==============================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              ---------------------

                                    FORM 10-K
(Mark One)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
      EXCHANGE ACT OF 1934.

      For the fiscal year ended June 30, 1999
                                      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 NO. 333-12995


                          FOX FAMILY WORLDWIDE, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 DELAWARE                           95-4596247
       (STATE OR OTHER JURISDICTION              (I.R.S. EMPLOYER
           OF INCORPORATION OR                 IDENTIFICATION NUMBER)
              ORGANIZATION)


       10960 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024 (Address of
                    registrant's principal executive offices)

                                 (310) 235-5100
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                                 ---------------
           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                                      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. [X]

    Aggregate market value of Registrant's voting stock held by non-affiliates:
NOT APPLICABLE

    Number of shares of common stock outstanding as of September 20, 1999:
15,840,000 shares of Class B Common Stock; 160,000 shares of Class A Common
Stock

==============================================================================


<PAGE>


                                    PART I

ITEM 1. BUSINESS

OVERVIEW

     The Company is a fully 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
broadcast operations comprise (i) 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 95% 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) a growing portfolio of Fox Kids branded cable and
direct-to-home ("DTH") satellite channels with approximately 22 million
subscribers operating in approximately 39 countries and 13 languages worldwide
(the "Fox Kids International Networks"). The Company's production and
distribution operations comprise Saban Entertainment, Inc. ("Saban"), whose
library of approximately 5,800 half-hours of completed and in-production
children's programming is among the largest in the world (the "Fox Family Kids
Library"). 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.

    The Company is the result of the joint venture launched in 1995 by Fox
Broadcasting Company ("Fox Broadcasting") and Saban to match the complementary
programming and broadcasting strengths of the Fox Kids Network and the
international reach of Fox Broadcasting's parent company, The News Corporation
Limited ("News Corp."), with the development, production, distribution and
merchandising strengths of Saban. In September 1997, the Company completed the
acquisition (the "IFE Acquisition") of International Family Entertainment, Inc.
("IFE"), whose principal business is the Fox Family Channel, the successor to
The Family Channel. The IFE Acquisition provides the Company with several
strategic advantages, including (i) a widely distributed cable platform, which
reaches approximately 75.3 million viewers, or approximately 95% of all U.S.
cable and direct broadcast satellite ("DBS") homes, providing an effective means
for more vigorous competition with other family- and children's-oriented cable
services, (ii) an additional outlet for Saban's existing children's programming
library, (iii) increased awareness in the children's (ages 2-11) target market
through expanded hours, increased brand exposure and additional licensing and
merchandising opportunities and (iv) cross-promotional opportunities with the
Fox Kids Network.

     While maintaining the family image and general entertainment format of the
channel, the Company reformatted The Family Channel on August 15, 1998 as the
"Fox Family Channel" with a new schedule, look, marketing campaign and on-air
packaging designed to appeal to the adult 18-49 demographic during primetime and
evenings and to children during the day. From 7 a.m. to 6 p.m., the Fox Family
Channel telecasts programming targeted principally to children. From 6 p.m. to
11 p.m. and from midnight to 1 a.m., the Fox Family Channel telecasts
programming intended to appeal to families aged 18-49 and carries advertising
sold on the basis of adult demographics. Prime time programming consists
principally of new original productions produced or co-produced by the Company
and original and library product licensed from independent suppliers. Some of
the original programming developed for prime time includes CLIFFHANGERS,
EXTRAORDINARY WORLD OF ANIMALS, LIFE, CAMERA, ACTION!, SHOW ME THE FUNNY, RANDOM
ACTS OF COMEDY and THE NEW ADDAMS FAMILY series. Children's programming for the
Fox Family Channel is taken principally from the Company's library, with
selected productions acquired from independent suppliers, much of which has not
previously been broadcast in the United States.

    The Company also owns and operates the Fox Kids Network, one of the leading
U.S. children's broadcast television networks, which broadcasts 14 hours of
children's programming each week to 97% of U.S. television households, the
broadest reach of any network targeting children. The Fox Kids Network was
formed by Fox Broadcasting and most of Fox Broadcasting's affiliates to provide
children's programming weekdays and Saturday


                                     Page 2
<PAGE>


mornings. The Fox Kids Network affords advertisers the opportunity to reach
children in a cost-effective manner, in part by ensuring consistent nationwide
placement of their advertisements by generally broadcasting its programming at
the same local time and on the same day ("day-and-date") in each television
market. The Fox Kids Network's advertising customers include virtually every
major children's advertiser.

    The Company, through its Saban subsidiary, creates, produces and acquires
quality animated and live-action children's television programming with
brand-name characters and elements which are either widely known to children,
such as the MIGHTY MORPHIN POWER RANGERS ("POWER RANGERS") and X-MEN, or which
are or have been developed or purchased due to their likelihood of maturing into
popular brands. The Company will produce, finance or co-finance approximately
432 episodes of children's television programming for the 1999/2000 broadcast
season. The Company generally retains worldwide rights to its brands, and
currently has over 300 licensees worldwide, including toy companies Bandai
America, Inc. ("Bandai"), Playmates Toys, Inc., Hasbro, Inc. ("Hasbro") and
Tiger Electronics, Inc. One of the most attractive attributes of the Company's
children's programming is its "portability," in that it generally can be
modified at modest cost and resold for exhibition in other countries through
editing and dubbing into other languages. The Company currently distributes its
children's programming in most major television markets throughout the world.

    Over the past two years, the Company has aggressively pursued a strategy of
launching Fox Kids branded cable and DTH channels in Europe and Latin America.
These channels are either fully owned and operated by the Company or in
conjunction with local partners. Much of the children's programming owned by the
Company is globally recognized and easily transportable, requiring only dubbing
which can be done at minimal cost. The Company has therefore been able to
efficiently leverage the potential of its content to expand its international
distribution outlets. The Fox Kids International Networks currently reach in the
aggregate over 22 million subscribers in Europe and Latin America.

    Taking advantage of the emergence of digital television transmission, during
the fiscal year ending June 30, 2000 ("Fiscal 2000") the Company will launch two
new U.S. digital cable networks. In June 1999, two websites catering
specifically to boys (WWW.BCHANNEL.COM) and girls (WWW.GCHANNEL.COM) were
successfully launched and later in Fiscal 2000, the boyzChannel and the
girlzChannel will begin cable distribution. The boyzChannel and girlzChannel
will be full-time satellite networks. Programmed with original and exclusive
material, these two networks will offer boys and girls, respectively, a place of
their own on television. The daytime programming on each of these channels will
target ages 2-14, with evening programming targeting parents.

PROGRAMMING

     The Company creates, produces and acquires quality family and children's
television programming. The Company has a library of approximately 4,300 hours
of completed family programming and made-for-television-movies. In addition, the
Fox Family Kids Library of approximately 5,800 half-hour episodes of completed
and in-production children's television programming is one of the largest
children's libraries in the world. The principal programming objective of the
Company is to develop or acquire appealing characters and concepts that can be
commercially exploited throughout the world through broadcast network and cable
television exhibition, home video sales, licensing and merchandising.

     FOX FAMILY CHANNEL PROGRAMMING. On August 15, 1998, the Company debuted the
Fox Family Channel with a completely revamped programming schedule. The daytime
current lineup features a variety of original, acquired and library product
targeted to children, ages 2-11, with animated series including ROTTEN RALPH,
THE THREE FRIENDS & JERRY SHOW, WEIRD-OHS and THE KIDS FROM ROOM 402, live
action series such as I WAS A SIXTH GRADE ALIEN, BIG WOLF ON CAMPUS and GREAT
PRETENDERS, scheduled Monday through Friday from 7 a.m. - 6 p.m., and Saturday
and Sunday from 7 a.m. - 4 p.m. During the prime time hours of 6 p.m. - 11 p.m.
and from midnight to 1 a.m., Fox Family Channel provides programming which is
family-friendly but targeted primarily to the 18-49 demographic. With an
emphasis on original programming, the Fox Family Channel provides such new
series as RANDOM ACTS OF COMEDY, EXTRAORDINARY WORLD OF ANIMALS, FAMOUS
FAMILIES, WORLD GONE WILD and EXPLORING THE UNKNOWN. The Fox Family Channel also
programs between 10 and 12 original movies per year, with at least one original
film such as


                                     Page 3
<PAGE>


AU PAIR, MICHAEL JORDAN: AN AMERICAN HERO and DON'T LOOK BEHIND YOU airing
every month. The original movie, AU PAIR, which aired August 22, 1999, attracted
the largest single viewing audience in the entire history of the Channel.
Original specials will also become a signature of the network, with shows
including the WORLD MAGIC AWARDS and FOX FAMILY CHANNEL PRESENTS THE NOBEL PEACE
CONCERT regularly scheduled.

     CHILDREN'S PROGRAMMING. The two principal sources of the Fox Family Kids
Library are (i) television series that have been originally produced by the
Company through its Saban subsidiary for broadcast in the United States and
internationally (approximately 2,400 half-hours) and (ii) children's programming
produced by others for which the Company has acquired various distribution
rights (approximately 3,400 half-hours). Of the Fox Family Kids Library,
including episodes in production as of June 30, 1999, approximately 1,500
half-hours are original co-produced programming that meet applicable European
content requirements and are intended for initial broadcast in Europe. In
January 1997, the Company obtained from FOX Television, a division of Fox
Entertainment Group, Inc. ("FOX Television") the distribution rights to the New
World Communications Group Incorporated's ("New World") animation library of
approximately 500 half-hour episodes. In July 1998, the Company agreed to
acquire the New World animation library from FOX Television.

    The Company's international programming includes worldwide distribution
rights to a 445 half-hour episode library of family oriented programming
acquired in the April 1996 acquisition of Paris-based Creativite &
Developpement, S.A. ("C&D"), a leading European producer of family
entertainment, and a 712 half-hour episode library of animated children's
programming acquired in the April 1996 acquisition of Vesical Limited. The
Vesical library includes non-U.S. rights to classic series such as INSPECTOR
GADGET, HEATHCLIFF and DENNIS THE MENACE.

  CREATION AND DEVELOPMENT OF PROGRAMMING

    The Company has and will continue to pursue ideas and properties for
original production from a number of sources. For example, the Company may
acquire production, distribution and possibly other rights to an existing
property (such as Marvel's SPIDERMAN AND AVENGERS, Francine Pascal's SWEET
VALLEY HIGH and THE NEW ADDAMS FAMILY) or series (such as Scholastic/Protocol's
GOOSEBUMPS), develop internally a new property based on an existing public
domain property (such as SABAN'S ADVENTURES OF OLIVER TWIST) or create or
acquire an entirely new idea or character (such as XYBER 9 and THE SECRET FILES
OF THE SPY DOGS).

    The Company also maintains a state-of-the-art post-production facility in
Los Angeles, California. The Company records all of the music for its
programming and edits and adds audio and sound effects to its programming. The
Company also produces most of the on-air promotions, sales films and public
service announcements for the Fox Family Channel and the Fox Kids Network.

    The Company owns a full-service animation studio in Paris which develops
children's programming containing content that meets the local content
requirements of various European countries for local broadcast television. The
Paris studio has produced approximately 408 half-hours of children's programming
since its inception in 1990 through June 30, 1999. In general, the Company
enters into strategic co-production alliances to develop its French and European
content programming.

  INTERNATIONAL SALES OF PROGRAMMING

    Much of the Company's children's programming is distributed on a worldwide
basis. The Company believes that by owning and controlling the international
distribution rights to its programming, in addition to generating significant
revenue from the sale of its programming, it can also establish an international
presence for the Company and its properties.

    The Company is currently party to distribution arrangements with
international television broadcasters and distributors to exhibit and distribute
the Company's children's programming to over 375 terrestrial, cable and
satellite distribution platforms in approximately 100 countries. These
distribution arrangements accounted for approximately $141 million, or 22% of
the Company's consolidated revenues for the fiscal year ended June 30,


                                     Page 4
<PAGE>


1999. For example, in January 1996, the Company entered into a distribution
agreement with ARD, the largest broadcaster in Germany, pursuant to which the
Company granted rights to at least 24 two-hour movies for television
("telefilms"), six co-produced animated children's program series (consisting of
JIM BUTTON, WUNSCHPUNSCH, WALTER MELON, THE WHY WHY FAMILY, PRINCESS SISSI and
SABAN'S ADVENTURES OF OLIVER TWIST), any coproduced series based on German
author Michel Ende's stories for which the Company controls the rights and 390
half-hour episodes of other children's animated programs. In addition, in
September 1997, a separate agreement was entered into with ARD to co-produce
four disaster genre television motion pictures, including EARTHQUAKE IN NEW
YORK, VOYAGE OF TERROR, FREEFALL, and HEAVEN'S FIRE.

DISTRIBUTION OUTLETS

    The Company distributes its own programming, as well as the programming of
others, throughout the United States and in major markets throughout the world.
The Company is uniquely positioned as a distributor as a result of its strategic
relationship with Fox Broadcasting and News Corp. and by reason of its large
programming library. The Company owns three distribution outlets: the Fox Family
Channel, the Fox Kids Network and the Fox Kids International Networks.

  THE FOX FAMILY CHANNEL

    The Fox Family Channel is a basic cable network that provides
family-oriented entertainment and informational programming to approximately 95%
of all U.S. cable and satellite television households. The Company debuted the
Fox Family Channel in August 1998 with a new schedule, look, marketing campaign
and logo. The new format includes daytime programming for children followed by
evening programming targeting adults, but which is suitable for the entire
family. Evening programming includes original series, specials and movies
produced and licensed to the Fox Family Channel, as well as programs originally
televised on the major broadcast networks. Currently, the Fox Family Channel's
programs are transmitted 24 hours a day via satellite from the Fox Television
Network Broadcast Center's uplink facility in Los Angeles, California.

    In general, pursuant to the Fox Family Channel's affiliation agreements,
each cable system operator or other delivery service distributing the Fox Family
Channel agrees to pay the Company a monthly fee per subscriber. The Fox Family
Channel affiliation agreements are generally three, five or ten years in
duration and provide for annual per subscriber rate increases. Increases in per
subscriber fees and, to a lesser extent, increased household penetration have
generated growth in the Fox Family Channel subscriber fee revenue. In addition,
the Fox Family Channel earns revenue through the sale of advertising spots.

    PROGRAMMING. From Monday-Friday, the Company airs children's programming on
the Fox Family Channel from 7 a.m.-9 a.m. and 11 a.m.-6 p.m., with programming
gradually targeted to older children during the day. The Company targets
programming toward families aged 18-49 from 6 p.m.-8 p.m. and features a movie
each weekday evening from 8 p.m.-10 p.m. Following the movie, the Company will
air original series. The weekend schedules include children's programming from 7
a.m.-5 p.m. and comedy series, original movies and specials from 5
p.m.-midnight.

    TRANSMISSION FACILITIES. With the reformat of the Fox Family Channel in
August 1998, the Company began transmitting all programming for the Fox Family
Channel from the Fox Television Network Broadcast Center located in Los Angeles,
California, by means of an earth station transmitting antenna (an "uplink"). The
uplink facility transmits the programming signal to a transponder on an orbiting
satellite, which in turn retransmits the signal to cable systems operators, DBS
services and other alternative delivery services. Programming is transmitted
using two separate "feeds" (one for the eastern, central and certain mountain
time zones and another for all other mountain time zones and the pacific time
zones) which are transmitted to two different satellite transponders. The
Company owns the transponders for these two feeds as well as a transponder on a
third satellite. All of the Company's owned transponders have "protected"
status. "Protected" status means that should the transponder fail, service will
be transferred to a spare transponder.


                                     Page 5
<PAGE>


  FOX KIDS NETWORK

    The Fox Kids Network, launched in September 1990, was the first television
network to broadcast children's programs during the week (Monday through Friday)
as well as on Saturday. The guiding philosophy of the Fox Kids Network is to
provide a diverse slate of quality entertainment targeted toward children. The
Fox Kids Network broadcasts 14 hours of programming per week; four hours on
Saturday mornings, and two hours each weekday afternoon. One half-hour of
programming each week is dedicated to educational programming for children.

     Prior to September 1999, the Fox Kids Network broadcast 19 hours each week,
including one hour each weekday morning (the "Morning Block"). The Morning Block
was returned to the affiliates to program for a minimum of two years in exchange
for additional advertising spots during the remaining 14 hours per week of Fox
Kids Network programming. In addition, the Fox Kids Network agreed to provide an
optional 2 1/2 hours of educational programming to affiliates free of charge to
be broadcast in non-Fox Kids Network time periods. The revenue generated from
the additional advertising spots will more than offset the lost revenues from
the Morning Block.

    Now in its tenth broadcast season, the Fox Kids Network currently is carried
by 182 television stations affiliated with the Fox Kids Network (the "Fox Kids
Network Affiliates"), 168 of which are affiliated with the FOX Television Member
Stations including 11 currently owned and operated by FOX Television (the "Fox
O&O's"). The Fox Kids Network Affiliates reach approximately 97% of all U.S.
television households. The Fox Kids Network produces and acquires programs,
markets and promotes these programs, makes its schedule available to its Fox
Kids Network Affiliates and sells network advertising. The Company
cross-promotes the Fox Kids Network through the Fox Family Channel, the Fox Kids
Club, FOX KIDS quarterly magazine, Fox Family Countdown radio show and Fox Kids
website.

     RATINGS. The Fox Kids Network is measured by Nielsen in terms of ratings
and share points. For the 1998-1999 broadcast season, the potential viewing
universe of children in the United States was estimated to be 39 million. Each
ratings point represents 1.0% of these children who are watching television
during a particular time slot. For the 1998-1999 broadcast season to date
(September 12, 1998-September 12, 1999), the Fox Kids Network averaged a 1.8
rating Monday-Friday, a 2.8 rating on Saturday mornings and a 2.0 rating
Monday-Saturday during the hours it broadcasts.

    FOX KIDS AFFILIATION AGREEMENTS. The Company's affiliation agreements with
the Fox Kids Network Affiliates expire over the next one to ten years and there
can be no assurance that they will be renewed.

    In July 1998, the financial arrangements between the Fox Kids Network and
the Fox Kids Network Affiliates were changed. The new agreement provides that
all of the Fox Kids Network Affiliates will receive from the Company beginning
July 1, 1998 an aggregate amount of approximately $15.0 million per year for
five years in exchange for (i) guaranteed clearance of Fox Kids programming in
its current time period for ten years, (ii) relinquishment of any participation
in the current or future profits of the Fox Kids Network, and (iii) additional
allocation of promotional advertising spots for the next three and one-half
years. All current primary Fox Kids Network affiliates operate under this
agreement.

  FOX KIDS INTERNATIONAL NETWORK

    The Company believes that it is positioned strategically, particularly
through its relationship with News Corp., to take advantage of growth in
international DTH satellite and cable television services and the resulting
increase in demand for television programming. To date, the Company has launched
eight branded Fox Kids channels in 39 countries in 13 languages, which are
distributed via DTH satellite and cable in the United Kingdom, France, the
Netherlands, the Nordic countries, Poland, Spain, Latin America, including
Central and South America and the Caribbean, and Central and Eastern Europe. The
Company is in active discussions and negotiations to launch additional Fox
branded family oriented channels and Fox Kids branded children's oriented
channels in other countries throughout the world, with particular emphasis in
Italy and Germany. The Company's objective is to


                                     Page 6
<PAGE>


become the leading operator of international family and children's channels by
creating fully localized Fox Kids or Fox branded channels in every major
territory.

  DIGITAL CHANNELS/INTERNET

    Taking advantage of the emergence of digital television transmission, during
Fiscal 2000 the Company will launch two new U.S. digital cable networks. In June
1999, two websites catering specifically to boys (WWW.BCHANNEL.COM) and girls
(WWW.GCHANNEL.COM) were successfully launched and later in Fiscal 2000, the
boyzChannel and the girlzChannel will begin cable distribution. The boyzChannel
and girlzChannel will be full-time cable/satellite networks. Programmed mostly
with original and exclusive material, these two networks will offer boys and
girls, respectively, a place of their own on television. The daytime programming
on each of these channels will target ages 2-14, with evening programming
targeting parents. The Company intends to expand its websites to target children
with information, promotions and eventually, e-commerce.

ADVERTISING

    The extensive reach of the Fox Family Channel and Fox Kids Network affords
advertisers substantial day-and-date capacity to conduct nationwide advertising
campaigns. Substantially all of the revenues of the Fox Kids Network are derived
from national network advertising sales, and approximately 54% of the Fox Family
Channel's revenues are derived from national advertising sales. For the year
ended June 30, 1999, the Company's domestic revenues from advertising were
approximately $249 million, or 39% of consolidated revenues. One of the
Company's objectives with the new schedule on the Fox Family Channel is to reach
viewers in demographics that are attractive to advertisers. The Company also
derives revenues from program sales which consist of sales of program length
periods of time for infomercials which currently air during certain portions of
the 1:00 a.m. to 7:00 a.m. time block on the Fox Family Channel.

MERCHANDISING AND LICENSING

    The Company capitalizes on its popular characters and properties by entering
into licensing agreements with manufacturers and retailers of children's
products. Under these agreements, the Company seeks to earn revenue from the
sale of products while limiting the costs and risks associated with
manufacturing, distributing and marketing merchandise. For the year ended June
30, 1999, the Company's licensing and merchandising activities represented
approximately 4% of the Company's consolidated revenues. The revenue derived
from licensing and merchandising depends not only on the success, recognition
and appeal of a character, but also on the quality and extent of the marketing,
product development and retail efforts of the Company and its licensees. Sales
of licensed products also help the Company's shows by promoting the Company's
brands and characters. This in turn reinforces the strength of the Company's
distribution platform.

    The Company has entered into merchandise license agreements with a number of
toy manufacturers pursuant to which the manufacturers are given the right to
create, manufacture and develop products representing characters from the
Company's series. For example, the Company has toy licenses with Bandai,
covering POWER RANGERS, BEETLEBORGS, MYSTIC KNIGHTS OF TIR NA NOG and XYBER 9,
and with Hasbro, covering NASCAR RACERS (a NASCAR-based property). According to
industry sources, POWER RANGERS is the largest selling action figure of the
1990's. These licenses generally grant the exclusive right to manufacture and
sell toys based upon the characters and other creative elements in the licensed
series. Pursuant to these agreements, the Company generally receives an up-front
advance that is non-refundable but is credited against royalties, generally
based on a percentage of net sales of the licensed product. The Company also
retains approval rights regarding advertising, packaging and the quality of its
licensed product, as well as continued ownership of the copyright and trademark.
The Company has licensing arrangements in place with over 300 different
licensees worldwide for consumer products targeting children, such as toys,
apparel, publishing, software, dinnerware/lunch boxes, watches, bedding and soft
vinyl goods, such as boots, backpacks and raincoats. Merchandise based on the
Company's characters and properties is sold in approximately 60 countries
throughout the world.


                                     Page 7
<PAGE>


HOME VIDEO AND TELEFILMS

     HOME VIDEO. The Company grants home video distribution rights to
manufacture and distribute video cassettes based upon its television
programming. Through agreements with Twentieth Century Fox Home Entertainment,
Inc. ("Fox Video"), the Company distributes throughout the world its television
programs produced, owned or controlled by Saban or the Fox Kids Network. The
Company receives royalties from the sale of home video cassettes of its
television programming.

    TELEFILMS. Historically, prior to the acquisition of the Family Channel, the
Company acquired international distribution rights to several telefilms ranging
from 12 to 15 motion pictures per year. While the Company occasionally acquired
U.S. rights to these films, the primary objective of acquiring telefilms was to
complement the Company's international children's programming sales activities.
With the acquisition of The Family Channel, the Company increased the number of
telefilms produced or acquired to 23 motion pictures for the year ended June 30,
1999. Further, whenever possible, the Company will acquire worldwide rights to
these features. These films are typically targeted at prime time audiences and
consist of family films, dramas, thrillers and action/adventure features. The
Company intends to air these features on the Fox Family Channel and to
distribute these features internationally to television broadcasters and home
video distributors.

THE STRATEGIC ALLIANCE WITH FOX/NEWS CORP.

    News Corp., along with its subsidiaries, including the Fox Entertainment
Group, is a diversified international communications company principally engaged
in the production and distribution of motion pictures and television
programming, television broadcasting, the publication of newspapers, magazines,
books and free standing inserts, computer information services, and digital
broadcasting systems. Fox Entertainment Group owns 100% of Fox Broadcasting
Company. As of August 19, 1999, FOX Television had 180 prime time primary
television station affiliates and one prime time secondary television station
affiliate across the United States, including 22 Fox O&O's, reaching over 97% of
U.S. television households. Each television station affiliate is a party with
Fox Broadcasting to an affiliation agreement which governs the terms of the
relationship between them.

    The Fox Kids Network is distributed over the same broadcast facilities as
FOX Television. In December 1995, Fox Broadcasting and certain of its affiliates
(the "Fox Parties") entered into a long-term strategic alliance with the Company
for the mutual support of the Fox Parties and the Company in the children's
entertainment business. Set forth below is a summary of certain of the material
portions of the relevant strategic alliance provisions contained in the Asset
Assignment Agreement (the "Asset Assignment Agreement"), pursuant to which the
Fox Parties assigned, effective as of June 1, 1995, certain assets and interests
to the Company.

    LICENSE OF "FOX" NAME. The Fox Parties granted to the Company the perpetual
exclusive right to use the name "Fox" in conjunction with the words "Kids,"
"Kid" or "Children" in the United States and agreed not to use or license the
name "Fox" to others for similar purposes. The Fox Parties separately granted to
certain of the Company's non-United States affiliated subsidiaries similar
rights to the territories outside the United States.

