          Vendor's Products," which was effective for the Company as of January
          1, 2002. As required, the Company has reclassified the amortization of
          cable distribution investments against revenues for all periods
          presented. The amortization of cable distribution investments had
          previously been included in Depreciation and amortization. Operating
          income, Net income and Earnings per share are not affected by this
          reclassification. This reclassification affects the Company's and the
          Cable Network Programming segment's revenues. The effect of the
          reclassification on the Company's revenues is as follows:

                                               For the year ended June 30,
                                               ----------------------------
                                                 2002                 2001
                                               -------              -------
                                                       (in millions)
Gross Revenues                                  $9,841               $8,504
Amortization of cable distribution
investments                                       (116)                 (90)
                                                ------               ------
Revenues                                        $9,725               $8,414
                                                ======               ======



     (2)  Operating Income Before Depreciation and Amortization is defined as
          operating income (loss) plus depreciation and amortization and the
          amortization of cable distribution investments. Depreciation and
          amortization expense includes the amortization of acquired intangible
          assets. Amortization of cable distribution investments represents a
          reduction against revenues over the term of a carriage arrangement and
          as such it is excluded from Operating Income Before Depreciation and
          Amortization. While Operating Income Before Depreciation and
          Amortization is considered to be an appropriate measure for evaluating
          operating performance by management, it should be considered in
          addition to, not as a substitute for, operating income (loss), net
          income (loss), cash flow and other measures of financial performance
          prepared in accordance with GAAP and presented in the audited
          consolidated financial statements included elsewhere in this filing.

Overview of Company Results. For the year ended June 30, 2002, Revenues
increased approximately 16% from $8,414 million to $9,725 million. Increased
revenues at the Filmed Entertainment and Cable Network Programming segments
principally contributed to this increase. In aggregate, Operating, Selling,
general and administrative and Depreciation and amortization expenses increased
approximately 15% from the prior year. Operating expenses increased
approximately 15% for the year ended June 30, 2002 due primarily to increased
programming rights costs at the Television Broadcast Network primarily due to
the telecast of the Super Bowl, the new MLB contract, and license fees for Star
Wars Episode I: Phantom Menace. Selling, general and administrative expenses
increased approximately 18% due to the $30 million write-off of Adelphia
Communications Corporation ("Adelphia") receivables at the Cable Network
Programming segment as well as the acquisition of RSN North and the
consolidation of Speed Channel and Sunshine at the Cable Network Programming
segment. During fiscal year 2002, Depreciation and amortization increased
approximately 3% due to the acquisition of the Acquired Stations (as defined
below) at the Television Stations segment. For the year ended June 30, 2002, the
Company reported an operating loss of $103 million declining from income of $652
million in the prior year. Operating Income Before Depreciation and Amortization
decreased to $413 million from $1,129 million for the year ended June 30, 2001.
These decreases were primarily due to the Other operating charge of $909 million
related to losses on the Company's sports contracts caused by changes in
accounting estimates primarily with respect to reductions of projected
advertising revenue on national sports rights agreements with the NFL, MLB and
NASCAR. Partially offsetting the Other operating charge were improved results at
the Filmed Entertainment and Television Stations segments.

Equity losses of affiliates of $144 million increased $52 million from $92
million in the preceding fiscal year. These increased losses relate primarily to
a non-cash compensation charge of which the Company's share is $30 million
recorded at Fox Family Worldwide, Inc. ("FFW") prior to the sale of the
Company's interests in FFW to The Walt Disney Company ("Disney"). In addition,
the absence of earnings from The Golf Channel (sold in June 2001) and increased
losses at Regional Programming Partners ("RPP") and National Geographic
Channel-Domestic, after its launch in January 2001 contributed to increased
losses.

                                       34

<PAGE>

For the year ended June 30, 2002, the Company recognized its share of FFW's
one-time, non-cash charge for a cumulative effect of accounting change in the
amount of $26 million for the change in FFW's film accounting in accordance with
SOP 00-2. This is compared to the Company's adoption of SOP 00-2 beginning July
1, 2000. The Company's non-cash charge of $494 million, net of tax benefit of
$302 million, was recorded during the year ended June 30, 2001.

Net income for the year ended June 30, 2002 was $581 million ($0.69 per share),
an improvement from losses of $288 million ($0.40 loss per share) for the year
ended June 30, 2001. This improvement was primarily the result of the Company's
gains on the sales of FFW and Outdoor Life, which were partially offset by the
charge for the change in accounting estimate on the Company's national sports
rights agreements.

Filmed Entertainment. Revenues at the Filmed Entertainment segment increased
from $3,676 million for the year ended June 30, 2001 to $4,048 million for the
year ended June 30, 2002. This increase is due to the worldwide theatrical,
worldwide home entertainment and domestic pay-television performance of Planet
of The Apes, domestic theatrical and home entertainment performance of Kiss of
the Dragon, the worldwide theatrical performance of Ice Age, the worldwide home
entertainment performances of Moulin Rouge and Dr. Dolittle 2 and library titles
on DVD. Prior year results included the worldwide theatrical, worldwide home
entertainment and domestic pay-television performance of X-Men, the
international television sales of Titanic and the worldwide home entertainment
performance of library titles. Additionally, at Twentieth Century Fox Television
("TCFTV"), increased syndication revenues for NYPD Blue and King of the Hill,
higher license fees for Buffy the Vampire Slayer, Dharma and Greg and The
Practice and increased worldwide home entertainment and international
free-television revenues for The Simpsons contributed to the increase in
revenues. The Filmed Entertainment segment's operating income for the year ended
June 30, 2002 increased 75% or $208 million to $485 million from $277 million
for the year ended June 30, 2001. Operating Income Before Depreciation and
Amortization increased $202 million to $544 million for the year ended June 30,
2002 from $342 million in the prior year. These increases are due to the revenue
increases noted above, compared to prior year results which were partially
offset by the disappointing results of Monkeybone, Say It Isn't So and Legend of
Bagger Vance.

Television Stations. On July 31, 2001, the Company acquired the television
broadcasting business of Chris-Craft (as defined below), consisting of ten
television stations and subsequently exchanged three former Chris-Craft stations
with Viacom, Inc., Clear Channel Communications, Inc. and Meredith Corporation
for five other television stations (after giving effect to these transactions
the acquired television stations are referred to as the "Acquired Stations").
This acquisition increased the number of the Company's O&Os to 34 full power
stations.

The table below reflects the unaudited pro forma combined results of the
Television Stations segment as if the acquisition of the Acquired Stations had
taken place as of July 1, 2000.
<TABLE>
<CAPTION>
                                                                For the year ended June 30,
                                                             ----------------------------------
                                                               2002          2001      Change
                                                             ----------  ----------  ----------
                                                                        (in millions)
<S>                                                         <C>        <C>          <C>
Revenues                                                        $1,913       $2,018      $(105)
Operating income                                                   618          600         18
Operating Income Before Depreciation and Amortization              821          809         12
</TABLE>

On a pro forma basis, for the year ended June 30, 2002, Revenues at the
Television Stations segment decreased $105 million to $1,913 million from $2,018
million for the year ended June 30, 2001. This decrease is primarily due to the
adverse impact of the September 11th terrorist attacks, which further weakened
the advertising markets, partially offset by an estimated 1.4 percentage point
gain in market share over the prior year. This market share gain resulted from
the positive impact of non-returning political advertising and the 2000 Summer
Olympics (broadcast during fiscal 2001), syndicated

                                       35

<PAGE>

programming of Seinfeld, the replacement of Fox Kids programming with better
rated programming and the telecast of major sporting events including the
post-season MLB, especially the seven game MLB World Series, and the Super Bowl.
For the year ended June 30, 2002, Operating income at the Television Stations
segment increased by $18 million to $618 million from $600 million in the prior
year. This increase is due to savings from the use of an in-house advertising
sales representative, the non-renewal of local rights to broadcast the New York
Yankees games for the 2002 season, and improved performance at the Acquired
Stations. For the year ended June 30, 2002, Operating Income Before Depreciation
and Amortization for the Television Stations segment increased $12 million to
$821 million for fiscal year 2002 compared to $809 million in fiscal year 2001
due to the reasons noted above.

Television Broadcast Network. For the year ended June 30, 2002, the Television
Broadcast Network's Revenues increased $225 million to $2,048 million from
$1,823 million in the prior year. This 12% increase is due primarily to
advertising revenues from the Super Bowl, which was not telecast on FOX in the
prior year, $85 million of revenue recognized from the sale of MLB divisional
series rights to ABC Family, and increased advertising revenue for MLB due to
additional postseason games compared to the prior year. These results were
partially offset by lower prime time advertising revenue resulting from a
ratings decline in entertainment programming and lower NFL advertising revenue
due to a decrease in regular season pricing and ratings. For fiscal year 2002,
operating losses for the Television Broadcast Network segment increased $218
million to a loss of $283 million and Operating Income Before Depreciation and
Amortization decreased $218 million to a loss of $263 million compared to the
preceding year. Increased MLB programming rights associated with more games
shown than in the prior year, the Super Bowl, not telecast on FOX in the prior
year, license fees for Star Wars Episode I: Phantom Menace and higher prime time
license fees for returning series contributed to the increased losses.

Cable Network Programming. On a reported basis, Revenues for the Cable Network
Programming segment increased by $389 million from $1,365 million to $1,754
million for the year ended June 30, 2002. Improved ratings and increased
subscribers at the Fox News Channel ("Fox News") and the FX Channel ("FX")
contributed to this 28% increase in revenues. Operating income improved $65
million from a loss of $59 million for the year ended June 30, 2001 to income of
$6 million for the year ended June 30, 2002, primarily due to improved results
across all channels and the inclusion of results from the acquisitions, most
notably Speed Channel which contributed $17 million of operating income since
its acquisition in fiscal 2002. These improvements were partially offset by the
$30 million write-off of Adelphia receivables. Operating Income Before
Depreciation and Amortization increased $94 million to $243 million from $149
million for the prior year.

Fox Cable Networks Group consists of the results of FX, the majority-owned
regional sports networks ("RSNs"), Speed Channel and Fox Sports International.
In February 2001, Fox Cable Networks Group acquired RSN North and in January
2002, a controlling interest in Sunshine was acquired. Both RSN North and
Sunshine are consolidated in the results of the RSNs. During fiscal year 2002,
Fox Cable Networks Group acquired the remaining ownership interest in Speed
Channel and has consolidated its results since July 25, 2001. In December 2001,
Fox Cable Networks Group acquired the remaining 50% interest in Fox Sports
International and has consolidated its results since the date of acquisition.

                                       36

<PAGE>

The table below reflects the unaudited pro forma combined results of the Cable
Network Programming segment as if the acquisitions discussed above had taken
place as of July 1, 2000.
<TABLE>
<CAPTION>
                                                                 For the year ended June 30,
                                                            -------------------------------------
                                                                2002         2001       Change
                                                            -------------------------------------
                                                                          (in millions)
<S>                                                         <C>          <C>         <C>
Revenues                                                     $  1,814    $  1,566     $   248
Operating income (loss)                                            15         (91)        106
Operating Income Before Depreciation and Amortization             253         132         121
</TABLE>

On a pro forma basis, for the year ended June 30, 2002, Fox Cable Networks
Group's Revenues increased 16% from the prior year. Revenues at FX and the RSNs
grew 18% and 9%, respectively. FX affiliate revenues increased 22%, reflecting a
20% increase in average subscribers over the prior year. As of June 30, 2002, FX
reached over 78 million households, an increase of 13 million over the prior
year. Despite the difficult advertising sales market, FX advertising revenues
increased 26% over the prior year, as the result of an increase in average
audience and higher ratings, primarily due to the success of The Shield,
partially offset by declines in pricing. Affiliate revenues increased 13% at the
RSNs primarily from increased average cable rates per subscriber, as well as
increases in total subscribers. Advertising revenues for the RSNs were even with
the prior year, primarily resulting from the weak advertising market. Revenues
at Speed Channel increased 56% from the prior year primarily due to increased
average audience and new programming. As of June 30, 2002, Speed Channel reached
nearly 52 million households. Fox Cable Networks Group's operating income
increased $77 million or 213% for the twelve months ended June 30, 2002. Revenue
increases noted above primarily drove Fox Cable Networks Group's operating
profit, partially offset by higher average rights fees associated with new
professional sports rights agreements and an increase in the number of
professional events telecast at the RSNs, and increased programming and
marketing costs associated with FX's Fall prime-time lineup and its new original
series, The Shield. Operating Income Before Depreciation and Amortization
improved approximately 55% from the year ended June 30, 2001 due to the reasons
noted above.

For the year ended June 30, 2002, Fox News' Revenues increased 46% from the
prior year. A 72% increase in advertising revenue was driven by improved
ratings, partially offset by lower national sell-out and pre-emptions. Affiliate
revenues increase of 31% was attributable to an 18% increase in subscribers from
approximately 68 million subscribers as of June 30, 2001 to 80 million as of
June 30, 2002. These increases were partially offset by a 16% increase in
amortization of cable distribution investments due to subscriber acquisitions.
Operating losses improved 67% for the year ended June 30, 2002 compared to the
prior year. This improvement resulted from the revenue increase of 46% noted
above, which was only partially offset by higher costs associated with breaking
news events and programming expenses. These higher costs were mitigated by cost
savings due to the absence of election coverage in the current year. Operating
Income Before Depreciation and Amortization improved $47 million from the prior
year due to the reasons noted above.

Other operating charge. The Company continually evaluates the recoverability of
the rights costs against the revenues directly associated with the program
material and related direct expenses over the expected contract lives. At
December 31, 2002, the Company recorded an Other operating charge of $909
million in its consolidated statement of operations. This charge related to a
change in accounting estimate on the Company's national sports rights agreements
caused by the downturn in the advertising market, which caused the Company to
write off programming costs inventory and to provide for estimated losses on
these contracts. This evaluation considered the severe downturn in
sports-related advertising, the lack of any sustained advertising rebound
subsequent to September 11th and the industry-wide reduction of projected
long-term advertising growth rates, all of which resulted in the Company's
estimate of future directly attributable revenues associated with these
contracts being lower than previously anticipated. Because the vast majority of
costs incurred under these contracts are fixed, such as the rights costs and
production costs, the results of these lower revenue estimates indicated that
the

                                       37

<PAGE>

Company would generate a loss over the remaining term of the sports contracts.
The charge, by contract is as follows: NFL for $387 million, MLB for $225
million and NASCAR for $297 million.

Interest expense, net. Interest expense, net decreased $104 million for fiscal
year 2002 from $345 million to $241 million due to a decrease in amounts Due to
affiliates of News Corporation, the expiration of the New Millennium film
financing agreement in March 2001 and the classification of the expenses related
to the New Millennium II film financing as minority interest in subsidiaries and
lower amounts outstanding under single picture film financing.

Equity losses of affiliates. Equity losses of affiliates for the year ended June
30, 2002 increased $52 million to $144 million from $92 million in the prior
year. The primary reasons for the increase in Equity losses of affiliates are a
non-cash compensation charge of which the Company's share is $30 million
recorded before the sale of the Company's interests in FFW. In addition, the
absence of earnings from The Golf Channel, which was sold in June 2001, and
decreased results at RPP and National Geographic Channel - Domestic, after its
launch in January 2001, contributed to increased losses.
<TABLE>
<CAPTION>

                                              Ownership            For the year ended June 30,
                                                             ------------------------------------
Affiliate:                                   Percentage          2002         2001      Change
-------------------------------------------  -------------   -----------  -----------  ----------
                                                                           (in millions)
<S>                                          <C>              <C>         <C>          <C>
Fox Family Worldwide (a)                        49.5%         $  (51)     $ (37)       $ (14)
Fox Sports International (b)                     50%              (9)       (22)          13
Fox Sports Networks Domestic:
  National Sports Partners                       50%             (25)       (22)          (3)
  Regional Programming Partners                  40%              (9)         2          (11)
  Other                                        Various            18         11            7
National Geographic Channel - Domestic          66.7%            (42)       (22)         (20)
The Golf Channel (c)                             31%               -         14          (14)
Other                                          Various           (26)       (16)         (10)
                                                             -----------  -----------  ----------
  Total equity losses of affiliates                           $ (144)     $ (92)       $ (52)
                                                             ===========  ===========  ==========
</TABLE>

(a) The Company sold its interests in FFW in October 2001.
(b) Subsequent to the acquisition of the remaining 50% interest in December
    2001, the results of Fox Sports International have been consolidated in
    the Cable Network Programming segment.
(c) The Company sold its interests in The Golf Channel in June 2001.


The Company's share of National Geographic Channel-Domestic's losses were $42
million for the year ended June 30, 2002, as compared to $22 million in losses
in the prior year. As the channel launched in January 2001, the growth in
programming and advertising revenues was offset by the increase in the
amortization of cable distribution investments in fiscal year 2002. Also
contributing to the losses was the increase in production and marketing expenses
associated with a full year of operations. As of June 30, 2002, National
Geographic Channel - Domestic reached 28 million households as compared to 12
million households as of June 30, 2001.

The Company's share of RPP's losses was $9 million for the year ended June 30,
2002, as compared to income of $2 million for the year ended June 30, 2001. This
decrease is primarily due to charges from the Madison Square Garden ("MSG")
division associated with the termination of two professional player contracts,
the negative impact of losing the telecast rights of the New York Yankees at MSG
Network, lower revenues from the Radio City Music Hall Christmas Spectacular as
well as lower advertising revenues at its RSNs. These losses were partially
offset by the favorable impact of cost savings at the Metro Channels and lower
amortization of intangible assets resulting from RPP's implementation of SFAS
No. 142 effective January 1, 2002.

                                       38

<PAGE>

Minority interest in subsidiaries. Minority interest in subsidiaries increased
$23 million to $37 million for the year ended June 30, 2002 due to the
establishment of preferred interests in New Millennium II relating to the
Company's film financing arrangement, under which outstanding amounts are
reflected as Minority interest in subsidiaries in the accompanying consolidated
balance sheets.

Other, net. Other, net was $1,540 million for the year ended June 30, 2002 as
compared to $190 million in the prior year. The current year's income includes
the gains recognized on the sales of FFW in the amount of $1,439 million and
Outdoor Life in the amount of $147 million and a loss of $42 million on the
early redemption of the Fox Sports Networks, LLC bonds. The prior year reflected
the gain on the sale of the Company's interest in The Golf Channel in the amount
of $311 million, a loss on the restructuring of the Company's relationship with
Healtheon/WebMD Corporation ("WebMD") in the amount of $143 million, a $40
million gain on the sale of Home Team Sports and a $15 million loss on the sale
of The Health Network ("THN").

Provision for income taxes on a stand-alone basis. Provision for income tax
expense for the year ended June 30, 2002 increased to $408 million from $185
million in the corresponding period of the prior year. The effective tax rate
for the period decreased to 40% compared to 47% in the corresponding period of
the preceding year. The decrease in the effective rate resulted from an increase
in the relationship of pre-tax income to non-deductible items as compared to the
corresponding period of the prior year.

                                       39

<PAGE>

Results of Operations - Fiscal 2001 versus Fiscal 2000

The following table sets forth the Company's operating results, by segment, for
fiscal 2001 as compared to fiscal 2000.
<TABLE>
<CAPTION>

                                                                           For the year ended June 30,
                                                             ------------------------------------------------
                                                                2001        2000        Change      % Change
                                                             ----------  -----------  -----------  ----------
Revenues /(1)/:                                                               (in millions)
<S>                                                           <C>          <C>          <C>         <C>
  Filmed Entertainment                                        $  3,676     $  3,953     $  (277)       (7)%
  Television Stations                                            1,550        1,635         (85)       (5)%
  Television Broadcast Network                                   1,823        1,751          72          4%
  Cable Network Programming                                      1,365        1,178         187         16%
                                                             ----------  -----------  -----------  ----------
 Total revenues                                               $  8,414     $  8,517     $  (103)       (1)%
                                                             ==========  ===========  ===========  ==========
Operating income (loss):
  Filmed Entertainment                                        $    277        $ 117     $   160        137%
  Television Stations                                              499          585         (86)      (15)%
  Television Broadcast Network                                     (65)          29         (94)     (324)%
  Cable Network Programming                                        (59)         (75)         16         21%
                                                             ----------  -----------  -----------  ----------
 Total operating income                                            652          656          (4)       (1)%
                                                             ----------  -----------  -----------  ----------
Interest expense, net                                             (345)        (297)        (48)      (16)%
Equity losses of affiliates                                        (92)         (90)         (2)       (2)%
Minority interest in subsidiaries                                  (14)          (4)        (10)     (250)%
Other, net                                                         190            -         190         -
                                                             ----------  -----------  -----------  ----------
Income before provision for income taxes and cumulative            391          265         126         48%
  effect of accounting change
Provision for income tax expense on a stand-alone basis           (185)        (120)        (65)      (54)%
                                                             ----------  -----------  -----------  ----------
Income before cumulative effect of accounting change               206          145          61         42%
Cumulative effect of accounting change, net of tax                (494)           -        (494)         -
                                                             ----------  -----------  -----------  ----------
Net (loss) income                                             $   (288)    $    145     $  (433)     (299)%
                                                             ==========  ===========  ===========  ==========
Other data:
Operating Income Before Depreciation and Amortization /(2)/:
  Filmed Entertainment                                        $    342     $    168     $   174        104%
  Television Stations                                              683          774         (91)      (12)%
  Television Broadcast Network                                     (45)          47         (92)     (196)%
  Cable Network Programming                                        149          107          42         39%
                                                             ----------  -----------  -----------  ----------
 Total Operating Income Before Depreciation and
  Amortization                                                $  1,129     $  1,096     $    33          3%
                                                             ==========  ===========  ===========  ==========
Depreciation and amortization:
  Filmed Entertainment                                        $     65     $     51     $    14         27%
  Television Stations                                              184          189          (5)       (3)%
  Television Broadcast Network                                      20           18           2         11%
  Cable Network Programming                                        118          110           8          7%
                                                             ----------  -----------  -----------  ----------
 Total Depreciation and amortization                          $    387     $    368     $    19          5%
                                                             ==========  ===========  ===========  ==========
</TABLE>

                                       40

<PAGE>

FOOTNOTE:

     (1)  In January 2002, the Company adopted Emerging Issues Task Force No.
          01-09, "Accounting for the Consideration Given by a Vendor to a
          Customer or a Reseller of the Vendor's Products," which was effective
          for the Company as of January 1, 2002. As required, the Company has
          reclassified the amortization of cable distribution investments
          against revenues for all periods presented. The amortization of cable
          distribution investments had previously been included in Depreciation
          and amortization. Operating income, Net income and Earnings per share
          are not affected by this reclassification. This reclassification
          affects the Company's and the Cable Network Programming segment's
          revenues. The effect of the reclassification on the Company's revenues
          is as follows:

                                                 For the year ended June 30,
                                                 ----------------------------
                                                       2001           2000
                                                     ---------     ---------
                                                         (in millions)
Gross Revenues                                       $ 8,504        $ 8,589
Amortization of cable distribution investments           (90)           (72)
                                                     ---------     ---------
Revenues                                             $ 8,414        $  8,517
                                                     =========     =========

     (2)  Operating Income Before Depreciation and Amortization is defined as
          operating income (loss) plus depreciation and amortization and the
          amortization of cable distribution investments. Depreciation and
          amortization expense includes the amortization of acquired intangible
          assets. Amortization of cable distribution investments represents a
          reduction against revenues over the term of a carriage arrangement and
          as such it is excluded from Operating Income Before Depreciation and
          Amortization. While Operating Income Before Depreciation and
          Amortization is considered to be an appropriate measure for evaluating
          operating performance by management, it should be considered in
          addition to, not as a substitute for, operating income (loss), net
          income (loss), cash flow and other measures of financial performance
          prepared in accordance with GAAP and presented in the audited
          consolidated financial statements included elsewhere in this filing.

Overview of Company Results. For the fiscal year ended June 30, 2001, revenues
of $8,414 million declined slightly compared to the $8,517 million reported for
the prior year. Decreased revenues from the Filmed Entertainment and Television
Stations segments were partially offset by a 16% increase in revenue at the
Cable Network Programming segment. In aggregate, Operating, Selling, general and
administrative, and Depreciation and amortization expenses were flat compared to
the prior year. Operating expenses decreased approximately 3% compared to fiscal
2000 due to savings resulting from the production of fewer new series as
compared to the prior year. Selling, general and administrative expenses
increased approximately 9% from the prior year mainly due to an increase in bad
debt reserve and overhead expenses. Depreciation and amortization increased
approximately 5% due to increased amortization at the Filmed Entertainment
segment. The Company reported operating income of $652 million for the year
ended June 30, 2001, as compared to $656 million reported in fiscal 2000.
Operating Income Before Depreciation and Amortization of $1,129 million
increased approximately 3% over the $1,096 million reported in fiscal year 2000.
These increases relate to the improved operating results at the Filmed
Entertainment and Cable Network Programming segments.

Equity losses of affiliates of $92 million increased $2 million from fiscal 2000
due to decreased contributions from FFW resulting from the prior year's one-time
gain related to the Fox Kids Europe N.V.'s ("FKE") initial public offering
("IPO") and the January 2001 launch of the National Geographic Channel in the
US, which offset improved results at the Fox Cable Networks Group's domestic
equity affiliates due to subscriber growth.

At the beginning of fiscal 2001, the Company adopted SOP 00-2, which established
new accounting standards for producers and distributors of films and supersedes
SFAS No. 53. SOP 00-2 establishes new accounting standards for, among other
things, marketing and development costs. The Company recorded a one-time,
non-cash charge of $494 million, net of $302 million tax, as a cumulative effect
of accounting change as of July 1, 2000. This charge primarily reflects the
write-off of marketing and certain development costs, which were previously
capitalized under SFAS No. 53 and are no longer capitalizable under SOP 00-2.
Subsequent to the adoption of SOP 00-2, the Company's accounting policy is to
expense marketing and certain development costs as incurred.

Net loss for the year ended June 30, 2001 was $288 million ($0.40 loss per
share) as compared to net

                                       41

<PAGE>

income of $145 million ($0.20 per share) for the prior year. This decrease
primarily relates to the $494 million after-tax charge for the adoption of SOP
00-2 and a non-recurring charge related to the restructuring of the Company's
relationship with WebMD. These charges were partially offset by gains related to
the sales of the Company's interest in The Golf Channel and Home Team Sports.

Filmed Entertainment. For the twelve months ended June 30, 2001, Filmed
Entertainment's revenues decreased 7% compared to the prior year. Decreased
revenues from international theatrical releases were partially offset by
increased revenues from domestic theatrical releases, international free
television revenues, and network revenues. Operating income and Operating Income
Before Depreciation and Amortization increased by 137% to $277 million and by
104% to $342 million, respectively, for fiscal year 2001. In fiscal 2001,
theatrical and catalog releases overall performed better than releases in the
prior year. The fiscal 2001's results included the strong worldwide theatrical
and video performance of X-Men, strong growth in video catalog sales primarily
due to growth in the DVD market, the broadcast network release of Titanic and
the solid performance of releases in international free television markets.
These results were partially offset by losses from Monkeybone, The Legend of
Bagger Vance and Say It Isn't So. At the beginning of fiscal 2001, the Company
adopted SOP 00-2 changing its film accounting policies; accordingly operating
income and Operating Income Before Depreciation and Amortization were further
offset by the releasing costs for Moulin Rouge, Dr. Dolittle 2, Planet of the
Apes and Kiss of the Dragon, which are now, under SOP 00-2, expensed as
incurred. These results are compared to fiscal 2000 results, which included the
poor performances of Brokedown Palace, Anna and the King, Light It Up, Bartok
and Titan AE.

At TCFTV, for the twelve months ended June 30, 2001, revenues increased
approximately 2% primarily due to higher network revenue from the license fee
renegotiations for The Practice and increased license fees for three additional
returning series as compared to the prior year. Operating results in fiscal 2001
increased approximately 116% over the prior year primarily due to greater gross
profit from The Practice due to the renegotiated license fees, increased gross
profit from Buffy the Vampire Slayer due to increased international home video
and domestic syndication revenues and savings resulting from the production of
fewer new series as compared to the prior year. Partially offsetting the
increases were higher development expenses and production expenses from a
greater number of pilots in the current year.

Television. For the year ended June 30, 2001, combined revenues from all
television-related segments declined slightly to $3,373 million as compared to
the preceding fiscal year of $3,386 million. Operating income decreased by 29%
and Operating Income Before Depreciation and Amortization decreased by 22% for
the year ended June 30, 2001. Operating results were greatly affected by the
negative impact of the weak advertising market and increased programming,
broadcasting and news costs at the Television Stations, as well as a $71 million
loss at FOX resulting from the short duration and lower ratings of the MLB
post-season divisional playoffs and World Series in October 2000.

For fiscal year 2001, the Television Broadcast Network segment's revenues
increased 4% over the prior year primarily related to NASCAR events, which is in
its first year of contract, and an increase in NFL advertising sales resulting
from higher pricing. Operating income in fiscal 2001 decreased $94 million to a
loss of $65 million and Operating Income Before Depreciation and Amortization
decreased $92 million from the prior fiscal year. These losses were primarily
driven by the $71 million loss associated with the World Series that was not
telecast in the prior year and a ratings shortfall coupled with lower sell-out
for the MLB Divisional and Championship play-off series, all in October 2000.
This loss was increased by higher NFL program rights costs and higher
advertising and promotional costs of off-air media awareness spending for the
Fall launch. These decreases were partially offset by lower prime time
programming costs due to the replacement of Party of Five and Beverly Hills
90210 with new less expensive programming. In fiscal 2001, FOX primetime
delivered a 2.5% adults 18 - 49 ratings increase over the prior year due
primarily to the successful launch of series such as Boston Public, Dark Angel
and Grounded for Life.

For fiscal year 2001, the Fox Television Stations' revenues decreased to $1,550
million from $1,635 million in fiscal year 2000. This 5% revenue decline
primarily related to the weak advertising market.

                                       42

<PAGE>

Also contributing to the decreased revenues were the competition from NBC's
broadcast of the Olympics, the delayed Fall launch and lower FOX primetime
ratings in the first half of the year. For the twelve months ended June 30,
2001, Fox Television Stations produced operating income and Operating Income
Before Depreciation and Amortization of $499 million and $683 million,
respectively, decreasing $86 million and $91 million, respectively, versus the
prior year. Increases in program amortization for new shows, including Drew
Carey and 3rd Rock From The Sun, local broadcast rights amortization for the
Boston Red Sox and the Texas Rangers and costs related to the local news launch
at KDVR in Denver contributed to the decreases in operating income and Operating
Income Before Depreciation and Amortization.

Cable Network Programming. The revenues of the Cable Network Programming segment
for the year ended June 30, 2001 as compared to the prior year increased $187
million, operating losses of $59 million improved by $16 million and Operating
Income Before Depreciation and Amortization improved by $42 million to $149
million. Revenue increases were due to a combination of subscriber growth and
advertising revenue increases primarily at FX and Fox News. Costs increased due
to higher rights and production costs related to NASCAR on FX and the increased
number of National Basketball Association ("NBA") and National Hockey League
("NHL") games at the RSNs.

For the year ended June 30, 2001, revenues at FX and the RSNs grew 32% and 8%,
respectively. At FX, cable and DTH affiliate revenue increased 41%, reflecting a
36% increase in average subscribers over the prior year and a 4% increase in
average rates per subscriber. As of June 30, 2001, FX reached over 66 million
households, an increase of 18 million over the prior year. Despite the difficult
advertising sales market, FX advertising revenue increased 23%, due to an
increase in pricing and an increase in average audience. The RSNs' revenue
increases reflect an 11% increase in combined cable and DTH affiliate revenue,
excluding the impact of the newly acquired RSN North, resulting from recently
completed affiliation agreements, whereby the RSNs increased their average rate
per subscriber and an increase in total subscribers. While the number of
professional sports events increased over the prior year, the RSNs experienced a
5% decline in advertising revenues on regional sports programming, excluding the
impact of RSN North, primarily resulting from the weak advertising market.
Despite increased programming and marketing costs supporting its original
programming and the rights fees and production costs associated with the
inaugural season of NASCAR, FX's operating income increased 54% from fiscal year
2000. Operating income for fiscal year 2001 decreased 141% at the RSNs primarily
due to significant increases in operating expenses resulting from an increased
number of professional sports events and higher average rights fees associated
with new professional sports rights agreements. Also contributing to the
decreased operating income were first year broadcast costs associated with the
recently completed MLB cable deal.

For the year ended June 30, 2001, revenues at Fox News increased 30% versus
fiscal 2000. This increase primarily resulted from a 30% increase in cable
affiliate revenue and a 48% increase in cable advertising sales. The increase in
cable affiliate revenue was attributable to an increase of 33% in Fox News
subscribers from 50.8 million to 67.7 million. Advertising revenue was driven by
higher pricing and improved ratings. Operating losses decreased 38% over the
prior year primarily resulting from the revenue increase, the shutdown of the
Fox Files Magazine Unit, partially offset by increased programming expenses
associated with political coverage on the channel and additional costs
associated with the re-launch of FoxNews.com.

                                       43

<PAGE>

Equity losses of affiliates.  For the year ended June 30, 2001, Equity losses of
affiliates increased by $2 million to $92 million.
<TABLE>
<CAPTION>

                                                                   For the year ended June 30,
                                              Ownership     --------------------------------------
Affiliate:                                    Percentage        2001        2000         Change
-------------------------------------------  -------------  ----------   ---------   -------------
<S>                                          <C>            <C>           <C>          <C>
                                                                          (in millions)
Fox Family Worldwide (FFW)                      49.5%        $    (37)    $    23      $   (60)
Fox Sports International                         50%              (22)        (28)           6
Fox Sports Networks Domestic:
  National Sports Partners  (NSP)                50%              (22)        (17)          (5)
  Regional Programming Partners  (RPP)           40%                2          (1)           3
  Other                                        Various             11           6            5
National Geographic Channel - Domestic          66.7%             (22)         (1)         (21)
The Golf Channel                                 31%               14           -           14
Other                                          Various            (16)        (72)     $    56
                                                            ----------   ---------   -------------
  Total equity losses of affiliates                          $    (92)    $   (90)     $    (2)
                                                            ==========   =========   =============

</TABLE>



For the twelve months ended June 30, 2001, the Company's share of FFW's net
losses were flat as compared to the prior year, excluding the approximate $60
million one-time gain in fiscal 2000 resulting from the FKE IPO. Revenue at FFW
increased 3% resulting from higher affiliate revenues at Fox Family Channel and
FKE and Digimon toy royalties. These revenue increases were partially offset by
lower advertising revenue at Fox Family Channel and Fox Kids Network, higher
marketing expenses due to rebranding of the Fox Family Channel and higher
general and administrative expenses due to expansion of Internet activities and
FKE.

The Company's share of Fox Sports International's net losses decreased $6
million to $22 million for fiscal 2001. Fox Sports World and Fox Sports World
Espanol experienced higher affiliate revenues due to increased subscribers. In
addition, LMC International's revenues increased due to the English Premier
League and Argentine Football. Partially offsetting these revenue increases were
decreased operating results at Fox Sports Latin America, particularly in
Argentina, due to the weak economic environment.

The Company's share of Fox Cable Networks Group's domestic equity affiliates'
net losses improved to $9 million during the year ended June 30, 2001. RPP
generated higher affiliate revenues across all of its RSNs from increased
subscribers and rates, which was partially offset by losses associated with the
continued investment in the Metro Channels. CTV Sports Net experienced higher
affiliate and advertising revenues, resulting from continued distribution growth
as well as a slight decrease in professional sports rights, production and
marketing expenses. NSP experienced decreased revenues due to the soft
advertising market and higher programming and production expenses, while NAP had
increased commission revenues. Deferred compensation expenses associated with a
management equity appreciation rights plan at Speedvision and Outdoor Life more
than offset the increased affiliate revenues generated at each network resulting
from distribution gains over the prior year.

The year ended June 30, 2001 included $22 million of equity losses related to
the January 2001 launch of The National Geographic Channel in the US. National
Geographic, which had 12 million subscribers as of June 30, 2001, incurred
considerable studio, programming and marketing costs during fiscal year 2001, in
addition to significant amortization charges related to long-term cable
distribution investments with major multi system operators.

