FOX LIBERTY NETWORKS LLC, 10-K405, 1999-03-31

FOX LIBERTY NETWORKS LLC
10-K405, 1999-03-31
CABLE & OTHER PAY TELEVISION SERVICES

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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Form 10-K

[X]Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the fiscal year ended December 31, 1998.

or
[_]Transition report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 for transition period from to .

Commission File No. 333-38689

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FOX/LIBERTY NETWORKS, LLC
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
Delaware 95-4577574
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

1440 South Sepulveda Boulevard, Los Angeles, CA 90025
(Address of principal executive offices)

Registrant's telephone number, including area code: (310) 444-8123

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

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

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Indicate by check mark whether the Registrant has (1) 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) 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 the close of the period
covered by this report: None

Documents incorporated by reference: None

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This document contains statements that constitute "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended, and Section 27A of the Securities Act of 1933, as
amended. The words "expect," "estimate," "anticipate," "predict," "believe"
and similar expressions and variations thereof are intended to identify
forward-looking statements. These statements appear in a number of places in
this document and include statements regarding the intent, belief or current
expectations of the Company, its members or its officers with respect to,
among other things, trends affecting the Company's financial condition or
results of operations. The readers of this document are cautioned that any
such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, including those risks and uncertainties
discussed in this document under the headings "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company does not ordinarily make projections of its future operating results
and undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. Readers should carefully review the risk factors discussed herein
and in the other documents filed by the Company with the Securities and
Exchange Commission. This report should be read in conjunction with the
audited consolidated financial statements of the Company and related notes set
forth elsewhere herein.

PART I

Item 1. Business

Background

Fox/Liberty Networks, LLC, a limited liability company organized under the
laws of the State of Delaware in April 1996, (together with its subsidiaries,
the "Company") is the largest regional sports network ("RSN") programmer in
the United States, focusing on live professional and major collegiate home
team sports events. Fox/Liberty Networks, LLC is a holding company which
provides cable programming through its sports programming operations,
consisting of interests in RSNs and Fox Sports Net ("FSN"), a national sports
programming service that provides its affiliated RSNs with 24 hour per day
national sports programming featuring live and replay sporting events and
original programming, a national sports news program, Fox Sports News, and
other national sports programming services and through FX Network ("FX"), a
general entertainment network.

The Company is a 50%/50% joint venture (the "Fox/Liberty Joint Venture")
between Fox Entertainment Group, Inc. ("Fox"), a majority-owned subsidiary of
The News Corporation Limited ("News Corporation"), and Liberty Media
Corporation ("Liberty"), a wholly-owned subsidiary of Tele-Communications,
Inc. ("TCI"). The Fox/Liberty Joint Venture was formed in April 1996.

In December 1997, the Company consummated a transaction (the "Rainbow
Transaction") with Rainbow Media Sports Holdings, Inc. ("Rainbow"), an
indirect subsidiary of Cablevision Systems Corporation ("Cablevision"),
pursuant to which (i) the Company acquired a 40% interest in Regional
Programming Partners ("RPP") which was formed to hold interests in Rainbow's
then existing RSNs and Madison Square Garden, L.P. (which, in addition to
owning two RSNs, owns the Madison Square Garden entertainment complex, Radio
City Productions LLC, the New York Rangers, a professional hockey team, and
the New York Knicks, a professional basketball team), (ii) the Company and
Rainbow formed National Sports Partners (the "National Sports Partnership") as
a 50%/50% partnership to operate FSN and (iii) the Company and Rainbow formed
National Advertising Partners (the "National Advertising Partnership") as a
50%/50% partnership to act as a national advertising sales representative for
the RSNs which are affiliated with FSN. RPP is managed by Rainbow, while the
National Sports Partnership and the National Advertising Partnership are
managed by the Company.

The Company's interests in the sports programming business are derived
through its 99% ownership interests in Fox Sports Net, LLC ("Fox/Liberty
Sports") and Fox Sports RPP Holdings, LLC ("Fox Sports RPP"), and its interest
in FX is derived through its 99% ownership interest in FX Networks, LLC
("Fox/Liberty FX"). The remainder of the interests in these entities are held
by affiliates of Fox and Liberty.

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Overview

The Company owns and operates 12 RSNs (the "O&O RSNs") and has direct or
indirect equity interests ranging from 12% to 70% in an additional nine RSNs
(together with the O&O RSNs, the "Company's RSNs"). The Company's RSNs are
complemented by FSN, which provides national programming for distribution by
RSNs. The O&O RSNs have rights to telecast live games of 37 professional
sports teams in the National Basketball Association (the "NBA"), the National
Hockey League (the "NHL"), Major League Baseball ("MLB") and numerous
collegiate sports teams. Because of their home team programming, RSNs have
strong local appeal in their respective markets, generating high prime time
ratings and attractive subscriber fees from cable operators. The Company's
strategy is to utilize its RSNs to build a national cable sports network under
the "FOX" brand name based on a "broadcast network affiliate" model.

The Company owns interests in, or is affiliated with, 25 RSNs. These RSNs
have rights to telecast live games of 73 professional sports teams in the NBA,
NHL and MLB (out of a total of 76 such teams in the United States) and
numerous collegiate sports teams to approximately 62 million households out of
a total of approximately 75 million households receiving basic cable or direct
to home ("DTH") satellite service.

The Company also owns and operates FX, a general entertainment network
reaching approximately 37.9 million cable households. The Company also owns
interests in various other entertainment and programming related businesses
which it believes are complementary to its principal businesses.

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Regional Sports Networks

The following table lists the O&O RSNs, the Company's ownership interests in
such RSNs, such RSNs' primary DMAs, the approximate number of cable
subscribers for each of the O&O RSNs (as of December 31, 1998), and the
professional sports teams with which each O&O RSN has sports programming
rights agreements.

<TABLE>
<CAPTION>
Ownership Subscribers
RSN Interest(1) DMA (in millions) Team (League)
--- ----------- --- ------------- -------------
<S> <C> <C> <C> <C>
Fox Sports 100% Dallas/ 5.1 Dallas Mavericks (NBA)
Southwest Ft. Worth; Dallas Stars (NHL)
Houston; Houston Astros (MLB)
San Antonio Houston Rockets (NBA)
San Antonio Spurs (NBA)
Texas Rangers (MLB)

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Fox Sports 100% Los Angeles; 4.0 Los Angeles Lakers (NBA)
West San Diego Anaheim Angels (MLB)
Los Angeles Kings (NHL)

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Fox Sports 100% Los Angeles; 2.5 Los Angeles Clippers (NBA)
West2 San Diego Mighty Ducks of Anaheim (NHL)
Los Angeles Dodgers (MLB)

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Fox Sports 100% Pittsburgh 2.0 Pittsburgh Pirates (MLB)
Pittsburgh Pittsburgh Penguins (NHL)

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Fox Sports 100% Denver; 2.1 Denver Nuggets (NBA)
Rocky Kansas City Colorado Avalanche (NHL)
Mountain Colorado Rockies (MLB)
Kansas City Royals (MLB)

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Fox Sports 100% Seattle/Tacoma; 2.1 Seattle Mariners (MLB)
Northwest Portland Seattle SuperSonics (NBA)

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Fox Sports
Utah 100% Salt Lake City 0.6 Utah Jazz (NBA)

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Fox Sports 100% St. Louis; 1.5 St. Louis Cardinals (MLB)
Midwest Indianapolis St. Louis Blues (NHL)
Indiana Pacers (NBA)

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Fox Sports 100% Phoenix/Tucson 1.1 Arizona Diamondbacks (MLB)
Arizona Phoenix Coyotes (NHL)

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Fox Sports 100% Detroit 2.3 Detroit Red Wings (NHL)
Detroit Detroit Pistons (NBA)
Detroit Tigers (MLB)

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Fox Sports 88% Atlanta; Charlotte 6.3 Atlanta Braves (MLB)
South Atlanta Hawks (NBA)
Charlotte Hornets (NBA)
Carolina Hurricanes (NHL)
Nashville Predators (NHL)

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Sunshine 56.4% Tampa/ 3.8 Tampa Bay Lightning (NHL)
Network St. Petersburg/ Miami Heat (NBA)
Sarasota; Miami/ Orlando Magic (NBA)
Ft. Lauderdale;
Orlando
</TABLE>

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(1) The Fox/Liberty Joint Venture consists of numerous limited liability
companies, general and limited partnerships and corporations. For a
variety of tax and corporate reasons, the equity ownership of individual
entities in the chain of entities holding interests in RSNs and FX
include interests held directly by affiliates of Liberty and Fox. See
"Business--Certain Arrangements Regarding Ownership Interests."

In addition, a contract with MLB allows the Company to nationally telecast
26 MLB games per year on each of FX and FSN.

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The following table lists the non-managed RSNs in which the Company owns
equity interests, the Company's ownership interests in such RSNs, the primary
DMAs in which such RSNs operate, the approximate number of subscribers of such
RSNs (as of December 31, 1998), and the professional sports teams with which
each RSN has sports programming rights agreements.

<TABLE>
<CAPTION>
Ownership Subscribers
RSN Interest(1) DMA (in millions) Team (League)
--- ----------- --- ------------- -------------
<S> <C> <C> <C> <C>
Fox Sports 70% Chicago 3.1 Chicago Bulls (NBA)
Chicago Chicago Blackhawks (NHL)
Chicago White Sox (MLB)
Chicago Cubs (MLB) (2)

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Home Team 34.3% Washington, DC; 4.3 Washington Capitals (NHL)
Sports Baltimore Washington Wizards (NBA)
Baltimore Orioles (MLB)

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Fox Sports 70% San Francisco/ 2.8 San Francisco Giants (MLB)
Bay Area Oakland/San Jose; Oakland A's (MLB)
Sacramento/ Golden State Warriors (NBA)
Stockton/Modesto San Jose Sharks (NHL)
Sacramento Kings(NBA)

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Fox Sports 20% Boston; 2.9 Boston Celtics (NBA)
New England Providence;
Hartford

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SportsChannel 12% Tampa/ 3.0 Florida Marlins (MLB)
Florida St. Petersburg/Sarasota; Florida Panthers (NHL)
Miami/ Tampa Bay Devil Rays (MLB)
Ft. Lauderdale;
Orlando/Daytona/
Melbourne

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Fox Sports 40% Cleveland; 2.1 Cleveland Indians (MLB)
Ohio Columbus Cleveland Cavaliers (NBA)

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Fox Sports 40% Cincinnati 2.4 Cincinnati Reds (MLB)
Cincinnati

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Fox Sports 38.5% New York City 4.3 New York Mets (MLB)
New York New Jersey Nets (NBA)
New York Islanders (NHL)
New Jersey Devils (NHL)

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MSG Network 38.5% New York City 7.1 New York Yankees (MLB)
New York Knicks (NBA)
New York Rangers (NHL)
</TABLE>

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(1) All ownership interests are indirect.

(2) Rights to telecast games beginning in the 1999 season.

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The following table lists third-party-owned RSNs currently affiliated with
FSN, the primary DMAs in which such RSNs operate and the professional sports
teams currently associated with such RSNs.

<TABLE>
<CAPTION>
RSN DMA Team (League)
--- --- -------------
<S> <C> <C>
Comcast Philadelphia Philadelphia Phillies (MLB)
SportsNet Philadelphia 76ers (NBA)
Philadelphia Flyers (NHL)

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Midwest Sports Minneapolis/ Minnesota Twins (MLB)
Channel St. Paul; Milwaukee Brewers (MLB)
Milwaukee Minnesota Timberwolves (NBA)
Milwaukee Bucks (NBA)

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Empire Buffalo Buffalo Sabres (NHL)

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New England Boston Boston Red Sox (MLB)
Sports Network(1) Boston Bruins (NHL)
</TABLE>

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(1) It is anticipated that FSN will enter into a primary affiliation agreement
with Fox Sports New England upon the expiration (December 31, 1999) or
earlier termination of its existing affiliation agreement with New England
Sports Network.

Owned and Operated RSNs

The Company manages, and, together with affiliates of Fox and Liberty, owns
100% of, the following FSN-affiliated RSNs:

Southwest. Launched in 1983, the Southwest RSN's coverage area includes
Texas, Oklahoma, Arkansas, Louisiana and parts of New Mexico. As of
December 31, 1998, there were approximately 5.1 million subscribers,
representing 91% penetration of total basic cable subscribers in the
region. The Southwest RSN currently has professional rights agreements with
the Dallas Mavericks (NBA), the Houston Astros (MLB), the Dallas Stars
(NHL), the San Antonio Spurs (NBA), the Houston Rockets (NBA) and the Texas
Rangers (MLB) and collegiate contracts covering the Big 12.

West/West2. Launched in 1985, the West RSN's coverage area includes
southern California, Nevada and Hawaii. As of December 31, 1998, there were
approximately 4.0 million subscribers, representing 99% penetration of
total basic subscribers in the region. The West RSN currently has
professional rights agreements with the Los Angeles Lakers (NBA), the Los
Angeles Kings (NHL) and the Anaheim Angels (MLB) as well as collegiate
contracts covering the University of Southern California, the University of
California/Los Angeles and other PAC-10 teams.

The West2 RSN, a second channel in the southern California region, was
launched by the Company on January 31, 1997. As of December 31, 1998, there
were approximately 2.5 million subscribers, representing 99% penetration of
total basic subscribers in the region. The West2 RSN currently has
professional rights agreements with the Los Angeles Dodgers (MLB), the
Anaheim Mighty Ducks (NHL) and the Los Angeles Clippers (NBA).

Pittsburgh. Launched in 1986, the Pittsburgh RSN's coverage area includes
Pennsylvania, eastern Ohio, West Virginia and parts of New York and
Maryland. As of December 31, 1998, there were approximately 2.0 million
subscribers, representing 86% penetration of total basic subscribers in the
region. The Pittsburgh RSN currently has professional rights agreements
with the Pittsburgh Pirates (MLB) and the Pittsburgh Penguins (NHL) and
collegiate sublicenses for games of the University of Pittsburgh and The
Pennsylvania State University. In October 1998, Pittsburgh Hockey
Associates, the owner of the Pittsburgh Penguins, filed a voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy Code. A
reorganization plan has not yet been approved. The Company believes that
the Pittsburgh RSN will maintain its rights to telecast Pittsburgh Penguins
games throughout and following the reorganization process either under its
current telecast rights agreement, or under a new telecast rights agreement
with the current or any new ownership group. However, because of
uncertainties inherent in the bankruptcy process, there is no assurance
that the Pittsburgh RSN will maintain its current rights, the loss of which
could have a material adverse effect on the Pittsburgh RSN's business,
financial position and results of operations.

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Rocky Mountain. Launched in 1988, the Rocky Mountain RSN's coverage area
includes Colorado, Kansas, Missouri, Nebraska, New Mexico, South Dakota and
Wyoming. As of December 31, 1998, there were approximately 2.1 million
subscribers, representing 94% penetration of total basic subscribers in the
region. The Rocky Mountain RSN currently has professional rights agreements
with the Denver Nuggets (NBA), the Colorado Avalanche (NHL), the Colorado
Rockies (MLB) and the Kansas City Royals (MLB) and collegiate contracts
covering the Big 12 and Western Athletic Conferences.

Northwest. Launched in 1988, the Northwest RSN's coverage area includes
Washington, Oregon, Idaho, Alaska and western Montana. As of December 31,
1998, there were approximately 2.1 million subscribers, representing 94%
penetration of total basic subscribers in the region. The Northwest RSN
currently has professional rights agreements with the Seattle Mariners
(MLB) and the Seattle SuperSonics (NBA) and collegiate contracts covering
University of Washington, Washington State University, the University of
Oregon, Oregon State University and the Big Sky Conference.

Utah. Launched in 1989, the Utah RSN's coverage area includes Utah,
southern Idaho, Montana, Nevada and western Wyoming. As of December 31,
1998, there were approximately 0.6 million subscribers, representing 94%
penetration of total basic subscribers in the region. The Utah RSN
currently has a professional rights agreement with the only professional
sports team in the region, the Utah Jazz (NBA), and collegiate contracts
covering the Western Athletic and Big Sky Conferences.

Midwest. Launched in 1989, the Midwest RSN's coverage area includes
Missouri, Indiana, Kentucky, Ohio, eastern Wisconsin and southern Illinois.
As of December 31, 1998, there were approximately 1.5 million subscribers,
representing 96% penetration of total basic subscribers in the region. The
Midwest RSN currently has professional rights agreements with the St. Louis
Cardinals (MLB), the Indiana Pacers (NBA) and the St. Louis Blues (NHL) and
collegiate contracts covering the Big 12 Conference.

Arizona. Launched in 1996, the Arizona RSN's coverage area includes
Arizona and parts of Nevada. As of December 31, 1998, there were
approximately 1.1 million subscribers, representing essentially 100%
penetration of total basic subscribers in the region. The Arizona RSN has
professional rights agreements with the Phoenix Coyotes (NHL) and the
Arizona Diamondbacks (MLB) and collegiate contracts covering the University
of Arizona, Arizona State University and other PAC-10 teams.

Detroit. Launched in September 1997, the Detroit RSN, as of December 31,
1998, had approximately 2.3 million subscribers, representing 97%
penetration of total basic subscribers in the region. The Detroit RSN's
coverage area includes Michigan and northern Ohio. The Detroit RSN has
professional rights agreements with the Detroit Red Wings (NHL), the
Detroit Pistons (NBA) and the Detroit Tigers (MLB) and collegiate contracts
covering teams from the Big 10 Conference.

The Company manages, and, together with affiliates of Fox and Liberty, owns
substantial equity interests in, the following RSNs:

South. The Company owns 88% of the South RSN and the remaining 12% of the
South RSN is owned by E.W. Scripps Company. Launched in 1990, the South
RSN's coverage area includes Georgia, Alabama, Kentucky, Mississippi, North
Carolina, South Carolina and Tennessee. As of December 31, 1998, there were
approximately 6.3 million total subscribers, representing 98% penetration
of total basic subscribers in the region. The South RSN currently has
professional rights agreements with the Atlanta Braves (MLB), the Atlanta
Hawks (NBA), the Charlotte Hornets (NBA), the Nashville Predators (NHL) and
the Carolina Hurricanes (NHL) and collegiate contracts covering the South
East and Atlantic Coast Conferences. See "Business--Certain Arrangements
Regarding Ownership Interests."

Sunshine. The Company owns 56.4% of the Sunshine RSN and the remaining
43.6% of the Sunshine RSN is owned by various Multiple System Operators
("MSOs") operating in the region, including Comcast Corporation and Media
One. In October 1998, the Company purchased additional ownership interests
in the Sunshine RSN from Time Warner Entertainment. Launched in 1988, the
Sunshine RSN coverage area includes most of Florida. As of December 31,
1998, there were approximately 3.8 million subscribers, representing 98%
penetration of total basic subscribers in the region. The Sunshine RSN
currently has

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professional rights agreements with the Orlando Magic (NBA), the Miami Heat
(NBA) and the Tampa Bay Lightning (NHL) and collegiate contracts covering
the University of Florida, Florida State University and the University of
Miami. See "Business--Certain Arrangements Regarding Ownership Interests."

Non-Managed RSNs

The Company owns equity interests in, but does not manage, the following
RSNs:

Chicago. The Company directly owns 50% of the Chicago RSN and owns an
additional 20% of the Chicago RSN indirectly through RPP. A subsidiary of
RPP currently owns 50% of the Chicago RSN and is the managing partner.
Launched in 1986 and affiliated with FSN since January 1998, the Chicago
RSN's coverage area includes Illinois, Iowa, Indiana and Wisconsin. As of
December 31, 1998, there were approximately 3.1 million subscribers,
representing 96% penetration of total basic subscribers in the region.
Featured teams in this region include the Chicago Bulls (NBA), the Chicago
Blackhawks (NHL) and the Chicago White Sox (MLB). The Chicago RSN recently
entered into a telecast rights agreement with the Chicago Cubs (MLB) which
commences in the 1999 season. Collegiate contracts cover DePaul University
as well as the Big 10 Conference.

D.C./Baltimore. The Company owns 34.3% of the D.C./Baltimore RSN, which
operates under the name Home Team Sports ("HTS"), and the remaining 65.7%
of the D.C./Baltimore RSN is owned by Group W. Launched in 1984 and
affiliated with FSN since 1996, the D.C./Baltimore RSN's coverage area
includes Maryland, parts of Washington, D.C., Delaware and Virginia. As of
December 31, 1998, there were approximately 4.3 million subscribers,
representing 97% penetration of total basic subscribers in the region.
Featured teams include the Baltimore Orioles (MLB), the Washington Capitals
(NHL) and the Washington Wizards (NBA), and college contracts covering
teams in the Big East Conferences, Atlantic Coast Conference and Colonial
Athletic Association.

Bay Area. The Company directly owns 50% of the Bay Area RSN and owns an
additional 20% of the Bay Area RSN through RPP. A subsidiary of RPP
currently owns 50% of the Bay Area RSN and is the managing partner.
Launched in 1990 and affiliated with FSN since January 1998, the Bay Area
RSN's coverage area includes northern California, southern Oregon, Hawaii
and northern Nevada. The Bay RSN area carries all FSN programming, with the
exception of PAC-10 football and basketball. The PAC-10 programming will
continue to be broadcast by Bay TV, a third-party-owned broadcast station
in the region formerly affiliated with FSN, through December 31, 1999. As
of December 31, 1998, there were approximately 2.8 million subscribers,
representing 90% penetration of total basic subscribers in the region.
Featured professional teams include the San Francisco Giants (MLB), the
Oakland A's (MLB), the Golden State Warriors (NBA), the Sacramento Kings
(NBA) and the San Jose Sharks (NHL), while collegiate contracts cover
Stanford University and the University of California, Berkeley.

Through its 40% ownership interest in RPP, the Company holds indirect
ownership interests, in the following RSNs:

New England. RPP manages and owns 50% of the New England RSN. Launched in
1984, the New England RSN's coverage area includes Massachusetts, Rhode
Island, Vermont, New Hampshire, Maine and parts of Connecticut. It is
anticipated that, upon the expiration (December 31, 1999) or earlier
termination of FSN's existing affiliation agreement with New England Sports
Network, the New England RSN will become an affiliate of FSN. As of
December 31, 1998, there were approximately 2.9 million subscribers,
representing 80% penetration of total basic subscribers in the region. The
featured professional team is the Boston Celtics (NBA).

Florida. RPP owns 30% of the Florida RSN and the remaining 70% of the
Florida RSN is owned by Front Row Communications, Inc. ("Front Row"). Front
Row is the managing partner of the Florida RSN. Launched in 1993, the
Florida RSN's coverage area includes northern and southern Florida. As of
December 31, 1998, there were approximately 3.0 million subscribers,
representing 95% penetration of total

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basic subscribers in the region. Featured professional teams include the
Florida Marlins (MLB), the Florida Panthers (NHL) and the Tampa Bay Devil
Rays (MLB). The Tampa Bay Devil Rays, Inc. has an option to acquire 10% of
the Florida RSN.

Ohio. RPP manages and owns 100% of the Ohio RSN. Launched in 1989 and
affiliated with FSN since January 1998, the Ohio RSN's coverage area
includes Ohio, western Pennsylvania, northwest New York, West Virginia and
Kentucky. As of December 31, 1998, there were approximately 2.1 million
subscribers, representing 91% penetration of total basic subscribers in the
region. Featured professional teams include the Cleveland Indians (MLB) and
the Cleveland Cavaliers (NBA).

Cincinnati. RPP manages and owns 100% of the Cincinnati RSN. Launched in
1989 and affiliated with FSN since January 1998, the Cincinnati RSN's
coverage area includes Ohio, Kentucky and Indiana. As of December 31, 1998,
there were approximately 2.4 million subscribers, representing 94%
penetration of total basic subscribers in the region. The featured
professional team is the Cincinnati Reds (MLB).

New York. RPP owns and operates two RSNs in the New York region: The
Madison Square Garden Network ("MSG") and Fox Sports New York, formerly
SportsChannel New York. RPP manages and owns 96.3% of each of MSG and Fox
Sports New York. The remaining 3.7% of each of MSG and Fox Sports New York
is owned by ITT Corporation ("ITT"), through its 3.7% ownership interest in
Madison Square Garden, L.P. ("MSG, L.P."). ITT and Cablevision have entered
into an agreement pursuant to which ITT's remaining interest in MSG, L.P.
will be redeemed. A subsidiary of RPP is the managing partner of the New
York RSNs. See "Certain Relationships and Related Transactions."

Acquired in 1994 as Madison Square Garden Network, MSG's coverage area
includes New York and parts of New Jersey and Connecticut. As of December
31, 1998, there were approximately 7.1 million subscribers in the region.
Featured professional teams include the New York Knicks (NBA), the New York
Rangers (NHL) and the New York Yankees (MLB).

Launched in 1982 and an affiliate of FSN since January 1998, Fox Sports
New York's coverage area includes New York and parts of New Jersey and
Connecticut. As of December 31, 1998, there were approximately 4.3 million
subscribers in the region. Featured professional teams include the New
Jersey Nets (NBA), the New York Islanders (NHL), the New Jersey Devils
(NHL) and the New York Mets (MLB).

Through its ownership of MSG, L.P., RPP has a 96.3% ownership interest in
the New York Knicks (NBA), the New York Rangers (NHL), the Madison Square
Garden facilities and Radio City Productions LLC ("RCP"). RPP also has a
100% ownership interest in Metro Channel LLC, a company established by
Rainbow to own and operate the Metro Channel. The Metro Channel is intended
to provide programming of particular interest to a region, such as local
news, business, entertainment and sports.

Rights Agreements

The right to telecast professional sports events is obtained through rights
agreements entered into between an RSN and an individual professional sports
team. Rights agreements are generally for a specified number of games per
season for a specified number of years and for a specified market area as
determined by the respective leagues. The acquisition of programming rights
pursuant to a rights agreement allows an RSN to telecast those games which are
subject to the agreement on an exclusive basis. The average term of rights
agreements (from commencement to scheduled termination) entered into by the
O&O RSNs in 1998, and to date in 1999, is 6.9 years. Certain of the rights
agreements contain provisions for early termination or renegotiation of the
terms therein prior to their scheduled termination. In addition, the O&O RSNs'
rights agreements generally contain certain rights with respect to a
subsequent term such as rights of first refusal, rights of first negotiation
or rights to match offers made by third parties. The Company's objective is to
renew O&O RSN rights contracts on favorable terms. However, the renewal costs
could substantially exceed the original contract cost, the O&O RSNs could be
outbid for such rights contracts or rights holders could elect to retain the
rights for their own use. The loss of rights could impact the extent of the
Company's regional sports coverage, which could adversely affect

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the Company's ability to sell local and national advertising time and, in some
cases, to maintain affiliate fees. See "Business--Competition," "Business--
Advertising" and "Business--Affiliated Cable Systems and Subscribers."

The O&O RSNs' collection of rights agreements is diversified, with a total
of 37 professional rights contracts. These contracts include rights to 12 MLB
teams, 14 NBA teams and 11 NHL teams. The O&O RSNs, through affiliation with
FSN, also have rights to three of the country's top collegiate football
conferences, the PAC-10, Big 12 and Conference USA.

Fox Sports Direct

Fox Sports Direct packages and distributes via satellite the programming of
various RSNs. In addition to providing sports programming produced by the O&O
RSNs, Fox Sports Direct also distributes sports programming produced by
certain third-party-owned RSNs pursuant to arrangements with such RSNs. The
Company is currently the nation's largest provider of sports programming for
the DTH market, reaching approximately 5.6 million DTH households. Fox Sports
Direct packages the programming of various RSNs for distribution to the Ku-
Band marketplace by DirecTV, Inc. and EchoStar Communications Corporation's
Dish network. In addition, Fox Sports Direct distributes certain programming
to the residential C-band marketplace.

Fox Sports Net

FSN has been structured based on the "broadcast network affiliate" model, in
which each RSN airs a slate of local programming, which is supplemented by a
schedule of network-provided national programming, consistent across all
regions. Unlike the typical "broadcast network affiliate" model, the Company's
programming is anchored by highly rated local programming during prime time,
with national FSN programming during the balance of the schedule. Hence, the
primary function of FSN is to complement regional sports programs with a
synchronized schedule of quality national programming, the cornerstone of
which is Fox Sports News. Fox Sports News provides comprehensive coverage of
all sports news nationwide, presenting a consistent brand image with high
quality on-air graphics. Fox Sports News consists of a half hour pre-game news
show aired at 6:30 p.m. and a two hour wrap-up news program aired at 10:00
p.m., each of which is shown locally in each time zone. FSN also provides
other sports programming events, including nationally televised MLB games,
NCAA college football and basketball, boxing, PGA golf, Formula One racing,
and other sporting events, as well as original sports-related programming such
as The Last Word and Goin' Deep. In addition to providing national
programming, FSN also supplies corporate and marketing support, as well as
technical operations to the Company's RSNs, helping to create one cohesive
network.

FSN has entered into affiliation agreements with RSNs across the country
including the Company's O&O RSNs, certain RSNs that RPP owns and operates and,
in certain regions where the Company does not hold interests in RSNs, with
third-party-owned RSNs. These agreements allow the RSNs to carry certain
programming of FSN in exchange for a per subscriber fee. The affiliation
agreements also permit FSN to market and sell advertising time during the
national portions of the RSN's programming schedule. Pursuant to separate
advertising representation agreements, the National Advertising Partnership is
permitted to sell advertising time for the RSN during a portion of the RSN's
regional sports programming.

Affiliated Cable Systems and Subscribers

During fiscal year 1998, the O&O RSNs generated approximately 62% of their
revenues, excluding DTH revenues, from subscriber fees paid by affiliated
cable systems. As of December 31, 1998, the Company's O&O RSNs transmitted
programming to approximately 5,150 local affiliated cable systems in 35
states.

Each of the Company's RSNs enters into affiliation agreements with MSOs
and/or individual cable system operators. Such agreements typically run for
five to seven years and generally provide for annual rate increases. Under
affiliation agreements, cable system operators must distribute the RSN service
to a certain number of

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subscribers and/or maintain a certain subscriber base penetration level. The
same criteria are generally used as the basis for calculating the monthly fees
paid by the cable operator to the Company for its programming. The Company's
RSNs command license fees in excess of average fees charged by basic cable
networks overall, but generally consistent with fees charged by other cable
network providers of live regional sports programming. The Company's
affiliation agreements have staggered expiration dates, with an average
maturity of approximately six years (from commencement to scheduled
termination).

The Company's RSNs' programming meets many subscribers' demands for
increased local and national sports programming. Current industry trends
suggest that many new channels to be offered by cable system operators will be
offered on a pay-per-view, a la carte or digital tier basis as the operators
seek to compete against the extensive choices offered by DTH distribution
systems. As advertiser supported networks, RSNs depend on achieving and
maintaining carriage within the basic cable programming package, as the
subscriber penetration rate for pay-per-view or a la carte programming
packages is substantially less than the penetration rate achieved by basic
programming packages. To date, the strong demand for the Company's RSNs' local
and national sports programming has allowed the Company's RSNs to either
maintain or establish a presence on the basic programming package while
expanding within the DTH market.

Advertising

FSN and the Company's RSNs derive significant revenues from selling a fixed
supply of advertising inventory, comprised of advertising time slots ("units")
shown during the Company's national and regional programming. The inventory is
divided among national network, national spot and local advertising. Regional
professional sports events such as basketball, hockey and baseball, as well as
other local sports programming, currently carry both national spot and local
advertising. Network programming such as Fox Sports News, nationally televised
MLB games and PGA golf includes national network, national spot and local
advertising. The Company's approach offers national advertisers the unique
ability to purchase national network, national spot and local advertising from
one source in each of the top DMAs.

Local advertising is sold at the RSN level, and national network and
national spot units are sold at the national level by the National Advertising
Partnership. The National Advertising Partnership's centralized inventory
management for the national network, national spot and local advertising
categories of inventory enables the Company to respond to supply and demand,
and to allocate inventory across advertising categories, such that units are
sold to the advertiser willing to pay the highest rate, regardless of market.
Accordingly, the split of advertising time between national network, national
spot and local advertising varies across markets and is dictated by pricing
conditions in each specific market at any point in time. The Company believes
that this ability to buy units across advertising categories and across
regions from one source also provides advertisers with a more efficient
purchasing mechanism.

Total advertising revenues are a function of the audience viewing level, the
average cost of each incremental viewer and the number of advertising units
sold. The audience viewing level, or audience delivery, is determined by the
number of subscribers to whom the programming is available and the portion of
those subscribers who are tuned into the programming, as measured by ratings
achieved by FSN and the RSNs. FSN uses A.C. Nielsen, Inc. ("Nielsen") to
provide metered estimates of audience viewing levels which are widely accepted
by advertisers as a basis for measuring audience delivery. The cost of each
incremental viewer is quantified by the cost per thousand homes ("CPM") or the
cost per point ("CPP"). The CPM or CPP is negotiated by the advertiser and the
telecaster, and will vary depending on the type and schedule of the program
that will carry the advertisement and the overall reach or ubiquity of the
network (i.e. cable networks with more subscribers are generally able to
command higher CPMs). CPMs are used in selling national network while CPPs are
used in the national spot and local advertising markets.

The Company's advertising revenues are derived primarily from sales of
advertising units, and to a lesser extent, from 30 to 60 minute program
advertising. Advertisers on FSN include nationally known companies in the
entertainment, beverage, packaged goods, fast food, automotive, retail,
insurance and travel industries.

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Production and Distribution

Distribution of live sporting events is accomplished by a combination of
satellite and fiber transmissions. A production crew in a mobile remote
facility is stationed at the venue to produce and direct the event. The
various camera shots, pre-produced tape elements and graphics packages are
integrated by the mobile remote facility and then formatted to be delivered to
a technical operations center ("Master Control"). The telecast is delivered to
the Master Control via remote satellite uplink, direct fiber transmission, or
a microwave network depending upon the location of the event.

After receiving the remote feed, the Master Control "traffics" the event,
inserting commercial inventory and on-air promotion spots in formatted
positions. The signal is then uplinked from the Master Control to the RSN's
transponder, where the local cable system operator, or MSO, can downlink the
signal. After accessing the feed from the transponder, the cable system
operator delivers the signal to the cable subscriber via hard-wired coaxial
cable.

FSN provides 24 hours of national programming each day, which is made
available for all affiliated RSNs. Each RSN has the opportunity to receive and
deliver the national programming when no regional professional sports event or
locally-produced programming is available. This national service is treated
like a separate RSN with its own Master Control and technical operations.

Fox Sports News, the cornerstone of FSN's programming, is produced live
daily from 3:00 p.m. until 12:00 a.m. Pacific time. The show is delivered to
the Company's uplink facility located in Houston via a direct fiber optic
connection. A separate news integration control studio, which uses technology
similar to a Master Control, brings each affiliated RSN into and out of the
live news telecast. Once a professional sports event or other regularly
scheduled program ends, the RSN joins the news telecast. The integration
studio makes sure that each RSN joins Fox Sports News during a commercial
break only, and never during the program in progress. Commercial inserts and
on-air promotional materials are handled through each RSN's Master Control.

FX was launched in June 1994. As of December 31, 1998, FX reached
approximately 37.9 million cable households and has become a popular choice
among cable viewers. FX's strength has been derived from its ability to bring
award-winning television series to cable and from its access to the Twentieth
Century Fox film library. In addition, FX carries sports programming with
coverage of MLB, college football and college basketball.