     NEW SERVICES AND OTHER NONCOMPETITION PROVISIONS. The Fox Parties agreed
not to operate in the United States any broadcast, cable or non-standard
programming service targeted toward children ages 2-11 (a "kids' service") other
than the Fox Kids Network. If the Fox Parties at any time determine to acquire a
new kids' service anywhere else in the world, which kids' service would bear the
"Fox" name, they are required to provide the Company with a right of first
refusal to acquire and own that new kids' service. Moreover, should the Fox
Parties or any of their affiliates at any time acquire a television, cable or
satellite network or any other business which includes a kids' programming
service, the Fox Parties will be required to offer the Company the right to
acquire and own that kids' service.

    FIRST RIGHT TO FOX PARTIES ORIGINATED PROGRAMMING. The Fox Parties have
agreed to provide the Company with the first right to acquire first run
exhibition rights to any new programming suitable for a kids' service ("kids'
programming") prior to its sale or license to any third party; however, the Fox
Parties may freely license kids'


                                     Page 8
<PAGE>


programming to any broad based entertainment network (which is not a kids'
service) for prime time or late night broadcast and programming derived from
properties (such as THE SIMPSONS) not originally launched on the Fox Kids
Network.

COMPETITION

    The businesses in which the Company engages are highly competitive. Each of
the Company's primary business segments are subject to competition from
companies which, in some instances, have greater production, distribution and
capital resources than those of the Company.

     PROGRAMMING. The Company competes on the basis of relationships and pricing
for access to a limited supply of facilities and creative personnel to produce
its programs. The Company competes with major motion picture studios, such as
Warner Bros. and The Walt Disney Company, and animation production companies,
including Hanna Barbera, Film Roman and Klasky Cuspo, for the services of
writers, producers, animators, actors and other creative personnel and
specialized production facilities.

     DISTRIBUTION OUTLETS. In the United States, the Company competes for
ratings and related advertising revenues. The Company currently competes through
the Fox Kids Network and the Fox Family Channel, with the other broadcast
television networks, public television and cable television channels, such as
USA Cable Network, Turner Network Television ("TNT"), The Cartoon Network and
Nickelodeon for market acceptance of its programming and for viewership ratings
and related advertising revenues. To the extent that the Company produces
original programming for distribution outlets it does not own, it competes with
other producers of children's programming. Internationally, the Company competes
with a large number of U.S.-based and international distributors of children's
programming, including The Walt Disney Company, Warner Bros. and Nickelodeon, in
the development or acquisition of programming expected to appeal to
international audiences. Such programming often must comply with foreign
broadcast rules and regulations, which may stipulate certain minimum local
content requirements.

    DIGITAL CHANNELS. When the Company launches its digital cable networks in
Fiscal 2000, the Company will compete in a rapidly developing area of the
entertainment industry against companies that may have greater financial
resources and technical expertise in the area.

    INTERNET. As the Company expands its websites and internet business, the
Company will compete with companies with substantially greater internet
presence, financial, technical, marketing and other services.

    More generally, the Company competes with various other leisure-time
activities such as home videos, movie theaters, personal computers and other
alternative sources of entertainment and information.

GOVERNMENT REGULATION

    Certain aspects of the Company's operations are subject, directly or
indirectly, to federal, state, and local regulation. At the federal level, the
operations of cable television systems, satellite distribution systems, other
multichannel distribution systems, broadcast television stations, and, in some
respects, vertically integrated cable programmers are subject to the
Communications Act of 1934, as amended, the Cable Communications Policy Act of
1984 (the "1984 Act"), the Cable Television Consumer Protection and Competition
Act (the "1992 Act"), and the Telecommunications Act of 1996 (the "1996 Act")
and regulations promulgated thereunder by the Federal Communications Commission
(the "FCC"). Cable television systems are also subject to regulation at the
state and local level. See "--State and Local Regulation."

    The following does not purport to be a summary of all present and proposed
federal, state and local regulations and legislation relating to the
broadcasting and cable television industries and other industries involved in
the video marketplace; rather it attempts to identify those requirements that
could affect the Company's business. Also, other existing legislation and
regulations, copyright licensing, and, in many jurisdictions, state and local
franchise requirements, are currently the subject of a variety of judicial
proceedings, legislative hearings and administrative and legislative proposals
which could affect, in varying degrees, the manner in which the broadcasting and
cable television industries and other industries involved in the video
marketplace operate.


                                     Page 9
<PAGE>


  FEDERAL REGULATIONS AND LEGISLATION

    The broadcast stations and cable systems that distribute the Company's
programming must comply with the provisions of the Children's Television Act of
1990 ("CTA") and the rules and policies of the FCC pertaining to television
programs directed to children, particularly with respect to the amount and type
of commercial matter broadcast during such programs. Failure to comply with the
children's television commercial limitations can result in the imposition of
sanctions, including substantial monetary fines, on a broadcast television
station or cable system, which could adversely impact the Company.

    Under FCC license renewal "processing guidelines" promulgated under the CTA,
broadcast television stations are required to broadcast at least three hours per
week, averaged over a six-month period, of programming that furthers the
educational and informational needs of children 16 and under ("Core
Programming"). Core Programming has been defined as educational and
informational programming that, among other things, (i) has serving the
educational and informational needs of children "as a significant purpose," (ii)
has a specified educational and informational objective and a specified target
child audience, (iii) is regularly scheduled, weekly programming, (iv) is at
least 30 minutes in length and (v) airs between 7:00 a.m. and 10:00 p.m. Any
station that satisfies the processing guideline will receive FCC staff-level
approval of the portion of its license renewal application pertaining to the
CTA. Alternatively, a station may qualify for staff-level approval even if it
broadcasts "somewhat less" than three hours per week of Core Programming by
demonstrating that it has aired a weekly package of different types of
educational and informational programming that is "at least equivalent" to three
hours of Core Programming. At the present time, the Company makes at least three
hours per week of Core Programming to the Fox Kids Network Affiliates available,
thereby enabling them to fulfill their obligations under the CTA.

    The 1996 Act took effect in February 1996, altering the network of federal,
state, and local laws and regulations pertaining to telecommunications providers
and services. To the extent the 1996 Act fosters greater competition for the
provision of multichannel video services to individual subscribers, the Company
should generally be impacted either neutrally or advantageously, as additional
providers are additional potential customers for the Company. The FCC is in the
process of promulgating rules interpreting and implementing the provisions of
the 1996 Act. At this time, it is impossible to state with precision the full
impact the 1996 Act will have on the Company.

    The 1992 Act subjected all cable television operators not subject to
"effective competition" to rate regulation. Rate regulation under the 1992 Act
resulted in a reduction of rates to some subscribers in some markets. The 1996
Act phased out cable rate regulation on March 31, 1999, except with respect to
the "basic" tier (which must include all local broadcast stations and public,
educational and governmental access channels, and must be provided to all
subscribers). In response to the 1992 Act and the FCC's implementing
regulations, many cable systems retiered channels to create an attractively
priced basic tier, while offering satellite-delivered programming services such
as the Company's on a different service tier or on an a la carte basis. To the
extent such retiering or repricing of the Company's network induced customers to
discontinue their subscriptions, the Company's financial performance might have
been adversely affected. Deregulation of rates pursuant to the 1996 Act may
reverse such tiering and pricing decisions by cable system operators and,
correspondingly, reverse or ameliorate any adverse effects of the 1992 Act. On
the other hand, to the extent that rate deregulation causes a material increase
in cable rates, the individual subscriber base of the Company could be
decreased, potentially affecting the Company's subscriber revenues.

    FCC regulations adopted pursuant to the 1992 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


                                    Page 10
<PAGE>


services in which the cable operator has an attributable interest. As a result
of Liberty Media's ownership interest in News Corp., the Fox Family Channel, the
boyzchannel and the girlzchannel are subject to these requirements. The FCC's
program access and non-discrimination regulations therefore affect the ability
of these programming services to enter into exclusive contracts. The rules also
permit multichannel video programming distributors (such as MMDS, satellite
master antenna televisions ("SMATV"), DBS and DTH 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 an AT&T Cable Service
system with 75 channels or less will not be able to carry one or more of the
Company's cable programming services or will have to remove another affiliated
channel.

    The 1992 Act subjects cable systems to "must carry" rules, pursuant to which
local broadcast stations may elect to demand carriage. It also provides
favorable channel positioning rights for broadcasters electing to exercise their
must carry rights. The 1992 Act also gives television broadcast stations the
right to withhold consent to be carried by a cable system which may result in a
station receiving compensation for carriage.

    The FCC has adopted rules requiring closed captioning of most broadcast and
cable programming on a phased-in basis, beginning in the year 2000. The
broadcast and cable industries have adopted, and the FCC has approved, a
voluntary content ratings system which, when used in conjunction with so-called
"V-Chip" technology, will permit the blocking of programs with a common rating.
The FCC has directed that all television receiver models with picture screens 13
inches or greater be equipped with "V-Chip" technology under a phased
implementation which began July 1, 1999. The Company may be called upon to
provide increased closed captioning to assist in complying with rules
promulgated under the 1996 Act and may be required to provide assistance or
information to establish ratings for its programming. Either of these
undertakings could increase the Company's operating expenses.

ONLINE SERVICES

    The Children's Online Privacy Protection Act ("COPPA") prohibits web sites
from collecting personally identifiable information from children under age 13
without prior parental consent. The Federal Trade Commission is expected to
adopt final rules implementing COPPA by late 1999. Online services provided by
the Company may be subject to COPPA requirements. Congress may also consider
online privacy legislation that would apply to personal information collected
from teens and adults.

    Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that may affect, directly or indirectly, the operation, ownership and
profitability of the Company's business. These proposed changes include, for
example, expansion of program access requirements and potential must-carry
rights for digital television broadcast signals (which could limit multi video
program distributions ("MVPDs"') channel capacity available for the Company's
programming). The Company is unable to predict the outcome of future federal
legislation or the impact of any such laws or regulations on its operations.

  STATE AND LOCAL REGULATION

    Cable television systems are generally constructed and operated under
non-exclusive franchises granted by a municipality or other state or local
governmental entity. Franchises are granted for fixed terms and are subject to
periodic renewal. The 1984 Act places certain limitations on a local franchising
authority's ("LFA") ability to control the operations of a cable operator, and
the courts from time to time have reviewed the constitutionality of several
franchise requirements, often with inconsistent results. The 1992 Act prohibits
exclusive franchises, and allows LFAs to exercise greater control over the
operation of franchised cable television systems, especially in the areas of
customer service and rate regulation. The 1992 Act also allows LFAs to operate
their own multichannel video distribution systems without having to obtain
franchises. Moreover, LFAs are immunized from monetary damage awards arising
from their regulation of cable television systems or their decisions on
franchise grants, renewals, transfers, and amendments.


                                    Page 11
<PAGE>


    The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Cable franchises generally contain provisions governing time
limitations on the commencement and completion of construction, and governing
conditions of service, including the number of channels, the types of
programming (but not the actual cable programming channels to be carried), and
the provision of free service to schools and certain other public institutions.
The specific terms and conditions of a franchise and the laws and regulations
under which it is granted directly affect the profitability of the cable
television system, and thus the cable television system's financial ability to
carry programming. Local governmental authorities also may certify to regulate
basic cable rates, and continue to exercise rate regulation authority over the
basic tier despite that regulation of other tiers has been eliminated. Local
rate regulation for a particular system could result in resistance on the part
of the cable operator to pay the amount of subscriber fees charged by the
Company for its programming.

    Various proposals have been introduced at the state and local level with
regard to the regulation of cable television systems, and a number of states
have enacted legislation subjecting cable television systems to the jurisdiction
of centralized state governmental agencies.

  INTERNATIONAL

    The Company is also subject to local content and quota requirements in
international markets which, although a significant portion of the Company's
library meets such current requirements in Europe, effectively limit access to
particular markets.

INTELLECTUAL PROPERTY

    The Company generally holds copyrights to its owned programming in its
library. Additionally, the Company holds registered trademarks on the various
characters and series contained in its owned programming. The Company also holds
significant rights as licensee of other productions, programming, characters and
series, most of which are subject to copyrights and trademarks owned by the
respective licensors of such properties. The Company considers its owned and
licensed copyrights and trademarks to be of significant value and importance to
the Company's business. Accordingly, the Company's policy is to vigorously
enforce copyrights and trademarks with respect to owned and licensed programming
against unlawful infringement by third parties.

EMPLOYEES

    As of June 30, 1999, the Company had 862 full-time and 3 part-time employees
in the United States. Outside the United States, the Company had 239 full-time
and 7 part-time employees. The Company also regularly engages freelance creative
staff and other independent contractors on a project-by-project basis. The
Company believes its relations with its employees are good.


                                    Page 12
<PAGE>


ITEM 2. PROPERTIES

     The Company currently leases a total of approximately 218,000 square feet
of office and production space in its headquarters building in Los Angeles,
California under a lease expiring in April 2006, subject to two separate
five-year extension options. The Company also leases a multi-purpose production
facility in Valencia, California under a lease that expires in January 2000. The
Company's Paris operations currently lease 18,430 square feet of office and
production space under a lease expiring February 28, 2008; this lease may be
cancelled by the Company with six months prior notice on February 28, 2003 or
February 28, 2006. The Company also leases approximately 14,500 square feet of
office space for its European headquarters in London, England under a lease
expiring September 30, 2007. This lease may be cancelled after the fifth year
with nine months advance notice. In connection with the IFE Acquisition, the
Company acquired IFE's executive and administrative offices, a sales office and
an affiliate relations office in Virginia Beach, Virginia. The Company also
leases office facilities in other locations throughout the world, none of which
are considered material. The Company believes that its current office and
production space, together with space readily available without material cost in
the markets in which it operates, are adequate to meet its needs for the
foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

    The Company currently and from time to time is engaged in litigation in the
ordinary course of its business. The Company is not currently a party to any
lawsuit or proceeding which, in the opinion of management, if decided adversely
to the Company, would be likely to have a material adverse effect on the
Company's financial position and results of operations.

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

    Not Applicable.


                                    Page 13
<PAGE>


                                   PART II

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

    Not Applicable.


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The selected consolidated financial data of the Company set forth below as
of June 30, 1998 and 1999 and for the fiscal years ended June 30, 1998 and 1999
are derived from the Company's consolidated financial statements audited by
Arthur Andersen LLP, independent public accountants, included elsewhere in this
Report. The selected financial data of the Company set forth below for the eight
months ended June 30, 1996 and the fiscal year ended June 30, 1997 are derived
from the Company's combined financial statements audited by Ernst & Young LLP,
independent auditors.

    The selected financial data of Saban set forth below as of May 31, 1995 and
as of October 31, 1995 and for the year ended May 31, 1995 and for the five
months ended October 31, 1995 are derived from Saban's consolidated financial
statements audited by Ernst & Young LLP, independent auditors.

    The selected financial data of FCN Holding set forth below as of July 2,
1995 and as of October 31, 1995 and for the year ended July 2, 1995 and for the
four months ended October 31, 1995 are derived from FCN Holding's consolidated
financial statements audited by Ernst & Young LLP, independent auditors.

    The financial statements of the Company for the year ended June 30, 1997 are
not comparable to the eight month period ended June 30, 1996 due to the
different lengths of the time periods compared and because neither period
includes the operations of IFE. In addition, the financial statements of the
Company as of and for the year ended June 30, 1998 (which includes the results
of operations of IFE from August 1, 1997) are not comparable to the year ended
June 30, 1997 as the prior period did not include the operations of IFE and the
financial statements of the Company as of and for the year ended June 30, 1999
are not comparable to the year ended June 30, 1998 as the prior period included
only eleven months of the operations of IFE.


                                    Page 14
<PAGE>


    The selected financial data presented below and under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" should
be read in conjunction with the consolidated and combined financial statements,
including the notes thereto, appearing elsewhere in this Report.

<TABLE>
THE COMPANY

<CAPTION>
                                                    EIGHT MONTHS                       YEAR ENDED
                                                   ENDED JUNE 30,     YEAR ENDED        JUNE 30,        YEAR ENDED
                                                        1996         JUNE 30, 1997       1998(1)      JUNE 30, 1999
                                                     (COMBINED)       (COMBINED)     (CONSOLIDATED)   (CONSOLIDATED)
                                                  ---------------- ---------------  ---------------- ---------------
                                                                          (IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA:
<S>                                                 <C>               <C>            <C>               <C>
Revenues                                            $   191,621       $  307,820     $   664,458       $  635,273
Costs and expenses:
     Production and programming....................     107,790          186,575         356,664          315,504
     Selling, general and administrative...........      22,562           61,263         141,394          159,973
     Depreciation..................................         510            1,203           9,370           10,083
     Amortization of intangible assets.............          --               --          37,557           40,434
                                                    ------------     ------------    ------------      -----------
                                                        130,862          249,041         544,985          525,994

Operating income...................................      60,759           58,779         119,473          109,279
Investment advisory fee............................      10,000               --             --                --
Equity in loss of unconsolidated affiliate.........          --            1,546           6,790            5,088
Other expense (income), net........................          --               --               8             (506)
Interest expense, net..............................         885            2,226         134,002          169,107
                                                    ------------     ------------    ------------      -----------
Income (loss) before provision for income taxes....      49,874           55,007         (21,327)         (64,410)
Provision for income taxes.........................      18,274           14,567           3,446            1,989
                                                    ------------     ------------    ------------      -----------
Net income
(loss)............................................. $    31,600      $    40,440     $   (24,773)      $  (66,399)
                                                    ============     ============    ============      ===========

OTHER DATA:
Ratio of earnings to fixed charges.................        22:1             11:1              --               --
Deficiency of earnings  available to cover fixed
     charges.......................................          --               --     $   (26,656)      $  (68,848)


                                                                                   JUNE 30,
                                                                   -----------------------------------------
                                                                          1998                  1999
                                                                   -------------------   -------------------
                                                                                (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents.....................................       $    82,313           $    46,858
Programming costs, less accumulated amortization..............           453,608               538,219
Total assets..................................................         2,516,024             2,471,874
Long-term obligations (including current maturities)..........         1,749,464             1,840,288
Mandatorily redeemable preferred stock........................           345,000               345,000
Stockholders' equity (deficit)................................            30,396               (67,743)

</TABLE>

                                    Page 15
<PAGE>


<TABLE>
                            SABAN ENTERTAINMENT, INC.

<CAPTION>
                                                                           FIVE MONTHS
                                                                              ENDED
                                                          YEAR ENDED       OCTOBER 31,
                                                         MAY 31, 1995         1995
                                                       ----------------- ----------------
                                                                (IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA:
<S>                                                      <C>              <C>
Revenues(2)........................................      $ 242,468        $ 105,130
Costs and expenses:
     Production and programming....................        117,557           42,022
     Selling, general and administrative...........         51,894           11,538
                                                         ---------        ---------
Operating income...................................         73,017           51,570
Interest expense...................................          1,315              539
                                                         ---------        ---------
Income before provision for income taxes                    71,702           51,031
Provision for income taxes.........................         27,027           14,289
                                                         ---------        ---------
Net income.........................................      $  44,675        $  36,742
                                                         =========        =========

                                                           MAY 31,         OCTOBER 31,
                                                            1995              1995
                                                       ----------------  ----------------
                                                                (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents.............................    $ 14,584         $ 16,207
Programming costs, less accumulated amortization......     115,873          118,210
Total assets..........................................     218,197          207,479
Long-term obligations (including current maturities)..       5,623            5,605
Stockholders' equity..................................      58,112           94,971
</TABLE>


                                    Page 16
<PAGE>



<TABLE>
                                FCN HOLDING, INC.

<CAPTION>
                                                                             FOUR MONTHS
                                                                                ENDED
                                                           YEAR ENDED        OCTOBER 31,
                                                          JULY 2, 1995          1995
                                                        ----------------    -------------
                                                                  (IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA:
<S>                                                             <C>               <C>
Revenues (2).........................................       $ 168,871           $ 46,286
Costs and expenses:
     Production and programming......................         109,259             29,698
     Fees and costs to a related party...............          24,713              7,313
     Selling, general and administrative.............           5,202              2,566
     Fox Kids Network affiliate participations.......          11,523              6,883
                                                            ---------           --------
Operating income (loss)(3)...........................          18,174               (174)
Interest expense.....................................           1,630                145
                                                            ---------           --------
Income (loss) before provision for income taxes......          16,544               (319)
Provision for income taxes...........................              --                 --
                                                            ---------           --------
Net income (loss)....................................       $  16,544           $   (319)
                                                            =========           ========

                                                            JULY 2,          OCTOBER 31,
                                                             1995               1995
                                                        ---------------     -------------
                                                                  (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............................       $      --           $    317
Programming costs, less accumulated amortization.....          26,143             27,085
Total assets.........................................          49,816             52,807
Long-term obligations (including current maturities).          10,686              8,727
Stockholders' deficit................................          (3,811)            (4,130)


                   NOTES TO SELECTED HISTORICAL FINANCIAL DATA
--------------

<FN>
(1)  Includes the results of operations of IFE from the date of the acquisition
     of a majority interest (August 1, 1997) through June 30, 1998.

(2) Includes revenues recognized by Saban from FCN and by FCN from Saban as set
forth below:
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                               FISCAL YEAR              FIVE MONTHS ENDED         FOUR MONTHS ENDED
                                                   1995                 OCTOBER 31, 1995          OCTOBER 31, 1995
                                         -------------------------    ----------------------    ----------------------
                                                                        (IN THOUSANDS)
<S>                                              <C>                         <C>
Saban revenues from FCN                          $ 16,228                    $ 9,651                     n/a
FCN revenues from Saban                          $ 14,662                      n/a                      $ 973

<FN>
(3)   Under agreements between FCN and Fox Broadcasting, for periods prior to
      June 1, 1995, FCN paid administrative and other fees to Fox Broadcasting.
      Effective June 1, 1995, Fox Broadcasting assigned to the Company its
      rights to such payments accrued thereafter. Amounts expensed under these
      agreements were $26.9 million and $9.1 million, for the year ended June
      30, 1995 and the four months ended October 31, 1995, respectively.
</FN>
</TABLE>


                                    Page 17
<PAGE>


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

INTRODUCTION

    The Company's current principal operations are conducted through IFE, FCN,
Saban and the Fox Kids International Networks. IFE operates the Fox Family
Channel, one of the top ten most widely distributed cable television networks in
the United States, reaching approximately 95% of all cable and satellite
television households. FCN commenced operations with the launch, in September
1990, of the Fox Kids Network, which is currently one of the top-rated
children's-oriented broadcast television networks in the United States. Saban,
which commenced business in 1983, is currently one of the largest suppliers of
children's television programming in the world. The Fox Kids International
Networks have approximately 22 million subscribers and operate in approximately
39 countries and in 13 languages worldwide.

    FCN Holding, Inc. ("FCN Holding"), which indirectly owns FCN, and Saban
entered into a strategic alliance, which included the formation of Fox Kids
Worldwide, LLC ("the LLC") pursuant to agreements entered into on November 1,
1995 (the "Effective Date"). Under the terms of the agreements relating to the
strategic alliance, between November 1, 1995 and August 1, 1997 (the date of the
Reorganization described below), each of Saban and FCN was operated by its
respective management subject to the overall supervision of a governing
committee comprised of an equal number of representatives of each of FCN and
Saban. As a result of the formation of the joint venture and the common
management of the joint venture business, the respective assets, liabilities and
operations of Saban, FCN Holding and the LLC have been combined at historical
cost from and after November 1, 1995.

     Fox Family Worldwide, Inc. was incorporated in August 1996 under Delaware
law as a holding company of 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 a controlling interest in
IFE, (i) Fox Broadcasting Sub, Inc., a wholly owned indirect subsidiary of Fox
Broadcasting ("Fox Broadcasting Sub"), exchanged its capital stock in FCN
Holding, which indirectly owns 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 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 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 10.42%. The payment of principal and interest under the Fox Subordinated
Note are subordinated in right to the obligations of the Company and its
subsidiaries under the Second Amended and Restated Credit Agreement dated as of
October 28, 1997 between certain subsidiaries of the Company and certain banks
(as amended, supplemented or otherwise modified from time to time, the "Amended
Credit Facility") and the indentures relating to the Company's 9 1/4% Senior
Notes and 10 1/4% Senior Discount Notes (collectively, the "Company Notes"),
each dated as of October 28, 1997 between the Company and the Bank of New York,
as Trustee (collectively, the "Indentures").

    The Company acquired a controlling interest in IFE on August 1, 1997 and
completed the IFE Acquisition on September 4, 1997. The IFE Acquisition was
accounted for using the purchase accounting method, and, consequently, the
historical financial statements included herein do not reflect the results of
operations of IFE prior to the date the Company first acquired a controlling
interest in IFE. Following the IFE Acquisition, the Company decided that certain
IFE assets unrelated to The Family Channel were not strategic to the Company.
The Company has sold, licensed or otherwise discontinued use of the majority of
these non-strategic assets which generated $72.8 million in revenues and $116.5
million in operating expenses in the twelve month period ended June 30, 1997.
The operations of such businesses have been excluded from operating results.