Interest expense, net. Net interest expense increased $48 million in fiscal 2001
as compared to the prior year. This increase relates to the higher intercompany
balances with affiliates as a result of cash advances and external balances
associated with film production financing.

Minority interest in subsidiaries. Minority interest in subsidiaries increased
$10 million to $14 million in fiscal 2001. This increase is related to
distributions paid on preferred interests issued in relation to the

                                       44

<PAGE>

New Millennium transaction entered into in the third quarter of fiscal 2001.
(See "New Millennium" in Liquidity and Capital Resources.)

Other, net. In January 2000, the Company completed a series of integrated
transactions with WebMD to exchange, among other things, media services and its
interest in THN for a cost based Preferred Stock interest in WebMD. No gain or
loss was recorded by the Company in connection with this original integrated
transaction. On December 29, 2000, the Company, The News Corporation Limited
("News Corporation") and WebMD entered into an agreement to restructure the
initial integrated transactions, which resulted in the Company agreeing to
exchange its entire Preferred stock investment with a carrying value of $505
million, for an approximate $126 million reduction in the Company's obligation
to provide future media services, an approximate $37 million elimination of
future funding commitments to THN, and the acquisition of WebMD's interest in
THN. The acquisition of THN has been recorded at its fair market value of
approximately $200 million, as determined by an independent appraisal. The
Company will continue to provide future domestic media services over 10 years
and will remain obligated for cash payments to WebMD of $27.5 million over 4
years. The carrying value of the deferred revenue for future media services was
approximately $152 million as of June 30, 2001, with a market value of
approximately $192 million. Such deferred revenue will be recognized over the
remaining nine-year term as such media services are delivered under an agreed
annual commitment schedule. The restructuring transaction has resulted in the
Company recording a non-cash charge of approximately $143 million, which is
reflected within Other, net in the consolidated statement of operations.

In February 2001, Fox Sports Networks sold its approximate 34% limited
partnership interest in Home Team Sports to Comcast Corporation ("Comcast"), in
a non-cash exchange for Comcast entering into new or amended cable carriage
arrangements valued at approximately $46 million related to the distribution of
the Company's programming services on Comcast's cable systems. The Company
recognized a gain of approximately $40 million, which is reflected within Other,
net in the consolidated statement of operations.

In June 2001, the Company sold its approximate 31% interest in The Golf Channel
to Comcast for total consideration of approximately $375 million, of which $365
million was received in cash during fiscal 2001. The Company recorded a gain of
approximately $311 million related to this transaction, which is reflected in
Other, net in the consolidated statement of operations.

In June 2001, the Company completed the previously announced sale of its entire
interest in THN for cash of approximately $155 million, of which $100 million
was paid at closing and $55 million is due one year from Closing, and a 10%
carried interest in the equity of the acquirer with a minimum guarantee value of
$100 million in December 2003. In accordance with SFAS No. 94, "Consolidation of
All Majority-Owned Subsidiaries," and EITF 87-11, "Allocation of Purchase Price
to Assets to be Sold," for the period from the acquisition of THN (December 29,
2000) until the Closing Date of the sale, control of THN was deemed to be
temporary and therefore, its results of operations have not been consolidated in
the Company's statement of operations for the six months ended June 30, 2001.
The Company recorded a loss of approximately $15 million from the sale, which is
reflected in Other, net in the consolidated statement of operations.

Provision for income tax expense on a stand-alone basis. Provision for income
tax expense for the year ended June 30, 2001 increased to $185 million from $120
million in the preceding year. The effective tax rate for the period increased
to 47% compared to 45% in the preceding year. The increase in the effective rate
resulted from an increase in nondeductible items from the prior year.

                                       45

<PAGE>
Liquidity and Capital Resources

The Company's principal sources of cash flow are internally generated funds,
various film financing alternatives and borrowings from News Corporation and its
subsidiaries. As of June 30, 2002, News Corporation had consolidated cash and
cash equivalents of $3.6 billion, excluding the cash of the Company, and unused
credit facilities of $2.1 billion. We believe that funds available from News
Corporation and cash flows from operations will be adequate for the Company to
conduct its operations. The Company's internally generated funds are highly
dependent upon the state of the advertising market and public acceptance of film
products. Any significant decline in the advertising market or the performance
of its films could adversely impact its cash flows from operations.

The principal uses of cash flow that affect the Company's liquidity position
include the following: investments in the production and distribution of new
feature films and television programs, the acquisition of and payments under
programming rights for entertainment programming and sporting events operational
expenditures, interest expense and income tax payments.

Net cash flows provided by operating activities during the year ended June 30,
2002 were $987 million as compared to uses of $153 million in the preceding
fiscal year. During the current period, payables and accrued expenses were
higher due to increased participations and residuals from film and television
titles and timing of payments for NFL, NASCAR and MLB. Offsetting these sources
of cash, receivables increased from the sale of home entertainment and
theatrical products, the syndication of certain programs and the payment of
taxes related to the gain on the sale of FFW.

Net cash flows provided by investing activities were $678 million for the year
ended June 30, 2002 as compared to cash uses of $176 million in the preceding
fiscal year. The current year included the proceeds of the sales of FFW and
Outdoor Life, partially offset by cash used for the acquisition of a controlling
interest in the Speed Channel, investments in the National Geographic Channels
and Fox Studios Australia and increased cable distribution investments for Fox
News, FX and Speed Channel.

Net cash flows used in financing activities were $1,675 million during fiscal
year ended June 30, 2002 as compared to cash provided by financing activities of
$281 million in the preceding fiscal year. The increase in cash used by
financing activities is primarily attributable to higher repayments to
affiliates of News Corporation.

In June 2002, the Company and its subsidiary, Fox Sports Networks, LLC,
irrevocably called for redemption all of the outstanding 9 3/4% Senior Discount
Notes due 2007 and all of the outstanding 8 7/8% Senior Notes due 2007. The
redemption was completed in August 2002 and was financed through borrowings from
News Corporation and its subsidiaries. The Company has recorded a pre-tax loss
of $42 million on the early redemption of these notes in Other, net in the
consolidated statement of operations for the year ended June 30, 2002 in
accordance with SFAS No. 145.

Intercompany Financing

The Company is funded primarily by cash generated from operations and by loans
from other affiliates of News Corporation. Interest on outstanding intercompany
balances has been charged at commercial market rates not to exceed News
Corporation's average cost of borrowing as set forth in the Master Intercompany
Agreement between the Company and News Corporation. For the year ended June 30,
2002, the intercompany interest rate was 8%. The Company anticipates that cash
from foreseeable future operations and borrowings from News Corporation will be
sufficient to meet its working capital requirements.

Ratings of News Corporation Public Debt

As of June 30, 2002, News Corporation's debt ratings from Moody's (Ba1 for
subordinated notes and Baa3 for senior unsecured notes) and Standard & Poors
(BBB-) for the debt guaranteed by the Company and others were within the
investment grade scale.

                                       46

<PAGE>
The Company has commitments under certain firm contractual arrangements ("firm
commitments") to make future payments for goods and services. These firm
commitments secure the future rights to various assets and services to be used
in the normal course of operations. The following table summarizes the Company's
material firm commitments and borrowings as of June 30, 2002 and the timing and
effect that such obligations are expected to have on the Company's liquidity and
cash flow in future periods. The Company expects to fund these commitments
primarily with operating cash flow generated in the normal course of business.

<TABLE>
<CAPTION>
                                                              As of June 30, 2002
                                  -------------------------------------------------------------------------
                                                             Payments Due by Period
                                  -------------------------------------------------------------------------
 Contractual Obligations and
         Commitments                  Total       1 year       2-3 years      4-5 years     After 5 years
-------------------------------   ------------  ------------  ------------  -------------  ----------------
                                                                 (in millions)
<S>                                    <C>            <C>           <C>            <C>               <C>
Borrowings /(a)/                       $   942        $  942        $    -         $    -            $    -
Due to affiliates of News
  Corporation /(b)/                      1,413             -             -              -             1,413
New Millennium II preferred
  interest /(c)/                           850           576           239             35                 -
Major League Baseball /(d)/              1,995           334           765            896                 -
National Football League /(e)/           2,880           575         1,490            815                 -
National Association of
  Stock Car Auto Racing /(f)/            1,621           201           495            536               389
Commitment for purchase of TV
  station /(g)/                            425           425             -              -                 -
Capital expenditures                        30            29             1              -                 -
Operating leases /(h)/                     502            80           128             93               201
Other programming commitments
  and obligations /(i)/                  4,488         1,068         1,160            707             1,553
                                       -------        ------        ------         ------            ------
Total Contractual Obligations
  and Commitments                      $15,146        $4,230        $4,278         $3,082            $3,556
                                       =======        ======        ======         ======            ======
</TABLE>

The Company also has certain contractual arrangements that would require the
Company to make payments or provide funding if certain circumstances occur
("contingent guarantees"). The Company does not expect that these contingent
guarantees will result in any amounts being paid by the Company in the
foreseeable future. The timing of the amounts presented in the table reflect
when the maximum contingent guarantees will expire and does not indicate that
the Company expects to incur an obligation to make payments during that
timeframe.

                                       47

<PAGE>

<TABLE>
<CAPTION>
                                                              As of June 30, 2002
                                  -------------------------------------------------------------------------
                                                       Amount of Guarantees Expiration Per Period
                                                -----------------------------------------------------------
                                      Total
                                     Amounts
    Contingent Guarantees          Committed      1 year       2-3 years      4-5 years     After 5 years
-------------------------------   ------------  ------------  ------------  -------------  ----------------
                                                                 (in millions)
<S>                                    <C>            <C>           <C>            <C>               <C>
Guarantees /(j)/                        $8,655           $73          $502           $  -            $8,080

Guarantees of equity
  affiliates /(k)/                      $1,050            43            93           $105            $  809
</TABLE>

FOOTNOTES:
(a)  In June 2002, the Company and its subsidiary, Fox Sports Networks, LLC,
     irrevocably called for redemption all of the outstanding 9 3/4% Senior
     Discount Notes due 2007 and all of the outstanding 8 7/8% Senior Notes due
     2007. The redemption was completed in August 2002. The Company has recorded
     a pre-tax loss of $42 million on the early redemption of these notes in
     Other, net in the consolidated statement of operations for the year ended
     June 30, 2002 in accordance with SFAS No. 145.

(b)  The Company is funded primarily by cash from operations and by loans from
     other subsidiaries and affiliates of News Corporation. The Company had
     approximately $1.4 billion of indebtedness to affiliates of News
     Corporation as of June 30, 2002, which extend through June 30, 2008.

(c)  See discussion of New Millennium II, which appears on subsequent pages. As
     noted therein, this interest has no fixed redemption rights but is entitled
     to an allocation of gross receipts from the distribution of eligible films.

(d)  The Company's six-year contract with MLB grants the Company rights to
     telecast certain regular season and all post-season MLB games. The contract
     began with the 2001 MLB season and ends with the 2006 MLB season. The
     remaining future scheduled payments for telecast rights to such MLB games
     aggregated approximately $2.0 billion as of June 30, 2002, before
     sublicense fees are considered. For the duration of the term of its
     contract with MLB, the Company has sublicensed telecast rights to certain
     MLB post-season games to The Walt Disney Company, and is entitled to be
     paid a sublicense fee aggregating $590 million over the remaining term. The
     amounts reflected on this schedule have not been reduced by the sublicense.

(e)  Under the Company's eight-year contract with the NFL through 2006, which
     contains certain termination clauses, remaining future minimum payments for
     program rights to broadcast certain football games aggregated approximately
     $2.9 billion as of June 30, 2002, and are payable over the remaining five
     year term of the contract assuming no early terminations.

(f)  The Company's contracts with the NASCAR, which contain certain termination
     clauses, give the Company rights to broadcast certain NASCAR races through
     fiscal year 2009 and exclusive NASCAR content rights, as well as the NASCAR
     brand to be exploited with a new NASCAR cable channel or the existing Speed
     Channel through fiscal year 2013. The remaining future minimum payments
     aggregated approximately $1.6 billion as of June 30, 2002, and are payable
     over the remaining terms assuming no early terminations.

(g)  In June 2002, the Company entered into an agreement to acquire WPWR-TV in
     Chicago from Newsweb Corporation for approximately $425 million. This
     acquisition closed in August 2002.

(h)  The Company leases transponders, office facilities, equipment and microwave
     transmitters used to carry its broadcast signals. These leases, which are
     classified as operating leases, expire at various dates through 2016.

(i)  The Company's minimum commitments and guarantees under certain other
     programming, local sports broadcast rights, players and other agreements
     aggregated approximately $4.5 billion as of June 30, 2002 and are payable
     principally over a five year period.

(j)  The Company,  News  Corporation and certain of News  Corporation's
     subsidiaries are guarantors of various debt obligations of News
     Corporation and certain of its subsidiaries. During fiscal year 2001,
     certain of the Company's

                                      48

<PAGE>

     subsidiaries were released as guarantors of these debt obligations. The
     principal amount of indebtedness outstanding under such debt instruments as
     of June 30, 2002 and 2001 was approximately $8.7 billion and $9.3 billion,
     respectively. The debt instruments limit the ability of guarantors,
     including the Company, to subject their properties to liens and certain of
     the debt instruments impose limitations on the ability of News Corporation
     and certain of its subsidiaries, including the Company, to incur
     indebtedness in certain circumstances. Such debt instruments mature at
     various times between 2004 and 2096, with a weighted average maturity of
     over 20 years. In the case of any event of default under such debt
     obligations, the Company will be directly liable to the creditors or
     debtholders. News Corporation has agreed to indemnify the Company from and
     against any obligations it may incur by reason of its guarantees of such
     debt obligations. As of June 30, 2002, News Corporation was in compliance
     with all of its debt covenants and had satisfied all financial ratios and
     tests and expects to remain in compliance and satisfy all such ratios and
     tests.

(k)  The Company guarantees various sports rights agreements for certain
     associated companies. The aggregate of these guarantees is approximately
     $1,050 million and extends through 2019.

Except as otherwise discussed above, the Company does not guarantee the debt of
any of its affiliates accounted for using the equity method of accounting.


New Millennium II

Due to increased competition and costs associated with film production, film
studios and the Company constantly evaluate the risks and rewards of production.
Various strategies are used to balance risk with capital needs, including, among
other methods, co-production, contingent profit participations, acquisition of
distribution rights only and insurance.

In March 2001, the Company entered into a new series of film rights agreements
whereby a controlled consolidated subsidiary of the Company, Cornwall Venture
LLC ("NM2"), that holds certain library film rights, funds the production or
acquisition costs of all eligible films, as defined, to be produced or acquired
by Twentieth Century Fox Film Corporation ("TCF"), a subsidiary of the Company,
between 2001 and 2004 (these film rights agreements are collectively referred to
as the "New Millennium II Agreement"). NM2 is a separate legal entity from the
Company and TCF and has separate assets and liabilities. NM2 issued a preferred
limited liability membership interest ("Preferred Interest") to a third party to
fund the film financing, which is presented on the consolidated balance sheets
as Minority interest in subsidiaries. The Preferred Interest has no fixed
redemption rights but is entitled to an allocation of the gross receipts to be
derived by NM2 from the distribution of each eligible film. Such allocation to
the extent available based on the gross receipts from the distribution of the
eligible films consists of (i) a return on the Preferred Interest (the
"Preferred Payments"), based on certain reference rates (generally based on
commercial paper rates or LIBOR) prevailing on the respective dates of
determination, and (ii) a redemption of the Preferred Interest, based on a
contractually determined amortization schedule. The Preferred Interest has a
preference in the event of a liquidation of NM2 equal to the unredeemed portion
of the investment plus any accrued and unpaid Preferred Payments.

The net change in Preferred Interests outstanding was $8 million and $841
million for the years ended June 30, 2002 and 2001, respectively. These amounts
were comprised of issuances by the Company of additional Preferred Interests
under New Millennium II in the amount of $657 million and $131 million and
redemptions by the Company of Preferred Interests of $649 million and $42
million during fiscal year 2002 and 2001, respectively.  The original issuance
 of Preferred Interests was $752 million in fiscal year 2001.

As of June 30, 2002 and 2001, there was approximately $850 million and $842
million, respectively, of Preferred Interests outstanding, which are included in
the consolidated balance sheets as Minority interest in subsidiaries. The
Preferred Payments are recorded as an expense in Minority interest in
subsidiaries on the consolidated statements of operations.

                                       49

<PAGE>
A Ratings Trigger Event for the New Millennium II Agreement would occur if News
Corporation's debt rating:

     (i) (a) falls below BB+ and below Ba1, or (b) falls below BB, or (c) falls
     below Ba2, or (d) it is not rated by both rating agencies, and, in each
     case, neither News Corporation nor the Company shall, within ten business
     days after the occurrence of such event, have provided credit enhancement
     so that the resulting New Millennium II Agreement is rated at least BB+ and
     Ba1, or

     (ii) (a) falls below BBB- and Baa3, or (b) it is not rated by both rating
     agencies, and, in each case, more than $25 million in capital payments
     redeemable at that time from film gross receipts remain unredeemed for at
     least one quarter.

If a Ratings Trigger Event were to occur, then (a) no new films will be
transferred, (b) rights against certain film assets may be enforced, and (c) the
Preferred Interest may become redeemable.

During fiscal 2002, no Ratings Trigger Event had occurred. If a Ratings Trigger
Event were to occur, then $425 million (or approximately 50% of the outstanding
balance as of June 30, 2002) may be payable immediately. The balance of the
redemption would be payable to the extent of future gross receipts from films
that had been transferred to NM2.


Acquisitions and dispositions

WebMD

In January 2000, the Company completed a series of integrated transactions with
WebMD to exchange, among other things, media services and its interest in THN
for a cost based Preferred stock interest in WebMD. No gain or loss was recorded
by the Company in connection with this original integrated transaction. On
December 29, 2000, the Company, News Corporation and WebMD entered into an
agreement to restructure the initial integrated transaction, which resulted in
the Company agreeing to exchange its entire Preferred stock investment with a
carrying value of $505 million, for an approximate $126 million reduction in the
Company's obligation to provide future media services, an approximate $37
million elimination of future funding commitments to THN, and the acquisition of
WebMD's interest in THN. The acquisition of THN was recorded at its fair market
value of approximately $200 million, as determined by an independent appraisal.
The Company will continue to provide future domestic media services over the
remaining eight years and will remain obligated for cash payments to WebMD of
$10.7 million over the remaining two years. The carrying value of the deferred
revenue for future media services is approximately $135 million as of June 30,
2002, with a market value of approximately $171 million. Such deferred revenue
will be recognized over the remaining eight-year term as such media
services are delivered under an agreed annual commitment schedule based upon
market rates prevailing in each future period. The restructuring transaction
resulted in the Company recording a non-cash charge of approximately $143
million, which is reflected within Other, net in the consolidated statement of
operations for the year ended June 30, 2001.

In June 2001, the Company completed the previously announced sale of its entire
interest in THN for cash of approximately $155 million, of which $100 million
was paid at closing and $55 million was due one year from closing (which was
satisfied during fiscal year 2002), and a 10% carried interest in the equity of
the acquirer with a minimum guarantee value of $100 million in December 2003. In
accordance with SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries,"
and EITF 87-11, "Allocation of Purchase Price to Assets to be Sold," for the
period from the acquisition of THN (December 29, 2000) until the Closing Date of
the sale, control of THN was deemed to be temporary and therefore, its results
of operations had not been consolidated in the Company's statement of operations
for the six months ended June 30, 2001. The Company recorded a loss of
approximately $15 million from the sale, which is reflected in Other, net in the
consolidated statement of operations for the year ended June 30, 2001.

                                     50

<PAGE>
RSN North

In February 2001, Fox Sports Networks, a subsidiary of the Company, acquired
certain assets and liabilities constituting the business of Midwest Sports
Channel, a regional sports network serving the Minneapolis, Minnesota and
Milwaukee, Wisconsin metropolitan areas, pursuant to an Assignment and
Assumption Agreement among Fox Sports Networks, Viacom, Inc. and Comcast
Corporation and a Purchase Agreement between Viacom and Comcast for
approximately $40 million. The excess of the net purchase price over the net
assets acquired, of approximately $33 million is reflected within Intangible
assets, net on the consolidated balance sheets.

Home Team Sports

In February 2001, Fox Sports Networks sold its approximate 34% limited
partnership interest in Home Team Sports, in a non-cash exchange for new or
amended cable carriage arrangements valued at approximately $46 million related
to the distribution of the Company's programming services on cable systems. The
Company has recognized a gain of approximately $40 million related to this
transaction, which is reflected within Other, net in the consolidated statement
of operations for the year ended June 30, 2001.

The Golf Channel

In June 2001, the Company sold its approximate 31% interest in The Golf Channel
for total consideration of approximately $375 million, of which $365 million was
received in cash during fiscal 2001. The Company has recorded a gain of
approximately $311 million related to this transaction, which is reflected in
Other, net in the consolidated statement of operations for the year ended June
30, 2001.

Chris-Craft

On July 31, 2001, News Corporation, through a wholly-owned subsidiary, acquired
all of the outstanding common stock of Chris-Craft Industries, Inc. and its
subsidiaries, BHC Communications, Inc. and United Television, Inc.,
(collectively, "Chris-Craft"). The consideration for the acquisition was
approximately $2 billion in cash and approximately $3 billion in News
Corporation American Depositary Receipts representing preferred limited voting
ordinary shares ("ADRs"). Simultaneously with the closing of the acquisition,
News Corporation transferred $3,432 million of net assets, constituting
Chris-Craft's ten television stations (the "Acquired Stations") to the Company
in exchange for 122,244,272 shares of the Company's Class A Common Stock and net
indebtedness of $48 million (the "Exchange"), thereby increasing News
Corporation's ownership in the Company from 82.76% to 85.25%. The Company
assigned the licenses issued by the Federal Communications Commission ("FCC")
for the Acquired Stations to its indirect subsidiary, Fox Television Stations,
Inc., which became the licensee and controls the operations of the Acquired
Stations. News Corporation acquired Chris-Craft and transferred to the Company
the Acquired Stations in order to strengthen the Company's existing television
station business. This transaction has been treated as a purchase in accordance
with SFAS Nos. 141 and 142.

The Company has consolidated the results of operations of the Acquired Stations
as of the date of Exchange, July 31, 2001, with the exception of KTVX-TV in Salt
Lake City, whose operations were not consolidated as of the exchange due to
regulatory requirements which precluded the Company from controlling the station
and required its disposal (see description of Clear Channel swap below). For
financial reporting purposes, in accordance with EITF 90-5, "Exchanges of
Ownership Interests between Entities under Common Control," the Company has
recognized the assets and liabilities of Chris-Craft based upon their acquired
basis in the News Corporation merger and issued equity to News Corporation at
that value.

In October 2001, the Company exchanged KTVX-TV in Salt Lake City and KMOL-TV in
San Antonio with Clear Channel Communications, Inc. for WFTC-TV in Minneapolis
(the "Clear Channel swap"). In addition, on November 1, 2001, the Company
exchanged KBHK-TV in San Francisco with Viacom Inc. for WDCA-TV in Washington,
DC and KTXH-TV in Houston (the "Viacom swap"). In June 2002, the

                                       51

<PAGE>
Company exchanged KPTV-TV in Portland, an Acquired Station, for Meredith
Corporation's WOFL-TV in Orlando and WOGX-TV in Ocala (the "Meredith swap", and
together with the Viacom and Clear Channel swaps, the "Station Swaps"). All of
the stations exchanged in the Station Swaps were Acquired Stations. No gain or
loss was recognized by the Company as a result of the Station Swaps.

Speed Channel

In July 2001, as a result of the exercise of rights by existing shareholders of
Speed Channel, the Company acquired an additional 53.44% of Speed Channel, for
approximately $401 million, increasing the Company's ownership in Speed Channel
to approximately 85.46%. As a result, the Company consolidated the results of
Speed Channel beginning in July 2001. In October 2001, the Company acquired the
remaining 14.54% minority interest in Speed Channel for approximately $111
million bringing the Company's ownership to 100%. These transactions have been
treated as a purchase in accordance with SFAS Nos. 141 and 142.

Outdoor Life

In July 2001, as a result of the exercise of rights by existing shareholders of
Outdoor Life, the Company acquired 50.23% of Outdoor Life for approximately $309
million. This acquisition resulted in the Company owning approximately 83.18% of
Outdoor Life. In October 2001, a shareholder of Outdoor Life acquired the
Company's ownership interest in Outdoor Life for approximately $512 million in
cash. During the period from July 2001 until the closing of the sale of Outdoor
Life in October 2001, the ownership interest in Outdoor Life was held for sale
and control of Outdoor Life was deemed temporary. Therefore, in accordance with
SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries," and EITF 87-11,
"Allocation of Purchase Price to Assets to be Sold," the results of Outdoor Life
were not consolidated in the Company's statement of operations for this period.
Upon the closing of the sale of the Company's ownership interest in Outdoor
Life, the Company recognized a gain of $147 million, which is reflected in
Other, net in the accompanying consolidated statements of operations for the
year ended June 30, 2002.

FFW

In October 2001, the Company, Haim Saban and the other stockholders of FFW, sold
FFW to Disney for total consideration of approximately $5.2 billion (including
the assumption of certain debt) of which approximately $1.6 billion was in
consideration of the Company's interest in FFW, which was rebranded ABC Family.
As a result of this transaction, the Company recognized a pre-tax gain of
approximately $1.4 billion, which is reflected in Other, net in the accompanying
consolidated statements of operations for the year ended June 30, 2002. The
proceeds from this transaction were used to reduce obligations to affiliates of
News Corporation. In addition, the Company sublicensed certain post-season MLB
games for the 2001 to 2006 MLB seasons to Disney for aggregate consideration of
approximately $675 million, payable over the period of the sublicense.

Fox Sports International

In December 2001, News Corporation acquired from Liberty Media Corporation
("Liberty") its 50% interest in Fox Sports International, in exchange for
3,673,183 ADRs valued at $115 million. Under the terms of the transaction, the
Company purchased News Corporation's acquired interest in Fox Sports
International, which increased the Company's ownership interest from 50% to
100%, in exchange for the issuance of 3,632,269 shares of the Company's Class A
Common Stock. As a result of this transaction, News Corporation's equity
ownership interest in the Company increased from 85.25% to 85.32%. For financial
reporting purposes, in accordance with EITF 90-5, the Company has recognized the
assets and liabilities of Fox Sports International based upon their acquired
basis in the News Corporation acquisition and issued 3,632,269 shares of the
Company's Class A Common Stock to News Corporation at that value. This
transaction has been treated as a purchase in accordance with SFAS Nos. 141 and
142.

                                       52

<PAGE>
Sunshine

In January 2002, the Company acquired an approximate 23.3% interest in Sunshine
for approximately $23.3 million. This resulted in the acquisition of a
controlling interest in Sunshine and increased the Company's ownership
percentage in Sunshine to approximately 83.3%. In February 2002, the Company
acquired an additional approximate 0.4% interest in Sunshine, increasing the
Company's ownership interest to approximately 83.7%. Since the acquisition in
January 2002, Sunshine has been consolidated into the Cable Network Programming
segment of the Company as it is now under the control of the Company. This
transaction has been treated as a purchase in accordance with SFAS Nos. 141 and
142.

WPWR-TV

In August 2002, the Company acquired WPWR-TV in Chicago from Newsweb Corporation
for approximately $425 million.

Contingencies

Regional Programming Partners

In December 1997, Rainbow Media Sports Holdings, Inc. ("Rainbow") (a subsidiary
of Cablevision Systems Corporation ("Cablevision")) and Fox Sports Net, Inc.
("Fox Sports Net") (a subsidiary of the Company) formed RPP to hold various
programming interests in connection with the operation of certain RSNs. Rainbow
contributed various interests in RSNs, the Madison Square Garden Entertainment
Complex, Radio City Music Hall, the New York Rangers NHL franchise, and the New
York Knickerbockers NBA franchise, to RPP in exchange for a 60% partnership
interest in RPP, and Fox Sports Net contributed $850 million in cash for a 40%
partnership interest in RPP.

Pursuant to the RPP partnership agreement upon certain actions being taken by
Fox Sports Net, Rainbow has the right to purchase all of Fox Sports Net's
interests in RPP. The buyout price will be the greater of (i) (a) $2.125
billion, increased by capital contributions and decreased by capital
distributions, times Fox Sports Net's interest in RPP plus (b) an 8% rate of
return on the amount in (a) and (ii) the fair market value of Fox Sports Net's
interest in RPP. Consideration will be, at Rainbow's option, in the form of cash
or a three-year note with an interest rate of prime plus 1/2%.

In addition, for 30 days following December 18, 2002 and during certain periods
thereafter, so long as RPP has not commenced an initial public offering of its
securities, Fox Sports Net has the right to cause Rainbow to, at Rainbow's
option, either (i) purchase all of its interests in RPP or (ii) consummate an
initial public offering of RPP's securities. The purchase price will be the fair
market value of Fox Sports Net's interest in RPP and the consideration will be,
at Rainbow's option, in the form of marketable securities of certain affiliated
companies of Rainbow or a three year note with an interest rate of prime plus
1/2%.

In connection with the Rainbow Transaction, Rainbow and Fox Sports Net formed
NSP in which each of Rainbow and Fox Sports Net were issued a 50% partnership
interest to operate Fox Sports Net ("FSN"), a national sports programming
service that provides its affiliated RSNs with 24 hour per day national sports
programming. In addition, Rainbow and Fox Sports Net formed NAP, in which each
of Fox Sports Net and Rainbow were issued a 50% partnership interest, to act as
the national advertising sales representative for the Fox Sports Net-owned RSNs
and the RPP-owned and managed RSNs. Independent of the arrangements discussed
above relating to RPP, for 30 days following December 18, 2002 and during
certain periods thereafter, so long as NSP and NAP have not commenced an initial
public offering of its securities, Rainbow has the right to cause Fox Sports to,
at Fox Sports' option, either (i) purchase all of Rainbow's interests in NSP and
NAP, or (ii) consummate an initial public offering of NSP's and NAP's
securities. The purchase price will be the fair market value of Rainbow's
interest in NSP and NAP and the consideration will be, at Fox Sports Net's
option, in the form of marketable securities of certain affiliated entities of
Fox Sports Net or a three-year note with an interest rate of prime plus 1/2%.

                                       53

<PAGE>
Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business
combinations to be accounted for by the purchase method and that acquired
intangible assets be recognized apart from goodwill if they meet specific
criteria. SFAS No. 141 supersedes APB Opinion No. 16 and is effective for all
business combinations initiated after June 30, 2001. SFAS No. 142 eliminates the
requirement to amortize goodwill, identifiable intangible assets that have
indefinite useful lives and the excess cost of equity investments attributable
to such intangibles. However, it requires that goodwill and identifiable
intangibles with indefinite lives be tested for impairment at least annually
using the guidance specifically provided in the statement. SFAS No. 142
supersedes APB Opinion No. 17 and will be adopted by the Company on July 1,
2002. While the Company is still in the process of evaluating the overall impact
of adopting the provisions of SFAS No. 142, the Company expects that all of its
goodwill, a substantial amount of its identifiable intangibles, primarily FCC
Licenses, and the excess cost of equity investments attributable to
indefinite-lived intangibles will no longer be amortized beginning in the first
quarter of fiscal 2003. In addition, the Company's share of net income (loss) of
certain of its equity affiliates that have adopted SFAS No. 142 will no longer
reflect the amortization of such affiliates' goodwill and indefinite-lived
intangibles. This will result in an annual reduction in amortization expense of
approximately $200 million and an increase in equity earnings of approximately
$30 million, all on a pre-tax basis. In addition, the Company does not currently
expect that adoption of SFAS No. 142 will result in a transitional impairment
loss that will be material to its consolidated statement of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which is effective for fiscal years beginning
after December 15, 2001. SFAS No. 144 establishes an accounting model for the
impairment or disposal of long-lived assets to be (i) held and used and (ii)
disposed of by sale. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." The Company will adopt SFAS No.
144 on July 1, 2002 and does not expect it to have a material impact on its
consolidated statement of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," required
that gains and losses from extinguishment of debt be classified as an
extraordinary item, net of the related income tax effect. Any gain or loss on
extinguishment of debt that was classified as an extraordinary item in prior
periods presented that does not meet the criteria in APB Opinion No. 30 for
classification as an extraordinary item shall be reclassified. SFAS No. 13,
"Accounting for Leases," has been amended to require sale-leaseback accounting
for certain lease modifications that are similar to sale-leaseback transactions.
The rescission of SFAS No. 4 and the amendment to SFAS No. 13 shall be effective
for fiscal years and transactions, respectively, occurring after May 15, 2002.
The Company has adopted the provisions of SFAS No. 145.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of foreign currency fluctuations and
utilizes derivative instruments in a limited manner to modify its exposure to
foreign exchange rate movements. The Company's policy is to enter into
derivative and other financial instruments only to the extent considered
necessary to meet its business objectives. The Company does not enter into these
transactions for speculative purposes.

Foreign Exchange Rate Risk

The Company uses foreign exchange forward contracts to minimize its limited
exposure to exchange rate movements. The foreign exchange contracts have
principally been used to hedge the costs of producing

                                       54

<PAGE>
films abroad and are principally denominated in the Czech Koruna, the Euro, the
Mexican Peso and the New Zealand Dollar. The Company designates forward
contracts used to hedge future production costs as cash flow hedges.



At June 30, 2002, the net fair value asset of financial instruments with
exposure to foreign currency risk was approximately $1.3 million. The potential
loss in fair value for such financial instruments from a 10% adverse change in
quoted foreign currency exchange rates would be approximately $2 million.
Consistent with the nature of the economic hedge provided by such foreign
exchange contracts, such gains or losses largely would be offset by
corresponding decreases or increases, respectively, in the U.S. Dollar value of
future foreign currency obligations.

                                       55

<PAGE>

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                  PAGE

FOX ENTERTAINMENT GROUP, INC.
2002 Report of Independent Public Accountants ................................57
Copy of 2001 Report of Independent Public Accountants ........................58
Consolidated Balance Sheets as of June 30, 2002 and 2001 .....................59
Consolidated Statements of Operations for the years ended
  June 30, 2002, 2001, and 2000 ..............................................60
Consolidated Statements of Cash Flows for the years ended
  June 30, 2002, 2001, and 2000 ..............................................61
Consolidated Statements of Shareholders' Equity for the years ended
  June 30, 2002, 2001, and 2000 ..............................................62
Notes to the Consolidated Financial Statements ...............................63


FOX FAMILY WORLDWIDE, INC.

Copy of 2001 Report of Independent Public Accountants ........................98
Consolidated Balance Sheets as of June 30, 2000 and 2001 .....................99
Consolidated Statements of Operations for each of the three
  years in the period ended June 30, 2001 ...................................100
Consolidated Statements of Stockholders' Equity (Deficit) and
  Comprehensive Income (Loss) for each of the three years
  in the period ended June 30, 2001 .........................................101
Consolidated Statements of Cash Flows for each of the
  three years in the period ended June 30, 2001 .............................102
Notes to the Consolidated Financial Statements ..............................104

Financial Statement Schedules:
Copy of 2001 Report of Independent Public Accountants .......................127
Schedule I: Condensed Financial Information of the Registrant ...............128
Schedule II: Valuation and Qualifying Accounts and Reserves .................132


                                       56

<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Fox Entertainment Group, Inc.

We have audited the accompanying consolidated balance sheet of Fox Entertainment
Group, Inc., a Delaware corporation, and Subsidiaries (the "Company"), as of
June 30, 2002 and the related consolidated statements of operations, cash flows
and shareholders' equity for the year then ended. The consolidated financial
statements of the Company as of June 30, 2001 and for the two years then ended
were audited by other auditors whose report dated August 16, 2001 expressed an
unqualified opinion on those statements. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Fox
Entertainment Group, Inc. and Subsidiaries as of June 30, 2002, and the
consolidated results of their operations and their cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States.

