NOTE 8. RELATED PARTY TRANSACTIONS AND TWENTY-FIRST CENTURY FOX, INC. INVESTMENT

In the ordinary course of business, the Company enters into transactions with related parties, including subsidiaries and equity affiliates of 21CF (prior to the Distribution), to buy and/or sell programming and purchase and/or sell advertising.

The following table sets forth the net revenue from related parties included in the Unaudited Consolidated and Combined Statements of Operations:

	For the three months ended March 31,						For the nine months ended March 31,
	2019			2018			2019			2018
	(in millions)
Related party revenue	$	111		$	42		$	289		$	174
Related party expense		(33	)		(18	)		(67	)		(67	)

Related party revenue, net of expense	$	78		$	24		$	222		$	107

Prior to the Distribution, 21CF provided services to and funded certain expenses for the Company such as: global real estate and occupancy costs and employee benefits (“Direct Corporate Expenses”). In addition, the Company’s Unaudited Consolidated and Combined Financial Statements include general corporate expenses of 21CF which were not historically allocated to the Company for certain support functions that were provided on a centralized basis within 21CF and not recorded at the business unit level, such as expenses related to finance, legal, insurance, information technology, compliance and human resources management activities, among others (“General Corporate Expenses”). For purposes of these standalone Unaudited Consolidated and Combined Financial Statements, the General Corporate Expenses have been allocated to the Company. The General Corporate Expenses are included in the Unaudited Consolidated and Combined Statements of Operations in Selling, general and administrative expenses and Other, net, as appropriate, and accordingly as a component of the Twenty-First Century Fox, Inc. investment in the Consolidated and Combined Balance Sheets. These expenses have been allocated to the Company on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of combined revenues, headcount or other relevant measures of the Company. Management believes the assumptions underlying the Unaudited Consolidated and Combined Financial Statements, including the assumptions regarding allocating General Corporate Expenses from 21CF are reasonable. Nevertheless, the Unaudited Consolidated and Combined Financial Statements may not include all of the actual expenses that would have been incurred and may not reflect the Company’s consolidated and combined results of operations, financial position and cash flows had it been a standalone company prior to the Distribution. Actual costs that would have been incurred if the Company had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. For the purposes of these standalone Unaudited Consolidated and Combined Financial Statements, the corporate allocations recorded for the three months ended March 31, 2019 and 2018 of $111 million and $93 million, respectively, and for the nine months ended March 31, 2019 and 2018 of $291 million and $230 million, respectively, were General Corporate Expenses of 21CF, which were not historically allocated to the Company.

Intercompany transactions with 21CF or its affiliates and the Company are reflected in the historical Unaudited Consolidated and Combined Financial Statements for periods prior to the Distribution. All significant intercompany balances between 21CF and the Company, for periods prior to the Distribution, have been reflected in the Unaudited Consolidated and Combined Statements of Cash Flows as a financing activity and in the Consolidated and Combined Balance Sheets as a Twenty-First Century Fox, Inc. investment.

The following table summarizes the components of the net (decrease) increase in the Twenty-First Century Fox, Inc. investment for the three and nine months ended March 31, 2019 and 2018:

	For the three months ended March 31,					For the nine months ended March 31,
	2019			2018		2019			2018
	(in millions)
Cash pooling, general financing activities and other^(a)	$	(1,523	)	$	607	$	(1,537	)	$	928
Corporate allocations		111			93		291			230
Net dividend paid to Twenty-First Century Fox, Inc.		(6,500	)		-		(6,500	)		-
Taxes payable^(b)		593			-		593			-
Deferred taxes on step-up^(c)		5,515			-		5,515			-
Other deferred taxes⁽^c⁾		(481	)		-		(481	)		-

Net (decrease) increase in Twenty-First Century Fox, Inc. investment	$	(2,285	)	$	700	$	(2,119	)	$	1,158

^(a)

The nature of activities included in the line item ‘Cash pooling, general financing activities and other’ includes financing activities, capital transfers, cash sweeps, other treasury services and Direct Corporate Expenses. As part of this activity and prior to December 31, 2017, the majority of the cash balances were swept to 21CF on a daily basis and the Company received capital from 21CF for the Company’s cash needs. Effective January 1, 2018, the Company ceased participating in 21CF’s capital and cash management accounts.

^(b)

For purposes of the Company’s financial statements for the periods prior to the Distribution, the income tax (expense) benefit in the Unaudited Consolidated and Combined Statements of Operations has been calculated as if FOX filed a separate tax return and was operating as a standalone business. This amount represents the difference between the separate tax return methodology and the actual tax liabilities attributed to the Company, in accordance with applicable tax law, as of the date of the Distribution.

^(c)

As a result of the Separation and the Distribution, FOX obtained an additional tax basis in its assets equal to their respective fair market values. These amounts represent the additional estimated deferred tax asset recorded as a result of the increased tax basis (See Note 1 – Description of Business and Basis of Presentation under the heading “Basis of Presentation”) and other deferred tax adjustments recorded as of the date of the Distribution.