                                    Page 18
<PAGE>


    The financial statements of the Company as of and for the year ended June
30, 1998 (which includes the results of operations of IFE from August 1, 1997)
are not comparable to the year ended June 30, 1997 as the prior period did not
include the operations of IFE. In addition, the financial statements as of and
for the year ended June 30, 1999 are not comparable to the year ended June 30,
1998 as the prior period includes only eleven months of activity for IFE. The
Company has made significant changes to the programming of the Family Channel.
For example, each week the Fox Family Channel now broadcasts programming from 7
a.m. to 6 p.m. targeted principally to children; at the time of its acquisition
by the Company, The Family Channel did not carry any material amounts of
programming targeted to this audience. Because of these changes, results of
operations of IFE in prior periods may not be comparable to results of
operations for future periods.

    The following discussion provides information and analysis with respect to
the results of operations reflected in the financial statements included in this
Report, as well as the liquidity and capital resources of the Company. This
discussion should be read in conjunction with the financial statements and
related notes and Item 6, "Selected Consolidated Financial Data" included
elsewhere in this Report.

SIGNIFICANT ACCOUNTING FACTORS

  USE OF ESTIMATES

    As is industry practice, management has made a number of estimates and
assumptions relating to the amortization of programming costs and the reporting
of assets and liabilities in the preparation of the financial statements
discussed herein. Actual results could differ materially from these 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 the
periodic adjustments in such amortization.

  REVENUE RECOGNITION AND SEASONALITY

    Revenues from television programming lease agreements are recognized when
the lease period begins, collectibility is reasonably assured and the product is
available pursuant to the terms of the lease agreement. Advertising revenue is
recognized as earned in the period in which the advertising commercials are
broadcast. For this reason, significant fluctuations in the Company's revenues
and net income can occur from period to period depending upon the availability
dates of programs and advertising revenues. For example, in the United States,
revenues from advertising are normally significantly higher in the fourth
calendar quarter. During the fiscal year ended June 30, 1999, 29%, 28%, 20% and
23% of the Company's consolidated revenues were recognized in the first, second,
third and fourth fiscal quarters, respectively, of that year.

  INCREASED INTERNATIONAL FOCUS

    In recent years, revenues derived from international operations have become
increasingly significant to the Company, representing 25% of the Company's
consolidated revenues for the fiscal year ended June 30, 1999, as compared to
21% for the fiscal year ended June 30, 1998. As part of its business strategy,
the Company intends to expand its international program production and
distribution activities. Certain of these activities, such as the rollout of new
international channels, may require material marketing and other expenses in
advance of the receipt of related revenues, thereby adversely affecting the
Company's results of operations as these activities are expanded and the
international markets are developed.


                                     Page 19
<PAGE>


RESULTS OF OPERATIONS

THE COMPANY

  The following tables set forth, for the periods indicated, certain data with
respect to revenues, and costs and expenses of the Company as a percentage of
total revenue.

<TABLE>
                                                                            YEARS ENDED JUNE 30,
                                                              -------------------------------------------------
                                                                 1997              1998               1999
                                                              ------------    ----------------    -------------
                                                                              (IN THOUSANDS)
Revenues:
<S>                                                            <C>                <C>               <C>
     Broadcasting....................................            $ 144,356           $ 423,060        $ 429,610
     Production and distribution.....................              163,297             240,538          204,321
     Other...........................................                  167                 860            1,342
                                                                ------------       -------------    -------------
          Total revenues.............................              307,820             664,458          635,273
Costs and expenses:
     Production and programming......................              186,575             356,664          315,504
     Selling, general and administrative.............               61,263             141,394          159,973
     Depreciation....................................                1,203               9,370           10,083
     Amortization of intangibles.....................                 --                37,557           40,434
                                                                ------------       -------------    -------------
                                                                   249,041             544,985          525,994

Operating income.....................................               58,779             119,473          109,279
Other expenses:
     Equity in loss of unconsolidated affiliate......                1,546               6,790            5,088
     Other expense (income), net.....................                --                      8             (506)
     Interest expense, net...........................                2,226             134,002          169,107
                                                                ------------       -------------    -------------

Income (loss) before provision for income taxes......               55,007             (21,327)         (64,410)
Provision for income taxes...........................               14,567               3,446            1,989
                                                                ------------       -------------    -------------
Net income (loss)....................................            $  40,440           $ (24,773)       $ (66,399)
                                                                ============       ============     =============
</TABLE>


<TABLE>
              COSTS AND EXPENSES AS A PERCENTAGE OF TOTAL REVENUES

<CAPTION>
                                                                            YEARS ENDED JUNE 30,
                                                              -------------------------------------------------
                                                                 1997               1998              1999
                                                              ------------      -------------     -------------
                                                                               (IN THOUSANDS)
Costs and expenses:
<S>                                                               <C>                <C>               <C>
     Production and programming......................             60.6%              53.7%             49.7%
     Selling, general and administrative.............             19.9               21.3              25.2
     Depreciation....................................              0.4                1.4               1.6
     Amortization of intangibles.....................              --                 5.6               6.3
                                                              ------------      -------------     -------------
            Total costs and expenses.................             80.9               82.0              82.8
Operating income ....................................             19.1%              18.0%             17.2%
</TABLE>


                                     Page 20
<PAGE>


  YEAR ENDED JUNE 30, 1999 COMPARED WITH THE YEAR ENDED JUNE 30, 1998

    Revenues for the year ended June 30, 1999 were $635.3 million as compared to
$664.5 million for the year ended June 30, 1998, a decrease of 4.4%. On a pro
forma basis, giving effect to the IFE acquisition as if it had occurred on July
1, 1997, revenues decreased $53.7 million or 7.8%. The actual revenue decrease
of $29.2 million results primarily from lower direct-to-video revenue of $26.4
million and lower domestic revenues associated with the production and
distribution segment of the Company. The market for direct-to-video features is
highly competitive, primarily due to an oversupply of product in the
marketplace. These decreases were offset, in part, by two factors. Revenues for
the Company's broadcast segment increased as a result of subscriber revenue
growth for the Fox Family Channel (the Company acquired a controlling interest
in IFE on August 1, 1997, and only eleven months of activity were included for
the Fox Family Channel for the twelve-month period ended June 30, 1998) while
the international cable channels posted higher revenues as a result of increased
penetration in the marketplace and the launch of additional channels. The
channels currently are broadcast in approximately 39 countries as compared to
only approximately 28 countries in the prior year. These increases were
partially offset by lower domestic cable and network ad sale revenues due to
lower overall ratings as compared to the prior year.

    On August 15, 1998, The Family Channel was reformatted as the Fox Family
Channel to the cable households of America with new programming and a new
schedule, which included children's programming, followed by evening and
late-night programming for the entire family. The Company utilizes its library
product along with other third party acquired and original programming during
the daytime children's block. Prime time programming, on the other hand,
consists principally of original series, specials, and movies produced for or
licensed by the Fox Family Channel. The process of reformatting a channel is
challenging and will take time to accomplish. The industry response to the
reformatting has generally been positive. The Company has not lost any cable or
direct broadcast system subscribers as a result of the reformatting and the
distribution of the Fox Family Channel has increased by over 3 million homes
since the reformatting. Since the August 15, 1998 reformat, overall ratings
compared to last year are lower. However, the Company has introduced various
programming changes which have had a positive impact on ratings and have
improved important demographics. The Company continues to pursue its long-term
objective of attracting a broader audience with improved advertiser
demographics.

    Production and programming costs for the year ended June 30, 1999 decreased
11.5% to $315.5 million as compared to $356.7 million for the prior year.
Production and programming costs as a percentage of total revenues decreased to
49.7% for the year ended June 30, 1999 from 53.7% for the prior year. The
decreases in production and programming costs are attributable to a number of
factors in the Company's production and distribution segment, including the
decrease in direct-to-video distribution revenues described above, which have
high amortization rates, and lower amortization expense associated with
Company's distribution of domestic syndicated product. In addition, production
and programming costs associated with the Company's broadcast segment also
decreased principally as a result of lower production and programming expense
for the Fox Kids Network, including an approximately $15.9 million one-time
reduction in expense related to the Company's new affiliation agreement.

    Selling, general and administrative expenses for the year ended June 30,
1999 increased $18.6 million or 13.1% as compared to the prior year. As a
percentage of total revenues, selling, general and administrative expenses
increased to 25.2% in the current year from 21.3% in the prior year. This
increase is due to a number of factors in the Company's broadcast segment
including one additional month of activity of IFE and various costs ($11.6
million) incurred with the reformatting of the Fox Family Channel and higher
international channel expenses ($5.9 million) as a result of the growth
described above.

    Depreciation expense for the year ended June 30, 1999 increased $0.7 million
or 7.6% as compared to the year ended June 30, 1998. As a percentage of total
revenues, depreciation expense increased to 1.6% in the current year from 1.4%
in the prior year. The increase is due to depreciation on property and equipment
additions.

    Amortization of intangible assets results from the acquisition of IFE in
August 1997. Twelve months of amortization was taken for the year ended June 30,
1999 as compared to only eleven months in the prior year.


                                     Page 21
<PAGE>


    The equity in loss of unconsolidated affiliate represents the Company's
portion of the loss generated by TV10 BV, a cable network based in The
Netherlands. The Company acquired its initial interest in TV10 BV in March 1997.
Effective August 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 interest in TV10 BV to a U.S. limited liability company ("TV10
LLC") in exchange for a 50% equity interest in the TV10 LLC. The other 50%
equity interest is owned by a subsidiary of News Corp.

    Interest expense increased by $35.1 million for the year ended June 30, 1999
as compared to the year ended June 30, 1998. The increase is due to increased
interest expense on the Company's subordinated debt and imputed interest on
long-term Fox Family Channel film contracts partially offset by lower interest
rates on the bank facility.

    The Company's provision for income taxes for the twelve months ended June
30, 1999 reflects foreign withholding taxes and state income taxes related to
normal recurring business activity. The decrease from the prior year is largely
due to U.S. federal and state income taxes related to IFE for the period before
IFE became part of the Company's U.S. consolidated tax return.


  YEAR ENDED JUNE 30, 1998 COMPARED WITH THE YEAR ENDED JUNE 30, 1997

    Revenues for the year ended June 30, 1998 were $664.5 million as compared to
$307.8 million for the year ended June 30, 1997, an increase of 115.9%. This
increase is primarily due to higher revenues as a result of the inclusion of
eleven months activity of IFE, a controlling interest in which was acquired on
August 1, 1997. As a result of this acquisition, broadcasting revenues increased
$277.0 million and production and distribution revenues increased $44.6 million
for the year ended June 30, 1998. In addition, production and distribution
revenues increased due to the home video releases of "Casper: A New Beginning"
and "Turbo: A Power Ranger Movie" which contributed $61.7 million in revenues
for the year ended June 30, 1998. There were no comparable video releases in the
prior year. In addition, syndication and other revenues for this same business
segment increased for the year ended June 30, 1998 offsetting the $20.0 million
recognized in the prior year in connection with the settlement and termination
of an output agreement with Warner Bros. Home Video. Total POWER RANGERS revenue
across all business segments (including "Turbo: A Power Rangers Movie") was
$50.5 million for the year ended June 30, 1998 as compared to $70.8 million for
the year ended June 30, 1997. As a result of the acquisition of IFE, the Company
expects that POWER RANGERS will represent a smaller percentage of the Company's
total revenue in the future.

    Production and programming costs increased $170.1 million or 91.2% for the
year ended June 30, 1998 as compared to the prior year. This increase is
attributable to the inclusion of eleven months of activity for IFE, which
accounted for $107.8 million ($78.9 attributed to broadcasting while $28.9 is
attributed to production and distribution) of the increase, and the
significantly higher amortization expense associated with the two home video
releases described above. Production and programming expenses as a percentage of
total revenues decreased to 53.7% for the year ended June 30, 1998 from 60.6%
for the year ended June 30, 1997. This decrease is principally due to the
inclusion of IFE which has lower production and programming costs as a
percentage of revenues than the Company has historically experienced. The
Company expects this trend to continue.

    Selling, general and administrative expenses for the year ended June 30,
1998 increased $80.1 million or 130.8% as compared to the year ended June 30,
1997. As a percentage of total revenues, selling, general and administrative
expenses increased to 21.3% for the year ended June 30, 1998 from 19.9% in the
prior year. This increase is primarily due to the inclusion of eleven months of
broadcast activity of IFE ($68.2 million) and higher expenses associated with
the Company's international channels ($5.4 million).

  In July 1998, the financial arrangements between the Fox Kids Network and the
Fox Kids Network Affiliates were changed. The new agreement provides that all of
the Fox Kids Network Affiliates will receive from the Company beginning July 1,
1998 an aggregate amount of approximately $15.0 million per year for five years
in


                                     Page 22
<PAGE>


exchange for (i) guaranteed clearance of Fox Kids programming in its current
time period for ten years, (ii) relinquishment of any participation in the
current or future profits of the Fox Kids Network, and (iii) additional
allocation of promotional advertising spots for the next three and one-half
years. All current Fox Kids Network affiliates operate under this agreement.

    Depreciation expense for the year ended June 30, 1998 increased $8.2 million
or 678.9% as compared to the year ended June 30, 1997. As a percentage of total
revenues, depreciation expense increased to 1.4% in the current year from 0.4%
in the prior year. This increase is primarily due to the inclusion of eleven
months of broadcast activity of IFE.

    Amortization of intangible assets results from the acquisition of a
controlling interest in IFE in August 1997. Eleven months of amortization was
taken for the year ended June 30, 1998.

    The equity in loss of unconsolidated affiliate represents the portion of the
loss generated by TV10 BV, a cable network based in The Netherlands. The Company
acquired its initial interest in TV10 BV in March 1997.

    Interest expense increased by $131.8 million for the year ended June 30,
1998 as compared to the year ended June 30, 1997. The increase is due to
interest on the debt incurred in connection with the acquisition of IFE.

    The Company's provision for income taxes for the year ended June 30, 1998
reflects foreign withholding taxes and U.S. federal and state income taxes
related to IFE for the period before IFE became part of the Company's U.S.
consolidated income tax return. The effective tax rate, excluding the
amortization of intangible assets, is 21.1% as compared to 26.5% for the twelve
months ended June 30, 1997. The decrease from the prior year is largely due to
interest expense on the acquisition debt incurred by certain domestic
subsidiaries of the Company.

USE OF EBITDA

    While many in the financial community consider earnings before interest
expense, taxes, depreciation and amortization of intangible assets ("EBITDA") to
be an important measure of comparative operating performance, it should be
considered in addition to, but not as a substitute for or superior to, operating
income, net income (loss), cash flow and other measures of financial performance
prepared in accordance with generally accepted accounting principles. EBITDA
does not reflect cash available to fund cash requirements, and the items
excluded from EBITDA, such as depreciation and non-film amortization, are
significant components in assessing the Company's financial performance. Other
significant uses of cash flows are required before cash will be available to the
Company, including debt service, taxes and expenditures for production,
distribution and broadcast assets. EBITDA eliminates the uneven effect across
business segments of depreciation and amortization primarily resulting from the
value of intangible assets acquired in business combinations accounted for by
the purchase method of accounting, including the Company's August 1997
acquisition of IFE. The Company's calculation of EBITDA may be different from
the calculation used by other companies and, therefore, comparability may be
limited.


                                     Page 23
<PAGE>


    The following table sets forth EBITDA for the years ended June 30, 1997,
1998 and 1999:

<TABLE>
<CAPTION>
                                                 YEARS ENDED JUNE 30,
                                        ---------------------------------------
                                          1997           1998          1999
                                        ----------     ----------     --------
                                                    (IN THOUSANDS)
 Revenues:
<S>                                    <C>            <C>            <C>
     Broadcasting....................  $  144,356     $  423,060     $429,610
     Production and distribution.....     163,297        240,538      204,321
     Other...........................         167            860        1,342
                                       -----------    -----------    ---------
          Total revenues.............     307,820        664,458      635,273
                                       -----------    -----------    ---------
 EBITDA:
     Broadcasting....................       5,297        117,825      112,921
     Production and distribution.....      59,445         57,737       54,314
     Other...........................      (6,306)       (15,960)     (12,021)
                                        ----------     ----------     --------
                                           58,436        159,602      155,214
                                       -----------    -----------    ---------
Other Expenses
     Interest expense................       2,226        134,002      169,107
     Depreciation....................       1,203          9,370       10,083
     Amortization of intangibles.....          --         37,557       40,434
                                       -----------    -----------    ---------
                                            3,429        180,929      219,624
                                       -----------    -----------    ---------
 Income (loss) before  provision for
 income taxes........................      55,007        (21,327)     (64,410)
 Provision for income taxes..........      14,567          3,446        1,989
                                       -----------    -----------    ---------
 Net income (loss)...................  $   40,440     $  (24,773)    $(66,399)
                                       ===========    ===========    =========
</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

    In September 1997, the Company completed the IFE Acquisition. The total
consideration for the IFE Acquisition was approximately $1.9 billion, including
assumption of debt, and was financed by (i) the borrowing of $1.25 billion under
a credit facility (the "Old Credit Facility"), (ii) the issuance of
approximately $345 million of Series A Preferred Stock to Liberty IFE, Inc.
("Liberty IFE") and (iii) the issuance of a note to News America Incorporated in
the amount of $345.5 million (the "NAHI Bridge Note"). In October 1997, the
Company completed an offering (the "Offering") of the Company Notes, generating
net proceeds to the Company of approximately $830 million. Of the net proceeds
from the Offering, $215 million was used to repay a portion of the NAHI Bridge
Note and the balance of $615 million was used to repay indebtedness under the
Company's Old Credit Facility. Approximately $119 million (including accreted
interest) was outstanding under the NAHI Bridge Note at June 30, 1999; however,
no payments are due under the NAHI Bridge Note until March 2008.

    In October 1997, as part of the Offering, the Company amended the Old Credit
Facility to the Amended Credit Facility which includes a $710 million facility,
comprised of a seven-year amortizing term loan and a seven-year reducing
revolving credit facility. The Amended Credit Facility is scheduled to terminate
September 29, 2004. Borrowings under the Amended Credit Facility bear interest
at the Company's option at a rate per annum equal to either LIBOR plus a 1.5%
interest rate margin or a base rate plus a .5% interest rate margin. As of June
30, 1999, $50 million was available under the Amended Credit Facility for
additional borrowings.

    In June 1999, a subsidiary of the Company entered into a subscription
agreement with Fox Broadcasting pursuant to the terms of which Fox Broadcasting
paid the subsidiary $100 million in exchange for subscription rights for the
non-voting Class B Common Stock of the subsidiary. The stock will be issued to
Fox Broadcasting (subject to certain conditions) in connection with an initial
public offering of the subsidiary's common stock, a private sale of shares of
the capital stock of the subsidiary to an unaffiliated third party, and
subsequent public offerings of the subsidiary's common stock or any subsequent
private sale, until all of the shares of stock subscribed


                                     Page 24
<PAGE>


for have been issued. Fox Broadcasting may hold the subscription rights
indefinitely, exchange the subscription rights for a deeply subordinated note
from the Company or exchange the subscription rights for new equity of the
Company at such time as the Company issues a new class of common stock or
preferred stock. In addition, in June 1999 the Company issued a deeply
subordinated note in the principal amount of $25 million to Fox Broadcasting.
The net proceeds from these two transactions were used to repay a portion of the
Amended Credit Facility.

    As a result of the IFE Acquisition and the financing transactions described
above, the Company's principal liquidity requirements arise from interest
payments. The Company further anticipates certain seasonal working capital needs
related to the development, production and acquisition of programming, the
financing of accounts receivable and other related operating costs. The Company
on a regular basis has had, and intends to continue to engage in, exploratory
discussions concerning programming and other acquisition opportunities, and any
such acquisition could result in additional capital requirements. Commencing
July 1, 1998 the Company will be obligated to pay to the affiliates an aggregate
of approximately $15.0 million per year for five years in exchange for (i)
guaranteed clearance of Fox Kids programming in its current time period for ten
years, (ii) relinquishment of any participation in the current or future profits
of the Fox Kids Network, and (iii) additional allocation of promotional spots
for the next three and one-half years.

    Net cash provided by operating activities of the Company for the year ended
June 30, 1999 was $331.6 million as compared to $315.8 million for the year
ended June 30, 1998, reflecting a full year of IFE activity as compared to
eleven months in the prior year.

    Net cash used in investing activities of the Company during the years ended
June 30, 1998 and 1999 was $1.63 billion and $360.1 million, respectively. The
majority of the investing activity for the year ended June 30, 1998 was related
to the IFE Acquisition as described above, additions to production and
programming costs, and purchases of property and equipment. The investing
activities for the year ended June 30, 1999 primarily consisted of additions to
production and programming costs and purchases of property and equipment.

    Net cash provided by (used in) financing activities of the Company during
the years ended June 30, 1998 and 1999 was $1.36 billion and ($7.0 million),
respectively. The financing activities for the year ended June 30, 1998
consisted primarily of bank and other borrowings in connection with the IFE
Acquisition, while the activities for the year ended June 30, 1999 consisted
primarily of proceeds from bank and other borrowings offset by dividends related
to the Company's Series A Manditorily Redeemable Preferred Stock and bank loan
paydowns.

    The Company's total unrestricted cash balances at June 30, 1999 were $46.9
million.

    The Company believes that the $50 million of available borrowings under the
Amended Credit Facility, together with cash flow from operations and cash on
hand and funding from the Company's stockholders, will be sufficient to fund its
operations and service its debt for the foreseeable future.

NEW ACCOUNTING PRONOUNCEMENT

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which is effective for all quarters of
fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.

    The Company has currently reviewed this statement and will apply such
provisions as it deems appropriate.

IMPACT OF YEAR 2000

    The Year 2000 issue is the result of computer programs being written using
two digits instead of four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software or facilities or equipment
containing embedded micro-controllers may recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing potential disruptions of operations,


                                     Page 25
<PAGE>


including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.

    The Company began its Year 2000 project in June 1998. In November 1998, the
Company engaged the services of a consulting firm to review all phases completed
to date, to assist the Company with testing and to help the Company build its
contingency plan.

    With the assistance of the consultants, the Company completed its assessment
of the significant software applications and equipment used in the Company's
operations. The Company then substantially completed the modification or
replacement of its software and hardware so that the areas of information
technology and non-information technology will function properly with respect to
dates in the year 2000 and thereafter. The vast majority of this hardware and
software was tested and changes were implemented prior to June 1999. Based upon
its efforts to date, the Company believes that all mission critical hardware and
software has been vendor verified and tested as Year 2000 compliant. The small
percentage of items which remain to be fixed are identified as non-critical and
are on schedule to be completed by the end of the year.

     The Company is in the process of contacting its key vendors and customers
to determine if there are any significant Year 2000 exposures which would have a
material effect on the Company. The financial impact on the Company of such
third parties not achieving high levels of Year 2000 readiness cannot be
estimated with any degree of accuracy. In the area of business continuity,
technological operations dependent in some way on one or more third parties, the
situation is much less in the Company's ability to predict or control. In
addition, many of the Company's businesses are dependent on third parties that
are themselves heavily dependent on technology. In some cases, third party
dependence is on vendors of technology who are themselves working towards
solutions to Year 2000 problems. In other cases, third party dependence is on
suppliers of products or services that are themselves computer-intensive. The
Company has included in its "mission critical" inventory significant service
providers, vendors, suppliers and customers that are believed to be critical to
business operations. The Company is in various stages of attempting to ascertain
the state of Year 2000 readiness of significant third parties. The Company is
taking steps to attempt to ensure that the third parties on which it is heavily
reliant are Year 2000 ready, but cannot predict the likelihood of such
compliance nor the direct or indirect costs of non-readiness by those third
parties or of securing such services from alternate third parties.

     Through June 30, 1999, the Company has incurred approximately $400,000 in
costs related to its Year 2000 readiness program which has been funded from its
operating cash flow. The Company currently estimates that the total costs of its
Year 2000 readiness program will not exceed $750,000. The total cost estimate is
based on the current assessment of the Company's Year 2000 readiness needs and
is subject to change as the program progresses. These costs have not all been
incremental, but rather reflect redeployment of internal resources from other
activities. The Company does not expect the activities of the Year 2000
readiness program to have a material adverse effect on the ongoing business
operations of the Company, although it is possible that certain maintenance and
upgrading processes will be delayed as the result of the priority being given to
Year 2000 readiness.

    Based upon its efforts to date, the Company continues to believe that the
vast majority of its systems will be able to process date-related data without
error after January 1, 2000. Accordingly, the Company does not currently
anticipate that internal systems failures will result in any material adverse
effect to its operations or financial condition. At this time, the Company
continues to believe that the most likely "worst-case" scenario involves
potential disruptions in areas in which the Company's operations must rely on
third parties whose systems may not work properly after January 1, 2000. While
such failures could affect important operations of the Company and its
subsidiaries, either directly or indirectly, in a significant manner, the
Company cannot, at present, estimate either the likelihood or the potential cost
of such failures.

    Readers are cautioned that forward-looking statements contained in this Year
2000 disclosure should be read in conjunction with the Company's disclosures
under the heading "Factors That Could Impact Future Results" in this Form 10-K.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions


                                     Page 26
<PAGE>


of future events, including the continued availability of certain resources,
third-party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved, or that there will not be a
delay in, or increased costs associated with, the implementation of the
Company's Year 2000 compliance project. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, timely responses to and corrections by third parties
and suppliers, the ability to implement interfaces between the new systems and
the systems not being replaced, and similar uncertainties. Due to the general
uncertainty inherent in the Year 2000 readiness of third parties and the
interconnection of national and international businesses, the Company cannot
ensure that its ability to timely and cost effectively resolve problems
associated with the Year 2000 issue will not affect its operations and business,
or expose it to third party liability.