/s/ ERNST & YOUNG LLP

Los Angeles, California
August 14, 2002
except for Note 20, as to
which the date is August 21, 2002

                                       57

<PAGE>


  THIS REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP.
     THE REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP NOR HAS ARTHUR
  ANDERSEN LLP PROVIDED A CONSENT TO THE INCLUSION OF ITS REPORT IN THIS FORM
                                     10-K.

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Fox Entertainment Group, Inc.

We have audited the accompanying consolidated balance sheets of Fox
Entertainment Group, Inc., a Delaware corporation, and Subsidiaries (the
"Company"), as of June 30, 2001 and 2000, and the related consolidated
statements of operations, cash flows and shareholders' equity for each of the
three years in the period ended June 30, 2001. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Fox Entertainment
Group, Inc. and Subsidiaries as of June 30, 2001 and 2000, and the results of
its operations and its cash flows for each of the three years in the period
ended June 30, 2001, in conformity with accounting principles generally accepted
in the United States.

As explained in Note 2 to the consolidated financial statements, effective July
1, 2000, the Company changed its method of accounting for filmed entertainment
costs.

ARTHUR ANDERSEN LLP

Los Angeles, California
August 16, 2001
except for Note 19 b, as to
which the date is August 23, 2001


                                       58






<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 AS OF JUNE 30,
                (in millions except share and per share amounts)

<TABLE>
<CAPTION>

                                                                                                            2002             2001
                                                                                                          --------         --------
<S>                                                                                                       <C>              <C>
Assets:

Cash and cash equivalents .......................................................................         $     56         $     66
Accounts receivable, net ........................................................................            2,577            2,504
Filmed entertainment and television programming costs, net ......................................            3,062            3,703
Investments in equity affiliates ................................................................            1,424            1,493
Property and equipment, net .....................................................................            1,501            1,454
Intangible assets, net ..........................................................................           13,169            7,647
Other assets and investments ....................................................................            1,087              989
                                                                                                          --------         --------
      Total assets ..............................................................................         $ 22,876         $ 17,856
                                                                                                          ========         ========

Liabilities and Shareholders' Equity

Liabilities:
Accounts payable and accrued liabilities ........................................................         $  1,844         $  1,705
Participations, residuals and royalties payable .................................................            1,129              890
Television programming rights payable ...........................................................            1,428            1,133
Deferred revenue ................................................................................              500              553
Borrowings ......................................................................................              942            1,032
Deferred income taxes ...........................................................................            1,912              706
Other liabilities ...............................................................................              735              142
                                                                                                          --------         --------
                                                                                                             8,490            6,161
Due to affiliates of News Corporation ...........................................................            1,413            2,866
                                                                                                          --------         --------
      Total liabilities .........................................................................            9,903            9,027
                                                                                                          --------         --------

Minority interest in subsidiaries (Note 10) .....................................................              878              861

Commitments and contingencies

Shareholders' Equity:
Preferred stock, $.01 par value per share; 100,000,000 shares authorized; 0
  shares issued and outstanding as of June 30, 2002 and 2001 ....................................               --               --
Class A Common stock, $.01 par value per share; 1,000,000,000 authorized;
  302,436,375 and 176,559,834 issued and outstanding as of June 30, 2002 and
  2001, respectively ............................................................................                3                2
Class B Common stock, $.01 par value per share; 650,000,000 authorized;
  547,500,000 issued and outstanding as of June 30, 2002 and 2001 ...............................                6                6
Additional paid-in capital ......................................................................           11,569            8,023
Retained earnings (deficit) and accumulated other comprehensive income ..........................              517              (63)
                                                                                                          --------         --------
      Total shareholders' equity                                                                            12,095            7,968
                                                                                                          --------         --------
      Total liabilities and shareholders' equity ................................................         $ 22,876         $ 17,856
                                                                                                          ========         ========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       59

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                           FOR THE YEAR ENDED JUNE 30,
                     (in millions except per share amounts)

<TABLE>
<CAPTION>
                                                                                           2002             2001             2000
                                                                                          -------          -------          -------
<S>                                                                                       <C>              <C>              <C>
Revenues ........................................................................         $ 9,725          $ 8,414          $ 8,517
Expenses:
  Operating .....................................................................           7,226            6,274            6,482
  Selling, general and administrative ...........................................           1,293            1,101            1,011
  Depreciation and amortization .................................................             400              387              368
  Other operating charge ........................................................             909               --               --
                                                                                          -------          -------          -------
Operating (loss) income                                                                      (103)             652              656

Other (Expense) Income:
  Interest expense, net .........................................................            (241)            (345)            (297)
  Equity losses of affiliates ...................................................            (144)             (92)             (90)
  Minority interest in subsidiaries .............................................             (37)             (14)              (4)
  Other, net ....................................................................           1,540              190               --
                                                                                          -------          -------          -------
Income before provision for income taxes and cumulative
  effect of accounting change ...................................................           1,015              391              265
Provision for income tax expense on a stand-alone basis .........................            (408)            (185)            (120)
                                                                                          -------          -------          -------
Income before cumulative effect of accounting change ............................             607              206              145
Cumulative effect of accounting change, net of tax ..............................             (26)            (494)              --
                                                                                          -------          -------          -------
Net income (loss) ...............................................................         $   581          $  (288)         $   145
                                                                                          =======          =======          =======

Basic and diluted earnings per share before cumulative effect
  of accounting change ..........................................................         $  0.72          $  0.28          $  0.20
Basic and diluted cumulative effect of accounting change, net
  of tax, per share .............................................................           (0.03)           (0.68)              --
                                                                                          -------          -------          -------
Basic and diluted earnings (loss) per share .....................................         $  0.69          $ (0.40)         $  0.20
                                                                                          =======          =======          =======
Basic and diluted weighted average number of common
  equivalent shares outstanding .................................................             838              724              722
                                                                                          =======          =======          =======
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       60

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE YEAR ENDED JUNE 30,
                                  (in millions)
<TABLE>
<CAPTION>
                                                                                               2002           2001           2000
                                                                                              -------        -------        -------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Operating activities:
  Net income (loss) ...................................................................       $   581        $  (288)       $   145
  Adjustments to reconcile net income (loss) to net cash provided by
   (used in) operating activities:
   Depreciation and amortization ......................................................           400            387            368
   Amortization of cable distribution investments .....................................           116             90             72
   Other operating charge .............................................................           909             --             --
   Cumulative effect of accounting change, net of tax .................................            26            494             --
   Equity losses of affiliates and distributions ......................................           179            137             90
   Other, net .........................................................................        (1,540)          (190)            --
   Minority interest in subsidiaries ..................................................             1             --             --
   Change in operating assets and liabilities, net of acquisitions:
    Accounts receivable and other assets ..............................................           (18)          (268)          (310)
    Filmed entertainment and television programming costs, net ........................           267           (507)          (786)
    Accounts payable and accrued liabilities ..........................................          (173)            59            100
    Participations, residuals and royalties payable and other liabilities .............           239            (67)            68
                                                                                              -------        -------        -------
Net cash provided by (used in) operating activities ...................................           987           (153)          (253)
                                                                                              -------        -------        -------

Investing activities:
  Acquisitions, net of cash acquired ..................................................          (332)           (85)            63
  Proceeds from sale of investments in equity affiliates ..............................         1,543            465             --
  Investments in equity affiliates ....................................................          (321)          (177)          (174)
  Other investments ...................................................................          (132)          (234)          (178)
  Purchases of property and equipment, net of acquisitions ............................           (80)          (145)          (247)
                                                                                              -------        -------        -------
Net cash provided by (used in) investing activities ...................................           678           (176)          (536)
                                                                                              -------        -------        -------

Financing activities:
  Borrowings ..........................................................................            --             26            197
  Repayment of borrowings .............................................................          (168)          (727)          (784)
  Increase in minority interest in subsidiaries .......................................             6             --             --
  Increase (decrease) in Preferred Interests ..........................................             8            841             --
  Advances from (repayments to) affiliates of News Corporation, net ...................        (1,521)           141          1,369
                                                                                              -------        -------        -------
Net cash (used in) provided by financing activities ...................................        (1,675)           281            782
                                                                                              -------        -------        -------

Net (decrease)  in cash and cash equivalents ..........................................           (10)           (48)            (7)
Cash and cash equivalents, beginning of year ..........................................            66            114            121
                                                                                              -------        -------        -------
Cash and cash equivalents, end of year ................................................       $    56        $    66        $   114
                                                                                              =======        =======        =======
Supplemental information on businesses acquired:
  Fair value of assets acquired .......................................................       $ 5,267                       $ 3,313
  Cash acquired .......................................................................            20                            63
   Less: liabilities assumed ..........................................................         1,730                         1,951
         cash paid ....................................................................            10                            --
                                                                                              -------                       -------
  Fair value of stock consideration ...................................................       $ 3,547                       $ 1,425
                                                                                              =======                       =======
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       61

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                           FOR THE YEAR ENDED JUNE 30,
                                  (in millions)

<TABLE>
<CAPTION>
                                                                                          ACCUMULATED
                                                              ADDITIONAL    RETAINED         OTHER
                                       PREFERRED    COMMON     PAID-IN      EARNINGS     COMPREHENSIVE
                                         STOCK       STOCK     CAPITAL      (DEFICIT)    INCOME (LOSS)     TOTAL
                                       ---------    ------    ----------    ---------    -------------    -------
<S>                                    <C>          <C>       <C>           <C>          <C>              <C>
BALANCE AS OF JUNE 30, 1999 .......    $      --    $    7    $    6,599    $      69    $          (7)   $ 6,668
Issuance of Class A Common
  Stock ...........................           --         1         1,424           --               --      1,425
Comprehensive income (loss):
  Net income (loss) ...............           --        --            --          145               --        145
  Foreign currency translation
   adjustments ....................           --        --            --           --                8          8
                                       ---------    ------    ----------    ---------    -------------    -------
 Total comprehensive income
  (loss) ..........................           --        --            --          145                8        153
                                       ---------    ------    ----------    ---------    -------------    -------
BALANCE AS OF JUNE 30, 2000 .......           --
                                                         8         8,023          214                1      8,246
Comprehensive income (loss):
  Net income (loss) ...............           --        --            --         (288)              --       (288)
  Foreign currency translation
   adjustments ....................           --        --            --           --               10         10
                                       ---------    ------    ----------    ---------    -------------    -------
 Total comprehensive income
  (loss) ..........................           --        --            --         (288)              10       (278)
                                       ---------    ------    ----------    ---------    -------------    -------
BALANCE AS OF JUNE 30, 2001
                                              --         8         8,023          (74)              11      7,968
Issuance of Class A Common
  Stock ...........................           --         1         3,546           --               --      3,547
Comprehensive income (loss):
  Net income (loss) ...............           --        --            --          581               --        581
  Minimum pension liability .......           --        --            --           --                8          8
  Foreign currency translation
   adjustments ....................           --        --            --           --               (9)        (9)
                                       ---------    ------    ----------    ---------    -------------    -------
 Total comprehensive income
  (loss) ..........................           --        --            --          581               (1)       580
                                       ---------    ------    ----------    ---------    -------------    -------
BALANCE AS OF JUNE 30, 2002 .......    $      --    $    9    $   11,569    $     507    $          10    $12,095
                                       =========    ======    ==========    =========    =============    =======
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       62

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Fox Entertainment Group, Inc. and its subsidiaries (the "Company") is a
diversified entertainment company with operations in four business segments.
These business segments are: Filmed Entertainment, which principally consists of
the production and acquisition of live-action and animated motion pictures for
distribution and licensing in all formats in all entertainment media worldwide
and the production of original television programming; Television Stations,
which principally consist of the operation of broadcast television stations;
Television Broadcast Network, which principally consists of the broadcasting of
network programming; and Cable Network Programming, which principally consists
of the production and licensing of programming distributed through cable
television systems and direct broadcast satellite ("DBS") operators and
professional sports team ownership.

Prior to the Company's initial public offering in November 1998, The News
Corporation Limited and its subsidiaries ("News Corporation") effected a
reorganization (the "Reorganization") by contributing to the Company, at book
value, certain of its assets and subsidiaries engaged in the production and
distribution of feature films and television programming. Included in this
contribution were Twentieth Century Fox Film Corporation ("TCF"), which was
acquired by News Corporation in 1985, and News Corporation's interests in Fox
Family Worldwide, Inc. ("FFW"), Fox Sports Networks, LLC, International Sports
Programming LLC ("Fox Sports International"), Fox Cable Networks Ventures, Inc.
and other cable network programming and related interests.

In connection with the Reorganization in fiscal 1999, the outstanding voting
preferred stock of the Company was acquired from an executive of the Company for
its par value of $760,000 plus accrued dividends. Contemporaneous with this
transaction, the executive acquired the voting preferred stock of a subsidiary
of the Company, Fox Television Holdings, Inc. ("FTH") for the identical par
value and dividend rate (See Note 2). The voting preferred stock of the Company
had been acquired by the executive in accordance with a 1985 order of the
Federal Communications Commission ("FCC") in connection with the Company's
acquisition of television stations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
consolidated with the accounts of its majority-owned and controlled
subsidiaries. For financial reporting purposes, control generally means
ownership of a majority interest in an entity but may, in certain instances,
result from other considerations, including the Company's capacity to dominate
decision making in relation to the financial and operating policies of the
consolidated entity. FTH, a subsidiary of the Company, has 7,600 shares of
voting preferred stock issued and outstanding with a liquidation value of
$760,000 and cumulative dividends at the rate of 12% per annum. Such shares are
held by an executive of the Company and represent 76% of the voting power of
FTH.

FTH is included in these consolidated financial statements because the Company
is deemed to control FTH for financial reporting purposes. Among the reasons why
the Company has a controlling financial interest in FTH are (i) the Company has
the ability to redeem the voting preferred stock, at any time, at the
liquidation value of $760,000 plus accrued dividends, (ii) the dividends on, and
amounts to be paid on redemption of, the voting preferred stock are fixed, and
not related to the performance of FTH, and, (iii) senior management of FTH,
including its Board of Directors, consists solely of persons employed by the
Company. As a result, the controlling financial interest in FTH rests with the
Company through its common stock ownership of FTH.

All material intercompany accounts and transactions have been eliminated in the
consolidated financial statements of the Company.

The Company maintains a 52-53 week fiscal year ending on the Sunday nearest to
June 30. Fiscal years 2001 and 2002 comprised 52-week periods, while fiscal year
2000 comprised a 53-week period.

                                       63

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

BALANCE SHEET PRESENTATION

As permitted by Statement of Position No. ("SOP") 00-2, "Accounting by Producers
or Distributors of Films," the Company presents an unclassified balance sheet.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand and marketable securities with
original maturities of three months or less.

REVENUE RECOGNITION

  Filmed Entertainment:

In accordance with SOP 00-2, revenues from the theatrical distribution of motion
pictures are recognized as they are exhibited. Revenues from home video and DVD
sales, net of a reserve for returns, are recognized on the date that video and
DVD units are made widely available for sale by retailers. Revenues from the
licensing of feature films and television programming are recorded when the
material is available for telecasting by the licensee and when certain other
conditions are met.

License agreements for the telecast of theatrical and television product in the
broadcast network, syndicated television and cable television markets are
routinely entered into in advance of their available date for telecast. Cash
received and amounts billed in connection with such contractual rights for which
revenue is not yet recognizable is classified as deferred revenue. Because
deferred revenue generally relates to contracts for the licensing of theatrical
and television product which have already been produced, the recognition of
revenue for such completed product is principally only dependent upon the
commencement of the availability period for telecast under the terms of the
related licensing agreement.

  Television Stations, Television Broadcast Network and Cable Network
Programming:

Advertising revenue is recognized as the commercials are aired. Subscriber fees
received from cable systems and DBS operators for cable network programming are
recognized as revenue in the period services are provided. Revenues from
professional team ownership are recognized on a game-by-game basis.

In November 2001, the Financial Accounting Standards Board ("FASB") issued
Emerging Issues Task Force No. ("EITF") 01-09, "Accounting for the Consideration
Given by a Vendor to a Customer or a Reseller of the Vendor's Products," which
was effective for the Company as of January 1, 2002. This EITF, among other
things, codified the issues and examples of EITF 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products."
EITF 00-25 states that customer incentives which consist of the amortization of
cable distribution investments (capitalized fees paid to a cable or DBS operator
to facilitate the launch of a cable network), should be presented as a reduction
in revenue in the consolidated statement of operations. As required, the Company
has reclassified the amortization of cable distribution investments against
revenues for all periods presented. The amortization of cable distribution
investments had previously been included in Depreciation and amortization.
Operating income, Net income and Earnings per share are not affected by this
reclassification. This reclassification affects the Company's and the Cable
Network Programming segment's revenues. The effect of the reclassification on
the Company's revenues is as follows:

                                       64

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- CONTINUED

<TABLE>
<CAPTION>

                                                      For the year ended June 30,
                                                     -----------------------------
                                                       2002       2001      2000
                                                     -------    -------    ------
                                                             (in millions)
<S>                                                  <C>        <C>        <C>
Gross Revenues ...................................   $ 9,841    $ 8,504    $ 8,589

Amortization of cable distribution investments ...      (116)       (90)       (72)
                                                     -------    -------    -------
Revenues .........................................   $ 9,725    $ 8,414    $ 8,517
                                                     =======    =======    =======
</TABLE>

FILMED ENTERTAINMENT AND TELEVISION PROGRAMMING COSTS

  Filmed Entertainment Costs:

In accordance with SOP 00-2, Filmed entertainment costs include capitalizable
production costs, overhead and interest costs expected to benefit future
periods, net of any amounts received from outside investors. These costs, as
well as participations and talent residuals, are recognized as operating
expenses on an individual film basis in the ratio that the current year's gross
revenues bear to management's estimate of total ultimate gross revenues from all
sources. Marketing costs and development costs under term deals are expensed as
incurred. Story costs for projects not produced after three years are
written-off.

Filmed entertainment costs are stated at the lower of unamortized cost or
estimated fair value on an individual film or television series basis. Revenue
forecasts for both motion pictures and television products are continually
reviewed by management and revised when warranted by changing conditions. When
estimates of total revenues and other events or changes in circumstances
indicate that a motion picture or television production has a fair value that is
less than its unamortized cost, a loss is recognized currently for the amount by
which the unamortized cost exceeds the film or television production's fair
value.

Through June 30, 2000, the Company employed the guidance of Statement of
Financial Accounting Standard ("SFAS") No. 53. The Company adopted SOP 00-2 on
July 1, 2000, which established new accounting standards for producers and
distributors of films and superseded SFAS No. 53. SOP 00-2 established new
accounting standards for, among other things, marketing and development costs.
The Company recorded a one-time, non-cash charge of $494 million, net of $302
million tax, as a cumulative effect of accounting change as of July 1, 2000.
This charge primarily reflects the write-off of marketing and certain
development costs, which were previously capitalized under SFAS No. 53 and are
no longer capitalizable under SOP 00-2. Subsequent to the adoption of SOP 00-2,
the Company's accounting policy is to expense marketing and certain development
costs as incurred.

  Television and Cable Programming Costs:

In accordance with SFAS No. 63, program rights for entertainment programs for
the Television Stations, Television Broadcast Network and Cable Network
Programming segments are amortized primarily on a straight-line basis, generally
based on the usage of the program or term of license. Original cable programming
is amortized on an accelerated basis. The Company has single and multi-year
contracts for broadcast rights of programs and sporting events. At the inception
of these contracts and at each subsequent reporting date, the Company evaluates
the recoverability of the costs associated therewith against the revenues
directly associated with the program material and related expenses. Where an
evaluation indicates that a programming contract will result in an ultimate
loss, additional amortization is provided to currently recognize that loss. The
costs of national sports contracts for the Television Broadcast Network and
Cable Network Programming segments are charged to expense based on the

                                       65

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

ratio of each period's operating profits to estimated total operating profit of
the contract. Estimates of total operating profit can change significantly and
accordingly, are reviewed periodically and amortization is adjusted as
necessary.

The costs of regional sports contracts for the Cable Network Programming
segment, which are for a specified number of events, are amortized on an
event-by-event basis and those, which are for a specified season, are amortized
over the season on a straight-line basis.

INVESTMENTS IN EQUITY AFFILIATES

Investments in and advances to affiliates or joint ventures in which the Company
has a substantial ownership interest of approximately 20% to 50%, or for which
the Company owns more than 50% but does not control policy decisions, are
accounted for by the equity method. The Company's share of net earnings or
losses of affiliates includes the amortization of the excess of the Company's
investment over its underlying share of the net assets of the investee at
acquisition, which is amortized over 40 years.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over an estimated useful life of three to forty years.
Leasehold improvements are amortized using the straight-line method over the
shorter of their useful lives or the life of the lease. Costs associated with
the repair and maintenance of property are expensed as incurred.

INTANGIBLE ASSETS

As a creator and distributor of branded content, the Company has a significant
amount of intangible assets, including goodwill, film and television libraries,
FCC licenses, sports franchises and trademarks. Goodwill is recorded as the
difference between the cost of acquiring entities and amounts assigned to their
tangible and identifiable intangible net assets. Except for intangible assets
acquired in business combinations subsequent to June 30, 2001, intangible assets
are amortized using the straight-line method over the following lives: goodwill
(40 years); FCC licenses (40 years); Franchises and other (4 - 40 years).

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS

In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," the Company evaluates the
recoverability of the carrying amount of its long-lived assets and certain
identifiable intangibles to be held and used by the Company. Such reviews are
performed whenever events or changes in circumstances indicate full
recoverability is questionable and on an individual business-entity basis.

Assessment of recoverability would include a comparison of the asset's carrying
value to the sum of the undiscounted estimated future cash flows anticipated to
be generated from the asset's use and eventual disposition. If the Company
determines that impairment has occurred, the measurement of the impairment will
be equal to the excess of the asset's carrying amount over its fair value.
Factors used in ascertaining the estimated fair value include operating income
before interest and taxes, television ratings and subscriber numbers. Should the
review determine impairment, the loss will be recognized through the statement
of operations as part of income from continuing operations and the corresponding
asset value will be reduced.

                                       66

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

FINANCIAL INSTRUMENTS

The fair value of financial instruments, including cash and cash equivalents,
investments and long-term borrowings, is generally determined by reference to
market values resulting from trading on national securities exchanges. In cases
where quoted market prices are not available, fair value is based on estimates
using present value or other valuation techniques.

INCOME TAXES

The Company accounts for income taxes using SFAS No. 109, "Accounting for Income
Taxes". SFAS No. 109 requires an asset and liability approach for financial
accounting and reporting for income taxes and allows recognition and measurement
of deferred tax assets based upon the likelihood of realization of tax benefits
in future years. Under the asset and liability approach, deferred taxes are
provided for the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Deferred taxes have not been provided on
the cumulative undistributed earnings of foreign subsidiaries since amounts are
expected to be reinvested indefinitely.

STOCK-BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does
not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to account for
stock-based compensation awards to employees under Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and its
interpretation, FASB Interpretation No. ("FIN") 44, "Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of APB Opinion No.
25".

COMPREHENSIVE INCOME

The Company follows SFAS No. 130, "Reporting Comprehensive Income" for the
reporting and display of comprehensive income and its components in financial
statements and thereby reports a measure of all changes.

DERIVATIVES

SFAS No. 133 requires every derivative instrument (including certain derivative
instruments embedded in other contracts) to be recorded on the balance sheet at
fair value as either an asset or a liability. The statement also requires that
changes in the fair value of recorded derivatives be recognized currently in
earnings unless specific hedge accounting criteria are met.

The Company uses financial instruments designated as cash flow hedges to hedge
its limited exposures to foreign currency exchange risks associated with the
costs for producing films abroad. All cash flow hedges are recorded at fair
value on the consolidated balance sheet. As of June 30, 2002 and 2001, the
contractual amount of foreign exchange forward contracts was $18.5 million and
$4.2 million and the net fair value asset and net fair value liability was $1.3
million and $0.3 million, respectively. These contracts expire by January 2003.
The effective changes in fair value of derivatives designated as cash flow
hedges are recorded in accumulated other comprehensive income (loss) with
foreign currency translation adjustments. Amounts are reclassified from
accumulated other comprehensive income (loss) when the underlying hedged item is
recognized in earnings. All ineffective changes in fair value of derivatives are
recorded in earnings.


                                       67

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

TRANSLATION OF FOREIGN CURRENCIES

Assets and liabilities of foreign subsidiaries and affiliates are translated
into US dollars at appropriate year-end current rates and all income and expense
accounts are translated at rates that approximate those rates prevailing at the
time of the transactions. The resulting translation adjustments are accumulated
as a component of accumulated other comprehensive income (loss). Foreign
currency receivables and payables are translated at appropriate year-end current
rates and the resulting translation gains or losses are taken into income
currently.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. The Company uses significant
estimates in determining the amortization of filmed entertainment costs and
programming contracts. Because of the use of estimates inherent in the financial
reporting process, especially for entertainment companies, actual results could
differ from those estimates. These differences could be material.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the fiscal 2002
presentation.


                                       68

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. CHRIS-CRAFT ACQUISITION

On July 31, 2001, News Corporation, through a wholly-owned subsidiary, acquired
all of the outstanding common stock of Chris-Craft Industries, Inc. and its
subsidiaries, BHC Communications, Inc. and United Television, Inc.,
(collectively, "Chris-Craft"). The consideration for the acquisition was
approximately $2 billion in cash and approximately $3 billion in News
Corporation American Depositary Receipts representing preferred limited voting
ordinary shares ("ADRs"). Simultaneously with the closing of the acquisition,
News Corporation transferred $3,432 million of net assets, constituting
Chris-Craft's ten television stations (the "Acquired Stations") to the Company
in exchange for 122,244,272 shares of the Company's Class A Common Stock and net
indebtedness of $48 million (the "Exchange"), thereby increasing News
Corporation's ownership in the Company from 82.76% to 85.25%. The Company
assigned the licenses issued by the FCC for the Acquired Stations to its
indirect subsidiary, Fox Television Stations, Inc., which became the licensee
and controls the operations of the Acquired Stations. News Corporation acquired
Chris-Craft and transferred to the Company the Acquired Stations in order to
strengthen the Company's existing television station business. This transaction
has been treated as a purchase in accordance with SFAS Nos. 141 and 142.

The Company has consolidated the results of operations of the Acquired Stations
as of the date of Exchange, July 31, 2001, with the exception of KTVX-TV in Salt
Lake City, whose operations were not consolidated as of the exchange due to
regulatory requirements which precluded the Company from controlling the station
and required its disposal (see description of Clear Channel swap below). For
financial reporting purposes, in accordance with EITF 90-5, "Exchanges of
Ownership Interests between Entities under Common Control," the Company has
recognized the assets and liabilities of Chris-Craft based upon their acquired
basis in the News Corporation merger and issued equity to News Corporation at
that value.

In October 2001, the Company exchanged KTVX-TV in Salt Lake City and KMOL-TV in
San Antonio with Clear Channel Communications, Inc. for WFTC-TV in Minneapolis
(the "Clear Channel swap"). In addition, on November 1, 2001, the Company
exchanged KBHK-TV in San Francisco with Viacom Inc. for WDCA-TV in Washington,
DC and KTXH-TV in Houston (the "Viacom swap"). In June 2002, the Company
exchanged KPTV-TV in Portland, an Acquired Station, for Meredith Corporation's
WOFL-TV in Orlando and WOGX-TV in Ocala (the "Meredith swap", and together with
the Viacom and Clear Channel swaps, the "Station Swaps"). All of the stations
exchanged in the Station Swaps were Acquired Stations. No gain or loss was
recognized by the Company as a result of the Station Swaps.


                                       69

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. CHRIS-CRAFT ACQUISITION-CONTINUED

The following table summarizes the preliminary fair values of the assets
transferred and liabilities assumed at the date of the Exchange. The allocation
of purchase price is substantially complete, but awaiting final valuations.


                                                                  As of July 31,
                                                                      2001
                                                                  --------------
                                                                   (in millions)
Assets transferred:
Accounts receivable, net .......................................     $   88
Filmed entertainment and television programming costs, net......        106
Property and equipment, net ....................................         90
Other intangible assets ........................................      2,960
Goodwill .......................................................      1,855
Other assets and investments ...................................         78
                                                                     ------
  Total assets transferred .....................................      5,177
                                                                     ------
Liabilities assumed:
Television programming rights payable ..........................        439
Accrued expenses ...............................................        236
Deferred income taxes ..........................................        973
Other liabilities ..............................................         97
                                                                     ------
  Total liabilities assumed
                                                                      1,745
                                                                     ------
  Net assets transferred .......................................     $3,432
                                                                     ======

The purchase price was primarily allocated to acquired intangible assets
including both goodwill and FCC licenses, which are deemed to have indefinite
lives, and therefore are not subject to amortization in accordance with the
provisions of SFAS No. 142, "Goodwill and Other Intangible Assets." The goodwill
and intangibles were assigned to the Television Stations segment, the majority
of which are not deductible for tax purposes. In accordance with SFAS No. 109,
"Accounting for Income Taxes," the Company has recorded deferred taxes for the
basis difference related to FCC licenses and other acquired assets and
liabilities.

The table below reflects the unaudited pro forma combined results of the Company
as if the Exchange and the Station Swaps had taken place as of July 1, 2000.

<TABLE>
<CAPTION>
                                                             For the year ended June 30,
                                                           ------------------------------
                                                                 2002         2001
                                                           ------------------------------
                                                           (in millions, except per share
                                                                       amounts)

<S>                                                             <C>         <C>
Revenues ...............................................        $ 9,763     $ 8,882
Operating income (loss) ................................            (82)        753
Cumulative effect of accounting change, net of tax .....            (26)       (494)
Net income (loss) ......................................            592        (199)
Basic and diluted earnings (loss) per share ............        $  0.70     $ (0.23)
</TABLE>



                                       70

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. CHRIS-CRAFT ACQUISITION-CONTINUED

The unaudited pro forma financial information is presented for comparative
purposes only and is not necessarily indicative of the operating results that
actually would have occurred had the Exchange and the Station Swaps been
consummated on July 1, 2000. In addition, these results are not intended to be a
projection of future results and do not reflect any synergies that might be
achieved from the combined operations.

4. ACQUISITIONS AND DISPOSITIONS

In January 2000, the Company completed a series of integrated transactions with
Healtheon/WebMD Corporation ("WebMD") to exchange, among other things, media
services and its interest in The Health Network ("THN") for a cost based
Preferred stock interest in WebMD. No gain or loss was recorded by the Company
in connection with this original integrated transaction. On December 29, 2000,
the Company, News Corporation and WebMD entered into an agreement to restructure
the initial integrated transaction, which resulted in the Company agreeing to
exchange its entire Preferred stock investment with a carrying value of $505
million, for an approximate $126 million reduction in the Company's obligation
to provide future media services, an approximate $37 million elimination of
future funding commitments to THN, and the acquisition of WebMD's interest in
THN. The acquisition of THN was recorded at its fair market value of
approximately $200 million, as determined by an independent appraisal. The
Company will continue to provide future domestic media services over the
remaining eight years and will remain obligated for cash payments to WebMD of
$10.7 million over the remaining two years. The carrying value of the deferred
revenue for future media services is approximately $135 million as of June 30,
2002, with a market value of approximately $171 million. Such deferred revenue
will be recognized over the remaining eight-year term as such media services are
delivered under an agreed annual commitment schedule based upon market rates
prevailing in each future period. The restructuring transaction resulted in the
Company recording a non-cash charge of approximately $143 million, which is
reflected within Other, net in the consolidated statement of operations for the
year ended June 30, 2001.

In June 2001, the Company completed the previously announced sale of its entire
interest in THN for cash of approximately $155 million, of which $100 million
was paid at closing and $55 million is due one year from Closing (which was
satisfied during fiscal year 2002), and a 10% carried interest in the equity of
the acquirer with a minimum guarantee value of $100 million in December 2003. In
accordance with SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries,"
and EITF 87-11, "Allocation of Purchase Price to Assets to be Sold," for the
period from the acquisition of THN (December 29, 2000) until the Closing Date of
the sale, control of THN was deemed to be temporary and therefore, its results
of operations had not been consolidated in the Company's statement of operations
for the six months ended June 30, 2001. The Company recorded a loss of
approximately $15 million from the sale, which is reflected in Other, net in the
consolidated statement of operations for the year ended June 30, 2001.

In February 2001, Fox Sports Networks, LLC ("Fox Sports Networks"), a subsidiary
of the Company, acquired certain assets and liabilities constituting the
business of Midwest Sports Channel, a regional sports network serving the
Minneapolis, Minnesota and Milwaukee, Wisconsin metropolitan areas, pursuant to
an Assignment and Assumption Agreement among Fox Sports Networks, Viacom, Inc.
("Viacom") and Comcast Corporation ("Comcast") and a Purchase Agreement between
Viacom and Comcast for approximately $40 million. The excess of the net purchase
price over the net assets acquired, of approximately $33 million is reflected
within Intangible assets, net on the consolidated balance sheets.

In February 2001, Fox Sports Networks sold its approximate 34% limited
partnership interest in Home Team Sports, in a non-cash exchange for new or
amended cable carriage arrangements valued at approximately $46 million related
to the distribution of the Company's programming services on cable systems. The
Company has recognized a gain of approximately $40 million related to this
transaction, which is reflected within Other, net in the consolidated statement
of operations for the year ended June 30, 2001.


                                       71

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. ACQUISITIONS AND DISPOSITIONS-CONTINUED

In March 2001, the Company acquired the outstanding equity of New Millennium
Investors, LLC ("New Millennium") for an aggregate purchase price of $45
million. (See Note 10)

In June 2001, the Company sold its approximate 31% interest in The Golf Channel
for total consideration of approximately $375 million, of which $365 million was
received in cash during fiscal 2001. The Company has recorded a gain of
approximately $311 million related to this transaction, which is reflected in
Other, net in the consolidated statement of operations for the year ended June
30, 2001.

In July 2001, as a result of the exercise of rights by existing shareholders of
Speedvision Network, LLC, the Company acquired an additional 53.44% of
Speedvision Network, LLC, now Speed Channel, Inc. ("Speed Channel"), for
approximately $401 million, increasing the Company's ownership in Speed Channel
to approximately 85.46%. As a result, the Company consolidated the results of
Speed Channel beginning in July 2001. In October 2001, the Company acquired the
remaining 14.54% minority interest in Speed Channel for approximately $111
million bringing the Company's ownership to 100%. These transactions have been
treated as a purchase in accordance with SFAS Nos. 141 and 142.

In July 2001, as a result of the exercise of rights by existing shareholders of
Outdoor Life Network, LLC ("Outdoor Life"), the Company acquired 50.23% of
Outdoor Life for approximately $309 million. This acquisition resulted in the
Company owning approximately 83.18% of Outdoor Life. In October 2001, a
shareholder of Outdoor Life acquired the Company's ownership interest in Outdoor
Life for approximately $512 million in cash. During the period from July 2001
until the closing of the sale of Outdoor Life in October 2001, the ownership
interest in Outdoor Life was held for sale and control of Outdoor Life was
deemed temporary. Therefore, in accordance with SFAS No. 94, "Consolidation of
All Majority-Owned Subsidiaries," and EITF 87-11, "Allocation of Purchase Price
to Assets to be Sold," the results of Outdoor Life were not consolidated in the
Company's statement of operations for this period. Upon the closing of the sale
of the Company's ownership interest in Outdoor Life, the Company recognized a
gain of $147 million, which is reflected in Other, net in the accompanying
consolidated statements of operations for the year ended June 30, 2002.

In October 2001, the Company, Haim Saban and the other stockholders of FFW, sold
FFW to The Walt Disney Company ("Disney") for total consideration of
approximately $5.2 billion (including the assumption of certain debt) of which
approximately $1.6 billion was in consideration of the Company's interest in
FFW, which was rebranded ABC Family. As a result of this transaction, the
Company recognized a pre-tax gain of approximately $1.4 billion, which is
reflected in Other, net in the accompanying consolidated statements of
operations for the year ended June 30, 2002. The proceeds from this transaction
were used to reduce obligations to affiliates of News Corporation. In addition,
the Company sublicensed certain post-season Major League Baseball ("MLB") games
for the 2001 to 2006 MLB seasons to Disney for aggregate consideration of
approximately $675 million, payable over the period of the sublicense.

