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09 September 2014 Asia Pacific/Australia Equity Research New Media / Publishing & Information Services (Media (AU))

News Corporation

(NWS.AX / NWS AU) Rating OUTPERFORM* FORECAST REDUCTION

Price (09 Sep 14, A$) 18.60 Target price (A$) 21.27¹ Market cap. (A$mn) 10,929.69 price changes a major strategic shift Yr avg. mthly trading (A$mn) 75 Last month's trading (A$mn) 58 ■ Price cuts negative for Foxtel's valuation. The recent Foxtel price Projected return: reductions represent a significant shift in strategy. Foxtel is accepting lower Capital gain (%) 14.4 near-term ARPU in order to shore up its existing subscriber base and drive Dividend yield (net %) 0.69 Total return (%) 15.0 subscriber growth longer term. The is negative for our Foxtel earnings 52-week price range 20.2 - 17.0 forecast and valuation, but positive for .

* Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. ■ Step down in ARPU. We expect the price changes to result in a c12.5% reduction in Foxtel ARPU to A$84 (from A$96 in FY14). We assume 50% of Research Analysts customers 'bank' the A$24 savings on the base price (reduced from A$49 to Fraser McLeish 61 2 8205 4069 A$25) and 50% pay the same but take more channels (lower margins as [email protected] Foxtel will incur more content costs). We model core subscriber growth to Lucas Goode pick up to 5% p.a. over FY15-19F (c8% including T-box, Play and Presto). 61 2 8205 4431 [email protected] ■ Reduce earnings forecasts. We reduce Foxtel's FY15F EBITDA by 17% to A$911mn (versus A$1094mn previously) and FY16F to A$729mn. Our Foxtel DCF valuation (100%) falls to A$5.1bn (vs A$6.2bn previously) on lower earnings and capex for iQ3. We increase our Fox Sports subscriber forecasts and EBITDA to US$141mn in FY15F (10% growth) and US$155mn in FY16F. Our Fox Sports valuation increases to US$1.46bn (vs US$1.17bn previously). ■ Maintain OUTPERFORM. Our NWS target price of A$21.27 is unchanged as the lower Foxtel valuation is offset by increases in Fox Sports and REA (due to higher share price). Our target price is at a 20% discount to valuation to reflect corporate structure and limited disclosure. has some valuable assets, which we believe are undervalued in the current share price and we see scope for re-rating on continued improvement in operating performance.

Total return forecast in perspective Financial and valuation metrics

40% Year 06/14A 06/15E 06/16E 06/17E 30% Revenue (US$mn) 8,574.0 8,857.6 9,064.5 9,405.4 20% EBITDA (US$mn) 842.0 973.4 1,086.6 1,279.7 CS tgt^ Mean^ 10% EBIT (US$mn) 264.0 379.7 498.9 695.3 0% Sh Prc Net income (US$mn) 270.0 306.7 306.8 418.7 -10% EPS (CS adj.) (USc) 46.59 52.92 52.95 72.25 -20% Change from previous EPS (%) n.a. -10.0 -26.3 -20.3 -30% Consensus EPS (USc) n.a. 47.60 57.00 76.40 12mth Volatility* 52wk Hi-Lo IBES Consensus EPS growth (%) -24.5 13.6 0.1 36.5 target return^ P/E (x) 37.0 32.6 32.6 23.9

Dividend (USc) — 10.00 20.00 30.00 Performance over 1M 3M 12M Dividend yield (%) — 0.6 1.2 1.7 Absolute (%) 3.9 2.2 4.6 P/B (x) 0.75 0.74 0.72 0.71 Relative (%) 0.7 -0.6 -3.7

Net debt/equity (%) net cash net cash net cash net cash Relative performance versus S&P ASX 200.See Reference Source: Company data, ASX, Credit Suisse estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E against Appendix for a description of the chart. Source: Credit Suisse ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency estimates, * Consensus, mean range from Thomson

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION® Client-Driven Solutions, Insights, and Access