FACTORS THAT COULD IMPACT FUTURE RESULTS

SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS

    As of June 30, 1999, the Company's total amount of consolidated debt
(including amounts payable to related parties) outstanding was approximately
$1.84 billion, or 86.9% of total capitalization. The Company is a holding
company and its ability to obtain funds from its subsidiaries and affiliates
could be limited.

    The degree to which the Company is leveraged could have important
consequences, including, but not limited to, the following: (i) the Company's
ability to obtain financing in the future for working capital, capital
expenditures or general corporate purposes may be impaired; (ii) a substantial
portion of cash flows from the operation of the Company's subsidiaries will be
dedicated to the payment of the principal of and interest on its debt and will
not be available for other purposes; and (iii) certain of the Company's
borrowings are at variable rates of interest, which could result in higher
interest expense in the event of increases in interest rates. Further, the
Company's Amended Credit Facility and the Indentures contain certain restrictive
financial and operating covenants which affect, and in many respects
significantly limit or prohibit, among other things, the ability of the Company
to incur indebtedness, make prepayments of certain indebtedness, pay dividends,
make investments, engage in transactions with affiliates, create liens, sell
assets and engage in mergers and consolidations. These covenants may
significantly limit the operating and financial flexibility of the Company and
may limit its ability to respond to changes in its business or competitive
activities. The failure by the Company to comply with such covenants could
result in an event of default under the applicable instrument, which could
permit acceleration of the debt under the instrument and in some cases
acceleration of debt under other instruments containing cross-default or
cross-acceleration provisions.

     The Company's ability to make scheduled payments of principal or to pay
interest on or to refinance its debt depends on its future financial
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control. Although management believes that cash from operations, together with
available borrowings pursuant to the Company's Amended Credit Facility, will be
adequate to meet the Company's anticipated future requirements for working
capital, capital expenditures and scheduled payments of interest on its debt for
the foreseeable future, this is a forward-looking statement and there can be no
assurance that the Company's business will generate sufficient cash flow from
operations or that future working capital borrowings will be available in an
amount sufficient to enable the Company to service its debt or to make necessary
capital expenditures or other expenditures. Furthermore, there can be no
assurance that the Company will be able to raise additional capital for any
required refinancing in the future. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

RISKS ASSOCIATED WITH HOLDING COMPANY STRUCTURE

    The Company is a holding company and its assets consist solely of
investments in its subsidiaries. As a holding company, the Company's ability to
meet its financial obligations and its funding and other commitments to its
subsidiaries is dependent upon the earnings of the subsidiaries and the
distribution or other payment of such earnings to the Company in the form of
dividend distributions, loans or other advances, payment or reimbursement


                                     Page 27
<PAGE>


for management fees and expenses and repayment of loans and advances from the
Company. Accordingly, the Company's ability to pay interest on its debt and
otherwise to meet its liquidity requirements may be limited as a result of its
dependence upon the distribution of earnings and advances of funds by its
subsidiaries. The payment of dividends or the making of loans or advances to the
Company by its subsidiaries may be subject to statutory, regulatory or
contractual restrictions, are contingent upon the earnings of those subsidiaries
and are subject to various business considerations. Certain of the Company's
subsidiaries may in the future be subject to loan or other agreements
prohibiting or limiting the transfer of funds to the Company, or requiring that
any indebtedness of such subsidiaries or affiliates to the Company be
subordinate to the indebtedness under such agreements.

ACQUISITION OF IFE

     LIMITED CABLE TELEVISION OPERATIONS HISTORY. The IFE Acquisition expanded
the Company's operations into the cable television business, a business in which
it had never before operated. The cable television business is highly
competitive, subject to government regulation and at risk to technological
change. As of August 27, 1999, cable television reached 78.8% of the United
States' television households ("TVHH") compared to 98% for broadcast television
and 8.5% for DTH satellite television. Cable television reaches approximately
30.6 million of U.S. children between the ages of 2-11. In the cable television
market, the Company is subject to competition from other cable television
companies which, in many instances, have greater production, distribution and
capital resources than the cable television operations of the Company.

    PROGRAMMING CHANGES AT THE FAMILY CHANNEL. The Company reformatted The
Family Channel as the Fox Family Channel in August 1998. There is no guarantee
that the reformatted channel will retain its existing viewers or attract new
viewers. If the ratings of the Fox Family Channel fail to meet the Company's
expectations, the Company could be materially adversely affected. The household
rating for the Fox Family Channel has dropped 34% since the reformatting,
although in the important adults 18-49 demographic the rating decrease has been
only 18%. In the children's 2-11 demographic, ratings have increased 100% from
the prior year. The Company has experienced improved ratings over the past few
months due to programming changes and increased viewership of its original
movies. The Company acquired IFE with the expectation that the acquisition would
result in synergies for the combined business. These include the potential to
realize a greater return on its children's programming library through
distribution on the Fox Family Channel and operational synergies through the
sale of "packaged advertising," cross-promotional opportunities with the Fox
Kids Network, consolidation of duplicative functions and the elimination of
excess overhead. Achieving these anticipated business benefits will depend in
part on whether the operations of IFE can be integrated with the operations of
the Company in an efficient, effective and timely manner and the success of the
programming changes. In addition, the integration of operations of IFE into the
Company has required the dedication of management resources, which may affect
management's attention regarding the day-to-day business of the Company. The
inability of management to integrate successfully the operations of the
companies could have a material adverse effect on the business, results of
operations and financial condition of the Company.

COMPETITION AMONG INTERNATIONAL CHANNELS

    The Company is spending considerable resources on the development of
international DTH and cable children's channels. The launch of channels
throughout the world is particularly capital intensive. In many markets a number
of the Company's competitors already have well established children's channels.
Not only does the Company have to negotiate to obtain channel capacity (which is
limited in many markets), but the Company must also acquire additional
programming or adapt existing programming so that it appeals to local viewers.

POSSIBLE  DECLINE  IN  POPULARITY  OF  CURRENT  PROGRAMS  AND  UNCERTAINTY  OF
ACCEPTANCE OF NEW PROGRAMS

    A significant portion of the Company's revenues are derived from the
creation, development, production, acquisition, international distribution,
merchandising and other exploitation of children's television properties. For
the fiscal year ended June 30, 1999, revenues from these sources represented
approximately 44% of the Company's consolidated revenues. As a result of
reformatting The Family Channel as the Fox Family Channel to emphasize


                                     Page 28
<PAGE>


children's programming during the day, it is anticipated that future
revenues from children's programming as a percentage of total revenues will
increase. The success of any series depends upon unpredictable and volatile
factors beyond the Company's control, such as children's preferences, competing
programming and the availability of other entertainment activities for children.
A shift in children's interests could cause the Company's current television
programming to decline in popularity, which could materially and adversely
affect the Company's results of operations and financial condition. The ability
of the Company to continue successfully to exploit the merchandising
opportunities afforded by its programs will also be dependent on the favorable
ratings of the programs and the ability of the Company's characters to continue
to provide attractive merchandising opportunities for its licensees. There can
be no assurance as to the continuing commercial success of any of the Company's
currently distributed properties, or that the Company will be successful in
generating sufficient demand and market acceptance for its new properties.

DECLINE IN RATINGS OF FOX KIDS NETWORK

    Ratings for the Fox Kids Network among children ages 2-11 decreased 12% from
the 1995-1996 broadcast season to the 1996-1997 broadcast season, 21% from the
1996-1997 broadcast season to the 1997-1998 broadcast season and, based on
figures available to date for the 1998-1999 season, ratings have decreased 15%
from the 1997-1998 season to the 1998-1999 season. The Company believes that
part of the decline is due to the fact that children have many entertainment
options, which are likely to continue, including more hours of children's
programming on cable, new video games, computers and home videos. Material
declines in the ratings of the Fox Kids Network could materially and adversely
affect the Company's results of operations and financial condition.

POSSIBILITY OF NON-RENEWAL OF AFFILIATION  AGREEMENTS BY FOX TELEVISION MEMBER
STATIONS

    Over 93% of the affiliation agreements with Fox Broadcasting's member
stations ("FOX Television Member Stations") require the affiliates also to carry
the Fox Kids Network. Fox Broadcasting currently expects to continue to be able
to renew its affiliation agreements with the FOX Television Member Stations as
they mature. A FOX Television Member Station may choose not to renew its
affiliation agreement with Fox Broadcasting and at the same time discontinue
carriage of the Fox Kids Network. If a FOX Television Member Station decides not
to renew its status as such, it is less likely that it would continue to carry
Fox Kids Network programming. If the Company fails to renew its affiliation
agreements, there could be a material and adverse effect on the results of
operations and financial condition of the Company.

POSSIBLE  REDUCTION IN  DISTRIBUTION  OR NON-RENEWAL OF THE FOX FAMILY CHANNEL
BY CABLE OPERATORS

    The Company distributes the Fox Family Channel to cable operators pursuant
to affiliation agreements whereby the cable operator agrees to provide carriage
for a specified per subscriber fee. Currently, the Fox Family Channel has
affiliation agreements covering approximately 13,700 affiliates. Pursuant to
these agreements, the Fox Family Channel has approximately 75 million viewers
out of a potential audience reach of approximately 79 million households at
August 27, 1999. Under these agreements, cable operators and other distributors
may discontinue carriage of the Fox Family Channel or move the Fox Family
Channel to a more narrowly distributed level of service or tier. Such
discontinuance or movement, if it involved a significant number of subscribers,
could limit the Fox Family Channel's ability to generate national advertising
revenues, as these depend on broad distribution, particularly by cable
operators. Subsequent to the debut of the new programming on the Fox Family
Channel, no cable operators have discontinued carriage of the Fox Family Channel
service. The Company currently expects to continue to be able to renew its
affiliation agreements as they mature or to maintain its carriage on an
"expanded basic," the most widely distributed level of service. However, there
can be no assurance that these affiliation agreements will be renewed or that
they will be renewed on the same or more favorable terms.


                                     Page 29
<PAGE>


DEPENDENCE UPON KEY PERSONNEL

    The Company's success depends to a significant extent upon the expertise and
services of certain key executives, including Haim Saban, the Company's Chairman
and Chief Executive Officer and the founder of Saban. The Company has entered
into employment agreements with Mr. Saban and certain of its other key
executives. The Company does not maintain "key person" life insurance policies
on any of its executives. The loss of the services of Mr. Saban or any of the
key personnel could have a material adverse effect on the results of operations
and financial condition of the Company.

COMPETITION

    The businesses in which the Company engages are highly competitive. Each of
the Company's primary business operations is subject to competition from
companies which, in some instances, have greater production, distribution and
capital resources than the Company.

    PROGRAMMING. The Company competes on the basis of relationships and pricing
for access to a limited supply of facilities and creative personnel to produce
its programs. The Company competes with major motion picture studios, such as
Warner Bros. and The Walt Disney Company, and animation production companies,
including Hanna Barbera, Film Roman and Klasky Cuspo, for the services of
writers, producers, animators, actors and other creative personnel and
specialized production facilities.

    DISTRIBUTION OUTLETS. In the United States, the Company competes for
ratings and related advertising revenues. The Company currently competes through
its Fox Kids Network and the Fox Family Channel, with the other broadcast
television networks, public television and cable television channels, such as
USA Cable Network, TNT, The Cartoon Network and Nickelodeon, for market
acceptance of its programming, viewership ratings and related advertising
revenues. To the extent that the Company produces original programming for
distribution outlets it does not own, it competes with other producers of
children's programming. Internationally, the Company contends with a large
number of U.S.-based and international distributors of children's programming,
including The Walt Disney Company, Warner Bros. and Nickelodeon in the
development or acquisition of programming expected to appeal to international
audiences. Such programming often must comply with foreign broadcast rules and
regulations which may stipulate certain local content requirements.

    DIGITAL CHANNELS. When the Company launches its digital cable networks in
Fiscal 2000, the Company will compete in a rapidly developing area of the
entertainment industry against companies that may have greater financial
resources and technical expertise in the area.

    INTERNET. As the Company expands its websites and internet business, the
Company will compete with companies with substantially greater internet
presence, financial, technical, marketing and other services. More generally,
the Company competes with various other leisure-time activities such as home
videos, movie theaters, personal computers and other alternative sources of
entertainment and information.

OVERESTIMATION OF REVENUES OR UNDERESTIMATION OF COSTS

    The Company follows Financial Accounting Standards Board Statement No. 53,
"Financial Reporting by Producers and Distributors of Motion Picture Films,"
regarding revenue recognition and amortization of production costs for programs
and films in which the Company owns or controls all applicable rights. All costs
incurred in connection with an individual program or film, including
acquisition, development, production and allocable production overhead costs and
interest, are capitalized as television and film costs. These costs are stated
at the lower of unamortized cost or estimated net realizable value. Estimated
total production costs for an individual program or film are amortized in the
proportion that revenue realized relates to management's estimate of the total
revenues expected to be received from such program or film. For programs in
which the Company acquires only network or basic cable broadcast rights, the
Company amortizes such program costs over the estimated number of broadcasts in
accordance with Financial Accounting Standards Board Statement No. 63,
"Financial Reporting by Broadcasters." If revenue or cost estimates change with
respect to a program or film, the Company may be required to write down all or a
portion of the unamortized costs for such program or film. No assurance can be


                                     Page 30
<PAGE>


given that such write-downs, if they occur, will not have a material adverse
effect on the Company's results of operations or financial condition.

SEASONALITY

    All of the Company's television programming revenues are recognized either
when the program is available for broadcast or when advertising spots are
broadcast during a program. For this reason, significant fluctuations in the
Company's total revenues and net income can occur from period to period
depending upon availability dates of programs and advertising revenues. In the
United States, for example, revenues from advertising are concentrated in the
fourth calendar quarter of each year. Due, in part, to these seasonality
factors, the results of any one quarter are not necessarily indicative of
results for future periods, and cash flows may not correlate with revenue
recognition.

DEPENDENCE UPON SATELLITE TRANSPONDERS

    Distribution of the Fox Family Channel depends upon the operation of
satellites by third parties. Since August 15, 1998, the Company has been
transmitting all programming for the Fox Family Channel from the FOX Television
Broadcast Center in Los Angeles, California. Satellites are subject to
significant risks that may prevent or impair proper commercial operations,
including satellite defects, launch failure, destruction and damage and
incorrect orbital placement. Currently, there are a limited number of domestic
communications satellites available for the transmission of cable television
programming to cable system operators. If satellite transmission is interrupted
or terminated due to the failure or unavailability of a transponder, the
termination or interruption could have a material adverse effect on the Company.
The availability of additional transponders in the future is dependent on a
number of factors over which the Company has no control. These factors include
the future authorization of additional domestic satellites, future competition
among prospective users for available transponder space, the uncertain status of
the United States' Space Shuttle Program (including priority allocations of
future shuttle cargo space to military rather than commercial payloads) and the
uncertain availability of satellite launching by private entities in the United
States and by private or governmental entities in other countries.

INTERNATIONAL SALES

    For the fiscal year ended June 30, 1999, the Company derived approximately
25% of its consolidated revenues from international operations. As part of its
business strategy, the Company intends to expand its international program
production and distribution activities, as well as its worldwide merchandising,
licensing and ancillary activities, including the launch of children's channels
on DTH satellite and cable platforms throughout the world. The Company is
subject to the special risks inherent in international business activities,
including (i) general economic, social and political conditions in each country,
(ii) currency fluctuations, (iii) double taxation, (iv) unexpected changes in
applicable regulatory requirements and (v) compliance with a variety of
international laws and regulations. The operations of the Company's
international entities are measured in part in local currencies. For reporting
purposes, assets and liabilities are translated into U.S. dollars using exchange
rates in effect at the end of each reporting period. Revenues and expenses are
translated into U.S. dollars at the average exchange rates prevailing during the
period. As a result, the Company can expect to record foreign exchange losses
and gains in the future.

POTENTIAL ADVERSE IMPACT OF REGULATION

    The United States Congress and the FCC currently have under consideration,
and may in the future consider and adopt, new laws, regulations and policies
regarding a wide variety of matters that may affect, directly or indirectly, the
operation, ownership and profitability of the Company's business. These proposed
changes include, for example, expansion of program access requirements and
potential must-carry rights for digital television broadcast stations (which
could limit the capacity of multi-channel video programming distributors
available for the Company's programming). It is impossible to predict the
outcome of federal legislation or administrative action currently under
consideration or the potential effect thereof on the Company's business. In
addition, certain aspects of the Company's cable operations are subject,
directly or indirectly, to regulation at the state and/or local level.


                                      Page 31
<PAGE>


State and/or local authorities could adopt laws or regulations in this area that
could further restrict the operations of the Company.

POTENTIAL FOR DEADLOCKS

    The holders of the Class B Common Stock of the Company have agreed, so long
as neither Fox Broadcasting nor Haim Saban and the other former stockholders of
Saban as a group have disposed of more than one-third of their respective
initial Class B Common Stock beneficial holdings, to vote their shares together
on all matters presented to the stockholders, and if they cannot agree as to how
to vote on a matter, to abstain from voting with respect thereto. There is no
mechanism for breaking a deadlock among the holders of Class B Common Stock.
With respect to the election of directors, the holders of the Class B Common
Stock have agreed to vote their shares for three directors selected by Haim
Saban and three directors selected by Fox Broadcasting. Because the charter
documents provide that no Board action may be taken without a vote of at least
three-quarters of the directors, the possibility exists that, as a result of
differences which may in the future arise between Fox Broadcasting and Mr.
Saban, the Company may experience difficulties in defining and meeting its
business objectives, or in effecting a transaction which would be in the best
interests of the Company, which could materially adversely affect the results of
operations and financial condition of the Company.

STRATEGIC RELATIONSHIPS WITH NEWS CORP. AND FOX

    The Company has had, and continues to have, a close strategic relationship
with News Corp. and its affiliated entities, including Fox Broadcasting, and
believes that this relationship is materially important to its business and
business strategies. However, except as may be provided in the agreements
between them which are discussed elsewhere in this Form 10-K, neither News Corp.
or its affiliated companies nor the Company are obligated to engage in any
business transactions or jointly participate in any opportunities with the
other, and the possibility exists that the current strategic relationships
between the parties could materially change in the future.

TRANSACTIONS WITH STOCKHOLDERS AND THEIR AFFILIATES

    The Company has in the past entered into transactions and agreements, some
of which are ongoing, with Haim Saban and with Fox Broadcasting and News Corp.
and their affiliated companies. In addition, the Company may in the future enter
into additional agreements and other transactions with certain of these
affiliates. Although the Company has adopted a policy that future transactions
between the Company and any of these affiliates or family members must be
approved by a majority of the Board of Directors of the Company, there can be no
assurance that any such future transactions will prove to be favorable to the
Company. In addition, the Indentures provide, with certain exceptions, that the
Company may not enter into any transactions with affiliates except on terms that
are no less favorable to the Company than the Company would obtain in a
comparable arm's-length transaction.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company's primary market risks include fluctuations in interest rates,
variability in interest rate spread relationships (i.e., prime to LIBOR spreads)
and exchange rate variability. The Company manages these market risks by using
derivative financial instruments in accordance with established policies and
procedures. The Company does not use derivative financial instruments for
trading purposes.


                                      Page 32
<PAGE>


    The following table provides information about the Company's interest rate
swaps at June 30, 1999.

<TABLE>
<CAPTION>
                                             AMOUNTS
                                          SCHEDULED FOR
                                           MATURITY FOR      ESTIMATED FAIR
                                         THE YEAR ENDING        VALUE AT
                                          JUNE 30, 2000       JUNE 30, 1999
                                         ---------------    ----------------
                                                   (IN THOUSANDS)
<S>                                      <C>                 <C>
Interest rate swap Variable to fixed:
   Notional value.............                $  25,000            $   (384)
   Average pay rate...........                    5.875%
   Average  receive rate......                    5.000%

</TABLE>


    When the Company licenses its programming outside the United States, the
majority of transactions are denominated in U.S. dollars. Channel subscription
fees are denominated in local currencies. For those transactions denominated in
foreign currencies, to the extent possible, sales and purchases in specific
currencies are offset against each other. The foreign currencies in which the
Company has the most significant exchange rate exposure are the British pound,
French franc, German mark and Canadian dollar. To manage these exposures, the
Company periodically initiates hedging activities by entering into currency
exchange agreements, consisting primarily of currency forward contracts, to
minimize cost variations which could result from fluctuations in currency
exchange rates. The currency exchange agreements which provide hedge coverage
typically mature within one year of origination, consistent with the underlying
purchase or sales commitment.

    The following table provides information about the Company's sensitivity to
foreign currency exchange contracts into which the Company enters. The contracts
generally mature within one year. The Company currently intends to continue to
enter into such contracts to hedge against future material foreign currency
exchange rate risks.

<TABLE>
<CAPTION>

                                             AMOUNTS
                                          SCHEDULED FOR
                                           MATURITY FOR      ESTIMATED FAIR
                                         THE YEAR ENDING        VALUE AT
                                          JUNE 30, 2000       JUNE 30, 1999
                                         ---------------    ----------------
                                                  (IN THOUSANDS)
<S>                                     <C>                 <C>
$US Functional Currency
Forward exchange agreements
  (receive CAD/pay $US).......
    Contract amount (CAD$)....                 $   1,650           $     (2)
    Average contractual
    exchange rate.............                   0.68058

</TABLE>

    The Company maintains a mix of fixed and floating debt to mitigate its
exposure to interest rate fluctuations.

    The Company's management believes that fluctuations in interest rates and
currency exchange rates in the near term would not materially affect the
Company's consolidated operating results, financial position or cash flows as
the Company has limited risks related to interest rate and currency exchange
rate fluctuations.


ITEM 8.   CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The Index to Financial Statements, Reports of Independent Public
Accountants, Financial Statements and Notes to the Financial Statements appear
in a separate section of this Form 10-K (beginning on page F-1) following Part
IV.

                                      Page 33

<PAGE>

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

    None.


                                       Page 34

<PAGE>


                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

    The directors and executive officers of the Company, and their ages at June
30, 1999, are as follows:

<TABLE>
<CAPTION>

             NAME             AGE                   POSITION
             ----             ---                   --------
    <S>                       <C>   <C>

    Haim Saban................ 54   Chairman of the Board and Chief  Executive
                                    Officer of the Company

    Mel Woods................. 47   President,  Chief Operating Officer, Chief
                                    Financial  Officer  and  Director  of  the
                                    Company

    Shuki Levy................ 53   Executive  Vice  President and Director of
                                    the Company

    Donna Cunningham.......... 38   Executive  Vice  President,  Business  and
                                    Legal  Affairs  and  General  Counsel of
                                    the Company

    Mark Ittner............... 47   Senior  Vice   President  of  Finance  and
                                    Chief Accounting Officer of the Company

    K. Rupert Murdoch......... 68   Director

    Chase Carey............... 45   Director

    Lawrence Jacobson......... 40   Director

</TABLE>

    HAIM SABAN, the founder of Saban, has served as the Chairman of the Board
and Chief Executive Officer of the Company since its inception in August 1996,
and Chairman and Chief Executive Officer of Saban since the establishment of
Saban in 1983. Mr. Saban is a creator and executive producer of the Company's
live-action series, POWER RANGERS.

    MEL WOODS has served as President, Chief Operating Officer, Chief Financial
Officer and a director of the Company since its inception in August 1996. Mr.
Woods has also been the President and Chief Operating Officer and a director of
Saban since 1991. From 1987 to 1991, Mr. Woods served as Senior Vice President
and Chief Financial Officer of DIC Enterprises, an animation production company.
Prior to joining DIC, Mr. Woods was Senior Vice President, Chief Financial
Officer and Treasurer of Orion Pictures Corp. and served as a member of its
board of directors. Mr. Woods is a member of the board of directors of On Stage
Entertainment, Inc., a producer of live entertainment shows.

    SHUKI LEVY became the Executive Vice President and a director of the Company
in 1996 and is responsible for productions. Mr. Levy has served as an
independent contractor performing production related assignments for Saban since
1983. Mr. Levy is executive producer of the Company's live-action series, POWER
RANGERS, and also has served as executive producer for BIG BAD BEETLEBORGS and
MASKED RIDER.

    DONNA CUNNINGHAM became the Executive Vice President of the Company in June
of 1998 and is responsible for overseeing the business and legal affairs of the
Company. From March 1996 to December 1996, Ms. Cunningham served as Vice
President, Business and Legal Affairs for the Fox Kids Network, and from
December 1996 to June 1998, she served as Senior Vice President of Business and
Legal Affairs for Fox Kids Worldwide, overseeing all business and legal affairs
for both the Fox Kids Network and the Fox Family Channel. From September 1995
through March 1996, Ms. Cunningham was Vice President of Business and Legal
Affairs for Hanna-Barbera, Inc., a full service animation production and
distribution company. From March 1991 through

                                     Page 35

<PAGE>


September 1995, she served as Director, Vice President and Consultant of
Business and Legal Affairs for animation production company DIC Entertainment,
Inc. (formerly known as DIC Animation City, Inc.).

    MARK ITTNER has served as Senior Vice President of Finance and Chief
Accounting Officer of the Company since September 1997, and as Senior Vice
President of Finance of Saban since March 1995 and as Vice President of Finance
from February 1993 to March 1995. From 1990 to 1993, Mr. Ittner served as Vice
President and Controller of Imagine Films, a motion picture and television
production company. Prior to joining Imagine Films, Mr. Ittner was the acting
Co-Chief Financial Officer of Weintraub Entertainment Group, after joining
Weintraub as a Vice President and Controller in January 1988. From 1979 to 1984,
Mr. Ittner was first Assistant Controller and then in 1984, Vice President and
Controller, of Hanna-Barbera Productions, Inc. and its parent company, The Taft
Entertainment Company.