In December 2001, News Corporation acquired from Liberty Media Corporation
("Liberty") its 50% interest in Fox Sports International, in exchange for
3,673,183 ADRs valued at $115 million. Under the terms of the transaction, the
Company purchased News Corporation's acquired interest in Fox Sports
International, which increased the Company's ownership interest from 50% to
100%, in exchange for the issuance of 3,632,269 shares of the Company's Class A
Common Stock. As a result of this transaction, News Corporation's equity
ownership interest in the Company increased from 85.25% to 85.32%. For financial
reporting purposes, in accordance with EITF 90-5, the Company has recognized the
assets and liabilities of Fox Sports International based upon their acquired
basis in the News Corporation acquisition and issued 3,632,269 shares of the
Company's Class A Common Stock to News Corporation at that value. This
transaction has been treated as a purchase in accordance with SFAS Nos. 141 and
142.


                                       72

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. ACQUISITIONS AND DISPOSITIONS-CONTINUED

In January 2002, the Company acquired an approximate 23.3% interest in the
Sunshine Network ("Sunshine") for approximately $23.3 million. This resulted in
the acquisition of a controlling interest in Sunshine and increased the
Company's ownership percentage in Sunshine to approximately 83.3%. In February
2002, the Company acquired an additional approximate 0.4% interest in Sunshine,
increasing the Company's ownership interest to approximately 83.7%. Since the
acquisition in January 2002, Sunshine has been consolidated into the Cable
Network Programming segment of the Company as it is now under the control of the
Company. This transaction has been treated as a purchase in accordance with SFAS
Nos. 141 and 142.

5. FILMED ENTERTAINMENT AND TELEVISION PROGRAMMING COSTS, NET

Filmed entertainment and television programming costs, net consisted of the
following as of June 30:

<TABLE>
<CAPTION>

                                                                       2002     2001
                                                                      ------   ------
                                                                       (in millions)
<S>                                                                   <C>      <C>
Filmed entertainment costs:
 Films:
  Released ........................................................   $  728   $  732
  Completed, not released .........................................       80       23
  In production ...................................................      366      555
  In development or preproduction .................................       49       69
                                                                      ------   ------
                                                                       1,223    1,379
                                                                      ------   ------
 Television productions:
  Released ........................................................      500      484
  In production ...................................................       94      150
  In development or preproduction .................................        7       10
                                                                      ------   ------
                                                                         601      644
                                                                      ------   ------
Total filmed entertainment costs, less accumulated amortization....    1,824    2,023
Television programming costs, less accumulated amortization .......    1,238    1,680
                                                                      ------   ------
Total filmed entertainment and television programming costs, net...   $3,062   $3,703
                                                                      ======   ======
</TABLE>

As of June 30, 2002 the Company estimated that approximately 63% of unamortized
filmed entertainment costs from completed films are expected to be amortized
during fiscal year 2003 and approximately 91% of released unamortized filmed
entertainment costs will be amortized within the next three years. As of June
30, 2002, the Company estimated that approximately 35% of $817 million in
accrued participation liabilities will be payable during fiscal year 2003.


                                       73

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. OTHER OPERATING CHARGE

The Company has several multi-year sports rights agreements, including a
contract with the National Football League ("NFL") through fiscal year 2006,
contracts with the National Association of Stock Car Auto Racing ("NASCAR")
through fiscal year 2013 and a contract with Major League Baseball ("MLB")
through fiscal year 2007. These contracts provide the Company with the broadcast
rights to certain national sporting events during their respective terms. The
NFL and NASCAR contracts contain certain early termination clauses that are
exercisable by the NFL and NASCAR.

The Company continually evaluates the recoverability of the rights costs against
the revenues directly associated with the program material and related direct
expenses over the expected contract lives. At December 31, 2001, the Company
recorded an Other operating charge of $909 million. This charge related to a
change in accounting estimate on the Company's national sports rights agreements
caused by the downturn in the advertising market, which caused the Company to
write off programming costs inventory and to provide for estimated losses on
these contracts over their estimated terms. This evaluation considered the
severe downturn in sports-related advertising, the lack of any sustained
advertising rebound subsequent to September 11th and the industry-wide reduction
of projected long-term advertising growth rates, all of which resulted in the
Company's estimate of future directly attributable revenues associated with
these contracts being lower than previously anticipated. Because the vast
majority of costs incurred under these contracts are fixed, such as the rights
costs and production costs, the results of these lower revenue estimates
indicated that the Company would generate a loss over the estimated remaining
term of the sports contracts.

In accordance with APB Opinion No. 20, "Accounting Changes," the Company has
determined that the impact of the charge on Basic and diluted earnings (loss)
per share, net of tax benefit of $346 million, for the year ended June 30, 2002
is $0.67 loss per share.

The costs of these sports contracts are charged to expense based on the ratio of
each period's operating profits to estimated total operating profit of the
contract. Considering the provision of $909 million for estimated losses and
absent a difference between the actual future revenues and costs as compared to
the estimated future revenues and costs, no operating profit or loss will be
recognized by the Company over the estimated remaining term of the sports
contracts.

The profitability of these long-term national sports contracts as discussed
above is based on the Company's best estimates at June 30, 2002, of directly
attributable revenues and costs; such estimates may change in the future, and
such changes may be significant. Should revenues decline from estimates applied
at June 30, 2002, an additional loss will be recorded. Should revenues improve
as compared to estimated revenues, then none of the recorded loss will be
restored, but the Company will have a positive operating profit, which will be
recognized over the estimated remaining contract term.

As of June 30, 2002, there have been no significant changes in the Company's
estimates from those employed as of December 31, 2001.

7. INVESTMENTS

The Company's investments in equity affiliates consist principally of a 49.5% of
FFW, a family television programming venture, until its sale in October 2001;
40% of Regional Programming Partners ("RPP"), a partnership holding interests in
various regional sporting networks ("RSNs") and sporting teams and arenas; 40%
of Ventures Arena, an entity which holds interests in sporting arenas; 66.7% of
the domestic National Geographic Channel and 50% of the international National
Geographic Channel (together, the "National Geographic Channels"), which air
documentary programming on such topics as natural history, adventure, science
and culture.

As of June 30, 2002, the investment in these affiliates was as follows: FFW - $0
million; RPP - $896 million; Ventures Arena - $122 million; and National
Geographic Channels - $214 million. As of June 30, 2001, the investment in these
affiliates was as follows: FFW - $119 million; RPP - $908 million; Ventures


                                       74

<PAGE>

                          FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. INVESTMENTS-CONTINUED

Arena - $131 million; and National Geographic Channels - $76 million.

The Company's investment in several of its affiliates exceeded its equity in the
underlying net assets by a total of $402 million and $420 million as of June 30,
2002 and 2001, respectively. These excess amounts are being amortized on a
straight-line basis over 40 years. The fiscal 2001 amount includes the excess on
the investment in Sunshine Networks, which became a consolidated subsidiary
during fiscal 2002. The amortization aggregated to $12 million for each of the
years ended June 30, 2002, 2001 and 2000.

The Company's share of the income (loss) of each of its equity affiliates is as
follows:

<TABLE>
<CAPTION>

                                                  For the year ended June 30,
                                                  ----------------------------
Affiliate:                                         2002       2001       2000
------------------------------------------------  ------     ------     ------
                                                          (in millions)
<S>                                               <C>       <C>       <C>
Fox Family Worldwide(a) ........................  $ (51)      $(37)       $ 23

Fox Sports International(b) ....................     (9)       (22)        (28)
Fox Sports Networks Domestic:
  National Sports Partners .....................    (25)       (22)        (17)
  Regional Programming Partners ................     (9)         2          (1)
  Other ........................................     18         11           6
National Geographic Channel - Domestic .........    (42)       (22)         (1)
The Golf Channel(c) ............................                14          --
Other ..........................................    (26)       (16)        (72)
                                                   ----       ----        ----
  Total equity losses of affiliates ............  $(144)      $(92)       $(90)
                                                  =====       ====        ====

</TABLE>

(a) The Company sold its interests in FFW in October 2001. (See Note 4)
(b) Subsequent to the acquisition of the remaining 50% interest in December
    2001, the results of Fox Sports International have been consolidated in the
    Cable Network Programming segment. (See Note 4)
(c) The Company sold its interests in The Golf Channel in June 2001. (See
    Note 4)

SUMMARIZED FINANCIAL DATA

Summarized financial information for significant equity affiliates and joint
ventures, as defined in Rule 1-02(w) of Regulation S-X, accounted for under the
equity method is as follows:
<TABLE>
<CAPTION>

                                                  For the year ended June 30,
                                                  ----------------------------
                                                   2002       2001       2000
                                                  ------     ------     ------
                                                          (in millions)
                                                  <S>        <C>        <C>
Revenues                                          $1,378     $1,528     $1,370

Operating income (loss)                              (82)      (126)       (49)

Net income (loss)                                    (77)      (140)       (57)

                                                               As of June 30,
                                                             -----------------
                                                              2002       2001
                                                             -----------------
                                                               (in millions)

Total assets                                                 $2,565      2,600

Total liabilities                                               899      1,116

</TABLE>


                                       75

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. INVESTMENTS-CONTINUED

The summarized financial information for FFW, as defined in Rule 1-02(w) of
Regulation S-X, accounted for under the equity method is as follows:

<TABLE>
<CAPTION>

                                                   For the quarter
                                                   ended September

                                                         30,

                                                  ------------------
                                                                        For the year ended June 30,
                                                  ------------------  ---------------------------------
                                                        2001                2001              2000
                                                  ------------------  ------------------  -------------
                                                                     (in millions)


<S>                                               <C>                 <C>                 <C>
Revenues                                                        $134                $724           $642

Operating income (loss)                                          (50)                144            110

Net income (loss)                                               (145)                (26)            61
                                                                                   As of
                                                                      ---------------------------------
                                                                      September 30,         June 30,
                                                                            2001              2001
                                                                      ------------------  -------------
                                                                               (in millions)

Total assets                                                                      $2,530         $2,622

Total liabilities                                                                  2,371          2,306

</TABLE>


On October 24, 2001, the Company sold its 49.5% ownership interest in FFW to
Disney (See Note 4). The full, unaudited financial statements of FFW for the
period from July 1 to October 24, 2001 were not produced by FFW in the ordinary
course of business and as such are not available. The financial information
included above is for the quarter ended September 30, 2001 since the financial
information for the twenty-four days ended October 24, 2001 was not available.
The impact of the operating results from October 1 through October 24, 2001 was
immaterial to the Company's consolidated statement of operations.

Other Investments

Cable distribution investments of $519 million and $472 million are included in
Other assets and investments on the consolidated balance sheets as of June 30,
2002 and 2001, respectively, and are amortized on a straight line basis over
their remaining terms through 2012.

8. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of June 30:


<TABLE>
<CAPTION>

                                                              2002             2001
                                                         ---------------  ----------------
                                                                  (in millions)
<S>                                                      <C>              <C>
Machinery and equipment                                           $1,215              $998

Buildings and leaseholds                                             928               914

Land                                                                 195               175
                                                         ---------------  ----------------

                                                                   2,338             2,087

Less accumulated depreciation and amortization                      (837)             (633)
                                                         ---------------  ----------------
Total property and equipment, net                                 $1,501            $1,454
                                                         ===============  ================
</TABLE>

Depreciation and amortization expenses related to property and equipment were
$171 million, $164 million and $142 million for the years ended June 30, 2002,
2001 and 2000, respectively.


                                       76

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. BORROWINGS

Borrowings consisted of the following as of June 30:

<TABLE>
<CAPTION>

                                                                  2002         2001
                                                               -----------  -----------
                                                                    (in millions)

<S>                                                                         <C>
  Film production financing (a)                                $         -   $      168

 $500 million 8 7/8% Senior Notes due 2007 (b)                         522          500

 $405 million 9 3/4% Senior Discount Notes due 2007 (b)                420          364
                                                               -----------  -----------

Total borrowings                                               $       942  $     1,032
                                                               ===========  ===========

</TABLE>



(a)   The Company had various single-film production financing arrangements,
      which were secured by the film assets and bore interest at approximately
      6.5% for fiscal years 2001 and 2000.

(b)   In June 2002, the Company and its subsidiary, Fox Sports Networks, LLC,
      irrevocably called for redemption all of the outstanding 9 3/4% Senior
      Discount Notes due 2007 and all of the outstanding 8 7/8% Senior Notes due
      2007. The redemption was completed in August 2002. The Company has
      recorded a pre-tax loss of $42 million on the early redemption of these
      notes in Other, net in the consolidated statement of operations for the
      year ended June 30, 2002 in accordance with SFAS No. 145.

External interest paid, including amounts capitalized, was $82 million, $135
million and $128 million for the year ended June 30, 2002, 2001 and 2000,
respectively. The Company capitalizes interest on filmed entertainment and
television programming in process. The total interest capitalized was $22
million, $29 million and $43 million for the year ended June 30, 2002, 2001 and
2000, respectively.


                                       77

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. MINORITY INTEREST IN SUBSIDIARIES

In March 2001, the Company entered into a new series of film rights agreements
whereby a controlled consolidated subsidiary of the Company, Cornwall Venture
LLC ("NM2"), that holds certain library film rights, funds the production or
acquisition costs of all eligible films, as defined, to be produced or acquired
by TCF, a subsidiary of the Company, between 2001 and 2004 (these film rights
agreements are collectively referred to as the "New Millennium II Agreement").
NM2 is a separate legal entity from the Company and TCF and has separate assets
and liabilities. NM2 issued a preferred limited liability membership interest
("Preferred Interest") to a third party to fund the film financing, which is
presented on the consolidated balance sheets as Minority interest in
subsidiaries. The Preferred Interest has no fixed redemption rights but is
entitled to an allocation of the gross receipts to be derived by NM2 from the
distribution of each eligible film. Such allocation to the extent available
based on the gross receipts from the distribution of the eligible films consists
of (i) a return on the Preferred Interest (the "Preferred Payments"), based on
certain reference rates (generally based on commercial paper rates or LIBOR)
prevailing on the respective dates of determination, and (ii) a redemption of
the Preferred Interest, based on a contractually determined amortization
schedule. The Preferred Interest has a preference in the event of a liquidation
of NM2 equal to the unredeemed portion of the investment plus any accrued and
unpaid Preferred Payments.

The net change in Preferred Interests outstanding was $8 million and $841
million for the years ended June 30, 2002 and 2001, respectively. These amounts
were comprised of issuances by the Company of additional Preferred Interests
under New Millennium II in the amount of $657 million and $131 million and
redemptions by the Company of Preferred Interests of $649 million and $42
million during fiscal year 2002 and 2001, respectively. The original issuance of
Preferred Interests was $752 million in fiscal year 2001.

As of June 30, 2002 and 2001, there was approximately $850 million and $842
million, respectively, of Preferred Interests outstanding, which are included in
the consolidated balance sheets as Minority interest in subsidiaries. The
Preferred Payments are recorded as an expense in Minority interest in
subsidiaries on the consolidated statements of operations.

A Ratings Trigger Event for the New Millennium II Agreement would occur if News
Corporation's debt rating:

     (i) (a) falls below BB+ and below Ba1, or (b) falls below BB, or (c) falls
     below Ba2, or (d) it is not rated by both rating agencies, and, in each
     case, neither News Corporation nor the Company shall, within ten business
     days after the occurrence of such event, have provided credit enhancement
     so that the resulting New Millennium II Agreement is rated at least BB+ and
     Ba1, or

     (ii) (a) falls below BBB- and Baa3, or (b) it is not rated by both rating
     agencies, and, in each case, more than $25 million in capital payments
     redeemable at that time from film gross receipts remain unredeemed for at
     least one quarter.

If a Ratings Trigger Event were to occur, then (a) no new films will be
transferred, (b) rights against certain film assets may be enforced, and (c) the
Preferred Interest may become redeemable.

During fiscal 2002, no Ratings Trigger Event had occurred. If a Ratings Trigger
Event were to occur, then $425 million (or approximately 50% of the outstanding
balance as of June 30, 2002) may be payable immediately. The balance of the
redemption would be payable to the extent of future gross receipts from films
that had been transferred to NM2.


                                       78

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. INCOME TAXES

Although, during the periods presented, the Company and certain of its
subsidiaries were included in the consolidated tax returns of another News
Corporation entity and other subsidiaries of the Company filed a separate tax
return, the Company has provided for income taxes as if it were a stand-alone
taxpayer, in accordance with SFAS No. 109.

Income before income taxes was attributable to the following jurisdictions for
the year ended June 30:

<TABLE>
<CAPTION>
                                                                                   2002           2001          2000
                                                                               -----------   -------------  ------------
                                                                                             (in millions)

<S>                                                                             <C>          <C>            <C>
United States (including exports)                                                   $  930            $350          $201

Foreign                                                                                 85              41            64
                                                                               -----------   -------------  ------------
                                                                                    $1,015            $391          $265
                                                                               ===========   =============  ============
</TABLE>



Components of income tax expense were as follows for the year ended June 30:

<TABLE>
<CAPTION>
                                                                                  2002           2001          2000
                                                                               -----------   -------------  ------------
                                                                                             (in millions)
<S>                                                                             <C>          <C>            <C>
Current:
   Federal - pursuant to the Tax Sharing Agreement                                  $  348            $119          $ 70

   Foreign                                                                              19              23            19
                                                                               -----------   -------------  ------------
                                                                                    $  367            $142          $ 89
                                                                               -----------   -------------  ------------
Deferred:
   Federal                                                                          $    7            $ 39          $ 26

   State and local                                                                      34               4             5
   Foreign                                                                               -               -             -
                                                                               -----------   -------------  ------------
                                                                                    $   41            $ 43          $ 31

                                                                               -----------   -------------  ------------
Total income tax expense                                                            $  408            $185          $120
                                                                               ===========   =============  ============
</TABLE>

A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on income before income taxes is summarized as follows for
the year ended June 30:

<TABLE>
<CAPTION>
                                                                                  2002           2001          2000
                                                                               -----------   -------------  ------------
<S>                                                                             <C>          <C>            <C>
U.S. Federal income tax rate                                                            35%             35%           35%
State and local taxes (net of federal tax benefit)                                       2               1             1
Effect of foreign operations                                                            (1)              2            (1)
Non-deductible amortization and expenses                                                 3               7            10
Other                                                                                    1               2             -
                                                                               -----------   -------------  ------------
Effective tax rate                                                                      40%             47%           45%
                                                                               ===========   =============  ============
</TABLE>


                                       79

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. INCOME TAXES-CONTINUED

The following is a summary of the components of the deferred tax accounts as of
June 30:

<TABLE>
<CAPTION>

                                                                    2002           2001
                                                               -------------   ------------
                                                                       (in millions)
<S>                                                            <C>             <C>
Deferred tax assets (liabilities):
Amortization and basis difference on intangible assets          $  (2,772)      $  (1,641)
Revenue recognition                                                   369             438
Accrued liabilities                                                   202             201
Other operating charge                                                230               -
Other                                                                 (25)           (112)
Net operating loss carryforwards                                      195             555
                                                               -------------   ------------
Net deferred tax liability                                         (1,801)           (559)

Income tax payable                                                   (111)           (147)
                                                               -------------   ------------
                                                                $  (1,912)      $    (706)
                                                               =============   ============

</TABLE>


As of June 30, 2002, the Company had approximately $557 million of operating
loss carryforwards available to reduce future taxable income of certain
subsidiaries that file separate tax returns. If the operating losses are not
utilized, they expire in varying amounts starting in 2003 through 2022. The
realization of these loss carryforwards is dependent on generating sufficient
taxable income prior to the expiration of the loss carryforwards, subject to any
limitations on their use. Although realization is not assured, management
believes it is more likely than not that the deferred tax assets relating to
these loss carryforwards will be realized; accordingly, no valuation allowance
has been provided.

As noted above, certain subsidiaries of the Company are included in the
consolidated group of News Publishing Australia Limited ("NPAL"), the principal
U.S. subsidiary of News Corporation, for U.S. federal income tax purposes (the
"Consolidated Group") as well as in certain consolidated, combined or unitary
groups which include NPAL and/or certain of its subsidiaries (the "Combined
Group") for state and local income tax purposes. The Company and NPAL have
entered into a tax sharing agreement (the "Tax Sharing Agreement"). Pursuant to
the Tax Sharing Agreement, the Company and NPAL generally will make payments
between them such that, with respect to tax returns for any taxable period in
which the Company or any of its subsidiaries are included in the Consolidated
Group or any Combined Group, the amount of such consolidated or combined taxes
to be paid by the Company will be determined, subject to certain adjustments, as
if the Company and each of its subsidiaries included in the Consolidated Group
or Combined Group filed their own consolidated, combined or unitary tax return.
Net operating losses and other future tax benefits actually availed of to reduce
the tax liabilities of the Consolidated Group or Combined Group and any taxes
actually paid by the Company's subsidiaries included in such groups will be
taken into account for this purpose. The Company will be responsible for any
taxes with respect to tax returns that include only the Company and its
subsidiaries.

Under the Tax Sharing Agreement the Company paid $370 million in 2002 and $153
million in 2001. Amounts paid in 2000 were not significant. Taxes paid in 2002
principally relate to the gain on the sale of the Company's interest in FFW.


                                       80

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. SHARE OPTION PLAN

The Company does not have a share option plan.

Certain of the Company's employees have been granted News Corporation stock
options under News Corporation's Share Option Plan (the "Plan"). The price of
options granted under the Plan is the weighted average market price of the
shares sold on the Australian Stock Exchange during the five trading days
immediately prior to the date of the option being granted. Stock options are
exercisable at a ratio of four options per ADR.

Options issued under the Plan have a term of ten years, but are exercisable only
after they have been vested in the option holder. The options granted vest and
become exercisable as to one quarter on each anniversary of the grant until all
options have vested.

As permitted under SFAS No. 123, the Company has chosen to account for
stock-based awards to employees using the intrinsic value method in accordance
with APB Opinion No. 25.

A summary of the Plan activity is as follows for the year ended June 30, (in
thousands of shares and Australian dollars):

<TABLE>
<CAPTION>

                                        2002                       2001                         2000
                               ------------------------   ------------------------    --------------------------
                                             WEIGHTED                   WEIGHTED                      WEIGHTED
                                              AVERAGE                    AVERAGE                       AVERAGE
                                             EXERCISE                   EXERCISE                      EXERCISE
                                OPTIONS        PRICE       OPTIONS        PRICE         OPTIONS        PRICE
                               ---------    -----------   ---------    -----------    ----------    ------------
<S>                            <C>          <C>           <C>          <C>            <C>           <C>



Outstanding at the beginning
   of the year                   59,585        A$11.08      46,419        A$7.75         42,278         A$6.32
Granted                          40,976        A$11.63      20,083       A$17.74         16,851        A$10.52
Exercised                        (5,483)        A$8.25      (4,736)       A$6.35         (8,120)        A$6.47
Cancelled                        (4,901)       A$12.93      (2,181)      A$12.16         (4,590)        A$7.04
                               ---------    -----------  ----------    -----------    ----------    ------------
Outstanding at the end of
   the year                      90,177        A$11.40      59,585       A$11.08         46,419         A$7.75
                               =========    ===========  ==========    ===========    ==========    ============
Exercisable at the end of
   the year                      29,322                     21,687                       14,207
Weighted average fair value
   of options granted                           A$5.40                    A$7.50                        A$4.52

</TABLE>


                                       81

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. SHARE OPTION PLAN-CONTINUED

The following table summarizes information about the Plan as of June 30, 2002.

<TABLE>
<CAPTION>

                                                      Weighted
                                         Weighted      Average                     Weighted
                                          Average     Remaining                    Average
                        Options          Exercise    Contractual   Exercisable     Exercise
        Tranches      Outstanding         Price         Life         Options        Price
-------------------   -----------       ---------    -----------   -----------     --------

<S>        <C>             <C>              <C>             <C>      <C>              <C>
A$4.79 to A$6.56           16,134          A$5.21           4.13        14,074       A$5.27

A$8.08 to A$11.58          26,219          A$9.58           6.24        11,215       A$9.26

A$12.13 to A$18.15         47,824         A$14.49           8.46         4,033       A$12.51
                      -----------                                  -----------
                           90,177                                       29,322
                      -----------                                  -----------

</TABLE>

In connection with the Company's acquisition of Chris-Craft, outstanding stock
options held by employees of Chris-Craft became exercisable, according to their
terms, for News Corporation ADRs effective at the acquisition date. The share
equivalent of the News Corporation ADRs issued to employees of Chris-Craft has
been included in the chart above. These options did not reduce the shares
available for grant under any other option plan. The fair value of the options
issued to the acquired companies' employees, up to the fair value of the options
surrendered, was included as part of the purchase price. The excess in fair
value of the issued options over the surrendered options is accounted for in
accordance with SFAS No. 123, whereby the excess fair value is recorded as
unamortized deferred compensation expense and future amortization is based on
the graded vesting schedule of the stock options. As of July 31, 2001, the
Company began recording deferred compensation related to the unvested options
held by employees of Chris-Craft, in accordance with Financial Interpretation
No. 44.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model, with the following assumptions:

<TABLE>
<CAPTION>

                                                    2002            2001           2000
                                                  --------        --------       --------
<S>                                                <C>             <C>            <C>
Australian risk free interest rate                   4.92%           6.59%          6.55%
Dividend yield                                        1.5%            1.5%           1.5%
Expected volatility                                 33.27%          33.27%         33.27%
Expected life of options                           7 years         7 years        7 years

</TABLE>

Had compensation expense for the Plan been determined on the fair value at the
date of grant for options under the alternative method prescribed by SFAS No.
123, the Company's Net income (loss) would have been adjusted to the pro forma
amounts indicated below. The fair value of the Chris-Craft options granted have
not been included in this pro forma presentation as they were included in
purchase accounting.

<TABLE>
<CAPTION>

                                                      For the year ended June 30,
                                                 ------------------------------------
                                                   2002          2001           2000
                                                 --------      --------      --------
                                                  (in millions except per share data)
Net income (loss):
<S>                                              <C>           <C>            <C>
As reported                                       $ 581        $ (288)        $ 145
Pro forma                                           551          (308)          129
Basic and diluted earnings (loss) per share:
As reported                                       $0.69        $(0.40)        $0.20
Pro forma                                          0.66         (0.43)         0.18

</TABLE>


                                       82

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

PENSION PLANS

The Company has non-contributory pension plans covering specific groups of
employees. The benefits for these plans are based primarily on an employee's
years of service and pay near retirement. Participant employees are vested in
the plans after five years of service. The Company's policy for all pension
plans is to fund amounts in accordance with the Employee Retirement Income
Security Act of 1974. Plan assets consist principally of common stocks,
marketable bonds and government securities.

Accumulated plan benefits and plan net assets for the Company's defined benefit
plans are as follows as of June 30:

<TABLE>
<CAPTION>

                                                                 2002                        2001
                                                              ------------  -------------------------------------------
                                                               Projected
                                                               Benefits      Assets Exceed     Projected
                                                                Exceed        Projected         Benefits
                                                                Assets         Benefits      Exceed Assets     Total
                                                              ------------  --------------   -------------   ----------
                                                                                  (in millions)
<S>                                                            <C>             <C>             <C>            <C>
Accumulated benefit obligation                                 $    347        $     14        $    239       $    253
  Effect of projected future salary increases                        45               3              36             39
                                                              ------------  --------------   -------------   ----------
Total projected benefit obligations                                 392              17             275            292
Plan assets at fair value                                           274              17             220            237
                                                              ------------  --------------   -------------   ----------
Plan assets less than projected benefit obligations            $    118        $     -         $     55       $     55
                                                              ============  ==============   =============   ===========
</TABLE>


In accordance with SFAS No. 87, an additional pension liability of approximately
$8 million has been recognized to reflect the excess of the accumulated benefit
obligation over the fair value of plan assets.

The components of net periodic pension costs were as follows for the year ended
June 30:

<TABLE>
<CAPTION>
                                                               2002           2001           2000
                                                          -------------    -----------   -----------
                                                                          (in millions)
<S>                                                        <C>              <C>           <C>
Service cost-benefits earned during the period             $      20        $      16     $      16
Interest cost on projected benefit obligation                     25               19            17
Expected return on plan assets                                   (25)             (24)          (21)
                                                          -------------    -----------   -----------
Net periodic pension cost                                  $      20        $      11     $      12
                                                          =============    ===========   ===========
</TABLE>


The following assumptions were used in accounting for the defined benefit plans
for the year ended June 30:

<TABLE>
<CAPTION>

                                                               2002           2001           2000
                                                          -------------    -----------   -----------
<S>                                                          <C>            <C>             <C>
Discount rate                                                     7%        7% - 7.75%        7.25%
Expected return on plan assets                                    9%               10%          10%
Rate of increase in future compensation                      4%-5.5%         4% - 5.5%      4% - 6%
</TABLE>


                                       83

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS-CONTINUED

The following table sets forth the change in defined benefit obligation for the
Company's benefit plans for the year ended June 30:


                                                           2002        2001
                                                        ----------  ----------
                                                            (in millions)

Benefit obligation, beginning of the year               $     292   $     253

Service cost                                                   20          16

Interest cost                                                  25          19

Benefits paid                                                 (14)        (10)

Actuarial gain                                                  4          14
Plan Amendment                                                (10)         -
Acquisitions                                                   75          -
                                                        ----------  ----------
Benefit obligation, end of the year                     $     392   $     292
                                                        ==========  ==========

The following table sets forth the change in the fair value of plan assets for
the Company's defined benefit plans for the year ended June 30:


                                                           2002        2001
                                                        ----------  ----------
                                                            (in millions)

Fair value of plan assets, beginning of the year        $     237   $     232

Actual return on plan assets                                   (5)         (3)

Employer contributions                                          6          18

Benefits paid                                                 (14)        (10)
Acquisitions                                                   50           -
                                                        ----------  ----------
Fair value of plan assets, end of the year              $     274   $     237
                                                        ==========  ==========


The funded status of the defined benefit plans was as follows as of June 30:


                                                           2002        2001
                                                        ----------  ----------
                                                            (in millions)

Funded status                                           $    (118)  $     (55)

Unrecognized net loss                                          66          33

Unrecognized prior service cost                               (11)         (2)
                                                        ----------  ----------
Net amount recognized, end of the year                  $     (63)  $     (24)
                                                        ==========  ==========


Amounts recognized in the consolidated balance sheets as of June 30:

                                                           2002        2001
                                                        ----------  ----------
                                                            (in millions)

Prepaid pension assets                                  $       2   $       1

Accrued pension liabilities                                   (73)        (25)
Other Comprehensive Income                                      8           -
                                                        ----------  ----------
Net accrued pension liability, end of year              $     (63)  $     (24)
                                                        ==========  ==========


The unfunded projected benefit obligation as of July 31, 2001 for the
Chris-Craft Qualified Pension Plan, the Chris-Craft Non-Qualified Pension Plan
and the UTV Pension Plan (together the "Acquired Plans") was, in aggregate,
approximately $25 million and was included in the purchase price of Chris-Craft.
This unfunded pension obligation of $25 million represents the excess of the
projected benefit obligation over the fair value of assets acquired at the date
of acquisition. Net periodic pension cost includes expenses of the acquired
plans from August 1, 2001 through June 30, 2002.


                                       84

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS-CONTINUED

OTHER POST RETIREMENT BENEFITS

The Company sponsors retiree health and life insurance benefit plans. These
benefit plans offer medical and/or life insurance to certain full-time employees
and eligible dependents that retire after fulfilling age and service
requirements. These plans cover approximately 2,000 participants.

The components of net periodic postretirement benefit costs were as follows for
the year ended June 30:


                                                      2002       2001      2000
                                                     ------     ------    ------

Service cost-benefits earned during the period       $   6      $   5      $   4
Interest cost on accumulated benefit obligation          4          4          3
Amortization of unrecognized loss                        1          -          -
                                                     ------     ------    ------
Net periodic postretirement benefit cost             $  11      $   9      $   7
                                                     ======     ======    ======


The following table sets forth the change in accumulated postretirement benefit
obligation ("APBO") for the Company's postretirement benefit plans for the year
ended June 30:


                                                            2002        2001
                                                        ----------   -----------
                                                            (in millions)

APBO, beginning of the year                             $      64    $      50
Service cost                                                    6            5
Interest cost                                                   4            4
Benefits paid                                                  (3)          (2)
Actuarial loss                                                 22            7
Plan Amendments                                                (3)           -
Acquisition                                                     8            -
                                                        ----------   -----------
APBO, end of the year                                   $      98    $      64
                                                        ==========   ===========


The funded status of the Company's postretirement benefit plans was as follows
as of June 30:


                                                            2002        2001
                                                        ----------   -----------
                                                            (in millions)
APBO                                                    $      98     $     64
Plan assets                                                     -           -
                                                        ----------   -----------

Funded status                                                 (98)         (64)
                                                        ----------   -----------
Unrecognized net loss                                          35           13

Unrecognized prior service cost                                (4)           -
                                                        ----------   -----------
Accrued postretirement liability, end of the year       $     (67)   $     (51)
                                                        ==========   ===========


                                       85

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS-CONTINUED

The following weighted average assumptions were used in accounting for the
Company's postretirement plans for the year ended June 30:


                                             2002          2001         2000
                                        --------------  ----------  -----------
Discount rate                                   7.00%       7.00%        7.75%
Healthcare cost trend                   12.50%-16.50%       8.50%        8.50%


The effect of a one percentage point increase and one percentage point decrease
in the assumed health care cost trend rate would have the following effects on
the results for fiscal year 2002:


                                                      Service and
                                                       Interest
                                                        Costs          APBO
                                                     -------------   -----------
                                                            (in millions)
One percentage point increase                           $      1      $    12
One percentage point decrease                           $     (1)     $   (10)


14. RELATED PARTY TRANSACTIONS

As a subsidiary of News Corporation, the Company has entered into a Master
Intercompany Agreement, which provides various cash management, financial, tax,
legal and other services. The consideration for each of the services and other
arrangements set forth in the Master Intercompany Agreement has been mutually
agreed upon based upon allocated costs; provided that all such consideration and
any material arrangements are subject to the approval of the audit committee of
the Company. The Company has used and expects that it will continue to use
various cash management, financial, tax, legal and other services provided by
News Corporation or its subsidiaries. All costs relating to direct intercompany
services have been reflected in the accompanying consolidated financial
statements.

The Master Intercompany Agreement has been entered into in the context of a
parent-subsidiary relationship; therefore, these services are not the result of
arm's-length negotiations between independent parties. There can be no
assurance, therefore, that each of such agreements, or the transactions provided
for therein, or any amendments thereof will be effected on terms at least
favorable to the Company as could have been obtained from unaffiliated third
parties.

The Company and its subsidiaries sell broadcast rights to certain of its filmed
entertainment products to other affiliates of News Corporation. Management
believes that the pricing of these transactions results from arm's-length
negotiations between the parties and are reflective of the market value for
these rights.

The Company advertises in TV Guide, a publication of Gemstar - TV Guide
International, Inc. ("Gemstar - TV Guide"), an equity affiliate of News
Corporation. For the years ended June 30, 2002, 2001 and 2000, the Company had
advertising expenses of $5 million, $7 million and $11 million, respectively,
related to Gemstar - TV Guide advertising. In addition, the Company provided
Gemstar-TV Guide with programming in the amount of $5 million, $12 million and
$16 million for the years ended June 30, 2002, 2001 and 2000, respectively.

The Company supplies programming to subsidiaries and equity affiliates of News
Corporation. The Company provided STAR, a subsidiary of News Corporation, with
programming in the amount of $7 million for each of the years ended June 30,
2002 and 2001 and $1 million for the year ended June 30, 2000. Equity affiliates
of News Corporation that received programming from the Company are British Sky
Broadcasting Group, plc ("BSkyB"), a UK satellite broadcaster and FOXTEL, a
cable and satellite television service in Australia. BSkyB received programming
of $67 million, $75 million and $63 million


                                       86

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. RELATED PARTY TRANSACTIONS-CONTINUED

for the years ended June 30, 2002, 2001 and 2000. The amount of programming
supplied to FOXTEL was $2 million, $1 million and $1 million for the years ended
June 30, 2002, 2001 and 2000, respectively.