FX's line-up for the Fall 1998 season included "M*A*S*H," "Beverly Hills
90210," "The X-Files" and "NYPD Blue." Recently, as FX continues to increase
its presence as a leading general entertainment cable network, the cable
rights to "Millenium" and "Married With Children" have been acquired as well
as a slate of feature films including "The Full Monty," "The X-Files" and
"Jackie Brown." FX's extensive programming library also includes television
hits like "Batman," "The A-Team" and "Mission: Impossible."

In addition, FX provides cable viewers with a line-up of sports coverage.
MLB was introduced in 1997, with live coverage of national games airing one
night per week. FX also airs live coverage of various college football and
basketball games.

FX is distributed from a Master Control located in Los Angeles. FX has two
transponders to provide alternate programming feeds for the east and west
coast time zones. Each feed has its own dedicated transponder which cable
system operators access via their system head-ends and distribute to
subscribers via co-axial cable. Overall, FX's distribution functions just like
an RSN, with the exception of the dual feeds for the two different time zones.

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Competition

General

The business of distributing sports programming for cable and satellite
television is highly competitive. A number of basic and pay television
programming services (such as ESPN) as well as free over-the-air broadcast
networks provide programming that targets the Company's RSNs' audience. The
business of distributing general entertainment programming for cable and
satellite television is also highly competitive. A number of basic and pay
television programming services (such as USA Network and Turner Network
Television) as well as free over-the-air broadcast networks provide
programming that targets the same viewing audience as FX.

The Company's RSNs and FX directly compete with other programming services
for distribution and, when distribution is obtained, the Company's RSNs and FX
compete, in varying degrees, for viewers and advertisers with other cable
programming services and over-the-air broadcast television, radio, print
media, motion picture theaters, video cassettes and other sources of
information and entertainment. Important competitive factors are the prices
charged for programming, the quantity, quality and variety of the programming
offered and the effectiveness of marketing efforts.

Increased competition for viewers in the cable industry may result from
technological advances, such as digital compression technology, which allows
cable systems to expand channel capacity; the further deployment of fiber
optic cable, which has the capacity to carry a much greater number of channels
than co-axial cable; and "multiplexing," in which programming services offer
more than one feed of their programming. The increased number of choices
available to the Company's viewing audience as a result of such technological
advances may lead to a reduction in the Company's market share. The Company
competes or expects to compete in the future for advertising revenue with the
television programming services described above, as well as with other
national television programming services, superstations, broadcast television
networks, local over-the-air television stations, radio and print media.

RSNs

The Company is currently the only national network distributing a full range
of sports programming on both a national and regional level. On a national
level, the Company's primary competitor is ESPN, and to a lesser extent,
ESPN2. However, while ESPN and ESPN2 currently focus exclusively on the
national television and cable market, national programming is only a part of
the Company's overall objective. The Company's major focus is regional sports
programming. Since ESPN and ESPN2 do not currently program specifically for
local audiences or solicit regional or local advertisers, they do not directly
compete with the Company's RSNs. However, team owners and other sports
programming providers and distributors such as Time Warner, Inc. and Southwest
Sports Group, have recently announced plans to distribute events of teams
owned by them on a regional basis. Companies such as these, or others, may
seek to establish regional sports programming services that are competitive
with the Company's RSNs. In addition, ESPNews and CNN/SI, each offer a 24 hour
sports news format which competes directly with Fox Sports News.

In addition to competition for cable distribution, viewers and advertisers,
the Company's RSNs also compete, to varying degrees, for programming. With
respect to the acquisition of sports programming rights, FSN competes for
national rights principally with the national broadcast television networks, a
number of national cable services that specialize in or carry sports
programming, and television "superstations," which distribute sports and other
programming to cable television systems by satellite, and with independent
syndicators that acquire and resell such rights nationally, regionally and
locally. The Company's RSNs also compete for local and regional rights with
those independent syndicators, with local broadcast television stations and
with other local and regional sports networks. The owners of distribution
outlets such as cable television systems may also contract directly with the
sports teams in their service area for the right to distribute a number of
such teams' games on their systems. The owners of teams may also launch their
own regional sports network and contract with cable television systems for
carriage.

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FX faces competition in the acquisition of distribution rights to
programming produced by other diversified media companies, due to industry
consolidation and the elimination of the financial interest and syndication
rules. Many of FX's competitors are larger and have financial and other
resources substantially greater than those of the Company. Certain of these
organizations are "vertically integrated" (i.e., producing, distributing and
exhibiting their own programming). Industry integration may impact FX's
ability to acquire programming distribution rights, as it is likely that
vertically integrated media companies will sell programming distribution
rights to their cable network subsidiaries. The effect of such distribution
patterns would be to reduce the availability of such programming and to
increase the cost of programming that is available for acquisition by FX. With
the repeal of certain governmental regulations which formerly prohibited the
broadcast networks from acquiring financial interests in, and syndication
rights to, television programming, this trend towards vertical integration
and, accordingly, competition in the industry, is expected to increase. See
"Business--Regulation and Legislation."

Satellite Distribution

All programming for the Company is transmitted from the Company's facilities
located in Houston, Los Angeles and Seattle. Local teleports near each
facility provide uplink services to deliver the Company's programming to
transponders on various geosynchronous satellites which, in turn, are received
by cable system operators, DTH services and other customers.

Presently, each regional sports network has a dedicated feed which is
transmitted to a transponder as an analog signal. In addition, a network feed
is transmitted to a transponder as a means of distributing certain programming
(including Fox Sports News) to the Company's RSNs. Each cable system head-end
has equipment which is controlled remotely from the Company's Houston
location. This provides the Company with substantial flexibility to "switch"
the programming for an individual region or sub-region to alternative
programming in order to accommodate regional variations in broadcast rights
for certain teams and events.

Programming for FX is distributed using two separate feeds on two separate
satellite transponders, one for the Eastern, Central and certain portions of
the Mountain time zone and one for all other portions of the Mountain time
zone and the Pacific time zone.

The Company's business depends upon the launch and operation of satellites
by third parties. During 1998, the Company leased 22 full-time transponders,
however leases on 3 of these transponders expired on December 31, 1998. Twelve
of the 19 continuing transponders, with leases expiring between 1999 and 2006,
are used by its domestic sports networks. Of these 12 transponders, 6 are on
Satcom C-1, with three leases direct from GE Americom ("GE"), two leases from
GE via a WTCI sublease and one lease from GE via a Fox Broadcasting sublease.
With respect to the remaining six full-time domestic sports transponders,
three are also leased from GE (one on GE-1, one on Satcom C-3 and one on GE-
3), one from Primestar on its Ku-band service and two from PanAmSat
Corporation on the Hughes Galaxy VII satellite. The remaining seven of the 19
continuing transponders are used by entities other than the Company's domestic
sports networks. Of these seven transponders, one is leased from GE on GE-3,
one is leased from PanAmSat Corporation and one from Broadcast Development,
Inc. on the Hughes Galaxy VII satellite, one is leased from GE via a WTCI
sublease on Satcom C-1, one is leased from GE on Satcom C-3, one is leased
from Unlimited Satellite Services on GE-3 and one is leased from Fox Family
Worldwide on the Hughes Galaxy V satellite. FX uses two of these transponders.
The others are subleased to Fox News Channel, FXM, FIT-TV, Fox Sports World
and NDTC (all affiliates of Fox). See "Certain Relationships and Related
Transactions."

Commencing in 1998, the Company began to digitally compress its
transmissions to three of the four transponders on Galaxy VII. This transition
to digital transponder equipment will continue in 1999. Through compression,
the Company will be able to combine up to eight services on one transponder,
using bit rates ranging from 4 to 7 megabits per second. This will improve
signal quality, programming and "switching"

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capability, growth opportunities, and will also result in significant cost
savings due to the reduced transponder requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of Operatons" and
"Certain Relationships and Related Transactions."

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. Because the Company's
primary satellites (Galaxy VII and Satcom C-1) are already in orbit, the
Company does not expect to face any significant launch risks over the next
several years. In 2006, which is the projected end of useful life for Galaxy
VII, the Company might again face satellite launch risk, depending on the
selected transponder migration plans at that time. Failure or disruption of
satellites that are already operational, such as Satcom C-1 and Galaxy VII,
could have a material adverse effect on the Company. The Satcom C-1
transponder leases have minimal back-up in the event of transponder or
satellite failure, and the Company would have to rely on spare transponder
capacity (available internally as well as via third parties) and alternative
program scheduling methods in the event of loss of one or more Satcom C-1
transponders. The Galaxy VII and Satcom C-3 transponder leases are
"protected," in that these leases provide for transmission on a back-up
satellite should a serious transmission or reception fault occur. With the
full implementation of the Company's digital compression plans during 1998-
1999, all of the Company's services will be either on Galaxy VII or Satcom C-3
and, thus "protected."

Regulation and Legislation

Certain aspects of the Company's programming 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, by the
Cable Communications Policy Act of 1984 (the "1984 Act"), the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Act"), which
amended the 1984 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.

The following does not purport to be a summary of all present and proposed
federal, state, and local regulations and legislation relating to the cable
television industry and other industries involved in the video marketplace.
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 change, in varying
degrees, the manner in which the cable television industry and other
industries involved in the video marketplace operate.

Federal Regulation and Legislation

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 phases out cable rate regulation, 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). Rate
regulation of all non-basic services will be completely eliminated on March
31, 1999. 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. To the extent such retiering or
repricing of the Company's networks induces customers to discontinue their
subscriptions, the Company's financial performance could be 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.

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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 services in which the cable operator has an
attributable interest. As a result of TCI's ownership of Liberty, the
Company's programming services are subject to these requirements. The FCC has
recently adopted regulations to speed the processing of program access
complaints, and Congress is considering legislation, which, if enacted, would
extend program access rules to terrestrially-delivered programming. Similarly,
Cablevision is deemed to have an attributable interest in Regional Programming
Partners ("RPP"). The FCC's program access and non-discrimination regulations
therefore affect the ability of these cable programming services to enter into
exclusive contracts. The rules also permit multichannel video programming
distributors (such as multichannel multipoint distribution services ("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 a
TCI or a Cablevision system with 75 channels or less will not be able to carry
one or more of the Company's services (or in the case of Cablevision, an RPP
service) or will have to remove another affiliated channel.

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

FCC regulations implementing the 1992 Act require each television
broadcaster to elect, at three year intervals, either to (i) require carriage
of its signal by cable systems in the station's market ("must carry") or (ii)
negotiate the terms on which such broadcast station would permit transmission
of its signal by the cable systems within its market ("retransmission
consent"). The FCC recently has initiated a rulemaking proceeding to determine
carriage requirements for digital broadcast television signals on cable
systems, including carriage during the period of transition from analog to
digital signals.

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 authorities ("LFAs") 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.

The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. 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 are responsible
for regulating the rates charged for the basic tier of service. Local rate
regulation for a particular system could result in resistance on the part of
the cable operator pay to the amount of subscriber fees charged by the Company
for its programming.

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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.

Patents, Trademarks and Licenses

In connection with the formation of the Company and the Rainbow Transaction,
Twentieth Century Fox Film Corporation and Fox Broadcasting Company agreed to
grant the Company a non-exclusive, royalty free license, with the right to
sublicense to RSNs, to use the "FOX" brand name and certain related artwork.
See "Certain Relationships and Related Transactions."

In their telecast rights agreements with the professional sports teams in
their markets, RSNs are granted certain rights to use the name, logos,
symbols, seals, emblem, and insignia and other trademarks of the team and its
opponents. Generally, such agreements restrict such usage to the actual game
telecasts, and for other purposes incident thereto (news and highlight shows
and on-air promotional spots), and for other purposes (e.g., print
advertisements) so long as the use is limited to the marketing and promotion
of the teams and the RSNs. Generally, such promotional usages may be
"sponsored" (e.g., a particular company sponsoring a particular RSN's telecast
of a professional sports team with the visual use of team and sponsor logos),
but such promotional uses cannot imply endorsements by the team. Typically the
RSNs also have the contractual right to use the pictorial representations and
the names and likenesses of the players, managers, coaches and officials of
the team, its opponents, and the applicable league in the telecasts and for
promotional purposes incident thereto. As a protection of their proprietary
property, the teams generally reserve certain approval rights of trademark
usages and other rights reservations. Because the telecast rights agreements
are limited to the "home territories" of the teams, and the RSNs only operate
within such territories, the rights to use a teams logo are generally limited
to such territories.

The Company has an agreement with MLB to telecast certain of its games on a
national basis on FSN and FX, and has the same general rights under the
agreement for use of the MLB logo and those of its teams as are in the team
contracts, but such usages are permitted on a national basis.

Employees

As of December 31, 1998, the Company, together with its O&O RSNs and other
subsidiaries, had 1,268 full-time employees. The Company also regularly
engages freelance creative staff and other part-time employees. None of the
Company's employees are covered by collective bargaining agreements. The
Company believes its relations with its employees are good.

Certain Arrangements Regarding Ownership Interests

Fox/Liberty Joint Venture

Fox/Liberty Networks, LLC. Fox/Liberty Networks, LLC is the principal
holding company for the Fox/Liberty Joint Venture. Liberty/Fox Sports
Financing LLC (an entity in which LMC Newco U.S., Inc. ("LMCI"), a subsidiary
of Liberty, and Fox each hold 50% membership interests) holds a 38.314%
membership interest and each of LMCI and Fox Regional Sports Holdings, Inc., a
subsidiary of Fox, hold 30.843% membership interests.

Fox/Liberty Sports. Fox/Liberty Sports is a holding company which holds the
Company's interests in certain cable sports telecasting businesses, including
its interests in certain RSNs. The Company holds a 99% membership interest in
Fox/Liberty Sports. Liberty Sports Member, Inc. ("LSM"), an affiliate of
Liberty, holds a .5% membership interest in Fox/Liberty Sports and Fox
Regional Sports Member ("FRSM"), an affiliate of Fox, holds a .5% membership
interest in Fox/Liberty Sports.

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Fox/Liberty FX. Fox/Liberty FX owns and operates FX. The Company holds a 99%
membership interest in Fox/Liberty FX. Liberty FX, Inc., an affiliate of
Liberty, holds a .5% membership interest and FX Holdings, Inc., an affiliate
of Fox, holds a .5% membership interest.

Fox Sports RPP. Fox Sports RPP is a holding company which holds the
Company's interest in RPP. The Company holds a 99% membership interest in Fox
Sports RPP. LSM holds a .5% membership interest in Fox Sports RPP and FRSM
holds a .5% interest in Fox Sports RPP.

Owned and Operated RSNs

Southwest. The Southwest RSN is operated through ARC Holding, Ltd. ("ARC
Holding"). Affiliated Regional Communications, Ltd. ("ARC Ltd.") holds a 99%
limited partnership interest in ARC Holding and Sports Holding Inc., a wholly-
owned subsidiary of ARC Ltd. holds a 1% limited partnership interest.
Liberty/Fox ARC L.P. ("ARC L.P.") holds a 100% equity interest and 62.6799%
capital limited partnership interest in ARC Ltd. and LMC Regional Sports,
Inc., an affiliate of Liberty, holds a 37.3201% capital general partnership
interest. Fox/Liberty Sports holds a 98% limited partnership interest in ARC
L.P., New LMC ARC, Inc., a subsidiary of Liberty, holds a 1% general
partnership interest and FRSM holds a 1% limited partnership interest.

West. The West RSN is operated through Prime Ticket Networks, L.P. ("West
LP"). Liberty/Fox West LLC holds a 99% limited partnership interest in West
LP, LMC West Sports Inc., an affiliate of Liberty, holds a .5% general
partnership interest and Fox West Sports Member, Inc., an affiliate of Fox,
holds a .5% general partnership interest.

West2. The West2 RSN is operated through West2 LLC. West LP holds a 100%
membership interest in West2 LLC.

Pittsburgh. The Pittsburgh RSN is operated through Liberty/Fox KBL L.P.
("Pittsburgh LP"). Fox/Liberty Sports holds a 60% limited partnership interest
in Pittsburgh LP, New LMC KBL, Inc., an affiliate of Liberty, holds a 20%
general partnership interest and FRSM holds a 20% limited partnership
interest.

Rocky Mountain. The Rocky Mountain RSN is operated through Rocky Mountain
Prime Sports Network ("Rocky Mountain Network"). ARC Ltd. holds a 66.67%
general partnership interest in Rocky Mountain Network and ARC L.P. holds a
33.33% general partnership interest.

Northwest. The Northwest RSN is operated through Prime Sports Northwest
Network ("Northwest Network"). Liberty/Fox Northwest L.P. holds an 89.9%
capital general partnership interest and a 100% equity interest in Northwest
Network. LMC Northwest Cable Sports, Inc., an affiliate of Liberty, holds a
10.1% capital general partnership interest in Northwest Network. Fox/Liberty
Sports holds a 98% limited partnership interest in Liberty/Fox Northwest L.P.,
New LMC Northwest, Inc., an affiliate of Liberty, holds a 1% general
partnership interest and FRSM holds a 1% limited partnership interest.

Utah. The Utah RSN is operated through Liberty/Fox Utah LLC ("Utah LLC").
Fox/Liberty Sports holds a 99% membership interest in Utah LLC, New LMC Utah
Sports, Inc., an affiliate of Liberty, holds a .5% membership interest and
FRSM holds a .5% membership interest.

Midwest. The Midwest RSN is operated through ARC Holding. ARC Ltd. holds a
99% limited partnership interest in ARC Holding and Sports Holding Inc., a
wholly-owned subsidiary of ARC Ltd., holds a 1% general partnership interest.

Arizona. The Arizona RSN is operated through Liberty/Fox Arizona LLC
("Arizona LLC"). Fox/Liberty Sports holds a 99% membership interest in Arizona
LLC, LMC Arizona Sports, Inc., an affiliate of Liberty, holds a .5% membership
interest and FRSM holds a .5% membership interest.

18
<PAGE>

Detroit. The Detroit RSN is operated through Fox Sports Detroit, LLC
("Detroit LLC"). Fox/Liberty Sports holds a 99% membership interest in Detroit
LLC, an affiliate of Liberty holds a .5% membership interest and FRSM holds a
.5% membership interest.

South. The South RSN is operated through SportSouth Network, Ltd. ("South
Ltd."). LMC Southeast Sports, Inc. ("LMC Southeast") holds a 1% limited
partnership capital interest and a 43% general partnership capital interest in
South Ltd. SportSouth Holdings, LLC (jointly owned by LMC Southeast and LMC
Southeast's direct parent) holds a 1% general partnership profits interest and
a 43% limited partnership profits interest and Liberty SportSouth Inc. (a
wholly-owned subsidiary of LMC Southeast) holds a 1% general partnership
capital and profits interest and a 43% limited partnership capital and profits
interest in South Ltd. The remaining 12% general partnership interest in South
Ltd. is held by E.W. Scripps Company. Liberty/Fox Southeast LLC holds 100% of
the equity interest and 49% of the voting interest of LMC Southeast and
Liberty Sports, Inc., an affiliate of Liberty, holds 51% of the voting
interest. Fox/Liberty Sports holds a 99% membership interest in Liberty/Fox
Southeast LLC, New LMC Southeast, Inc., an affiliate of Liberty, holds a .5%
membership interest and FRSM holds a .5% membership interest.

The partners of South Ltd. are subject to a buy/sell procedure which may be
initiated at any time by any general partner of South Ltd. The partner
initiating the buy/sell procedure (the "Initiating Partner") must notify the
other general partner (the "Responding Partner") of South Ltd. of its
intention to initiate the buy/sell procedure, such notification to include a
statement by the Initiating Partner of the value of South Ltd. Within 90 days
after receipt of such notice, the Responding Partner shall notify the
Initiating Partner of its election to either purchase the Initiating Partner's
interest in South Ltd. or sell its interest in South Ltd. to the Initiating
Partner. If the Responding Partner does not respond within 90 days, it shall
be deemed to be an election of the Responding Partner to sell its interest in
South Ltd. to the Initiating Partner.

Sunshine. The Sunshine RSN is operated through Sunshine Network ("Sunshine
Network"), a joint venture with ARC Ltd. holding a 49% interest and Sunshine
Network of Florida, Ltd. ("SNFL") holding a 51% interest. LMC Sunshine, Inc.
holds a 14.362% limited partnership interest in SNFL and Sunshine Network,
Inc. ("SNI"), an entity in which LMC Sunshine, Inc. holds a 14.507% interest,
holds a 1% general partnership interest. The remaining interests in SNFL, Ltd.
are held by various regional cable MSOs. Liberty/Fox Sunshine LLC holds 100%
of the equity interest and 49% of the voting interest of LMC Sunshine, Inc.
and Liberty Sports, Inc., an affiliate of Liberty, holds 51% of the voting
interest. Fox/Liberty Sports holds a 99% membership interest in Liberty/Fox
Sunshine LLC, New LMC Sunshine, Inc., an affiliate of Liberty, holds a .5%
membership interest and FRSM holds a .5% membership interest. In October 1998,
the Company, together with certain other partners in SNFL and shareholders of
SNI, acquired Time Warner Entertainment's 29.647% limited partnership interest
in SNFL and 29.946% interest in SNI, respectively.

The joint venturers of Sunshine Network are subject to a buy/sell procedure
which may be initiated at any time by either joint venturer. The venturer
initiating the buy/sell procedure (the "Initiating Venturer") must notify the
other venturer (the "Responding Venturer") of Sunshine Network of its
intention to initiate the buy/sell procedure, such notification to include a
statement by the Initiating Venturer of the value of Sunshine Network. Either
within 60 days after receipt of such notice if Sunshine Network of Florida,
Ltd. is the Initiating Venturer, or, if ARC Ltd. is the Initiating Venturer,
within 120 days of the date that Sunshine Network of Florida, Ltd. receives an
appraisal of Sunshine Network (provided that such appraisal is requested by
Sunshine Network of Florida, Ltd. within 10 days of the receipt of the
buy/sell notice and such appraisal is completed no later than 21 days after
such request), the Responding Venturer shall notify the Initiating Venturer of
its election to either purchase the Initiating Venturer's interest in Sunshine
Network or sell its interest in Sunshine Network to the Initiating Venturer.
If the Responding Venturer fails to timely notify the Initiating Venturer of
its election, the Initiating Venturer shall have the right, at its option, to
either purchase the Responding Venturer's interest in Sunshine Network or
require the Responding Venturer to purchase its interest in Sunshine Network.

19
<PAGE>

Non-Managed RSNs

Chicago. The Chicago RSN is operated through SportsChannel Chicago
Associates ("Chicago Associates"). RPP holds a 50% interest in Chicago
Associates and Fox/Liberty Chicago, LLC holds a 50% interest. Fox/Liberty
Sports holds a 98% membership interest in Fox/Liberty Chicago, LLC, New LMC
Chicago, Inc., an affiliate of Liberty, holds a 1% membership interest and
FRSM holds a 1% membership interest.

Rainbow holds a 60% general partnership interest in RPP and Fox Sports RPP
holds a 40% general partnership interest. The Company holds a 99% membership
interest in Fox Sports RPP, Liberty Sports Member, Inc., an affiliate of
Liberty, holds a .5% membership interest and FRSM holds a .5% membership
interest.

D.C./Baltimore. The D.C. Baltimore RSN is operated through Home Team Sports
Limited Partnership ("D.C./Baltimore LP"). ARC Ltd. holds a 34.3% limited
partnership interest in D.C./Baltimore LP and the remaining interest is held
by Group W.

Bay Area. The Bay Area RSN is operated through SportsChannel Pacific
Associates ("San Francisco Associates"). RPP holds a 50% interest in San
Francisco Associates and Fox/Liberty Bay Area, LLC holds a 50% interest.
Fox/Liberty Sports holds a 98% membership interest in Fox/Liberty Bay Area,
LLC, New LMC Bay Area, Inc., an affiliate of Liberty, holds a 1% membership
interest and FRSM holds a 1% membership interest.

Regional Programming Partners

New England. The New England RSN is operated through SportsChannel New
England, a wholly owned subsidiary of RPP. RPP holds a 50% ownership interest
in the New England RSN and Media One, Inc. holds a 50% interest.

Florida. The Florida RSN is operated through SportsChannel Florida
Associates ("Florida Associates"). RPP holds a 30% interest in Florida
Associates and the remaining 70% of Florida Associates is held by Front Row.
The Tampa Bay Devil Rays, Inc. has an option to purchase 10% of the Florida
RSN.

Ohio. The Ohio RSN is operated through SportsChannel Ohio Associates ("Ohio
Associates"), a wholly-owned subsidiary of RPP Associates.

Cincinnati. The Cincinnati RSN is operated through SportsChannel Cincinnati
Associates ("Cincinnati Associates"), a wholly-owned subsidiary of RPP.

New York. RPP currently owns and operates two RSNs in the New York region:
The Madison Square Garden Network, operated through Madison Square Garden,
L.P. ("MSG, L.P."), and Fox Sports New York, operated through SportsChannel
Associates ("SportsChannel New York Associates"), a wholly-owned subsidiary of
MSG, L.P. RPP holds a 96.3% interest in MSG, L.P. and ITT holds the remaining
3.7% interest. ITT and Cablevision have entered into an agreement pursuant to
which ITT's remaining interest in MSG, L.P. will be redeemed.

Item 2. Properties

The Company's corporate facilities are located in Los Angeles, California
where it leases approximately 66,600 square feet of office space from New
World Communications Group Incorporated, an indirect, wholly-owned subsidiary
of Fox. See "Certain Relationships and Related Transactions."

20
<PAGE>

In addition to the corporate facilities, the Company also leases office
facilities located in the market of each of the Company's RSNs, technical and
uplink facilities located in Houston, Texas and Los Angeles, California and
various sales offices located throughout the United States. The Company has
national ad sales offices in New York, Boston, Atlanta, Detroit, Chicago,
Dallas, Los Angeles and San Francisco. The Company's RSNs have sales offices
in Houston, Ft. Lauderdale, Kansas City, Tallahassee, Tampa and Salt Lake
City. The O&O RSNs lease office space within the market that they serve and
are summarized as follows:

<TABLE>
<CAPTION>
RSN Location
--- --------
<S> <C>
Southwest........................................... Irving, Texas
West/West2.......................................... Los Angeles, California
Pittsburgh.......................................... Pittsburgh, Pennsylvania
Rocky Mountain...................................... Denver, Colorado
Northwest........................................... Bellevue, Washington
Utah................................................ Salt Lake City, Utah
Midwest............................................. St. Louis, Missouri
Arizona............................................. Phoenix, Arizona
Detroit............................................. Detroit, Michigan
South............................................... Atlanta, Georgia
Sunshine............................................ Orlando, Florida
</TABLE>

Fox Sports Direct leases its corporate office space in Irving, Texas. FX
also leases sales offices in Los Angeles, Chicago and New York.

The Company does not own any real property. The Company believes that its
current office and production space, together with space readily available in
the markets in which it operates, are adequate to meet its needs for the
foreseeable future.

Item 3. Legal Proceedings

As of December 31, 1998 there are no material pending legal proceedings
against the Company, other than routine litigation incidental to the Company's
business, except as described below.

U.S. v. ASCAP - Virtually every cable network is involved in this "rate
court" proceeding in the Southern District of New York to set a formula for
assessing music performance license fees on cable programming. The Company's
cable services pay ASCAP license fees under the current interim rate
structure, which is calculated as a percentage of each network's gross
revenues, and ASCAP is seeking an increase in those fees. The interim rate is
subject to upward or downward adjustment in future rate court proceedings. The
other major copyrighted music performance society, BMI, is assessing a
negotiated interim license fee, and the final rate will be determined either
by negotiation after the conclusion of the ASCAP rate court proceeding or in
another rate court proceeding. The Company cannot predict the final outcome of
these disputes, but does not believe that it will suffer any material
liability as a result therof.

Echostar--On October 27, 1997, Echostar Communications Corporation
("Echostar") filed a complaint with the FCC against the Company alleging that
the Company had violated Section 548 of the Communications Act of 1934, as
amended (the "1934 Act") and Sections 76.1000 et seq. of the FCC's Rules (the
"FCC Rules") by discriminating against Echostar in the prices and other terms
and conditions for distribution of regional sports programming to Echostar's
subscribers by direct broadcast satellite. Echostar's claim is based on
allegations that the Company licenses cable operators to distribute regional
sports programming at lower prices and on more favorable terms than those
contained in Echostar's contract with the Company. Echostar's complaint
requests the FCC to order the Company to offer Echostar regional sports
programming at rates and on terms that are no worse than those offered to
other cable operators, to award damages in an unspecified amount, and to
impose future reporting requirements to ensure non-discrimination. On December
10, 1997, the Company filed a

21
<PAGE>

response to the Echostar complaint denying any violation of the 1934 Act or
the FCC Rules. On October 28, 1998, the FCC dismissed Echostar's complaint
with prejudice on the grounds that the statute of limitations had expired. On
November 27, 1998 Echostar filed a petition for the FCC to reconsider its
decision in this matter.

Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable.

22
<PAGE>

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Not Applicable

Item 6. Selected Financial Data

The selected financial data of the Company as of December 31, 1998 and 1997
and for the years ended December 31, 1998 and 1997 and for the eight months
ended December 31, 1996 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 Liberty Sports, Inc. and subsidiaries--
Domestic Operations set forth below for the period January 1, 1996 to April
29, 1996 is derived from the combined financial statements of Liberty Sports,
Inc. and subsidiaries--Domestic Operations ("LSI Domestic") audited by KPMG
LLP, independent auditors, included elsewhere in this report.

The selected financial data of Fox/Liberty FX set forth below for the ten
month period ended April 29, 1996 is derived from Fox/Liberty FX's financial
statements audited by Arthur Andersen LLP, independent public accountants,
included elsewhere in this report.

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 financial statements, including the
notes thereto, appearing elsewhere in this report.

THE COMPANY

<TABLE>
<CAPTION>
Year Ended Year Ended April 30 to
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Statement of Operations:
Revenues............................... $ 655,194 $ 471,792 $ 144,792
---------- ---------- ---------
Expenses:
Operating............................ 485,276 420,888 197,445
General and administrative........... 90,662 65,558 31,609
Depreciation and amortization........ 21,662 18,968 8,507
---------- ---------- ---------
597,600 505,414 237,561
---------- ---------- ---------
Operating income (loss)................ 57,594 (33,622) (92,769)
---------- ---------- ---------
Other (income) expenses:
Interest, net........................ 110,425 34,142 3,819
Subsidiaries' income tax expense
(benefit)........................... 1,456 (1,590) 3,437
Loss on sale of assets............... 121 -- 4,913
Equity loss of affiliates, net....... 5,913 9,018 12,024
Other, net........................... (1,478) 401 --
Minority interest.................... 3,225 2,864 187
---------- ---------- ---------
Net loss............................... $ (62,068) $ (78,457) $(117,149)
========== ========== =========
Deficiency of earnings available to
cover fixed charges................... $ (62,068) $ (78,457) $(117,149)

Balance Sheet Data (end of period):
Total assets........................... $1,891,935 $1,817,758
Long-term debt......................... 1,401,891 1,246,291
Stockholders' equity................... 90,203 152,271
</TABLE>

23
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS (PREDECESSOR)

<TABLE>
<CAPTION>
January 1
to
April 29,
1996
----------
(Dollars
in
thousands)
<S> <C>
Statement of Operations
Revenues............................................................. $99,753
-------
Expenses:
Operating expenses................................................. 60,664
General and administrative expenses................................ 27,993
Depreciation and amortization...................................... 10,788
-------
99,445
-------
Operating income..................................................... 308
-------
Other income (expenses):
Interest expense................................................... (1,963)
Interest income.................................................... 91
Equity in earnings of affiliates................................... 219
Minority interest in earnings of subsidiaries...................... (1,076)
Other, net......................................................... 1,467
-------
(1,262)
-------
Loss before income taxes........................................... (954)
Income tax benefit................................................... 217
-------
Net loss........................................................... $ (737)
=======
Deficiency of earnings available to cover fixed charges.............. $ (954)
</TABLE>

FX NETWORKS, LLC (PREDECESSOR)

<TABLE>
<CAPTION>
Ten Months
Ended
April 29,
1996
----------
(Dollars
in
thousands)
<S> <C>
Statement of Operations:
Revenues............................................................ $ 75,401
--------
Expenses:
Operating......................................................... 63,369
General and administrative........................................ 19,936
Depreciation and amortization..................................... 480
--------
Total operating expenses........................................ 83,785
--------
Interest expense.................................................... 7,898
--------
Net loss.......................................................... $(16,282)
========
Deficiency of earnings available to cover fixed charges............. $(16,282)
</TABLE>

24
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Introduction

In April 1996, Fox and Liberty entered into the Fox/Liberty Joint Venture,
pursuant to which the Company was formed to provide cable programming through
its sports programming operations, consisting of interests in RSNs and a
national sports programming service, and through FX, a general entertainment
network. The Company's interests in the sports programming business are
derived through its 99% ownership interests in Fox/Liberty Sports and Fox
Sports RPP, while its interests in FX are derived through its 99% ownership
interest in Fox/Liberty FX. In establishing the Fox/Liberty Joint Venture, Fox
contributed $244 million in cash, certain assets related to the operation of a
regional sports business and all of the assets and liabilities of FX. Liberty
contributed its interests in regional sports programming businesses (which
then operated under the name "Prime Sports"), interests in non-managed sports
businesses, satellite distribution services and technical facilities.

In December 1997, the Company consummated the Rainbow Transaction, pursuant
to which (i) RPP was formed to hold interests in Rainbow's then existing RSNs
and certain other businesses, (ii) the National Sports Partnership was formed
to operate FSN and other national sports programming services, and (iii) the
National Advertising Partnership was formed to act as a national advertising
sales representative for the RSNs which are affiliated with FSN. RPP is
managed by Rainbow, while the National Sports Partnership and the National
Advertising Partnership are managed by the Company. In connection with the
consummation of the Rainbow Transaction, (i) the Company contributed $850
million to RPP in exchange for a 40% partnership interest held by Fox Sports
RPP and Rainbow contributed its interests in certain RSNs, the Madison Square
Garden entertainment complex, Radio City Productions LLC, the New York Rangers
and the New York Knicks to RPP in exchange for a 60% partnership interest,
(ii) the parties each contributed certain business interests and other assets
related to national sports programming to the National Sports Partnership in
exchange for 50% partnership interests, and (iii) the parties each contributed
certain assets related to advertising sales to the National Advertising
Partnership in exchange for 50% partnership interests.

In August 1997, the Company issued $500.0 million aggregate principal amount
of its 8 7/8% Senior Notes due 2007 and $405.0 million aggregate principal
amount at maturity ($252.3 million gross proceeds) of its 9 3/4% Senior
Discount Notes due 2007 (together, the "Offering"). The net proceeds from
these notes were used, along with proceeds from the Bank Facility (as defined
below), to finance the Rainbow Transaction. In January 1998, pursuant to an
Exchange Offer, the Company exchanged all of these notes for new notes, the
terms of which were are substantially identical to the original notes, which
were registered by the Company under the Securities and Exchange Act of 1933,
as amended. The Company received no proceeds from the issuance of the Notes in
the Exchange Offer.