    K. RUPERT MURDOCH has served as a director of the Company since August 1996.
Mr. Murdoch is an Executive Director and has been the Chief Executive of News
Corp. since its formation in 1979 and has served as its Chairman since 1991. Mr.
Murdoch has been a director of Fox Entertainment Group since 1985, Chairman
since 1992 and Chief Executive Officer since 1995. Mr. Murdoch has served as a
director of News International plc, News Corp.'s principal operating subsidiary
in the United Kingdom since 1969, a director of News Limited, News Corp.'s
principal operating subsidiary in Australia since 1983, and a director of New
America Incorporated, News Corp's principal operating subsidiary in the United
States, since 1973. Mr. Murdoch has served as director of the Star Television
Group since 1993 and as a director of BSkyB since 1990 and Chairman since 1999.
Mr. Murdoch is also a member of the board of directors of Philip Morris
Companies, Inc.

    CHASE  CAREY has served as a director of the Company  since  August  1996.
Mr.  Carey  is an  Executive  Director  and has been  the  Co-Chief  Operating
Officer of News Corp.  since  October  1996.  Mr. Carey has been a director of
Fox  Entertainment  Group  since 1992 and  Co-Chief  Operating  Officer  since
August  1998.  Mr.  Carey has  served  as the  Chairman  and  Chief  Executive
Officer of FOX  Television  since July 1994. Mr. Carey joined Fox Inc. in 1988
as Executive Vice President,  served as Chief Financial  Officer,  and assumed
the title of Chief  Operating  Officer in February 1992. Mr. Carey is a member
of the  boards  of  directors  of TV Guide,  Inc.,  Gateway  2000 and  Colgate
University.

    LAWRENCE  JACOBSON has served as a director of the Company since  November
1997.  Mr.  Jacobson  was  named  President  of  FOX  Television  Network,  in
September  1997.  Mr.  Jacobson  had  been  Executive  Vice  President  of Fox
Television  since May 1996,  and was named  Executive Vice President and Chief
Financial  Officer of Fox  Broadcasting  Company in July  1994.  Mr.  Jacobson
joined  Fox Inc.  in  December  1990 as Vice  President,  Finance,  and became
Senior Vice President, Finance in July 1992.

  ELECTION OF DIRECTORS; CHANGE IN CONTROL

    Pursuant to the terms of an Amended and Restated Strategic Stockholders
Agreement dated as of August 1, 1997 between, among others, Fox Broadcasting and
Haim Saban and the former Saban Stockholders (the "Amended and Restated
Strategic Stockholders Agreement"), Fox Broadcasting and Mr. Saban have agreed
to vote all of the shares of Class B Common Stock beneficially owned by each of
them to the election of three directors designated by Fox Broadcasting and three
directors designated by Mr. Saban. If in the future the Company becomes subject
to any requirement that the Company's Board of Directors include independent
directors, Fox Broadcasting and Mr. Saban are each to include among their
respective slates of nominees the number of independent directors necessary to
satisfy such requirement. Fox Broadcasting and Mr. Saban will mutually agree on
two independent directors. If they are unable to mutually agree, Fox
Broadcasting will nominate one independent director and Mr. Saban will nominate
the other and they will each vote for both nominees.

    If either Haim Saban or Fox Broadcasting transfers more than one-third of
its initial holdings of Class B Common Stock (Mr. Saban's holdings to include
the shares of the former Saban Stockholders), then Fox Broadcasting or Mr.
Saban, as the case may be, has the right to designate the remaining two-thirds
of the authorized number of directors.

                                     Page 36

<PAGE>

    As part of the voting provisions of the Amended and Restated Strategic
Stockholders Agreement, both Mr. Saban and Fox Broadcasting have agreed to a
standstill whereby neither of them will, without the consent of the other, among
other things, (i) purchase, acquire, offer or agree to purchase or acquire any
shares of capital stock or other voting securities of the Company; (ii) solicit
stockholders for the approval of stockholder proposals; or (iii) otherwise act,
alone or in concert with others, to assert or encourage any other person or
entity in seeking to control the management, board of directors or policies of
the Company or to propose or effect a business combination, restructuring,
recapitalization, liquidation, dissolution or similar transaction.

    Fox Broadcasting's  designees are currently K. Rupert Murdoch, Chase Carey
and Lawrence Jacobson.  Haim Saban, Mel Woods and Shuki Levy are the designees
of Haim Saban.

    Under an agreement among Fox Broadcasting, Haim Saban and the former Saban
Stockholders, Fox Broadcasting has the right and option, commencing in December
2002 or earlier in certain circumstances, to acquire all of the shares of Class
B Common Stock of the Company then held by Mr. Saban and the former Saban
Stockholders, and pursuant to the Amended and Restated Strategic Stockholders
Agreement, Mr. Saban has the right and option, commencing in December 2000, or
earlier in the event of a change in control of Fox Broadcasting or certain
limited circumstances, to cause Fox Broadcasting to purchase all of these
shares. See Item 13, "Certain Relationships and Related Transactions."

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

    Not Applicable.

                                     Page 37

<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

    The following table sets forth the aggregate cash and non-cash compensation
paid or accrued by the Company to the Chief Executive Officer and the other four
most highly compensated executive officers ("Named Executive Officers")
compensated in excess of $100,000 for the fiscal year ended June 30, 1999.
Compensation decisions are currently made by the President and the Chief
Executive Officer.

<TABLE>
<CAPTION>

                          SUMMARY COMPENSATION TABLE

                                                                       OTHER
                                                                       ANNUAL
       NAME AND PRINCIPAL POSITION        ANNUAL COMPENSATION      COMPENSATION
       ---------------------------        -------------------      ------------
                                   YEAR   SALARY      BONUS
                                   ----   ------      -----
<S>                                <C>    <C>         <C>           <C>

Haim Saban ........................1997   $1,000,000  $    --            (1)
  Chairman of the Board and        1998    1,000,000       --            (1)
  Chief Executive Officer          1999    1,000,000       --            (1)

Mel Woods..........................1997   $  452,100  $  650,000         (1)
  President, Chief Operating       1998      476,500   2,528,700(2)      (1)
  Officer and Chief Financial      1999      506,700   2,028,400(2)      (1)
  Officer

Shuki Levy.........................1997   $  500,000  $  700,000         (1)
  Executive Vice President         1998      500,000       --            (1)
                                   1999      500,000       --            (1)

Donna Cunningham...................1997   $  199,300  $   10,000         (1)
 Executive Vice President,         1998      246,200     130,000         (1)
 Business and Legal Affairs        1999      300,000       --            (1)
 and General Counsel

Mark Ittner........................1997   $  198,600  $   10,000         (1)
 Senior Vice President of Finance  1998      222,900      27,500         (1)
 and Chief Accounting Officer      1999      227,200      25,000         (1)

<FN>

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

(1) Less than either $50,000 or 10% of total annual salary and bonus.

(2) See Item 13, "Certain Relationships and Related Transactions--Transactions
    between Haim Saban, other Executive Officers and Saban."

</FN>

</TABLE>


    See Item 13, "Certain Relationships and Related Transactions--Transactions
between Haim Saban, other Executive Officers and Saban" for information with
respect to certain loans, forgiveness of loans and other transactions for the
benefit of certain of the Named Executive Officers.


                                     Page 38

<PAGE>

STOCK OPTIONS

    The following table summarizes information with respect to the number of
shares of Class A Common Stock underlying stock options held by each of the
Named Executive Officers at June 30, 1999, and the value of unexercised options,
assuming a value of $62.50 per share of Class A Common Stock at June 30, 1999.

<TABLE>
<CAPTION>

                   AGGREGATED FISCAL YEAR-END OPTION VALUES

                                                     NUMBER OF                         VALUE OF
                                                     SECURITIES                       UNEXERCISED
                   NAME                              UNDERLYING                      IN-THE-MONEY
                                                    UNEXERCISED                         OPTIONS
                                                 OPTIONS AT FISCAL                   AT FISCAL YEAR
                                                      YEAR END                            END
                                           EXERCISABLE     UNEXERCISABLE      EXERCISABLE    UNEXERCISABLE
                                           -----------     -------------      -----------    -------------
<S>                                        <C>             <C>                <C>            <C>
Haim Saban.................................     --               --                --              --

Mel Woods(1)...............................  161,637             --            $4,601,805          --

Shuki Levy(2)..............................  161,637             --            $8,102,863          --

Mark Ittner................................     --               --                --              --

Donna Cunningham...........................     --               --                --              --

<FN>

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

(1) The value of unexercised in-the-money options at fiscal year end is based on
    the difference between the Company's estimate of $62.50 for the fair market
    value of the Class A Common Stock and the exercise price of $34.02 for the
    options. See "--Employment Agreements".

(2) The value of unexercised in-the-money options at fiscal year end is based on
    the difference between the Company's estimate of $62.50 for the fair market
    value of the Class A Common Stock and the exercise price of $12.37 for the
    options.

</FN>
</TABLE>

    Under the terms of the option agreements, an executive whose employment is
terminated must sell his or her stock options (together with any shares acquired
pursuant to the exercise of such options, the "Option Shares") to the Company
for an amount equal to the fair market value of such Option Shares plus the fair
market value of the shares with respect to which the executive's option has
vested but has not been exercised, less the executive's purchase price. Such
amount is to be paid to the executive 10% in cash and 90% by a promissory note
to be payable in nine equal annual installments.

    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 executive must sell the "applicable percentage" of
his or her Option Shares for the same per share consideration paid by the third
party for the Saban Company Shares. 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.
The Company must purchase such shares for cash consideration equal to the
applicable percentage of the per share consideration paid by the third party for
the Saban Company Shares multiplied by the number of Option Shares with respect
to which such executives' options have vested but have not been exercised, less
the purchase price.

EMPLOYMENT AGREEMENTS

    Haim Saban has an employment agreement with the Company which extends
through June 30, 2002. Pursuant to the terms of the agreement, Mr. Saban is to
be paid an annual salary of $1.0 million. Mr. Saban may not be removed or
replaced with or without cause until he and the other stockholders of the
Company whose shares he controls collectively transfer more than one-third of
the number of shares of Class B Common Stock they currently beneficially own. If
Mr. Saban is terminated following such an event, he will be entitled to receive
an

                                     Page 39

<PAGE>

amount equal to his annual base salary from the date of his termination
through June 30, 2002. Under the agreement, Mr. Saban may engage in certain
activities for his own account, including music, composing and publishing,
investments and charity. The agreement generally provides that Mr. Saban will
not, during the term of his employment and for a period of five years
thereafter, compete with the Company.

    The Company has a new employment agreement with Mel Woods dated April 1,
1999. The term of Mr. Woods' employment agreement with the Company extends
through May 31, 2002. Mr. Woods will receive an annual base salary of $625,000,
$650,000 and $675,000 for each of the 1998-2000, 2000-2001 and 2001-2002
periods, respectively, and an annual contingent bonus which is limited to
$650,000, $675,000 and $700,000 for each of the 1999-2000, 2000-2001 and
2001-2002 periods, respectively. At the option of the Company, the Company may
extend Mr. Woods' term of employment for two years. The Company may terminate
Mr. Woods' employment only for cause or upon his death or disability, and Mr.
Woods may terminate his employment upon the Company's material breach of the
employment agreement. If Mr. Woods' employment is terminated by the Company for
cause, he will be entitled to receive (i) his annual base salary for the period
in which the date of termination falls, pro-rated to the date of such
termination, (ii) his bonus compensation for the period in which the date of the
termination falls, pro-rated to date of termination, and (iii) vested rights
with respect to certain stock options granted in connection with the employment
agreement. All of Mr. Woods' options are vested. Should Mr. Woods terminate his
employment as a result of a material breach by the Company, he will be entitled
to receive (i) his annual base salary for the period in which the date of
termination falls, pro-rated to the date of such termination, (ii) severance pay
for the balance of the term of the employment agreement, (iii) bonus
compensation for the period in which the date of termination falls, pro-rated to
the date of such termination and (iv) vested rights with respect to certain
stock options granted in connection with the employment agreement. If the
Company decides not to renew Mr. Woods' employment at the end of the initial
three-year term, Mr. Woods will be entitled to receive as severance his base
salary for the third term year and his actual bonus. On May 20, 1998, the
Company amended Mr. Woods' original employment agreement and paid Mr. Woods
compensation of $2,000,000 in the form of an advance against amounts to be paid
to Mr. Woods upon termination of his employment. In connection with Mr. Woods'
new employment agreement with the Company, Mr. Woods received a second advance
of $1,500,000 against amounts to be paid to Mr. Woods upon termination of his
employment. These advances do not bear interest and were included in Mr. Woods'
compensation during the fiscal years in which they were made. Further, if Mr.
Woods exercises any stock options to acquire shares of the Company's Class A
Common Stock, Mr. Woods shall concurrently repay the advances through an
increase in the purchase price in connection with the exercise.

     The Company has reached an agreement in principle for a new employment
agreement with Shuki Levy that extends through May 31, 2002. Mr. Levy will
receive an annual salary of $525,000 for the year ending May 31, 2000, $550,000
in the second year of employment, $575,000 for the third and fourth years of
employment and is eligible to receive additional benefits. The Company may
terminate Mr. Levy's employment with cause, and Mr. Levy may terminate his
employment upon the Company's material breach of the employment agreement. If
Mr. Levy's employment with the Company is terminated as a result of the
Company's breach or as a result of the Company's decision not to extend the
agreement beyong the term he will be entitled to receive as severance, $575,000.

    The Company has an employment agreement with Donna Cunningham to serve as
Executive Vice President, Business and Legal Affairs and General Counsel of the
Company. The employment agreement was amended as of July 1, 1999. The term of
the employment agreement extends through June 30, 2001. The Company has one
two-year option to extend the term. Ms. Cunningham is to be paid an annual base
salary of $400,000 for the one year period from July 1, 1999 through June 30,
2000 and a base salary of $425,000 from July 1, 2000 through June 30, 2001. The
employment agreement provides that the Company may terminate Ms. Cunningham's
employment for cause.


                                     Page 40

<PAGE>

    The Company has an employment agreement, as amended, with Mark Ittner to
serve as Senior Vice President of Finance. The term of the employment agreement
extends through March 31, 2002. Mr. Ittner will receive an annual base salary of
$235,000 for the period from April 1, 1999 through March 31, 2000 and $255,000
for the period from April 1, 2000 through March 31, 2001 and $270,000 for the
period April 1, 2001 to March 31, 2002. The employment agreement provides that
the Company may terminate Mr. Ittner's employment for cause.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth certain information as of June 30, 1999 with
respect to the shares of Class A Common Stock and Class B Common Stock
beneficially owned by (i) each director of the Company; (ii) each person known
to the Company to be the beneficial owner of more than 5% of either class of
Common Stock; (iii) each Named Executive Officer; and (iv) all directors and
executive officers of the Company as a group. Except as may be indicated in the
footnotes to the table, each of such persons has sole voting and investment
power with respect to the shares owned, subject to applicable community property
laws. The address of each person listed is in care of the Company, 10960
Wilshire Boulevard, Los Angeles, California 90024.

<TABLE>
<CAPTION>

                                              CLASS A                     CLASS B
                                           COMMON STOCK(1)             COMMON STOCK(1)
                                           --------------              ---------------
                                          NUMBER   PERCENT OF        NUMBER      PERCENT OF
                                            OF       CLASS             OF          CLASS
                                          SHARES     OWNED           SHARES        OWNED
                                         --------  ----------       --------     ----------
    <S>                                  <C>       <C>            <C>           <C>

    Haim Saban(2)(3)................         --        --          15,840,000      100.0%
    SilverlightEnterprises,
    L.P.(2)(3)......................         --        --           2,759,724       17.4
    Fox Broadcasting(2)(3)..........         --        --          15,840,000      100.0
    Allen & Co. Incorporated........     160,000     100.0%                --         --
    Mel Woods(5)....................     161,637      50.3                 --         --
    Shuki Levy(5)...................     161,637      50.3                 --         --
    Donna Cunningham................          --       --                  --         --
    Mark Ittner.....................          --       --                  --         --
    K. Rupert Murdoch(4)............          --       --          15,840,000      100.0
    Chase Carey(4)..................          --       --          15,840,000      100.0
    Lawrence Jacobson...............          --       --                  --         --
    All of the Company's executive
    officers and directors as a
    group (eight persons)...........     323,274      66.9%        15,840,000      100.0%

-------------
<FN>
(1) Under Rule 13d-3 of the Exchange Act, certain shares may be deemed to be
    beneficially owned by more than one person (if, for example, persons share
    the power to vote or the power to dispose of the shares). In addition,
    shares are deemed to be beneficially owned by a person if the person has the
    right to acquire the shares (for example, upon exercise of an option) within
    60 days of the date as of which the information is provided. In computing
    the percentage ownership of any person, the amount of shares outstanding is
    deemed to include the amount of shares beneficially owned by that person
    (and only that person) by reason of these acquisition rights. As a result,
    the percentage of outstanding shares of any person as shown in this table
    does not necessarily reflect the person's actual ownership or voting power
    with respect to the number of shares of Common Stock actually outstanding at
    June 30, 1999.

(2) Pursuant to Rule 13d-3 under the Exchange Act, Haim Saban and Fox
    Broadcasting may be deemed to beneficially own all shares of Class B Common
    Stock held by each of them, and by the other stockholders identified in the
    table, as the result of an agreement (the "Voting Agreement") pursuant to
    which Mr. Saban and Fox Broadcasting have the right to direct the voting of
    such shares with respect to all matters submitted to a vote of stockholders,
    including the election of directors of the Company. With regard to the
    election of directors, Fox Broadcasting has agreed to vote in favor of three
    nominees designated by Haim Saban and Haim Saban has agreed to vote in favor
    of three nominees designated by Fox Broadcasting. If either Haim Saban,
    together with the entities he controls, or Fox Broadcasting owns less than
    2,640,000 shares of Class B Common Stock, then, at the option of the other,
    the Voting Agreement will terminate. As part of the Voting Agreement, both
    Mr. Saban and Fox Broadcasting have agreed to a standstill whereby neither
    of them will, without the consent of the other, among other things,

                                     Page 41

<PAGE>

    (i) purchase, acquire, offer or agree to purchase or acquire any shares of
    capital stock or other voting securities of the Company; (ii) solicit
    stockholders for the approval of stockholder proposals; or (iii) otherwise
    act, alone or in concert with others, to assert or encourage any other
    person or entity in seeking to control the management, board of directors or
    policies of the Company or to propose or effect a business combination,
    restructuring, recapitalization, liquidation, dissolution or similar
    transaction. See "--Election of Directors; Change in Control."

(3) Pursuant to Rule 13d-3 under the Exchange Act, Haim Saban may be deemed to
    beneficially own all shares of Class B Common Stock held by Silverlight
    Enterprises, L.P. as the result of the Voting Agreement pursuant to which
    Mr. Saban has the right to direct the voting of these shares with respect to
    all matters submitted to a vote of the stockholders, including the election
    of directors of the Company.
</FN>
</TABLE>

    Under agreements between Mr. Saban, the other Saban Stockholders and Fox
    Broadcasting, Fox Broadcasting has the right and option, commencing in
    December 2002 or earlier in certain circumstances, to acquire all of the
    shares of Class B Common Stock of the Company held by Mr. Saban and the
    other Saban Stockholders and Mr. Saban has the right and option, commencing
    in December 2000, or earlier in the event of a change in control of Fox
    Broadcasting or certain limited circumstances, to cause Fox Broadcasting to
    purchase all of such shares.

    As of June 30, 1999, the total number of shares of Class B Common Stock and
    the percentage of Class B Common Stock beneficially owned by Mr. Saban, the
    entities which he controls, and Fox Broadcasting over which each had sole
    investment power was as follows:

<TABLE>
<CAPTION>
                                           NUMBER    AGGREGATE
                                             OF        VOTING
                                           SHARES      POWER
                                          ---------  ---------

<S>                                       <C>           <C>
    Haim Saban........................... 3,737,844     23.6%

    Quartz Enterprises, L.P. ............   760,320      4.8

    Merlot Investments, a California
    general partnership..................   645,381      4.1

    Silverlight Enterprises, L.P. ....... 2,759,724     17.4

    Celia Enterprises, L.P. .............    16,731      0.1

    Fox Broadcasting..................... 7,920,000     50.0%


<FN>
(4) Because of their positions with Fox Broadcasting, each of Messrs. Murdoch
    and Carey may be deemed to beneficially own all of the shares of Class B
    Common Stock owned or controlled by Fox Broadcasting. Each of Messrs.
    Murdoch and Carey disclaims any pecuniary interest in such securities.

(5) Represents shares reserved for issuance upon exercise of stock options
    exercisable within 60 days of June 30, 1999.
</FN>
</TABLE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  THE REORGANIZATION

    The Company was incorporated in August 1996 under Delaware law as a holding
company of 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 a controlling interest in IFE, (i)
Fox Broadcasting Sub, a wholly owned indirect subsidiary of Fox Broadcasting,
exchanged its capital stock in FCN Holding, which indirectly owns 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

                                     Page 42

<PAGE>

Saban and 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 the LLC and its $50 million
contingent note receivable from the LLC for the Fox Subordinated Note from the
Company, which accrues interest at the rate of 10.42%. The payment of principal
and interest under the Fox Subordinated Note are subordinated in right to the
obligations of the Company and its subsidiaries under the Amended Credit
Facility and the Indentures.

    On August 29, 1997, in connection with the acquisition of IFE, the Company
issued the NAHI Bridge Note to NAHI upon substantially the same terms and
conditions as the Fox Subordinated Note, except that the NAHI Bridge Note had a
principal amount of $345.5 million. In connection with the Offering, $215
million of the net proceeds was used to repay a portion of the NAHI Bridge Note.
The NAHI 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 NAHI
Bridge Note accretes interest at a rate of approximately 10.427% per annum. The
Company may repay the NAHI 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 NAHI Bridge Note will be subordinated in right to the
obligations of the Company under the Amended Credit Facility and the Indentures.

    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. See Item 10, "Directors and Executive Officers of the
Registrant--Election of Directors; Change in Control."

    As part of the Amended and Restated Strategic Stockholders Agreement, Haim
Saban agreed with Fox Broadcasting Sub as follows: if the Company is unable to
meet its obligations (i) to pay any dividend under the terms of the Series A
Preferred Stock or to redeem the Series A Preferred Stock, (ii) under its lease
of 10960 Wilshire Boulevard, Los Angeles, California, or any obligation
guaranteed by News Corp., or (iii) under 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 million, 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 million may be converted into shares of Class B Common Stock. If Fox
Broadcasting Sub elects to convert any portion of the advance into Class B
Common Stock, Haim Saban will have the right to purchase from Fox Broadcasting
Sub 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 million 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 Sub 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, the LLC was granted an option to
purchase, upon the occurrence of certain events, all of the Class B

                                     Page 43

<PAGE>

Common Stock held by the Saban Stockholders, and any of their transferees. The
LLC paid to the Saban Stockholders an aggregate of $80.1 million for the grant
of the option. In September 1996 the LLC distributed the Stock Ownership
Agreement to FCN Holding, which immediately transferred the agreement to Fox
Broadcasting Sub, a wholly owned subsidiary of Fox Broadcasting. Accordingly,
the option may be exercised by Fox Broadcasting Sub as follows: (i) for a period
of one year following the death of Haim Saban, if he dies prior to December 22,
2012; (ii) on December 22, 2000, upon receipt by Fox Broadcasting of written
notice from Haim Saban of his desire to cause Fox Broadcasting to purchase all
of the shares of Class B Common Stock held by the Saban Stockholders; or (iii)
upon delivery of written notice by Fox Broadcasting at any time on or after
December 22, 2002, or before December 22, 2012. The purchase price formula under
the option is based on the fair market value of the Company. In addition, Haim
Saban has the right and option, commencing in December 2002, or earlier in the
event of a change in control of Fox Broadcasting or certain other limited
circumstances, to cause Fox Broadcasting to purchase all of the Class B Common
Stock held by the Saban Stockholders.

    In connection with the acquisition of IFE, the Company issued to Liberty
IFE, Inc. $345 million of Series A Preferred Stock which receives cash dividends
of 9% per annum, in arrears, paid quarterly. Any accrued and unpaid dividends
are added to the liquidation price and until such accrued and unpaid dividends
are paid in full, the dividend rate increases to 11.5%. The Series A Preferred
Stock will be redeemed by the Company in 2027 at a price equal to the
liquidation price as of the date of redemption, payable in cash. Holders of the
Series A Preferred Stock can require the Company to redeem the Series A
Preferred Stock in years 2017 and 2022 and the Company has an option to
repurchase the Series A Preferred Stock at any time following August 1, 2007.

    Pursuant to a Funding Agreement among News Corp., News Publishing Australia
Limited ("NPAL") and the Company (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, Inc.,
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.

    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 million in exchange for subscription rights (the "Subscription Rights") for
shares of FKEH's non-voting Class B Common Stock (the "Stock"). The Stock will
be issued to Fox Broadcasting (subject to certain conditions) in connection with
an initial public offering of common stock, a private sale of shares of the
capital stock of FKEH to an unaffiliated third party, and subsequent public
offerings of FKEH's common stock or any subsequent private sale (each an
"Event"), until all the shares of stock subscribed for have been issued. In the
event that an Event does not occur, FKEH's Stock will not be issued to Fox
Broadcasting; however, Fox Broadcasting may hold the Subscription Rights
indefinitely. Fox Broadcasting does not have any claim on FKEH or its assets
other than in an Event as provided specifically in the Subscription Agreement.
In addition, in June 1999, Fox Broadcasting entered into an exchange agreement
with the Company, pursuant to which Fox Broadcasting has the right but not the
obligation to require the Company to acquire all or any portion of its
Subscription Rights in exchange for new equity in the Company at such time as
the Company issues a new class of equity, or a deeply subordinated note with an
interest rate of 20% per annum to be issued by the Company.