In addition, through the normal course of business, the Company is involved in
transactions to supply programming and provide other services to equity
affiliates that have not been significant in any of the periods presented. These
affiliates include Premium Movie Partnership, Regency TV, Telecine, National
Sports Partners and National Advertising Partners.

As of June 30, 2002 and 2001, the Company had related party accounts receivable
in the amounts of $79 million and $73 million, respectively, included in
Accounts receivable, net on the consolidated balance sheets.

The Company is funded primarily by loans from other subsidiaries and affiliates
of News Corporation. Intercompany interest expense of $182 million, $239 million
and $211 million for the years ended June 30, 2002, 2001 and 2000, respectively,
is included in interest expense, net in the consolidated statements of
operations and reflects the net interest expense associated with the aggregate
borrowings from subsidiaries or affiliates of News Corporation. From November
11, 1998, interest on outstanding intercompany balances has been charged at
commercial market rates not to exceed News Corporation's average cost of
borrowings as set forth in the Master Intercompany Agreement. For all periods
presented, the intercompany interest rate was 8%.


                                       87

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. COMMITMENTS AND CONTINGENCIES

The Company has commitments under certain firm contractual arrangements ("firm
commitments") to make future payments for goods and services. These firm
commitments secure the future rights to various assets and services to be used
in the normal course of operations. The following table summarizes the Company's
material firm commitments and borrowings as of June 30, 2002 and the timing that
such obligations are expected to have on the Company's liquidity and cash flow
in future periods.

<TABLE>
<CAPTION>

                                                              As of June 30, 2002
                                  -----------------------------------------------------------------------------
                                                            Payments Due by Period
                                  -----------------------------------------------------------------------------
                                       Total          1 year        2-3 years      4-5 years     After 5 years
                                  -----------------------------------------------------------------------------
                                                                 (in millions)
 Contractual Obligations and
         Commitments

-------------------------------
<S>                                <C>             <C>          <C>
Borrowings /(a)/                      $   942         $  942         $    -         $    -          $    -
Due to affiliates of News
  Corporation /(b)/                     1,413              -              -              -           1,413
New Millennium II preferred
  interest /(c)/                          850            576            239             35               -

Major League Baseball /(d)/             1,995            334            765            896               -

National Football League /(e)/          2,880            575          1,490            815               -
National Association of
  Stock Car Auto Racing /(f)/           1,621            201            495            536             389
Commitment for purchase   of
TV station /(g)/                          425            425                             -               -

Capital expenditures                       30             29              1              -               -

Operating leases /(h)/                    502             80            128             93             201
Other programming
  commitments and
  obligations /(i)/                     4,488          1,068          1,160            707           1,553
                                  -----------------------------------------------------------------------------
Total Contractual
  Obligations and
  Commitments                         $15,146         $4,230         $4,278         $3,082          $3,556
                                  =============================================================================
</TABLE>

The Company also has certain contractual arrangements that would require the
Company to make payments or provide funding if certain circumstances occur
("contingent guarantees"). The Company does not expect that these contingent
guarantees will result in any amounts being paid by the Company in the
foreseeable future. The timing of the amounts presented in the table reflect
when the maximum contingent guarantees will expire and does not indicate that
the Company expects to incur an obligation to make payments during that
timeframe.


                                       88

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. COMMITMENTS AND CONTINGENCIES-CONTINUED


<TABLE>
<CAPTION>
                                                              As of June 30, 2002
                                  -----------------------------------------------------------------------------
                                                           Amount of Guarantees Expiration Per Period
                                                  -------------------------------------------------------------
                                       Total
                                      Amounts
    Contingent Guarantees            Committed      1 year       2-3 years      4-5 years      After 5 years
-------------------------------   --------------  ----------  --------------  ------------  -------------------
                                                              (in millions)
<S>                                  <C>            <C>          <C>             <C>              <C>
Guarantees/j/                        $  8,655       $   73       $    502        $     -          $  8,080
Guarantees of equity affiliates/k/   $  1,050       $   43       $     93        $   105          $    809
</TABLE>



FOOTNOTES:

(a)  In June 2002, the Company and its subsidiary, Fox Sports Networks, LLC,
     irrevocably called for redemption all of the outstanding 9 3/4% Senior
     Discount Notes due 2007 and all of the outstanding 8 7/8% Senior Notes due
     2007. The redemption was completed in August 2002. The Company has recorded
     a pre-tax loss of $42 million on the early redemption of these notes in
     Other, net in the consolidated statement of operations for the year ended
     June 30, 2002 in accordance with SFAS No. 145.

(b)  The Company is funded primarily by cash from operations and by loans from
     other subsidiaries and affiliates of News Corporation. The Company had
     approximately $1.4 billion of indebtedness to affiliates of News
     Corporation as of June 30, 2002, which extend through June 30, 2008.

(c)  See discussion of New Millennium II in Note 10 "Minority interest in
     subsidiaries". As noted therein, this interest has no fixed redemption
     rights but is entitled to an allocation of gross receipts from the
     distribution of eligible films.

(d)  The Company's six-year contract with MLB grants the Company rights to
     telecast certain regular season and all post-season MLB games. The contract
     began with the 2001 MLB season and ends with the 2006 MLB season. The
     remaining future scheduled payments for telecast rights to such MLB games
     aggregated approximately $2.0 billion as of June 30, 2002, before
     sublicense fees are considered. For the duration of the term of its
     contract with MLB, the Company has sublicensed telecast rights to certain
     MLB post-season games to The Walt Disney Company, and is paid a sublicense
     fee aggregating $590 million over the remaining term. The amounts reflected
     on this schedule have not been reduced by the sublicense.

(e)  Under the Company's eight-year contract with the NFL through 2006, which
     contains certain termination clauses, remaining future minimum payments for
     program rights to broadcast certain football games aggregated approximately
     $2.9 billion as of June 30, 2002, and are payable over the remaining
     five-year term of the contract assuming no early terminations.

(f)  The Company's contracts with the NASCAR, which contain certain termination
     clauses, give the Company rights to broadcast certain NASCAR races through
     fiscal year 2009 and exclusive NASCAR content rights as well as the NASCAR
     brand to be exploited with a new NASCAR cable channel or the existing Speed
     Channel through fiscal year 2013. The remaining future minimum payments
     aggregated approximately $1.6 billion as of June 30, 2002, and are payable
     over the remaining terms assuming no early terminations.


                                       89

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. COMMITMENTS AND CONTINGENCIES-CONTINUED

(g)  In June 2002, the Company entered into an agreement to acquire WPWR-TV in
     Chicago from Newsweb Corporation for approximately $425 million. This
     acquisition closed in August 2002.

(h)  The Company leases transponders, office facilities, equipment, and
     microwave transmitters used to carry its broadcast signals. These leases,
     which are classified as operating leases, expire at various dates through
     2016.

(i)  The Company's minimum commitments and guarantees under certain other
     programming, local sports broadcast rights, players and other agreements
     aggregated approximately $4.5 billion as of June 30, 2002 and are payable
     principally over a five year period.

(j)  The Company, News Corporation and certain of News Corporation's
     subsidiaries are guarantors of various debt obligations of News Corporation
     and certain of its subsidiaries. During fiscal year 2001, certain of the
     Company's subsidiaries were released as guarantors of these debt
     obligations. The principal amount of indebtedness outstanding under such
     debt instruments as of June 30, 2002 and 2001 was approximately $8.7
     billion and $9.3 billion, respectively. The debt instruments limit the
     ability of guarantors, including the Company, to subject their properties
     to liens and certain of the debt instruments impose limitations on the
     ability of News Corporation and certain of its subsidiaries, including the
     Company, to incur indebtedness in certain circumstances. Such debt
     instruments mature at various times between 2004 and 2096, with a weighted
     average maturity of over 20 years. In the case of any event of default
     under such debt obligations, the Company will be directly liable to the
     creditors or debtholders. News Corporation has agreed to indemnify the
     Company from and against any obligations it may incur by reason of its
     guarantees of such debt obligations. As of June 30, 2002, News Corporation
     was in compliance with all of its debt covenants and had satisfied all
     financial ratios and tests and expects to remain in compliance and satisfy
     all such ratios and tests.

(k)   The Company guarantees various sports rights agreements for certain
      associated companies. The aggregate of these guarantees is approximately
      $1,050 million and extends through 2019.

Except as otherwise discussed above, the Company does not guarantee the debt of
any of its affiliates accounted for using the equity method of accounting.


                                       90

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. COMMITMENTS AND CONTINGENCIES-CONTINUED

CONTINGENCIES

REGIONAL PROGRAMMING PARTNERS

In December 1997, Rainbow Media Sports Holdings, Inc. ("Rainbow") (a subsidiary
of Cablevision Systems Corporation ("Cablevision")) and Fox Sports Net, Inc.
("Fox Sports Net") (a subsidiary of the Company) formed RPP to hold various
programming interests in connection with the operation of certain RSNs. Rainbow
contributed various interests in RSNs, the Madison Square Garden Entertainment
Complex, Radio City Music Hall, the New York Rangers National Hockey League
franchise, and the New York Knickerbockers National Basketball Association
franchise, to RPP in exchange for a 60% partnership interest in RPP, and Fox
Sports Net contributed $850 million in cash for a 40% partnership interest in
RPP.

Pursuant to the RPP partnership agreement upon certain actions being taken by
Fox Sports Net, Rainbow has the right to purchase all of Fox Sports Net's
interests in RPP. The buyout price will be the greater of (i) (a) $2.125
billion, increased by capital contributions and decreased by capital
distributions, times Fox Sports Net's interest in RPP plus (b) an 8% rate of
return on the amount in (a) and (ii) the fair market value of Fox Sports Net's
interest in RPP. Consideration will be, at Rainbow's option, in the form of cash
or a three-year note with an interest rate of prime plus 1/2%.

In addition, for 30 days following December 18, 2002 and during certain periods
thereafter, so long as RPP has not commenced an initial public offering of its
securities, Fox Sports Net has the right to cause Rainbow to, at Rainbow's
option, either (i) purchase all of its interests in RPP or (ii) consummate an
initial public offering of RPP's securities. The purchase price will be the fair
market value of Fox Sports Net's interest in RPP and the consideration will be,
at Rainbow's option, in the form of marketable securities of certain affiliated
companies of Rainbow or a three year note with an interest rate of prime plus
1/2%.

In connection with the Rainbow Transaction, Rainbow and Fox Sports Net formed
National Sports Partners ("NSP") in which each of Rainbow and Fox Sports Net
were issued a 50% partnership interest to operate Fox Sports Net ("FSN"), a
national sports programming service that provides its affiliated RSNs with 24
hour per day national sports programming. In addition, Rainbow and Fox Sports
Net formed National Advertising Partners ("NAP"), in which each of Fox Sports
Net and Rainbow were issued a 50% partnership interest, to act as the national
advertising sales representative for the Fox Sports Net-owned RSNs and the
RPP-owned and managed RSNs. Independent of the arrangements discussed above
relating to RPP, for 30 days following December 18, 2002 and during certain
periods thereafter, so long as NSP and NAP have not commenced an initial public
offering of its securities, Rainbow has the right to cause Fox Sports to, at Fox
Sports' option, either (i) purchase all of Rainbow's interests in NSP and NAP,
or (ii) consummate an initial public offering of NSP's and NAP's securities. The
purchase price will be the fair market value of Rainbow's interest in NSP and
NAP and the consideration will be, at Fox Sports Net's option, in the form of
marketable securities of certain affiliated entities of Fox Sports Net or a
three-year note with an interest rate of prime plus 1/2%.

LITIGATION

In the ordinary course of business, the Company has become involved in disputes
or litigation. While the results of such disputes cannot be predicted with
certainty, in management's opinion, based in part on the advice of counsel, the
ultimate resolution of these disputes will not have a material adverse effect on
the Company's financial position or its results of operations.


                                       91

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SEGMENT INFORMATION

The Company manages and reports its activities in four business segments: Filmed
Entertainment, which principally consists of the production and acquisition of
live-action and animated motion pictures for distribution and licensing in all
formats in all entertainment media primarily in the United States, Canada and
Europe, and the production of original television programming in the United
States and Canada; Television Stations, which principally consists of the
operation of broadcast television stations in the United States; Television
Broadcast Network, which principally consists of the broadcasting of network
programming in the United States; and Cable Network Programming, which
principally consists of the production and licensing of programming distributed
through cable television systems and direct broadcast satellite operators in the
United States and professional sports team ownership in the United States.

In the first quarter of fiscal 2002, management redefined its Filmed
Entertainment segment to reflect a change in how the business is analyzed and
evaluated. The redefined segment includes all activities previously included in
the Filmed entertainment segment along with the activity of the former Other
Television Businesses segment, primarily comprised of divisions, which produce
and distribute television programming and also distribute feature motion
pictures. Prior year segments have been reclassified to conform to the current
year presentation.

The Company's reportable operating segments have been determined in accordance
with the Company's internal management structure, which is organized based on
operating activities. The Company evaluates performance based upon several
factors, of which the primary financial measure is segment operating income.

                                              For the year ended June 30,
                                       -----------------------------------------
                                           2002         2001            2000
                                       ----------    ----------     ------------
                                                     (in millions)
Revenues:
  Filmed Entertainment                     $4,048        $3,676           $3,953
  Television Stations                       1,875         1,550            1,635
  Television Broadcast Network              2,048         1,823            1,751
  Cable Network Programming                 1,754         1,365            1,178
                                       ----------    ----------     ------------
    Total revenues                         $9,725        $8,414           $8,517
                                       ==========    ==========     ============

                                         92

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SEGMENT INFORMATION-CONTINUED

<TABLE>
<CAPTION>

                                                    For the year ended June 30,
                                                ------------------------------------
                                                   2002         2001         2000
                                                ----------   ----------   ----------
                                                           (in millions)
<S>                                             <C>          <C>          <C>
Operating income (loss):
  Filmed Entertainment                           $  485       $  277       $  117
  Television Stations                               598          499          585
  Television Broadcast Network                     (283)         (65)          29
  Cable Network Programming                           6          (59)         (75)
  Other operating charge                           (909)           -            -
                                                ----------   ----------   ----------
 Total operating income (loss)                     (103)         652          656
                                                ----------   ----------   ----------
Interest expense, net                              (241)        (345)        (297)
Equity losses of affiliates                        (144)         (92)         (90)
Minority interest in subsidiaries                   (37)         (14)          (4)
Other, net                                        1,540          190            -
                                                ----------   ----------   ----------
Income before provision for income taxes and
  cumulative effect of accounting change         $1,015       $  391       $  265
                                                ==========   ==========   ==========

</TABLE>



Intersegment revenues generated primarily by the Filmed Entertainment segment of
approximately $772 million, $455 million and $373 million for the years ended
June 30, 2002, 2001 and 2000, respectively, have been eliminated within the
Filmed Entertainment segment. Intersegment operating income generated primarily
by the Filmed Entertainment segment of approximately $40 million, $13 million
and $15 million for the years ended June 30, 2002, 2001 and 2000, respectively,
has been eliminated within the Filmed Entertainment segment.

Other operating charge, Interest expense, net, Equity losses of affiliates
(which primarily relate to entities involved in the production and licensing of
cable network programming), Minority interest in subsidiaries, Other, net and
Provision for income tax expense on a stand-alone basis are not allocated to
segments, as they are not under the control of segment management.

<TABLE>
<CAPTION>

                                                    For the year ended June 30,
                                                ------------------------------------
                                                   2002         2001         2000
                                                ----------   ----------   ----------
                                                           (in millions)
<S>                                              <C>          <C>         <C>
Depreciation and amortization:
  Filmed Entertainment                            $  59        $  65        $  51
  Television Stations                               200          184          189
  Television Broadcast Network                       20           20           18
  Cable Network Programming                         121          118          110
                                                ----------   ----------   ----------
Total depreciation and amortization              $  400        $ 387        $ 368
                                                ==========   ==========   ==========

Capital expenditures:
  Filmed Entertainment                            $  16        $ 58         $  72
  Television Stations                                17          22            85
  Television Broadcast Network                       12          11            12
  Cable Network Programming                          35          54            78
                                                ----------   ----------   ----------
Total capital expenditures                       $   80         145         $ 247
                                                ==========   ==========   ==========
</TABLE>


                                       93

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. SEGMENT INFORMATION-CONTINUED

<TABLE>
<CAPTION>

                                                      As of June 30,
                                                ------------------------
                                                   2002          2001
                                                ----------    ----------
                                                      (in millions)
<S>                                             <C>           <C>
Total assets:
  Filmed Entertainment                          $   4,454      $  4,690
  Television Stations                              10,945         6,106
  Television Broadcast Network                        828         1,534
  Cable Network Programming                         5,225         4,033
  Investments in equity affiliates                  1,424         1,493
                                                ----------    ----------
 Total assets                                   $  22,876      $ 17,856
                                                ==========    ==========
Intangible assets, net:
  Filmed Entertainment                          $     480      $    459
  Television Stations                               9,458         4,783
  Television Broadcast Network                          -             -
  Cable Network Programming                         3,231         2,405
                                                ----------    ----------
 Total intangible assets, net                   $  13,169      $  7,647
                                                ==========    ==========

</TABLE>

There is no material reliance on any single customer. Revenues from any
individual foreign country were not material in the periods presented.

<TABLE>
<CAPTION>

                                        For the year ended June 30,
                                 ---------------------------------------
Geographic Segments                 2002          2001           2000
                                 ----------    ----------     ----------
                                              (in millions)
<S>                              <C>           <C>            <C>
Revenues:
  United States and Canada        $  8,047      $  6,827       $  6,588
  Europe                             1,111         1,071          1,175
  Other                                567           516            754
                                -----------    ----------    ----------
 Total revenues                   $  9,725      $  8,414       $  8,517
                                ===========    ==========    ==========

                                                   As of June 30,
                                               -------------------------
                                                   2002          2001
                                               ----------    -----------
                                                    (in millions)
Long-Lived Assets:
  United States and Canada                      $ 19,464       $ 13,911
  Europe                                              34             87
  Other                                               94             76
                                               ----------    -----------
Total long-lived assets                         $ 19,592       $ 14,074
                                               ==========    ===========

</TABLE>


                                       94

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. DETAIL OF OTHER FINANCIAL STATEMENT ACCOUNTS

<TABLE>
<CAPTION>
                                                                          For the year ended June 30,
                                                                   ---------------------------------------
                                                                       2002          2001        2000
                                                                   -----------  ------------  -----------
                                                                               (in millions)
<S>                                                                    <C>           <C>          <C>
ALLOWANCE FOR RETURNS AND DOUBTFUL ACCOUNTS
  Balance at the beginning of the year                                 $   170       $   167      $   125
  Charged to costs and expenses                                            376           242          194
  Actual returns/ write-offs/ recoveries/ other                           (271)         (239)        (152)
                                                                   -----------  ------------- -----------
  Balance at the end of the year                                       $   275       $   170      $   167
                                                                   ===========  ============  ===========
<CAPTION>
                                                                                As of June 30,
                                                                   --------------------------------------
                                                                       2002          2001        2000
                                                                   -----------  ------------  -----------
                                                                               (in millions)
<S>                                                                    <C>           <C>          <C>
INTANGIBLE ASSETS, NET
  Goodwill                                                             $ 5,503       $ 3,284      $ 3,252
  FCC licenses                                                           8,437         5,506        5,506
  Franchises and other                                                     810           212          212
                                                                   -----------  ------------  -----------
                                                                        14,750         9,002        8,970
  Less accumulated amortization                                         (1,581)       (1,355)      (1,134)
                                                                   -----------  ------------  -----------
  Total intangible assets, net                                         $13,169       $ 7,647      $ 7,836
                                                                   ===========  ============  ===========
</TABLE>

Amounts preliminarily allocated to Goodwill, FCC licenses and Franchises and
other for several of the Company's fiscal year 2002 acquisitions are subject to
adjustment and reclassification upon the completion of the final allocation.

ADVERTISING EXPENSES

     The Company incurred advertising expenses of $1,061 million, $947 million,
and $789 million for the years ended June 30, 2002, 2001 and 2000, respectively.
Advertising expenses for the Filmed Entertainment segment included above for the
fiscal years 2002 and 2001 were recognized in accordance with SOP 00-2 while
advertising expenses in fiscal year 2000 were recognized in accordance with SFAS
No. 53.

OPERATING LEASE EXPENSE

Total operating lease expense was approximately $98 million, $70 million, and
$77 million for the years ended June 30, 2002, 2001 and 2000, respectively.

                                       95

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                                                            For the three months ended
                                                         ------------------------------------------------------------------
                                                          September 30,       December 31,       March 31,       June 30,
                                                         ----------------   ----------------   -------------   ------------
                                                                         (in millions, except per share amounts)
Fiscal 2002/(1)/
-------------------------------------------------------
<S>                                                       <C>               <C>                <C>             <C>
Revenues                                                     $ 2,065            $ 2,741         $ 2,488        $ 2,431
Operating income (loss)                                          142               (695)            262            188
Cumulative effect of accounting change, net of tax               (26)                 -               -              -
Net income (loss)                                                (22)               455             108             40
Basic and diluted cumulative effect of accounting
  change, net of tax, per share                              $ (0.04)                 -               -              -
Basic and diluted earnings (loss) per share                  $ (0.03)           $  0.54         $  0.13         $ 0.05

Fiscal 2001
-------------------------------------------------------
Revenues                                                     $ 1,807            $ 2,481         $ 1,943        $ 2,183
Operating income (loss)                                          171                276             100            105
Cumulative effect of accounting change, net of tax              (494)                 -               -              -
Net income (loss)                                               (458)                 5              (9)           174
Basic and diluted cumulative effect of accounting
  change, net of tax, per share                              $ (0.68)                 -               -              -
Basic and diluted earnings (loss) per share                  $ (0.63)           $  0.01         $ (0.01)        $ 0.24

</TABLE>


  (1)  Additional significant items that impacted earnings during the second
       quarter of fiscal year 2002 were the writedown of the Company's national
       sports contracts of $909 million and the gains on the sales of FFW and
       Outdoor Life aggregating to $1,585 million.

19. RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business
combinations to be accounted for by the purchase method and that acquired
intangible assets be recognized apart from goodwill if they meet specific
criteria. SFAS No. 141 supersedes APB Opinion No. 16 and is effective for all
business combinations initiated after June 30, 2001. SFAS No. 142 eliminates the
requirement to amortize goodwill, identifiable intangible assets that have
indefinite useful lives and the excess cost of equity investments attributable
to such intangibles. However, it requires that goodwill and identifiable
intangibles with indefinite lives be tested for impairment at least annually
using the guidance specifically provided in the statement. SFAS No. 142
supersedes APB Opinion No. 17 and will be adopted by the Company on July 1,
2002. While the Company is still in the process of evaluating the overall impact
of adopting the provisions of SFAS No. 142, the Company expects that all of its
goodwill, a substantial amount of its identifiable intangibles, primarily FCC
Licenses, and the excess cost of equity investments attributable to
indefinite-lived intangibles will no longer be amortized beginning in the first
quarter of fiscal 2003. In addition, the Company's share of net income (loss) of
certain of its equity affiliates that have adopted SFAS No. 142 will no longer
reflect the amortization of such affiliates' goodwill and indefinite-lived
intangibles. This will result in an annual reduction in amortization expense of
approximately $200 million and an increase in equity earnings of approximately
$30 million, all on a pre-tax basis. In addition, the Company does not currently
expect that adoption of SFAS No. 142 will result in a transitional impairment
loss that will be material to its consolidated statement of operations.

                                       96

<PAGE>

                        FOX ENTERTAINMENT GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. RECENTLY ISSUED ACCOUNTING STANDARDS-CONTINUED

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which is effective for fiscal years beginning
after December 15, 2001. SFAS No. 144 establishes an accounting model for the
impairment or disposal of long-lived assets to be (i) held and used and (ii)
disposed of by sale. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." The Company will adopt SFAS No.
144 on July 1, 2002 and does not expect it to have a material impact on its
consolidated statement of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," required
that gains and losses from extinguishment of debt be classified as an
extraordinary item, net of the related income tax effect. Any gain or loss on
extinguishment of debt that was classified, as an extraordinary item in prior
periods presented that does not meet the criteria in APB Opinion No. 30 for
classification as an extraordinary item shall be reclassified. SFAS No. 13,
"Accounting for Leases," has been amended to require sale-leaseback accounting
for certain lease modifications that are similar to sale-leaseback transactions.
The rescission of SFAS No. 4 and the amendment to SFAS No. 13 shall be effective
for fiscal years and transactions, respectively, occurring after May 15, 2002.
The Company has adopted the provisions of SFAS No. 145. (See Note 9.)

20. SUBSEQUENT EVENTS

On August 21, 2002, the Company acquired WPWR-TV in Chicago from Newsweb
Corporation for approximately $425 million.

                                       97

<PAGE>

THIS REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP. THE
REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP NOR HAS ARTHUR ANDERSEN LLP
PROVIDED A CONSENT TO THE INCLUSION OF ITS REPORT IN THIS FORM 10-K.

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Fox Family Worldwide, Inc.:

     We have audited the accompanying consolidated balance sheets of Fox Family
Worldwide, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
June 30, 2000 and 2001, and the related consolidated statements of operations,
stockholders' equity (deficit) and comprehensive income (loss), and cash flows
for each of the three years in the period ended June 30, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of June 30, 2000 and 2001, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 2001 in
conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Los Angeles, California
September 17, 2001

                                      98

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.

                          CONSOLIDATED BALANCE SHEETS

                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                    June 30, 2000    June 30, 2001
                                                                                                  ---------------   --------------
<S>                                                                                               <C>                 <C>
Assets:
Cash and cash equivalents.......................................................................     $   89,674        $   86,327
Restricted cash.................................................................................          8,215             8,225
Accounts receivable, net of allowance for doubtful accounts of $4,688 and $5,321 at
     June 30, 2000 and 2001, respectively.......................................................        143,817           149,540
Amounts receivable from related parties, net....................................................         56,753           140,039
Programming costs, net..........................................................................        671,443           710,101
Property and equipment, net.....................................................................         51,874            48,693
Deferred income taxes...........................................................................             --             3,228
Intangible assets, net..........................................................................      1,481,189         1,440,667
Other assets, net...............................................................................         51,297            35,076
                                                                                                   ------------------------------
  Total assets..................................................................................     $2,554,262        $2,621,896
                                                                                                   ==============================

Liabilities and stockholders' deficit:
Accounts payable................................................................................     $   57,773        $   59,402
Accrued liabilities.............................................................................         96,959            94,367
Accrued programming costs.......................................................................        153,765           151,495
Deferred revenues...............................................................................         36,534            36,105
Accrued participations..........................................................................         54,073            55,878
Deferred income taxes...........................................................................         14,888            17,591
Bank and other debt.............................................................................      1,744,134         1,868,547
Amounts payable to related parties, net.........................................................         21,243            22,672
                                                                                                   ------------------------------
  Total liabilities.............................................................................      2,179,369         2,306,057
                                                                                                   ------------------------------

Commitments and contingencies
Series A Mandatorily Redeemable Preferred Stock, $0.001 par value; 500,000 shares authorized;
  345,000 shares issued and outstanding ($1,000 per share liquidation value)....................        345,000           345,000
                                                                                                   ------------------------------
Minority interest...............................................................................         54,236            53,744
                                                                                                   ------------------------------

Stockholders' deficit:
  Preferred Stock, $0.001 par value; 2,000,000 shares authorized, of which 500,000 shares are
    designated as Series A Preferred Stock; no shares issued or outstanding.....................             --                --
  Class A Common Stock, $0.001 par value; 2,000,000 shares authorized, 160,000 shares
    issued and outstanding at June 30, 2000 and 2001, respectively..............................             --                --
  Class B Common Stock, $0.001 par value; 16,000,000 shares authorized, 15,840,000 shares
    issued and outstanding at June 30, 2000 and 2001, respectively..............................             16                16
  Contributed capital...........................................................................         78,671            78,671
  Accumulated other comprehensive loss..........................................................         (6,683)           (8,468)
  Deficit.......................................................................................        (96,347)         (153,124)
                                                                                                   ------------------------------
  Total stockholders' deficit...................................................................        (24,343)          (82,905)
                                                                                                   ------------------------------
  Total liabilities and stockholders' deficit...................................................     $2,554,262        $2,621,896
                                                                                                   ==============================
</TABLE>

                            See accompanying notes.

                                       99

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                (in thousands)

<TABLE>
<CAPTION>
                                                                      Years Ended June 30,
                                                     ----------------------------------------------------
                                                        1999               2000                 2001
                                                     ------------     --------------       --------------
<S>                                                  <C>              <C>                  <C>
Revenues...........................................      $635,273           $641,876            $ 724,221
                                                     ------------     --------------       --------------

Costs and expenses:
  Production and programming.......................       302,232            270,549              311,309
  Selling, general and administrative..............       173,245            209,477              216,566
  Depreciation.....................................        10,083             10,883               11,582
  Amortization of intangibles......................        40,434             40,522               40,522
                                                     ------------     --------------       --------------
                                                          525,994            531,431              579,979
                                                     ------------     --------------       --------------

                                                          109,279            110,445              144,242
Operating income...................................

Equity in loss (earnings) of affiliates............         5,088              1,609               (1,559)
Minority interest share of losses..................          (444)            (2,184)                (491)
Other income, net..................................           (62)                --                   --
Interest expense, net..............................       169,107            168,415              172,018
Gain on issuance of subsidiary stock:
  Staff Accounting Bulletin No. 51 gain............            --            117,316                   --
  Gain on issuance of subsidiary stock.............            --             78,623                   --
                                                     ------------     --------------       --------------
Income (loss) before provision for income taxes....       (64,410)           138,544              (25,726)
Provision for income taxes.........................         1,989             77,159                   --
                                                     ------------     --------------       --------------
Net income (loss)..................................      $(66,399)          $ 61,385            $ (25,726)
                                                     ============     ==============       ==============
</TABLE>

                            See accompanying notes.

                                       100

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                        AND COMPREHENSIVE INCOME (LOSS)
                                (in thousands)

<TABLE>
<CAPTION>
                                 Series A      Class A and Class B               Accumulated
                             Preferred Stock      Common Stock                      Other
                             ----------------     ------------      Contributed Comprehensive                         Comprehensive
                             Shares    Amount   Shares      Amount    Capital       Loss         Deficit     Total    Income (Loss)
                             ------    ------   ------      ------    -------       ----         -------     -----    -------------
<S>                          <C>       <C>     <C>         <C>      <C>         <C>            <C>         <C>        <C>
Balance at June 30, 1998         --    $   --    16,000    $     16 $    60,731 $      (1,201) $  (29,150) $  30,396
 Dividends on Series A
  Mandatorily Redeemable
  Preferred Stock...........     --        --        --          --          --            --     (31,048)   (31,048)
 Exchange loss on
  translation of foreign
  subsidiaries' financial
  statements................     --        --        --          --          --          (692)         --       (692) $        (692)
 Net loss...................     --        --        --          --          --            --     (66,399)   (66,399)       (66,399)
                             ------    ------  --------    -------- ----------- -------------  ----------  ---------  -------------
Balance at June 30, 1999         --        --    16,000          16      60,731        (1,893)   (126,597)   (67,743) $     (67,091)
                                                                                                                      =============
 Dividends on Series A
  Mandatorily Redeemable
  Preferred Stock...........     --        --        --          --          --            --     (31,135)   (31,135)
 Capital contribution by
  related party in formation
  of an unconsolidated
  affiliate.................     --        --        --          --      17,940            --          --     17,940
 Exchange loss on
  translation of foreign
  subsidiaries' financial
  statements................     --        --        --          --          --        (4,790)         --     (4,790) $      (4,790)
 Net income.................     --        --        --          --          --            --      61,385     61,385         61,385
                             ------    ------  --------    -------- ----------- -------------  ----------  ---------  -------------
Balance at June 30, 2000         --        --    16,000          16      78,671        (6,683)    (96,347)   (24,343) $      56,595
                                                                                                                      =============
 Dividends on Series A
  Mandatorily Redeemable
  Preferred Stock...........     --        --        --          --          --            --     (31,051)   (31,051)
 Exchange loss on
  translation of foreign
  subsidiaries' financial
  statements................     --        --        --          --          --        (1,785)         --     (1,785) $      (1,785)
 Net loss...................     --        --        --          --          --            --     (25,726)   (25,726)       (25,726)
                             ------    ------  --------    -------- ----------- -------------  ----------  ---------  -------------
Balance at June 30, 2001         --    $   --    16,000    $     16 $    78,671 $      (8,468) $ (153,124) $ (82,905) $     (27,511)
                             ======    ======  ========    ======== =========== =============  ==========  =========  =============
</TABLE>

                            See accompanying notes.

                                       101

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                (in thousands)

<TABLE>
<CAPTION>
                                                                                                     Years Ended June 30,
                                                                                            -------------------------------------
                                                                                               1999          2000         2001
                                                                                            ----------    ----------   ----------
<S>                                                                                         <C>           <C>          <C>
Operating activities:
Net income (loss)........................................................................   $  (66,399)   $   61,385   $  (25,726)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
  Amortization of programming costs......................................................      277,808       223,060      266,219
  Depreciation...........................................................................       10,083        10,883       11,582
  Amortization of intangibles............................................................       40,434        40,522       40,522
  Amortization of debt issuance costs....................................................        3,253         3,250        3,269
  Reduction of goodwill due to realization of tax benefits...............................           --        18,141           --
  Equity in loss (earnings) of affiliates................................................        5,088         1,609       (1,559)
  Minority interest in share of losses...................................................         (444)       (2,184)        (491)
  Non-cash interest expense..............................................................       66,746        79,983       94,002
  Gain on issuance of subsidiary stock...................................................           --      (195,939)          --
  Changes in operating assets and liabilities:
   Restricted cash.......................................................................         (204)          (11)         (10)
   Accounts receivable...................................................................      (12,997)        1,233       (5,723)
   Amounts receivable from related parties...............................................       44,043       (22,753)     (83,286)
   Other assets..........................................................................        5,143        16,425       12,161
   Accounts payable and accrued liabilities..............................................      (42,500)       11,931         (963)
   Accrued programming costs.............................................................       29,076        66,124       (2,270)
   Deferred revenue......................................................................      (15,204)      (22,780)        (429)
   Accrued participations................................................................      (13,741)       15,213        1,805
   Deferred income taxes, net............................................................           --        32,969         (525)
                                                                                            ----------    ----------   ----------
          Net cash provided by operating activities......................................      330,185       339,061      308,578
                                                                                            ----------    ----------   ----------
Investing activities:
Purchase of property and equipment.......................................................      (11,394)       (8,256)     (11,449)
Additions to production and programming costs............................................     (358,399)     (352,689)    (301,829)
Intangible assets........................................................................       14,000            --           --
Other....................................................................................       (4,279)       (1,747)         564
                                                                                            ----------    ----------   ----------
          Net cash used in investing activities..........................................     (360,072)     (362,692)    (312,714)
                                                                                            ----------    ----------   ----------
Financing activities:
Proceeds from bank borrowings............................................................       25,622        36,073       31,734
Payments on bank borrowings..............................................................     (137,296)     (112,969)      (1,054)
Dividends on Preferred Stock.............................................................      (31,048)      (31,135)     (31,051)
Proceeds on Fox Kids Europe N.V. public offering, net....................................           --       152,963           --
Cost accrued for Fox Kids Europe N.V. public offering....................................           --           915           --
Paydown on NAI Bridge loan...............................................................         (267)         (268)        (269)
Proceeds from Fox Subordinated Debt......................................................       25,000        15,000           --
Advances from related parties............................................................      112,421         5,868        1,429
                                                                                            ----------    ----------   ----------
          Net cash provided by (used in) financing activities............................       (5,568)       66,447          789
                                                                                            ----------    ----------   ----------
Increase (decrease) in cash and cash equivalents.........................................      (35,455)       42,816       (3,347)
Cash and cash equivalents at beginning of year...........................................       82,313        46,858       89,674
                                                                                            ----------    ----------   ----------
Cash and cash equivalents at end of year.................................................   $   46,858    $   89,674   $   86,327
                                                                                            ==========    ==========   ==========
Supplemental disclosure of cash flow information
  Cash paid during the year for:
   Interest (net of amounts capitalized).................................................   $   86,874    $   80,646   $   73,037
                                                                                            ==========    ==========   ==========
   Income taxes..........................................................................   $    2,296    $    2,178   $    3,628
                                                                                            ==========    ==========   ==========
</TABLE>

                            See accompanying notes.