In connection with the consummation of the Rainbow Transaction, the Company
and a group of banks led by Chase Manhattan Bank, amended and restated an
existing credit agreement to permit borrowings by Fox/Liberty Sports, Fox
Sports RPP and Fox/Liberty FX, each a subsidiary of the Company (together, the
"Co-Borrowers"), in the amount of $800.0 million (the "Bank Facility"). The
Bank Facility is comprised of a $400.0 million revolving credit facility and a
$400.0 million term loan facility. The proceeds of the loans under the Bank
Facility were used to finance, in part, the Rainbow Transaction. The Company
currently expects that remaining availability will primarily be used for
investments in certain subsidiaries of the Company and for working capital
purposes.

Borrowings under the Bank Facility are unconditionally guaranteed by certain
RSNs that are wholly owned, directly or indirectly, by the Co-Borrowers and by
certain of the Co-Borrowers' subsidiaries that hold the direct interest in
RSNs that are not wholly owned, directly or indirectly, by the Co-Borrowers.
The Company also provides a parent company guarantee of the borrowing under
the Bank Facility. In addition, borrowings under the Bank Facility and the
guarantees are secured by substantially all of the equity interests of the Co-
Borrowers (other than Fox Sports RRP) and the equity interests held by the Co-
Borrowers (other than Fox Sports RPP) and their subsidiaries in certain
related entities.

25
<PAGE>

Included in this Report are: (i) the consolidated financial statements of
the Company for the eight months ended December 31, 1996 and for the years
ended December 31, 1997 and 1998, (ii) the combined financial statements of
Liberty Sports, Inc.--Domestic Operations for the period from January 1, 1996
to April 29, 1996, and (iii) the financial statements of Fox/Liberty FX for
the ten months ended April 29, 1996.

General Programming Operations

Basic cable networks generally recognize revenue from two principle sources:
the payment of affiliate fees from pay television distributors and the sale of
advertising time.

Basic cable networks typically enter into long-term contracts with pay
television distributors such as cable system operators, DTH operators,
multisystem multipoint distribution systems ("MMDS") operators and other
hybrid pay television platforms. These operators provide for the delivery of
the network's programming to subscribers. Contracts between networks and
distributors generally vary in length and provide for a monthly programming
fee ("affiliate license fee") to be paid by the distributor, on a per
subscriber basis, to the cable network for the right to distribute programming
on a non-exclusive basis. Affiliate license fees are generally based on the
popularity of the cable network and the cost of its programming, and
distribution contracts will generally set forth the manner in which fees will
change throughout the life of the contract. The affiliate license fee schedule
during the contract term typically varies based on the number of subscribers
to whom the distributor delivers the network (volume) and/or penetration of
the network among a distributor's total subscriber base. Affiliate license
fees paid by a distributor will typically increase in aggregate as the number
of subscribers served by the distributor increases, and will increase, on a
per subscriber basis, by an escalator, such as the consumer price index
("CPI") for a fixed number of years until the contract expiration date. Upon
the contract's expiration, the parties can renegotiate the license fee to the
extent that market forces will allow. In exchange for distribution and
affiliate license fees, distribution contracts often require the cable network
to provide its distributor with various forms of consideration, including
advertising time that the operator may sell locally, marketing programs and
materials, and in recent years, substantial per subscriber launch funds.

Basic cable networks also receive revenues from the sale of advertising time
on the network. Advertising is sold in time increments and is priced primarily
on the basis of a program's popularity among the specific audience that the
advertiser desires to reach. Advertising rates are affected by the number of
advertisers competing for available time, the total audience reached, as
measured by the number of subscribers to the network, and to the extent that
the network is targeted to a particular audience, the size and demographic
makeup of the subscriber base targeted by the network. Generally, most
advertising contracts are short-term in nature. Cable networks generally pay a
commission both to advertising agencies for placement of local or national
advertising and to their in-house sales force (or the national sales
representative for national advertising).

Cable networks expenses primarily include five general types of expenses:
programming expenses, production and technical expenses, marketing expenses,
advertising expenses and general and administrative expenses.

Programming expenses are generally the largest component of a cable
programmer's expenses and include expenses related to originally produced
programming, acquired programming and rights to programming obtained by
contract. Production and technical expenses typically include expenses related
to operating the technical facilities of the network, the equipment required
to uplink the signal to the satellite and, in the case of RSNs, the production
crews who film and announce the games. Marketing expenses include all
promotional expenses related to improving the market visibility and awareness
of the network. Advertising expenses include sales commissions paid to the in-
house sales force involved in the sale of advertising and commissions paid to
outside representatives. General and administrative expenses include salaries,
employee benefits, rent and other routine overhead expenses as well as legal,
accounting and consulting fees.

26
<PAGE>

The Company's Programming Operations

Each of the Company's RSNs receive revenues from both affiliate license fees
and from the sale of air time to local and national spot advertisers. The
Company's RSN's have rights agreements with professional sports teams and
colleges, within its region of operation. For professional teams, these rights
agreements generally grant the RSN the exclusive right to air a specified
number of games of the professional team per season, plus playoff games, for a
specified fixed fee. The average term of these contracts (from commencement to
scheduled termination) has historically been approximately six years for the
Company's O&O RSNs and such contracts have specified mechanisms for the
increase of the rights fee per game over the term of the contract.

FSN, the Company's national programming service, also receives revenue from
both affiliate license fees and from the sale of advertising time to national
network advertisers. FSN's affiliate license fees are received from affiliated
RSNs or broadcast stations for the right to distribute FSN's national
programming within their region of operations. Similar to the RSNs, FSN has
various rights agreements for its national sports programming, most notably
national rights from MLB and various college conferences for football and
basketball. FSN also produces its own daily sports news program, Fox Sports
News. Upon consummation of the Rainbow Transaction, FSN became a service of
the National Sports Partnership.

Fox Sports Direct, the Company's satellite services operation, provides
sports programming from the RSN's to C-band satellite owners and to the direct
broadcast service providers, such as DirecTV, Inc. and EchoStar's Dish
network, for Ku-band satellite owners. Fox Sports Direct's revenues are
received generally through an up-front annual subscription fee from C-band
customers and from a monthly per subscriber fee to the direct broadcast
service providers. Fox Sports Direct acquires its sports programming through a
license agreement with the RSNs whereby Fox Sports Direct splits a percentage
of its revenues received from its subscribers with the "home territory" RSN in
which the specific satellite subscriber resides.

Prior to the consummation of the Rainbow Transaction, Fox Sports Ad Sales,
LLC, the Company's advertising sales subsidiary received commissions from the
sale of air time on behalf of RSNs, both the Company's and third party RSNs,
as well as on behalf of FSN. Expenses consist of sales personnel and other
sales-related costs. Upon consummation of the Rainbow Transaction, sales of
national advertising became a function of the National Advertising
Partnership.

FX receives revenue from both affiliate license fee contracts and the sale
of advertising time and acquires programming from various sources. FX has
entered into contracts with various Hollywood studios, including Twentieth
Century Fox, a subsidiary of Fox, for the exclusive cable rights to telecast
specific programming, including both feature films and off network television
programming, within a specified term. These contracts are generally long-term
in nature. Under generally accepted accounting principles, FX capitalizes its
film rights and amortizes the asset over the life of the contract. As a
result, the amount of cash payments made for a film contract in a particular
reporting period may differ from the amount amortized.

Significant Accounting Practices

Basis of Presentation

The Company's ownership interests in the RSNs are held either directly or
indirectly and have different voting rights attached thereto. The Company
consolidates all subsidiaries in which it has a majority interest and voting
control. The percentage of ownership, together with the degree to which the
Company controls the management and operation of an RSN, determines the
appropriate accounting treatment for the Company's interest in that particular
RSN. If the Company owns a majority interest in a particular RSN, but does not
have voting control, the ownership interest is accounted for using the equity
method of accounting. Under the equity method of accounting, the financial
condition and results of operations of entities are not reflected on a
consolidated basis and, accordingly, the consolidated revenues and expenses of
the Company, as reported on its consolidated statements of operations, do not
include revenues and expenses related to the entities accounted for under the
equity method.

27
<PAGE>

As of December 31, 1996, the following RSNs, together with Fox Sports
Direct, are accounted for using the equity method of accounting: Southwest
RSN, Pittsburgh RSN, Rocky Mountain RSN, Midwest RSN, Sunshine RSN, Chicago
RSN, Bay Area RSN and D.C./Baltimore RSN, as well as certain operations within
Fox Sports Net. Prior to the formation of the Company, the Southwest RSN,
Pittsburgh RSN, Rocky Mountain RSN and Midwest RSN, as well as Fox Sports
Direct, were consolidated in Liberty Sports, Inc.'s financial statements,
while the others have historically always been accounted for under the equity
method.

Entities that are consolidated in the financial statements of the Company,
at December 31, 1996, include subsidiary entities which own Fox/Liberty FX,
West RSN, West 2 RSN, Northwest RSN, Utah RSN, Arizona RSN, South RSN and Fox
Sports Ad Sales, as well as certain operations within Fox Sports Net.

On March 13, 1997, upon the acquisition of the remaining interests in
Affiliated Regional Communications, Ltd. and affiliates ("ARC") by Liberty/Fox
ARC LP, the Company assumed management control of the consolidated
subsidiaries of Liberty/Fox ARC LP, and from that date the consolidated
subsidiaries of ARC and their operations were consolidated.

In connection with the Rainbow Transaction, the Company contributed certain
business interests and other assets related to national sports programming to
the National Sports Partnership and certain assets related to advertising
sales to the National Advertising Partnership. The Company holds 50%
partnership interests in each partnership. Whereas the assets and liabilities,
and the results of operations of FSN, the national sports programming business
and the national advertising sales representation business were consolidated,
the National Sports Partnership and the National Advertising Partnership are
each accounted for under the equity method. Fox Sports RPP's 40% interest in
RPP is also accounted for under the equity method.

The following RSNs, together with Fox Sports Direct and Fox/Liberty FX, are
consolidated in the financial statements of the Company, at December 31, 1997
and 1998: West RSN, West 2 RSN, Northwest RSN, Utah RSN, Arizona RSN, South
RSN, Southwest RSN, Rocky Mountain RSN, Midwest RSN and Detroit RSN.

As of December 31, 1997 and 1998, the following are accounted for using the
equity method of accounting: Pittsburgh RSN, Sunshine RSN, Chicago RSN, Bay
Area RSN, D.C./Baltimore RSN, RPP, National Sports Partnership and National
Advertising Partnership.

Because the Company reports the results of a significant number of its
subsidiary entities on the equity method, its financial results do not
represent the total combined revenues and expenses of the entire Company. As a
result of the various acquisitions and sales in recent years, which in turn
impact the accounting treatment of many of the Company's subsidiary entities,
comparability of the Company's historical financial results is not possible.

Program Rights

The Company has multi-year contracts for telecast rights of syndicated
entertainment programs and sporting events. Program rights for entertainment
programs are amortized over the term of the contract using the straight-line
method. Program rights for sporting events which are for a specified number of
games are amortized on an event-by-event basis, and those which are for a
specified season are amortized over the term of the season on a straight-line
basis.

At the inception of these contracts and periodically thereafter, the Company
evaluates the recoverability of the costs associated therewith against the
advertising revenues directly associated with the program material and related
expenses. Where an evaluation indicates that a multi-year contract will result
in an ultimate loss, additional amortization is provided to currently
recognize that loss.

Excess Cost

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The Company periodically reviews the propriety of the carrying amount of its
excess cost as well as the related amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value
and/or the estimates of useful lives. This evaluation consists of the
Company's projection of undiscounted operating income before interest over the
remaining lives of the excess cost.

Results of Operations

FOX/LIBERTY NETWORKS, LLC

Year ended December 31, 1998

The Company has certain subsidiaries that are consolidated and others, which
are accounted for under the equity method of accounting. The comparability of
the year ended December 31, 1998 to the year ended December 31, 1997 is
affected significantly by three events: (i) on March 13, 1997, upon the
acquisition of the remaining interests in ARC by ARC LP, the Company assumed
management control of the consolidated subsidiaries of Liberty/Fox ARC LP and
from that date the consolidated subsidiaries of ARC and their operations were
consolidated, (ii) Fox Sports Detroit was launched in September 1997 and (iii)
the operations of FSN were contributed to the National Sports Partnership in
December 1997 and subsequent to the date of such contribution were accounted
for under the equity method.

Total revenues for the year ended December 31, 1998 were $655.2 million, an
increase of $183.4 million, or 39%, over the year ended December 31, 1997. The
increase in total revenue between the years ended 1998 and 1997 would have
been $128.3 million, or 27%, had ARC been consolidated for the entire period,
and excluding Fox Sports Detroit and the impact of FSN.

Programming revenue was the largest source of revenue, representing 46% of
total revenue, or $301.7 million, for the year ended December 31, 1998.
Advertising revenue represents 24% of total revenue, or $160.5 million, for
the year ended December 31, 1998. For the year ended December 31, 1997,
programming revenue was $226.5 million and advertising revenue was $117.9
million. Had ARC been consolidated for the entire period ended December 31,
1997 and excluding the impact of FSN, programming and advertising revenue
would have been $223.6 million and $115.2 million in the year ended December
31, 1997. On this basis, as a percentage of total revenue for the year ended
December 31, 1997, programming and advertising revenue represented 46% and
24%, respectively. Excluding Fox Sports Detroit and the impact of FSN,
programming and advertising revenue for the year ended December 31, 1998
represented 44% and 25%, respectively, of total revenue.

Had ARC been consolidated for the entire year ended December 31, 1997, and
excluding Fox Sports Detroit and the impact of FSN, programming and
advertising revenue would have increased by $48.0 million and $39.5 million,
respectively in the year ended December 31, 1998 as compared to the year ended
December 31, 1997. These represent a 21% increase and 34% increase in
programming and advertising revenue, respectively, between the periods. The
increase in programming revenue of 21% is comprised primarily of an increase
in subscribers at Fox Sports West 2 which launched on January 31, 1997,
subscriber growth in other RSNs and the continued subscriber growth of FX.
Rate increases comprised the balance of the increase between periods. The
increase in advertising revenue of 34% is comprised of a 48% increase in
advertising revenue for FX and a 31% increase for RSNs, other than Fox Sports
Detroit. Increased ratings on FX, together with the increased subscribers,
resulted in a 17% increase in average audience during primetime, in the year
ended December 31, 1998 over the same period in the previous year. The
increase is due primarily to the addition of The X-Files and NYPD Blue to the
primetime schedule in the fall of 1997. The increased ratings together with
increased subscribers resulted in the significant increase in advertising
revenue. The RSNs growth in advertising revenue is due to increased
advertising rates and an increase in the number of professional events,
primarily MLB. Advertising rates per game increased for MLB, NBA and NHL
events in the year ended December 31, 1998 as compared to the same period in
the previous year. The number of local professional events increased by 27%
over these same periods.

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Operating expenses totaled $485.3 million for the year ended December 31,
1998, which represented 74% of total revenues. These expenses consist
primarily of rights fees, programming and production costs. Operating expenses
for the year ended December 31, 1997 totaled $420.9 million, or 89% of total
revenues. Had ARC been consolidated for the entire year ended December 31,
1997, and excluding Fox Sports Detroit and the impact of FSN, operating
expenses for the year ended December 31, 1998 and 1997 would have been $441.9
million and $372.6 million, respectively. On this basis, operating expenses
represent 72% and 77% of total revenues for the year ended December 31, 1998
and 1997, respectively. The increase in operating expenses is attributable to
an increase in the number of professional events, primarily MLB games, as well
as increased programming rights fees of RSNs due to renegotiated and newly
entered into sports rights agreements. Additionally, programming expenses of
FX increased relating to newly launched programs during or subsequent to the
year period ended December 31, 1997.

General and administrative expenses totaled $90.7 million for the year ended
December 31, 1998, which represented 14% of total revenues. General and
administrative expenses for the year ended December 31, 1997 totaled $65.6
million, or 14% of total revenues. A non-cash charge to earnings was taken in
the year ended December 31, 1998 with respect to an equity appreciation rights
plan in the amount of $13.5 million. Excluding this non-cash charge, general
and administrative expenses would have been $77.2 million, or 12% of total
revenues.

Depreciation and amortization expenses totaled $21.7 million and $19.0
million for the years ended December 31, 1998 and 1997, respectively. Of these
amounts, $14.3 million and $11.8 million were related to amortization of
excess cost from acquisitions of programming entities consolidated with the
Company. The increase is primarily due to the consolidation of ARC and the
acquisition of an RSN in Detroit.

Interest expense for the year ended December 31, 1998 totaled $113.0 million
as a result of $1.4 billion of debt outstanding as of December 31, 1998. The
amount of debt is primarily attributable to (i) the Offering, pursuant to
which $786.9 million of debt is outstanding at December 31, 1998, (ii) the
Bank Facility and indebtedness thereunder in the amount of $605.0 million; and
(iii) the acquisition of certain assets in connection with the commencement of
operations of Fox Sports Detroit, pursuant to which the Company incurred
$25.7 million of debt.

Equity loss of affiliates for the year ended December 31, 1998 was $5.9
million, a decrease of $3.1 million, from an equity loss of $9.0 million for
the year ended December 31, 1997. For the year ended December 31, 1998, equity
income of affiliates includes the Company's equity interests in the operations
of the National Sports Partnership and the National Advertising Partnership,
whose operations were consolidated prior to the Rainbow Transaction, RPP and
certain RSNs. For the year ended December 31, 1997, equity income of
affiliates included the Company's equity interests in ARC and its related
subsidiaries through March 13, 1997, certain RSNs and equity losses of the
National Sports Partnership and the National Advertising Partnership for the
period from December 18, 1997 through December 31, 1997. For the year ended
December 31, 1998, equity income of affiliates includes the effect of $7.9
million in amortization of excess cost relating to the Company's investment in
several of its affiliates and a $7.1 million gain on the sale of 50% of RPP's
investment in Fox Sports New England.

Year ended December 31, 1997

The Company has certain subsidiaries that are consolidated and others which
are accounted for on the equity method of accounting. On March 13, 1997, upon
the acquisition of the remaining interests in ARC by Liberty/Fox ARC LP, the
Company assumed management control of the consolidated subsidiaries of
Liberty/Fox ARC LP, and from that date the consolidated subsidiaries of ARC
and their operations were consolidated. Had the additional 12.78% interest
been acquired at the beginning of the period (January 1, 1997), the Company's
consolidated revenue and income would have increased by $29.9 million and $0.3
million, respectively.

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Total revenue for the year ended December 31, 1997 was $471.8 million.
Programming revenue is the largest source of revenue, representing 48% of
total revenues, or $226.5 million. Advertising revenue represents 25% of total
revenues, or $117.9 million. For the eight months ended December 31, 1996,
programming revenue was $85.3 million and advertising revenue was $37.7
million, or 59% and 26% of total revenues, respectively. The primary reason
for this change in the mix of revenues as compared to total revenue is due to
the consolidation of ARC in which direct broadcast revenue represents 52% of
ARC's total revenues. For the year ended December 31, 1997, direct broadcast
revenue represented 19% of total revenues, or $91.7 million. For the eight
months ended December 31, 1996, direct broadcast revenue was $5.7 million, or
4% of total revenues reflecting the impact of ARC being accounted for on the
equity method during this period.

Operating expenses totaled $420.9 million for the year ended December 31,
1997, which represented 89% of total revenues. These expenses consist
primarily of programming and production costs. Operating expenses for the
eight months ended December 31, 1996 totaled $117.4 million, or 81% of total
revenues. The increase can be attributed to acquisition and renewals of
programming rights during the first half of 1997 and direct telecast rights to
third party RSNs that were not previously consolidated. The Company also
incurred significant expenses throughout the year related to the launch of
West2 in January 1997. As West2 has not yet achieved full distribution,
operating expenses substantially exceeded revenues during the year. The
Company also made a significant investment in programming in conjunction with
the continued development of FSN, which launched in November 1996.

General and administrative expenses totaled $65.6 million for the year ended
December 31, 1997, which represented 14% of total revenues. General and
administrative expenses for the eight months ended December 31, 1996 totaled
$31.6 million, or 22% of total revenues. In 1996, the Company incurred
significant costs relative to severance and relocation expenses in connection
with the Company's decision to relocate its corporate offices from Dallas,
Texas to Los Angeles, California. The Company offered a severance package
based upon years of service to those employees who elected not to transfer,
and a relocation package to those employees who elected to relocate to Los
Angeles. Similar costs were not incurred in 1997.

Depreciation and amortization expenses totaled $19.0 million and $8.5
million for the year ended December 31, 1997 and for the eight months ended
December 31, 1996, respectively. Of these amounts, $11.8 million and $5.2
million were related to amortization of excess cost from acquisitions of
programming entities. The increases are primarily due to the consolidation of
ARC in 1997, as discussed above.

Interest expense for the year ended December 31, 1997 totaled $49.2 million
as a result of $1.3 billion of debt outstanding as of December 31, 1997.
Interest expense for the eight months ended December 31, 1996 totaled $4.2
million which related to $171.7 million of outstanding indebtedness as of
December 31, 1997. The increase in the amount of debt is attributable to (i)
the Offering, pursuant to which the Company incurred $752.3 million of debt;
(ii) the consolidation of ARC's consolidated subsidiaries, pursuant to which
the Company incurred $9.0 million of debt; (iii) the purchase of the remaining
interest in ARC pursuant to which the Company incurred $40.0 million of debt;
(iv) the arrangement of an advertising sales and carriage agreement pursuant
to which the Company incurred $30.0 million of debt; (v) the Bank Facility and
indebtedness thereunder in the amount of $460.0 million; (vi) the acquisition
of certain assets in connection with the commencement of operations of the
Detroit RSN, pursuant to which the Company incurred $25.7 million of debt; and
(vii) additional borrowings of approximately $39.5 million to fund operations
for the year ended December 31, 1997, net of the extinguishment of debt of
$201.7 million during the period.

Eight months ended December 31, 1996

The Company was formed pursuant to a 50%/50% joint venture in April 1996
from the contribution of assets from Liberty and Fox. The consolidated
statement of operations of the Company reflects the RSNs and other sports
businesses, formerly owned by Liberty and Fox.

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<PAGE>

The Company has certain subsidiaries that are consolidated and others which
are accounted for under the equity method of accounting. The key criteria used
to determine the accounting treatment are ownership and voting control. For
comparative purposes to a pro forma combined Liberty Sports and Fox/Liberty FX
statement of operations prior to the formation of the Company, it is important
to realize that certain subsidiary entities were accounted for under the
equity method after formation of the Company in April 1996 which were
previously consolidated in Liberty Sports, Inc. financial statements. These
significant subsidiary entities are Liberty/Fox KBL LP (Pittsburgh RSN),
Liberty/Fox ARC LP (Southwest, Midwest and Rocky Mountain RSNs, and Fox Sports
Direct), and Liberty/Fox Distribution LP (primarily national rights for
college football).

If these operating subsidiaries had been consolidated for the eight months
ended December 31, 1996, as they were under Liberty Sports, Inc. prior to the
formation of the Company, the effect on total consolidated revenues and
expenses would have been significant. For the eight months ended December 31,
1996, total revenues for these operating subsidiaries were $138.6 million,
consisting of the following: programming--$40.7 million, advertising--$19.3
million, direct broadcast--$55.1 million and other--$23.5 million. Total
expenses for the same period were $163.3 million, consisting of the following:
operating--$150.0 million, general and administrative--$10.4 million, and
depreciation and amortization--$2.9 million. The operating loss for these non-
consolidated subsidiaries was $24.7 million, which is included on the
Company's financial statements as equity income of affiliates, net and equity
in loss of affiliates related to additional amortization of program rights.

For comparability purposes, the following discussion will make reference to
comparisons between calendar 1996 and 1995 for the O&O RSNs. To achieve
comparability, these calculations were made by summing the specific revenues
and expenses for all owned and operated regional sports networks, whether
consolidated or accounted for under the equity method for financial statement
purposes, for 1996 and 1995.

Total revenues for the eight months ended December 31, 1996 were $144.8
million. Programming revenue is the largest revenue source, representing 59%
of total revenue or $85.3 million. Programming revenues for RSNs increased 30%
in calendar 1996 compared to calendar 1995 due to rate increases and
increasing subscribers. Advertising revenue totaled $37.7 million or 26% of
total revenues. For RSNs, advertising revenues increased 15% in calendar 1996
due to new sports contracts and higher advertising rates and sell-out
percentages in certain events. Direct satellite broadcast revenue represented
only 4% of total revenues or $5.7 million due to the Company's direct
satellite broadcast division, Fox Sports Direct, not being consolidated. The
remaining revenue sources account for 11% of total revenues and consist of
infomercials, merchandising, and other.

Operating expenses totaled $117.4 million for the eight months ended
December 31, 1996, which represented 81% of total revenues. These expenses
consisted primarily of programming and production costs. For RSNs, programming
and production costs increased 17% in calendar 1996 from calendar 1995 due
primarily to escalating and/or renegotiated costs in certain existing sports
contracts, and, to a lesser extent, new sports contracts.

In 1996 the Company finalized a long-term agreement with MLB for national
cable rights. In accordance with the Company's accounting policies as
described above, an evaluation of the recoverability of the costs associated
with this agreement was performed. Additional amortization of program rights
totaling $80.0 million was recorded associated with this contract, as a result
of the evaluation of projected future advertising revenues in comparison to
future program rights. Depreciation and amortization expenses totaled $8.5
million for the period. Of this amount, $5.2 million was related to
amortization of excess cost from acquisitions of programming entities. An
additional amortization of program rights totaling $29.0 million was also
recorded with respect to a projected loss to an affiliate on college football
contracts.

General and administrative expenses totaled $31.6 million, or 22% of total
revenues, for the eight months ended December 31, 1996. Included in this total
for the period was $1.3 million for deferred compensation to certain employees
and $1.2 million in severance costs associated with the announced relocation
in August 1996 of the Company's corporate offices from Dallas to Los Angeles.
The actual relocation was completed in March 1997.

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Interest expense was $4.2 million for the period with substantially all of
the Company's debt bearing interest at floating rates.

Subsidiaries income tax expense totaled $3.4 million for the period which
related to estimated federal and state tax liabilities.

In September 1996, the Company sold its merchandising division for $3.8
million to a company owned by former executives of Liberty. A loss on sale of
$4.9 million was realized in conjunction with this transaction.

The Company has numerous significant investments accounted for under the
equity method. For the eight months ended December 31, 1996, net equity income
of affiliates was $17.0 million.

LIBERTY SPORTS, INC.--DOMESTIC OPERATIONS

Period from January 1, 1996 to April 29, 1996

Revenues for the four months ended April 29, 1996 totaled $99.8 million.
Programming, advertising, and direct broadcast revenues were 38%, 28%, and
24%, respectively, of total revenues for the four month period compared to
38%, 30%, and 23%, respectively, of total revenues for the calendar year ended
December 31, 1995 ("Liberty Calendar 1995"). The slight percentage decrease in
advertising revenues was offset by an increase in the percentage of other
revenues as other revenues were 10% of total revenues for the four month
period compared to 9% for Liberty Calendar 1995.

Operating expenses for the four months ended April 29, 1996 were $60.7
million, or 61% of total revenues for the period. Operating expenses for
Liberty Calendar 1995, as a percentage of total revenues, were comparable at
60%.

General and administrative expenses for the four months ended April 29, 1996
were $28.0 million, or 28% of total revenues for the period. General and
administrative expenses for the preceding fiscal year, as a percentage of
total revenues, were 33%. The decreased percentage cost is attributable to the
sale of certain unprofitable business divisions in January 1996 and overall
efficiencies in Liberty Sports, Inc.--Domestic Operations' existing
operations.

Ten Months ended April 29, 1996

Revenues for the ten months ended April 29, 1996 totaled $75.4 million, of
which approximately 74% represented revenues attributable to programming
revenue, as compared to 77% of FX's total revenue for the fiscal year ended
June 30, 1995 ("FX Fiscal 1995"). Increased advertising revenues due to the
maturing of the programming service and increased awareness among viewers and
advertisers since the June 1994 launch resulted in a decrease in the
percentage. Advertising revenue (net of commissions) contributed approximately
23% of revenues for the ten month period, and infomercial revenue contributed
3%.

Operating expenses for the ten months ended April 29, 1996 were $63.4
million, or 84% of total revenues for the period. Operating expenses for FX
Fiscal 1995, as percentage of total revenues, was 122%. This improvement in
operating expenses as a percentage of revenues is attributable to a decrease
in original programming production.

General and administrative expenses for the ten months ended April 29, 1996
were $19.9 million, or approximately 26% of revenues for the period. General
and administrative expenses for FX Fiscal 1995 were approximately 35% of
revenues. This decrease in general and administrative expenses as a percentage
of revenues is attributable to an overall increase in programming and
advertising revenues as compared to FX Fiscal 1995.

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Liquidity and Capital Resources

The Company's liquidity requirements arise from (i) the funding of operating
losses and other general working capital needs, (ii) its strategic plan to
secure national distribution for its network programming, either through the
acquisition of existing third party-owned RSNs or through the launch of new
RSNs, (iii) the acquisition of additional programming rights, and (iv) its
capital expenditure requirements, which include the Company's plans to convert
to digital transmission.

Net cash (used in) provided by operating activities of the Company for the
years ended December 31, 1998 and 1997 and for the eight months ended December
31, 1996 was ($32 million), ($76.7 million) and $14.3 million, respectively.

Net cash used in investing activities of the Company for the years ended
December 31, 1998 and 1997 and for the eight months ended December 31, 1996
was $36.1 million, $932.4 million and $38.8 million, respectively.

Net cash provided by financing activities of the Company for the years ended
December 31, 1998 and 1997 and for the eight months ended December 31, 1996
was $61.4 million, $1,050.8 million and $25.2 million, respectively.

In June 1997, the Company entered into an agreement with Rainbow to acquire
a 40% interest in Rainbow's sports properties, including economic interests in
eight RSNs, Madison Square Garden entertainment complex, Radio City
Productions LLC, the New York Knicks, and the New York Rangers in exchange for
$850 million. In December 1997 the Rainbow Transaction was consummated and the
net proceeds from the Offering, along with available proceeds under the Bank
Facility, were used to fund the Company's cash contribution of $850 million to
RPP.

In August 1997, the Company consummated the Offering. The net proceeds from
the Offering were used in part, to finance the Rainbow Transaction. The
indentures, as amended, pursuant to which the Notes were issued in connection
with the Offering contain certain restrictive covenants that, among other
things, restrict the Company's ability to incur additional indebtedness, pay
dividends, transfer assets and engage in transactions with affiliates. As of
December 31, 1998 the Company was in compliance with these restrictive
covenants.

At December 31, 1998, the total amounts borrowed under these credit
facilities were $611.3 million. The total commitments pursuant to these credit
facilities were $806.3 million as of December 31, 1998. In September 1997, the
Company entered into a credit agreement which permitted borrowings of up to
$450.0 million. The proceeds of such credit agreement were used to retire
amounts borrowed under previously existing credit facilities and for working
capital purposes. Upon consummation of the Rainbow Transaction, the Company
amended and restated this $450.0 million credit agreement to permit borrowings
of up to $800.0 million under the Bank Facility. The Bank Facility was used to
finance, in part, the Rainbow Transaction. At December 31, 1998, the total
amount borrowed under the Bank Facility was $605.0 million. South Ltd. also
has a credit facility (the "South Credit Facility") with permitted borrowings
of $6.3 million. At December 31, 1998, the total amount borrowed under the
South Credit Facility was $6.3 million. The Bank Facility and the South Credit
Facility restrict the payment of dividends, and contain certain restrictive
covenants regarding, among other things, the maintenance of certain financial
ratios and restrictions on the distribution of assets.

Future capital requirements are substantial. At December 31, 1998, the
Company has future minimum payments on operating leases, including
transponders totaling $91.3 million, and commitments under long-term program
rights contracts totaling $1,654.0 million. The Company has also made a
substantial investment in the National Sports Partnership in the year ended
December 31, 1998. The National Sports Partnership, which was formed in
December 1997, required a significant investment to fund operating losses,
primarily related to the agreement with MLB and the development of Fox Sports
News. Investment in the National Sports Partnership will continue as the
network continues to develop. Also, within the next several years, the Company
will complete its transition from analog transponder equipment to digital
transponder equipment. Obligations under operating leases for the Company's
fleet of transponders currently in use total $1.6 million per month, with
varying expiration dates through 2006. Upon completion of the transition to
digital transponder equipment, the Company anticipates savings of
approximately $1.0 million per month, as compared to current obligations. In

34
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order to transition to the digital system, the Company will purchase five
signal compression systems. In addition, the Company is purchasing satellite
receivers which will allow cable operators to convert the digital signal back
into a single channel feed for distribution across their system. The total
cost of the compression systems and receivers will be approximately $22
million, of which approximately $17 million has been spent to date. The
transition to digital transponder equipment commenced in 1998 and will
continue into 1999. In addition, the cost of acquiring sports programming
rights continues to escalate. See "Business--Rights Agreements." Furthermore,
the Company intends to continue to explore opportunities to expand its
distribution.

The Company is a holding company and its assets consist solely of
investments in its subsidiaries and affiliates. As a holding company, the
Company's ability to meet its financial obligations, including its obligations
under the Notes and the Bank Facility and its funding and other commitments to
its subsidiaries and affiliates, is dependent on the earnings of such
subsidiaries and affiliates 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 for management fees and expenses, and
repayment of loans and advances from the Company. Accordingly, the Company's
ability to pay interest on the Notes and to otherwise 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 and
affiliates. The payment of dividends or the making of loans or advances to the
Company by its subsidiaries and its affiliates, which may be subject to
statutory, regulatory or contractual restrictions, are contingent upon the
earnings of those subsidiaries and affiliates, and are subject to various
business considerations. Although the agreements between the Company and its
partners contemplate the payment of distributions, the Company may not be able
to cause its subsidiaries or affiliates to make distributions when it may have
a need for distributions, and the Company may not be able to dispose of its
investments in any of its RSNs if required for financial or other reasons.

Sources of funding for the Company's future financing requirements, if any,
may include public or private offerings of equity and/or debt securities,
commercial bank loans, and partner capital contributions. The extent of the
additional financing required, if any, will depend on the success of the
Company's business. There can be no assurance that additional financing, if
needed, will be available to the Company or, if available, that such financing
can be obtained on terms acceptable to the Company and within the limitations
contained in the terms of any future financing arrangements. Failure to obtain
any such financing could delay or prevent the Company's development and growth
plans, impair the Company's ability to meet its debt service requirements, and
have a material adverse effect on the Company's business.

The Company believes that its existing funds and the proceeds from
borrowings under the Bank Facility, will be sufficient to meet its plan to
secure national distribution, maintain and/or acquire programming, make
anticipated capital expenditures, and meet its projected working capital
requirements, although no assurances can be given in this regard.

Year 2000

The following disclosure is a Year 2000 readiness disclosure statement
pursuant to the Year 2000 Readiness and Disclosure Act.

The Company is devoting significant resources throughout its business
operations to resolve the potential impact of the Year 2000 (Y2K) on the
processing of date-sensitive information by its computerized information
technology ("IT") systems. The Y2K problem is the result of computer programs
being written using two digits (rather than four) to define the applicable
year. Certain programs may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculations or system failures.
The problem also extends to non-IT systems including: operating and control
systems that rely on embedded chip systems.

The Company's standard for compliance requires that for a computer system or
a business process to be Year 2000 compliant, it must be designed to be used
prior to, on and after January 1, 2000. Such systems or processes must be able
to operate without error in dates and date-related data, including without
limitation, calculating, comparing, indexing and sequencing prior to, on and
after January 1, 2000.