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

  CERTAIN TRANSACTIONS BETWEEN THE COMPANY AND THE FOX PARTIES

    The Company, on the one hand, and News Corp. and the Fox Parties, on the
other hand, are engaged in a broad range of transactions in the ordinary course
of business, including agreements with Fox Video to produce and/or distribute

                                     Page 44

<PAGE>


live action feature films and other family and children's programming for the
home video market, both domestic and international; agreements with Twentieth
Century Fox Film Corporation for the licensing of certain library programming;
agreements with Fox Broadcasting for barter advertising sales; and agreements
with certain of the Fox Parties with respect to owning and operating the
Company's international channels. Although the terms of these agreements were
determined by negotiation and not by third parties or by competitive bid, the
Company believes that the terms and conditions of these transactions are
comparable to that which could have been obtained in transactions with
unaffiliated parties. For a description of these transactions, see Note 10 of
the Notes to Fox Family Worldwide, Inc. Financial Statements.

    The Company, on the one hand, and Tele-Communications, Inc. ("TCI") and its
subsidiaries and affiliates, on the other hand, are engaged in a broad range of
transactions in the ordinary course of business, including agreements with
Encore Media for the sale of air time and agreements with TCI, Liberty
Communications, Inc. and Netlink International for subscriber fees. Although the
terms of these agreements were determined by negotiation and not by third
parties or by competitive bid, the Company believes that the terms and
conditions of these transactions are comparable to that which could have been
obtained in transactions with unaffiliated parties. For a description of these
transactions, see Note 10 of the Notes to Fox Family Worldwide, Inc. Financial
Statements.

  TRANSACTIONS BETWEEN HAIM SABAN, OTHER EXECUTIVE OFFICERS AND SABAN

    From time to time, the Company has loaned and advanced funds and entered
into certain agreements with its executive officers and directors. For a
description of these loans, advances and agreements, see Note 10 of the Notes to
Fox Family Worldwide, Inc. Financial Statements.


                                      Page 45

<PAGE>



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

     (a) The following documents are filed as part of this Annual Report of Form
10-K for the fiscal year ended June 30, 1999.

    1. Financial Statements:

       Financial Statements are listed in the "Index to Financial Statements
and Schedules" at page F-1.

    2. Schedules:

       Financial Statements schedules are listed in the "Index to Financial
Statements and Schedules" at page F-1 herein.

    3. Exhibits (numbered in accordance with Item 601 of Regulation S-K):

     (a) The Exhibits listed below are filed or incorporated by reference as
part of this Report.

EXHIBIT NO.                             DESCRIPTION
-----------                             ------------

2.1         Agreement  and Plan of Merger dated as of June 11, 1997 by and among
               Fox  Kids  Worldwide,  Inc.,  Fox  Kids  Merger  Corporation  and
               International Family Entertainment, Inc. (2)
2.2            Amended and Restated Agreement dated as of August 1, 1997 by and
               among Fox Kids Worldwide, Inc., Saban Entertainment, Inc., Fox
               Broadcasting Sub, Inc., Allen & Company Incorporated, Haim Saban
               and certain entities listed on Schedule A thereto. (2)
3.1         Corrected  Restated  Certificate of Incorporation of the Registrant,
               as amended.  (2)
3.2         Amended and Restated Bylaws of the Registrant.  (2)
4.1         Senior  Notes  Indenture  dated as of October 28,  1997  between Fox
               Kids  Worldwide,  Inc., as obligor,  and The Bank of New York, as
               trustee, and form of Notes.  (2)
4.2         Senior Discount Notes Indenture dated as of October 28, 1997
               between Fox Kids Worldwide, Inc., as obligor, and The Bank of New
               York, as trustee, and form of Notes. (2)
10.1        Amended and Restated Strategic Stockholders Agreement dated as of
               August 1, 1997 by and among Haim Saban, certain entities listed
               on Schedule A thereto, Fox Broadcasting Company, Fox Broadcasting
               Sub, Inc., and Allen & Company Incorporated. (2)
10.2        Form  of  Indemnification  Agreement  and  Schedule  of  Indemnified
               Parties.  (2)
10.3        Employment  Agreement dated as of December 22, 1995 between Fox Kids
               Worldwide, L.L.C. and Haim Saban.  (1) +
10.4        Employment  Agreement dated as of September 1, 1996 between Fox Kids
               Worldwide,  Inc. and Shuki Levy;  Stock Option Agreement dated as
               of June 1,  1994  between  Saban  Entertainment,  Inc.  and Shuki
               Levy, as amended by Amendment No. 1.  (2) +
10.5        Employment  Agreement  dates as of April 1,  1999 by and  among  Fox
               Family  Management,  L.L.C.,  Fox Family Worldwide,  Inc. and Mel
               Woods.  (7) +
10.6        Employment  Agreement  dated as of  September  15, 1997  between Fox
               Kids  Worldwide,   Inc.  and  Donna  Cunningham,  as  amended  by
               Amendment to Employment Agreement dated May 18, 1998.  (6) +
10.7        Employment  Agreement  dated  as of  April  1,  1997  between  Saban
               Entertainment, Inc. and Mark Ittner.  (6) +
10.8        Amendment  No. 1 to Employment  Agreement  dated as of April 1, 1999
               between Fox Family Worldwide, Inc. and Mark Ittner.  (7) +


                                     Page 46

<PAGE>


10.9        Operating  Agreement  for Fox Kids  Worldwide,  L.L.C.,  dated as of
               December 22, 1995, by and
                 among Saban  Entertainment,  Inc.,  FCN  Holding,  Inc. and Fox
               Broadcasting Company.  (1)
10.10       Amendment  No. 1 to Operating  Agreement  dated as of September  26,
               1996, by and among Saban Entertainment,  Inc., FCN Holding,  Inc.
               and Fox Broadcasting Company.  (1)
10.11       Amendment No. 2 to Operating  Agreement dated as of July 31, 1997 by
               and among Saban  Entertainment,  Inc.,  FCN  Holding,  Inc.,  Fox
               Broadcasting Company and Fox Kids Worldwide, Inc.  (2)
10.12       Agreement Re Transfer of LLC Interests  dated as of July 31, 1997 by
               and among Fox Kids Worldwide,  Inc., Fox Kids  Worldwide,  L.L.C.
               and Fox Broadcasting Company.  (2)
10.13       Management  Agreement dated as of December 22, 1995 by and among Fox
               Kids Worldwide,  L.L.C., Saban Entertainment,  Inc. and FCNH Sub,
               Inc.  (1)
10.14       Stock Ownership Agreement dated as of December 22, 1995 by and
               among Haim Saban, certain entities listed on Schedule 1.1(a)
               thereto and Fox Kids Worldwide, L.L.C. (2)
10.15       Amendment No. 1 to Stock  Ownership  Agreement dated as of September
               26,  1996 by and among Haim  Saban,  certain  entities  listed on
               Schedule  "A"  thereto,  Fox  Broadcasting  Sub,  Inc.,  and  Fox
               Broadcasting Company.  (2)
10.16       Home Video Rights  Acquisition  Agreement dated as of August 8, 1996
               among Saban Entertainment,  Inc., Ventura Film Distributors, B.V.
               and Twentieth Century Fox Home Entertainment.  (3)
10.17       Form of Fox Broadcasting Company Station Affiliate Agreement.  (2)
10.18       Registration  Agreement  (the  "Saban/Fox  Registration  Agreement")
               dated as of December 22, 1995 among Saban Entertainment, Inc.,
               Haim Saban, certain entities listed on Schedule A thereto, Fox
               Broadcasting Company, Inc., and FCN Holding, Inc. (2)
10.19       Amendment  No. 1 to  Saban/Fox  Registration  Agreement  dated as of
               September 27, 1996.  (2)
10.20       Guarantee  dated as of  December  22,  1995 by The News  Corporation
               Limited. (2)
10.21       10960  Wilshire  Boulevard  Office  Lease  dated as of July 17, 1995
               between  10960  Property  Corporation  and  Saban  Entertainment,
               Inc.  (2)
10.22       First  Amendment  to  10960  Wilshire  Boulevard  Lease  dated as of
               August 1, 1997.  (2)
10.23       Guaranty  of  Lease  by  The  News  Corporation   Limited  and  News
               Publishing  Australia  Limited  in  favor of  Beacon  Properties,
               L.P., dated as of August 1, 1997.  (2)
10.24       Production  Facility Agreements dated as of June 7, 1994 and January
               5, 1994 between Magic Movie  Studios of Valencia,  Ltd. And Saban
               Entertainment, Inc.  (2)
10.25       Second  Amended and Restated  Credit  Agreement  dated as of October
               28,  1997  among  FCN   Holding,   Inc.,   International   Family
               Entertainment,  Inc. and Saban Entertainment,  Inc. as Borrowers,
               and Fox  Kids  Holdings,  LLC,  as  Guarantor,  and  the  initial
               lenders named therein,  as Initial Lenders,  and Citicorp U.S.A.,
               Inc. as Administrative  Agent, and Citicorp Securities,  Inc. and
               Bank Boston, N.A., as Co-Arrangers.  (3)
10.26       Letter  Amendment  No. 1 to the Second  Amended and Restated  Credit
               Agreement dated as of November 18, 1997.  (3)
10.27       Letter  Amendment  No. 2 to the Second  Amended and Restated  Credit
               Agreement dated as of April 16, 1998.  (5)
10.28       Letter  Amendment and Waiver No. 3 to the Loan Documents dated as of
               June 29, 1998.  (6)
10.29       Letter  Amendment  and  Waiver  No.  4 to  the  Second  Amended  and
               Restated Credit Agreement dated as of May 26, 1999.
10.30       Amended and Restated Subordinated Note Agreement dated as of May
               19, 1998 by and among Fox Broadcasting Company, as lender, Fox
               Family Worldwide, Inc., f/k/a Fox Kids Worldwide, Inc.,

                                     Page 47

<PAGE>


               as borrower, and Citicorp USA, Inc., as the Senior Representative
               for the Senior Creditors. (6)
10.31       Amended and Restated Subordinated Note Agreement dated as of May
               19, 1998 by and among Fox Family Worldwide, Inc. f/k/a Fox Kids
               Worldwide, Inc., as borrower, News America Incorporated f/k/a
               News American Holdings Incorporated, as lender, and Citicorp USA,
               Inc., as the Senior Representative for the Senior Creditors (6)
10.32       Subordinated Note dated as of June 28, 1999 between Fox Family
               Worldwide, Inc., as borrower, and Fox Broadcasting Company, as
               Subordinated Lender.
10.33       Funding  Agreement  dated as of June 11,  1997 by and among The News
               Corporation  Limited,  News Publishing  Australia Limited and Fox
               Kids Worldwide, Inc.  (2)
10.34       Guaranty dated as of June 11, 1997 by The News  Corporation  Limited
               in favor of International Family Entertainment, Inc.  (2)
10.35       Distribution  Agreement  dated as of August 21,  1992,  as  amended,
               between  Saban   International   N.V.  and  Saban   International
               Services, Inc. on the one hand and Toei Company Ltd.  (2)
10.36       Memorandum  of Agreement  dated as of January 19, 1996 between Saban
               Merchandising,  Inc. and Ventura Film  Distributors,  B.V. on the
               one hand and Bandai America Incorporated, on the other hand.  (2)
10.37       Letter   Agreement  dated  as  of  January  1,  1995  between  Saban
               International, N.V. and Duveen Trading Ltd.  (2)
10.38       Barter  Syndication  Agreement  dated as of January 5, 1996  between
               Saban Entertainment, Inc. and Fox Broadcasting Company, Inc.  (2)
10.39       Agreement Re Registration Rights dated as of August 1, 1997 by
               and among Saban Entertainment, Inc., Haim Saban, certain entities
               listed on Schedule A to the Saban/Fox Registration Agreement, Fox
               Broadcasting Company, FCN Holding, Inc., Fox Kids Worldwide,
               Inc., Liberty Media Corporation and Liberty IFE, Inc. (2)
10.40       Amendment to  Affiliation  Agreement  dated June 11,  1997,  between
               International Family Entertainment,  Inc. and Satellite Services,
               Inc.   (Filed  as   exhibit   99.4.1  to   International   Family
               Entertainment's  Report on Form 8-K,  dated  June 11,  1997,  and
               incorporated herein by reference).  (3)
10.41       Letter of Amendment dated as of May 16, 1996, amending the
               International Family Entertainment, Inc. Family Channel
               Affiliation Agreement dated as of December 28, 1989, between
               Satellite Services, Inc. and International Family Entertainment,
               Inc. (Filed as Exhibit 10.28 to International Family
               Entertainment's Annual Report of Form 10-K/A for the year ended
               December 31, 1996, and incorporated herein by reference). (3)
10.42       Program  Time  Agreement  dated as of January 5, 1990,  between  The
               Christian  Broadcasting  Network,  Inc. and International  Family
               Entertainment,   Inc.  and   Amendment  No.  1  to  Program  Time
               Agreement dated as of June 11, 1997.  (3)
10.43       International Family Entertainment,  Inc. Family Channel Affiliation
               Agreement,  dated as of  December  28,  1989,  between  Satellite
               Services,  Inc.  and  International  Family  Entertainment,  Inc.
               (Filed as Exhibit 10.8 to  International  Family  Entertainment's
               Registration   Statement   on  Form  S-1  (NO.   33-45967),   and
               incorporated herein by reference).  (3)
10.44       Amendment,  dated as of January 1, 1994,  amending the International
               Family Entertainment,  Inc. Family Channel Affiliation Agreement,
               dated as of December 28, 1989, between Satellite  Services,  Inc.
               and International Family Entertainment Inc.  (3)
10.45       Registration  Rights Agreement dated August 1, 1997 by and among Fox
               Kids Worldwide,  Inc., Liberty Media Corporation and Liberty IFE,
               Inc.  (2)
10.46       Galaxy V  Transponder  Purchase  Agreement,  dated as of January 23,
               1992,   between   Hughes   Communications    Galaxy,   Inc.   and
               International Family  Entertainment,  Inc. (Filed as Exhibit 10.8
               to  International  Family  Entertainment's  Annual Report on Form
               10-K for the year  ended December 31, 1994, and incorporated

                                     Page 48

<PAGE>

                herein by reference).  (3)
10.47       GE C-3/C-4 Satellite Transponder Sales Agreement dates as of July
               7, 1989 between GE American Communications and The Christian
               Broadcasting Network Inc. (Filed as an exhibit to International
               Family Entertainment's Registration Statement on Form S-1 (No.
               33-45967), and incorporated herein by reference). (3)
10.48       C-3/C-4 Satellite  Transponder Sales Agreement  Amendment Number One
               dated   as  of   December   15,   1989,   between   GE   American
               Communications,  Inc.  and the  Christian  Broadcasting  Network,
               Inc.  (3)
10.49       C-3/C-4 Satellite  Transponder Sales Agreement  Amendment Number Two
               dated   as  of   December   15,   1989,   between   GE   American
               Communications,  Inc.  and the  Christian  Broadcasting  Network,
               Inc.  (3)
10.50       Letter of Amendment dated September 30, 1991, re: C-3/C-4  Satellite
               Transponder   Sales   Agreement   by  and   between  GE  American
               Communications,  Inc.  and The  Christina  Broadcasting  Network,
               Inc.  as   predecessor  in  interest  to   International   Family
               Entertainment, Inc.  (3)
10.51          C-3/C-4 Satellite Transponder Sales Agreement Amendment Number
               Four dated as of November 24, 1992 by and between GE American
               Communications, Inc. and International Family Entertainment, Inc.
               License Agreement dated as of June 26, 1998 among Twentieth
               Century Fox Film Corporation and MTM Holding Company, Inc., MTM
               Enterprises, Inc. and certain of their respective subsidiaries.
               (3)
10.52       Subscription  Agreement  between Fox Kids Europe Holdings,  Inc. and
               Fox Broadcasting Company, dated as of June 28, 1999.
10.53       Exchange  Agreement  by and  among  Fox  Broadcasting  Company,  Fox
               Family Worldwide and Fox Kids Europe Holdings,  Inc., dated as of
               June 28, 1999.
12.1        Ratio of Earnings (Deficiency) to Fixed Charges.
21.1        Subsidiaries of the registrant.
27.1        Financial Data Schedule.

------------
(1)         Previously  filed  as an  exhibit  to the  Registrant's  Form S-1 on
            September 27, 1996
(2)         Previously filed as an exhibit to the Registrant's Amendment No. 1
            to Form S-1 on January 26, 1998
(3)         Previously filed as an exhibit to the Registrant's Amendment No. 2
            to Form S-1 on February 20, 1998
(4)         Previously filed as an exhibit to the Registrant's Amendment No. 4
            to Form S-4 on March 25, 1998
(5)         Previously filed as an exhibit to the Registrant's Quarterly Report
            on Form 10-Q for the quarter ended March 31, 1998
(6)         Previously filed as an exhibit to the Registrant's Annual Report on
            Form 10-K for the year ended June 30, 1998
(7)         Previously filed as an exhibit to the Registrant's Quarterly Report
            on Form 10-Q for the quarter ended March 31, 1999

(8)         Portions of exhibits deleted and granted confidential treatment by
            the Securities and Exchange Commission pursuant to a request for
            confidentiality.

+ Denotes employment contract.

    (b) Reports on Form 8-K

        No current Reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1999.

        Supplemental Information to be furnished with reports filed pursuant to
Section 15(d) of the Act by Registrants which have not registered securities
pursuant to Section 12 of the Act: No annual report or proxy material has been
sent to security holders. A copy of this Report will be sent to security holders
of the Registrant.

                                     Page 49

<PAGE>


                                  SIGNATURES

    Pursuant to the requirement of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunder duly authorized.

Dated:  September 27, 1999

                                                    FOX FAMILY WORLDWIDE, INC.

                                                    /S/ MEL WOODS
                                                    --------------------------
                                                    Mel Woods
                                                    President, Chief
                                                    Operating Officer  and
                                                    Chief Financial Officer


    Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates stated:

<TABLE>
<CAPTION>

    SIGNATURE                          TITLE                      DATE
<S>                        <C>                               <C>
 /S/ HAIM SABAN            Chairman of the Board and Chief   September 27, 1999
---------------------      Executive Officer (Principal
    HAIM SABAN             Executive Officer)

 /S/ MEL WOODS             President, Chief Operating        September 27, 1999
---------------------      Officer, Chief Finanical Officer
    MEL WOODS              and Director
                           (Principal Financial Officer)

 /S/ MARK ITTNER           Senior Vice President of          September 27, 1999
---------------------      Finance and
    MARK ITTNER            Chief Accounting Officer
                           (Principal Accounting Officer)

 /S/ SHUKI LEVY            Director                          September 27, 1999
----------------------
    SHUKI LEVY

/s/ LAWRENCE JACOBSON      Director                          September 27, 1999
----------------------
LAWRENCE JACOBSON


</TABLE>


                                     Page 50

<PAGE>

                  INDEX TO FINANCIAL STATEMENT AND SCHEDULES

FOX FAMILY WORLDWIDE, INC.
    Report of Independent Public Accountants.................................F-2
    Report of Independent Auditors ..........................................F-3
    Consolidated Balance Sheets as of June 30, 1998 and 1999.................F-4
    Statements of Operations for each of the three years
      in the period ended June 30, 1999......................................F-5
    Statements of Stockholders' Equity (Deficit) and Comprehensive Income
      (Loss) for each of the three years in the period ended June 30, 1999...F-6
    Statements of Cash Flows for each of the three years
      in the period ended June 30, 1999......................................F-7
    Notes to Financial Statements............................................F-9

FINANCIAL STATEMENT SCHEDULES
    Report of Independent Public Accountants

SCHEDULE I:   CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
SCHEDULE II:  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


                                      F-1

<PAGE>


                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Fox Family Worldwide, Inc.:

   We have audited the accompanying consolidated balance sheets of Fox Family
Worldwide, Inc. and its subsidiaries as of June 30, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity (deficit)
and comprehensive income (loss), and cash flows for the years then ended. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
and its subsidiaries as of June 30, 1998 and 1999, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.

                                          ARTHUR ANDERSEN LLP

Los Angeles, California
September 16, 1999

                                      F-2

<PAGE>


                        REPORT OF INDEPENDENT AUDITORS

Board of Directors
FCN Holding, Inc., Saban Entertainment, Inc. and Fox Kids Worldwide, L.L.C.

    We have audited the combined statements of operations, stockholders' equity
(deficit) and comprehensive income (loss), and cash flows of FCN Holding, Inc.,
Saban Entertainment, Inc. and Fox Kids Worldwide, L.L.C. (from and after the
date of the Reorganization (Note 1), Fox Kids Worldwide, Inc.) for the year
ended June 30, 1997. 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 audit.

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

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of operations and cash flows of
FCN Holding, Inc., Saban Entertainment, Inc. and Fox Kids Worldwide, L.L.C.
(from and after the date of the Reorganization (Note 1), Fox Kids Worldwide,
Inc.) for the year ended June 30, 1997, in conformity with generally accepted
accounting principles.

                                          ERNST & YOUNG LLP

September 29, 1997

                                      F-3

<PAGE>


                          FOX FAMILY WORLDWIDE, INC.

                         CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                           JUNE 30,    JUNE 30,
                                                             1998        1999
                                                          ----------   --------
                                                               IN THOUSANDS,
                                                             EXCEPT SHARE DATA
<S>                                                       <C>          <C>
ASSETS:
Cash and cash equivalents............................... $   82,313  $   46,858
Restricted cash.........................................      8,000       8,204
Accounts receivable, net of allowance for doubtful
  accounts of $1,594 and $2,493 at June 30, 1998
  and 1999, respectively................................    132,053     145,050
Amounts receivable from related parties.................     58,043      19,082
Programming costs, net..................................    453,608     538,219
Property and equipment, net.............................     60,805      58,096
Deferred income taxes...................................     39,779      38,829
Intangible assets, net..................................  1,594,286   1,539,852
Other assets, net.......................................     87,137      77,684
                                                         ----------   ---------
    Total assets........................................ $2,516,024  $2,471,874
                                                         ==========  ==========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Accounts payable........................................ $   37,668  $   44,743
Accrued liabilities.....................................    204,679     190,664
Deferred revenue........................................     74,518      59,314
Accrued participations..................................     52,601      38,860
Deferred income taxes...................................     21,698      20,748
Bank and other debt.....................................  1,746,510   1,726,315
Amounts payable to related parties......................      2,954     113,973
                                                         ----------   ---------
    Total liabilities...................................  2,140,628   2,194,617
                                                         ----------   ---------

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' EQUITY (DEFICIT):
  Preferred Stock, $0.001 par value; 19,500,000 shares
    authorized; no shares issued or outstanding.........        --          --
  Class A Common Stock, $0.0001 par value; 16,000,000
    shares authorized, 160,000 shares
    issued and outstanding at June 30, 1998 and 1999,
    respectively........................................        --          --
  Class B Common Stock, $0.0001 par value; 16,000,000
    shares authorized, 15,840,000 shares
    issued and outstanding at June 30, 1998 and 1999,
    respectively........................................         16          16
  Contributed capital...................................     60,731      60,731
  Accumulated other comprehensive loss..................     (1,201)     (1,893)
  Accumulated deficit...................................    (29,150)   (126,597)
                                                          ----------   ---------
    Total stockholders' equity (deficit)................     30,396     (67,743)
                                                          ---------- -----------

    Total liabilities and stockholders' equity (deficit) $2,516,024  $2,471,874
                                                          ==========  ==========
</TABLE>

                           See accompanying notes.

                                      F-4

<PAGE>


                           FOX FAMILY WORLDWIDE, INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                        YEARS ENDED JUNE 30,
                                              ----------------------------------------
                                                  1997       1998            1999
                                              (COMBINED) (CONSOLIDATED) (CONSOLIDATED)
                                              ---------  -------------  -------------
                                                         IN THOUSANDS
<S>                                           <C>        <C>            <C>
Revenues..................................    $307,820     $664,458       $ 635,273
Costs and expenses:
    Production and programming............     186,575      356,664         315,504
    Selling, general and administrative...      61,263      141,394         159,973
    Depreciation..........................       1,203        9,370          10,083
    Amortization of intangibles...........          --       37,557          40,434
                                              ---------    ---------      ----------
                                               249,041      544,985         525,994

Operating income..........................      58,779      119,473         109,279

Equity in loss of unconsolidated affiliate       1,546        6,790           5,088
Other expense (income), net...............          --            8            (506)
Interest expense, net.....................       2,226      134,002         169,107
                                              ---------    ---------      ----------
Income (loss) before provision for
    income taxes..........................      55,007      (21,327)        (64,410)
Provision for income taxes................      14,567        3,446           1,989
                                              ---------    ---------      ----------
Net income (loss).........................    $ 40,440     $(24,773)      $ (66,399)
                                              =========    =========      ==========

</TABLE>


                           See accompanying notes.


                                      F-5


<PAGE>


<TABLE>
                                                   FOX FAMILY WORLDWIDE, INC.