                                       102

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.

              CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)

Supplemental disclosure of non-cash investing and financing activities

  Year ended June 30, 2000

     A related party contributed non-cash capital in the amount of $17,940,000
in connection with the formation of an unconsolidated affiliate. Additionally,
the unconsolidated affiliate assumed payables of $20,000,000.

     Shares of subsidiary ordinary shares were issued as settlement of a
$100,000,000 subscription advance.



                            See accompanying notes.

                                       103

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 JUNE 30, 2001

1. Basis of Financial Statement Presentation and Organization

     Fox Family Worldwide, Inc. ("Fox Family Worldwide" or the "Company") is an
integrated global family and children's entertainment company that produces,
broadcasts and distributes live-action and animated family and children's
television programming. The Company's principal operations comprise (i)
International Family Entertainment, Inc. ("IFE"), which operates the Fox Family
Channel, one of the top 10 most widely distributed cable television networks in
the United States and one which provides family-oriented entertainment
programming reaching approximately 96% of all cable and satellite television
households, (ii) the Fox Kids Network, one of the leading children's (ages 2-11)
oriented broadcast television networks in the United States, and (iii) the Fox
Kids International Networks, including Fox Kids Europe, N.V. ("FKE") and Fox
Kids Latin America, Inc. ("FKLA"), a growing portfolio of Fox Kids branded cable
and direct-to-home ("DTH") satellite channels reaching approximately 34.5
million households operating in approximately 73 countries and 16 languages
worldwide.  The Company's production and distribution operations include Saban
Entertainment, Inc. ("Saban"), whose library of approximately 6,500 half-hours
of completed and in-production children's programming is among the largest in
the world (the "Fox Family Kids Library"), and certain other subsidiaries.  By
combining a widely distributed cable platform, a top-rated broadcast network,
one of the world's largest children's programming libraries, and the Fox Kids
branded international channels, the Company has the ability to manage family and
children's properties and brands from their creation through production,
distribution and the merchandising of related consumer products.

     Television production, distribution and broadcast are speculative and
inherently risky. There can be no assurance of the economic success of
television programming since the revenues derived from the production,
distribution and broadcast (which do not necessarily bear a direct correlation
to the production or distribution costs incurred) depend primarily upon its
acceptance by the public, which cannot be predicted. The commercial success of
programming also depends upon the quality and acceptance of other competing
programming released into the marketplace at or near the same time, the
availability of alternative forms of entertainment and leisure time activities,
general economic conditions and other tangible and intangible factors, all of
which can change and cannot be predicted with certainty. The success of the
Company's television programming also may be impacted by prevailing advertising
rates, which are subject to fluctuation. Therefore, there is a risk that not all
of the Company's television projects will be commercially successful, resulting
in costs not being recouped or anticipated profits not being realized.

     The financial statements of the Company as of and for the years ended June
30, 1999, 2000 and 2001 reflect the consolidated financial statements of Fox
Family Worldwide and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

     As permitted by Statement of Financial Accounting Standards ("SFAS") No.
53, "Financial Reporting by Producers and Distributors of Motion Pictures," the
Company has presented an unclassified consolidated balance sheet.

  The Reorganization

     The Company was incorporated in August 1996 under Delaware law as a holding
company of FCN Holding, Inc. ("FCN Holding") and Saban.  Between August 1996 and
August 1997, the Company conducted no business or operations. On August 1, 1997,
in connection with the Company's acquisition of IFE (see Note 3), (i) a wholly
owned indirect subsidiary of Fox Broadcasting Company ("Fox Broadcasting"),
exchanged its capital stock in FCN Holding, which indirectly owns Fox Children's
Network, Inc. ("FCN") for 7,920,000 shares of Class B Common Stock of the
Company, (ii) the other stockholder of FCN Holding exchanged its capital stock
in FCN Holding for an aggregate of 160,000 shares of Class A Common Stock of the
Company, (iii) Haim Saban and the other former stockholders of Saban (together,
the "Saban Stockholders") exchanged their capital stock of Saban for an
aggregate of 7,920,000 shares of Class B Common Stock of the Company, and (iv)
all outstanding management options to purchase Saban capital stock became
options to purchase an aggregate of 646,548 shares of Class A Common Stock of
the Company (together, the "Reorganization"). In addition, Fox Broadcasting
exchanged its preferred, non-voting interest in Fox Kids Worldwide, L.L.C. (the
"LLC") and its $50 million contingent note receivable from the LLC for a new
subordinated pay-in-kind note (the "Fox Subordinated Note") from the Company,
which accrues interest at the rate of 10.427%.

                                       104

<PAGE>

     In connection with the acquisition of IFE, the Company issued the NAI
Bridge Note to News America Incorporated ("NAI") upon substantially the same
terms and conditions as the Fox Subordinated Note. In addition, the Company
issued to Liberty IFE, Inc. ("Liberty IFE") $345,000,000 of Series A Mandatorily
Redeemable Preferred Stock.

     As part of the formation of the LLC, Saban, the Saban Stockholders, Fox
Broadcasting, FCN Holding and one of its subsidiaries entered into a Strategic
Stockholders Agreement dated December 22, 1995, which provided, among other
things, for restrictions on transfer of the stock held by the parties, certain
voting rights between them, as well as the terms of the Reorganization. The
parties to the Strategic Stockholders Agreement also agreed to provide Haim
Saban and the Saban Stockholders and Fox Broadcasting certain registration
rights. On August 1, 1997, the Strategic Stockholders Agreement was amended and
restated (the "Amended and Restated Strategic Stockholders Agreement") to add
provisions regarding voting between Fox Broadcasting and the former Saban
Stockholders.

     As part of the Amended and Restated Strategic Stockholders Agreement, Haim
Saban agreed with Fox Broadcasting Sub, Inc. ("FBSI"), a wholly owned indirect
subsidiary of Fox Broadcasting, as follows: if the Company is unable to meet its
obligations (i) to pay any dividend under the terms of the Series A Mandatorily
Redeemable Preferred Stock or to redeem the Series A Mandatorily Redeemable
Preferred Stock, (ii) under its lease of 10960 Wilshire Boulevard, Los Angeles,
California, or any obligation guaranteed by The News Corporation Limited ("News
Corp."), or (iii) under the Funding Agreement among News Corp., News Publishing
Australia Limited ("NPAL"), a wholly owned subsidiary of News Corp., and the
Company (the "Funding Agreement"), and either News Corp. or NPAL provides funds
to the Company, the advance will be treated as a loan, or if Citibank, in its
sole discretion as administrative agent under the Amended Credit Facility,
determines it is unacceptable to treat the advance as a loan, the advance will
be treated as preferred stock. To the extent the advance is treated as a loan
and the amount exceeds $50,000,000, if the advance is not repaid after 18 months
(or 12 months for all advances after the third anniversary of the agreement),
all or any portion of the advance in excess of $50,000,000 may be converted into
shares of Class B Common Stock. If FBSI elects to convert any portion of the
advance into Class B Common Stock, Haim Saban will have the right to purchase
from Fox Broadcasting up to 50% of the number of shares of Class B Common Stock
issued pursuant to the conversion. If instead, the advance is treated as
preferred stock, the first $50,000,000 of the advance shall be applied to the
issuance of shares of Series B Preferred Stock, and the remainder of the advance
shall be applied to the issuance of Series C Convertible Preferred Stock, which
is convertible into Class B Common Stock at the election of the holder. Each of
the Series B and Series C Preferred Stock will have a liquidation preference
equal to its issue price of $100,000 per share. The Series B and Series C
Preferred Stock will be entitled to dividends at an annual rate of 11.7% of its
liquidation value. If Fox Broadcasting elects to convert the Series C
Convertible Preferred Stock into Class B Common Stock, Haim Saban will have the
right to purchase up to 50% of the number of shares of Class B Common Stock
issued pursuant to the conversion. Notwithstanding the agreements, News Corp.
has no obligation to make any advances, and the Company has no obligation to
accept any amounts from News Corp.

     In connection with the formation of the LLC and pursuant to a Stock
Ownership Agreement dated December 22, 1995, as amended (the "Stock Ownership
Agreement") the LLC was granted an option to purchase, upon the occurrence of
certain events, all of the Class B Common Stock held by the Saban Stockholders,
and any of their transferees. The purchase price formula under the option is
based on the fair market value of the Company. In September 1996 the LLC
distributed the Stock Ownership Agreement to FCN Holding, which immediately
distributed that agreement to FBSI.

     In addition, under the terms of the original Amended and Restated Strategic
Stockholders Agreement, Haim Saban has the right and option to cause Fox
Broadcasting to purchase all of the Class B Common Stock held by the Saban
Stockholders, which option may be exercised by Haim Saban upon the occurrence of
certain events. In connection with the "Change of Control" provisions of the
Indentures that govern the Notes, and the "Change of Control" provisions of the
Amended Credit Facility, the exercise of FBSI's option to purchase the Class B
Common Stock held by the Saban Stockholders, or the exercise by Haim Saban of
his option to cause Fox Broadcasting to purchase all of the Class B Common Stock
held by the Saban Stockholders, would not constitute a "Change of Control."

     On December 21, 2000, Mr. Saban exercised the option to cause Fox
Broadcasting to purchase all of the Class B Common Stock held by the Saban
Stockholders in accordance with the terms of the Amended and Restated Strategic
Stockholders Agreement. On January 17, 2001, FBSI delivered notice to Mr. Saban,
stating that it had exercised the Call

                                       105

<PAGE>

Option (as defined in the Stock Ownership Agreement) under the Stock Ownership
Agreement, to purchase such shares pursuant thereto. (See Note 14 - Subsequent
Event.)

     Pursuant to the Funding Agreement, each of News Corp. and NPAL, jointly and
severally, agreed to provide the Company with the funds necessary to redeem in
full or pay the liquidation distribution on all other amounts owing in respect
of the Series A Preferred Stock in the event of an event of default under the
provisions governing the Series A Preferred Stock contained in the Company's
Certificate of Incorporation or a liquidation, dissolution or similar event of
the Company. In addition, pursuant to an Exchange Agreement among NPAL, Liberty
Media Corporation and Liberty IFE, each holder of the Series A Preferred Stock
has the right, in the event of an event of default under the provisions
governing the Series A Preferred Stock contained in the Company's Certificate of
Incorporation or a liquidation, dissolution or similar event of the Company, to
exchange its shares for an equivalent number of shares of preferred stock of
NPAL.

2.  Summary of Significant Accounting Policies

 Principles of Consolidation

     The consolidated financial statements for the years ended June 30, 1999,
2000 and 2001 include the accounts of the Company and all of its majority-owned
and controlled subsidiaries.  The accounts of certain foreign subsidiaries were
consolidated as of May 31 due to the time needed to consolidate these
subsidiaries.  No events occurred related to these foreign subsidiaries in June
1999, 2000 and 2001 that materially affected the Company's consolidated
financial position or results of operations. The Company's investments in
related companies which represent a 20% to 50% ownership interest over which the
Company has significant influence but not control are accounted for using the
equity method. All significant intercompany transactions and balances have been
eliminated.

 Revenue Recognition

     Revenue from television, music, and merchandising lease agreements, which
provide for the receipt by the Company of nonrefundable guaranteed amounts, is
recognized when the lease period begins, collectibility is reasonably assured
and the product is available pursuant to the terms of the lease agreement.
Amounts in excess of minimum guarantees under these lease agreements are
recognized when earned. Amounts received in advance of recognition of revenue
are recorded as deferred revenues. Advertising revenue is recognized as earned
in the period in which the advertising commercials are telecast. The Company
generally provides advertisers with guaranteed ratings in connection with its
domestic network broadcasts. Revenue is recorded net of estimated shortfalls,
which are settled either by additional advertising time ("make goods") or cash
refunds to the advertiser. Subscriber revenue is recognized based upon the
reported level of subscribers.

 Production and Programming Costs

     Programming costs, consisting of direct production costs, acquisition of
story rights, costs to acquire distribution rights, allocable production
overhead, interest and exploitation costs which are expected to benefit future
periods are capitalized as incurred. The individual film forecast method is used
to amortize programming costs in which the Company owns or controls distribution
rights. Under such method, costs accumulated in the production of a program are
amortized in the proportion that gross revenues realized bear to management's
estimate of the total gross revenues expected to be received. Estimated
liabilities for residuals and participations are accrued and expensed in the
same manner as programming cost inventories are amortized.

     For programs in which the Company acquires only broadcast rights, the
Company amortizes such program costs over the estimated number of telecasts. The
Company evaluates its programming rights for possible changes in the estimated
number of telecasts or the possibility of impairment.

                                       106

<PAGE>

     Revenue estimates on a program-by-program basis are reviewed periodically
by management and are revised, if warranted, based upon management's appraisal
of current market conditions. Based on this review, if estimated future gross
revenues from a program are not sufficient to recover the unamortized costs, the
unamortized programming cost will be written down to net realizable value.

     Production and programming costs also include the use of satellite
transponders and costs associated with engineering and technical support
services.

 Concentration of Credit Risk

     Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of temporary cash investments
and accounts receivables. The Company places its temporary cash investments with
high credit quality financial institutions or in a mutual fund which invests in
government securities and therefore are subject to reduced risk. The Company has
not incurred any losses relating to these investments.

     The Company leases its product to distributors and broadcasters and sells
advertising time throughout the world. The Company performs periodic credit
evaluations of its customers' condition and generally does not require
collateral. Generally, payment is received in full or in part prior to the
Company's release of product to such distributors and broadcasters. At June 30,
2000 and June 30, 2001, substantially all of the Company's trade receivables
were from customers in the entertainment or broadcast industries or from
advertising agencies. Receivables generally are due within 30 days. Credit
losses relating to customers in the entertainment and broadcast industries or
advertising agencies consistently have been within management's expectations.

 Cash and Cash Equivalents

     Cash and cash equivalents consist of all highly liquid investments that are
both readily convertible into cash and with maturities when purchased of three
months or less to be cash equivalents.

 Restricted Cash

     Restricted cash primarily represents amounts held by financial institutions
as collateral on outstanding debt.

 Financial Instruments

     Financial instruments are carried at historical cost which approximate fair
value.

 Property and Equipment, net

     Property and equipment are stated at cost less accumulated depreciation and
amortization. Property and equipment acquired as part of the acquisition of IFE
is stated at estimated fair market value at the date of purchase. Depreciation
of property and equipment is computed under the straight-line method over the
expected useful lives of applicable assets, ranging from three to eight years.
Leasehold improvements are amortized under the straight-line method over the
shorter of the estimated useful lives of the assets or the terms of the related
leases. When property is sold or otherwise disposed of, the cost and related
accumulated depreciation or amortization is removed from the accounts, and any
resulting gain or loss is included in operating income (loss). The costs of
normal maintenance, repairs and minor replacements are charged to expense when
incurred.

  Intangible Assets, net

     The intangible assets resulting from the acquisition of IFE are amortized
over an estimated useful life of 40 years using the straight-line method.
Management continuously monitors and evaluates the realizability of existing
assets, to determine whether their carrying values have been impaired. In
evaluating the value and future benefits of existing assets, their carrying
value is compared to management's best estimate of undiscounted future cash
flows expected to result from the use of the assets and their eventual
disposition. Management also considers events or changes in circumstances, such
as changes in the number of subscribers, which indicates that assets may not be
recoverable. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount

                                       107

<PAGE>

by which the carrying value of the assets exceeds the estimated fair value of
the assets. Estimated fair value will be based on either reliably determined
third-party valuations, if available, or discounted cash flows. When discounting
cash flows, a discount rate will be selected which will be commensurate with the
risk involved as it relates to IFE. As of June 30, 2001, there are no
indications of impairment as it relates to the intangible assets.

     Accumulated amortization of intangibles as of June 30, 2000 and 2001 was
$118,513,000 and $159,035,000, respectively. For the year ended June 30, 2000,
intangible assets related to the IFE acquisition were reduced by $18,141,000 due
to the utilization of certain tax assets not benefited at the acquisition date.

 Debt Issuance Costs

     Included within other assets, net, are debt issuance costs and deferred
loan fees incurred in connection with the issuance of the Senior Notes, the
Senior Discount Notes and the Amended Credit Facility (see Note 6). Such costs
and fees are being amortized over the term of the debt using the straight-line
method, which approximates the effective interest method.  Accumulated
amortization of debt issuance costs and deferred loan fees was $8,956,000 and
$12,225,000 as of June 30, 2000 and 2001, respectively.

 Foreign Currency Translation and Cumulative Adjustment

     Saban International N.V. (SINV), which is deemed to be a wholly-owned
subsidiary of the Company, uses the U.S. dollar as its functional currency. All
other foreign subsidiaries of the Company use local currency as their functional
currency. Assets and liabilities are translated into U.S. dollars at current
exchange rates. Revenues and expenses are translated into U.S. dollars based
generally on the average rates prevailing during the period.

     Gains and losses arising from foreign currency transactions are included in
determining net income (loss) for the period. The aggregate transaction losses
for the years ended June 30, 1999, 2000 and 2001, were $1,596,000, $5,575,000
and $4,584,000, respectively, and are generally netted against the related
revenues.

     The cumulative translation adjustment included in accumulated other
comprehensive loss in stockholders' deficit represents the Company's net
unrealized exchange losses on the translation of foreign subsidiaries' financial
statements.

 Income Taxes

     In accordance with SFAS No. 109 "Accounting for Income Taxes," deferred tax
assets and liabilities are recognized with respect to the tax consequences
attributable to differences between the financial statement carrying values and
tax bases of existing assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these temporary differences are expected to be
recovered or settled. Further, the effect on deferred tax assets and liabilities
of changes in tax rates is recognized in income in the period that included the
enactment date.

  Use of Estimates

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes including amortization of programming costs.
Actual results could differ from those estimates. Management periodically
reviews and revises its estimates of future airings and revenues, as necessary,
which may result in revised amortization of its programming costs. Results of
operations may be significantly affected by such periodic adjustments in
amortization.

 Stock-Based Compensation

     The Company accounts for its stock compensation arrangements with employees
under the provisions of Accounting Principles Board ("APB") No. 25, "Accounting
for Stock Issued to Employees." As such, compensation expense would be recorded
on the date of grant only if the current market price of the underlying stock
exceeded the exercise price.

                                       108

<PAGE>

     SFAS No. 123, "Accounting for Stock-Based Compensation," requires entities
to recognize as expense over the vesting period the fair value of all stock-
based awards on the date of grant or allows entities to continue to apply the
provisions of APB No. 25 and provide pro forma disclosures for employee stock
option grants as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB No.
25 and provide the pro forma disclosure provisions of SFAS No. 123 (see Note
12).

 Reclassifications

     Certain reclassifications have been made to prior years' financial
statements to conform with fiscal 2001 presentation.

 New Accounting Pronouncements

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101").  SAB 101 clarifies certain existing accounting principles for the
recognition and classification of revenues in financial statements.  The new
rules resulted in some changes as to how the filmed entertainment industry
classifies its revenue, particularly relating to distribution arrangements for
third-party and co-financed joint ventures product, but it does not result in
any changes to net income.  The Company adopted SAB 101 during the first quarter
of fiscal 2001.  SAB 101 has had no material effect on the Company's
consolidated financial statements.

     In January 2000, EITF 99-17, "Accounting for Advertising Barter
Transactions" was issued. EITF 99-17 requires that revenues and expenses related
to advertising barter transactions be recognized at fair value only if the fair
value of the advertising surrendered in the transaction is determinable based on
the entity's own historical practice of receiving cash, marketable securities,
or other consideration that is readily convertible to a known amount of cash for
similar advertising from buyers unrelated to the counterparty in the barter
transaction. This EITF has had no material impact on the financial position or
operating results of the Company.

     In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued by the Financial Accounting Standards Board
("FASB"). SFAS No. 133 was subsequently amended by SFAS No. 137, which had the
effect of deferring the date of its effectiveness. In March 2000, SFAS No. 133
was also amended by SFAS No. 138, "Accounting for Certain Derivative Instruments
and Hedging Activities - An Amendment to FASB Statement No. 133," which amends
the accounting and reporting standards of SFAS No. 133 for certain derivative
instruments and hedging activities. SFAS No. 133 and 138 establish accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133 and 138 are effective for fiscal periods beginning after June 15, 2000. The
Company adopted SFAS No. 133 and 138 as of July 1, 2000, which had no material
effect on the consolidated financial statements.

     In June 2000, the FASB issued SFAS No. 139, which, effective for financial
statements for fiscal years beginning after December 15, 2000, rescinds FASB No.
53. The companies that were previously subject to the requirements of SFAS No.
53 are now required to follow the guidance of Statement of Position 00-2,
"Accounting by Producers and Distributors of Films" ("SOP 00-2"), issued by the
American Institute of Certified Public Accountants. SOP 00-2 requires that
advertising and other exploitation costs for theatrical and television product
be expensed as incurred. This compares to the Company's existing policy of
capitalizing and then expensing advertising cost for theatrical and television
product over the related revenue streams, as prescribed under SFAS No. 53. In
addition, SOP 00-2 requires development costs for abandoned projects after three
years and certain indirect overhead costs to be charged directly to expense,
instead of those costs being capitalized to programming costs, which currently
is required under the existing accounting standard. The Company will also be
required to classify film additions to operating activities in the statements of
cash flow as opposed to the Company's current policy of including these as
investing activities.  SOP 00-2 is effective for financial statements for fiscal
years beginning after December 15, 2000.  The Company plans to adopt SOP 00-2
during the first quarter of fiscal 2002.  Based on the Company's estimates at
this time, the effect of adopting SOP 00-2 will result in a one-time, non-cash,
pre-tax charge as a cumulative effect of accounting change in the range of
approximately $55 million to $60 million.

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations." This
statement has eliminated the flexibility to account for some mergers and
acquisitions as pooling of interests, and is effective as of July 1, 2001, all
business combinations are to be accounted for using the purchase method. The
Company will adopt SFAS No. 141 as

                                       109

<PAGE>

of July 1, 2001, and the impact of such adoption is not anticipated to have a
material impact on the Company's financial statements.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." Under this statement goodwill and intangible assets with indefinite
lives are no longer subject to amortization, but rather an annual assessment of
impairment by applying a fair-value-based test. The Company will implement SFAS
No. 142 on July 1, 2002. The impact of such adoption has not been determined.

3.  Acquisition of International Family Entertainment, Inc.

     On August 1, 1997, the Company acquired a 50.7% interest in IFE through the
purchase, for $35 per share, of the stock owned by M.G. "Pat" Robertson, Tim
Robertson and certain trusts of which they are trustees, The Christian
Broadcasting Network, Inc. ("CBN") and Regent University (together, the
"Privately Owned Shares") and Liberty IFE exchanged of all of the IFE stock
owned by it and $23,000,000 principal amount of 6% Convertible Secured Notes due
2004 of IFE (the "Convertible Notes") (which have since been retired) for shares
of Series A Mandatorily Redeemable Preferred Stock of the Company (the "IFE
Acquisition"). On September 4, 1997, the Company consummated a merger to acquire
the remaining shares of IFE from the public shareholders. Total consideration
for the IFE Acquisition was approximately $1.9 billion including assumption of
liabilities. The Company paid approximately $545,000,000 for the Privately Owned
Shares and issued $345,000,000 of its Series A Mandatorily Redeemable Preferred
Stock to Liberty IFE as payment for the IFE stock and the Convertible Notes. The
balance of the consideration was paid to acquire the publicly traded shares
through the merger, to cash out existing options, to acquire shares of IFE stock
held by IFE senior executives and employees, and to assume IFE's existing bank
debt, which has since been retired.

     When IFE was acquired, the Company had plans to relocate IFE to California
and consolidate certain other operations of IFE and therefore recorded severance
and related reserves of $36,500,000 of which $3,147,000, payable to former IFE
employees, remains as of June 30, 2001. The Company made severance and related
payments of $8,873,000 for the year ended June 30, 1999, $2,713,000 for the year
ended June 30, 2000 and $1,917,000 for the year ended June 30, 2001. Severance
amounts are being paid monthly to certain former employees of IFE through fiscal
2006. The Company also recorded litigation and other related accruals of
$4,800,000, of which $2,444,000 remains as of June 30, 2001. The Company made
litigation and other related payments of $1,139,000 and $331,000 in the years
ended June 30, 2000 and 2001, respectively. Legal matters pertaining to IFE
which existed prior to the acquisition are being charged against the accrual
until resolution of such matters.

4.  Programming Costs, net

     Programming costs, net of accumulated amortization, are comprised of the
following as of June 30, (in thousands):

<TABLE>
<CAPTION>
                                                                                             2000
                                                                -----------------------------------------------------------------
                                                                                           Accumulated            Net Programming
                                                                     Cost                  Amortization                Costs
                                                                ----------------         ---------------          ---------------
<S>                                                             <C>                      <C>                        <C>
     Children's programming.................................    $      1,446,229         $     1,177,591            $     268,638
     Family programming, movies and mini-series.............             805,078                 454,809                  350,269
     Projects in production.................................              44,818                      --                   44,818
     Development............................................               7,718                      --                    7,718
                                                                ----------------         ---------------            -------------
                                                                $      2,303,843         $     1,632,400            $     671,443
                                                                ================         ===============            =============
</TABLE>

                                       110

<PAGE>

<TABLE>
<CAPTION>
                                                                                              2000
                                                                 -----------------------------------------------------------------
                                                                                            Accumulated            Net Programming
                                                                      Cost                  Amortization                Costs
                                                                 ----------------         ---------------          ---------------
<S>                                                              <C>                      <C>                      <C>
     Children's programming..................................    $      1,710,678         $     1,314,171          $      $396,507
     Family programming, movies and mini-series..............             840,846                 584,448                  256,398
     Projects in production..................................              41,325                      --                   41,325
     Development.............................................              15,871                      --                   15,871
                                                                 ----------------         ---------------          ---------------
                                                                 $      2,608,720         $     1,898,619          $      $710,101
                                                                 ================         ===============          ===============
</TABLE>

     Future minimum program commitments as of June 30, 2001 are approximately
$303 million.

     As of June 30, 2001 the Company estimates that approximately 71% of
released unamortized programming costs will be amortized within the next three
years. Interest amounting to $3,128,000, $2,253,000 and $5,759,000 was
capitalized to programming costs for the years ended June 30, 1999, 2000 and
2001, respectively.  Capitalized depreciation expense for the years ended June
30, 1999, 2000 and 2001 amounted to $4,020,000, $3,595,000 and $3,048,000,
respectively.

5.  Property and Equipment, net

     Property and equipment is comprised of the following as of June 30, (in
thousands):

<TABLE>
<CAPTION>
                                                                                            2000               2001
                                                                                       --------------     --------------
<S>                                                                                    <C>                <C>
     Studio and other equipment........................................                $       28,595     $       35,463
     Satellite transponders............................................                        39,596             39,596
     Office furniture and fixtures.....................................                        18,474             20,368
     Leasehold improvements............................................                         9,536              9,439
     Other.............................................................                         2,460              2,399
                                                                                       --------------     --------------
                                                                                               98,661            107,265
     Less accumulated depreciation and amortization....................                       (46,787)           (58,572)
                                                                                       --------------     --------------
                                                                                       $       51,874     $       48,693
                                                                                       ==============     ==============
</TABLE>

6.  Bank and Other Debt

     Bank and other debt is comprised of the following as of June 30, (in
thousands):

<TABLE>
<CAPTION>
                                                                                                  2000              2001
                                                                                             --------------    --------------
     <S>                                                                                     <C>               <C>
     Senior Notes.........................................................................   $      475,000    $      475,000
     Senior Discount Notes, net of unamortized discount of $130,242 and $77,049 at
      June 30, 2000 and 2001, respectively................................................          488,428           541,621
     NAI Bridge Note......................................................................          131,784           145,884
     Fox Subordinated Notes...............................................................          194,693           221,133
     Citicorp USA, secured revolving line of credit; interest at prime rate (9.5% and
      6.75% at June 30, 2000 and 2001, respectively) or six month LIBOR (6.94% and
      3.71% at June 30, 2000 and 2001, respectively) plus 0.75%; maximum borrowings of
      $355,000............................................................................          325,000           355,000
     Citicorp USA; secured term loan facility; interest at prime rate (9.5% and 6.75%
      at June 30, 2000 and 2001, respectively) or six month LIBOR (6.94% and 3.71% at
      June 30, 2000 and 2001, respectively) plus 0.75%; maximum borrowings of $120,000....          120,000           120,000
     Secured lines of credit with varying due dates between December 12, 2001 and
      November 30, 2002; maximum borrowing availability $10,578 at June 30, 2001;
      varying interest rates between 4.25% and 5.5%.......................................            9,229             9,909
                                                                                             --------------    --------------
                                                                                             $    1,744,134    $    1,868,547
                                                                                             ==============    ==============
</TABLE>

                                       111

<PAGE>

     Payments of bank and other debt in future periods are as follows (in
thousands):

     Year ending June 30,
     --------------------
     2002...............................................        $   74,386
     2003...............................................            98,710
     2004...............................................           239,688
     2005...............................................            72,124
     Thereafter.........................................         1,383,639
                                                              ------------
                                                                $1,868,547
                                                              ============

     In August 1997, the Company, FCN Holding, Saban and IFE entered into a
credit facility ("Old Credit Facility") with a group of banks led by Citicorp in
the amount of $1.25 billion. The Old Credit Facility comprised a $602,000,000
seven-year secured reducing revolving credit facility, a $298,000,000 seven-year
secured reducing revolving credit facility and a $350,000,000 nine-year secured
term loan facility.

     The proceeds of the loans under the old Credit Facility were used to
finance, in part, the IFE Acquisition and to repay certain obligations of
subsidiaries of the Company.

     In October 1997, upon consummation of the Company's Offering, the Old
Credit Facility was amended (the "Amended Credit Facility") to provide a
$355,000,000 seven-year term loan, subsequently reduced to $120,000,0000 as of
June 30, 2001, and a $355,000,000 seven-year reducing revolving credit facility.
The Company is not a borrower under the Amended Credit Facility but is a
guarantor. A wholly-owned subsidiary of the Company, Fox Kids Holdings, LLC, was
created by the Company to hold the equity interests of FCN Holding, Saban and
IFE (which remained borrowers) and guarantee the Amended Credit Facility.
Subsequently, two additional subsidiaries of Fox Kids Holdings, LLC were formed,
Fox Family Properties, Inc. and Fox Family Management, LLC, which are also
borrowers under the Amended Credit Facility.

     The collateral for the Amended Credit Facility is limited to the equity
interests of Fox Kids Holdings, LLC, the borrowers and their subsidiaries
(subject to certain limitations for foreign and less than wholly owned
subsidiaries) and certain intercompany indebtedness of subsidiaries of Fox Kids
Holdings, LLC. Scheduled payments on the term loan began December 30, 2000, with
10% of the term loan being reduced in year 3 of the loan, 20% in each of years 4
and 5 and 25% in each of years 6 and 7. Scheduled quarterly reductions to the
revolving credit commitment will begin December 28, 2001, with 15% of the
commitment being reduced in each of years 5 and 6 and 70% in year 7.

     The borrowings under the Amended Credit Facility bear interest at the
Company's option at a rate per annum equal to either LIBOR plus an applicable
interest rate margin or the base rate. In addition, the Company pays a
commitment fee on the unused and available amounts under the Amended Credit
Facility.

     The Amended Credit Facility contains a number of significant covenants
that, among other things, limit the ability of the co-borrowers and their
respective subsidiaries to incur additional indebtedness, create liens and other
encumbrances, prepay indebtedness, sell assets, make certain payments and
investments, make distributions to owners and repurchase debt and equity. In
addition, the Amended Credit Facility requires the maintenance of certain
specified financial and operating covenants, including, without limitation,
capital expenditure limitations and ratios of earnings before interest expense,
taxes, depreciation and amortization of intangible assets ("EBITDA") to fixed
charges, total debt to EBITDA and EBITDA to interest expense.  The Amended
Credit Facility also contains representations, warranties, covenants, conditions
and events of default customary for senior credit facilities of similar size and
nature. (See Note 14 - Subsequent Event.)

     On October 28, 1997, the Company issued $475,000,000 aggregate principal
amount of 9-1/4% Senior Notes Due 2007 ("Senior Notes") and $618,670,000
aggregate principal amount at maturity of 10-1/4% Senior Discount Notes Due 2007
("Senior Discount Notes" and collectively the "Notes") in a transaction not
registered under the Securities Act in reliance upon an exemption from the
registration requirements of the Securities Act. Gross proceeds from the
offering amounted to $850,000,000. The discount on the Senior Discount Notes is
being accreted under the effective interest method.

                                       112

<PAGE>

     Cash interest on the Senior Notes is payable semi-annually in arrears on
each May 1 and November 1, commencing May 1, 1998. Cash interest will not accrue
or be payable on the Senior Discount Notes prior to November 1, 2002.
Thereafter, cash interest on the Senior Discount Notes will be payable semi-
annually in arrears on each May 1 and November 1, commencing on May 1, 2003.
However, at any time prior to November 1, 2002, the Company may elect (the "Cash
Interest Election") on any interest payment date (the date of such Cash Interest
Election, the "Cash Interest Election Date") to commence the accrual of cash
interest from and after the Cash Interest Election Date, in which case the
principal amount at maturity of each Senior Discount Note will on such interest
payment date be reduced to the accreted value of such Senior Discount Note as of
such interest payment date, and cash interest (accruing at a rate of 10- 1/4%
per annum from the Cash Interest Election Date) shall be payable with respect to
such Senior Discount Note on each interest payment date thereafter.

     The Senior Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after November 1, 2002, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, to the redemption date, if redeemed during the 12-month
period beginning on November 1 of the years indicated below:


                                                             Redemption
     Year                                                       Price
     ----                                                    -----------
     2002............................................          104.63%
     2003............................................          103.08%
     2004............................................          101.54%
     2005 and thereafter.............................          100.00%

     The Senior Discount Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after November 1, 2002, at the redemption
prices (expressed as a percentage of principal amount at maturity) set forth
below, plus accrued and unpaid interest thereon, if any, to the redemption date,
if redeemed during the 12-month period beginning on November 1 of the years
indicated below:

                                                             Redemption
     Year                                                       Price
     ----                                                    ------------
     2002............................................          105.13%
     2003............................................          103.42%
     2004............................................          101.71%
     2005 and thereafter.............................          100.00%

     Upon the occurrence of a change of control, the Company shall be obligated
to make an offer to purchase (a "Change of Control Offer"), on a business day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the occurrence of the change of control, all of the then outstanding
Notes tendered at a purchase price in cash (the "Change of Control Purchase
Price") equal to (x) with respect to the Senior Notes, 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the Change of
Control Purchase Date and (y) with respect to the Senior Discount Notes, 101% of
the accreted value on the Change of Control Purchase Date, unless the Change of
Control Purchase Date is on or after the earlier to occur of November 1, 2002
and the Cash Interest Election Date, in which case such Change of Control
Purchase Price shall be equal to 101% of the aggregate principal amount at
maturity thereof, plus accrued and unpaid interest thereon, if any, to the
Change of Control Purchase Date. The Company shall be required to purchase all
Notes tendered into the Change of Control Offer and not withdrawn. The Change of
Control Offer is required to remain open for at least 20 business days and until
the close of business on the Change of Control Purchase Date.  The closing of
the Disney Acquisition would result in a "Change of Control" under the
Indentures that govern the Notes (See Note 14 - Subsequent Event).

     The Notes will be senior unsecured obligations of the Company and will rank
senior in right of payment to all future subordinated indebtedness of the
Company. Claims of the holders of the Notes will effectively be subordinated to
the claims of creditors of the Company's subsidiaries, including the banks under
the Bank Facility.