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The Company has established a dedicated Y2K Steering Committee to oversee
the Company's Y2K internal IT application and infrastructure readiness
activities. The Y2K Steering Committee is charged with raising awareness
throughout the Company, developing tools and methodologies for addressing the
Y2K issue, monitoring the development and implementation of business and
infrastructure plans to bring non-compliant applications into compliance on a
timely basis and identifying and assisting in resolving high risk issues. The
Y2K Steering Committee is focused on the following major areas:

Internal IT Systems. The Company is approaching its Y2K internal readiness
program in the following five phases: (1) assessment, (2) strategy,
(3) planning, (4) implementation and (5) testing and management. The
assessment phase involves taking an inventory of the Company's internal IT
applications. The strategy phase involves prioritizing risk, identifying
failure dates, defining a solution strategy, estimating repair costs and
communicating across the Company the magnitude of the problem and the need to
address Y2K issues. The planning phase consists of identifying the tasks
necessary to ensure readiness, scheduling remediation plans for applications
and infrastructure, and determining resource requirements and allocations. The
fourth phase, implementation, involves readying the development and testing
environments, and piloting the remediation process. Testing and management,
the last phase, consists of executing the Company's plan to fix, test and
implement critical applications and associated infrastructure, and putting in
place contingency plans for processes that have a high impact on the Company's
business. The Company is targeting its efforts so that its IT applications
will be Y2K compliant on or about September 30, 1999.

Internal Non-IT Systems. The Company has also focused on internal non-IT
systems. Non-IT systems include those systems that are not commonly thought of
as IT systems, such as broadcast equipment, satellite transmission equipment
telephone/PBX systems, fax machines, facilities systems regulating alarms,
building access and other miscellaneous systems that depend on date related
processing. The Company's Y2K Steering Committee is providing standardized
tools and is monitoring the progress of these readiness efforts to ensure
business continuity.

Material Third Party Relationships. The Company has developed a Y2K process
for dealing with its key suppliers, contract manufacturing, distributors,
vendors and partners. The process generally involves the following steps:
(i) initial supplier survey, (ii) risk assessment and contingency planning,
(iii) follow-up supplier reviews and escalation, if necessary, and where
relevant, (iv) testing. To date, the Company has received responses from many
of its critical suppliers, most of whom responded that they expect to address
all their significant Y2K issues on a timely basis. The Company is following
up with those significant vendors and service providers that either did not
respond initially or whose responses were unsatisfactory. The company is
working to identify and analyze the most reasonably likely worst case
scenarios for third party relationships affected by Y2K.

The Company expects to successfully implement the systems and programming
changes necessary to address internal IT and non-IT readiness issues.The
Company has been focusing its efforts on identifying and remediating its Y2K
exposures and is developing and will have tested where practical contingency
plans in the event it does not successfully complete all phases of its Y2K
program. These contingency plans include, but are not limited to
identification of alternative suppliers, vendors and service providers.

Based on the Company's current assessment, the costs of addressing potential
problems are not currently expected to have a material adverse impact on the
Company's financial position, results of operations or cash flows in future
periods. However, if the Company, its customers or vendors identify Y2K issues
in the future and are unable to resolve such issues in a timely manner, it
could result in a material financial risk. Accordingly, the Company plans to
devote the necessary resources to resolve all significant Y2K issues in a
timely manner. The estimated costs to complete the project are currently
expected to be approximately $2.5 million.

The costs of the project and the date on which the Company believes it will
complete the Y2K modifications are based on management's best estimates, which
were derived utilizing numerous assumptions 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

36
<PAGE>

increased costs associated with, the implementation of the Company's Y2K
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 correction 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 Y2K readiness of third parties and the
interconnection of national businesses, the Company cannot ensure that its
ability to timely and cost effectively resolve problems associated with the
Y2K issue will not affect its operations and business, or expose it to third
party liability.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

The Company's exposure to interest rate changes is primarily related to its
variable rate debt under its Bank Facility. The Bank Facility is comprised of
a $400 million seven-year revolving credit facility and a $400 million seven
year term loan which were entered into in conjunction with the Rainbow
Transaction. Because the interest rates on these facilities are variable,
based upon the bank's prime rate or LIBOR, the Company's interest expense and
cash flow are affected by interest rate fluctuations. At December 31, 1998,
the Company had $205 million outstanding under the revolving credit facility
and $400 million outstanding under the term loan. If interest rates were to
increase or decrease by 100 basis points, the result, based upon the existing
outstanding debt, would be an annual increase or decrease of $6.0 million in
interest expense and a corresponding decrease or increase of $6.0 million in
the Company's cash flow.

Item 8. Financial Statements and Supplementary Data

The 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. The index to Financial
Statements is included in Item 14.

Item 9. Disagreements With Accountants on Accounting and Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

Executive Officers

The current executive officers of the Company and/or certain of its
subsidiaries are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
David Hill.......... 52 Chairman
Anthony F.E. Ball... 43 President and Chief Executive Officer
Executive Vice President and Chief Financial
Jeff Shell.......... 33 Officer
Tracy Dolgin........ 39 Chief Operating Officer
Executive Vice President, Head of Business
James A. Martin..... 44 Operations
Louis LaTorre....... 45 Senior Vice President
Robert L. Thompson.. 41 Executive Vice President of Fox/Liberty Sports
</TABLE>

David Hill has served as Chairman of the Company since April 1996. From
April 1996 through October 1997, Mr. Hill also served as the Company's Chief
Executive Officer. In addition, since October 1997 he has served as Chairman
and Chief Executive Officer of Fox Broadcasting Company. Prior thereto, from
July 1996 until October 1997, Mr. Hill served as Chief Operating Officer of
Fox Television and from December 1993 until

37
<PAGE>

October 1997 as President of Fox Sports, a division of Fox Television. From
April 1988 until October 1993, Mr. Hill was employed at Sky Television and its
successor company, British Sky Broadcasting Group plc ("BSkyB"), in various
capacities, including Head of Sky Sports, a subsidiary of BSkyB.

Anthony F.E. Ball has served as President of the Company since March 1997
and additionally as its Chief Executive Officer since October 1997. From March
1997 until October 1997, Mr. Ball also served as Chief Operating Officer of
the Company. Mr. Ball has also served as President and Chief Executive Officer
of Fox/Liberty Sports and Fox/Liberty FX since October 1997. In addition,
since June 1996 he has served as President and Chief Operating Officer of
International Sports Programming Partners ("ISPP"), an international sports
programming joint venture between Fox and TCI. From December 1993 until June
1996, Mr. Ball was employed by BSkyB in various capacities, including as its
General Manager/Broadcasting and as Head of Production and Operations of Sky
Sports. Prior thereto, from March 1991 until December 1993, Mr. Ball served as
Senior International Vice President and Head of European Productions at
TransWorld International, a subsidiary of International Management Group.

Jeff Shell has served as Executive Vice President and Chief Financial
Officer of the Company since February 1998. Prior thereto, Mr. Shell served as
Senior Vice President, Finance and Development of the Company from June 1996
until February 1998. From October 1994 until November 1996, he served as Vice
President of Business Development for Fox, Inc. Prior thereto, from September
1991 until October 1994, Mr. Shell served in various capacities in the
Strategic Planning and Corporate Development Group at The Walt Disney Company.

Tracy Dolgin has served as Chief Operating Officer of the Company since
September 1998. Prior thereto, Mr. Dolgin served as Joint Chief Operating
Officer of Fox/Liberty Sports from July 1997 to September 1998. In addition,
he served as Executive Vice President, Marketing for Fox Sports, a division of
Fox Broadcasting Company, from December 1993 until September 1998. Prior
thereto, from December 1992 until December 1993, Mr. Dolgin served as
Executive Vice President, Marketing of Fox Broadcasting Company, and from May
1989 until December 1992, Mr. Dolgin served as Senior Vice President,
Marketing of Home Box Office, a subsidiary of Time Warner, Inc.

James A. Martin has served as Executive Vice President, Head of Business
Operations of each of the Company, Fox/Liberty Sports and Fox/Liberty FX since
June 1997. From September 1996 until June 1997, he served as Executive Vice
President and Chief Operating Officer of Fox/Liberty Sports. From January 1995
until September 1996, Mr. Martin served as Executive Vice President and
President of Regional Network Operations of Liberty Sports, Inc. Prior
thereto, from September 1991 until December 1994, Mr. Martin served as Vice
President and Chief Operating Officer of Liberty.

Louis LaTorre has served as Senior Vice President of the Company, President,
Advertising Sales of Fox/Liberty Sports and President, Advertising Sales of
Fox/Liberty FX since January 1997. From July 1994 until December 1996, he
served as President and Chief Operating Officer for the Sales and Marketing
Division of New World Communications, Inc. From October 1993 until June 1994,
Mr. LaTorre served as President of Pro Star Entertainment Inc., a satellite
encryption and entertainment company. From March 1993 until September 1993, he
served as President of Platinum Productions, Inc., a pay-per-view
entertainment company. Prior thereto, from June 1981 until February 1993, Mr.
LaTorre served in various capacities at Turner Broadcasting System, Inc.
including, most recently, as Executive Vice President, Advertising Sales and
Marketing, for the Turner Entertainment Group, a subsidiary of Turner
Broadcasting System, Inc.

Robert L. Thompson has served as Executive Vice President of Fox/Liberty
Sports since October 1997 and, from July 1996 through October 1997, he served
as its Senior Vice President, Rights and Acquisitions and Regional Network
Operations. In addition, since December 1998 he has also served as Chief
Operating Officer of ISPP. From October 1994 through July 1996, Mr. Thompson
served as Senior Vice President, Regional Network Operations for Liberty
Sports, Inc. and from January 1994 until October 1994 he served as Group Vice
President of Liberty Sports, Inc. Prior thereto, from February 1989 until
October 1994, Mr. Thompson served as Vice President/General Manager of the
Rocky Mountain Prime Sports Network.

There are no family relationships between any of the executive officers.

38
<PAGE>

Item 11. EXECUTIVE COMPENSATION

Executive Compensation

The following table sets forth the compensation paid for the eight months
ended December 31, 1996 and for the years ended December 31, 1997 and 1998 to
those persons who were, at December 31, 1998, the Company's Chief Executive
Officer and the next four most highly compensated executive officers of the
Company and/or its subsidiaries (the "Named Executives").
Summary Compensation Table

<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------------------ --------------------- ---------
Restricted Securities Incentive
Name and Principal Other Annual Stock Underlying Plan All Other
Occupation Year Salary Bonus Compensation Awards Option Payouts Compensation
----------------------- ---- -------- -------- ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Hill.............. 1998 $500,000(2) $150,000(2) -- -- -- -- --
Chairman(1) 1997 $500,000(2) $150,000(2) -- -- -- -- --
1996 $333,333(2) $100,000(2) -- -- -- -- --
Anthony F.E. Ball....... 1998 $538,888 $400,000 -- -- -- -- --
President and Chief 1997 $250,000(3) $ 75,000(3) -- -- -- -- --
Executive
Officer(1) 1996 -- -- -- -- -- -- --
Tracy Dolgin............ 1998 $472,234 $200,000 -- -- -- -- --
Chief Operating 1997 $256,597(5) $100,000(5) -- -- -- -- --
Officer(4)
1996 -- -- -- -- -- -- --
James A. Martin......... 1998 $382,762 $125,000 -- -- -- -- $300,000(8)
Executive Vice 1997 $358,333 $125,000 -- -- -- -- $300,000(8)
President(6)
1996 $215,625(7) $ 63,333(7) -- -- -- -- $300,000(8)
Louis LaTorre........... 1998 $464,636 $200,000 $30,714 -- -- -- --
Senior Vice President 1997 $391,026 $200,000 $20,148 -- -- -- --
1996 -- -- -- -- -- -- --
</TABLE>
- -------
(1) In October 1997, Mr. Ball succeeded Mr. Hill as Chief Executive Officer of
the Company.
(2) Reflects the compensation received by Mr. Hill for the services he
rendered to the Company from the Company's inception in April 1996 through
the year ended December 31, 1998. During fiscal years 1998, 1997 and 1996,
Mr. Hill was, and currently remains employed by Fox Broadcasting Company.
Fox Broadcasting Company grants the Company the right to utilize Mr.
Hill's services. The above disclosure does not include compensation
information for Mr. Hill with respect to the services he performed at Fox
Broadcasting Company. See "Certain Transactions."
(3) Reflects compensation received by Mr. Ball for services he rendered to the
Company for a portion of fiscal year 1997. The Company has been granted
the right to utilize Mr. Ball's services through March 1, 2001.
(4) Mr. Dolgin served as Joint Chief Operating Officer of Fox/Liberty Sports
until September 1998.
(5) Reflects compensation received by Mr. Dolgin for services he rendered to
the Company for a portion of fiscal year 1997.
(6) Mr. Martin served as Executive Vice President and Chief Operating Officer
of Fox/Liberty Sports until June 1997.
(7) Reflects compensation received by Mr. Martin for the services he rendered
to the Company from the Company's inception in April 1996 through December
1996. During fiscal year 1996, Mr. Martin was employed by Liberty Sports,
Inc., which granted the Company the right to utilize Mr. Martin's
services. Mr. Martin became an employee of the Company on January 1, 1997.
See "Certain Transactions."
(8) In connection with the formation of the Company, a deferred compensation
incentive plan (the "Plan") with an effective date of January 1, 1996, was
approved and adopted by the Company. A substantially similar plan existed
at Liberty Sports, Inc. ("LSI"), then a subsidiary of Liberty (the "LSI
Plan"), prior to the formation of the Company. The Plan was adopted by the
Company in anticipation of certain LSI employees performing services for
the Company. Such employees, including Mr. Martin, were beneficiaries
under the LSI Plan. Pursuant to the Plan, deferred compensation vests
annually at a 20% rate and was fully vested in 1998. Upon full vesting of
the deferred compensation under the Plan, the Company has incurred charges
against earnings in the amount of $900,000 with respect to Mr. Martin.

The Company does not have a stock option plan and no long term compensation
awards were made in the fiscal year ended 1997, except as disclosed above.

39
<PAGE>

In October 1997, the Company adopted the Fox/Liberty Networks, LLC Equity
Appreciation Rights Plan for Management and Key Employees (the "Plan"). The
Plan is designed to provide a flexible mechanism to permit management and key
employees of the Company and its subsidiaries to obtain significant interests
in the equity of the Company, thereby increasing their proprietary interest in
the growth and success of the Company. During fiscal year 1998, grants under
the Plan have been awarded to the Named Executives as follows.

Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>

Individual Grants(1) Potential Realizable
-------------------------- Value at Assumed
Number of Percent Of Annual Rates of Stock
Securities Total Exercise Price Appreciation
Underlying Options/SARs Of Base For Option Term
Option/SARs To Employees Price Expiration ---------------------
Name Granted (#) In Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ----------- -------------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Anthony F.E. Ball....... 10,000 22% $185 5/1/2006 850,753 2,025,511
</TABLE>
- --------
(1) Messrs. Hill, Dolgin, Martin and LaTorre did not receive grants during
fiscal year 1998.

Employment Arrangements

During fiscal years 1996, 1997 and 1998 Mr. Hill was, and currently remains,
employed by Fox Broadcasting Company, which grants the Company the right to
utilize Mr. Hill's services. For fiscal year 1998 Fox Broadcasting Company
allocated to the Company $650,000 for the services Mr. Hill rendered to
Company for that period. See "Certain Relationships and Related Transactions."

The Company entered into an agreement granting to the Company the exclusive
right to utilize Mr. Ball's services for a term of four years, which commenced
on March 1, 1997. Pursuant to the agreement, Mr. Ball renders services to the
Company and to ISPP, the international sports programming joint venture
between Fox and Liberty. The agreement provides that the Company will pay a
pro rata share of Mr. Ball's compensation, based on the number of days
services are provided to the Company and its affiliates during the contract
year. The portion of Mr. Ball's salary and bonus which is allocable to the
Company for fiscal year 1998 is $938,888. Mr. Ball is eligible to participate
in all employee benefit plans available to other comparable executives of the
Company, including vacation, personal travel, and medical, disability and life
insurance. The agreement also provides for additional benefits, including the
reimbursement of certain expenses and an annual bonus similar to the bonus of
comparable executives. Further, the agreement provides that in the event of
the termination of Mr. Ball's services by the Company, the Company shall be
obligated to make payments under the agreement to pay for the balance of the
term, reduced by the amount Mr. Ball earns upon finding new employment. The
agreement contains provisions prohibiting the disclosure of confidential or
proprietary information of the Company. In addition, Mr. Ball is prohibited
during the term of the agreement and for a period of two years thereafter,
from inducing any managerial, sales or supervisory employee of the Company or
its affiliates to render services to another entity.

The Company entered into an employment agreement with Mr. Jeff Shell in
February 1998 with an effective date of September 1997, which will terminate
on August 31, 2000. Pursuant to his employment agreement, Mr. Shell is
entitled to receive an annual salary of $330,000 for the period of September
1, 1997 to August 31, 1998, $360,000 for the period of September 1, 1998 to
September 30, 1999 and $400,000 for the period October 1, 1999 to August 31,
2000. From January to September 1997, Mr. Shell was employed with the Company
under a prior employment agreement. During fiscal year 1996 Mr. Shell was
employed by Fox, Inc., which granted the Company the right to utilize Mr.
Shell's services as its Senior Vice President, Finance and Development from
June 1996 through December 1996. Commencing in January 1997, Mr. Shell became
an employee of the Company. Pursuant to the current agreement, Mr. Shell is
entitled to participate in all employee benefit plans available to other
comparable executives of the Company. The agreement contains provisions
prohibiting the disclosure of confidential or proprietary information of the
Company. In addition, Mr. Shell is prohibited during the term of his
employment and for a period of two years thereafter, from inducing any
managerial, sales or supervisory employee of the Company or its affiliates to
render services to another entity.

40
<PAGE>

The Company entered into a two year, four month employment agreement with
Mr. Tracy Dolgin which commenced on September 1, 1998. This agreement replaced
Fox/Liberty Sports' prior agreement with Mr. Dolgin, under which Mr. Dolgin
was entitled to receive $339,600 during the period from January 1, 1998 to
August 31, 1998. Pursuant to the current agreement, Mr. Dolgin is entitled to
receive an annual salary of $700,000 for the period September 1, 1998 to
August 31, 1999, $750,000 for the period September 1, 1999 to August 31, 2000
and $787,500 for the period September 1, 2000 to December 31, 2000. The
agreement provides for participation in all employee benefit plans available
to other comparable executives. The agreement contains provisions prohibiting
the disclosure of confidential or proprietary information of Fox/Liberty
Sports. In addition, Mr. Dolgin is prohibited during the term of his
employment and for a period of one year thereafter, from inducing any
managerial, sales or supervisory employee of Fox/Liberty Sports or its
affiliates to render services to another entity.

The Company entered into an employment agreement with Mr. Louis LaTorre
which commenced on January 27, 1997 and will end on April 30, 1999. Pursuant
to the agreement, Mr. LaTorre is entitled to receive an annual base salary of
$400,000 for the period January 27, 1997 to April 30, 1997, $425,000 for the
period May 1, 1997 to April 30, 1998 and $450,000 for the period May 1, 1998
to April 30, 1999. In addition, upon achieving certain goals, Mr. LaTorre is
entitled to receive an annual bonus (as specified in the agreement) based on
the performance of the Company, Fox/Liberty Sports and Fox/Liberty FX. The
agreement provides for additional benefits, including vacation, medical
benefits, and long-term disability. Further, the agreement provides that in
the event Mr. LaTorre is terminated without cause (as defined in the
agreement), or if the Company breaches the agreement, the Company shall pay
Mr. LaTorre an amount equal to the sum of (i) all earned but unpaid amounts of
base salary and bonuses to the date of termination, (ii) the applicable bonus
amount, if any, with respect to the year in which termination occurs, and
(iii) the lesser of (a) one year's base salary calculated at the then
prevailing rate or (b) the remaining base salary to be paid for the balance of
the term as then in effect. The agreement contains provisions requiring Mr.
LaTorre not to disclose confidential or proprietary information of the
Company. In addition, the agreement prohibits him from competing or inducing
others to compete with the Company, its subsidiaries or affiliates, during the
term of his employment and for a period of twelve months following
termination.

The Company entered into an employment agreement with Mr. Robert Thompson
for a term of two years, unless the Company exercises an option for an
additional one year period. The agreement commenced May 1, 1998. Pursuant to
the agreement, Mr. Thompson renders services to the Company and to ISPP and
provides that the Company will pay a pro rata share of Mr. Thompson's
compensation, based on the number of days services are provided to the Company
and its affiliates during the contract year. The portion of Mr. Thompson's
salary and bonus which is allocable to the Company for fiscal year 1998 is
$411,736. Mr. Thompson is eligible to participate in all employee benefit
plans available to other comparable executives. The agreement contains
provisions prohibiting the disclosure of confidential or proprietary
information of the Company. In addition, Mr. Thompson is prohibited during the
term of his employment and for a period of two years thereafter, from inducing
any managerial, sales or supervisory employee of the Company or its affiliates
to render services to another entity.

Operating Agreement

The Company is a limited liability company organized under the Delaware
Limited Liability Company Act. The Company is governed by an operating
agreement (the "Operating Agreement") dated April 29, 1996 among its members,
LMC Newco U.S., Inc. ("LMCI") (a wholly-owned subsidiary of Liberty), Fox
Regional Sports Holdings, Inc. ("FRSH") (a wholly-owned subsidiary of Fox) and
Fox/Liberty Sports Financing LLC (a 50%/50% Delaware limited liability company
owned by each of LMCI and Fox) (LMCI, FRSH and Fox/Liberty Sports Financing
LLC are collectively, the "Members"). See "Business--Certain Arrangements
Regarding Ownership Interests."

The Company is managed by the Members. The day-to-day activities of the
Company are directed by its officers, subject to the supervision of the
Members. The Company's chief executive officer, chief financial officer

41
<PAGE>

and chief operating officer are nominated and elected by the Members of the
Company at the direction of FRSH and subject to the approval of LMCI. The
chief executive officer has the authority to select such other officers as may
be necessary or desirable to carry out the day-to-day operations of the
Company.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Not applicable.

Item 13. Certain Relationships and Related Transactions

Fox/Liberty Transaction

The Company was formed on April 29, 1996, through the Fox/Liberty Joint
Venture, to own and operate programming services featuring predominantly
sports and sports-related programming for distribution in the United States.

Fox, a majority-owned subsidiary of News Corporation, and LMCI, a wholly-
owned subsidiary of Liberty, each own 50% of the Company. The Company owns a
99% interest in each of Fox/Liberty Sports, Fox Sports RPP and Fox/Liberty FX.
The remaining 1% interests in each of Fox/Liberty Sports, Fox Sports RPP and
Fox/Liberty FX are owned by affiliates of Fox and Liberty.

Pursuant to the Fox/Liberty Joint Venture formation documents, at any time
after October 3, 2000, if the Members of the Company fail to approve an annual
budget for Fox/Liberty Sports and Fox Sports RPP or Fox/Liberty FX for two
consecutive fiscal years or fail to appoint a chief executive officer of the
Company for such period, or at any time after April 20, 2002, either Fox or
Liberty may initiate a buy/sell procedure. Upon a Change of Control (as
defined in the Agreement Regarding Ownership Interests dated as of April 29,
1996, as amended, by and among Liberty, News America Incorporated, FRSH, LMCI
and FX Holdings, Inc.), the party not experiencing the Change of Control has a
call option on all the interests held by the other party.

Rainbow Transaction

On June 22, 1997, Rainbow and the Company entered into a Formation Agreement
pursuant to which they agreed to form RPP, to hold various programming
interests in connection with the operation of certain RSNs. In accordance with
the terms of the Formation Agreement, upon consummation of the Rainbow
Transaction on December 18, 1997, Rainbow contributed various interests in
RSNs to the partnership in exchange for a 60% partnership interest in RPP and
the Company contributed $850 million in cash for a 40% partnership interest in
RPP. Rainbow serves as managing partner of RPP.

Pursuant to the partnership agreement of RPP (the "RPP Agreement"), after
the third anniversary of the closing of the Rainbow Transaction, upon the
occurrence of a Buy-Out Trigger (as defined in the RPP Agreement), or upon the
date on which Fox Sports RPP, a subsidiary of the Company, submits a notice,
pursuant to the RPP Agreement, to remove the managing partner of RPP following
a Change of Control of RPP (as defined in the RPP Agreement), Rainbow Regional
Holdings, Inc. ("RRH"), a subsidiary of Rainbow, has the right to purchase
from Fox Sports RPP all of Fox Sports RPP's interests in RPP.

Additionally, for each of the (i) 30 days following the fifth anniversary of
the closing of the Rainbow Transaction, (ii) 30 days following each third year
anniversary of the fifth anniversary of the closing of the Rainbow Transaction
and (iii) 30 days following receipt of a notice initiating the buy-out
procedure described

42
<PAGE>

above, so long as RPP has not commenced an initial public offering of its
securities, RPP has the right to cause RRH, at RRH's option, to either (i)
purchase all of its interests in Fox Sports RPP or (ii) consummate an initial
public offering of RPP's securities.

In connection with the Rainbow Transaction, Rainbow National Sports
Holdings, Inc. ("RNSH"), a subsidiary of Cablevision, and Fox Sports NSP
Holdings LLC ("Fox Sports NSP"), a subsidiary of the Company, agreed to form
the National Sports Partnership to operate FSN. The National Sports
Partnership is owned 50% by RNSH and 50% by Fox Sports NSP. Fox Sports NSP is
the managing partner of the National Sports Partnership. For the 30 days
following the fifth anniversary of the closing of the Rainbow Transaction and
for the 30 days following each third year anniversary of the first anniversary
of the closing of the Rainbow Transaction, so long as the National Sports
Partnership has not consummated an initial public offering of its securities,
RNSH has the right to cause Fox Sports NSP, at Fox Sports NSP's option, to
either (i) purchase all of its interests in the National Sports Partnership or
(ii) consummate an initial public offering of the National Sports
Partnership's securities. Further, upon a Change of Control (as defined in the
Partnership Agreement of the National Sports Partnership), the party not
experiencing the Change of Control has a call option on all the interests held
by the other party.

Also in connection with the Rainbow Transaction, a subsidiary of Rainbow and
Fox Sports Ad Sales agreed to form the National Advertising Partnership to act
as the national advertising sales representative for the O&O RSNs and the RPP-
owned and managed RSNs. The National Advertising Partnership is owned 50% by a
subsidiary of Rainbow ("Rainbow Ad Sales") and 50% by Fox Sports Ad Sales. Fox
Sports Ad Sales is the managing partner of the National Advertising
Partnership.

For the 30 days following the fifth anniversary of the closing of the
Rainbow Transaction and for the 30 days following each third year anniversary
of the fifth anniversary of the closing of the Rainbow Transaction, so long as
the National Advertising Partnership has not consummated an initial public
offering of its securities, Rainbow Ad Sales has the right to cause Fox Sports
Ad Sales, at Fox Sports Ad Sales' option, to either (i) purchase all of its
interests in the National Advertising Partnership or (ii) consummate an
initial public offering of the National Advertising Partnership's securities.
Further, upon a Change of Control (as defined in the Partnership Agreement of
the National Advertising Partnership), the party not experiencing the Change
of Control has a call option on all the interests held by the other party.

Other Transactions

Under agreements with the Company in connection with its formation, Fox,
Liberty, and their respective affiliates provide technical, administrative,
financial, treasury, accounting, tax, legal and other services to the Company
and may make available certain of their respective employee benefit plans to
officers and other employees of the Company. To date, except as disclosed
below, the charges for any such services have been immaterial. In addition,
Fox, Liberty, and their respective affiliates, and the Company have entered
into a number of intercompany agreements covering matters such as lending
arrangements, tax sharing, and the use of trade names and service marks by the
Company. To date, except as disclosed below, the charges for any such
arrangements have been immaterial. The terms of many of these agreements were
not the result of arms' length negotiation. See "Business."

The Company, News Corporation, TCI and Cablevision, through their respective
subsidiaries and affiliates, each own or have interests in television
programming entities. The presence of all such companies in the television
programming business could give rise to potential conflicts of interest
between them, including conflicts which may arise with respect to business
dealings between them and when more than one of them may be pursuing the same
business opportunity. Although News Corporation and TCI have agreed to conduct
all of their future cable television sports programming activities in the
United States through the Company so long as they both maintain their
interests therein, Cablevision is not contractually obligated to do so, and
such arrangements between News Corporation and TCI may be waived or modified
at any time without the Company's consent.

43
<PAGE>

The Company has had, and continues to have, a close strategic relationship
with News Corporation and certain of its subsidiaries and affiliates,
including Fox Broadcasting Company ("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,
or in the agreements between News Corporation and TCI, or their respective
subsidiaries or affiliates, which are discussed elsewhere in this report,
neither News Corporation or its subsidiaries and affiliates, 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.

The Company is currently utilizing three transponders it subleases from
WTCI, a subsidiary of TCI, one transponder it subleases from Fox Broadcasting
and one it subleases from Fox Family Worldwide ("Fox Family"). The rental
payment for the three transponders subleased from WTCI is approximately
$285,000 per month and the rental payments for the transponders subleased from
Fox Broadcasting and Fox Family are $130,000 and $41,600 per month,
respectively. Two of the WTCI subleases expire on December 31, 1999 and the
remaining WTCI sublease expires on December 31, 2000. The Fox Broadcasting
sublease expires May 30, 1999 and the Fox Family sublease expires in June
2003. In addition, the Company currently subleases one transponder to each of
Fox News Channel, FXM, NDTC, Fit-TV and Fox Sports International (all of which
are affiliates of Fox). The monthly rental payment paid to the Company
pursuant to each of these subleases is $185,000, $90,000, $180,000, $41,600
and $88,000, respectively. The Company believes that the sublease arrangements
described above are on terms no less favorable than could have been obtained
from an unaffiliated third party. See "Business--Satellite Distribution."

Fox Broadcasting and certain affiliates render marketing, public relations,
promotional, management and other business services to the Company for which
the Company pays an allocated fee. The expenses recognized by the Company for
the provision of the above services for the eight months ended December 31,
1996 and the years ended December 31, 1997 and 1998 were approximately
$1,184,900, $1,706,100 and $1,939,000, respectively. Included in these amounts
are salaries, benefits and other related costs charged to the Company in
connection with the services rendered to it by Mr. Hill and other individuals.
Certain individuals, including Messrs. Martin, Shell and Thompson, rendering
services to the Company for the eight months ended December 31, 1996 were
employed by either News Corporation or its affiliates or TCI or its
affiliates. Compensation and benefits paid to such individuals and related
payroll costs were charged to the Company at cost. In addition, Fox provides
legal services to the Company, for which the Company pays an allocated fee.
There was no expense recognized by the Company for the provision of legal
services for the eight months ended December 31 , 1996 and the year ended
December 31, 1998. For the year ended December 31, 1997 the expense recognized
by the Company for the provision of legal services was approximately $300,000.
Similarly, the Company and certain of its affiliates provide production,
programming, accounting, legal, marketing, public relations, promotional,
management and other business services to an affiliate of Fox Broadcasting
Company. The charges for these services to this affiliate for the eight months
ended December 31, 1996 and the years ended December 31, 1997 and 1998 were
approximately $750,0000, $1,000,000 and $1,000,000, respectively. The Company
believes that all of the above-described arrangements are on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties. See "Directors and Executive Officers of the Company" and "Executive
Compensation."

Fox Broadcasting and certain of its affiliates provide production
facilities, production and post production related services and technical
operations to the Company in connection with the Company's production of Fox
Sports News and other original programming. The services are provided at
competitive market rates and the Company believes that the arrangements are on
terms no less favorable than could have been obtained from an unaffiliated
third party. Expenses related to these services for the eight months ended
December 31, 1996 and the years ended December 31, 1997 and 1998 were
approximately $8,545,000, $20,416,800 and $5,939,000, respectively.

44
<PAGE>

Fox and its affiliates collect certain revenues and pay certain expenses on
behalf of the Company. The Company charges interest to Fox on amounts due the
Company which have been collected by Fox and, in turn, Fox and its affiliates
charge interest to the Company on amounts paid by Fox in connection with
expenses of the Company. All interest rates pursuant to these arrangements are
at market rate. Interest income recognized by the Company for the eight month
period ended December 31, 1996 and the years ended December 31, 1997 and 1998
was approximately $785,500, $2,719,100 and $351,000, respectively, and
interest expense incurred by the Company during these periods was $451,300,
$1,569,600 and $25,000, respectively.

Certain of the O&O RSNs have entered into affiliation agreements with
various MSOs and/or individual cable systems which are either owned or
operated by TCI. For the eight months ended December 31, 1996 and the years
ended December 31, 1997 and 1998 revenue recognized from such MSOs and/or
individual cable systems pursuant to these affiliation agreements was
approximately $28,788,000, $43,687,400 and $56,761,000, respectively. FX has
also entered into affiliation agreements with various MSOs and/or individual
cable systems which are either owned or operated by TCI. For the eight months
ended December 31, 1996 and the years ended December 31, 1997 and 1998 revenue
recognized from such MSOs and/or individual cable systems pursuant to these
affiliation agreements was approximately $21,388,000, $41,720,300 and
$37,161,000, respectively. The Company believes that all of the above
described affiliation agreements contain terms no less favorable than could
have been obtained from an unaffiliated third party.

Twentieth Century Fox Film Corporation and its affiliates purchase
advertising time which is shown during the Company's programming. The
advertising revenues recognized for the eight months ended December 31, 1996
and for the years ended December 31, 1997 and 1998 were approximately
$408,200, $1,213,100 and $1,523,000, respectively.

The Company licenses television and feature film programming from Twentieth
Century Fox Film Corporation and affiliates. Expense recognized by the Company
related to program rights amortization for the eight months ended December 31,
1996 and the years ended December 31, 1997 and 1998 was approximately
$7,624,000, $17,963,000 and $30,674,000, respectively. Additionally, the
Company has a non exclusive, royalty-free license from Twentieth Century Fox
Film Corporation and Fox Broadcasting Company to use the "FOX" brand name and
certain related artwork in connection with the Company's business.

The Company leases its corporate facilities in Los Angeles from New World
Communications Group Incorporated, an indirect wholly-owned subsidiary of Fox.
The Company has the ability to increase office space in this facility as the
need arises. As of December 31, 1998 the Company rented a total of 66,583
square feet at a rental rate of $4.18 per square foot per month. As of
December 31, 1998, the monthly rental was $278,317. See "Properties."

In March 1999, the Company agreed to sell its investment in Fit TV to an
affiliate of Fox for $6 million in cash. The Company expects to record a loss
from the sale of this investment in the amount of the excess of the Company's
carrying value of the investment at the date of sale, including any related
unamortized excess cost, over the selling price. The Company believes that the
terms of this transaction were no less favorable to the Company than it could
have obtained in a transaction with a non-affiliated third party.

45
<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) The Following documents are filed as part of this Annual Report on Form
10-K for the fiscal year ended December 31, 1998.

1.Financial Statements:
Financial Statements to this form are listed in the "Index to
Consolidated Financial Statements" at page F-1.

2.Schedules:
Financial statement schedules to this form are listed in the "Index
to Consolidated Financial Statements" at page F-1 herein.