                                          STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                                 AND COMPREHENSIVE INCOME (LOSS)
                                                         (In Thousands)


<CAPTION>
                              PREFERRED CLASS A                                    ACCUMULATED
                               MEMBERS INTEREST      COMMON STOCK                     OTHER        RETAINED
                              ------------------   ----------------   CONTRIBUTED  COMPREHENSIVE   EARNINGS            COMPREHENSIVE
                              SHARES      AMOUNT   SHARES    AMOUNT     CAPITAL    INCOME (LOSS)   (DEFICIT)    TOTAL  INCOME (LOSS)
                              ------      ------   ------    ------   -----------  -------------   ---------   ------- -------------
<S>                           <C>        <C>       <C>       <C>      <C>          <C>             <C>         <C>      <C>
 Balance at June 30,
 1996 (combined).............    --      $ 40,000       3    $    2   $   49,245      $    (11)   $ (16,405)   $ 72,831
  Issuance of Preferred
   Class A Members
   Interest..................    --        10,000      --        --           --            --           --      10,000
  Capital contribution.......    --            --      (1)       (1)           1            --           --         --
  Capital contributions......    --            --      --        --        5,376            --           --       5,376
  Related party tax
   obligation................    --            --      --        --        4,832            --           --       4,832
  Exchange loss on
   translation of foreign
   subsidiaries'
   financial statements......    --            --      --        --           --          (792)          --        (792)   $   (792)
  Net income.................    --            --      --        --           --            --       40,440      40,440      40,440
                             ------        ------  ------    ------   ----------      ---------   -----------   --------    --------
Balance at June 30, 1997
(combined)..................     --        50,000       2         1       59,454          (803)      24,035     132,687    $ 39,648
                                                                                                                            ========
  Transactions related
   to reorganization:
   Exchange of Preferred
    Class A
    Members Interest.........    --       (50,000)     --        --           --            --           --     (50,000)
    Issuance of Class A
    Common Stock.............    --            --     160        --           --            --           --         --
   Issuance of Class B
    Common Stock.............    --            --  15,840        16           (5)           --           --         11
   Exchange of Common
    Stock....................    --            --      (2)       (1)          --            --           --         (1)
  Capital contributions......    --            --      --        --        1,282            --           --       1,282
  Dividends on Series A
   Mandatorily
   Redeemable Preferred
   Stock.....................    --            --      --        --           --            --      (28,412)    (28,412)
  Exchange loss on
   translation of foreign
   subsidiaries'
   financial statements......    --            --      --        --           --          (398)          --        (398)   $   (398)
  Net loss...................    --            --      --        --           --            --      (24,773)    (24,773)    (24,773)
                             ------        ------  ------    ------   ----------      ---------   -----------   --------    --------
Balance at June 30, 1998
(consolidated)                   --            --  16,000        16       60,731        (1,201)     (29,150)     30,396    $(25,171)
                                                                                                                            ========
  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
(consolidated)..............     --        $   --  16,000    $   16   $   60,731      $ (1,893)   $(126,597)   $(67,743)   $(67,091)
                             ======        ======  ======    ======   ==========      =========   ==========   =========   =========
</TABLE>


                                                     See accompanying notes

                                                               F-6
<PAGE>


                                    FOX FAMILY WORLDWIDE, INC.

                                     STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                             YEARS ENDED JUNE 30,
                                                   ---------------------------------------
                                                     1997        1998             1999
                                                  (COMBINED) (CONSOLIDATED)  (CONSOLIDATED)
                                                  ---------- --------------  -------------
                                                              IN THOUSANDS
<S>                                               <C>        <C>             <C>
OPERATING ACTIVITIES:
Net income (loss)................................ $ 40,440    $  (24,773)      $ (66,399)
Adjustments  to reconcile net income (loss) to
    net cash provided by operating activities:
  Amortization of programming costs..............  144,713       291,878         277,808
  Depreciation...................................    1,203         9,370          10,083
  Amortization of intangibles....................       --        37,557          40,434
  Amortization of debt issuance costs............       --         2,453           3,253
  Equity in loss of unconsolidated affiliate.....    1,546         6,790           5,088
  Non-cash interest expense......................       --        50,410          66,746
Changes in operating assets and liabilities:
   Restricted cash...............................       --            --            (204)
   Accounts receivable...........................  (10,210)       61,957         (12,997)
   Amounts receivable from related parties.......    3,860       (29,836)         38,961
   Other assets..................................   (1,664)      (59,004)          4,699
   Accounts payable and accrued liabilities......   17,255       (40,807)         (6,940)
   Accrued participations........................   10,103       (11,442)        (13,741)
   Deferred income taxes.........................   14,665         7,977              --
   Deferred revenue..............................  (27,088)       13,309         (15,204)
                                                   -------     ---------       ---------
       Net cash provided by operating activities   194,823       315,839         331,587
                                                   -------     ---------       ---------

INVESTING ACTIVITIES:
Purchase of property and equipment...............   (3,435)      (10,515)        (11,394)
Proceeds from sale of property and equipment
  and assets held for sale, net..................       --         3,376              --
Additions to production and programming costs.... (201,814)     (326,092)       (358,399)
Acquisition of International Family
  Entertainment, Inc.............................       --    (1,370,076)             --
Intangible assets................................       --            --          14,000
Cash acquired in acquisitions....................       --        19,296              --
Sale of marketable securities....................       --        61,396              --
Other............................................   (8,648)       (4,390)         (4,279)
                                                  ---------   -----------      ---------
       Net cash used in investing activities..... (213,897)   (1,627,005)       (360,072)
                                                  ---------   -----------      ----------

FINANCING ACTIVITIES:
Proceeds from bank borrowings....................   52,569     1,282,063          25,622
Payments on bank borrowings......................   (9,917)     (837,924)       (137,296)
Dividends on Preferred Stock.....................       --       (28,412)        (31,048)
Proceeds from issuance of Preferred Class A
  Members interest...............................   10,000            --              --
Proceeds from NAHI Bridge loan...................       --       345,514              --
Paydown on NAHI Bridge loan......................       --      (250,886)           (267)
Proceeds from Fox Subordinated Debt..............       --            --          25,000
Issuance of Senior Notes.........................       --       475,000              --
Issuance of Senior Discount Notes................       --       375,001              --
Issuance of Common Stock.........................       --            10              --
Advances (to) from related parties...............  (20,285)        4,236         111,019
Capital contributions to related parties.........     (460)           --              --
                                                   --------    ---------       ---------
       Net cash provided by (used in)financing
          activities.............................   31,907     1,364,602          (6,970)
                                                   --------    ---------       ---------

Increase (decrease) in cash and cash equivalents.   12,833        53,436         (35,455)

Cash and cash equivalents at beginning of year...   16,044        28,877          82,313
                                                   --------    ---------       ---------
Cash and cash equivalents at end of year......... $ 28,877    $   82,313       $  46,858
                                                   ========    =========       =========

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
 Cash paid during the year for:
   Interest (net of amounts capitalized)......... $  1,466    $   65,860       $  86,874
                                                   ========   ==========       =========
   Income taxes.................................. $  3,553    $    2,202       $   2,296
                                                   ========   ==========       =========

</TABLE>

                           See accompanying notes.

                                      F-7

<PAGE>


                          FOX FAMILY WORLDWIDE, INC.

                     STATEMENTS OF CASH FLOWS--(CONTINUED)

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTMENT ACTIVITIES

  YEAR ENDED JUNE 30, 1997

   Amounts payable to a related party of $5,835,000 were forgiven and recorded
as contributed capital.

   The Company recorded $4,832,000 arising under a tax sharing obligation which
was deemed to be contributed capital by the related party.

  YEAR ENDED JUNE 30, 1998

   Amounts payable to a related party of $1,282,000 were forgiven and recorded
to contributed capital.

   The Company issued a subordinated note to Fox Broadcasting ("Fox") in the
amount of $108,672,000 in exchange for Fox's $50,000,000 Preferred Class A
Members Interest in the LLC, its $50,000,000 contingent note receivable and
certain other Company obligations.

   Preferred Stock in the amount of $345,000,000 was issued in connection with
the acquisition of International Family Entertainment, Inc.

   Certain assets held for sale were sold by the Company. In connection with the
sale, the Company agreed to assume a $10,000,000 bank loan, the Company's
$6,720,000 note payable to an outside party was forgiven and marketable
securities of $1,737,000 were transferred to the Company.





                           See accompanying notes.

                                      F-8

<PAGE>


                          FOX FAMILY WORLDWIDE, INC.

                        NOTES TO FINANCIAL STATEMENTS

1.    BASIS OF FINANCIAL STATEMENT PRESENTATION AND ORGANIZATION

   On November 1, 1995 (the "Effective Date"), FCN Holding, Inc. ("FCN Holding")
and Saban Entertainment, Inc. ("Saban") formed a joint venture, Fox Kids
Worldwide, L.L.C. (the "LLC"), a limited liability company, for the purpose of
jointly expanding the worldwide children's businesses of FCN Holding and Saban.
On August 1, 1997, a reorganization referred to below was effected pursuant to
which Saban, FCN Holding and the LLC became wholly-owned subsidiaries of Fox
Family Worldwide, Inc. (formerly Fox Kids Worldwide, Inc.) ("Fox Family
Worldwide" or the "Company"). As a result of the formation of the joint venture
and the common management of the joint venture businesses, the respective
assets, liabilities and operations of Saban, FCN Holding and the LLC have been
combined at historical cost from and after the Effective Date. The combined
financial statements of the Company (as the deemed successor to Saban, FCN
Holding and the LLC) included herein represent the historical financial
statements of FCN Holdings (after giving effect to such combination as of the
Effective Date).

   The Company is an integrated global children's and family entertainment
company, which develops, acquires, produces, broadcasts and distributes quality
television programming. The Company's principal operations comprise (i)
International Family Entertainment, Inc. ("IFE"), which operates the Fox Family
Channel, (ii) Saban, whose library of approximately 5,800 half-hours of
completed and in-production children's programming is among the largest in the
world, (iii) the Fox Kids Network ("Fox Kids"), one of the leading U.S.
children's broadcast television network, and a growing business of Fox
Kids'-branded cable and DTH satellite channels operating in approximately 39
countries and 13 languages worldwide. Through these operating units, the Company
has the ability to manage properties and brands from their creation through
production, distribution and merchandizing of related consumer products. As the
distributor of Fox Kids programming on Fox Kids and owner and operator of the
Fox Family Channel, the Company controls the distribution of programming on both
a major broadcast network and a widely distributed cable network.

   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 June 30, 1997 together with the
results of operations for the year ended June 30, 1997, reflect the combined
financial statements of FCN Holding, Saban and the LLC. The financial statements
of the Company as of and for the years ended June 30, 1998 and 1999 reflect the
consolidated financial statements of Fox Family Worldwide and subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.


                                      F-9

<PAGE>


                          FOX FAMILY WORLDWIDE, INC.


  THE REORGANIZATION

   The Company was incorporated in August 1996 under Delaware law as a holding
company of 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 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 the LLC and its $50
million contingent note receivable from the LLC for the Fox Subordinated Note.

   In connection with the acquisition of IFE, the Company issued the NAHI Bridge
Note to News America Holding, Inc. ("NAHI") upon substantially the same terms
and conditions as the Fox Subordinated Note. In addition, the Company issued to
Liberty IFE, Inc. $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 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 News Corp., or (iii)
under the Funding Agreement, and either News Corp. or News Publishing Australia
Limited ("NPAL"), a wholly owned subsidiary of News Corp., 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 Fox Broadcasting Sub 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

                                      F-10

<PAGE>


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, 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 option may be
exercised as follows: (i) for a period of one year following the death of Haim
Saban, if he dies prior to December 22, 2012; (ii) upon delivery of written
notice by Fox Broadcasting at any time on or after December 22, 2002, or before
December 22, 2012; or (iii) upon receipt by Fox Broadcasting of written notice
(which generally cannot be delivered prior to December 22, 2000) from Haim Saban
of his desire to cause Fox Broadcasting to purchase all of the shares of Class B
Common Stock held by the Saban Stockholders. The LLC paid to the Saban
Stockholders an aggregate of $80,100,000 for the grant of the option. 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 Fox Broadcasting.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  PRINCIPLES OF CONSOLIDATION

   The consolidated financial statements for the years ended June 30, 1998 and
1999 include the accounts of FCN Holding, Fox Kids Worldwide LLC, Saban, IFE and
all of their majority-owned and controlled subsidiaries. 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 balances have been
eliminated.

   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.

  REVENUE RECOGNITION

   Revenues from television, music, and merchandising lease agreements, which
provide for the receipt by the Company of nonrefundable guaranteed amounts, are
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 revenue. 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. Barter revenues, representing the exchange of
programming for advertising time on a television station, are recognized upon
the airing of an advertisement during such advertising time.

  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.


                                      F-11

<PAGE>

   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.

   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 trade
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,
1998 and June 30, 1999, 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

   For the purposes of balance sheet classification and the statement of cash
flows, the Company considers 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 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. Property and equipment acquired
as part of the acquisition of IFE is stated at estimated fair market value.
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 is removed from the accounts, and any
resulting gain or loss is included in income. The costs of normal maintenance,
repairs and minor replacements are charged to expense when incurred.


                                      F-12

<PAGE>


  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. The
Company has adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of." This statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used for long-lived assets and certain identifiable intangibles to be disposed
of. The carrying value of existing assets are reviewed when events or changes in
circumstances indicate that an impairment test is necessary in order to
determine if an impairment has occurred. When factors indicate that such assets
should be evaluated for possible impairment, the Company will estimate the
future cash flows expected to result from the use of the assets and their
eventual disposition, and compare the amounts to the carrying value of the
assets to determine if an impairment loss has occurred. Accumulated amortization
of intangibles as of June 30, 1998 and 1999 was $37,557,000 and $77,991,000,
respectively. For the year ended June 30, 1999, intangible assets related to the
IFE acquisition was reduced by $14,000,000 due to the favorable resolution of
certain pre-acquisition tax contingencies.

  OTHER ASSETS, NET

   Included within other assets, net are debt issuance costs and deferred loan
fees incurred in connection with the issuance of the Senior Notes and 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.
Accumulated amortization of debt issuance costs and deferred loan fees was
$2,453,000 and $5,706,000 as of June 30, 1998 and 1999, respectively.

  FOREIGN CURRENCY TRANSLATION AND CUMULATIVE ADJUSTMENT

     Saban International N.V. (SINV), which after the Effective Date is deemed
to be a wholly-owned subsidiary of the Company, uses the U.S. dollar as the
functional currency. All other foreign subsidiaries of the Company use local
currency as the functional currency. Assets and liabilities are translated into
U.S. dollars at current exchange rates. Revenue and expenses have been
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 for the period. The aggregate transaction losses for the
years ended June 30, 1997, 1998 and 1999, were $(643,000), $(1,442,000), and
($1,596,000), respectively.

     The cumulative translation adjustment included in accumulated other
comprehensive income (loss) in stockholders' equity (deficit) at June 30, 1997,
1998 and 1999, represents the Company's net unrealized exchange losses on the
translation of foreign subsidiaries' financial statements.

  COMPREHENSIVE INCOME (LOSS)

     The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
effective for the year beginning July 1, 1998. This statement establishes
standards for the reporting and display of comprehensive income (loss) and its
components in financial statements and thereby reports a measure of all changes
in equity of an enterprise that result from transactions and other economic
events other than transactions with owners.

  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.


                                      F-13

<PAGE>

  USE OF ESTIMATES

   The preparation of financial statements in conformity with generally accepted
accounting principles 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 the periodic adjustments in such amortization.

  STOCK-BASED COMPENSATION

   The Company accounts for its stock compensation arrangements 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.

   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 Opinion 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 Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No.
123.

  NEW ACCOUNTING PRONOUNCEMENT

   In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for all quarters of
fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.

   The Company is currently reviewing this statement and will apply such
provisions as deemed appropriate.

  RECLASSIFICATIONS

   Certain reclassifications have been made to prior years' financial statements
to conform with current classifications.

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 the exchange by Liberty IFE, Inc. ("Liberty IFE")
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. 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
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.

   The Company financed the IFE Acquisition, in part, by borrowing $1.25 billion
pursuant to the Existing Credit Facility as described below. On August 1, 1997,
the Company borrowed $602,000,000 under the Existing Credit Facility to finance
the purchase price of the Privately Owned Shares (and to refinance certain
indebtedness of Saban outstanding on the closing date of the acquisition of the


                                      F-14

<PAGE>

Privately Owned Shares). On September 4, 1997, the Company borrowed
$648,000,000 under the Existing Credit Facility in order to finance in part the
cash consideration payable to the remaining former public holders of the
outstanding shares of IFE stock for their shares in the merger, to cash out
existing options held by IFE senior executives and employees, to refinance
certain indebtedness of IFE and to pay certain related fees and expenses.

   The IFE Acquisition has been accounted for as a purchase. IFE's assets and
liabilities have been recorded in the Company's financial statements at their
estimated fair values at the acquisition date allocated as follows (in
thousands):

<TABLE>
<CAPTION>

     <S>                                                           <C>
     Accounts receivable........................................    $  130,694
     Film and television costs..................................       181,360
     Other assets...............................................       135,877
     Intangible assets..........................................     1,631,843
     Liabilities assumed, including severance and
        related reserves of $36,500.............................      (383,994)
     Cash on hand...............................................        19,296
     Preferred stock issuance...................................      (345,000)
                                                                    ----------
     Cash purchase price........................................    $1,370,076
                                                                    ==========


</TABLE>


   The Company has made severance and related payments of $19,850,000 from the
date of acquisition to June 30, 1998 and $8,873,000 for the year ended June 30,
1999. The results of operations of IFE since the purchase date of August 1, 1997
have been included with the Company's results of operations.

   The following unaudited pro forma information for the two years ended June
30, 1997 and 1998 reflect the results of the Company's consolidated operations
as if the acquisition and related financing occurred at the beginning of each
period presented. The unaudited pro forma consolidated financial results are not
necessarily indicative of the actual results that would have occurred had the
acquisition occurred at the beginning of each period presented (in thousands):

<TABLE>
<CAPTION>

                                                          YEARS ENDED JUNE 30,
                                                          --------------------
                                                            1997       1998
                                                          ---------  ---------
<S>                                                       <C>        <C>
     Revenues..........................................   $614,618   $688,943
     Operating income..................................    124,793    123,798
     Net loss..........................................   $(32,129)  $(45,610)

</TABLE>

4.    PROGRAMMING COSTS

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

<TABLE>
<CAPTION>

                                                      JUNE 30, 1998
                                          -------------------------------------
                                                                        NET
                                                      ACCUMULATED   PROGRAMMING
                                            COST      AMORTIZATION     COSTS
                                         -----------  ------------  -----------
     <S>                                 <C>         <C>            <C>
     Children's programming............. $1,081,397   $  900,785    $  180,612
     Family programming, movies and
       mini-series......................    413,507      214,006       199,501
     Projects in production.............     67,070           --        67,070
     Development........................      6,425           --         6,425
                                         -----------  -----------  -----------
                                         $1,568,399   $1,114,791    $  453,608
                                         ===========  ===========  ===========


</TABLE>


                                      F-15

<PAGE>


<TABLE>
<CAPTION>
                                                      JUNE 30, 1999
                                          -------------------------------------
                                                                        NET
                                                        ACCUMULATED PROGRAMMING
                                            COST       AMORTIZATION    COSTS
                                          ----------   ------------ -----------
     <S>                                  <C>         <C>          <C>

     Children's programming.............  $1,289,026   $1,064,308   $  224,718
     Family programming, movies and
        mini-series.....................     562,304      328,291      234,013
     Projects in production.............      72,172           --       72,172
     Development........................       7,316           --        7,316
                                          ----------   -----------  ----------
                                          $1,930,818   $1,392,599   $  538,219
                                          ==========   ==========   ===========


</TABLE>


   Future estimated program commitments at June 30, 1999 are approximately $167
million.

     Based on the Company's estimate of future revenues, approximately 69% of
unamortized released programming costs at June 30, 1999 will be amortized during
the three years ending June 30, 2002. Interest amounting to $1,146,000,
$3,160,000, and $3,128,000 was capitalized to programming costs for the years
ended June 30, 1997, 1998 and 1999, respectively. Capitalized depreciation
expense for the years ended June 30, 1997, 1998 and 1999 amounted to
$2,023,000, $2,459,000 and $4,020,000, respectively.

5.    PROPERTY AND EQUIPMENT, NET

   Property and equipment is comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                     JUNE 30,     JUNE 30,
                                                       1998         1999
                                                     ---------   ---------
     <S>                                             <C>         <C>
     Studio and other equipment...................   $ 19,087    $ 25,424
     Satellite transponders.......................     39,596      39,596
     Office furniture and fixtures................     13,451      16,119
     Leasehold improvements.......................      6,161       7,869
     Other........................................      2,493       2,478
                                                     ---------   ---------
                                                       80,788      91,486
     Less accumulated depreciation................    (19,983)    (33,390)
                                                     ---------   ---------
                                                     $ 60,805    $ 58,096
                                                     =========   =========
</TABLE>

6.    BANK AND OTHER DEBT

   Bank and other debt is comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                          JUNE 30,    JUNE 30,
                                                            1998        1999
                                                         ----------  ----------
     <S>                                                 <C>         <C>
     Senior Notes......................................  $ 475,000   $  475,000
     Senior Discount Notes, net of unamortized
        discount of $217,038 and $174,935 at June
        30, 1998 and 1999, respectively................    401,632      443,735
     NAHI Bridge Note..................................    107,631      119,056
     Fox Subordinated Notes............................    119,448      157,399
     Citicorp USA, secured revolving line of
        credit; interest at prime rate (7.75% at
        June 30, 1999) plus 1.25% or six month
        LIBOR (5.30% at June 30, 1999) plus 2.25%;
        maximum borrowings of $355,000.................    280,000      305,000
     Citicorp USA; secured term loan facility;
        interest at prime rate (7.75% at June 30,
        1999) plus 1.25% or six month LIBOR (5.30%
        at June 30, 1999) plus 2.25%; maximum
        borrowings of $215,000.........................    340,000      215,000
     Secured lines of credit with varying due dates
        between December 12, 1999 and April 18,
        2002; maximum borrowing availability
        $11,182 at June 30, 1999; varying interest
        rates between 3.32% and 5.40%..................     20,323       10,249
     Other.............................................      2,476          876
                                                         ----------  ----------
                                                         $1,746,510  $1,726,315
                                                         ==========  ==========

</TABLE>

                                      F-16

<PAGE>


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

<TABLE>
<CAPTION>

     YEAR ENDING JUNE 30,
     <S>                                                       <C>
     2000.................................................... $    3,792
     2001....................................................     40,676
     2002....................................................     88,133
     2003....................................................    100,952
     2004....................................................    229,671
     Thereafter..............................................  1,263,091
                                                              ----------
                                                              $1,726,315
                                                              ==========

</TABLE>


   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 $215,000,000 as of
June 30, 1999, 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 will remain borrowers) and guarantee 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 intercompany indebtedness. Scheduled payments on the term loan
will begin September 28, 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
September 27, 2002, 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 or a base rate plus,
in each case, an applicable interest rate margin. 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, make certain payments and investments, make capital expenditures,
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 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.

   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.

   Cash interest on the Senior Notes will be 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.

                                      F-17

<PAGE>


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:

<TABLE>
<CAPTION>
                                                                   REDEMPTION
     YEAR                                                            PRICE
     ----                                                          ----------
     <S>                                                           <C>
     2002........................................................   104.63%
     2003........................................................   103.08%
     2004........................................................   101.54%
     2005 and thereafter.........................................   100.00%

</TABLE>


   In addition, at any time, or from time to time, on or prior to November 1,
2000, the Company may, at its option, use the net cash proceeds of (a) one or
more public equity offerings or (b) sales of qualified equity interests to
strategic equity investors resulting in gross cash proceeds to the Company of at
least $100,000,000 to redeem, on a pro rata basis, up to an aggregate of 35% of
the principal amount of the Senior Notes originally issued, at a redemption
price equal to 109.25% of the principal amount thereof plus accrued and unpaid
interest, if any, to the redemption date; provided that at least 65% of the
originally issued principal amount of Senior Notes remains outstanding
immediately after the occurrence of such redemption.

   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:

<TABLE>
<CAPTION>
                                                                  REDEMPTION
     YEAR                                                           PRICE
     ----                                                         ----------
     <S>                                                          <C>
     2002.......................................................   105.13%
     2003.......................................................   103.42%
     2004.......................................................   101.71%
     2005 and thereafter........................................   100.00%

</TABLE>

   In addition, prior to November 1, 2000, the Company may redeem up to 35% of
the originally issued principal amount at maturity of the Senior Discount Notes
at a redemption price equal to 110.25% of the accreted value of the Senior
Discount Notes so redeemed at the redemption date or, if a Cash Interest
Election has been made, 110.25% of the principal amount at maturity of the
Senior Discount Notes so redeemed, plus accrued and unpaid interest thereon, if
any, to the redemption date, with the net cash proceeds of (a) one or more
public equity offerings or (b) sales of qualified equity interests of the
Company to one or more strategic equity investors resulting in gross cash
proceeds to the Company of at least $100,000,000 in the aggregate; provided,
however, that at least 65% of the originally issued principal amount at maturity
of the Senior Discount Notes would remain outstanding immediately after giving
effect to any such redemption.

   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


                                      F-18

<PAGE>


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 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 initial Fox Subordinated Note accretes interest at the rate of 10.42% and
is due on May 1, 2008. An additional Fox Subordinated Note in the amount of $25
million was issued in June 1999 and accretes interest at the rate of 20% and is
due on June 28, 2009. The payment of principal and interest under the Fox
Subordinated Notes are subordinated in right to the obligations of the Company
and its subsidiaries under the Amended Credit Facility and the Indentures.