     The Company is subject to certain covenants in connection with the issuance
of the Notes which include for example limitation on indebtedness, restricted
payments, liens, dividends, transactions with affiliates and disposition of
assets. The Company was in compliance with these covenants at June 30, 1999,
2000 and 2001.

                                       113

<PAGE>

     The initial Fox Subordinated Note was restated on May 19, 1998 and accretes
interest at the rate of 10.427% and is due on May 1, 2008. Two additional Fox
Subordinated Notes in the amounts of $25 million and $15 million were issued in
June 1999 and September 1999, respectively, and accrete interest at the rate of
20% and are due on June 28, 2009 and September 27, 2009, respectively.  The
payment of principal and interest under the Fox Subordinated Notes is
subordinated in right to the obligations of the Company and its subsidiaries
under the Amended Credit Facility and the Indentures. (See Note 14 - Subsequent
Event.)

     On August 29, 1997, in connection with the acquisition of IFE, the Company
issued the NAI Bridge Note to NAI upon substantially the same terms and
conditions as the Fox Subordinated Note, except that the NAI Bridge Note has a
principal amount of $345,500,000. The NAI Bridge Note was restated on May 19,
1998 to reflect a change in the interest rate, effective as of the date of
issuance. As restated, the NAI Bridge Note accretes interest at a rate of
approximately 10.427% per annum. The Company may repay the NAI Bridge Note in
whole or in part, subject to the terms of the Amended Credit Facility and the
Indentures. The payment of principal and interest under the NAI Bridge Note will
be subordinated in right to the obligations of the Company under the Amended
Credit Facility and the Indentures.  In October 1997, a $215 million paydown was
made to the NAI Bridge Note in connection with the issuance of the Senior Notes
and Senior Discount Notes.  (See Note 14 - Subsequent Event.)


7.  Income Taxes

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows as of June 30,
(in thousands):


                                                          2000          2001
                                                       ----------    ----------

     Deferred tax liabilities:
         Accounts receivable........................    $     127     $     477
         Property and equipment.....................        5,108         6,723
         Contract discount..........................        1,042           407
         Other......................................        8,611         9,984
                                                       ----------    ----------
     Total deferred tax liabilities.................       14,888        17,591
                                                       ----------    ----------

     Deferred tax assets:
         Deferred revenues..........................        1,550           264
         Programming costs..........................       10,160         5,081
         Accrued liabilities........................       19,487        19,057
         Loss carryforwards.........................      123,467       174,090
         Other......................................        2,483         3,212
                                                       ----------    ----------

     Total deferred tax assets......................      157,147       201,704
     Valuation allowance for deferred tax assets....     (157,147)     (198,476)
                                                       ----------    ----------
     Deferred tax assets............................           --         3,228
                                                       ----------    ----------
     Net deferred tax (liabilities).................    $ (14,888)    $ (14,363)
                                                       ==========    ==========

     The Company currently has approximately $354,000,000 of operating loss
carryforwards which will expire at various dates through June 30, 2021.
Approximately $63,600,000 of the operating loss carryforwards are separate
return year losses. As such federal and state income tax law and regulations
might limit utilization.

     Management has determined that as of June 30, 2001, $198,476,000 of
deferred tax assets do not satisfy the recognition criteria set forth in SFAS
No. 109. Accordingly, a valuation allowance has been recorded for this amount.
Approximately $56,658,000 of the prior year valuation allowance relates to
deferred tax assets acquired in the IFE acquisition. (See Note 3).   For the
year ended June 30, 2000, the Company realized the benefit of $18,140,000 of
these deferred tax assets for which the benefit was recorded as a reduction to
goodwill.  As of June 30, 2001, approximately $38,518,000 of the valuation
allowance relates to the remaining deferred tax assets acquired in the IFE
transaction.  Accordingly, goodwill will be reduced at such time as these
deferred tax assets are realized.

                                      114

<PAGE>

     Income before income taxes includes the following components (in
thousands):

<TABLE>
<CAPTION>
                                                                                         Years Ended June 30,
                                                                          ---------------------------------------------------
                                                                               1999               2000               2001
                                                                          -------------     --------------    ---------------
     <S>                                                                  <C>               <C>               <C>
     Pretax income (loss):
      United States..................................................          $(86,202)          $121,879           $(33,674)
      Foreign........................................................            21,792             16,665              7,948
                                                                          -------------     --------------    ---------------
                                                                               $(64,410)          $138,544           $(25,726)
                                                                          =============     ==============    ===============
</TABLE>


          Significant components of the provision for income taxes are as
     follows (in thousands):

<TABLE>
<CAPTION>
                                                                                              Years Ended June 30,
                                                                          --------------------------------------------------------
                                                                                 1999               2000                2001
                                                                          --------------      --------------      ----------------
     <S>                                                                  <C>                 <C>                <C>
     Current:
      Federal........................................................       $         --        $     21,281            $       --
      State..........................................................                500               2,090                    --
      Foreign........................................................              1,489               2,678                   525
                                                                          --------------      --------------     -----------------
                                                                                   1,989              26,049                   525
     Deferred:
      Federal........................................................                 --              48,284                    --
      State..........................................................                 --               2,826                    --
      Foreign........................................................                 --                  --                  (525)
                                                                          --------------      --------------     -----------------
                                                                                      --              51,110                  (525)
                                                                          --------------      --------------     -----------------
                                                                            $      1,989        $     77,159            $       --
                                                                          ==============      ==============     =================
</TABLE>


     The reconciliation of income tax computed at the U.S. federal statutory tax
rates to the provision for income taxes:

<TABLE>
<CAPTION>
                                                                                        Years Ended June 30,
                                                                          --------------------------------------------------
                                                                               1999               2000              2001
                                                                          -------------      -------------      ------------
      <S>                                                                 <C>                <C>                <C>
      Tax at U.S. statutory rates.....................................              (35)%               35%              (35)%
      State taxes, net of federal benefit.............................               (4)                 2                --
      Foreign income/transactions.....................................              (10)                (8)                4
      Subsidiary disposition..........................................               --                 --              (222)
      U.S. operating loss for which no federal and state benefit was                 26                 --               197
       derived........................................................
      Change in valuation allowance...................................               --                 16                --
      Non-deductible amortization of intangibles......................               24                 10                55
      Other...........................................................                2                  1                 1
                                                                          -------------      -------------      ------------
                                                                                      3%                56%               --%
                                                                          =============      =============      ============
</TABLE>

     Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $399,263,000 at June 30, 2001. Those earnings are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided thereon. Upon distribution of those
earnings in the form of dividends or otherwise, the Company would be subject to
both U.S. income taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to the various foreign countries. Determination of the
amount of unrecognized deferred U.S. income tax liability is not practicable
because of the complexities associated with its hypothetical calculation;
however, unrecognized foreign tax credit carryforwards would be available to
reduce some portion of the U.S. liability. It is possible that the Internal
Revenue Service could under certain theories attempt to tax the foreign
subsidiaries' income. Currently, management of the Company believe that any such
theories would be without merit.

                                       115

<PAGE>

8.  Commitments and Contingencies

 Leases

     In July 1995, the Company entered into a ten-year lease commencing on April
1, 1996 for office space in Los Angeles, California subject to two separate five
year extension options.  The lease provides for early termination at the end of
the eighth year upon payment of a termination fee. The lease calls for monthly
payments plus maintenance and property tax payments. The Company also leases
other facilities throughout the world on an as needed basis expiring at various
dates.

     Noncancellable future minimum payments for the remainder of the initial,
noncancellable lease periods are as follows (in thousands):

     Years ending June 30,
     ---------------------
     2002.................................................           $13,531
     2003.................................................            12,472
     2004.................................................            11,376
     2005.................................................            11,306
     2006.................................................             8,983
     Thereafter...........................................             5,411
                                                                  ----------
                                                                     $63,079
                                                                  ==========

     Rent expense for the years ended June 30, 1999, 2000 and 2001, net of
amounts capitalized, was approximately  $6,392,000, $7,119,000 and $7,667,000,
respectively.

 Legal Matters

     The Company is involved in various lawsuits, both as a plaintiff and
defendant, in the ordinary course of its business. Based on an evaluation which
included consultation with counsel concerning legal and factual issues involved,
management is of the opinion that the foregoing claims and lawsuits will not
have a material adverse effect on the Company's consolidated financial position
or results of operations.

 Employment Agreements

     The Company has entered into employment agreements with certain key members
of management. Such agreements are for terms originally ranging from one to six
and one-half years and generally include bonus provisions. Future minimum
payments under these agreements approximate $41,365,000, of which $30,278,000 is
due in 2002, $9,489,000 is due in 2003 and $1,598,000 is due in 2004.

9.  Profit Sharing Plan

     The Company has a qualified tax deferred profit sharing plan (the "Plan")
for all of its eligible employees. Under the Plan, employees become eligible on
the first January 1 following such employees' completion of six months of
service with the Company. Each participant is permitted to make voluntary
contributions, not to exceed 15% of his or her respective compensation and the
applicable statutory limitations, which are immediately vested. The Company, at
the discretion of the Board of Directors, may make matching contributions to the
Plan. Related expense for the years ended June 30, 1999, 2000 and 2001, was
approximately $448,000, $343,000 and $384,000, respectively.

     IFE had a 401(k) retirement savings plan (the "401(k) Plan") which covered
the majority of its employees. Subject to certain limitations, employees were
permitted to contribute up to 15% of their compensation to the 401(k) Plan.
IFE's contribution to the 401(k) Plan was discretionary as determined annually
by the Company's Board of Directors. As of January 1, 1999, the 401(k) Plan was
terminated and the participating employee contributions were transferred to the
Company's Plan.

                                       116

<PAGE>

10.  Other Related Party Transactions

     The following amounts are included within the consolidated statements of
operations and balance sheets in relation to related party transactions (in
thousands):

<TABLE>
<CAPTION>
                                                                                            Years Ended June 30,
                                                                          ------------------------------------------------------
                                                                               1999                2000               2001
                                                                          ---------------     ---------------    ---------------
     <S>                                                                  <C>                 <C>                <C>
     Consolidated Statements of Operations
     Revenues.............................................................       $106,205            $104,373           $193,670
     Production and programming costs(1)..................................          7,179              10,588              7,297
     Selling, general and administrative expenses.........................          9,090               6,052              5,012
     Interest expense, net................................................         24,642              39,263             42,237

     <CAPTION>
                                                                                                   As of June 30,
                                                                                       ------------------------------------
                                                                                              2000                2001
                                                                                       ----------------    ----------------
     <S>                                                                               <C>                 <C>
     Consolidated Balance Sheets
     Amounts receivable from related parties, net......................................        $ 56,753            $140,039
     Accounts payable..................................................................           3,664                 548
     Accrued liabilities...............................................................              --                 583
     Deferred revenues.................................................................           2,218                 672
     NAI Bridge Note...................................................................         131,784             145,884
     Fox Subordinated Notes............................................................         194,693             221,133
     Amounts payable to related parties, net...........................................          21,243              22,672
</TABLE>
     ____________
     (1)  Includes satellite transponder, engineering and technical support
     costs.


     Amounts receivable from related parties include advances of $5,631,000 and
$5,578,000 at June 30, 2000 and 2001, respectively, to certain non-stockholder
officers and directors of the Company.

     Related companies of Fox Broadcasting have funded certain of the operations
of the Company from its inception through loans to the Company and have
collected funds related to the Company's advertising sales receivables.  Amounts
due to the related companies of Fox Broadcasting in connection therewith,
including interest, totaled $70,724,000 at June 30, 2001.  Amounts due from
related companies of Fox Broadcasting totaled $98,662,000 at June 30, 2001.

     The Company broadcasts Fox Kids U.K., a cable and satellite channel via a
digital transponder. The channel is distributed as part of British Sky
Broadcasting Group, plc's ("BSkyB") Sky Multichannels DTH package.  News Corp.
holds an approximately 36% interest in BSkyB, a public company, as of June 30,
2001. As part of its agreement with BSkyB, the Company acquired, for
approximately $3,100,000, certain of BSkyB's United Kingdom license rights to
children's programming which had been previously acquired by BSkyB.
Additionally, the Company entered into an analog transponder sublease agreement
with BSkyB which expired February 1, 2001, requiring a financial commitment of
approximately $28,000,000.  A five-year digital transponder and uplink sublease
agreement, commenced in late 1998 and expires October 19, 2004, requiring a
future financial commitment of approximately $3,300,000, subject to annual cost
of living increases. In addition, BSkyB provides support services for the
Company for a fee equal to 15% of net revenue, as defined in the agreement.

     The Company broadcasts FKLA, a Fox Kids branded pan-regional Latin American
channel. The Company has entered into a cost sharing arrangement for employees
and service support in connection with the operation of the channel with Canal
Fox, a related party. The Company believes that such arrangement for employees
and service support are at rates which approximate fair market value.

     Foxtel, an Australian-based cable and satellite television service, has
carried a Fox Kids Network children's channel segment since 1994 under a license
agreement between Foxtel and an affiliate of Fox Broadcasting. This license was
assigned to the Company. Foxtel is owned and operated by Telstra, the Australian
telephone company; News Corp.; and Publishing and Broadcasting Limited.

                                       117

<PAGE>

     In connection with Haim Saban's employment agreement, the Company agreed to
reimburse Haim Saban for all out-of-pocket costs and expenses for domestic and
international travel, including private air charter which may include aircraft
owned directly or indirectly by Haim Saban. The Company has entered into a
contract with 5161 Corporation ("5161"), a corporation wholly owned by Haim
Saban, the Chief Executive Officer of the Company, for a minimum of fifty
charter hours during a twelve month period. For the twelve months ended June 30,
1999, 2000 and 2001, the Company has paid approximately $722,000, $552,000 and
$862,000, respectively, for such costs.

     The Company is party to a music services agreement (the "Music Agreement")
with 5161. Under the terms of the Music Agreement, the Company acquires
substantially all of the original theme music, underscores, cues and songs it
uses in programming produced by the Company from 5161. In addition, the Company
has the royalty-free right to use the compositions in articles of merchandise
such as home video units, video games and interactive toys and has been granted
the non-exclusive, worldwide, and perpetual license to use the music to (i)
synchronize and perform compositions in theatrical motion pictures and (ii)
synchronize compositions in all other forms of programming.

     The rights for the territory of Israel in programming produced or acquired
by the Company are transferred to Duveen Trading Ltd. (Distributor), a
corporation affiliated with Haim Saban's brother. The term of the agreement has
been orally extended through December 31, 2001.

     The Company creates and owns all rights, titles and interests in master
recordings of compositions for use in the Company's programming, and the Company
owns the proceeds derived from all forms of exploitation thereof. In
consideration for providing the compositions to the Company, 5161 is entitled to
receive all publishing income derived from the exploitation of all music
compositions. 5161 reimburses the Company for certain costs associated with the
creation of the compositions, which amounted to $301,000, $397,000 and $285,000,
respectively, for the years ended June 30, 1999, 2000 and 2001.  At June 30,
2000 and 2001, approximately $316,000 and $2,000, respectively, was owed to 5161
by the Company in connection with royalties collected by the Company on behalf
of 5161.

     The Company utilizes the legal services of Matthew Krane, a director of the
Company since January 2000.  Mr. Krane was paid approximately $145,000 for such
services for the year ended June 30, 2001.

     The Company is party to a distribution agreement with Fox Family Films,
Inc. ("Distributor") for "Turbo: A Power Rangers Movie," which was released
theatrically in the United States in Spring 1997 and in home video in late
Summer 1997. Distributor holds in perpetuity worldwide theatrical, non-
theatrical, home video, and television rights in the movie (except for the
territories of Japan and certain Asian territories and Israel). The Company
holds the copyright as well as certain rights including merchandising,
television series, stage, publication, radio, theme park and touring, music
publishing and soundtrack. Commercial tie-in rights are mutually controlled by
the Company and Distributor. The Company will receive 100% of gross receipts
after certain distribution fees and expenses are deducted, based upon a formula
set forth in the agreement.

     In April 1998, the Company sold its ownership interest in Fit TV and
certain other assets to Fox/Liberty Networks, LLC, a joint venture between News
Corp. and Liberty Media Corporation, for $15,000,000. The Company acquired Fit
TV in August 1997 as part of the IFE Acquisition.

     In January 1997, the Company obtained from Fox Television ("Fox
Television"), a division of Fox, Inc., distribution rights to the New World
Communications Group, Inc. ("New World") animation library of children's
programming, which Fox Television acquired as part of its purchase of New World.
In July 1998, the Company acquired the New World animation library from Fox
Television for approximately $14.1 million.

     The Company entered into a long-term license agreement effective October 1,
1997 with Twentieth Century Fox Film Corp. ("Twentieth Century Fox"), pursuant
to which Twentieth Century Fox will distribute certain products in the Company's
programming library.  In February 2001, Twentieth Century Fox exercised an
option to acquire a portion of the film library covered by the long-term license
agreement.  In June 2001, Twentieth Century Fox acquired the remaining portion.
The Company recognized revenue on the sale in the amount of $80,800,000 for the
fiscal year ended June 30, 2001.  Included in amounts receivable from related
parties at June 30, 2001 are two promissory notes totaling $59,672,000
(including interest).  These promissory notes earn interest at 10.31% and are
payable in annual installments.

                                       118

<PAGE>

     Pursuant to a Guaranty of Lease entered into on August 1, 1997 and amended
as of July 26, 2000 (the "Guaranty"), News Corp. and NPAL have guaranteed
certain of the Company's obligations under the lease of its corporate
headquarters. Under the Guaranty, News Corp. and NPAL are liable, jointly and
severally, for any amounts not paid by the Company. News Corp.'s and NPAL's
aggregate liability under the Guaranty is limited to approximately $6.6 million,
to be reduced annually over two years on a straight-line basis.

     In May 1996, the Company entered into an agreement with Fox Video (the "Fox
Video Agreement") for the production and distribution of a live-action feature
film for the home video market based upon the animated character of Casper (the
"Film") which was released by Fox Video in the United States on September 9,
1997. The Company and Fox Video each contributed one-half of the production
costs of the Film subject to the rights of both parties to recoup certain of
these costs. The Company and Fox Video will share the television net income 55%
and 45%, respectively, and the home video net income 45% and 55%, respectively,
subject to the participation rights of the Harvey Entertainment Company
("Harvey"), which holds the copyright to Casper.

     The Company entered into an agreement in principle with Fox Video for the
production and distribution of, a second live-action feature film (Casper Meets
Wendy) for the home video market released in fiscal 1999. Saban and Fox Video
each contributed one-half of the production costs subject to the rights of both
parties to recoup certain of these costs. The Company and Fox Video will share
the combined television, non-theatrical, airline, and home video receipts
equally, subject to the participation rights of Harvey.

     In August 1996, Fox Video and the Company entered into a Home Video Rights
Acquisition Agreement pursuant to which the Company granted to Fox Video the
exclusive home video rights to distribute English and Spanish language versions
throughout the United States and to distribute English language versions
throughout Canada of certain of its programs, all television programs produced
for children and owned or controlled by the Company or FCN, all television
programs produced or to be produced pursuant to an agreement with Marvel and all
television programs which are owned or controlled first by Marvel and
subsequently by the Company. In consideration for the grant of the distribution
rights, Fox Video has agreed to pay the Company 50% of gross receipts from these
home videos, after deduction of certain expenses. In connection with this
Agreement the Company has received $13,002,000 through June 30, 2001.

     Pursuant to an arrangement with Fox Broadcasting, the Fox Family Channel
has aired one regular season Major League Baseball game per week during the 2001
baseball season and expects to broadcast between eight and eleven playoff games
during October.  Such programs are supplied to the Company by Fox Broadcasting
in exchange for advertising time during the airing of the program.

     Effective August 1, 1998, as part of a joint venture with a subsidiary of
News Corp., a subsidiary of the Company, Fox Kids Europe Holdings, Inc.
("FKEH"), contributed its 100% interest in a cable network in The Netherlands,
TV10 BV, to a U.S. limited liability company (the "TV10 LLC") in exchange for a
50% equity interest in the TV10 LLC.  The subsidiary of News Corp. contributed
$20,000,000 in cash to the TV10 LLC in exchange for its 50% equity interest in
the TV10 LLC.  In accordance with the operating agreement between the parties,
an affiliate of the Company is responsible for procuring the supply of
programming during the hours of 6:00a.m. and 6:00p.m. and an affiliate of News
Corp. is responsible for the hours of 6:00p.m. to 1:00a.m.  The parties retain
the revenues and are responsible for costs and expenses related to their
respective programming hours (or "day parts").  Costs that are not directly
related to specific day parts are shared on the basis of a formula that ensures
that News Corp.'s share will not exceed two-thirds of total indirect costs.  No
gain or loss was recorded by the Company related to this transaction.  In
December 2000, TV10 BV through a series of transactions transferred the day part
operations of the TV10 channel to a subsidiary of the Company and the evening
part of the TV10 channel to a subsidiary of News Corp.   The subsidiary of News
Corp. then sold its 50% interest in TV10 LLC to SBS Broadcasting BV.  TV10 BV
now acts as a service company for the day part and evening part of the TV10
channel.  At June 30, 2001, amounts receivable from related parties included
approximately $24,148,000 owed to the Company by TV10 LLC, and amounts payable
to related parties included approximately $22,672,000 owed by the Company to
TV10 LLC.

     In June 1999, a subsidiary of the Company, Fox Kids Europe Holdings, Inc.
("FKEH") entered into a subscription agreement (the "Subscription Agreement")
with Fox Broadcasting pursuant to the terms of which Fox Broadcasting paid FKEH
$100,000,000 in exchange for a subscription (the "Subscription Rights") for
shares of FKEH's

                                       119

<PAGE>

non-voting Class B Common Stock (the "Stock"). In addition, in June 1999, Fox
entered into an exchange agreement with the Company pursuant to which Fox
Broadcasting was granted the right, but not the obligation, to require the
Company to acquire its Subscription Rights in exchange for a deeply subordinated
note with an interest rate of 20% per annum to be issued by the Company. Upon
exercise of the conversion rights, interest begins to accrete as of the earlier
of the exercise date or January 1, 2000. At June 30, 1999, the amount paid by
Fox Broadcasting was included in amounts payable to related parties. In November
1999, a subsidiary of the Company caused to be transferred 7,507,591 shares of
FKE to Fox Broadcasting as settlement of the $100 million Subscription
Agreement.

     In June 1999, the Company issued a deeply subordinated note in the
principal amount of $25,000,000 to Fox Broadcasting payable on June 28, 2009
with interest accreting at a rate of 20% per annum.  In September 1999, the
Company issued an additional deeply subordinated note in the principal amount of
$15,000,000 to Fox Broadcasting payable September 27, 2009 with interest
accreting at a rate of 20% per annum.

     Effective as of January 1, 2001, the Company entered into a transponder
lease agreement with a subsidiary of News Corp.  The agreement calls for the
subsidiary of News Corp. to pay a monthly lease payment to the Company through
the end-of-life (as defined in the agreement) of the satellite.

11. Business Segment Reporting

     The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," for its fiscal year ended June 30, 1999,
which changed the way the Company reports information about its operating
segments.  The Company's business units have been aggregated into two reportable
operating segments:  production and distribution and broadcasting.  The "other"
column includes corporate related items and income (including SAB No. 51 and
subsidiary stock gains) and expenses not allocated to reportable segments.  The
Company's reportable operating segments have been determined in accordance with
the Company's internal management structure, which is organized based on
operating activities.  The accounting policies of the operating segments are the
same as those described in the summary of significant accounting policies (see
Note 2).  The Company evaluates performance based upon several factors, of which
the primary financial measure is segment income (loss) before income taxes,
interest, depreciation and amortization of intangibles.

     Summarized financial information concerning the Company's reportable
segments is shown in the following tables (in thousands):

<TABLE>
<CAPTION>
                                                               Production and
                                             Broadcasting       Distribution           Other              Total
                                           ----------------   ----------------   ----------------   ----------------
   <S>                                     <C>                <C>                <C>                <C>
   Year Ended June 30, 2001:
     Revenues............................. $        460,158   $        263,580   $            483   $        724,221
     Equity in earnings of affiliates.....            1,559                 --                 --              1,559
     Income (loss) before income taxes,
      interest, depreciation and
      amortization of intangibles.........          104,621             97,109             (3,334)           198,396
     Identifiable assets..................          590,549            565,280             25,400          1,181,229
     Intangible assets, net...............        1,440,667                 --                 --          1,440,667
     Capital expenditures.................           10,405                490                554             11,449
     Depreciation expense.................           10,786                768                 28             11,582
</TABLE>

                                       120

<PAGE>

<TABLE>
<CAPTION>
                                                               Production and
                                             Broadcasting       Distribution           Other              Total
                                           ----------------   ----------------   ----------------   ----------------
   <S>                                     <C>                <C>                <C>                <C>
   Year Ended June 30, 2000:
     Revenues............................. $        434,392   $        202,086   $          5,398   $        641,876
     Equity in loss of affiliates.........           (1,609)                --                 --             (1,609)
     Income before income taxes,
      interest, depreciation and
      amortization of intangibles.........          109,109             61,871            187,384            358,364
     Identifiable assets..................          593,706            453,889             25,478          1,073,073
     Intangible assets, net...............        1,481,189                 --                 --          1,481,189
     Capital expenditures.................            7,266                844                146              8,256
     Depreciation expense.................           10,104                726                 53             10,883

   Year Ended June 30, 1999:
     Revenues............................. $        429,610   $        204,321   $          1,342   $        635,273
     Equity in loss of affiliates.........           (5,088)                --                 --             (5,088)
     Income (loss) before income taxes,
      interest, depreciation and
      amortization of intangibles.........          112,921             54,314            (12,021)           155,214
     Identifiable assets..................          299,598            587,672             39,670            926,940
     Intangible assets, net...............        1,539,852                 --                 --          1,539,852
     Capital expenditures.................            2,790              7,957                647             11,394
     Depreciation expense.................            8,432              1,491                160             10,083
</TABLE>

     The following table reconciles segment income (loss) before income taxes,
interest, depreciation and amortization of intangibles to the Company's
consolidated net income (loss) (in thousands):

<TABLE>
<CAPTION>
                                                                      Years Ended June 30,
                                                         --------------------------------------------
                                                             1999            2000            2001
                                                         ------------    ------------    ------------
   <S>                                                   <C>             <C>             <C>
   Income before income taxes, interest,
       depreciation and amortization of intangibles...   $    155,214    $    358,364    $    198,396
   Amortization of intangibles........................        (40,434)        (40,522)        (40,522)
   Interest expense, net..............................       (169,107)       (168,415)       (172,018)
   Depreciation.......................................        (10,083)        (10,883)        (11,582)
   Provision for income taxes.........................         (1,989)        (77,159)             --
                                                         ------------    ------------    ------------
   Net income (loss)..................................   $    (66,399)   $     61,385    $    (25,726)
                                                         ============    ============    ============
</TABLE>

   Geographic Segments

   Revenues are attributed to geographic segments based upon origin of sale.

<TABLE>
<CAPTION>
                                                                      Years Ended June 30,
                                                         --------------------------------------------
                                                             1999            2000            2001
                                                         ------------    ------------    ------------
                                                                         (in thousands)
   <S>                                                   <C>             <C>             <C>
   Revenues
     United States....................................   $    474,629    $    466,293    $    540,273
     Europe...........................................        151,995         163,666         170,604
     Central and South America........................          8,649          11,917          13,344
                                                         ------------    ------------    ------------
                                                         $    635,273    $    641,876    $    724,221
                                                         ============    ============    ============
</TABLE>

                                       121

<PAGE>

<TABLE>
<CAPTION>
                                                                      Years Ended June 30,
                                                         --------------------------------------------
   Identifiable and Intangible Assets                        1999            2000            2001
                                                         ------------    ------------    ------------
                                                                         (in thousands)
   <S>                                                   <C>             <C>             <C>
     United States....................................   $  2,071,161    $  2,100,050    $  2,137,834
     Europe...........................................        394,696         453,461         482,539
     Central and South America........................            935             751           1,523
                                                         ------------    ------------    ------------
                                                         $  2,466,792    $  2,554,262    $  2,621,896
                                                         ============    ============    ============
</TABLE>

     For the years ended June 30, 1999, 2000 and 2001, the Company's production
and development segment earned revenues from one customer, a related party, of
approximately $37,949,000 (6% of consolidated revenues), $37,815,000 (6% of
consolidated revenues) and $109,205,000 (15% of consolidated revenues),
respectively. The Company had no significant properties for the years ended June
30, 1999, 2000 and 2001.

12. Capital Stock

  Common Stock

     The authorized capital stock of the Company consists of 2,000,000 shares of
Class A Common Stock,16,000,000 shares of Class B Common Stock and 2,000,000
shares of Preferred Stock, of which 500,000 shares have been designated as
Series A Preferred Stock. As of June 30, 2000 and 2001, 160,000 shares of Class
A Common Stock and 15,840,000 shares of Class B Common Stock were outstanding.

     The holders of Class A Common Stock (the "Class A Stockholders") are
entitled to one vote per share and the holders of Class B Common Stock (the
"Class B Stockholders") are entitled to ten votes per share. Both classes vote
together as a single class. A majority vote (or any other greater percentage)
for stockholder action requires a majority of the aggregate number of votes
entitled to be cast as such vote. The Company's Corrected Restated Certificate
of Incorporation does not provide for cumulative voting rights.

     Subject to the rights of the holders of shares of any series of Preferred
Stock, the Class A and Class B Stockholders are to receive like dividends and
other similar distributions of the Company. In the case of any split,
subdivision, combination or reclassification of shares of Class A or Class B
Common Stock, an equivalent split, subdivision, combination or reclassification
must be made to the shares of Class B or Class A Common Stock, as the case may
be.

     The Class A and Class B Stockholders have equivalent rights to
distributions in the event of any liquidation, dissolution or winding up (either
voluntary or involuntary) of the Company, in proportion to the number of shares
held by them without regard to class.

     In the event of any corporate merger, consolidating purchase or
acquisition, the Class A and Class B Stockholders are to receive the same
consideration on a per share basis, and if the consideration in such transaction
consists in any part of voting securities, the Class B Stockholders are to
receive, on a per share basis, voting securities with ten times the number of
votes per share as those voting securities to be received by the Class A
Stockholders.

     The shares of Class A Common Stock are freely transferable, but the shares
of Class B Common Stock are subject to transfer restrictions as set forth more
fully in the Company's charter and in the Amended and Restated Strategic
Stockholders Agreement. The Class B Stockholders may only transfer their shares
to a "Permitted Transferee" and any unauthorized transfer will cause an
automatic conversion of such shares into shares of Class A Common Stock.
Regardless of the transfer restriction on the Class B Common Stock, any Class B
Stockholder may pledge its shares as collateral security for any indebtedness or
other obligation.

     Each share of Class B Common Stock is convertible, at the option of its
holder, at any time into one validly issued, fully paid and non-assessable share
of Class A Common Stock.

                                       122

<PAGE>

  Stock Options

     Effective June 1994, the Company issued stock options to three employees.
In connection with the Reorganization as described in Note 1, the options became
options to purchase an aggregate of 484,911 shares of Class A Common Stock, all
of which were exercisable at June 30, 1999, 2000 and 2001.  These options are
exercisable at prices ranging from $12.37 (161,637 shares) to $34.02 (323,274
shares) per share. No options have been exercised at June 30, 2001. With respect
to termination for any reason, so long as the Company is not public, the Company
will purchase from the employee and the employee will sell to the Company any
and all option shares owned by the employee and the option granted to the
employee for an amount equal to the fair market value of the option shares owned
by the employee plus the fair market value of the option shares with respect to
which the employee's option has vested but not exercised less the exercise
price.

     In addition, in the event Haim Saban, any member of his immediate family or
any of his affiliated entities (Haim Saban and such family members, the "Saban
Entities") sells to a third party any shares of common stock of the Company (the
"Saban Company Shares"), each of these option holders must sell to the Company,
and the Company must purchase, the "applicable percentage" of his or her options
for the same per share consideration paid by the third party for the Saban
Company Shares less the exercise price of such options.  The "applicable
percentage" is equal to the percentage of the Saban Company Shares sold to the
third party out of the total shares of the Company owned by the Saban Entities
immediately prior to the sale. (See Note 14 - Subsequent Event.)

     In May 1998, the Company provided two employees compensation of $2,000,000
each and in April 1999, the Company provided the two employees additional
compensation of $1,500,000 each in the form of an advance (together the
"Advances").  The Advances were included in the employees' taxable income and
bear no interest. Further, if the two employees exercise any stock options to
acquire shares of the Company's Class A Common Stock, the two employees shall
concurrently repay the Advances through an increase in the purchase price in
connection with the exercise.

     Included in accrued liabilities at June 30, 2000 and 2001 is $13,040,000
related to compensation recorded in connection with these options. (See Note 14
- Subsequent Event.)

     As of June 30, 2001, 646,548 shares of Class A Common Stock are reserved
for future issuance related to options.

     In connection with FKE's initial public offering (see Note 13), FKE
approved a stock incentive plan under which FKE may grant options to personnel
at exercise prices equal to or exceeding the market price at the date of grant.
Options become exercisable over a four year period from the date of grant and
expire ten years after the date of grant.  Shares available for future option
grants at June 30, 2001 totaled 5,276,901.

     The following table summarizes information about FKE stock options
outstanding and transactions as of and for the years ended June 30, 2000 and
2001:

<TABLE>
<CAPTION>
                                                                              Weighted average
                                                   Shares                    exercise price ($)
                                        ----------------------------    ----------------------------
                                            2000            2001            2000            2001
                                        ------------    ------------    ------------    ------------
     <S>                                <C>             <C>             <C>             <C>
     Outstanding at beginning of year             --       2,950,780              --           12.71
     Awards granted                        2,975,030         269,889           12.71           12.67
     Awards cancelled                        (24,250)       (261,103)          12.60           12.47
                                        ------------    ------------    ------------    ------------
     Outstanding at end of year            2,950,780       2,959,566           12.71           12.17
                                        ============    ============    ============    ============

     Exercisable options                          --         712,231              --           12.11
                                        ============    ============    ============    ============
</TABLE>

                                       123

<PAGE>

     The following table summarizes information about stock options outstanding
at June 30, 2001:

<TABLE>
<CAPTION>
                                            Outstanding                                  Exercisable
                        ----------------------------------------------------    ----------------------------
                                         Weighted average        Weighted                        Weighted
     Range of             Number            remaining            average           Number        average
     Exercise               of              years of             exercise            of          exercise
     Prices ($)           Options        contractual life        price ($)        Options        price ($)
   -----------------    -----------    --------------------    -------------    -----------    -------------
   <S>                  <C>            <C>                     <C>              <C>            <C>
      9.10 - 12.04       2,774,069              8.56                  11.64        703,228            12.04
     14.71 - 18.02         185,497              8.93                  17.09          9,003            17.50
</TABLE>

     Exercise prices for the above tables have been translated from Euros to
U.S. dollars based on average exchange rates during the year.

  Mandatorily Redeemable Preferred Stock

     In connection with the acquisition of IFE, the Company issued 345,000
shares of Series A Mandatorily Redeemable Preferred Stock to Liberty IFE. The
holders of the Series A Mandatorily Redeemable Preferred Stock will receive cash
dividends of 9% per annum in arrears, paid quarterly. Any accrued or unpaid
dividends will be added to the liquidation price and until such accrued and
unpaid dividends are paid in full, the dividend rate will increase to 11.5% of
the liquidation price. The liquidation price is $1,000 per share plus any
accrued and unpaid dividends.