3.Exhibits:

<TABLE>
<CAPTION>
Exhibit No Description of Exhibit
---------- ----------------------
<C> <S>
3.1* Certificate of Formation of Fox/Liberty Networks, LLC (f/k/a
Liberty/Fox U.S. Sports LLC), as amended.

4.1* Form of Notes (included in Exhibits 4(b) & 4(c)).

4.2(a)* Senior Notes Indenture, dated as of August 25, 1997 (the "Senior
Notes Indenture"), among Fox/Liberty Networks, LLC and FLN Finance,
Inc. as co-obligors, and the Bank of New York, as Trustee.

(b)** First Supplemental Indenture, dated as of March 31, 1998, among
Fox/Liberty Networks, LLC, FLN Finance, Inc. and the Bank of
New York, as Trustee.

4.3(a)* Senior Discount Notes Indenture, dated as of August 25, 1997 (the
"Senior Discount Notes Indenture"), among Fox/Liberty Networks, LLC
and FLN Finance, Inc., as co-obligors and The Bank of New York, as
Trustee.

(b)** First Supplemental Indenture, dated as of March 31, 1998, among
Fox/Liberty Networks, LLC, FLN Finance, Inc. and the Bank of
New York, as Trustee.

4.4* Senior Notes Registration Rights Agreement, dated as of August 25,
1997, among Fox/Liberty Networks, LLC and FLN Finance, Inc., as
Issuers and Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Bear, Stearns & Co. Inc., as Initial Purchasers.

4.5* Senior Discount Notes Registration Rights Agreement, dated as of
August 25, 1997, among Fox/Liberty Networks, LLC and FLN Finance,
Inc., as Issuers and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Bear, Stearns & Co. Inc., as Initial Purchasers.

4.6* Senior Notes Liquidated Damages Agreement, dated as of August 25,
1997, among Fox/Liberty Networks, LLC and FLN Finance, Inc., as
Issuers and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Bear, Stearns & Co. Inc., as Initial
Purchasers.

4.7* Senior Discount Notes Liquidated Damages Agreement, dated as of
August 25, 1997, among Fox/Liberty Networks, LLC and FLN Finance,
Inc., as Issuers and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Bear, Stearns & Co. Inc., as
Initial Purchasers. Senior Notes Deposit Agreement, dated as of
August 25, 1997, among Fox/Liberty Networks, LLC and FLN Finance,
Inc., and The Bank of New York, as Securities Intermediary and as
Trustee.

4.8* Senior Notes Deposit Agreement, dated as of August 25, 1997, among
Fox/Liberty Networks, LLC and FLN Finance, Inc., and The Bank of
New York, as Securities Intermediary and as Trustee.

4.9* Senior Discount Notes Deposit Agreement, dated as of August 25,
1997, among Fox/Liberty Networks, LLC and FLN Finance, Inc., and
The Bank of New York, as Securities Intermediary and as Trustee.

10.1(a)* Agreement Regarding Ownership Interests, dated April 29, 1996, by
and among Liberty Media Corporation, News America Holdings
Incorporated, Fox Regional Sports Holdings, Inc., LMC Newco U.S.,
Inc., and Liberty/Fox Sports Financing LLC.

</TABLE>

46
<PAGE>

<TABLE>
<C> <S>
(b)* First Amended and Restated Agreement Regarding Ownership Interests,
dated as of December 15, 1997, by and among Liberty Media
Corporation, News America Holdings Incorporated, Fox Regional
Sports Holdings, Inc., LMC Newco U.S., Inc., and Liberty/Fox

10.2* Operating Agreement of Fox Sports RPP Holdings, LLC, dated June 20,
1997, by and among Fox/Liberty Networks LLC, Liberty Sports Member,
Inc. and Fox Regional Sports Member, Inc.

10.3* Operating Agreement of FX Networks, LLC (f/k/a Liberty/Fox FX
Operations LLC), dated April 29, 1996, by and among Liberty/Fox
U.S. Sports LLC, Liberty FX, Inc. and FX Holdings, Inc.

10.4(a)* Operating Agreement of Fox/Liberty Networks, LLC (f/k/a Liberty/Fox
U.S. Sports LLC), dated April 29, 1996, by and among LMC Newco
U.S., Inc., Fox Regional Sports Holdings, Inc. and Liberty/Fox
Sports Financing LLC.

(b)* First Amended and Restated Operating Agreement of Fox/Liberty
Networks, LLC, dated December 15, 1997 by and among LMC Newco U.S.,
Inc., Fox Regional Sports Holdings, Inc. and Liberty/Fox Sports
Financing LLC.

10.5* Operating Agreement of Fox Sports Net, LLC (f/k/a Liberty/Fox
Regional Sports LLC), dated April 29, 1996, by and among
Liberty/Fox U.S. Sports LLC, Liberty Sports Member, Inc. and Fox
Regional Sports Member, Inc.

10.6* Formation Agreement, dated June 22, 1997, among Rainbow Media
Sports Holdings, Inc. and Fox Sports Net, LLC.

10.7* Form of General Partnership Agreement of Regional Programming
Partners between Rainbow Regional Holdings, Inc. and Fox Sports RPP
Holdings, LLC.

10.8* Form of General Partnership Agreement of National Sports Partners
between Rainbow National Sports Holdings, Inc. and Fox Sports
National Holdings, LLC.

10.9* Form of General Partnership Agreement of National Advertising
Partners between Rainbow Advertising Holdings, Inc. and Fox Sports
Ad Sales Holdings, LLC.

10.10(a)* Credit Agreement, dated as of September 12, 1997, among Fox Sports
Net, LLC and FX Networks, LLC, as Borrowers, and Fox/Liberty
Networks, LLC and Subsidiary Guarantors, as Guarantors, and The
Chase Manhattan Bank, as Administrative Agent, and Chase Securities
Inc., as Syndication Agent, and TD Securities (USA) Inc., as
Documentation Agent.

(b)* Form of Amendment and Restated Credit Agreement dated as of
December 15, 1997 among Fox Sports Net, LLC, FX Networks, LLC and
Fox Sports RPP Holdings, LLC, as Borrowers, and Fox/Liberty
Networks, LLC and The Chase Manhattan Bank, as Administrative
Agent, Chase Securities Inc., as Syndication Agent, and TD
Securities (USA) Inc., as Documentation Agent.

(c)** First Amendment to the Credit Agreement, dated as of April 20, 1998
among Fox Sports Net, LLC, FX Networks, LLC, Fox Sports
RPP Holdings, LLC, as Borrowers and Fox/Liberty Networks, LLC and
The Chase Manhattan Bank, as Administrative Agent, Chase Securities
Inc., as Syndication Agent and TD Securities (USA) Inc., as
Documentation Agent.

(d)** Second Amendment to the Credit Agreement, dated as of April 24,
1998, among Fox Sports Net, LLC, FX Networks, LLC, Fox Sports RPP
Holdings, LLC, as Borrowers and Fox/Liberty Networks, LLC and The
Chase Manhattan Bank, as Administrative Agent, Chase Securities
Inc., as Syndication Agent and TD Securities (USA) Inc., as
Documentation Agent.
(e) Third Amendment to the Credit Agreement, dated as of March 9, 1999,
among Fox Sports Net, LLC, FX Networks, LLC, Fox Sports RPP
Holdings, LLC, as Borrowers and Fox/Liberty Networks, LLC and The
Chase Manhattan Bank, as Administrative Agent, Chase Securities
Inc., as Syndication Agent and TD Securities (USA) Inc., as
Documentation Agent.
10.11*+ Employment Agreement among Fox/Liberty Networks, LLC, Anthony F.E.
Ball and T Entertainment Limited, dated April, 1997.

10.12***+ Employment Agreement between Fox/Liberty Networks, LLC (f/k/a
Liberty/Fox U.S. Sports LLC) and Jeff Shell, dated February 4,
1998.
</TABLE>

47
<PAGE>

<TABLE>
<C> <S>
10.13*+ Employment Agreement between Fox/Liberty Networks, LLC and Louis
LaTorre, dated January 27, 1997.

10.14(a)*+ Employment Agreement between Fox/Liberty Networks, LLC and Robert
L. Thompson, dated July 25, 1996, as amended on September 26, 1997.

(b)+ Employment Agreement between Fox/Liberty Networks, LLC and
Robert L. Thompson, dated June 1, 1998.

10.15(a)*+ Employment Agreement between Fox Sports Net, LLC and Tracy Dolgin,
dated as of July 1, 1997.

(b)+ Employment Agreement between Fox/Liberty Networks, LLC and Tracy
Dolgin, dated February 12, 1999.

10.16***++ Fox/Liberty Networks, LLC Equity Appreciation Rights Plan for
Management and Key Employees, effective as of May 1, 1996.

21 Subsidiaries of Registrant.

27 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference to the Company's Registration Statement on Form
S-4, as amended (File No. 333- 38689).
** Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1998.
*** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997.
+ Denotes an employment contract.
++ Denotes a compensation plan.

(b)Reports on Form 8-K

No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.

48
<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.

FOX/LIBERTY NETWORKS, LLC
Dated: March 30, 1999
By: /s/ Jeff Shell
------------------------------
Jeff Shell
Executive Vice President 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/ Anthony F.E. Ball President and Chief March 30, 1999
____________________________________ Executive Officer (Principal
Anthony F.E. Ball Executive Officer)

/s/ Jeff Shell Executive Vice President and March 30, 1999
____________________________________ Chief Financial Officer
Jeff Shell (Principal Financial Officer
and Principal Accounting
Officer)

LMC Newco U.S., Inc. Member of Fox/Liberty March 30, 1999
Networks, LLC

By: /s/ David J.A. Flowers
____________________________________
David J.A. Flowers
Vice President

Fox Regional Sports Holdings, Inc. Member of Fox/Liberty March 30, 1999
Networks, LLC

By: /s/ Jay Itzkowitz
____________________________________
Jay Itzkowitz
Senior Vice President

Liberty/Fox Sports Financing, LLC Member of Fox/Liberty March 30, 1999
Networks, LLC

By: LMC Newco U.S., Inc. Member of Liberty/Fox Sports March 30, 1999
Financing, LLC

By: /s/ David J.A. Flowers
____________________________________
David J.A. Flowers
Vice President

By: Fox Entertainment Group, Inc. Member of Liberty/Fox Sports March 30, 1999
Financing, LLC

By: /s/ Jay Itzkowitz
____________________________________
Jay Itzkowitz
Senior Vice President
</TABLE>

49
<PAGE>

FOX/LIBERTY NETWORKS, LLC

INDEX TO
FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Fox/Liberty Networks, LLC
Consolidated Financial Statements....................................... F-2
Report of Independent Public Accountants................................ F-3
Consolidated Balance Sheets as of December 31, 1998 and 1997............ F-4
Consolidated Statements of Operations for the years ended December 31,
1998 and 1997 and the eight months ended December 31, 1996............. F-5
Consolidated Statements of Members' Equity for the years ended December
31, 1998 and 1997 and the eight months ended December 31, 1996......... F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1998 and 1997 and the eight months ended December 31, 1996............. F-7
Notes to Consolidated Financial Statements.............................. F-8
Liberty Sports, Inc. and subsidiaries--Domestic Operations
Financial Statements.................................................... F-22
Independent Auditors' Report............................................ F-23
Combined Statements of Operations and Equity for the period January 1,
1996 to April 29, 1996................................................. F-24
Combined Statements of Cash Flows for the period January 1, 1996 to
April 29, 1996......................................................... F-25
Notes to Combined Financial Statements.................................. F-26
FX Networks, LLC
Financial Statements.................................................... F-30
Report of Independent Public Accountants................................ F-31
Statements of Operations for the periods ended April 29, 1996........... F-32
Statements of Cash Flows for the periods ended April 29, 1996........... F-33
Notes to Financial Statements........................................... F-34
Liberty/Fox ARC, L.P.
Consolidated Financial Statements....................................... F-37
Consolidated Statement of Operations for the period from Inception
(April 30, 1996) to December 31, 1996 (unaudited)...................... F-38
Consolidated Statement of Cash Flows for the period from Inception
(April 30, 1996) to December 31, 1996 (unaudited)...................... F-39
Notes to Consolidated Financial Statements.............................. F-40
Regional Programming Partners
Consolidated Financial Statements....................................... F-46
Report of Independent Public Accountants................................ F-47
Consolidated Balance Sheet as of December 31, 1998 and December 31,
1997................................................................... F-48
Consolidated Statements of Income for the year ended December 31, 1998
and the period from December 18, 1997 (Inception) to December 31,
1997................................................................... F-49
Consolidated Statements of Partners' Capital for the year ended December
31, 1998 and the period from December 18, 1997 (Inception) to December
31, 1997............................................................... F-50
Statements of Cash Flows for the year ended December 31, 1998 and the
period from December 18, 1997 (Inception) to December 31, 1997......... F-51
Notes to Consolidated Financial Statements.............................. F-52
Condensed Financial Statements of the Company on Schedule
Report of Independent Public Accountants on Schedule.................... S-2
Schedule I--Balance Sheets as of December 31, 1998 and 1997............. S-3
Schedule I--Statements of Operations for the periods ended December 31,
1998, 1997 and 1996.................................................... S-4
Schedule I--Statements of Cash Flows for the periods ended December 31,
1998, 1997 and 1996.................................................... S-5
Schedule I--Notes to Condensed Financial Statements..................... S-6
Schedule II--Valuation and Qualifying Accounts for the periods ended
December 31, 1998, 1997 and 1996....................................... S-7
</TABLE>

F-1
<PAGE>

FOX/LIBERTY NETWORKS, LLC

CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 1998 and 1997

With Report of Independent Public Accountants

F-2
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Members of
Fox/Liberty Networks, LLC:

We have audited the accompanying consolidated balance sheets of FOX/LIBERTY
NETWORKS, LLC and subsidiaries, a Delaware limited liability company (the
"Company") as of December 31, 1998 and 1997, and the related consolidated
statements of operations, members' equity and cash flows for the years ended
December 31, 1998 and 1997 and the period from inception (April 30, 1996) to
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with 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
Fox/Liberty Networks, LLC and subsidiaries as of December 31, 1998 and 1997,
and the results of their operations and their cash flows for the years ended
December 31, 1998 and 1997 and the period from inception (April 30, 1996) to
December 31, 1996 in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Los Angeles, California
February 19, 1999

F-3
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

CONSOLIDATED BALANCE SHEETS

December 31, 1998 and 1997
(Dollars in thousands)

<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents............................. $ 42,918 $ 49,560
Trade and other receivables, net of allowance for
doubtful accounts of $9,324 and $1,714 at December
31, 1998 and 1997.................................... 138,139 136,661
Receivables from equity affiliates, net............... 33,577 37,858
Program rights........................................ 88,620 50,373
Notes receivable, current............................. 1,928 3,376
Prepaid expenses and other current assets............. 9,939 7,886
---------- ----------
Total current assets................................ 315,121 285,714
Property and equipment, net............................. 49,306 42,027
Investments in affiliates............................... 871,432 850,201
Note receivable, long-term.............................. 24 4,432
Program rights.......................................... 106,459 78,110
Excess cost, net of accumulated amortization of $86,470
and $72,170 at December 31, 1998 and 1997.............. 521,133 514,608
Other assets............................................ 28,460 42,666
---------- ----------
Total Assets........................................ $1,891,935 $1,817,758
========== ==========
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
Current liabilities:
Accounts payable and accrued expenses................. $ 164,329 $ 176,241
Program rights payable................................ 56,651 23,232
Current portion of long-term debt..................... 15,450 80,216
Accrued interest...................................... 24,833 17,413
Other current liabilities............................. 13,806 11,515
---------- ----------
Total current liabilities........................... 275,069 308,617
Non-current program rights payable...................... 123,581 110,693
Long-term debt, net of current portion.................. 1,401,891 1,246,291
Minority interest....................................... 1,191 (114)
Commitments and contingencies
Members' equity......................................... 90,203 152,271
---------- ----------
Total Liabilities and Members' Equity............... $1,891,935 $1,817,758
========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-4
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Periods Ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

<TABLE>
<CAPTION>
Year ended Year ended April 30 to
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Programming........................... $301,734 $226,469 $ 85,288
Advertising........................... 160,499 117,874 37,685
Direct broadcast...................... 121,759 91,663 5,711
Infomercial........................... 23,270 16,420 4,261
Merchandising......................... -- -- 3,226
Other................................. 47,932 19,366 8,621
-------- -------- ---------
655,194 471,792 144,792
-------- -------- ---------
Expenses:
Operating............................. 485,276 420,888 197,445
General and administrative............ 90,662 65,558 31,609
Depreciation and amortization......... 21,662 18,968 8,507
-------- -------- ---------
597,600 505,414 237,561
-------- -------- ---------
Operating income (loss)................. 57,594 (33,622) (92,769)
-------- -------- ---------
Other (income) expenses:
Interest, net......................... 110,425 34,142 3,819
Subsidiaries' income tax expense
(benefit), net....................... 1,456 (1,590) 3,437
Loss on sale of assets................ 121 -- 4,913
Equity loss of affiliates, net........ 5,913 9,018 12,024
Other................................. (1,478) 401 --
Minority interest..................... 3,225 2,864 187
-------- -------- ---------
119,662 44,835 24,380
-------- -------- ---------
Net loss................................ $(62,068) $(78,457) $(117,149)
======== ======== =========
</TABLE>

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

F-5
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

For the Periods Ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

<TABLE>
<CAPTION>
LMC Liberty/Fox Fox Regional Total
Newco Sports Financing, Sports Members'
US, Inc. LLC Holdings, Inc. Equity
-------- ----------------- -------------- ---------
<S> <C> <C> <C> <C>
BALANCE, APRIL 30, 1996.. $ 8,000 $243,577 $ 96,300 $ 347,877
(representing the
initial contributions
of the members)
Net loss............... (36,132) (44,885) (36,132) (117,149)
-------- -------- -------- ---------
BALANCE, DECEMBER 31,
1996.................... (28,132) 198,692 60,168 230,728
Net loss............... (24,199) (30,059) (24,199) (78,457)
-------- -------- -------- ---------
BALANCE, DECEMBER 31,
1997.................... (52,331) 168,633 35,969 152,271
Net loss............... (19,144) (23,780) (19,144) (62,068)
-------- -------- -------- ---------
BALANCE, DECEMBER 31,
1998.................... $(71,475) $144,853 $ 16,825 $ 90,203
======== ======== ======== =========
</TABLE>

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

F-6
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Periods Ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

<TABLE>
<CAPTION>
Year ended Year ended April 30 to
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $(62,068) $ (78,457) $(117,149)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Additional amortization of program
rights............................. -- -- 80,000
Depreciation and amortization....... 21,662 18,968 8,507
Interest accretion and amortization
of debt issuance costs............. 29,868 9,431 --
Loss on sale of assets.............. 121 -- 4,913
Equity loss of affiliates........... 5,913 9,018 12,024
Minority interests.................. 3,225 2,864 187
Changes in operating assets and
liabilities:
Trade and other receivables......... (1,373) (47,296) (8,029)
Program rights...................... (65,871) (77,266) (3,205)
Prepaid expenses and other operating
assets............................. (4,812) (10,715) (239)
Accounts payable and accrued
expenses........................... (14,529) 51,462 33,939
Program rights payable.............. 46,278 26,749 (1,149)
Other operating liabilities......... 9,553 18,517 4,512
-------- ---------- ---------
Net cash (used in) provided by
operating activities............. (32,033) (76,725) 14,311
-------- ---------- ---------
Cash flows from investing activities:
Advances from equity affiliates....... 96,084 102,497 56,666
Advances to equity affiliates......... (92,913) (106,555) (78,651)
Notes receivable collected from
(issued to) third parties............ 5,856 540 (1,700)
Purchases of property and equipment... (14,665) (31,321) (11,202)
Distributions from equity affiliates.. 40,051 4,704 563
Investments in equity affiliates...... (67,671) (857,325) (4,046)
Purchase of program rights and related
assets............................... -- (45,000) --
Acquisition of FIT TV, net of cash
acquired............................. (3,618) -- --
Proceeds from sale of investment...... 900 -- --
Cash sold upon sale of merchandising
assets............................... -- -- (429)
-------- ---------- ---------
Net cash used in investing
activities....................... (35,976) (932,460) (38,799)
-------- ---------- ---------
Cash flows from financing activities:
Cash overdraft, included in accounts
payable.............................. -- -- 2,133
Borrowings of long-term debt.......... 155,000 1,720,078 48,448
Repayment of long-term debt........... (91,713) (648,960) (24,800)
Deferred debt issuance costs.......... -- (18,357) --
Distribution to minority shareholder
of subsidiary........................ (1,920) (1,980) (600)
-------- ---------- ---------
Net cash provided by financing
activities....................... 61,367 1,050,781 25,181
-------- ---------- ---------
Net (decrease) increase in cash and cash
equivalents............................ (6,642) 41,596 693
Cash and cash equivalents, beginning of
period................................. 49,560 7,964 7,271
-------- ---------- ---------
Cash and cash equivalents, end of
period................................. $ 42,918 $ 49,560 $ 7,964
======== ========== =========
</TABLE>

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

F-7
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998
(Dollars in thousands)

(1) Organization

Fox/Liberty Networks, LLC, a Delaware limited liability company, (together
with its subsidiaries, the "Company") was formed in April 1996, to own and
operate programming services featuring predominantly sports and sports related
programming, as well as a national general entertainment programming service.

The Company's members as of December 31, 1998 and 1997, were:

<TABLE>
<CAPTION>
Interest
--------
<S> <C>
LMC Newco U.S., Inc. ("LMCI") .................................... 30.843%
(a wholly-owned subsidiary of Liberty Sports, Inc. ("LSI"), a
wholly-owned subsidiary of Liberty Media Corporation ("LMC"))
Fox Regional Sports Holdings, Inc. ("FRSH")....................... 30.843%
(a wholly-owned subsidiary of Fox Entertainment Group, Inc.
("Fox"), a majority owned subsidiary of News America Incorporated
("NAI"), a wholly-owned subsidiary of The News Corporation
Limited)
Liberty/Fox Sports Financing, LLC.................................
(50% owned by each of LMCI and Fox) 38.314%
-------
100.000%
=======
</TABLE>

Liberty Sports, Inc. (a predecessor operation) contributed its interest in
regional sports programming businesses (which then operated under the name
"Prime Sports"), interests in non-managed sports businesses, satellite
distribution services and technical facilities. Fox and its subsidiaries
contributed cash, all of its assets and liabilities in the FX cable network (a
predecessor operation), and certain assets related to regional sports
programming.

(2) Significant Accounting Policies

(a) Basis of Presentation

The accompanying consolidated financial statements include the operations of
the Company and those majority-owned subsidiaries and entities for which there
is a controlling voting interest. All significant intercompany accounts and
transactions have been eliminated in consolidation. The subsidiaries
consolidated include the following intermediary holding companies (and their
subsidiaries):

Fox Sports Net, LLC, which is comprised of the following:

<TABLE>
<S> <C>
--Liberty/Fox West LLC --Liberty/Fox ARC LP
--Fox/Liberty Ad Sales LLC --Liberty/Fox Southeast LLC
--Liberty/Fox Northwest LP --Liberty/Fox Utah LLC
--Liberty/Fox Sunshine LLC --Liberty/Fox Arizona LLC
--Fox Sports Detroit, LLC --Fox/Liberty Network Programming LLC
</TABLE>

FX Networks, LLC
Fox Sports RPP Holdings, LLC

F-8
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

In September 1997, Fox Sports Detroit, LLC a majority-owned subsidiary of
the Company, was formed for the purpose of providing sports and sports related
programming in the Detroit, Michigan area (See Note 3(e)).

In December 1997, the Company consummated a transaction with Rainbow Media
Sports Holdings, Inc. ("Rainbow"), a subsidiary of CSC Holdings, Inc.
(formerly Cablevision Systems Corporation) ("Cablevision"), pursuant to which
(i) Fox Sports RPP Holdings, LLC was formed to hold an interest in Regional
Programming Partners ("RPP"), which in turn was formed to hold interests in
Rainbow's existing regional sports networks ("RSN's") and certain other
businesses, (ii) National Sports Partners ("NSP") was formed to operate Fox
Sports Net ("FSN") a national programming service, and (iii) National
Advertising Partners ("NAP") was formed to act as the national advertising
sales representative for the RSNs which are affiliated with FSN. The Company
contributed $850,000 for its 40 percent interest in RPP, which exceeded its
equity in the underlying net assets of RPP by $314,420 (See Note 6(b)). Had
the investment occurred at the beginning of the year ended December 31, 1997
(January 1, 1997) and the eight month period December 31, 1996 (April 30,
1996), pro-forma net loss would have increased by $2,234 and $9,099,
respectively. The pro-forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the investment occurred on the dates
indicated, or which may result in the future.

(b) Cash Equivalents

Cash equivalents consist of short-term investments with an original maturity
of less than 90 days. The carrying amounts of cash and cash equivalents
approximate their fair values due to their short maturities.

The Company has multi-year contracts for the cable telecast rights of
syndicated entertainment programs and sporting events. Pursuant to these
contracts, an asset is recorded for the rights acquired and a liability is
recorded for the obligation incurred, at the gross amount of the liability
when the programs or sporting events are available for telecast. Program
rights for entertainment programs are amortized over the term of the contract
using the straight-line method. Program rights for sporting events which are
for a specified number of games are amortized on an event-by-event basis, and
those which are for a specified season are amortized over the term of the
season on a straight-line basis.

The Company and its predecessor, Liberty Sports, Inc., have entered into or
committed to contracts for program rights to telecast college football and
Major League Baseball games, respectively. In 1996, the Company performed an
in-depth evaluation and determined that these contracts would produce losses
over the term of the respective contracts. Accordingly, the Company and its
affiliates recorded $109,000 in additional amortization related to these
contracts during the period from inception (April 30, 1996) to December 31,
1996.

(d) Property and Equipment

Property and equipment are stated at cost, which includes acquisition costs
allocated to tangible assets acquired. Depreciation and amortization for
financial statement purposes are provided using the straight-line method over
an estimated useful life of five to ten years.

F-9
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

(e) Other Assets

At December 31, 1998 and 1997 other assets included $17,063 and $17,896,
respectively, of debt issuance costs related to the issuance of Senior Notes
and Senior Discount Notes (the "Notes"--See Note 7(c)). These costs are
amortized using the effective interest method over the term of the Notes.
Amortization expense was $1,358 and $461 for the years ended December 31, 1998
and 1997 and is included in interest expense.

(f) Income Taxes

No provision has been made for federal, state or foreign income taxes, as
the liability for such income taxes is the responsibility of the members.

(g) Investments in Affiliates

The consolidated financial statements include the operations of subsidiary
companies more than 50% owned. Investments in and advances to affiliates in
which the Company has a substantial ownership interest of approximately 20 to
50%, or for which the Company owns more than 50% but does not control policy
decisions, are accounted for by the equity method. Under this method of
accounting, the original investment is increased or decreased by the Company's
share of income or losses and dividends.

Partnerships in which the Company acts as a limited partner, but in which
the third party general partner exercises management control, are not
consolidated regardless of the ownership interest. If these investments meet
the conditions outlined in the paragraph above then the partnerships are
accounted for under the equity method.

(h) Excess Cost

Excess cost represents the difference between the cost of acquiring
programming entities and amounts assigned to their tangible and intangible
assets. Such amounts are amortized on a straight-line basis over 40 years.
Amortization expense was $14,300, $11,776 and $5,241 for the years ended
December 31, 1998 and 1997 and the period from inception (April 30, 1996) to
December 31, 1996, respectively.

The Company periodically reviews the propriety of the carrying amount of its
excess cost as well as the related amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value
and/or the estimates of useful lives. This evaluation consists of the
Company's projection of undiscounted operating cash flows over the remaining
lives of the excess cost. Based on its review, the Company believes that no
significant impairment of its excess cost has occurred.

(i) Revenue

Revenue from programming represents monthly subscriber fees received from
cable system operators and is recognized as earned. Advertising revenue is
recognized upon airing of commercials. The Company has sold advance
subscriptions to its direct broadcast satellite customers. Such amounts are
amortized to revenue monthly as revenue is earned. Infomercial revenue is
recognized when the program is aired.

(j) Non-Monetary Transactions

The Company trades commercial advertising spots in return for other
services, primarily programming. These trades are recorded at the fair value
of the asset surrendered or the fair value of the asset obtained, whichever is
more clearly evident. These transactions resulted in the recording of
approximately $4,173, $8,539

F-10
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

and $2,512 in both advertising revenue and programming expenses during the
years ended December 31, 1998 and 1997 and the period from inception (April
30, 1996) to December 31, 1996, respectively.

(k) Use of Estimates

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Because of the use of estimates inherent
in the financial reporting process, actual results could differ from those
estimates.

(l) Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement No.
121 ("SFAS 121") on accounting for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to assets to be held and
used. SFAS 121 also establishes accounting standards for long-lived assets and
certain identifiable intangibles to be disposed of. The Company adopted the
SFAS 121 from inception (April 30, 1996). See Note 2(h) for the policy on
excess cost.

(m) Segment Reporting

In June 1997, the Financial Accounting Standards Board issued Statement No.
131 ("SFAS 131") on the disclosure of segments of an enterprise. SFAS 131
establishes guidelines for determining operating segments within public
business enterprises. Based on these guidelines the Company reports
information under a single cable programming segment. The Company adopted SFAS
131 as of January 1, 1998.

(n) Major Customers

The Company recognized revenue from one customer which represented 14.3% of
consolidated revenues.

(o) Reclassifications

Certain reclassifications have been made to the prior year balances in order
to conform to the current year presentation.

F-11
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

(3) Supplemental Disclosures to Consolidated Statements of Cash Flows

Supplemental disclosure of cash flow information and non-cash investing and
financing activities for the period from inception (April 30, 1996) to
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------
Acquisition Disposal Total
-------------------------- ---------------- --------
Prime Sports
Northwest(a) SportSouth(b) Merchandising(c)
------------ ------------- ----------------
<S> <C> <C> <C> <C>
Fair value of net assets
acquired/(disposed):
Cash.................. $ 1,328 $ 3,626 $ (429) $ 4,525
Accounts receivable... 4,663 10,691 (600) 14,754
Prepaid program
rights............... 425 -- -- 425
Prepaid expenses and
other current
assets............... 304 84 (10) 378
Inventory............. -- -- (3,064) (3,064)
Investment............ -- (2,135) -- (2,135)
Excess cost........... -- -- (5,771) (5,771)
Other assets.......... 46 102 (105) 43
Property, plant and
equipment, net....... 2,832 259 (1,064) 2,027
Notes receivable...... 40 -- -- 40
Accounts payable and
accrued expenses (809) (1,640) 2,330 (119)
Program rights
payable.............. (91) -- -- (91)
Notes payable......... -- (18,002) -- (18,002)
------- -------- ------- --------
8,738 (7,015) (8,713) (6,990)
Less: existing
investment in
affiliates............. (6,427) 471 -- (5,956)
------- -------- ------- --------
2,311 (6,544) (8,713) (12,946)
Satisfied by:
Cash.................. (9,000) -- -- (9,000)
Note payable.......... -- (65,334) -- (65,334)
Note receivable....... -- -- 3,800 3,800
------- -------- ------- --------
Subtotal................ -- -- -- (83,480)
------- -------- ------- --------
Excess cost............. $(6,689) $(71,878) $(78,567)
======= ======== ========
Loss on sale............ $(4,913) $ (4,913)
======= ========
</TABLE>

(a) In July 1996, the Company paid $9,000 to Viacom, Inc. to purchase an
additional 40% interest in its affiliate, Prime Sports Northwest Network.
Subsequent to the purchase, Prime Sports Northwest Network was
consolidated with the Company. Had the additional 40% interest been
acquired at inception (April 30, 1996), the consolidated pro forma revenue
and income would have increased by $5,886 and $648, respectively. These
pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which actually
would have resulted had the acquisitions occurred on the date indicated,
or which may result in the future.

(b) In October 1996, the Company purchased an additional 44% interest in its
affiliate, SportSouth Network, Ltd. ("SportSouth"), through the issuance
of a note in the amount of $65,334. SportSouth was then

F-12
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

consolidated with the Company. Had the additional 44% interest been
acquired at inception (April 30, 1996), the consolidated pro forma revenue
and income would have increased by $19,490 and $5,072, respectively. These
pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of results of operations which actually would
have resulted had the acquisitions occurred on the date indicated, or which
may result in the future.

(c) In September 1996, the Company received a note receivable for
approximately $3,800 in connection with the sale of its merchandising
assets.

Supplemental disclosure of cash flow information and non-cash investing and
financing activities for the year ended December 31, 1997 is as follows:

<TABLE>
<CAPTION>
December 31,
1997(e)(f)
ARC Ltd(d)
------------
<S> <C>
Fair value of net assets acquired:
Cash.......................................................... $ --
Accounts receivable........................................... 26,793
Prepaid program rights........................................ 4,764
Prepaid expenses and other current assets..................... 19,249
Investment.................................................... 6,739
Excess cost................................................... 103,806
Other assets.................................................. 305
Property, plant and equipment, net............................ 11,818
Notes receivable.............................................. 6,869
Accounts payable and accrued expenses......................... (25,520)
Program rights payable........................................ (3,522)
Unearned revenue.............................................. (4,744)
Notes payable................................................. (49,000)
--------
97,557
Satisfied by:
Original investment........................................... (97,557)
--------
Excess cost..................................................... $ --
========
</TABLE>

(d) In March 1997, Liberty/Fox ARC LP, an affiliate of the Company, paid
$40,000 to Group W to purchase the remaining 12.78% interest in Affiliated
Regional Communications, LTD and Affiliates ("ARC"). This transaction
resulted in Liberty/Fox ARC LP recording $25,785 in excess costs. In
conjunction with this transaction, the Company assumed management control
of the consolidated subsidiaries of Liberty/Fox ARC LP. Subsequent to the
purchase, the consolidated subsidiaries of ARC were consolidated with the
Company (see Note 2(a)). Had the additional 12.78% interest been acquired
at January 1, 1997 with respect to the year ended December 31, 1997 and
April 30, 1996 with respect to the eight months ended December 31, 1996,
the pro forma consolidated revenue would have increased by $29,913 and
$107,531, respectively, and pro forma consolidated income would have
increased by $372 and $482, respectively. These pro forma results have
been prepared for comparative purposes only and do not purport to be
indicative of the results of operations which actually would have resulted
had the acquisitions occurred on the date indicated, or which may result
in the future.

(e) In September 1997, the Company formed Fox Sports Detroit, LLC for the
purpose of providing sports and sports related programming to the Detroit,
Michigan area. Fox Sports Detroit, LLC entered into agreements to pay cash
of $45,000 and issue notes payable totaling $25,558 to secure certain
sports programming rights

F-13
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

and other assets. Amounts remaining as excess cost will be amortized over
40 years. Had the acquisition occurred at the beginning of the period
(January 1, 1997), and assuming that the full $70,713 is recorded as excess
cost and amortized over 40 years, the pro-forma consolidated revenue would
have increased, and loss would have decreased, by $17,940 and $2,143,
respectively. These pro-forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations which actually would have resulted had the acquisitions occurred
on the date indicated, or which may result in the future.

(f) In December 1997, the Company contributed net assets of $14,926 and $2,741
to NSP and NAP, respectively, for a 50% interest in each partnership. The
net assets contributed were comprised of certain accounts receivables,
fixed assets, investments and accrued liabilities.