   On August 29, 1997, in connection with the acquisition of IFE, the Company
issued the NAHI Bridge Note to NAHI upon substantially the same terms and
conditions as the Fox Subordinated Note, except that the NAHI Bridge Note has a
principal amount of $345,500,000. The NAHI 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 NAHI Bridge Note accretes interest at a rate of
approximately 10.427% per annum. The Company may repay the NAHI 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 NAHI Bridge Note
will be subordinated in right to the obligations of the Company under the
Amended Credit Facility and the Indentures.

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 (in thousands):



                                      F-19
<PAGE>


<TABLE>
<CAPTION>
                                                          JUNE        JUNE
                                                        30, 1998    30, 1999
                                                        ---------   ---------
     <S>                                                <C>         <C>
     Deferred tax liabilities:
           Accounts receivable.......................   $  1,224    $    927
           Property and equipment....................     11,670       9,497
           Contract discount.........................      7,120       2,184
           State taxes...............................         --         103
           Other.....................................      1,684       8,037
                                                        ---------   ---------

     Total deferred tax liabilities..................     21,698      20,748
                                                        ---------   ---------
     Deferred tax assets:
           Deferred revenue..........................      6,008       1,926
           Programming costs.........................     34,909      20,362
           Accrued expenses and reserves.............     34,955      20,693
           Loss carryforwards........................     20,496      75,329
           Other.....................................      3,796       4,688
                                                        ---------   ---------
     Total deferred tax assets.......................    100,164     122,998
     Valuation allowance for deferred tax assets.....    (60,385)    (84,169)
                                                        ---------   ---------
     Deferred tax assets.............................     39,779      38,829
                                                        ---------   ---------
     Net deferred tax assets.........................   $ 18,081    $ 18,081
                                                        =========   =========

</TABLE>


   The Company currently has approximately $175,600,000 of operating loss
carryforwards which will expire at various dates through June 30, 2019.
Approximately $12,500,000 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, 1999, $84,169,000 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 $35,000,000 of the valuation allowance relates to deferred tax
assets acquired in the IFE acquisition. (See Note 3--Acquisition of
International Family Entertainment, Inc.) Accordingly, no benefit to the income
statement will be recorded if these deferred tax assets are realized.

   For financial reporting purposes, income before income taxes includes the
following components (in thousands):

<TABLE>
<CAPTION>

                                                     YEARS ENDED JUNE 30,
                                                 ------------------------------
                                                   1997       1998       1999
                                                 ---------  --------   --------
     <S>                                         <C>        <C>        <C>
     Pretax income (loss):
         United States........................   $ 31,605   $(45,733)  $(86,202)
         Foreign..............................     23,402     24,406     21,792
                                                 ---------  ---------  ---------
                                                 $ 55,007   $(21,327)  $(64,410)
                                                 =========  =========  =========

</TABLE>

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

<PAGE>


<TABLE>
<CAPTION>
                                                     YEARS ENDED JUNE 30,
                                                 -----------------------------
                                                   1997      1998      1999
                                                 ---------  -------   --------
     <S>                                         <C>        <C>       <C>
     Current:
         Federal..............................   $  3,430   $    --   $     --
         State................................       (508)       --        500
         Foreign..............................      1,881     1,766      1,489
                                                 ---------  -------   --------
                                                    4,803     1,766      1,989
     Deferred:
         Federal..............................      6,970     1,470         --
         State................................      2,794       210         --
         Foreign..............................         --        --         --
                                                 ---------  -------   --------
                                                    9,764     1,680         --
                                                 ---------  -------   --------
                                                 $ 14,567   $ 3,446   $  1,989
                                                 =========  =======   ========


</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,
                                                 -----------------------------
                                                   1997      1998      1999
                                                 ---------  -------   --------
         <S>                                     <C>        <C>       <C>
         Tax at U.S. statutory rates..........         35 %    (35)%      (35)%
         State taxes, net of federal benefit..          3       (5)        (4)
         Earnings from foreign operations
           taxed at a lower rate than the
           U.S. rate..........................        (12)     (38)       (10)
         U.S. operating loss for which no
           federal and state benefit
           was derived........................         --       23         26
         Non-deductible amortization of
           intangibles........................         --       71         24
         Other................................         --       --          2
                                                 ---------  --------  --------
                                                       26 %     16 %        3 %
                                                 =========  =======   ========


</TABLE>



                                      F-20
<PAGE>


   Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $127,800,000 at June 30, 1999. 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.

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 sixth and eighth years 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):

<TABLE>
<CAPTION>

     YEAR ENDING JUNE 30,
     --------------------
     <S>                                                        <C>
     2000....................................................    $  9,436
     2001....................................................       8,849
     2002....................................................       9,123
     2003....................................................       8,254
     2004....................................................       7,740
     Thereafter..............................................      17,484
                                                                 --------
                                                                 $ 60,886
                                                                 ========

</TABLE>

   Rent expense for the years ended June 30, 1997, 1998 and 1999, net of amounts
capitalized, was approximately $2,573,000, $5,098,000 and $6,392,000,
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.


                                      F-21

<PAGE>


  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 $50,867,000, of which $23,047,000 is
due in 2000, $14,720,000 is due in 2001, $8,322,000 is due in 2002, $2,874,000
is due in 2003, $1,614,000 is due in 2004 and $290,000 is in 2005.

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 100% 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, 1997, 1998 and 1999, was
approximately $101,000, $122,000 and $448,000, 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. IFE contributed $349,000 to the 401(k) Plan
for the year ended June 30, 1998. As of January 1, 1999, the 401(k) Plan was
terminated and the participating employee contributions were transferred to the
Company's Plan.

10.   OTHER RELATED PARTY TRANSACTIONS

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

<TABLE>
<CAPTION>
                                                     YEARS ENDED JUNE 30,
                                                 -----------------------------
                                                   1997       1998      1999
                                                 --------  ---------  --------
     <S>                                         <C>       <C>       <C>
     STATEMENT OF OPERATIONS
     Revenues...........................         $21,316   $131,980   $106,205
     Production and programming costs(1)           4,301      6,456      7,179
     Selling, general and
       administrative expenses..........           2,322      5,328      9,090
     Interest expense...................             854     23,871     24,642

</TABLE>

<TABLE>
<CAPTION>
                                                            JUNE       JUNE
                                                          30, 1998   30, 1999
                                                          ---------  ---------
     <S>                                                  <C>        <C>
     BALANCE SHEETS
     Accounts receivable from related parties..........   $ 58,043   $ 19,082
     Other assets......................................        652         --
     Accounts payable..................................      4,984      3,542
     Accrued liabilities...............................     15,984      4,775
     Deferred revenue..................................      5,577      6,185
     NAHI Bridge Note..................................    107,631    119,056
     Fox Subordinated Note.............................    119,448    157,399
     Amounts payable to related parties................      2,954    113,973
------------
<FN>
(1) Comprises satellite transponder, engineering and technical support costs.
</FN>
</TABLE>

   Receivables from related parties include advances of $4,174,000 and
$4,023,000 at June 30, 1998 and 1999, respectively, to certain non-stockholder
officers and directors of the Company.


                                      F-22

<PAGE>


   The Company distributes product to related parties in the normal course of
business, and accordingly, included in accounts receivable from related parties
are $39,578,000 and $14,045,000 due from those related parties at June 30, 1998
and 1999, respectively.

   The Company and Fox Broadcasting were parties to a Barter Syndication
Agreement dated as of January 5, 1996, pursuant to which the Company engaged Fox
Broadcasting to provide barter advertising sales for the 1997-1998 broadcast
season for the Company's syndicated programming. In consideration for the
services rendered by Fox Broadcasting to the Company, the Company agreed to pay
Fox Broadcasting a barter advertising sales fee of $840,000 for the 1997-1998
broadcast season.

   Related companies of Fox Broadcasting have funded certain of the operations
of the Company from its inception through loans to the Company. Amounts due to
the related companies of Fox Broadcasting in connection therewith, including
interest, totaled $2,954,000 and $13,973,000 at June 30, 1998 and 1999,
respectively.

   The Company broadcasts Fox Kids U.K., a cable and satellite channel via
analogue transponder. The channel is distributed as part of British Sky
Broadcasting, Group plc's ("BSkyB") Sky Multichannels DTH package. News Corp.
holds an approximately 40% interest in BSkyB, a public company. 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 will enter into an
analog transponder sublease agreement with BSkyB through February 1, 2001
subject to extension in certain circumstances requiring a financial commitment
of approximately $28,000,000 and a five-year digital transponder and uplink
sublease agreement, commencing in late 1998, requiring a financial commitment of
approximately $5,600,000. 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 Fox Kids Latin America, 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 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 a 50/50 partnership between News Corp. and the Australian telephone
company, Telstra.

   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 to charter Haim Saban's or another similar airplane for a minimum of
fifty charter hours during a twelve month period. For the twelve months ended
June 30, 1997, 1998 and 1999, the Company has paid approximately $875,000,
$730,000 and $722,000, respectively, for such services.

   The Company currently leases and distributes its entertainment properties
(e.g., motion pictures, television programs, merchandising and licensing rights)
in Israel through Duveen Trading Ltd. (Distributor), a corporation wholly-owned
by Haim Saban's brother. The term of the agreement extends through December 31,
2000, subject to extension by the Company for an additional three years. At June
30, 1998 and 1999, the Company was due $500,000 under this agreement.

   The Company is party to a music services agreement (the "Music Agreement")
with 5161 Corporation ("5161"), a corporation wholly owned by Haim Saban, the
Chief Executive Officer of the Company. 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.


                                      F-23

<PAGE>


The Company creates and owns all right, title and interest 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 receives no payment from the
Company but is entitled to receive all publishing income derived from the
exploitation of such compositions. 5161 does reimburse the Company for certain
costs associated with the creation of the compositions, which amounted to
$374,000, $451,000 and $301,000, respectively, for the years ended June 30,
1997, 1998 and 1999. At June 30, 1998 and 1999, approximately $378,000 and
$126,000, respectively, was owed to 5161 by the Company in connection with
royalties collected by the Company on behalf of 5161.

   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, a wholly owned subsidiary of Tele-Communications,
Inc. 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, a division of Fox,
Inc. ("Fox Television"), distribution rights to the New World Communications
Group Incorporated's ("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 agreed to acquire 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.

   Pursuant to a Guaranty of Lease entered into on August 1, 1997 (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 $8.6 million, to be reduced annually over five 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 has 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 will contribute 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


                                      F-24

<PAGE>


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 $8,000,000 through June 30, 1999.

   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 ("LLC") in exchange for a 50%
equity interest in the LLC. The subsidiary of News Corp. agreed to contribute
$20,000,000 in cash to the LLC in exchange for its 50% equity interest in the
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 proceeds
were received as of June 30, 1999. Subsequent to June 30, 1999, the Company
received $15,000,000 of the $20,000,000 contribution. No gain or loss will be
recorded by the Company related to this transaction.

   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 non-voting Class B Common Stock (the "Stock"). The Stock will
be issued to Fox Broadcasting in connection with an initial public offering of
common stock, a private sale of shares of the capital stock of FKEH to an
unaffiliated third party, and subsequent public offering of the Company's common
stock or any subsequent private sale (each an "Event"). In the event that an
Event does not occur, FKEH's Stock will not be issued to Fox Broadcasting;
however, Fox Broadcasting may hold the Subscription Rights indefinitely. Fox
Broadcasting does not have any claim on FKEH or its assets other than in an
Event as provided specifically in the Subscription Agreement. In addition, in
June 1999, Fox entered into an exchange agreement with the Company pursuant to
which Fox Broadcasting has 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. If this
conversion right is exercised, interest will begin 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 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.

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 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.


                                      F-25

<PAGE>


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

<TABLE>
<CAPTION>
                             PRODUCTION
                                AND
                            DISTRIBUTION  BROADCASTING    OTHER       TOTAL
                            ------------  ------------  ----------  ----------
    <S>                     <C>           <C>           <C>         <C>
    Year Ended June 30,
    1999:
      Revenues.............    $ 204,321    $  429,610   $   1,342  $  635,273
      Income (loss)
        before income
        taxes, interest,
        depreciation and
        amortization of
        intangibles........       54,314       112,921     (12,021)    155,214
      Identifiable assets..      587,672       304,680      39,670     932,022
      Intangible assets,
        net................           --     1,539,852          --   1,539,852
      Capital expenditures.        7,957         2,790         647      11,394
      Depreciation expense.        1,491         8,432         160      10,083

    Year Ended  June 30,
    1998:
      Revenues.............    $ 240,538    $  423,060   $     860  $  664,458
      Income (loss)
        before income
        taxes, interest,
        depreciation and
        amortization of
        intangibles........       57,737       117,825     (15,960)    159,602
      Identifiable assets..      573,143       293,117      55,478     921,738
      Intangible assets,
        net................           --     1,594,286          --   1,594,286
      Capital expenditures.        7,667         1,782       1,066      10,515
      Depreciation expense.        1,047         8,234          89       9,370

    Year Ended June 30,
    1997:
      Revenues.............    $ 163,297    $  144,356   $     167  $  307,820
      Income (loss)
        before income
        taxes, interest,
        depreciation and
        amortization of
        intangibles........       59,445         5,297      (6,306)     58,436
      Identifiable assets..      314,330        76,461      21,610     412,401
      Intangible assets,
        net................           --            --          --          --
      Capital expenditures.        2,057         1,362          16       3,435
      Depreciation expense.          899           304          --       1,203

</TABLE>

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

<TABLE>
<CAPTION>
                                                YEARS ENDED JUNE 30,
                                        -----------------------------------
                                           1997         1998        1999
                                        -----------  ----------  ----------
     <S>                                <C>          <C>         <C>
     Income (loss) before income
       taxes, interest,
       depreciation and amortization
       of intangibles.................    $  58,436   $ 159,602   $ 155,214
     Amortization of intangibles......           --     (37,557)    (40,434)
     Interest expense.................       (2,226)   (134,002)   (169,107)
     Depreciation.....................       (1,203)     (9,370)    (10,083)
     Provision for income taxes.......      (14,567)     (3,446)     (1,989)
                                         -----------  ----------  ----------
     Net income (loss)................    $  40,440   $ (24,773)  $ (66,399)
                                         ===========  ==========  ==========


</TABLE>


                                      F-26

<PAGE>


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

<TABLE>
<CAPTION>
                                                  YEARS ENDED JUNE 30,
                                          ------------------------------------
                                             1997         1998        1999
                                          ----------   ----------  -----------
                                                    (IN THOUSANDS)
   <S>                                    <C>          <C>         <C>
   REVENUES
        United States.................    $ 199,575    $ 524,076   $  474,629
        Europe........................      107,522      131,145      151,995
        Central and South America.....          723        9,237        8,649
                                          ==========   ==========  ===========
                                          $ 307,820    $ 664,458   $  635,273
                                          ==========   ==========  ===========


                                                  YEARS ENDED JUNE 30,
                                          ------------------------------------
   IDENTIFIABLE AND INTANGIBLE ASSETS        1997         1998        1999
                                          ----------   ----------  -----------
                                                    (IN THOUSANDS)

        United States.................     $ 153,560   $2,213,103   $2,076,243
        Europe........................       257,398      301,288      394,696
        Central and South America.....         1,443        1,633          935
                                           ==========  ===========  ===========
                                           $ 412,401   $2,516,024   $2,471,874
                                           ==========  ===========  ===========

</TABLE>


For the year ended June 30, 1997, the Company earned revenues from one
significant customer of approximately $35,500,000 (12%) and also earned revenues
from one significant property (Power Rangers) of $70,810,000 (23%). The Company
had no significant customers or significant properties for the years ended June
30, 1998 and 1999.

12.   CAPITAL STOCK

  COMMON STOCK

   The authorized capital stock of the Company consists of 16,000,000 shares of
Class A Common Stock, 16,000,000 shares of Class B Common Stock and 20,000,000
shares of Preferred Stock, of which 500,000 shares have been designated as
Series A Preferred Stock. As of June 30, 1998 and 1999, 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.


                                      F-27

<PAGE>

   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. 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.

  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. These options vest ratably over five
years and are exercisable at prices ranging from $12.37 to $34.02 per share. No
options have been exercised at June 30, 1999. 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 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 selling, general and administrative expenses for the years ended
June 30, 1997, 1998 and 1999 is $3,760,0000, $0 and $0, respectively, and in
accrued liabilities at June 30, 1998, and 1999 is $16,040,000 and $13,040,000,
respectively, related to compensation recorded in connection with these options.

   As of June 30, 1999, 646,548 shares of Class A Common Stock are reserved for
future issuance related to options.

  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 (or the "Liberty
Preferred") 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


                                      F-28

<PAGE>

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 ("Liberty Media") 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 have
voting rights, except as required by law, nor will stockholders of Series A
Mandatorily Redeemable Preferred Stock have preemptive rights over any stock or
securities that may be issued by the Company.

  STOCK BASED COMPENSATION

   The Company has elected to follow  Accounting  Principles Board Opinion No.
25,  "Accounting for Stock Issued to Employees,"  and related  Interpretations
in accounting for its employee stock options.

   Pro forma information regarding net income and earnings per share as required
by FASB Statement No. 123, "Accounting for Stock-Based Compensation," has been
determined as if the Company had accounted for its employee stock options under
the fair value method of that Statement. The fair value for these options 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 these options is 6.5 years.

   The minimum value valuation method 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 its employee stock options.

   The pro forma net income (loss) determined as if the Company had accounted
for its employee stock options under the fair value method would be $39,915,000,
$(25,298,000) and $(66,924,000) for the years ended June 30, 1997, 1998 and
1999, respectively.


                                      F-29
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Fox Family Worldwide, Inc.:

     We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Fox Family Worldwide, Inc. and its
subsidiaries as of and for the years ended June 30, 1998 and 1999 included in
this Report on Form 10-K and have issued our report thereon dated September 16,
1999. Our audit was 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 Commissions 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 16, 1999


                                       S-1

<PAGE>

        SCHEDULE 1 -- CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

                          FOX FAMILY WORLDWIDE, INC.
                                 (PARENT ONLY)

                                BALANCE SHEETS

<TABLE>
<CAPTION>
                                                          JUNE 30,
                                                   -----------------------
                                                     1998          1999
                                                   ---------    ----------
                                                         IN THOUSANDS,
                                                      EXCEPT SHARE DATA
<S>                                               <C>          <C>
ASSETS:
Cash and cash equivalents........................ $     6,939   $        37
Investments in and advances to subsidiaries......   1,454,652     1,455,476
Other assets, net.... ...........................      28,552        25,314
                                                  -----------   -----------
    Total assets................................. $ 1,490,143   $ 1,480,827
                                                  ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
 Accounts payable................................ $        --   $       443
 Accrued liabilities.............................      11,036         7,937
 NAHI Bridge Note................................     107,631       119,056
 Fox Subordinated Note...........................     119,448       157,399
 Senior Notes....................................     475,000       475,000
 Senior Discount Notes, net of unamortized
  discount of $217,038 and $174,935
  at June 30, 1998 and 1999, respectively........     401,632       443,735
                                                  -----------   -----------
    Total liabilities............................   1,114,747     1,203,570
                                                  -----------   -----------

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' EQUITY (DEFICIT):
 Preferred Stock, $0.001 par value; 19,500,000
  shares authorized; no shares issued
  and outstanding................................          --            --
 Class A Common Stock, $0.0001 par value;
  16,000,000 shares authorized, 160,000 shares
  issued and outstanding at June 30, 1998
  and 1999, respectively.........................          --            --
 Class B Common Stock, $0.0001 par value;
  16,000,000 shares authorized, 15,840,000 shares
  issued and outstanding at June 30, 1998
  and 1999, respectively.........................          16            16
Contributed capital..............................      60,731        60,731
Accumulated other comprehensive loss.............      (1,201)       (1,893)
Accumulated deficit..............................     (29,150)     (126,597)
                                                  ------------  ------------
     Total stockholders' equity (deficit)........      30,396       (67,743)
                                                  ------------  ------------
     Total liabilities and stockholders'
        equity (deficit)......................... $ 1,490,143   $ 1,480,827
                                                  ============  ============

</TABLE>


                            See accompanying notes

                                       S-2

<PAGE>


                          FOX FAMILY WORLDWIDE, INC.
                                 (PARENT ONLY)
<TABLE>
<CAPTION>
                           STATEMENTS OF OPERATIONS

                                                   YEARS ENDED JUNE 30,
                                                   --------------------
                                                     1998       1999
                                                   ---------  ---------
                                                       IN THOUSANDS
<S>                                                <C>       <C>
Revenues:
    Equity in income of subsidiaries.............  $ 86,382   $ 55,700
    Other........................................       861        135
                                                   ---------  ---------
       Total revenue.............................    87,243     55,835
 Costs and expenses:
    Selling, general and administrative..........     8,470      6,172
    Depreciation.................................       157        133
    Interest expense.............................    99,943    113,940
                                                   ---------  ---------
 Loss before provision for income taxes..........   (21,327)   (64,410)
 Provision for income taxes......................     3,446      1,989
                                                   ---------  ---------
 Net loss........................................  $(24,773)  $(66,399)
                                                   =========  =========

</TABLE>



                            See accompanying notes


                                      S-3

<PAGE>


                          FOX FAMILY WORLDWIDE, INC.
                                (PARENT ONLY)

<TABLE>
<CAPTION>
                           STATEMENTS OF CASH FLOWS

                                                    YEARS ENDED JUNE 30,
                                                   ----------------------
                                                     1998         1999
                                                   ---------    ---------
                                                      IN THOUSANDS
<S>                                               <C>         <C>
OPERATING ACTIVITIES:
Net loss......................................... $  (24,773)   $ (66,399)
Adjustments to reconcile net loss to net cash
  used in operating activities:
  Equity gains on investments, net...............    (86,382)     (55,700)
  Amortization of debt issuance costs............      2,453        3,253
  Depreciation expense...........................        157          133
  Non-cash interest expense......................     50,410       66,746
  Increase in other assets.......................    (30,691)      (1,069)
  Increase  (decrease)  in  accounts  payable
   and accrued liabilities.......................     11,036       (2,656)
                                                  -----------   ----------
       Net cash used in operating activities         (77,790)     (55,692)
                                                  -----------   ----------
INVESTING ACTIVITIES:
    Purchase of property and equipment...........       (868)        (410)
    Acquisition of International Family
       Entertainment, Inc........................ (1,370,076)          --
    Cash acquired in acquisition.................     19,296           --
                                                  -----------   ---------
       Net cash used in investing activities..... (1,351,648)        (410)
                                                  -----------   ---------
FINANCING ACTIVITIES:
    Proceeds from NAHI Bridge Loan...............   345,514           --
    Paydown of NAHI Bridge Loan..................  (250,886)        (267)
    Issuance of Senior Notes.....................   475,000           --
    Issuance of Senior Discount Notes............   375,001           --
    Proceeds from Fox Subordinated Note..........        --       25,000
    Issuance of Common Stock.....................        10           --
    Dividends on Preferred Stock.................   (28,412)     (31,048)
    Net intercompany advances....................   520,150       55,515
                                                  ----------    ---------
       Net cash provided by financing activities. 1,436,377       49,200
                                                  ----------    ---------
Increase (decrease) in cash and cash equivalents.     6,939       (6,902)
Cash and cash equivalents, beginning of year.....        --        6,939
                                                  ----------    ---------
Cash and cash equivalents, end of year..........  $   6,939     $     37
                                                  ==========    =========

</TABLE>


SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INVESTMENT ACTIVITIES (IN THOUSANDS):


  YEAR ENDED JUNE 30, 1998

     The Company issued a subordinated note to Fox Broadcasting ("Fox") in the
amount of $108,672 in exchange for Fox's $50,000 Preferred Class A Members
Interest in the LLC, its $50,000 contingent note receivable and certain other
Company obligations Preferred Stock in the amount of $345,000 was issued in
connection with the acquisition of International Family Entertainment, Inc.

  YEAR ENDED JUNE 30, 1999

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



                            See accompanying notes

                                       S-4

<PAGE>


                           FOX FAMILY WORLDWIDE, INC.
                                  (PARENT ONLY)

                          NOTES TO FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION

     The accompanying 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 Financial Statements.

2.    DEBT

      Information relating to the NAHI Bridge Note, Fox Subordinated Notes,
Senior Notes and Senior Discount Notes is contained in Note 6 to the 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 Financial Statements.


                                       S-5

<PAGE>


                          SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                          ADDITIONS
                                                    -----------------------
                                          BALANCE    CHARGED   ACQUIRED OR
                                            AT         TO        CHARGED                   BALANCE
                                         BEGINNING  COSTS AND    TO OTHER                  AT END
        DESCRIPTION                       OF YEAR    EXPENSES    ACCOUNTS    DEDUCTIONS    OF YEAR
                                         ---------  ---------  -----------   ----------   ---------
                                                             (IN THOUSANDS)
<S>                                       <C>       <C>          <C>           <C>         <C>
Year ended June 30, 1997
   Allowance for doubtful
   accounts..........................      $ 1,690   $   200       $    --     $  (480)     $ 1,410

Year ended June 30, 1998
   Allowance for doubtful
    accounts.........................        1,410       (27)          211          --        1,594
   Reserve for severance and
    related costs under
    acquisition......................           --    36,500            --     (19,850)      16,650

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

</TABLE>


                                       S-6