     Pursuant to the Funding Agreement among News Corp., NPAL, and the Company
(the "Funding Agreement"), each of News Corp. and NPAL has unconditionally
agreed that, upon the occurrence and during the continuation of an event of
default under the provisions governing the Series A Mandatorily Redeemable
Preferred Stock in the Company's Corrected Restated Certificate of Incorporation
or liquidation, dissolution, winding up or other similar event of the Company,
News Corp. or NPAL, as the case may be, will provide the Company with the funds
necessary to redeem in full, or pay the liquidation distribution on all of the
outstanding Series A Mandatorily Redeemable Preferred Stock and to pay any other
amounts owing in respect of such shares. Pursuant to the Amended and Restated
Strategic Stockholders Agreement (as defined), such funds will be, except under
certain circumstances, in the form of an advance or loan to the Company. The
following constitute events of default with respect to the Series A Mandatorily
Redeemable Preferred Stock under the Corrected Restated Certificate of
Incorporation: (i) the failure of the Company to mandatorily redeem Series A
Mandatorily Redeemable Preferred Stock at the redemption dates indicated below;
(ii) a breach for thirty days of any of the covenants contained in the
provisions governing the Series A Mandatorily Redeemable Preferred Stock; and
(iii) an event of default under the terms of the preferred stock of NPAL, if any
shares of which are outstanding. In addition, pursuant to the Exchange Agreement
among NPAL, Liberty Media Corporation and Liberty IFE (the "Exchange
Agreement"), each of the holders of the Series A Mandatorily Redeemable
Preferred Stock has the right, upon the occurrence and during the continuation
of an event of default under the Corrected Restated Certificate of Incorporation
or the liquidation, winding up or other similar event of the Company, to
exchange their shares for an equivalent number of shares of preferred stock of
NPAL.

     The Series A Mandatorily Redeemable Preferred Stock issued to Liberty IFE
will rank senior as to dividend, redemption and liquidation rights to all other
classes and series of capital stock of the Company authorized on the date of
issuance, or to any other class or series of capital stock issued while any
shares of the Series A Mandatorily Redeemable Preferred Stock remain
outstanding. The Series A Mandatorily Redeemable Preferred Stock does not
generally have voting rights, except for certain approval rights set forth in
the Corrected Restated Certificate of Incorporation and as required by law.
Stockholders of Series A Mandatorily Redeemable Preferred Stock do not have
preemptive rights over any stock or securities that may be issued by the
Company.

  Stock Based Compensation

     The Company and its subsidiary, FKE, have elected to follow APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations
in accounting for their employee stock options.

     Pro forma information regarding net income as required by FAS No. 123,
"Accounting for Stock-Based Compensation," has been determined as if the Company
and FKE had accounted for their employee stock options

                                       124

<PAGE>

under the fair value method of that Statement. The fair value for options issued
by the Company was estimated at the date of grant in January 1996 to be
$2,623,000 using the minimum value method with the following weighted-average
assumptions, respectively: risk-free interest rate of 5.86%; dividend yields of
0%; and a weighted-average expected life of the option of 5 years. The remaining
contractual life of options granted by the Company is 5.5 years. The fair value
for options issued by FKE was estimated at the date of grant in November 1999 to
be $13,827,000 using the fair value method with the following weighted-average
assumptions, respectively: risk-free interest rate 5.5%; dividend yield of 0%;
expected stock volatility 60%; and an expected life of the options of 2 years.
The weighted average fair value of options at their date of grant during the
year ended June 30, 2001, where the exercise price exercise price equaled the
market price on the grant date, was $1,223,000. The estimated fair value of each
option granted was calculated using the following weighted average assumptions,
respectively: risk free interest rate of 4.25%; dividend yield of 0%; expected
stock volatility of 60%; and expected life of the options of 2 years.

     The minimum value valuation method used by the Company was developed for
use in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, valuation models require
the input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of employee stock options issued by the
Company.

     The pro forma net income (loss) determined as if the Company and its
subsidiaries had accounted for its employee stock options under the fair value
method would be  $(66,924,000), $58,387,000 and $(30,958,000) for the years
ended June 30, 1999, 2000 and 2001, respectively.

     These pro forma valuations may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years.

13. Issuance of Subsidiary Ordinary Shares

     In November 1999, net assets of certain direct and indirect subsidiaries of
the Company were contributed to FKE, a wholly owned indirect subsidiary of the
Company at the time the assets were contributed.  Net assets contributed mainly
represent the Fox Kids cable channels broadcasting in the European markets and
the distribution rights of children's programming in those markets owned by
SINV, a wholly owned indirect subsidiary of the Company.  In November 1999, FKE
issued 12,519,307 previously unissued ordinary shares (or 15.2 percent) for
gross proceeds of $175,518,000 ($14.02 per share) in an initial public offering
("IPO") on the Official Market for Amsterdam Exchanges.  Offering costs for the
IPO totaled $22,550,000 and consisted mainly of underwriter and professional
fees plus certain capital taxes.  The Company has accounted for the offering in
accordance with Staff Accounting Bulletin ("SAB") No. 51, "Accounting by the
parent in consolidation for sale of stock by subsidiary."  Accordingly, a pre-
tax gain of $117,316,000 was recorded in the year ended June 30, 2000.  The gain
recorded represents the Company's portion of the excess net offering price per
share of FKE's ordinary shares compared to the book carrying amount per share.

     In November 1999, in connection with the IPO, a subsidiary of the Company
caused to be transferred 7,507,591 ordinary shares of FKE (or 9.1 percent), to
Fox Broadcasting as settlement of a $100,000,000 subscription advance payable.
These shares were issued to the public on behalf of Fox Broadcasting in the IPO
for gross proceeds of $105,256,000 ($14.02 per share).  The gross proceeds from
these shares, less underwriter fees and capital taxes of $5,256,000, were
retained by Fox Broadcasting.  A pre-tax gain of $78,623,000 was recorded on
this transaction in the year ended June 30, 2000.

14. Subsequent Event

     On July 23, 2001, The Walt Disney Company ("Disney") entered into a
Purchase Agreement with Fox Broadcasting, FBSI, Haim Saban and the other Saban
Stockholders, Allen & Company Incorporated, News America Incorporated ("NAI")
and News Corp. (the "Disney Purchase Agreement"), pursuant to which Disney
agreed to purchase for cash from FBSI, the Saban Stockholders and Allen &
Company Incorporated all the outstanding shares of the Company's Class A Common
Stock and Class B Common Stock (the "Disney Acquisition") and subordinated debt.
Upon the closing of the Disney Acquisition, Disney would acquire control of the
Company by virtue of holding all of the Company's outstanding shares of common
stock.

                                       125

<PAGE>

Immediately following the closing under the Disney Purchase Agreement, the
Company will cease to broadcast the Fox Kids Network, which will be operated by
Fox Broadcasting following the Disney Acquisition. The Company will provide
certain programming to Fox Broadcasting for the 2001-2002 broadcast season for
broadcast on the Fox Kids Network. The closing of the Disney Acquisition will
occur following receipt of required U.S. and foreign governmental or regulatory
approvals, among other customary conditions to closing. The parties currently
expect the Disney Acquisition to close in the fourth quarter of the 2001
calendar year. The Company will change its name following the Disney
Acquisition.

     In connection with the Disney Acquisition, the Company will pay the
obligations owed under the Amended Credit Facility. In addition, according to
the terms of the Disney Purchase Agreement, Disney will purchase the Fox
Subordinated Notes and the NAI Bridge Note from Fox Broadcasting and NAI,
respectively.

     Pursuant to the Disney Purchase Agreement and in accordance with the terms
of their respective employment agreements, the Company will make certain cash
payments to the Company stock option holders with respect to the option shares
held by each of such option holders, and the number of such option shares
outstanding shall be reduced to zero.  The closing of the Disney Acquisition
will result in a compensation charge in the amount of approximately $78,000,000,
representing the difference between the net sales proceeds (as defined in the
Disney Purchase Agreement) and the stock option exercise price which ranges from
$12.37 to $34.02 per share.

                                       126

<PAGE>
THIS REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP. THE
REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP NOR HAS ARTHUR ANDERSEN LLP
PROVIDED A CONSENT TO THE INCLUSION OF ITS REPORT IN THIS FORM 10-K.

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Fox Family Worldwide, Inc.:

     We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of Fox Family
Worldwide, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
June 30, 2000 and 2001 and each of the three years ended June 30, 2001 included
in this Report on Form 10-K and have issued our report thereon dated September
17, 2000. Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed in the index
at F-1 are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.


Arthur Andersen LLP

Los Angeles, California
September 17, 2001


                                      127

<PAGE>

        SCHEDULE 1 -- CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

                          FOX FAMILY WORLDWIDE, INC.
                                 (PARENT ONLY)

                                BALANCE SHEETS

                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                              June 30, 2000           June 30, 2001
                                                                                             ---------------       -----------------
<S>                                                                                          <C>                   <C>
Assets:
Cash and cash equivalents.................................................................   $         1,207       $          3,223
Amounts receivable from related parties, net..............................................             1,215                    845
Investments in and advances to subsidiaries...............................................         1,614,627              1,661,750
Other assets, net.........................................................................            23,909                 18,371
                                                                                             ---------------       ----------------
   Total assets...........................................................................   $     1,640,958       $      1,684,189
                                                                                             ===============       ================

Liabilities and stockholders' deficit:
Accounts payable..........................................................................   $           154       $             31
Accrued liabilities.......................................................................             8,999                 15,753
NAI Bridge Note...........................................................................           131,784                145,884
Fox Subordinated Notes....................................................................           194,693                221,133
Senior Notes..............................................................................           475,000                475,000
Senior Discount Notes, net of unamortized discount of $130,242 and $77,049
 at June 30, 2000 and 2001, respectively..................................................           488,428                541,621
Amounts payable to related parties........................................................            21,243                 22,672
                                                                                             ---------------       ----------------
  Total liabilities.......................................................................         1,320,301              1,422,094
                                                                                             ---------------       ----------------

Commitments and contingencies
Series A Mandatorily Redeemable Preferred Stock, $0.001 par value; 500,000 shares
 authorized; 345,000 shares issued and outstanding ($1,000 per share liquidation value)...           345,000                345,000
                                                                                             ---------------       ----------------

Stockholders' deficit:
Preferred Stock, $0.001 par value; 2,000,000 shares authorized, of which 500,000
 shares are designated as Series A Preferred Stock, no shares issued and outstanding......                --                     --
Class A Common Stock, $0.001 par value; 2,000,000 shares authorized,
 160,000 shares issued and outstanding at June 30, 2000 and 2001, respectively............                --                     --
Class B Common Stock, $0.001 par value; 16,000,000 shares authorized,
 15,840,000 shares issued and outstanding at June 30, 2000 and 2001, respectively.........                16                     16
Contributed capital.......................................................................            78,671                 78,671
Accumulated other comprehensive loss......................................................            (6,683)                (8,468)
Deficit...................................................................................           (96,347)              (153,124)
                                                                                             ---------------       ----------------
  Total stockholders' deficit.............................................................           (24,343)               (82,905)
                                                                                             ---------------       ----------------
  Total liabilities and stockholders' deficit.............................................   $     1,640,958       $      1,684,189
                                                                                             ===============       ================
</TABLE>

                            See accompanying notes.

                                       128

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.
                                 (PARENT ONLY)

                           STATEMENTS OF OPERATIONS

                                (in thousands)

<TABLE>
<CAPTION>
                                                                                           Years Ended June 30,
                                                                                 --------------------------------------
                                                                                      1999         2000         2001
                                                                                 ------------  ------------  ----------
<S>                                                                             <C>            <C>          <C>
Revenues:
  Equity in income of subsidiaries..........................................     $  55,700     $ 277,366     $ 116,887
  Other.....................................................................           135           103           262
                                                                                 ---------     ---------     ---------
     Total revenue..........................................................        55,835       277,469       117,149
Costs and expenses:
  Selling, general and administrative.......................................         6,172         9,755         3,906
  Depreciation..............................................................           133            24            20
  Interest expense, net.....................................................       113,940       129,146       138,949
                                                                                 ---------     ---------     ---------
Income (loss) before provision for income taxes.............................       (64,410)      138,544       (25,726)
Provision for income taxes..................................................         1,989        77,159            --
                                                                                 ---------     ---------     ---------
Net income (loss)...........................................................     $ (66,399)    $  61,385     $ (25,726)
                                                                                 =========     =========     =========
</TABLE>

                            See accompanying notes.

                                       129

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.
                                 (PARENT ONLY)

                           STATEMENTS OF CASH FLOWS

                                (in thousands)

<TABLE>
<CAPTION>
                                                                                                       Years Ended June 30,
                                                                                             -------------------------------------
                                                                                                1999         2000          2001
                                                                                             -----------  ----------   -----------
<S>                                                                                          <C>           <C>          <C>
Operating activities:
Net income (loss)..........................................................................   $(66,399)    $  61,385    $ (25,726)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
  Equity gains on investments, net of taxes................................................    (55,700)     (277,366)    (116,887)
  Amortization of debt issuance costs......................................................      3,253         3,250        3,269
  Depreciation expense.....................................................................        133            24           20
  Non-cash interest expense................................................................     66,746        79,983       94,002
  Decrease (increase) in amounts receivable from related parties, net......................         --        (1,215)         370
  Decrease (increase) in other assets......................................................     (1,069)       (1,845)         464
  Increase (decrease) in accounts payable and accrued liabilities..........................     (2,656)          773        6,631
  Increase in amounts payable to related parties...........................................         --            --        1,429
                                                                                              --------     ---------    ---------
   Net cash used in operating activities                                                       (55,692)     (135,011)     (36,428)
                                                                                              --------     ---------    ---------

Investing activities:
  Purchase of property and equipment.......................................................       (410)           --           --
                                                                                              --------     ---------    ---------
   Net cash used in investing activities...................................................       (410)           --           --
                                                                                              --------     ---------    ---------

Financing activities:
  Paydown of NAHI Bridge Note..............................................................       (267)         (268)        (269)
  Proceeds from Fox Subordinated Note......................................................     25,000        15,000           --
  Dividends on Preferred Stock.............................................................    (31,048)      (31,135)     (31,051)
  Net intercompany advances................................................................     55,515       152,584       69,764
                                                                                              --------     ---------    ---------
    Net cash provided by financing activities..............................................     49,200       136,181       38,444
                                                                                              --------     ---------    ---------
Increase (decrease) in cash and cash equivalents...........................................     (6,902)        1,170        2,016
Cash and cash equivalents, beginning of year...............................................      6,939            37        1,207
                                                                                              --------     ---------    ---------
Cash and cash equivalents, end of year.....................................................   $     37     $   1,207    $   3,223
                                                                                              ========     =========    =========
</TABLE>

Supplemental disclosure of non-cash flow investment activities (in thousands):

 Year ended June 30, 1999

 Property and equipment with a book value of $638 was transferred to a
 subsidiary.

 Year ended June 30, 2000

 Property and equipment with a book value of $350 was transferred to a
 subsidiary.

                            See accompanying notes.

                                       130

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.
                                 (PARENT ONLY)

                    NOTES TO CONDENSED FINANCIAL STATEMENTS

1.   Basis of Presentation

     The accompanying condensed financial statements include the accounts of Fox
Family Worldwide, Inc. (the "Company") presented on a separate company (parent
only) basis.  The Company is a Delaware corporation formed in August 1996 as a
holding company.  Between August 1996 and August 1997, the Company conducted no
business or operations.  On August 1, 1997 the Company underwent a
reorganization in connection with its acquisition of International Family
Entertainment, Inc.  This reorganization is more fully explained in Note 1 to
the Consolidated Financial Statements.

2.   Debt

     Information relating to the NAI Bridge Note, Fox Subordinated Notes, Senior
and Senior Discount Notes is contained in Note 6 to the Consolidated
Financial Statements.  Payments of principal in future periods are all due
subsequent to June 30, 2003.  The Company is a guarantor under the Amended
Credit Facility, as described in Note 6 to the Consolidated Financial
Statements.

3.   Issuance of Subsidiary Ordinary Shares

     Information relating to the issuance of ordinary shares of FKE, a wholly
owned indirect subsidiary of the company, in an initial public offering of its
shares and the resulting SAB No. 51 pre-tax gain of $117,316,000 and pre-tax
gain on issuance of subsidiary stock of $78,623,000 recorded for the year ended
June 30, 2000, is contained in Note 13 to the Consolidated Financial Statements.

4.   Subsequent Event

     On July 23, 2001, Disney entered into the Disney Purchase Agreement with
Fox Broadcasting, FBSI, Haim Saban and the other Saban Stockholders, Allen &
Company Incorporated, News America Incorporated, and News Corp., pursuant to
which Disney agreed to purchase for cash from FBSI, the Saban Stockholders and
Allen & Company Incorporated all the outstanding shares of the Company's Class A
Common Stock and Class B Common Stock. Upon the closing of the Disney
Acquisition, Disney would acquire control of the Company by virtue of holding
all of the Company's outstanding shares of common stock. Immediately following
the closing under the Disney Purchase Agreement, the Company will cease to
broadcast the Fox Kids Network, which will be operated by Fox Broadcasting
following the Disney Acquisition. The Company will provide certain programming
to Fox Broadcasting for the 2001-2002 broadcast season for broadcast on the Fox
Kids Network. The closing of the Disney Acquisition will occur following receipt
of required U.S. and foreign governmental or regulatory approvals, among other
customary conditions to closing. The parties currently expect the Disney
Acquisition to close in the fourth quarter of the 2001 calendar year. The
Company will change its name following the Disney Acquisition.

     According to the terms of the Disney Purchase Agreement, Disney will
purchase the Fox Subordinated Notes and the NAI Bridge Note from Fox
Broadcasting and NAI, respectively, upon closing of the Disney Acquisition.

                                       131

<PAGE>

                          FOX FAMILY WORLDWIDE, INC.
                                (CONSOLIDATED)

                SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                          Additions
                                                             ----------------------------------
                                                                                   Acquired or
                                           Balance at          Charged to          Charged to                               Balance
                                          beginning of         Costs and              Other                                at end of
      Description                             Year              Expenses            Accounts          Deductions              Year
      -----------                         ------------         ----------          -----------        ----------           ---------
                                                                                  (in thousands)
<S>                                       <C>                  <C>                <C>                 <C>                  <C>
Year ended June 30, 1999
 Allowance for doubtful accounts.......          1,594                990                     --            (91)               2,493
 Reserve for severance and related
  costs under acquisition..............         16,650                 --                     --         (8,873)               7,777
 Accruals for litigation and other
  related costs under acquisition......          4,800                 --                     --           (886)               3,914
Year ended June 30, 2000
 Allowance for doubtful accounts.......          2,493              2,011                    436           (252)               4,688
 Reserve for severance and related
  costs under acquisition..............          7,777                 --                     --         (2,713)               5,064
 Accruals for litigation and other
  related costs under acquisition......          3,914                 --                     --         (1,139)               2,775
Year ended June 30, 2001
 Allowance for doubtful accounts.......          4,688              1,593                     --           (960)               5,321
 Reserve for severance and related
  costs under acquisition..............          5,064                 --                     --         (1,917)               3,147
 Accruals for litigation and other
  related costs under acquisition......          2,775                 --                     --           (331)               2,444
</TABLE>

                                       132

<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         The Company previously reported in its Current Report on Form 8-K dated
April 22, 2002 that it dismissed Arthur Andersen LLP as its independent auditors
and engaged Ernst & Young LLP to act as its independent auditors.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The information contained in the Company's Proxy Statement for the 2002
Annual Meeting of Stockholders (the "2002 Proxy Statement") under the captions
"Election of Directors", "Executive Officers of the Company" and "Section 16(a)
Beneficial Ownership Reporting Compliance" is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

         The information contained in the 2002 Proxy Statement under the
captions "Executive Officers of the Company" and "Committees of the Board -
Board Meetings" is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information contained in the 2002 Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners and Management" is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information contained in the 2002 Proxy Statement under the caption
"Certain Relationships and Related Transactions" is incorporated herein by
reference.

ITEM 14. CONTROLS AND PROCEDURES

         Not applicable.
                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      and (d) Financial Statements and Schedules (see Index on Page 56)

(b)      Reports on Form 8-K

         (i)   Current Report on Form 8-K of the registrant filed April 22,
         2002 relating to the announcement that, on April 16, 2002, the
         registrant dismissed Arthur Andersen LLP as its independent auditors.

         (ii)  Current Report on Form 8-K of the registrant filed June 25, 2002
         relating to the announcement that, on June 17, 2002, The News
         Corporation Limited, Fox Television Stations, Inc., a wholly-owned
         subsidiary of the registrant, ("Fox Television Stations") and Meredith
         Corporation completed the exchange of Meredith's WOFL (TV) in Orlando,
         Florida and WOGX (TV) in Ocala, Florida for Fox Television Station's
         KPTV (TV) in Portland, Oregon.

                                      133

<PAGE>

         (iii) Current Report on Form 8-K of the registrant filed June 28, 2002
         relating to the announcement that, on June 27, 2002, the registrant and
         Fox Television Stations, Inc. had agreed to purchase WPWR-TV in
         Chicago, Illinois from Newsweb Corporation.

(c)      Exhibits (see Exhibit Index)

                                      134

<PAGE>

                                   SIGNATURES

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

                           By /s/ K. RUPERT MURDOCH
                           --------------------------------------
                           K. Rupert Murdoch,
                           Chairman and
                           Chief Executive Officer (Principal Executive Officer)


                           By /s/ DAVID F. DeVOE
                           --------------------------------------
                           David F. DeVoe,
                           Senior Executive Vice President,
                           Chief Financial Officer
                           (Principal Financial and Accounting Officer)

Date: September 19, 2002

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

                                      135

<PAGE>

            Signature                       Title                    Date
            --------------                  ------                 -------


/s/  K. RUPERT MURDOCH                      Director          September 19, 2002
-----------------------------------
K. Rupert Murdoch


/s/  DAVID F. DeVOE                         Director          September 19, 2002
-----------------------------------
David F. DeVoe


/s/ ARTHUR M. SISKIND                       Director          September 19, 2002
-----------------------------------
Arthur M. Siskind


/s/ PETER CHERNIN                           Director          September 19, 2002
-----------------------------------
Peter Chernin


/s/  LACHLAN K. MURDOCH                     Director          September 19, 2002
-----------------------------------
Lachlan K. Murdoch


/s/ CHRISTOS M. COTSAKOS
-----------------------------------         Director          September 19, 2002
Christos M. Cotsakos


/s/  THOMAS W. JONES
-----------------------------------         Director          September 19, 2002
Thomas W. Jones

                                      136

<PAGE>

  CERTIFICATIONS

     I, K. Rupert Murdoch, Chairman and Chief Executive Officer of Fox
     Entertainment Group, Inc. (the "Company"), certify that:

1.       I have reviewed this annual report on Form 10-K of the Company;

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

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

  Date:  September 19, 2002

                                            /s/ K. Rupert Murdoch
                                            K. Rupert Murdoch
                                            Chairman and Chief Executive Officer

                                      137

<PAGE>

  I, David F. DeVoe, Senior Executive Vice President and Chief Financial Officer
  of Fox Entertainment Group, Inc. (the "Company"), certify that:

1.       I have reviewed this annual report on Form 10-K of the Company;

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

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

  Date:  September 19, 2002

                    /s/ David F. DeVoe
                    David F. DeVoe
                    Senior Executive Vice President and Chief Financial Officer

                                      138

<PAGE>

                                  EXHIBIT INDEX

                                                                   EXHIBIT NO.
                                                                   IN DOCUMENT
EXHIBIT                                                            INCORPORATED
NO.           DESCRIPTION                                          BY REFERENCE
--------      ---------------------                                -------------
  3.1         Restated Certificate of
              Incorporation of the Company                         3.1(1)
  3.2         Form of By-Laws of the Company                       3.2(1)
  4.1         Specimen Certificate for Shares of
              Class A Common Stock of the Company                  4.1(2)
 10.1         Indenture, dated as of January 28, 1993, by
              and among News America Hold- ings
              Incorporated, the guarantors named therein
              and State Street Bank and Trust Company (as
              successor to The First National Bank of
              Boston), as Trustee, with respect to senior
              debt securities                                      2(3)
 10.2         First Supplemental Indenture, dated as of
              March 24, 1993, by and among News America
              Holdings Incorporated, the guarantors named
              therein and State Street Bank and Trust
              Company (as successor to The First National
              Bank of Boston), as Trustee, with respect to
              senior debt securities                               2(4)
 10.3         Second Supplemental Indenture, dated as of
              April 8, 1993, by and among News America
              Holdings Incorporated, the guarantors named
              therein and State Street Bank and Trust
              Company (as successor to The First National
              Bank of Boston), as Trustee, with respect
              to senior debt securities                            3(4)
 10.4         Third Supplemental Indenture, dated as of
              May 20, 1993, by and among News America
              Holdings Incorporated, the guarantors named
              therein and State Street Bank and Trust
              Company (as successor to The First National
              Bank of Boston), as Trustee, with respect
              to senior debt securities                            4.7(5)
 10.5         Fourth Supplemental Indenture, dated as of
              May 28, 1993, by and among News America
              Holdings Incorporated, the guarantors named
              therein and State Street Bank and Trust
              Company (as successor to The First National
              Bank of Boston), as Trustee, with respect
              to senior debt securities                            4.8(5)

                                       1

<PAGE>




                                                                   EXHIBIT NO.
                                                                   IN DOCUMENT
 EXHIBIT                                                           INCORPORATED
 NO.          DESCRIPTION                                          BY REFERENCE
 --------     ---------------------                                -------------
 10.6         Fifth Supplemental Indenture, dated as of
              July 21, 1993, by and among News America
              Holdings Incorporated, the guarantors named
              therein and State Street Bank and Trust
              Company (as successor to The First National
              Bank of Boston), as Trustee, with respect
              to senior debt securities                            4.6(6)
 10.7         Form of Sixth Supplemental Indenture,
              dated as of January 25, 1994, by and among
              News America Holdings Incorpo- rated, the
              guarantors named therein and State Street
              Bank and Trust Com- pany (as successor to
              The First Na- tional Bank of Boston), as
              Trustee, with respect to senior debt securities      4.7(7)
 10.8         Form of Seventh Supplemental
              Indenture, dated as of February 4, 1994, by
              and among News America Holdings
              Incorporated, the guarantors named therein
              and State Street Bank and Trust Company (as
              successor to The First National Bank of
              Boston), as Trustee, with respect to senior
              debt securities                                      4.8(8)
 10.9         Form of Eight Supplemental Indenture, dated
              as of May 12, 1994, by and among News
              America Holdings Incorporated, the
              guarantors named therein and State Street
              Bank and Trust Company (as successor to The
              First National Bank of Boston), as Trustee,
              with respect to senior debt securities               4.9(8)
10.11         Form of Ninth Supplemental Indenture,
              dated as of July 27, 1995 by and among
              News America Holdings Incorporated, the
              guarantors named therein and State Street
              Bank and Trust Company (as successor to The
              First National Bank of Boston), as Trustee,
              with respect to senior debt securities               4.10(9)
10.12         Form of Tenth Supplemental Indenture,
              dated as of March 2, 2000 by and among
              News America Holdings
              Incorporated, the guarantors named therein
              and State Street Bank and Trust Company (as
              successor to The First National Bank of
              Boston), as Trustee, with respect to senior
              debt securities                                      10.12(10)
10.13         Form of Eleventh Supplemental Indenture,
              dated as of February 14, 2001 by and
              among News America Holdings
              Incorporated, the guarantors named therein
              and State Street Bank and Trust Company (as
              successor to The First National Bank of
              Boston), as Trustee, with respect to senior debt
              securities                                           10.13(10)

                                       2

<PAGE>


                                                                   EXHIBIT NO.
                                                                   IN DOCUMENT
EXHIBIT                                                            INCORPORATED
NO.           DESCRIPTION                                          BY REFERENCE
--------      ---------------------                                ------------
10.14         Form of Amended and Restated
              Indenture, dated as of March 24,
              1993, by and among News America
              Holdings Incorporated, the guarantors
              named therein and The Bank of New
              York, as Trustee, with respect to
              senior debt securities                               4.1(11)
10.15         First Supplemental Indenture, dated as of
              May 20, 1993, by and among News America
              Holdings Incorporated, the guarantors named
              therein and The Bank of New York, as
              Trustee, with respect
              to senior debt securities                            4.2(5)
10.16         Second Supplemental Indenture, dated
              as of May 28, 1993, by and among News
              America Holdings Incorporated, the
              guarantors named therein and The Bank
              of New York, as Trustee, with respect
              to senior debt securities                            4.3(5)
10.17         Third Supplemental Indenture, dated
              as of July 21, 1993, by and among
              News America Holdings Incorporated,
              the guarantors named therein and The
              Bank of New York, as Trustee, with
              respect to senior debt securities                    4.14(12)
10.18         Fourth Supplemental Indenture, dated as of
              October 20, 1995, by and among News America
              Holdings Incorporated, the guarantors named
              therein and The Bank of New York, as
              Trustee, with respect to the senior debt securities  4.15(12)
10.19         Fifth Supplemental Indenture, dated
              as of January 8, 1998, by and among
              News America Incorporated, the guarantors
              named therein and The Bank of New York,
              as Trustee with respect to senior debt securities    4.6(13)
10.20         Sixth Supplemental Indenture, dated as of March 1,
              1999, by and among News America Incorporated, the
              guarantors named therein and The Bank of New York,
              as Trustee, with respect
              to the senior debt securities                        10.20(10)
10.21         Seventh Supplemental Indenture dated as of
              February 14, 2001, by and among News America
              Incorporated, the guarantors named therein and
              The Bank of New York, as Trustee,
              with respect to the senior debt securities           10.21(10)
10.22         Composite Revolving Credit Agreement, dated as of
              May 19, 1993(including amendments dated August 9,
              1993, September 14, 1993, May 12, 1994, March 30,
              1995, February 29, 1996 and December 20,
              1996) among News America Incorporated et al,
              several agents, managers and banks                   10.21(2)
10.23         Indenture for the 5% Subordinated
              Discount Debentures, dated as of November
              12, 1996, among News America Holdings
              Incorporated, The News Corporation
              Limited, each of the Subsidiary Guarantors
              named therein and

                                       3

<PAGE>
                                                                   EXHIBIT NO.
                                                                   IN DOCUMENT
EXHIBIT                                                            INCORPORATED
NO.           DESCRIPTION                                          BY REFERENCE
--------      ---------------------                                ------------
              The Bank of New York, as Trustee                     4(i)(14)
10.24         First Supplemental Indenture, dated as of
              March 2, 2000, by and among News America
              Holdings Incorporated, The News Corporation
              Limited, each of the Subsidiary Guarantors named
              therein and The Bank of New York, as Trustee         10.24(10)
10.25         Second Supplemental Indenture, dated as of
              February 14, 2001, by and among News America
              Holdings Incorporated, The News Corporation
              Limited, each of the Subsidiary Guarantors named
              therein and The Bank of New York, as Trustee         10.25(10)
10.26         Indenture, dated as of February 28, 2001, by and
              among News America Incorporated, The News
              Corporation Limited, the other Guarantors named
              therein and The Bank of New York, as Trustee, with
              respect to the Liquid Yield Option(TM)Notes due
              February 28, 2021.                                   4.1(15)
10.27         Form of Master Intercompany
              Agreement between the Company and
              The News Corporation Limited                         10.29(2)
10.28         Letter Agreement between the Company and
              The News Corporation Limited dated as of June 30,
              2002*
10.29         Form of Tax Sharing Agreement between
              the Company and News Publishing Australia Limited    10.31(2)
10.30         Amendment No. 7, dated as of June 8, 1998, to the
              Revolving Credit Agreement dated as of May 19, 1993
              (as amended on August 9, 1993, September 14, 1993,
              May 12, 1994, March 30, 1995, February 29, 1996 and
              December 29, 1996) among News America Incorporated
              et al, several agents, managers and banks            10.32(2)
10.31         Amendment No. 8, dated as of
              November 22, 2000, to the Revolving Credit
              Agreement dated as of May 19, 1993 (as
              amended on August 9, 1993, September 14,
              1993, May 12, 1994, March 30, 1995, February
              29, 1996, December 20, 1996 and June 8, 1998)
              among News America Incorporated et al, several
              agents, managers and banks                           1.1(18)
10.32         Form of Transfer Agreement among The News
              Corporation Limited, News Publishing Australia
              Limited, FEG Holdings, Inc. and Fox Entertainment
              Group, Inc.                                          10.5(17)
 21.1         List of Principal Subsidiaries of the Company*
 23.1         Consent of Ernst & Young LLP*
 23.2         Notice Regarding Consent of Arthur Andersen LLP regarding
              Fox Entertainment Group, Inc.*
 23.3         Notice Regarding Consent of Arthur Andersen LLP regarding
              Fox Family Worldwide, Inc*
 99.1         Certification Pursuant to USC Section 1350, as
              Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002*
 99.2         Certification Pursuant to USC Section 1350, as
              Adopted Pursuant to Section 906 of the Sarbanes
              Oxley Act of 2002*

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

 * Filed herewith

(1)  Incorporated by reference to the Report on Form 10-Q of Fox Entertainment
     Group, Inc., dated December 22, 1998.
(2)  Incorporated by reference to Amendment No. 4 to the Registration Statement
     on Form S-1 of Fox Entertainment Group, Inc. (Registration No. 333-61515)
     filed with the Securities and Exchange Commission on November 4, 1998.
(3)  Incorporated by reference to the Report on Form 6-K of The News Corporation
     Limited, dated January 28, 1993.
(4)  Incorporated by reference to the Report on Form 6-K of The News Corporation
     Limited, dated April 26, 1993.

                                       4

<PAGE>

(5)  Incorporated by reference to the Registration Statement on Form F-3 of News
     America Holdings Incorporated (Registration No. 33-63604) and
     Post-Effective Amendment No. 1 to the Registration Statement on Form F-3 of
     the News America Holdings Incorporated (Registration No. 33-59688) filed
     with the Securities and Exchange Commission on May 28, 1993.
(6)  Incorporated by reference to the Registration Statement on Form F-3 of News
     America Holdings Incorporated (Registration No. 33-74574) filed with the
     Securities and Exchange Commission on January 28, 1994.
(7)  Incorporated by reference to Amendment No. 1 to the Registration Statement
     on Form F-3 of News America Holdings Incorporated (Registration No.
     33-74574) filed with the Securities and Exchange Commission on February 4,
     1994.
(8)  Incorporated by reference to Amendment No. 1 to the Registration Statement
     on Form F-3 of News America Holdings Incorporated (Registration No.
     33-79334) filed with the Securities and Exchange Commission on June 14,
     1994.
(9)  Incorporated by reference to the Registration Statement on Form F-3 of News
     America Holdings Incorporated (Registration No. 33-94868) filed with the
     Securities and Exchange Commission on July 24, 1995.
(10) Incorporated by reference to the Report on Form 10-K of Fox Entertainment
     Group, Inc. filed with the Securities and Exchange Commission on September
     28, 2001.
(11) Incorporated by reference to the Registration Statement on Form F-3 of The
     News Corporation Limited (Registration No. 33-67008) filed with the
     Securities and Exchange Commission on May 4, 1993.
(12) Incorporated by reference to Amendment No. 1 to the Registration Statement
     on Form F-3 of News America Holdings Incorporated (Registration No.
     33-98238) filed with the Securities and Exchange Commission on October 23,
     1995.
(13) Incorporated by reference to the Registration Statement Form F-4 of News
     America Incorporated on (Registration No. 333-8744) filed with the
     Securities and Exchange Commission on May 12, 1998.
(14) Incorporated by reference to the Registration Statement on Form F-3 of The
     News Corporation Limited (Registration No. 333-6896) filed with the
     Securities and Exchange Commission on January 26, 1998.
(15) Incorporated by reference to the Registration Statement on Form F-3 of The
     News Corporation Limited (Registration No. 333-12995) filed with the
     Securities and Exchange Commission on May 25, 2001.
(16) Incorporated by reference to Amendment No. 5 to the Registration Statement
     on Form S-1 of Fox Entertainment Group, Inc. (Registration No. 333-61515)
     filed with the Securities and Exchange Commission on November 9, 1998.
(17) Incorporated by reference to the Report on Form 8-K of Fox Entertainment
     Group, Inc., dated August 13, 2000 and filed with the Securities and
     Exchange Commission on August 23, 2000.
(18) Incorporated by reference to the Annual Report on Form 20-F of The News
     Corporation Limited, filed with the Securities and Exchange Commission on
     December 15, 2000.

                                       5