Supplemental disclosure of cash flow information and non-cash investing and
financing activities for the year ended December 31, 1998 is as follows:

<TABLE>
<CAPTION>
Fit TV(g)
---------
<S> <C>
Fair value of net assets acquired:
Cash............................................................. $ 132
Accounts receivable.............................................. 650
Prepaid program rights........................................... 725
Prepaid expenses................................................. 200
Fixed assets..................................................... 11
Other assets..................................................... 156
Accounts payable and accrued expenses............................ (3,762)
Program rights payable........................................... (29)
Other current liabilities........................................ (158)
-------
(2,075)
Satisfied by:
Cash............................................................. 18,750
-------
Excess cost........................................................ $20,825
=======
</TABLE>

(g) In April 1998, the Company completed the acquisition of Fit TV
Partnership, with an effective date as of January 1, 1998, in which the
Company paid $15,000 to Cable Health TV, Inc. in 1997 and $1,875 each to
Reebok CHC, Inc. and Liberty CHC, Inc., representing 100% capital interest
and a 92% profit interest in Fit TV Partnership, and accordingly, has been
consolidated with the Company. An 8% minority profit interest in Fit TV
Partnership was acquired by a third party. Had the capital interest been
acquired at January 1, 1997 with respect to the year ended December 31,
1997, and April 30, 1996 with respect to the eight months ended December
31, 1996, the pro forma revenue would have increased by $4,074 and $2,855,
respectively, and net loss would have increased by $7,561 and $4,429,
respectively. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations which actually would have resulted had the acquisition occurred
on the date indicated, or which may result in the future.

Cash paid for interest was $76,154, $24,848 and $5,330 for the years ended
December 31, 1998 and 1997 and the period from inception (April 30, 1996) to
December 31, 1996, respectively.

F-14
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

(4) Related Party Transactions

For the years ended December 31, 1998 and 1997 and the period from inception
(April 30, 1996) to December 31, 1996, the Company recognized the following
revenue and expenses as a result of arms-length transactions with affiliates
of LMCI and Fox:

<TABLE>
<CAPTION>
Year ended Year ended April 30, to
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Programming......................... $93,922 $92,244 $23,229
Advertising......................... 1,523 3,183 326
Direct broadcast.................... -- 2,082 5,711
Interest income..................... 351 2,719 108
Other............................... 19,606 -- 3,358
Expenses:
Operating........................... 62,216 65,736 12,631
General and administrative.......... 2,775 4,156 2,340
Interest expense.................... 25 1,570 293
</TABLE>

At December 31, 1998 and 1997, receivables from related parties were $19,962
and $29,293, respectively, and payables to related parties were $19,631 and
$21,476, respectively.

The Company has a non exclusive, royalty-free license from affiliates of Fox
to use the "FOX" brand name and certain related artwork in connection with the
Company's business.

(5) Property and Equipment

Property and equipment at December 31, 1998 and 1997 consisted of the
following:

<TABLE>
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
<S> <C> <C>
Studio and production equipment.......................... $ 50,455 $ 26,847
Office equipment......................................... 16,733 14,823
Construction in progress................................. 11,450 21,357
Other.................................................... 6,518 5,614
-------- --------
85,156 68,641
Accumulated depreciation................................. (35,850) (26,614)
-------- --------
$ 49,306 $ 42,027
======== ========
</TABLE>

F-15
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

(6) Investments Accounted for Under the Equity Method

(a) Significant Subsidiaries

Summarized unaudited financial information for significant subsidiaries, as
defined in Rule 1-02(w) of Regulation S-X, accounted for under the equity
method is as follows:

Combined Financial Position

<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
---------- ----------
<S> <C> <C>
Current Assets........................................ $ 523,347 $ 584,433
Non-Current Assets.................................... 1,883,399 1,820,560
---------- ----------
Total Assets.......................................... $2,406,746 $2,404,993
========== ==========
Current Liabilities................................... $ 356,004 $ 400,986
Non-Current Liabilities............................... 573,111 588,881
Minority Interest..................................... 64,117 129,495
Partners' Equity...................................... 1,413,514 1,285,631
---------- ----------
Total Liabilities and Equity.......................... $2,406,746 $2,404,993
========== ==========
</TABLE>

Combined Operations

<TABLE>
<CAPTION>
Year ended Year ended April 30, to
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Gross Revenue......................... $783,156 $ 66,167 $125,373
Operating (Loss) Profit............... (65,062) (24,647) 14,270
Net (Loss) Income..................... (29,834) (24,663) 7,205
</TABLE>

Liberty/Fox ARC LP was formed on April 30, 1996 and was accounted for under
the equity method for the period until March 1997. In March 1997, the Company
assumed management control of the consolidated subsidiaries of Liberty/Fox ARC
LP and, subsequent to this event, the consolidated subsidiaries of ARC were
consolidated with the Company.

F-16
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

(b) Unconsolidated Affiliates

The following table reflects the Company's ownership interests in majority
and minority owned affiliates as of:

<TABLE>
<CAPTION>
December 31,
-------------
Entity 1998 1997
------ ------ ------
<S> <C> <C>
Majority Owned Affiliates
Liberty/Fox Chicago LP....................................... 98.0% 98.0%
Liberty/Fox KBL LP........................................... 60.0% 60.0%
Liberty/Fox Bay Area LP...................................... 98.0% 98.0%
Liberty/Fox Upper Midwest LP................................. 98.0% 98.0%
Liberty/Fox Distribution LP.................................. 98.0% 98.0%

Minority Owned Affiliates
LMC Sunshine Inc............................................. 48.5% 48.5%
Cable Ad Partners-cost method................................ 0.0% 8.0%
Sunshine Network Joint Venture............................... 49.0% 49.0%
Prime Sports Network-Upper Midwest Joint Venture............. 33.0% 33.0%
Home Team Sports Limited Partnership......................... 34.3% 34.3%
Prime Sports Channel Prism Associates........................ 0.0% 33.3%
Mountain Mobile TV........................................... 33.3% 33.3%
Regional Programming Partners................................ 40.0% 40.0%
National Sports Partners..................................... 50.0% 50.0%
National Advertising Partners................................ 50.0% 50.0%
CTV Sports Net............................................... 20.0% 0.0%
</TABLE>

The following table reflects the carrying value of the Company's investments
accounted for under the equity method and the Company's equity in earnings
(losses) of its majority and minority owned affiliates:

<TABLE>
<CAPTION>
Investment
-------------------------
December 31, December 31,
Entity 1998 1997
------ ------------ ------------
<S> <C> <C>
Majority Owned Affiliates............................. $( 7,734) $(20,845)
Minority Owned Affiliates............................. 879,166 871,046
-------- --------
$871,432 $850,201
======== ========

</TABLE>

<TABLE>
<CAPTION>
Equity in Earnings (Losses)
---------------------------------------------
Period from
Year ended Year ended Inception
December 31, December 31, (April 30, 1996) to
Entity 1998 1997 December 31, 1996
------ ------------ ------------ -------------------
<S> <C> <C> <C>
Majority Owned Affiliates........ $ 13,111 $(2,288) $(17,163)
Minority Owned Affiliates........ (19,024) (6,730) 5,139
-------- ------- --------
$ (5,913) $(9,018) $(12,024)
======== ======= ========
</TABLE>

F-17
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

Prior to the contribution of the above majority owned entities to the
Company (see Note 1), there were certain regional networks that were wholly
owned and consolidated by Liberty Sports, Inc. (a predecessor company and a
Company shareholder). Upon contribution of these entities to the Company,
Liberty Sports, Inc. retained management control through a general partnership
minority interest. Hence, these operations are not consolidated by the
Company, although it owns the majority of the limited partnership interests.

The Company's investment in several of its affiliates exceeded its equity in
the underlying net assets by a total of $334,096 and $342,302 at December 31,
1998 and 1997, respectively. These excess amounts are being amortized on a
straight-line basis over 40 years. The amortization aggregated $7,876, $1,025
and $574 during the years ended December 31, 1998 and 1997 and the period from
inception (April 30, 1996) to December 31, 1996, respectively, and is included
in the Company's share of equity income of affiliates.

(7) Debt

Debt at December 31, 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
------------ ----------
<S> <C> <C>
Turner Note Payable(a)........................... $ -- $ 65,334
Chase Manhattan Bank--Term(b).................... 400,000 400,000
Chase Manhattan Bank--Revolver(b)................ 205,000 60,000
Senior Notes(c).................................. 500,000 500,000
Senior Discount Notes(c)......................... 286,878 260,828
Other............................................ 25,463 40,345
------------ ----------
1,417,341 1,326,507
Less current portion............................. (15,450) (80,216)
------------ ----------
$ 1,401,891 $1,246,291
============ ==========
Annual future minimum maturities of debt are as
follows:
1999........................................... $ 15,450
2000........................................... 22,344
2001........................................... 85,052
2002........................................... 100,223
2003........................................... 227,394
Thereafter..................................... 966,878
------------
$ 1,417,341
============
</TABLE>

The fair value of the Company's debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities. Rates on the Company's debt
approximate current market rates, and as such, the carrying amount of
borrowings outstanding approximates fair value.

(a) On October 10, 1996, LMC Southeast Sports, Inc. purchased Turner Sports
Programming, Inc.'s 44% partnership interest in SportSouth. LMC Southeast
Sports, Inc. signed a promissory note to Turner Broadcasting Company for
$65,334, plus interest at a rate of 7.5% per annum. The Note was paid in
full at maturity on October 10, 1998.

F-18
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

(b) On December 15, 1997, Fox Sports Net, LLC, FX Networks, LLC and Fox Sports
RPP Holdings, LLC (together, the "Co-Borrowers"), entered into a credit
agreement (the "Credit Agreement") with a group of banks. The Credit
Agreement provides for a $400,000 term loan and a $400,000 revolving
credit facility ("the Facilities"). Borrowings under the Facilities are
guaranteed by the Company, the Co-Borrowers and certain subsidiaries of
Fox Sports Net, LLC and are secured by substantially all of the assets of
the Company. Borrowings under the facilities bear interest, at the option
of the Co-Borrowers, at a rate based upon the prime rate of interest or
eurodollar rates. The Co-Borrowers also pay a commitment fee on the unused
and available amounts under the revolving credit facility. The revolving
credit commitments will reduce on a quarterly basis commencing December
31, 2000; principal payments under the term loan will also be required
quarterly commencing December 31, 2000. The Credit Agreement provides for
the maintenance of several financial and other covenants, including a
leverage ratio, an interest coverage ratio and a fixed charge coverage
ratio, among others. The Company was in compliance with the debt covenants
as of December 31, 1998.

(c) In August 1997, Fox/Liberty Networks, LLC (the "Issuer") privately sold
$500,000 aggregate principal amount of its 8 7/8% Senior Notes due 2007
and $405,000 aggregate principal amount at maturity ($252.3 million gross
proceeds) of its 9 3/4% Senior Discount Notes due 2007 (collectively the
"Old Notes") in a transaction (the "Offering") exempt from registration
under the Securities Act of 1933, as amended ("1933 Act"). In January
1998, pursuant to an exchange offer (the "Exchange Offer"), the Issuer
exchanged all of the Old Notes for new notes (the "Notes") which were
registered by the Issuer under the 1933 Act. The terms of the Notes are
substantially identical to the terms of the Old Notes. The Issuer received
no proceeds from the issuance of the Notes in the Exchange Offer. Interest
on the Senior Notes is payable semi-annually. Interest payments on the
Senior Discount Notes commence in February 2003. Interest accretes to
principal prior to the commencement of interest payments. At December 31,
1998 and 1997 the unamortized discount on the Senior Discount Notes was
$118,122 and $144,669, respectively. Interest expense, resulting from the
amortization of the discount, was $26,547 and $8,053 for the years ended
December 31, 1998 and 1997, respectively. The indentures pursuant to which
the Notes were issued include certain covenants regarding, among other
things, limitations on the incurrence of debt and distributions to
partners. The Notes are unsecured.

Interest expense was $112,961, $49,183 and $4,235 for the years ended
December 31, 1998 and 1997 and the period from inception (April 30, 1996) to
December 31, 1996, respectively. Interest income was $2,536, $15,041 and $416
for the years ended December 31, 1998 and 1997 and the period from inception
(April 30, 1996) to December 31, 1996, respectively.

(8) Additional Interests Earned by Company's Members

The Company consists of numerous limited liability companies, general and
limited partnerships and corporations. The equity ownership of individual
entities in the chain of entities holding interests in regional sports
networks and FX Networks, LLC include interests held directly by affiliates of
LMC and Fox. Generally, each regional sports network is owned by the Company
through a chain of entities in which the Company has a direct or indirect
interest of approximately 98%, with the remaining fractional interests being
held equally by the affiliates of Fox and LMC.

F-19
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

(9) 401(k) Plan

During 1997, the Company implemented a defined contribution plan under
section 401(k) of the Internal Revenue Code (the "401(k) Plan") covering most
of the employees of the Company. Under the 401(k) Plan, participating
employees may elect to defer a portion of their compensation. The Company
makes contributions to the 401(k) Plan based on a percentage of employee
contributions. Maximum employee and Company contributions are limited by
Internal Revenue Code regulations and by specific 401(k) Plan provisions. For
the years, ended December 31, 1998 and 1997, the Company contributed $4,757
and $4,013, respectively to the 401(k) Plan.

(10) Equity Appreciation Rights Plan

In October 1997, the Company adopted the Fox/Liberty Networks, LLC Equity
Appreciation Rights Plan for management and key employees (the "Plan"), with
an effective date of May 1, 1996. A committee has been appointed by the
Company to administer and interpret this Plan. The maximum number of
Appreciation Rights available for grant under this plan is 300,000. Unless
otherwise determined by the committee, the rights vest over five years and can
be exercised over a period ending on the tenth anniversary of the granting of
the rights. The amount payable by the Company with respect to any Appreciation
Right exercised will equal the excess, if any, of the value at December 31 of
the preceding year over the original grant value. The valuation may be
performed by the Company or by a third party.

During 1998, the Company granted 28,000 and 18,000 rights at $185 and $135,
respectively. During 1997, the Company granted 185,100 rights at $135. The
value of the 1998 grants were based on an independent valuation and the value
of the 1997 grants were based on the initial value determined by the Company's
members. At December 31, 1998 and 1997, 118,260 and 74,040 rights had vested,
respectively, with a weighted average exercise period of 7.3 years at December
31, 1998. A valuation at December 31, 1998 has not been completed.
Compensation expense of $13,526 has been recorded through December 31, 1998
with respect to vested Appreciation Rights.

(11) Commitments and Contingencies

(a) Operating Leases

The Company leases transponders, office facilities, and equipment and
microwave channels used to carry its broadcast signals. These leases, which
are classified as operating leases, expire at various dates through 2010.
Future minimum payments, by year under noncancelable operating leases with a
term of one year or more consist of the following at December 31, 1998:

<TABLE>
<S> <C>
1999............................................................ $ 20,291
2000............................................................ 13,794
2001............................................................ 11,768
2002............................................................ 10,752
2003............................................................ 10,193
Thereafter...................................................... 24,481
--------
Total minimum lease payments.................................... $ 91,279
========
</TABLE>

Total lease expense was approximately $27,396, $17,137 and $7,881 for the
years ended December 31, 1998 and 1997 and the period from inception (April
30, 1996) to December 31, 1996, respectively.

F-20
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998
(Dollars in thousands)

(b) Long-term Program Rights Contracts

The Company has long-term program rights contracts which require payments
through 2009. Future minimum payments, including unrecorded amounts, by year
are as follows at December 31, 1998:

<TABLE>
<S> <C>
1999.......................................................... $ 258,529
2000.......................................................... 262,390
2001.......................................................... 211,470
2002.......................................................... 208,479
2003.......................................................... 182,773
Thereafter.................................................... 530,380
----------
Total minimum program rights payments......................... $1,654,021
==========
</TABLE>

The Company licenses television and feature film programming on a long-term
basis from various related parties, and accordingly records a program rights
asset and payable for the contractual amounts. At December 31, 1998 and 1997,
the unamortized program rights were $150,771 and $108,672, respectively, and
the program rights payable were $134,652 and $103,444, respectively.

The Company has employment agreements with certain executives providing for
compensation payable through 2001.

(d) Litigation

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

(12) Subsequent Events

In March 1999, the Company agreed to sell its investment in Fit TV to an
affiliate of Fox for $6 million in cash. The Company expects to record a loss
from the sale of this investment in the amount of the excess of the Company's
carrying value of the investment in these net assets at the date of sale,
including any related unamortized excess cost, over the selling price.

F-21
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS

FINANCIAL STATEMENTS

F-22
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS

FINANCIAL STATEMENTS

With Independent Auditors' Report

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Fox/Liberty Networks, LLC:

We have audited the accompanying combined statements of operations and
equity and cash flows of Liberty Sports, Inc. and subsidiaries--Domestic
Operations for the period from January 1, 1996 to April 29, 1996. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
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 combined financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Liberty Sports, Inc. and subsidiaries--Domestic Operations for the period from
January 1, 1996 to April 29, 1996, in conformity with generally accepted
accounting principles.

KPMG LLP

Dallas, Texas
June 28, 1996

F-23
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS

COMBINED STATEMENT OF OPERATIONS AND EQUITY
(amounts in thousands)

<TABLE>
<CAPTION>
January
1, 1996
to April
29, 1996
--------
<S> <C>
Revenues (note 4):
Programming......................................................... $ 37,484
Advertising......................................................... 27,696
Direct broadcast.................................................... 23,709
Network support..................................................... 2,471
Other............................................................... 8,393
--------
99,753
--------
Operating costs and expenses (notes 4 and 7):
Operating........................................................... 60,664
General and administrative.......................................... 27,993
Depreciation and amortization....................................... 10,788
--------
99,445
--------
Operating income (loss)........................................... 308
--------
Other income (expense):
Interest expense.................................................... (1,963)
Interest income..................................................... 91
Equity in earnings of affiliates (note 5)........................... 219
Minority interest in earnings of subsidiaries....................... (1,076)
Other, net.......................................................... 1,467
--------
(1,262)
--------
Loss before income taxes.......................................... (954)
Income tax benefit (note 6)........................................... 217
--------
Net loss.......................................................... (737)
Equity, beginning of period........................................... 236,788
Net change in Parent's investment..................................... (11,570)
--------
Equity, end of period................................................. $224,481
========
</TABLE>

See accompanying notes to combined financial statements.

F-24
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS

COMBINED STATEMENT OF CASH FLOWS
(amounts in thousands)

<TABLE>
<CAPTION>
January 1,
1996
to April 29,
1996
------------
<S> <C>
Cash flows from operating activities:
Net loss........................................................ $ (737)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................. 10,788
Equity in earnings of affiliates.............................. (219)
Minority interest............................................. 1,076
Deferred income taxes......................................... (1,176)
Changes in operating assets and liabilities:
Receivables................................................. (9,198)
Inventories................................................. (167)
Prepaid program rights...................................... 1,197
Other assets................................................ (1,906)
Payables, accruals and unearned revenue..................... (2,881)
--------
Net cash used in operating activities..................... (3,223)
--------
Cash flows from investing activities:
Capital expended for property and equipment..................... (4,544)
Additional investments in and loans to affiliates............... (2,500)
Return of capital from affiliates............................... 1,000
--------
Net cash used in investing activities..................... (6,044)
--------
Cash flows from financing activities:
Borrowings of long-term debt.................................... 28,600
Repayments of long-term debt.................................... (8,956)
Change in Parent's investment................................... (11,570)
--------
Net cash provided by financing activities................. 8,074
--------
Decrease in cash and cash equivalents............................. (1,193)
Cash and cash equivalents at beginning of period.................. 10,453
--------
Cash and cash equivalents at end of period........................ $ 9,260
========
</TABLE>

See accompanying notes to combined financial statements.

F-25
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS

(1) Organization

Liberty Sports, Inc. was incorporated on November 13, 1989 as TCI Sports,
Inc., a wholly-owned subsidiary of Tele-Communications, Inc. ("TCI"). On March
29, 1991, the name was changed to Liberty Sports, Inc. and the ownership was
transferred to Liberty Media Corporation ("LMC"), an affiliate of TCI. On
August 4, 1994, LMC became a wholly-owned subsidiary of TCI.

Liberty Sports, Inc. and subsidiaries--Domestic Operations primarily provide
television sports programming services to customers throughout the United
States, sell advertising time in such programming and provide management and
technical services to other sports networks.

(2) Significant Accounting Policies

(a) Basis of Presentation

The accompanying combined financial statements include the accounts of
Liberty Sports, Inc. and its domestic majority-owned subsidiaries and other
entities in which it has a controlling voting interest (collectively, "LSI--
Domestic" or the "Company"). All significant intercompany accounts and
transactions have been eliminated in combination.

(b) Investments in Affiliates

Investments in affiliates are accounted for under the equity method. Under
this method, the investment, originally recorded at cost, is adjusted to
recognize LSI-Domestic's share of net earnings or losses of the affiliate as
they occur rather than as dividends or other distributions are received,
limited to the extent of LSI-Domestic's investment in, advances to and
guarantees on behalf of, the investee. LSI's share of net earnings or losses
of affiliates includes the amortization of purchase adjustments.

Revenue from programming represents affiliate fees received from cable
system operators and is recognized monthly as earned. Advertising revenue is
recognized upon airing of commercials.

Network support revenue is received from related parties for network,
traffic and master control operation services provided by the Company. Such
revenue is recognized as earned.

The Company has sold advance subscriptions to its direct broadcast satellite
customers. Such amounts are amortized to revenue monthly as revenue is earned.

(d) Nonmonetary Transactions

(e) Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ from those estimates.

F-26
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(3) Supplemental Disclosures to Combined Statements of Cash Flows

Cash paid for interest was $1,805,000 for the period January 1, 1996 to
April 29, 1996. Cash paid for income taxes during the period January 1, 1996
to April 29, 1996 was not material.

(4) Related Party Transactions

For the period January 1, 1996 to April 29, 1996, the Company recognized the
following revenue and expenses as a result of transactions with related
parties, primarily TCI and its affiliates (amounts in thousands):

<TABLE>
<S> <C>
Revenues and other:
Programming....................................................... $12,213
Direct broadcast.................................................. 5,908
Network support................................................... 2,375
Other............................................................. 824
Expenses:
Programming fees.................................................. 2,865
Direct broadcast programming fees................................. 3,094
</TABLE>

(5) Investments in Affiliates

The following table reflects LSI Domestic's share of earnings (losses)
(principally accounted for under the equity method) of each of these
affiliates (amounts in thousands):

<TABLE>
<CAPTION>
Entity
------
<S> <C>
SportsChannel Chicago Associates ("SC--CHI")........................ $ 2,877
Prime SportsChannel Network Associates.............................. (2,169)
Sunshine Network Joint Venture ("Sunshine")......................... 669
SportsSouth Network Ltd............................................. 2,026
Prime Sports Network--Upper Midwest Joint Venture................... --
SportsChannel Prism Associates...................................... 139
Rocky Mountain Mobile TV............................................ 93
Home Team Sports Limited Partnership ("HTS")........................ 397
SportsChannel Pacific............................................... --
Global Music Channel................................................ (3,813)
-------
$ 219
=======
</TABLE>

The Company's investment in three of these affiliates (Sunshine, HTS, and
SC-CHI) exceeded its equity in the underlying net assets. These excess amounts
are being amortized over the estimated useful lives of the investment
affiliate agreements and sports contracts. This amortization aggregated
$222,000 for the period January 1, 1996 to April 29, 1996 and is included in
LSI Domestic's share of earnings.

F-27
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Summarized financial operating results for affiliates accounted for under
the equity method is as follows:

Combined Operations
(amounts in thousands)

<TABLE>
<CAPTION>
January 1,
1996 to
April 29,
1996
----------
<S> <C>
Revenues.......................................................... $ 90,170
Operating, general and administrative expenses.................... (80,772)
Depreciation and amortization..................................... (1,290)
--------
Operating income................................................ 8,108
Interest income................................................... (144)
Other, net........................................................ (30)
--------
Net income...................................................... $ 7,934
========
</TABLE>

(6) Income Taxes

The Company accounts for income taxes using Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
SFAS No. 109 requires the use of the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates in effect for
the year in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.

The Company is included in the consolidated federal income tax returns filed
by TCI. Federal income taxes are calculated on a separate return basis in the
accompanying consolidated financial statements.

Income tax benefit (expense) attributable to loss before income taxes for
the period January 1, 1996 to April 29, 1996 consists of the following:

<TABLE>
<S> <C>
Current:
Federal............................................................. $(921)
State............................................................... (38)
Deferred.............................................................. 1,176
-----
Total................................................................. $ 217
=====
</TABLE>

Actual income tax benefit differs from the "expected" income tax benefit for
the period January 1, 1996 to April 29, 1996 (computed by applying the U.S.
federal corporate tax rate of 35% to loss before income taxes) as follows
(amounts in thousands):

<TABLE>
<S> <C>
Computed "expected" tax benefit...................................... $ 334
Minority interest in earnings of consolidated subsidiary............. (640)
Other, net........................................................... 523
-----
$ 217
=====
</TABLE>

(7) Commitments and Contingencies

F-28
<PAGE>

LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Future minimum lease payments under noncancellable operating leases by
calendar year are summarized as follows (amounts in thousands):

<TABLE>
<S> <C>
1996................................................................. $15,791
1997................................................................. 15,196
1998................................................................. 15,073
1999................................................................. 13,561
2000................................................................. 10,177
Thereafter........................................................... 5,500
</TABLE>

Total lease expense was approximately $4,049,000 for the period January 1,
1996 to April 29, 1996.

The Company has long-term sports program rights contracts which require
payments through 2005. Future minimum payments by calendar year are as follows
(amounts in thousands):

<TABLE>
<S> <C>
1996................................................................ $ 58,051
1997................................................................ 59,854
1998................................................................ 56,999
1999................................................................ 53,166
2000................................................................ 45,736
Thereafter.......................................................... 128,187
</TABLE>

The Company has guaranteed obligations of certain equity affiliates under
program rights agreements aggregating $3,331,000 in 1996; $3,598,000 in 1997;
and $2,857,000 in 1998.

Liberty Sports, Inc. and its domestic affiliates are parties to various
lawsuits and claims arising in the ordinary course of business. While the
outcome of such claims, lawsuits or other proceedings against the Company
cannot be predicted with certainty, management expects that such liability, to
the extent not provided through insurance or otherwise, will not have a
material adverse effect on the operating results or financial condition of the
Company.

(8) Subsequent Event

Effective April 29, 1996, Liberty Sports, Inc. contributed substantially all
of its domestic assets and liabilities to certain limited liability companies
and limited partnerships (collectively, the "Domestic Venture"). The members
of the Domestic Venture are certain affiliates of Liberty Sports, Inc. and
certain affiliates of The News Corporation Limited, each of which owns,
through its affiliates, 50% of the Domestic Venture. The Domestic Venture was
formed to provide sports programming services in the United States and Canada.

F-29
<PAGE>

FX NETWORKS, LLC
(A Limited Liability Company)

FINANCIAL STATEMENTS

For the Ten Months Ended April 29, 1996

Together with Report of Independent Public Accountants

F-30
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Fox/Liberty Networks, LLC:

We have audited the accompanying statements of Operations and Cash Flows of
FX NETWORKS, LLC (the Company, a Delaware limited liability company) for the
ten months ended April 29, 1996. 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. The financial
statements of FX Networks, LLC for the four months ended April 29, 1996 were
not audited by us and, accordingly, we do not express an opinion on them.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of FX NETWORKS, LLC's operations and its
cash flows for the ten months ended April 29, 1996 in conformity with
generally accepted accounting principles.

Arthur Andersen LLP

Los Angeles, California
August 4, 1997

F-31
<PAGE>

FX NETWORKS, LLC
(A Delaware Limited Liability Company)

STATEMENTS OF OPERATIONS

For the Periods Ended April 29, 1996
(Dollars in thousands)

<TABLE>
<CAPTION>
Four Ten
Months Ended Months Ended
April April 29,
29, 1996 1996
------------ ------------
(unaudited)
<S> <C> <C>
Revenue:
Programming......................................... $24,291 $ 55,934
Advertising......................................... 8,287 17,358
Infomercial......................................... 947 2,109
------- --------
33,525 75,401
------- --------
Expenses:
Operating........................................... 26,220 63,369
General and administrative.......................... 7,941 19,936
Depreciation and amortization....................... 201 480
------- --------
34,362 83,785
------- --------
Interest expense...................................... 3,354 7,898
------- --------
Net Loss.......................................... $(4,191) $(16,282)
======= ========
</TABLE>

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

F-32
<PAGE>

FX NETWORKS, LLC
(A Delaware Limited Liability Company)

STATEMENTS OF CASH FLOWS

For the Periods Ended April 29, 1996
(Dollars in thousands)

<TABLE>
<CAPTION>
Four months Ten months
ended April 29, Ended April 29,
1996 1996
--------------- ---------------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income................................... $(4,191) $(16,282)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 201 480
Changes in operating assets and liabilities:
Accounts receivables....................... (3,998) (9,110)
Program rights............................. (6,785) (7,194)
Other assets............................... 359 (167)
Accounts payable and accrued expenses...... (1,136) (927)
Program rights payable..................... 6,263 6,254
------- --------
Net cash used in operating activities.... (9,287) (26,946)
------- --------
Cash Flows from Investing Activities:
Purchases of property and equipment.......... (191) (521)
------- --------
Net cash used in investing activities.... (191) (521)
------- --------
Cash Flows from Financing Activities:
Related Party Payable........................ 9,478 27,467
------- --------
Net cash provided by financing
activities.............................. 9,478 27,467
------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents................................... -- --
Cash and Cash Equivalents, beginning of year... -- --
------- --------
Cash and Cash Equivalents, end of year......... $ -- $ --
======= ========
Supplemental Cash Flow Information
Cash paid for interest....................... $ 3,354 $ 7,898
======= ========
</TABLE>

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

F-33
<PAGE>

FX NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

(Information for the four month period ended April 29, 1996 is unaudited)

For the Ten Months Ended April 29, 1996
(Dollars in thousands)

(1) Organization

FX Networks, LLC was formed on July 1, 1993 as a division of Fox, Inc.
("Fox"), a subsidiary of The News Corporation Limited, as a basic cable
exclusive service distributed on a per subscriber basis, to provide general
entertainment and sports programming services and sell commercial advertising
time during its programming.

(2) Significant Accounting Policies

(a) Basis of Presentation

The accompanying financial statements of the Company present the operations
and cash flows for the interim four month period ended April 29, 1996
(unaudited) for the purpose of comparison to the year ended December 31, 1997
for its successor company, Fox/Liberty Networks, LLC.

(b) Program Rights

The Company has multi-year contracts for broadcast rights of syndicated
entertainment programs. Program rights are amortized over the term of the
contract using the straight-line method.

Property and equipment are stated at cost. Depreciation for financial
statement purposes is provided using the straight-line method over estimated
useful lives of 3 to 5 years.

(d) Income Taxes

No provision has been made for income tax expense or benefit in the
accompanying consolidated financial statements as the income or losses of the
Company are reported in the respective income tax returns of the partners.

(e) Revenue

Programming revenue represents monthly subscriber fees received from cable
system operations and is recognized as earned. Advertising revenue is
recognized as earned.

(f) 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 reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ from those estimates.

F-34
<PAGE>

FX NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the four month period ended April 29, 1996 is unaudited)

For the Ten Months Ended April 29, 1996
(Dollars in thousands)

(g) Allocation of expenses

Fox allocates costs, such as rent and payroll, incurred on behalf of the
Company based on the percentage of services rendered to the Company. These
allocated expenses are included in general and administrative expenses in the
Statements of Operations. Management believes the allocation method used is
reasonable.

(h) Interim Financial Data (unaudited)

The interim financial data for the period ended April 29, 1996 has been
prepared by the Company and is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results of
operations and cash flows for the interim period. Results for the interim
period are not necessarily indicative of the results to be achieved for the
full year.

(3) Related Party Transactions

The Company recognized the following revenue and expenses as a result of
arms-length transactions with related parties (amounts in thousands):

<TABLE>
<CAPTION>
Four Months Ten Months
Ended April 29, Ended April 29,
1996 1996
--------------- ---------------
(unaudited)
<S> <C> <C>
Revenue:
Advertising.............................. $ 159 $ 248
Expenses:
Interest expense......................... 3,354 7,898
Production............................... 7,932 23,068
Programming fees......................... 3,604 7,695
</TABLE>

TCI, which became a related party as a result of the Joint Venture (see Note
5), had transactions with the Company resulting in revenues of $25,310 for the
ten month period ended April 29, 1996.

(4) Commitments and Contingencies

(a) Leases

The Company leases transponders and equipment used to carry its broadcast
signals. These leases, which are classified as operating leases, expire at
various dates through 2006.

Total lease expense was approximately $3,912, and $1,564, for the ten months
and four months ended April 29, 1996 (unaudited).

(b) Long-term Program Rights Contracts

The Company has long-term program rights contracts which require payments
through 1999.

F-35
<PAGE>

FX NETWORKS, LLC
(A Delaware Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS--(Continued)

(Information for the four month period ended April 29, 1996 is unaudited)

For the Ten Months Ended April 29, 1996
(Dollars in thousands)

The Company is a party to various lawsuits and claims arising in the
ordinary course of business. While the outcome of such claims, lawsuits or
other proceedings against the Company cannot be predicted with certainty,
management expects that such liability will not have a material adverse effect
on the operating results or financial position of the Company.

(5) Subsequent Event

On April 30, 1996, The News Corporation Limited contributed a majority of
the assets and liabilities of the Company to Fox/Liberty Networks, LLC as part
of a joint venture formed by The News Corporation Limited and Tele-
Communications, Inc.

F-36
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

CONSOLIDATED FINANCIAL STATEMENTS

For the period from inception (April 30, 1996) to December 31, 1996
(Unaudited)

F-37
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

CONSOLIDATED STATEMENT OF OPERATIONS

For the Period from Inception (April 30, 1996) to December 31, 1996 (Unaudited)
(Dollars in thousands)

<TABLE>
<CAPTION>
April 30 to
December 31,
1996
------------
(Unaudited)
<S> <C>
Revenue:
Programming...................................................... $ 27,895
Advertising...................................................... 9,598
Infomercial...................................................... 1,763
Direct broadcast................................................. 57,319
Other............................................................ 10,956
--------
107,531
--------
Expenses:
Operating........................................................ 73,074
General and administrative....................................... 7,171
Depreciation and amortization.................................... 2,407
--------
82,652
--------
Operating Income................................................... 24,879
--------
Other (income) expense:
Interest, net.................................................... 267
Loss on sale of assets........................................... 34
Equity income of affiliates, net................................. (1,148)
Other............................................................ 211
Minority interest................................................ 1,468
--------
832
--------
Net Income......................................................... $ 24,047
========
</TABLE>

The accompanying notes are an integral part of this consolidated financial
statement.

F-38
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Period from Inception (April 30, 1996) to December 31, 1996 (Unaudited)
(Dollars in thousands)

<TABLE>
<CAPTION>
April 30 to
December 31,
1996
------------
(Unaudited)
<S> <C>
Cash flows from operating activities:
Net income...................................................... $ 24,047
Adjustments to reconcile net income to net cash provided by
operating activities:
Bad debt expense.............................................. 240
Depreciation and amortization................................. 2,407
Loss on sale of assets........................................ 34
Equity income of affiliates................................... (1,148)
Minority interest............................................. 1,468
Changes in operating assets and liabilities:
Trade and other receivables................................... (7,983)
Prepaid program rights........................................ 278
Prepaid expenses and other current assets..................... 889
Other assets.................................................. 49
Accounts payable and accrued expenses......................... (14,290)
Program rights payable........................................ 4,422
Unearned revenue.............................................. (733)
--------
Net cash provided by operating activities................... 9,680
--------
Cash flows from investing activities:
Purchases of property and equipment............................. (1,886)
Note receivable issued to third parties......................... (4,381)
Distribution from affiliates.................................... 4,759
Additional investment in affiliates............................. (1,160)
Advances to related parties..................................... (18,608)
Advances from related parties................................... 35,569
--------
Net cash provided by operating activities................... 14,293
--------
Cash flows from financing activities:
Repayment of long-term debt..................................... (22,275)
Principal payments on capital lease obligations................. (71)
Cash overdraft, included in accounts payable.................... 3,529
--------
Net cash used in financing activities....................... (18,817)
--------
Net increase in cash and cash equivalents......................... 5,156
Cash and cash equivalents, at inception........................... 6,119
--------
Cash and cash equivalents, end of year............................ $ 11,275
========
</TABLE>

The accompanying notes are an integral part of this consolidated financial
statement.

F-39
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of and for the period ended December 31, 1996 is unaudited)

December 31, 1996
(Dollars in thousands)

1. Organization

On April 30, 1996, Liberty/Fox ARC L.P. (the "Partnership"), a Delaware
limited partnership, was formed to own and operate programming services
featuring predominantly sports and sports related programming.

The partnership interests for the Partnership as of December 31, 1996 are as
follows:

<TABLE>
<CAPTION>
Partnership
Interest
-----------
<S> <C>
Fox Sports Net, LLC.............................................. 98%(l.p.)
Fox Regional Sports Member, Inc.................................. 1%(1.p.)
New LMC ARC, Inc................................................. 1%(g.p.)
</TABLE>

Fox/Liberty Networks, LLC, a Delaware limited liability company, through its
subsidiary Fox Sports Net, LLC, and New LMC ARC, Inc., a Delaware corporation,
each contributed interests in Affiliated Regional Communications, Ltd., a
Colorado limited partnership, and Rocky Mountain Prime Sports Network, a
Colorado general partnership. Fox Regional Sports Member, Inc. contributed
cash.

The Partnership provides television sports programming services, sells
advertising time in its programming, provides management services to other
sports networks, and provides technical services to other networks.

2. Significant Accounting Policies

(a) Basis of Presentation

The accompanying consolidated financial statements include the operations of
the Partnership and its domestic majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

(b) Cash Equivalents

Cash equivalents consist of short-term investments with an original maturity
of less than 90 days.

The Partnership has multi-year contracts for broadcast rights of sporting
events. Pursuant to these contracts, an asset is recorded for the rights
acquired and a liability is recorded for the obligation incurred, at the gross
amount of the liability when the programs of sporting events are available for
broadcast. Program rights which are for a specified number of games are
amortized on an event-by-event basis, and those which are for a specified
season are amortized over the term of the season on a straight-line basis. At
the inception of these contracts and periodically thereafter, the Partnership
evaluates the recoverability of the costs associated therewith against the
advertising revenues directly associated with the program material and related
expenses. Where an evaluation indicates that a multi-year contract will result
in an ultimate loss, additional amortization is provided to currently
recognize that loss.

F-40
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of and for the period ended December 31, 1996 is unaudited)

December 31, 1996
(Dollars in thousands)

(d) Property and Equipment

Property and equipment are stated at cost, which include acquisition costs
allocated to tangible assets acquired. Depreciation and amortization for
financial statement purposes are provided using the straight-line method over
an estimated useful life of five to ten years.

(e) Excess Cost

Excess cost represents the difference between the costs of acquiring
programming entities and amounts assigned to their tangible assets. Such
amounts are amortized on a straight-line basis over 40 years. Amortization
expense for the period from inception (April 30, 1996) to December 31, 1996
was $1,468 (Unaudited).

The Partnership continually reevaluates the propriety of the carrying amount
of its intangible assets as well as the related amortization period to
determine whether current events or circumstances warrant adjustments to the
carrying value and/or the estimates of useful lives. This evaluation consists
of the Partnership's projection of undiscounted operating income before
interest over the remaining lives of the related intangible assets. Based on
its review, the Partnership believes that no significant impairment of the
intangible assets has occurred and that no reduction of the estimated useful
lives is warranted.

(f) Income Taxes

No provision has been made for income tax expense or benefit in the
accompanying consolidated financial statements as the income or losses of the
Partnership are reported in the respective income tax returns of the partners.

(g) Allocation of Partnership of Net Income or Net Losses

Income or losses from the Partnership are allocated to the partners in
accordance with their respective profit interests.

(h) Investments in Affiliates

Investments in affiliates are accounted for under the equity method. Under
this method, the investment originally recorded at cost is adjusted to
recognize the Partnership's share of net income or losses of the affiliate as
they occur, rather than as dividends or other distributions are received,
limited to the extent of the Partnership's investment, advances to and
guarantees on behalf of the investee. The Partnership's share of net income or
losses of affiliates includes the amortization of excess cost.

(i) Revenue

Revenue from programming represents monthly subscriber fees received from
cable system operations and is recognized as earned. Advertising revenue is
recognized as earned. The Partnership has sold advance subscriptions to its
direct broadcast satellite customers. Such amounts are amortized to revenue in
the month such revenue is earned.

Network support revenue is received from related parties for network,
traffic, and master control operation services provided by the Partnership.
Such revenue is recognized as earned.

F-41
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of and for the period ended December 31, 1996 is unaudited)

December 31, 1996
(Dollars in thousands)

(j) Nonmonetary Transactions

The Partnership trades commercial advertising sports in return for other
services, primarily programming. These trades are recorded at the fair value
of the asset surrendered or the fair value of the asset obtained, whichever is
more clearly evident. These transactions resulted in the recording of
approximately $2,322 (Unaudited) in both advertising revenue and programming
expenses during the period from inception (April 30, 1996) to December 31,
1996.

(k) Use of Estimates

(l) Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement No.
121 ("SFAS 121") on accounting for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to assets to be held and
used. SFAS 121 also establishes accounting standards for long-lived assets and
certain identifiable intangibles to be disposed of. The Partnership adopted
SFAS 121 from inception (April 30, 1996). The adoption of the statement did
not have any material impact on the Partnership's financial statements.

3. Supplemental Cash Flow Information

Cash paid for interest for the period from inception (April 30, 1996) to
December 31, 1996 was $983 (Unaudited).

4. Related Party Transactions

For the period from inception (April 30, 1996) to December 31, 1996 the
Partnership recognized the following revenue and expenses as a result of arms-
length transactions with related parties:

<TABLE>
<CAPTION>
April 30 to
December 31,
1996
(Unaudited)
------------
<S> <C>
Revenue:
Programming................................................. $13,117
Network support, which is included in other revenue on the
statement of operations.................................... 2,456
Expenses:
Interest expense............................................ 32
DBS......................................................... 546
Production.................................................. 24
Advertising commissions..................................... 974
Programming fees............................................ 1,735
</TABLE>

F-42
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of and for the period ended December 31, 1996 is unaudited)

December 31, 1996
(Dollars in thousands)

5. Investments in Affiliates

The following table reflects the Partnership's equity in income (losses) of
these affiliates, accounted for under the equity method, for the period from
inception (April 30, 1996) to December 31, 1996 (Unaudited):

<TABLE>
<CAPTION>
Equity in
Ownership income
Entity percentage (losses)
------ ---------- ---------
<S> <C> <C>
Sunshine Network Joint Venture......................... 49.0% $ 1,306
Prime Sports Network--Upper Midwest Joint Venture...... 33.0% 5
Home Team Sports Limited Partnership................... 34.3% 699
Prime Sports Channel Prism Associates.................. 33.3% 869
Prime Sports Channel Network Associates................ 50.0% (1,953)
Mountain Mobile TV..................................... 33.3% 222
-------
$ 1,148
=======
</TABLE>

The Partnership's investment in Sunshine Network Joint Venture exceeded its
equity in the underlying net assets. These excess amounts are being amortized
on a straight-line basis over 40 years. The amortization aggregated $67
(Unaudited) for the period from inception (April 30, 1996) to December 31,
1996 and is included in the Partnership's share of equity in income of
affiliates.

6. Debt

ARC Holding, Ltd., a wholly-owned subsidiary of the Partnership ("Holding"),
is a party to a credit agreement, as amended, at December 31, 1996. Borrowings
bear interest at the agent bank's base rate, the London Interbank Offered
Rate, a CD rate or a combination thereof as selected by Holding plus a margin
depending on Holding's ratio of total debt to cash flow (as defined). The
effective interest rate at December 31, 1996 was 6.45 percent (Unaudited).
Beginning June 30, 1995, and quarterly thereafter through December 31, 2000,
the commitment amount is reduced in equal quarterly amounts. Holding must pay
an annual commitment fee of .375 percent of the unfunded portion of the
commitment. Borrowings under the credit agreement are secured by the assets of
Holding, including affiliate interests, and the stock and assets of its
existing and future subsidiaries.

The credit agreement contains certain provisions which limit Holding as to
additional indebtedness, sale of assets, liens, guarantees and distributions.
Additionally, Holding must attain certain specified financial ratios. Holding
was in compliance with the debt covenants as of December 31, 1996 (Unaudited).

7. Commitments and Contingencies

(a) Leases

The Partnership leases transponders, office facilities, equipment and
microwave channels used to carry its broadcast signals. These leases, which
are classified as operating leases, expire at various dates through 2001.

F-43
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of and for the period ended December 31, 1996 is unaudited)

December 31, 1996
(Dollars in thousands)

Future minimum payments by year under noncancelable operating leases with a
term of one year or more consist of the following:

<TABLE>
<CAPTION>
December 31,
1996
------------
(Unaudited)
<S> <C>
1997........................................................... $ 7,095
1998........................................................... 7,733
1999........................................................... 7,273
2000........................................................... 5,114
2001........................................................... 690
-------
Total minimum lease payments................................. $27,905
=======
</TABLE>

The Partnership has a capital lease related to equipment, which expires in
1999.

Future minimum payments by year under the capital lease consist of the
following:

<TABLE>
<CAPTION>
December
31, 1996
-----------
(Unaudited)
<S> <C>
1997............................................................. $104
1998............................................................. 114
1999............................................................. 115
----
Total minimum lease payments................................... $333
====
</TABLE>

Total lease expense was approximately $2,012 (Unaudited) for the period from
inception (April 30, 1996) to December 31, 1996.

(b) Long-term Sports Program Rights Contracts

The Partnership has long-term sports program rights contracts which require
payments through 2001. Future minimum payments by year are as follows:

<TABLE>
<CAPTION>
December 31,
1996
------------
(Unaudited)
<S> <C>
1997............................................................ $25,780
1998............................................................ 24,559
1999............................................................ 21,658
2000............................................................ 13,365
2001............................................................ 4,566
-------
Total minimum program rights payments......................... $89,928
=======
</TABLE>

F-44
<PAGE>

LIBERTY/FOX ARC L.P.
(A Delaware Limited Partnership)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(Information as of and for the period ended December 31, 1996 is unaudited)

December 31, 1996
(Dollars in thousands)

The Partnership has guaranteed obligations of certain equity affiliates
under program rights agreements of:

<TABLE>
<CAPTION>
December 31,
1996
------------
(Unaudited)
<S> <C>
1997............................................................ $3,598
1998............................................................ 2,857
------
Total guaranteed obligations.................................. $6,455
======
</TABLE>

The Partnership and its affiliates are parties to various lawsuits and
claims arising in the ordinary course of business. While the outcome of such
claims, lawsuits or other proceedings against the Partnership cannot be
predicted with certainty, management expects that such liability will not have
a material adverse effect on the operating results or financial position of
the Partnership.

11. Subsequent Event

In March 1997, the partnership paid $40,000 (Unaudited) to Group W to
purchase the 12.78% partnership interest in ARC.

The Partnership amended the credit agreement in March 1997, and June 1997,
which increased the borrowings ceiling to $75,000 (Unaudited). The Company
repaid the outstanding principal balance on September 12, 1997.

F-45
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 1998 and
Period from December 18, 1997 (Inception) to December 31, 1997

(With Independent Auditors' Report Thereon)

F-46
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Partners
Regional Programming Partners:

We have audited the accompanying consolidated balance sheets of Regional
Programming Partners and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of income, partners' capital and cash
flows for the year ended December 31, 1998 and for the period from December
18, 1997 (Inception) to December 31, 1997. These consolidated financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Regional
Programming Partners and subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for year ended December 31,
1998 and for the period from December 18, 1997 (Inception) to December 31,
1997, in conformity with generally accepted accounting principles.

March 12, 1999
Melville, New York

F-47
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 1998 and 1997
(Dollars in thousands)

<TABLE>
<CAPTION>
ASSETS 1998 1997
------ ---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 148,852 $ 402,978
Trade accounts receivable (less allowance for doubtful
accounts of $9,067 and $9,943)........................ 75,364 93,568
Trade accounts receivable-affiliates................... 18,329 26,674
Notes and other receivables-affiliates................. 180,519 450
Notes and other receivables............................ 1,734 3,632
Inventory.............................................. 2,483 3,486
Prepaid expenses and other current assets.............. 30,725 25,922
---------- ----------
Total current assets................................. 458,006 556,710

Notes receivable....................................... 41,320 44,085
Property and equipment, net............................ 259,175 245,395
Investments in affiliates.............................. 19,006 8,410
Other assets........................................... 4,905 7,163
Deferred costs, net of accumulated amortization of
$2,249 and $826....................................... 32,492 31,028
Intangible assets, net of accumulated amortization of
$249,700 and $149,695................................. 1,475,270 1,434,388
---------- ----------
$2,290,174 $2,327,179
========== ==========

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current liabilities:
Accounts payable....................................... $ 30,897 $ 21,532
Accrued expenses....................................... 69,794 60,356
Accrued payroll and related benefits................... 39,974 49,393
Deferred revenue....................................... 121,135 104,347
Accounts payable-affiliates, net....................... 10,114 7,338
Contractual rights obligations......................... 28,451 28,676
---------- ----------
Total current liabilities............................ 300,365 271,642

Long-term debt......................................... 330,000 380,000
Deferred compensation.................................. 8,747 11,079
Contractual rights obligations......................... 103,041 131,417
Other liabilities...................................... 117,442 44,485
Minority interest...................................... 64,117 129,495
---------- ----------
Total liabilities........................................ 923,712 968,118

Commitments and contingencies

Partners' capital...................................... 1,366,462 1,359,061
---------- ----------
$2,290,174 $2,327,179
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-48
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31, 1998 and the Period from
December 18, 1997 (Inception) to December 31, 1997
(Dollars in thousands)

<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Revenues, net (including affiliate amounts of $93,811 and
$3,305).................................................... $708,043 $56,957
Expenses:
Technical and operating (including affiliate amounts of
$12,853 and $529)........................................ 479,550 32,091
Selling, general and administrative (including affiliate
amounts of $12,104 and $295)............................. 122,276 9,472
Depreciation and amortization............................. 123,410 3,884
-------- -------
725,236 45,447
-------- -------
Operating (loss) income................................... (17,193) 11,510
-------- -------
Other income (expense):
Share of affiliates' net income (loss).................... 11,839 (359)
Interest income........................................... 24,318 973
Interest expense.......................................... (29,876) (1,395)
Gain on sale of partnership interest...................... 17,648 --
Write-off of deferred financing fees...................... -- (6,538)
Minority interest......................................... 758 (561)
Miscellaneous, net........................................ (93) (1,520)
-------- -------
24,594 (9,400)
-------- -------
Net income................................................ $ 7,401 $ 2,110
======== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-49
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

Year Ended December 31, 1998 and the Period from
December 18, 1997 (Inception) to December 31, 1997
(Dollars in thousands)

<TABLE>
<CAPTION>
RMHI FOX TOTAL
-------- --------- ----------
<S> <C> <C> <C>
Balance, December 18, 1997...................... $ -- $ -- $ --
Net assets contributed........................ 506,951 -- 506,951
Capital contributions......................... -- 850,000 850,000
Adjustment of partnership capital............. 307,220 (307,220) --
Net income.................................... 1,266 844 2,110
-------- --------- ----------
Balance, December 31, 1997...................... 815,437 543,624 1,359,061
Net income.................................... 4,441 2,960 7,401
-------- --------- ----------
Balance, December 31, 1998...................... $819,878 $ 546,584 $1,366,462
======== ========= ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-50
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 1998 and the Period from
December 18, 1997 (inception) to December 31, 1997
(Dollars in thousands)

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 7,401 $ 2,110
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization of deferred costs........................ 1,423 (195)
Depreciation and amortization......................... 123,410 3,884
Share of affiliates net income (loss)................. (11,839) 359
Minority interest..................................... (758) 561
Gain on sale of partnership interest.................. (17,648) --
Write off of deferred financing costs................. -- 6,538
Loss on sales of equipment............................ 100 --
Changes in assets and liabilities:
Trade accounts receivable, net...................... 16,106 6,160
Trade accounts receivable-affiliates................ 6,709 (7,072)
Notes and other receivables-affiliates.............. (69) --
Notes and other receivables......................... 3,899 232
Prepaid expenses and other current assets........... (5,359) (641)
Deferred costs and other assets..................... (1,263) --
Accounts payable and accrued liabilities............ (13,950) 35,189
Deferred revenue.................................... 16,788 (39,377)
Accounts payable-affiliates, net.................... 3,496 (8,770)
Deferred compensation............................... (2,332) --
Contractual rights obligations...................... (28,601) --
Other liabilities................................... (3,887) --
--------- ---------
Net cash provided by (used in) operating
activities....................................... 93,626 (1,022)
--------- ---------
Cash flows from investing activities:
Capital expenditures................................... (32,812) --
Loan to affiliates..................................... (180,000) --
Decrease in investments in affiliates, net............. 170 --
Partial redemption of partnership interest............. (94,000) --
Net proceeds from sale of partnership interest......... 19,884 --
Proceeds from sale of equipment........................ 16 --
Additions to intangible assets......................... (11,010) --
--------- ---------
Net cash used in investing activities............. (297,752) --
--------- ---------
Cash flows from financing activities:
Debt repayments........................................ (50,000) (812,000)
Proceeds from debt..................................... -- 366,000
Cash capital contributions from partners............... -- 850,000
--------- ---------
Net cash (used in) provided by financing
activities....................................... (50,000) 404,000
--------- ---------
Net (decrease) increase in cash and cash equivalents..... (254,126) 402,978

Cash and cash equivalents at beginning of period......... 402,978 --
--------- ---------
Cash and cash equivalents at end of year................. $ 148,852 $ 402,978
========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-51
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and 1997
(Dollars in thousands)

1. The Partnership and Nature of Operations

Regional Programming Partners (the "Partnership") is a general partnership
organized as of December 18, 1997, under the provisions of the New York State
Partnership Law. In exchange for a 60% interest in the Partnership issued to a
subsidiary of Rainbow Media Holdings, Inc. ("RMHI"), affiliates of RMHI,
through various indirect transfers, contributed to the Partnership their
interests in Madison Square Garden, L.P. ("MSG"), six additional regional
sports networks, and Metro Channel LLC. MSG is a sports and entertainment
company that owns and operates the Madison Square Garden arena and the
adjoining Theater at Madison Square Garden, the New York Knickerbockers
professional basketball team, the New York Rangers professional hockey team,
the New York Liberty professional women's basketball team, the New England
Seawolves professional arena football team, the Hartford Wolf Pack
professional hockey team, the Madison Square Garden Network, Fox Sports New
York and Radio City Entertainment (which operates Radio City Music Hall in New
York City). The regional sports networks in which the Partnership owns
interests provide regional sports programming to the New York, New England,
Chicago, Cincinnati, Cleveland, San Francisco and Florida areas. Metro Channel
LLC provides regional and local sports, news and educational programming to
the New York metropolitan area. A subsidiary of Fox/Liberty Networks, LLC
("Fox") contributed $850,000 in cash to the Partnership in exchange for a 40%
interest in the Partnership.

RMHI is a 75% owned subsidiary of CSC Holdings, Inc. (formerly Cablevision
Systems Corporation) ("CSC") and Fox is a joint venture between subsidiaries
of The News Corporation Limited and Liberty Media Corporation ("Liberty"). A
subsidiary of RMHI is the managing partner of the Partnership. Summary
financial information (at historical cost) for the net assets contributed to
the Partnership by affiliates of RMHI is as follows:

<TABLE>
<S> <C>
Current assets.............................................. $ 138,086
Other assets................................................ 316,997
Intangible assets, net...................................... 1,437,338
Current liabilities......................................... (259,400)
Bank debt................................................... (826,000)
Other liabilities........................................... (209,136)
Minority interest........................................... (90,934)
----------
$ 506,951
==========
</TABLE>

In order to align the partners' capital accounts to balances in accordance
with their ownership percentages after the initial contributions, an
adjustment was made to transfer $307,220 from Fox's capital account to RMHI's
capital account.

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the
Partnership and its majority-owned partnership interests. The Partnership's
interests in less than majority-owned entities are accounted for under the
equity method. All significant intercompany transactions and balances are
eliminated in consolidation. Minority interest represents ITT Corporation's
("ITT") share of net equity of MSG.

F-52
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

Revenue Recognition

The Partnership derives revenues principally from programming services
provided by its pay television networks, ticket sales and distributions of
league-wide revenue from its sports teams, advertising on its other sports
network and advertising and event sponsorships related to the MSG arena.
Programming revenue is recognized as services are provided to pay television
systems. Network advertising revenue is recognized as commercials are
telecast. Ticket sales and league-wide revenue are recognized as each team
plays its games. Revenues from the sale of advertising in the form of signage
and license fees from rental of MSG's luxury suites are recognized ratably
over the term of the respective agreements. Event-related revenues are
recognized as the underlying event occurs.

Inventory

Inventory consists of retail merchandise carried on a FIFO basis and stated
at the lower of cost or market.

Deferred Financing Costs

Costs incurred to obtain debt financing are deferred and amortized, on a
straight-line basis, over the life of the related debt.

Long-Lived Assets

Property and equipment are carried at cost and depreciated on the straight-
line basis over the estimated useful lives of the assets or, with respect to
leasehold improvements, amortized over the shorter of the lease term or the
assets' useful lives.

The Partnership reviews its long-lived assets (property and equipment, and
intangible assets) for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. If the sum of the
expected future cash flows, undiscounted and without interest, is less than
the carrying amount of the asset, an impairment loss is recognized as the
amount by which the carrying amount of the asset exceeds its fair value.

Income Taxes

The Partnership operates as a general partnership; accordingly, its taxable
income or loss is included in the tax returns of the individual partners and
no provision for income taxes is made by the Partnership.

Cash Equivalents

The Partnership considers temporary cash investments with original
maturities of three months or less at the time of purchase to be cash
equivalents. The Partnership paid cash interest expense of approximately
$26,464 for the year ended December 31, 1998. There was no cash paid for
interest during the period from December 18, 1997 (Inception) to December 31,
1997. On December 31, 1997, ITT made a capital contribution to MSG of
transportation equipment valued at $38,000.

Contractual Rights Obligations

Contractual rights obligations represent the remaining reserves on
unfavorable contracts established prior to the formation of the Partnership.
Such reserves are being amortized as a reduction of technical expense over the
life of the contracts.

Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from these estimates.

Reclassifications

Certain reclassifications have been made to the prior year financial
statements to conform to the 1998 presentation.

F-53
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

3. Acquisitions and Dispositions

In June 1998, the Partnership redeemed one-half of ITT Corporation's
remaining 7.8% limited partnership interest in Madison Square Garden, L.P. for
$94 million. Such redemption was accounted for as a purchase whereby the
excess of redemption price paid over the equity redeemed of $29,400 was
allocated based upon an independent appraisal as follows:

<TABLE>
<S> <C>
Property, plant and equipment.................................... $ 3,200
Player contracts................................................. 5,600
Franchises....................................................... 7,500
Excess costs over fair value of net assets acquired.............. 13,100
--------
$ 29,400
========
</TABLE>

On January 29, 1998, the Partnership sold a 50% interest in SportsChannel
New England Limited Partnership for $19,884. The Partnership recognized a
gain, net of expenses, of $17,648.

4. Notes Receivable

Notes receivable includes a $40,000 loan made by Garden Programming, Inc.
("Garden Programming"), a wholly owned subsidiary of MSG, to a broadcast
content provider entered into on July 11, 1997. The loan matures on November
1, 2011, and bears interest at a rate which approximates MSG's borrowing rate.
The loan is secured by certain assets of the borrower and a guarantee by an
affiliate of the borrower.

5. Property and Equipment

Property and equipment at December 31, 1998 and 1997, consist of the
following:

<TABLE>
<CAPTION>
Estimated
1998 1997 Useful Lives
--------- -------- -------------
<S> <C> <C> <C>
Land...................................... $ 23,193 $ 22,746
Building.................................. 117,809 115,476 23 years
Program, service and test equipment....... 14,182 9,346 2 to 9 years
Microwave and other equipment............. 6,664 7,323 2 to 9 years
Furniture and fixtures.................... 102,109 87,046 1 to 8 years
Leased assets and leasehold improvements.. 22,239 11,793 Life of lease
Transportation equipment.................. 39,166 38,525 5 to 15 years
--------- --------
325,362 292,255
Less accumulated depreciation and
amortization............................. 66,187 46,860
--------- --------
$ 259,175 $245,395
========= ========
</TABLE>

F-54
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

6. Investment in Affiliates

The Partnership has a 50% ownership interest in each of SportsChannel
Chicago Associates, SportChannel New England Limited Partnership,
SportsChannel Pacific Associates and the broadway production of the Scarlet
Pimpernel, a 30% partnership interest in SportsChannel Florida Associates and
a 10% interest in the broadway production of Footloose. The investment balance
and income (loss) of investees is comprised of the following:

<TABLE>
<CAPTION>
Investment Income (Loss)
December 31, December 31,
--------------- --------------
Investments 1998 1997 1998 1997
----------- ------- ------- ------- -----
<S> <C> <C> <C> <C>
SportsChannel Chicago Associates........... $12,149 $ 9,416 $10,233 $ 219
SportsChannel Pacific Associates........... 5,853 2,461 2,142 (443)
Other...................................... 1,004 (3,467) (536) (135)
------- ------- ------- -----
$19,006 $ 8,410 $11,839 $(359)
======= ======= ======= =====
</TABLE>

Several of the partnership agreements governing the operations of the
Partnership's investees contain buy-sell arrangements (generally providing for
a fair market determination of value) that may be initiated by one or more of
the partners under certain circumstances (as described in the partnership
agreements). Therefore, the Partnership's ownership interests in these
entities are subject to change.

7. Intangible Assets

At December 31, 1998 and 1997, intangible assets consist of the following:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Player contracts, net of accumulated amortization of
$106,444
and $74,747......................................... $ 86,287 $ 112,420
Franchises, broadcast rights and affiliation
agreements, net of accumulated amortization of
$17,269 and $5,991.................................. 195,150 198,918
Excess costs over fair value of net assets acquired,
net of
accumulated amortization of $125,987 and $68,957.... 1,193,833 1,123,050
---------- ----------
$1,475,270 $1,434,388
========== ==========
</TABLE>

Player contracts, which represent the value assigned to the total compliment
of players included on the professional hockey and basketball teams, are
amortized over a six-year period on the straight-line basis. Costs incurred to
acquire individual players, including signing bonuses, are amortized over the
contract period of the respective player.

Franchises, broadcast rights and affiliation agreements represent the value
assigned to MSG's professional hockey and basketball franchises, telecast
rights to certain sporting events and agreements with cable systems to carry a
certain programming service of the Partnership. These assets are being
amortized over a weighted average period of approximately thirty one years on
the straight-line basis.

Excess costs over fair value of net assets acquired resulting from RMHI's
pre-inception purchases of interests in MSG, Radio City Entertainment and a
sports network are being amortized over a weighted average period of
approximately thirty seven years on a straight-line basis. During 1998, an
independent appraisal was completed of the assets and liabilities of Radio
City Entertainment. The valuation resulted in additional excess costs of
approximately $93 million being recorded, principally related to unfavorable
leaseholds.

F-55
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

8. Accrued Expenses

Included in accrued expenses at December 31, 1998 and 1997, are the
following:

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Production and programming costs............................ $ 4,800 $22,944
Litigation reserves......................................... 3,967 15,112
Other....................................................... 61,027 22,300
------- -------
Total....................................................... $69,794 $60,356
======= =======
</TABLE>

9. Long-Term Debt

Long-term debt at December 31, 1998 and 1997, consists of borrowings made by
MSG as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
MSG Credit Facility:
Due December 31, 2004..................................... $310,000 $360,000
Garden Programming Promissory Notes:
Due July 11, 2002......................................... 20,000 20,000
-------- --------
Total..................................................... $330,000 $380,000
======== ========
</TABLE>

MSG's has a credit facility with various lending institutions consisting of
a $500 million revolving facility (the "Revolver") which expires on December
31, 2004. Loans under the Revolver bear interest at current market rates plus
a margin (6.038% at December 31, 1998 and 6.875% at December 31, 1997) based
on MSG's consolidated leverage ratio. Borrowings outstanding as of December
31, 1998 and 1997 of $310,000 and $360,000, respectively. MSG is required to
pay a fee based on the unutilized commitment which as of December 31, 1998 and
1997, was $185,278 and $131,392, respectively. The carrying amount of the debt
approximates fair value.

Deferred financing costs of $6,538 associated with a term loan of $650
million which was repaid on December 18, 1997 were expensed. The deferred
financing costs related to the Revolver of approximately $10,800 and $10,743
as of December 31, 1998 and 1997, respectively, are being amortized over the
term of the Revolver.

The Revolver contains certain covenants and restrictions including the
maintenance of certain financial ratios. MSG was in compliance with these
covenants and restrictions as of December 31, 1998 and 1997.

Additionally, Garden Programming borrowed $20,000 under promissory notes
with various lending institutions (the "Promissory Notes"). The Promissory
Notes bear interest at a margin above LIBOR (7.22% and 7.85% at December 31,
1998 and 1997). These funds were used to partially finance a $40,000 secured
loan to a broadcast content provider (see Note 3).

MSG is party to letters of credit totaling $4,722 and $8,608 as of December
31, 1998 and 1997, respectively, which have been issued against the Revolver
to guarantee certain insurance and other operating activities. Management does
not expect performance to be required.

F-56
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

10. Leases

The Partnership has various long term noncancelable operating lease
agreements with nonaffiliates for office space and practice facilities for its
professional sports teams and Radio City Music Hall which expire at various
dates through 2023. The leases generally provide for fixed annual rentals plus
certain other costs. Rent expense, net of amortization of the liability
established for unfavorable leaseholds, for the year ended December 31, 1998
and for the period from December 18, 1997 (Inception) to December 31, 1997
approximated $16,559 and $275, respectively. The following is a schedule of
future minimum payments for these operating leases (with initial or remaining
terms in excess of one year) as of December 31, 1998:

<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1999............................................................ $ 19,788
2000............................................................ 17,431
2001............................................................ 15,514
2002............................................................ 16,808
2003............................................................ 16,803
Thereafter...................................................... 267,502
--------
Total minimum lease payments..................................... $353,846
========
</TABLE>

11. Affiliate Transactions

Notes and other receivables--affiliates includes a $180,000 loan made on
June 1, 1998 by the Partnership to its parent, Rainbow Media Holdings, Inc.
Such loan is due on the earlier of demand by the Partnership or March 31,
2002, and bears interest at a rate of LIBOR plus 7/8% per annum.

The Partnership distributes certain programming to the pay television
industry under contracts called affiliation agreements. For the year ended
December 31, 1998 and for the period December 18, 1997 (Inception) to December
31, 1997, approximately $93,811 and $3,305, respectively, was earned under
affiliation agreements with companies owned or managed by affiliates of the
partners in the Partnership.

National Sports Partners, which is managed by Fox and in which Fox and RMHI
each indirectly own a 50% interest, provides certain programming to the
Partnership. The Partnership was charged approximately $3,783 and $130 for the
year ended December 31, 1998 and for the period from December 18, 1997
(Inception) to December 31, 1997, respectively, for this programming.

Rainbow Network Communications, an affiliate of the Partnership, provides
certain transmission and production services to the Partnership. The
Partnership was charged approximately $7,114 and $263 for the year ended
December 31, 1998 and for the period from December 18, 1997 (Inception) to
December 31, 1997, respectively, for these services.

CSC, RMHI and certain of its subsidiaries provide the Partnership with
certain administrative, advertising billing, computer, and creative services.
The Partnership was charged approximately $12,104 and $295 for the year ended
December 31, 1998 and for the period from December 18, 1997 (Inception) to
December 31, 1997, respectively, for such services.

The Partnership has an arrangement with National Advertising Partners
("NAP"), which is managed by Fox and in which Fox and RMHI each indirectly own
a 50% interest, to provide national advertising services to the Partnership in
exchange for a fee of 15% of the gross revenue, net of agency commissions,
from advertising

F-57
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

sold by this partnership. Fees charged by NAP on advertising revenues amounted
to approximately $1,956 and $136 for the year ended December 31 and for the
period from December 18, 1997 (Inception) to December 31, 1997, respectively.

The Partnership has non-majority ownership interests in several regional
sports networks as follows: 50% interest in SportsChannel Chicago Associates,
50% interest in SportsChannel Pacific Associates, 50% interest in
SportsChannel New England Limited Partnership (see note 1) and a 30% interest
in SportsChannel Florida Associates. A subsidiary of the Partnership has non-
majority ownership interests in several Broadway theater productions. The
Partnership's and subsidiary's investments in these entities are accounted for
on the equity method of accounting. Accordingly, the Partnership recorded
income of $11,838 for the year ended December 31, 1998 and a loss of $359 for
the period from December 18, 1997 (Inception) to December 31, 1997,
representing its share of the results of operations of these entities.

12. Pension and Other Postretirement Benefit Plans

CSC maintains a pension plan and 401(k) savings plan (collectively, the
"Plan") for each of the regional sports networks and Metro Channel, LLC
pursuant to which the Partnership contributes a percent of eligible employees'
annual compensation, as defined, to the defined contribution portion of the
Plan and prior to April 1998, an equivalent amount to the Section 401(k)
portion of the Plan. The Partnership also makes matching contributions for
employee voluntary contributions to the 401(k) portion of the Plan. The cost
associated with the Plan was approximately $130 and $7 for the year ended
December 31, 1998 and for the period from December 18, 1997 (Inception) to
December 31, 1997, respectively.

MSG sponsors several non-contributory pension plans covering the
Partnership's non-union employees and certain union employees. Benefits
payable to retirees under these plans are based upon years of service and
participant's compensation and are funded through trusts established under the
plans. MSG's funding policy is to meet the minimum funding requirements of the
Employee Retirement Income Security Act of 1974. Plan assets are invested in
common stocks, bonds, United States government securities and cash.

Components of MSG's net periodic pension cost for defined benefit plans for
the year ended December 31, 1998 and for the period from December 18, 1997
(Inception) to December 31, 1997, are as follows:

<TABLE>
<CAPTION>
1998 1997
------- ----
<S> <C> <C>
Service cost.................................................. $ 2,126 $ 52
Interest cost................................................. 1,796 63
Actual return on plan assets.................................. (1,707) (78)
Net amortization and deferral................................. 8 25
Recognized loss............................................... 31 --
------- ----
Net periodic pension cost..................................... $ 2,254 $ 62
======= ====
</TABLE>

F-58
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

The funded status and the amounts recorded for the defined pension plans at
December 31, 1998 and 1997, were as follows:

<TABLE>
<CAPTION>
1998 1997
Change in benefit obligation -------- -------
<S> <C> <C>
Benefit obligation at beginning of year/period........ $25,518 $25,370
Service cost.......................................... 2,126 52
Interest cost......................................... 1,796 63
Actuarial loss........................................ 2,415 33
Benefit paid.......................................... (667) --
-------- -------
Benefit obligation at year end........................ $31,188 $25,518
======== =======

<CAPTION>
1998 1997
Change in plan assets -------- -------
<S> <C> <C>
Fair value of plan assets at beginning of
year/period.......................................... $17,172 $17,094
Actual return on plan assets.......................... 2,065 78
Employer contributions................................ 1,166 --
Benefits paid......................................... (667) --
-------- -------
Fair value of plan assets at end of year.............. $19,736 $17,172
======== =======
Funded status......................................... $(11,452) $(8,346)
Unrecognized transition amount........................ (43) (47)
Unrecognized prior service cost....................... 21 34
Unrecognized net actuarial loss....................... 2,591 564
-------- -------
Accrued benefit cost.................................. $ (8,883) $(7,795)
======== =======
</TABLE>

Assumptions used to determine pension costs and the projected benefit
obligation are as follows:

<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Discount rate.................................................. 6.75% 7.25%
Rate of return on plan assets.................................. 10.00% 10.00%
Rate of increase in future compensation levels................. 5.00% 5.00%
</TABLE>

In addition, MSG contributes to various multiemployer defined benefit
pension plans. Pension expense recognized for these multiemployer plans for
the year ended December 31, 1998 and for the period from December 18, 1997
(Inception) to December 31, 1997 was approximately $3,083 and $63,
respectively.

MSG also sponsors a welfare plan which provides certain postretirement
health care and life insurance benefits to certain non-union employees and
their dependents who are eligible for early or normal retirement under MSG's
retirement plan. The welfare plan is insured through a managed care provider
and MSG funds these benefits with premium payments.

Components of MSG's cost for postretirement benefits for the year ended
December 31, 1998 and for the period from December 18, 1997 (Inception) to
December 31, 1997, are as follows:

<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
Service cost.................................................... $ 160 $ 6
Interest cost................................................... 140 6
Amortization of unrecognized prior service benefit.............. (179) (7)
Recognized gain................................................. (37) --
----- ----
Periodic postretirement benefit cost............................ $ 84 $ 5
===== ====
</TABLE>

F-59
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

The funded status and the amounts recorded on the Partnership's balance
sheet with respect to MSG's sponsored welfare plans are as follows:

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Benefit obligation at beginning of year/period............ $ 2,446 $ 2,430
Service cost.............................................. 160 6
Interest cost............................................. 140 6
Actuarial (gain)/loss..................................... (472) 4
Amendments................................................ 163 --
Plan participant contributions............................ 14 --
Benefit paid.............................................. (47) --
------- -------
Benefit obligation at end of year......................... $ 2,404 $ 2,446
======= =======

Plan assets............................................... -- --

Funded status............................................. $(2,404) $(2,446)
Unrecognized prior service cost........................... (2,884) (3,225)
Unrecognized net actuarial gain........................... (799) (365)
------- -------
Accrued benefit cost...................................... $(6,087) $(6,036)
======= =======
</TABLE>

The discount rate used in determining the accumulated postretirement benefit
obligation was 6.75% and 7.25% for 1998 and 1997, respectively. For
measurement purposes, a 6.1% annual rate of increase in the cost of covered
health care benefits was assumed for 1999. The rate was assumed to decrease
gradually to 5% for 2004 and remain at that level thereafter.

Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effect:

<TABLE>
<CAPTION>
1-Percentage-Point 1-Percentage-Point
Increase Decrease
------------------ ------------------
<S> <C> <C>
Effect on the total of service and
interest cost components........... $ 55 $ (45)

Effect on postretirement benefit
obligations........................ $348 $(292)
</TABLE>

In addition, MSG contributes to multiemployer plans which provide health and
welfare benefits to active as well as retired employees. MSG incurred costs of
$5,006 and $116 related to those plans for the year ended December 31, 1998
and for the period from December 18, 1997 (Inception) to December 31, 1997,
respectively.

F-60
<PAGE>

REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)

13. Commitments

Subsidiaries of the Partnership have entered into long-term agreements with
several professional sports teams and others which provide such subsidiaries,
among other things, certain exclusive distribution rights to certain live
sporting events and obligate such subsidiaries to make minimum contractual
payments when the events are provided for distribution. Certain of these
contracts provide for payments which are guaranteed. MSG also has employment
agreements with players and coaches of its professional sports teams. Certain
of these contracts provide for payments which are guaranteed regardless of
employee injury or termination. MSG has obtained disability insurance on
certain players which provide benefits payable to MSG in the event of injury.
The approximate aggregate minimum contractual payments under these agreements
as of December 31, 1998, are as follows:

<TABLE>
<CAPTION>
Years ending
December 31,
------------
<S> <C>
1999.......................................................... $ 229,933
2000.......................................................... 217,752
2001.......................................................... 153,717
2002.......................................................... 113,925
2003.......................................................... 98,150
Thereafter..................................................... 1,093,373
----------
$1,906,850
==========
</TABLE>

14. Contingencies

The Partnership is a party to various lawsuits arising out of the ordinary
conduct of its business. Management believes that the final outcome of these
matters will not have a material adverse effect on the financial position of
the Partnership.

In March, 1999, ITT Corporation and CSC entered into an agreement under
which ITT Corporation would exercise its right to require CSC to repurchase
its remaining interest in MSG for a purchase price of $87,000. Consummation of
this transaction is subject to league and regulatory approvals.

15. Fair Value of Financial Instruments

The Partnerships' financial instruments principally consist of cash and cash
equivalents, trade accounts receivable, notes receivable, accounts payable,
accrued expenses, long-term debt and contractual rights obligations. For all
instruments other than notes receivable, long-term debt and contractual rights
obligations, the carrying value of the instruments approximate their fair
value due to their short maturities. For notes receivable, long-term debt and
contractual rights obligations, carrying value approximates fair value as the
underlying instruments earn or bear interest at rates which approximate market
rates for the same or similar instruments.

F-61
<PAGE>

FOX/LIBERTY NETWORKS, LLC

CONDENSED FINANCIAL STATEMENTS OF THE COMPANY
WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

S-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES

To the Members of
Fox/Liberty Networks, LLC:

We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of FOX/LIBERTY NETWORKS, LLC (the
"Company") included elsewhere in this Form 10-K and have issued our report
thereon dated February 19, 1999. Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. Schedules I and
II are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
is 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
February 19, 1999

S-2
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF COMPANY

BALANCE SHEETS

December 31, 1998 and 1997
(Dollars in thousands)

<TABLE>
<CAPTION>
December 31,
-------------------
1998 1997
-------- ----------
(Restated)
----------
<S> <C> <C>
ASSETS
------
Cash........................................................ $ 137 $ --
Investments in subsidiaries................................. 891,006 911,489
Other assets................................................ 17,063 18,083
-------- --------
Total Assets.............................................. $908,206 $929,572
======== ========
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
Accrued liabilities......................................... $ 31,125 $ 16,473
Long-term debt.............................................. 786,878 760,828
Members' Equity............................................. 90,203 152,271
-------- --------
Total Liabilities and Members' Equity..................... $908,206 $929,572
======== ========
</TABLE>

The accompanying notes are an integral part of these combined balance sheets.

S-3
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF COMPANY

STATEMENTS OF OPERATIONS

For the Periods ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

<TABLE>
<CAPTION>
Year ended Year Ended April 30 To
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
(Restated)
------------
<S> <C> <C> <C>
Interest expense, net.................. $ 71,783 $ 12,914 $ --
Other expenses......................... 13,531 -- --
Equity in (income) loss of
subsidiaries.......................... (23,246) 65,543 117,149
-------- -------- ---------
Net loss............................... $(62,068) $(78,457) $(117,149)
======== ======== =========
</TABLE>

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

S-4
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF COMPANY

STATEMENTS OF CASH FLOWS

For the Periods ended December 31, 1998, 1997 and 1996
(Dollars in thousands)

<TABLE>
<CAPTION>
Year ended Year ended April 30 to
December 31, December 31, December 31,
1998 1997 1996
------------ ------------ ------------
(Restated)
------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $(62,068) $ (78,457) $(117,149)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Interest accretion.................. 26,050 8,550 --
Equity in (income) loss of
affiliates......................... (23,246) 65,543 117,149
Changes in operating assets and
liabilities:
Other assets........................ 1,020 (18,083) --
Accrued liabilities................. 14,652 16,473 --
-------- --------- ---------
Net cash used in operating
activities....................... (43,592) (5,974) --
-------- --------- ---------
Cash flows from investing activities:
Distributions from equity affiliates.. 144,267 58,040 --
Investments in equity affiliates...... (100,538) (804,344) --
-------- --------- ---------
Net cash provided by (used in)
investing activities............. 43,729 (746,304) --
-------- --------- ---------
Cash flows from financing activities:
Proceeds from notes................... -- 752,278 --
-------- --------- ---------
Net cash provided by financing
activities....................... -- 752,278 --
-------- --------- ---------
Net increase in cash and cash
equivalents............................ 137 -- --
Cash and cash equivalents, beginning of
period................................. -- -- --
-------- --------- ---------
Cash and cash equivalents, end of
period................................. $ 137 $ -- $ --
======== ========= =========
</TABLE>

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

S-5
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF COMPANY

NOTES TO CONDENSED FINANCIAL INFORMATION

December 31, 1998 and 1997
(Dollars in thousands)

(1) Restatement of Financial Information

The December 31, 1997 condensed financial information has been restated to
be comparative with December 31, 1998. This restatement had no effect on net
loss.

(2) Debt

Annual future minimum maturities of debt are as follows:

<TABLE>
<S> <C>
1999................................................................ $ --
2000................................................................ --
2001................................................................ --
2002................................................................ --
2003................................................................ --
Thereafter.......................................................... 786,878
--------
$786,878
========
</TABLE>

(3) Commitments and Contingencies

The Company has guaranteed certain obligations of its subsidiaries.

S-6
<PAGE>

FOX/LIBERTY NETWORKS, LLC
(A Delaware Limited Liability Company)

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)

<TABLE>
<CAPTION>
Balance
at Balance
Beginning Charged to at
of Costs and End of
Period Expenses Deductions Other Period
--------- ---------- ---------- ----- --------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1998
Allowance for doubtful
accounts.............. $ (1,714) $ (9,109) $ 1,570 $ (71)(1) $ (9,324)
Program rights
reserve............... (38,344) -- 19,617 -- (18,727)
YEAR ENDED DECEMBER 31,
1997
Allowance for doubtful
accounts.............. (957) (1,586) 1,029 (200)(1) (1,714)
Program rights reserve (80,000) -- 41,656 -- (38,344)
EIGHT MONTHS ENDED
DECEMBER 31, 1996
Allowance for doubtful
accounts.............. (454) (535) 32 -- (957)
Program rights
reserve............... -- (80,000) -- -- (80,000)
</TABLE>
- --------
(1) Represents balances acquired during the period.

S-7

<PAGE>

EXHIBIT 10.10(e)

THIRD AMENDMENT, dated as of March 9, 1999 (this "Amendment"), to the
---------
CREDIT AGREEMENT, dated as of December 15, 1997, as amended by the First
Amendment thereto dated as of April 20, 1998 and the Second Amendment thereto
dated as of April 24, 1998 (as further amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among Fox Sports Net, LLC,
----------------
fX Networks, LLC, Fox Sports RPP Holdings, LLC (collectively, the "Borrower"),
--------
Fox/Liberty Networks, LLC, the Lenders parties to the Credit Agreement, the
Syndication Agent and Documentation Agent named therein and The Chase Manhattan
Bank, as Administrative Agent. Terms defined in the Credit Agreement shall be
used in this Amendment with their defined meanings unless otherwise defined
herein.

W I T N E S S E T H :
- - - - - - - - - -

WHEREAS, the Borrower and Fox/Liberty have requested certain
amendments to the Credit Agreement as set forth herein; and

WHEREAS, the parties hereto are willing to agree to such amendments on
the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

I. AMENDMENTS.
----------

1. Section 6.7. Paragraph (c) of Section 6.7 of the Credit Agreement
-----------
is hereby amended and restated in its entirety as follows:

"(c) Guarantee Obligations permitted by Section 6.2 and Guarantee
Obligations of Fox/Liberty in connection with Programming Liabilities
incurred by or on behalf of the RSNs currently known as Fox Sports Detroit
and Fox Sports Chicago;"

2. Section 6.15. Subclause (iv) of clause (b) of Section 6.15 of the
------------
Credit Agreement is hereby amended and restated in its entirety as follows:

"(iv) in the case of Fox/Liberty, Guarantee Obligations of Fox/Liberty in
connection with Programming Liabilities incurred by or on behalf of the
RSNs currently known as Fox Sports Detroit and Fox Sports Chicago;"
<PAGE>

II. MISCELLANEOUS.
-------------

1. Representations and Warranties. The Borrower hereby represents
------------------------------
and warrants as of the date hereof that, after giving effect to this Amendment,
(a) no Default or Event of Default has occurred and is continuing and (b) each
of the representations and warranties made by any Loan Party in or pursuant to
the Loan Documents shall be true and correct in all material respects on and as
of such date as if made on and as of such date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date.

2. Expenses. The Borrower agrees to pay or reimburse the
--------
Administrative Agent on demand for all its reasonable out-of-pocket costs and
expenses incurred in connection with the preparation and execution of this
Amendment, including, without limitation, the reasonable fees and disbursements
of counsel to the Administrative Agent.

3. No Change. Except as expressly provided herein, no term or
---------
provision of the Credit Agreement shall be amended, modified or supplemented,
and each term and provision of the Credit Agreement shall remain in full force
and effect.

4. Effectiveness. This Amendment shall become effective as of the
-------------
date hereof upon receipt by the Administrative Agent of (a) an executed
counterpart of this Amendment from Fox/Liberty and the Borrower and (b) executed
Lender Consent Letters (or facsimile transmissions thereof) from the Required
Lenders consenting to the execution of this Amendment by the Administrative
Agent.

5. Counterparts. This Amendment may be executed by the parties
------------
hereto in any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.

6. Governing Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES.
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the date first above written.

FOX SPORTS NET, LLC

By: /s/ Andrew R. Hubsch
-------------------------------------
Name:
Title:

FX NETWORKS, LLC

By: /s/ Andrew R. Hubsch
-------------------------------------
Name:
Title:

FOX SPORTS RPP HOLDINGS, LLC

By: /s/ Andrew R. Hubsch
-------------------------------------
Name:
Title:

FOX/LIBERTY NETWORKS, LLC

By: /s/ Andrew R. Hubsch
-------------------------------------
Name:
Title:

THE CHASE MANHATTAN BANK, as Administrative Agent

By: /s/ Constance M. Coleman
-------------------------------------
Name: CONSTANCE M. COLEMAN
Title: V.P.

<PAGE>

EXHIBIT 10.14(b)

Mr. Robert Thompson
Los Angeles, California

Dear Mr.Thompson:

This letter, when executed by both you and Fox/Liberty Networks, L.L.C.
(hereinafter referred to as "the Company"), will confirm the agreement between
you and the Company relating to your employment by the Company, and will
supersede all prior agreements between you and the Company relative to your
employment with the Company.

1. (a) The Company hereby employs you for a period of two years, commencing
May 1, 1998 and ending April 30, 2000. In addition, the Company shall have
one irrevocable option exercisable at its discretion to employ you for one
additional one-year period pursuant to this agreement, commencing on May 1,
2000 and ending April 30, 2001. The exercise of such option shall be on not
less than 90 days written notice to you prior to the expiration of the term
set forth above.

(b) If the option is exercised, ninety (90) days prior to the expiration
of the one-year option period, the parties will enter into good faith
negotiations to agree upon the Terms of an extension of this Agreement. If
the parties cannot mutually agree on the Terms of an extension, and you
continue to render services to the Company after April 30, 2001, this
Agreement shall be terminable at-will by either party on 30 days written
notice. Amounts payable to you during such extended period shall be at the
rate paid during the last regular payment period hereunder.

2. You shall perform such duties consistent with your position set forth in
Paragraph 3, as are assigned to you from time to time (and agree to take
such trips both within and outside the United States as shall be determined
to be desirable) by the President and Chief Executive Officer.

3. (a) You shall serve as Executive Vice President, Fox Sports International
and Executive Vice President, Fox Sports Net, L.L.C. and report directly to
the President and Chief Executive Officer of Fox/Liberty Networks, L.L.C.

(b) You shall assume the title of Chief Operating Officer Fox Sports
International no later than December 31, 1998.

1
<PAGE>

(c) If you are elected a member of the Board of Directors or to any other
office of the Company or any of its affiliates, you agree to serve in such
capacity or capacities without additional compensation.

4. You hereby accept such employment and agree to devote the time and
attention necessary to fulfill the duties of your employment hereunder.

5. For your services hereunder, the Company will, during the term of your
employment described in Paragraph 1 hereof, on regular pay dates as then in
effect under applicable Company policy, pay you at the rate of:

(a) $450,000 per annum for the twelve month period from May 1, 1998
through April 30, 1999;

(b) $500,000 per annum for the twelve month period from May 1, 1999
through April 30, 2000;

(c) If the option for the additional period is exercised by the Company,
$550,000 per annum for the twelve month period from May 1, 2000
through April 30, 2001.

6. (a) If you substantially neglect the duties of your position, or fail to
perform your duties in compliance with applicable law, are convicted of any
crime or offense of a serious nature, willfully refuse or fail to comply
with policies or directives of the Company's management, materially breach
any affirmative or negative covenant or undertaking hereunder, or have
engaged in conduct which has injured or would injure the business or
reputation of the Company or otherwise adversely affect its interests,
then, and in any such event, the Company may give you written notice of
default and, if the default is of a type that is curable, a ten-day period
within which to cure such default. If the default is not cured within such
ten-day period or is of a type which cannot be cured, the Company may at
any time thereafter by written notice to you terminate your employment
hereunder, and you shall have no right to receive any compensation or
benefit hereunder on and after the effective date of such notice.

(b) The Company retains the right to discharge you and terminate your
employment hereunder and the Term without cause at any time by written
notice thereof given to you. If the Company discharges you pursuant to this
Paragraph 6(b), prior to April 30, 2000, you shall continue to receive, as
severance compensation, the greater of (i) all of the compensation provided
in Paragraphs 5(a) and (b) hereof payable through April 30, 2000, or (ii)
six months salary whichever is greater. If the Company discharges you
pursuant to this Paragraph 6 (b), after April 30, 2000 and prior to April
30,

2
<PAGE>

2001, you shall continue to receive, as severance compensation, the greater
of (i) all of the compensation provided in Paragraph 5(c) hereof payable
through April 30, 2001, or (ii) six months salary whichever is greater. It
the Company discharges you pursuant to this Paragraph 6 (b) after April 30,
2001, you shall receive six months severance pay.

7. (a) You agree that during the term of your employment, you will have no
interest, directly or indirectly, in any motion picture or television
program producing, distributing or exhibiting business, or in any
broadcasting, cable or film laboratory business or in any related business
other than the Company and its affiliates, and you will perform no services
for any person, firm or corporation engaged in any such business. The
foregoing does not prohibit your ownership of less than one percent (1%) of
the outstanding common stock of any company whose shares are publicly
traded.

(b) Enclosed is a copy of the News Corporation Limited Standard of
Business Conduct Statement. You agree to abide by the provisions of this
statement at all times during your employment by the Company.

8. You will not during the term of your employment and for a period of two
years thereafter, directly or indirectly, induce or attempt to induce any
managerial, sales or supervisory employee of the Company or its affiliates
to render services to any other person, firm or corporation.

9. (a) You acknowledge that the relationship between the parties hereto is
exclusively that of employer and employee and that the Company's
obligations to you are exclusively contractual in nature. The Company shall
be the sole owner of all the fruits and proceeds of your services
hereunder, including, but not limited to, all ideas, concepts, formats,
suggestions, developments, arrangements, designs, packages, programs,
promotions and other intellectual properties which you may create in
connection with and during the term of your employment hereunder, free and
clear of any claims by you (or anyone claiming under you) of any kind or
character whatsoever (other than your right to compensation hereunder). You
shall, at the request of the Company, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title and interest in or to any such
properties.

(b) All memoranda, notes, records and other documents made or compiled by
you, or made available to you during the term of this Agreement concerning
the business of the Company or its affiliates shall be the Company's
property and shall be delivered to the Company on the termination of this
Agreement

3
<PAGE>

or at any other time on request. You shall keep in confidence and shall not
use for yourself or others, or divulge to others, any information
concerning the business of the Company or its affiliates which is not
otherwise publicly available and which is obtained by you as a result of
your employment, including but not limited to, trade secrets or processes
and information deemed by the Company to be proprietary in nature, unless
disclosure is permitted by the Company or required by law.

(c) The Company shall have the right to use your name, biography and
likeness in connection with its business, including in advertising its
products and services, and may grant this right to others, but not for use
as a direct endorsement.

(d) The covenants set forth above in this paragraph shall survive the
termination of this Agreement.

10. (a) You shall be eligible to participate in all employee benefit plans of
the Company available to other comparable executives of the Company. You
shall participate in the stock appreciation plan and bonus plan, and your
eligibility to participate in such plans shall be governed by the rules
applicable to comparable executives.

(b) Liberty Media has granted you certain rights to compensation pursuant
to the provisions of what has been referred to as Liberty's stock
appreciation rights ("SAR"). It is acknowledged that in executing this
employment agreement neither you nor the Company shall be deemed to have
waived or lost any rights, claims or position with respect to the issue of
the SAR. Your employment hereunder shall count toward any required
additional time for vesting purposes.

11. The services to be furnished by you hereunder and the rights and privileges
granted to the Company by you are of a special, unique, unusual,
extraordinary, and intellectual character which gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in any action at law, and a breach by you of any of the provisions
contained herein will cause the Company irreparable injury and damage. You
expressly agree that the Company shall be entitled to seek injunctive and
other equitable relief to prevent a breach of this Agreement by you.
Resort to such equitable relief, however, shall not be construed as a
waiver of any preceding or succeeding breach of the same or any other term
or provision. The various rights and remedies of the Company hereunder
shall be construed to be cumulative and no one of them shall be exclusive
of any other or of any right or remedy allowed by law.

4
<PAGE>

12. Any prior agreements that do not relate to your current employment,
including but not limited to any Consulting Agreement, Business Agreement,
Development Agreement, Production Agreement, General Release, and
Settlement Agreement shall remain in full force and effect, notwithstanding
this Agreement.

13. This Agreement shall be governed by the laws of the State of California
applicable to contracts performed entirely therein.

14. This Agreement shall inure to the benefit of the successors and general
assigns of the Company and to the benefit of any other corporation or
entity which is a parent, subsidiary or affiliate of the Company to which
this Agreement is assigned, and any other corporation or entity into which
the Company may be merged or with which it may be consolidated. Except as
herein provided, this Agreement shall be nonassignable.

Sincerely,

Fox/Liberty Networks, L.L.C.

By /s/ Anthony F. E. Ball
--------------------------------------
Anthony F. E. Ball
President and Chief Executive Officer

______________________________________
Date

THE FOREGOING IS AGREED TO:

/s/ Robert Thompson
- ----------------------------
Robert Thompson

- ----------------------------
Date

<PAGE>

EXHIBIT 10.15(b)

Mr. Tracy Dolgin
Los Angeles, CA

This letter, when executed by both you and Fox/Liberty Networks, L.L.C.
hereinafter referred to as "the Company"), will confirm the agreement between
you and the Company relating to your employment by the Company, and will
supersede all prior agreements between you and the Company relative to your
employment with the Company.

1. (a) The Company hereby employs you for a period of twenty-seven months,
commencing September 1, 1998 and ending December 31, 2000.

(b) One Hundred Eighty (180) days prior to the expiration of the Term,
the parties will enter into good faith negotiations to agree upon the Terms of
an extension of this Agreement. If the parties cannot mutually agree on the
Terms of an extension, and Employee continues to render services to the Company
after the end of the above Term, this Agreement shall be terminable at will by
either party on 30 days notice. Amounts payable to Employee during such
extended period shall be at the rate paid during the last regular payment period
hereunder.

2. You shall perform such duties consistent with your position set forth in
paragraph 3.(a), as are assigned to you from time to time (and agree to take
such trips at the Company's sole cost and expense both within and outside the
United States as shall be determined to be desirable).

3 (a) You shall serve as Chief Operating Officer of Fox/Liberty Networks,
L.L.C., reporting directly to the President and Chief Executive Officer,
Fox/Liberty Networks, L.L.C.

(b) If you are elected a member of the Board of Directors or to any other
office of the Company or any of its affiliates, you agree to serve in such
capacity or capacities without additional compensation.

4. You shall render your services in Los Angeles, California and at such
places as the Company shall reasonably designate from time to time on a
temporary basis.

5. You hereby accept such employment and agree to devote the time
and attention necessary to fulfill the duties of your employment hereunder.

6. For your services hereunder, the Company will, during the term
of your employment described in Paragraph 1.(a) hereof, on regular pay dates as
then in effect under applicable Company policy, pay you at the rate of:

1
<PAGE>

(a) $700,000 per annum for the twelve month period from September 1, 1998
through August 31, 1999;

(b) $750,000 per annum for the twelve month period from September 1, 1999
through August 31, 2000;

7. (a) You agree that during the term of your employment, you will have no
interest, directly or indirectly, in any motion picture or television program
producing, distributing or exhibiting business, or in any broadcasting, cable or
film laboratory business or in any related business other than the Company and
its affiliates, and you will perform no services for any person, firm or
corporation engaged in any such business. The foregoing does not prohibit your
ownership of less than one percent (1%) of the outstanding common stock of any
company whose shares are publicly traded.

8. You will not during the term of your employment and for a period of two
years thereafter, directly or indirectly, induce or attempt to induce any
managerial, sales or supervisory employee of the Company or its affiliates to
render services to any other person, firm or corporation.

9. (a) You acknowledge that the relationship between the parties
hereto is exclusively that of employer and employee and that the Company's
obligations to you are exclusively contractual in nature. The Company shall be
the sole owner of all the fruits and proceeds of your services hereunder,
including, but not limited to, all ideas, concepts, formats, suggestions,
developments, arrangements, designs, packages, programs, promotions and other
intellectual properties which you may create in connection with and during the
term of your employment hereunder, free and clear of any claims by you (or
anyone claiming under you) of any kind or character whatsoever (other than your
right to compensation hereunder). You shall, at the request of the Company,
execute such assignments, certificates or other instruments as the Company may
from time to time deem necessary or desirable to evidence, establish, maintain,
perfect, protect, enforce or defend its right, title and interest in or to any
such properties.

(b) Creative activities unrelated to your duties, including any work product
associated with the production of a movie for Fox Entertainment or Fox
Television Group, are excluded from the

2
<PAGE>

provision of (a) above and may be pursued by you provided that such activities
do not materially interfere with the full performance of your position.
Furthermore, you understand and agree that the Company, for itself and its
subsidiaries, successors and general assignees reserves the right of first
refusal; during the term of your employment, on any property (which is developed
during that time) for which the Company might reasonably be anticipated to have
an interest. In the event that the Company is interested in the property but you
and the Company are unable to reach a satisfactory purchase agreement within 20
business days after submission by you of any such property, such inability to
successfully conclude negotiations with the prescribed time will be deemed a
refusal and you shall be free to go elsewhere to sell said property provided
that any subsequent sale is for terms more favorable to you than those the
Company offered.

(c) All memoranda, notes, records and other documents made or compiled by
you, or made available to you during the term of this Agreement concerning the
business of the Company or its affiliates shall be the Company's property and
shall be delivered to the Company on the termination of this Agreement or at any
other time on request. You shall keep in confidence and shall not use for
yourself or others, or divulge to others, any information concerning the
business of the Company or its affiliates which is not otherwise publicly
available and which is obtained by you as a result of your employment, including
but not limited to, trade secrets or processes and information deemed by the
Company to be proprietary in nature, unless disclosure is permitted by the
Company or required by law.

(d) The Company shall have the right to use your name, approved biography
and likeness in connection with its business, including in advertising its
products and services, and may grant this right to others, but not for use as a
direct endorsement.

(e) The covenants set forth above in this paragraph shall survive the
termination of this Agreement.

10. You shall be eligible to participate in all employee benefit plans of the
Company available to other comparable executives. During the Term, the Company
shall pay to, or provide you the following additional amounts or rights:

(a) You shall be eligible to participate in, and be granted and additional
12,000 Incentive Units under, the Equity Appreciation rights Plan for Management
and Key Employees. Each additional Incentive Unit granted shall be the value of
an Incentive Unit as of the 12/31/98 valuation date.

(b) In addition to the compensation set forth above you were granted
options to purchase ordinary shares of The News Corporation Limited pursuant to
the then-in-effect provisions of the News

3
<PAGE>

Corporation Share Option Plan (the "Plan"). All options shall be governed in
accordance with the terms and conditions of the Plan provided that in no event
shall anything contained herein affect your right to retain your currently held
News Corporation options. Your employment hereunder shall count toward any
required additional time for vesting purposes.

(c) You shall participate in the Company's bonus program in the same manner
as other comparable executives and, in any event, second only to the Chief
Executive Officer of Fox/Liberty Networks, L.L.C. provided, however, the payment
of any bonus and the amount of any such payment shall be entirely at the
discretion of the Company.

(d) You will receive twenty round-trip tickets per year for travel within
the continental United States for personal use by you and your family members.
Travel shall be arranged through Fox Travel Department using the most cost-
efficient ticketing available.

(e) Notwithstanding the provisions of Paragraph 12 of this Employment
Agreement, if employment terminates at the expiration of the Agreement you will
be entitled to severance pay in accordance with the Company's then current
severance policy. The calculation of severance pay will be based on your
original hire date at Fox Broadcasting Company.

(f) The Company shall provide you a car allowance in the amount of $1,100
per month.

(g) Business travel shall be in accordance with Company policy.

11. The services to be furnished by you hereunder and the rights and privileges
granted to the Company by you are of a special, unique, unusual, extraordinary,
and intellectual character which gives them a peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in any action at law,
and a breach by you of any of the provisions contained herein will cause the
Company irreparable injury and damage. You expressly agree that the Company
shall be entitled to seek injunctive and other equitable relief to prevent a
breach of this Agreement by you. Resort to such equitable relief, however, shall
not be construed as a waiver of any preceding or succeeding breach of the same
or any other term or provision. The various rights and remedies of the Company
hereunder shall be construed to be cumulative and no one of them shall be
exclusive of any other or of any right or remedy allowed by law.

12. In consideration of the making of this Agreement, as well as of the other
consideration stated herein, you expressly agree that any contract, agreement or
understanding between you and the

4
<PAGE>

Company with respect to severance or termination pay, notice of severance or
termination, or pay in lieu of notice of severance or termination previously
extended to you whether by way of contract, letter, or Company termination
policy, is hereby rescinded. You further agree that if you continue in the
employ of the Company after the end of this Agreement, your employment may be
terminated in accordance with the provisions of such then existing Company
policies as may then be in effect applicable to comparable executives of the
Company.

13. This Agreement shall be governed by the laws of the State of California
applicable to contracts performed entirely therein.

14. This Agreement shall inure to the benefit of the successors and general
assigns of the Company and to the benefit of any other corporation or entity
which is a parent, subsidiary or affiliate of the Company to which this
Agreement is assigned, and any other corporation or entity into which the
Company may be merged or with which it may be consolidated. Except as herein
provided, this Agreement shall be nonassignable.

Sincerely,

FOX/LIBERTY NETWORKS, LLC

By /s/ Anthony F.E. Ball
--------------------------------------
Anthony F.E. Ball
President and Chief Executive Officer

______________________________________
Date

THE FOREGOING IS AGREED TO:

/s/ Tracy Dolgin
- ---------------------------
Tracy Dolgin

______________________________
Date

<PAGE>

Exhibit 21

SUBSIDIARIES OF FOX/LIBERTY NETWORKS, LLC AS OF MARCH 31, 1999

Affiliated Regional Communications, Liberty/Fox Northwest L.P.
Ltd.

Liberty/Fox ARC L.P.
ARC Holding, Ltd.

Liberty/Fox Canada LLC
BB Fit TV Holdings, LLC (Inactive)

Liberty SportSouth, Inc.
Fox/Liberty SportsCom, LLC

LMC Sunshine, Inc.
Fox/Liberty Network Sales, Inc.

LMC Southeast Sports, Inc.
Fox Sports Ad Sales Holdings, LLC

National Sports Partners
Fox Sports Detroit, LLC

National Advertising Partners
Fox Sports National Holdings, LLC

Prime Sports Network--Upper Midwest
Fox/Liberty Bay Area, LLC

Prime Philadelphia Sports, LLC
Fox/Liberty Chicago, LLC

Prime Network, LLC
Fox Sports Net, LLC

Prime Ticket Networks, L.P.
Fox Sports Net Baseball, LLC

Prime Sports Northwest Network
Fox Sports RPP Holdings, LLC

PrimeSports Channel Networks
Fox/Liberty Ad Sales, LLC Associates

Fox/Liberty West II, LLC Professional Sports Services, LLC

Foxwatch Productions, Inc. Regional Programming Partners

FX Networks, LLC Rocky Mountain Prime Sports Network

Liberty/Fox KBL L.P. Sports Holding Inc.

Liberty/Fox Network Programming, LLC SportsChannel Chicago Associates

Liberty/Fox Southeast LLC SportsChannel Prism Associates

Liberty/Fox Distribution L.P. SportsChannel Bay Area Associates

Liberty/Fox Arizona LLC SportSouth Network, Ltd.

Liberty/Fox Sunshine LLC SportSouth Holdings, LLC

Liberty/Fox Upper Midwest L.P. Sunshine Network

Liberty/Fox Utah LLC Upper Midwest Cable Partners

Liberty/Fox West LLC

<PAGE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998
<CASH> 49,560 42,918
<SECURITIES> 0 0
<RECEIVABLES> 17,609 182,968
<ALLOWANCES> (1,714) (9,324)
<INVENTORY> 0 0
<CURRENT-ASSETS> 285,714 315,121
<PP&E> 68,641 85,156
<DEPRECIATION> (26,614) (35,850)
<TOTAL-ASSETS> 1,817,758 1,891,935
<CURRENT-LIABILITIES> 308,617 275,069
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 152,271 90,203
<TOTAL-LIABILITY-AND-EQUITY> 1,817,758 1,891,935
<SALES> 471,792 655,194
<TOTAL-REVENUES> 471,792 655,194
<CGS> 420,888 485,276
<TOTAL-COSTS> 505,414 597,600
<OTHER-EXPENSES> 10,693 9,237
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 34,142 110,425
<INCOME-PRETAX> (78,457) (62,068)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (78,457) (62,068)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (78,457) (62,068)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>