09 September 2014

Figure 1: NWS – Financial summary

News Corporation (NWS)2013 2014 2015 Year2016 ending 302017 Jun 2013 2014 In USDmn,2015 unless 2016otherwise stated2017 Share Price: A$18.60 9/09/2014 17:36 Earnings 06/13A 06/14A 06/15E 06/16E 06/17E Rating OUTPERFORM c_EPS_SHARESEquiv. FPO (period avg.) mn 578.5 579.5 579.5 579.5 579.5 Target Price A$ 21.27 c_EPS*100EPS (Normalised) c 61.7 46.6 52.9 52.9 72.3 vs Share price % 14.35 EPS_GROWTH*100EPS Growth % -24.5 13.6 0.1 36.5 SOTP A$ 23.65 c_EBITDA_MARGIN*100EBITDA Margin % 9.8 9.8 11.0 12.0 13.6 News Corporation is a diversified media conglomerate. It's activities include c_DPS*100DPS c 0.0 0.0 10.0 20.0 30.0 publishing, book publishing, cable network programming, subscription broadcasting, c_PAYOUT*100Payout % 0.0 0.0 18.9 37.8 41.5 digital real estate services & educational content and analytics. FRANKING*100Franking % 0.0 0.0 0.0 0.0 0.0 c_FCF_PS*100Free CFPS c 29.2 82.0 68.7 120.0 148.6 Profit & Loss 06/13A 06/14A 06/15E 06/16E 06/17E c_TAX_RATE*100Effective tax rate % -512.3 141.9 30.1 26.2 29.1 Sales revenue 8,891.0 8,574.0 8,857.6 9,064.5 9,405.4 Valuation EBITDA 871.0 842.0 973.4 1,086.6 1,279.7 c_PE P/E x 27.9 37.0 32.6 32.6 23.9 Depr. & Amort. (548.0) (578.0) (593.8) (587.7) (584.4) PEG PEG x -1.9 -1.5 2.4 615.4 0.7 EBIT 323.0 264.0 379.7 498.9 695.3 c_EBIT_MULTIPLE_CURREV/EBIT x 13.1 21.2 37.0 24.2 18.0 Associates 0.0 0.0 0.0 0.0 0.0 c_EBITDA_MULTIPLE_CUEV/EBITDA x 4.1 3.6 3.8 3.5 3.1 Net interest Exp. 77.0 68.0 78.6 77.5 92.7 c_DIV_YIELD*100Dividend Yield % 0.0 0.0 0.6 1.2 1.7 Other 0.0 0.0 0.0 0.0 0.0 c_FCF_YIELD*100FCF Yield % 1.7 4.8 4.0 7.0 8.6 Profit before tax 400.0 332.0 458.3 576.3 788.0 c_PB Price to Book x 0.8 0.8 0.7 0.7 0.7 Income tax (102.0) (97.0) (138.0) (151.0) (229.5) Returns Profit after tax 298.0 235.0 320.3 425.3 558.6 c_ROE*100Return on Equity % 2.8 2.0 2.3 2.2 3.0 Minorities (41.0) (55.0) (66.6) (81.5) (116.7) c_I_NPAT/c_I_SALES*100Profit Margin % 4.0 3.1 3.5 3.4 4.5 Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.6 0.5 0.5 0.5 0.5 Associates & Other 100.0 90.0 53.0 (36.9) (23.2) c_ASSETS/c_EQ_COMMONEquity Multiplier x 1.2 1.2 1.2 1.2 1.2 Normalised NPAT 357.0 270.0 306.7 306.8 418.7 c_ROA*100Return on Assets % 2.3 1.6 1.8 1.8 2.4 Unusual item after tax 149.0 (31.0) 0.0 0.0 0.0 c_ROIC*100Return on Invested Cap. % 2.3 1.8 2.5 3.6 4.9 Reported NPAT 506.0 239.0 306.7 306.8 418.7 Gearing (SUM (Net c_BORROW, Debt to Net -c_B_CASH debt + Equity , -c_B_CASH_OPER,% Net Cash -c_B_RESTR_CASH,Net Cash Net c_NET_DEBT_ADJ)Cash Net Cash /Net SUM Cash (c_EQ_SUM, c_BORROW, -c_B_CASH , -c_B_CASH_OPER, -c_B_RESTR_CASH, c_NET_DEBT_ADJ))*100 Balance Sheet 06/13A 06/14A 06/15E 06/16E 06/17E SUM ( Netc_BORROW, Debt to EBITDA -c_B_CASH , -c_B_CASH_OPER,x Net Cash -c_B_RESTR_CASH,Net Cash Net c_NET_DEBT_ADJ)/c_I_EBITDA Cash Net Cash Net Cash Cash & equivalents 2,381.0 3,145.0 3,099.1 3,708.0 4,424.7 c_I_EBITDA/Int Cover c_I_NET_INTEREST (EBITDA/Net Int.) x -11.3 -12.4 -12.4 -14.0 -13.8 Inventories 301.0 310.0 299.9 306.9 318.4 c_I_EBIT/Int Cover c_I_NET_INTEREST (EBIT/Net Int.) x -4.2 -3.9 -4.8 -6.4 -7.5 Receivables 1,582.0 1,454.0 1,576.1 1,612.9 1,673.5 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 3.7 4.4 4.5 3.6 3.2 Other current assets 379.0 361.0 361.0 361.0 361.0 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 60.6 65.6 67.4 56.1 51.3 Current assets 4,643.0 5,270.0 5,336.0 5,988.7 6,777.7 MSCI IVA (ESG) Rating Credit Suisse View Property, plant & equip. 2,992.0 3,009.0 2,815.2 2,557.5 2,273.1 TP ESG Risk (%): -10 Intangibles 4,911.0 4,919.0 5,334.0 5,334.0 5,334.0 TP Risk Comment: NWS has been faced with significant governance issues; most recently the UK phone hacking Other non-current assets 3,097.0 3,291.0 3,229.0 3,167.0 3,105.0 7.7 controversy. The considerable influence that and Non-current assets 11,000.0 11,219.0 11,378.2 11,058.5 10,712.1 6.7 the exert over the company through its dual class Total assets 15,643.0 16,489.0 16,714.2 17,047.2 17,489.8 share structure raises the risk of further governance issues in the Payables 1,350.0 1,464.0 1,344.9 1,376.3 1,428.1 5.7 future as well as inhibiting the rights of minority shareholders. Interest bearing debt 0.0 0.0 0.0 0.0 0.0 4.7 Other liabilities 1,597.0 1,606.0 1,606.0 1,606.0 1,606.0 MSCI IVA Risk: Neutral Total liabilities 2,947.0 3,070.0 2,950.9 2,982.3 3,034.1 3.7 MSCI IVA Risk Comment: While the concerns over governance Net assets 12,696.0 13,419.0 13,763.3 14,064.9 14,455.7 are fully justified, the scrutiny over illegal phone hacking at NotW 2.7 has faded somewhat with the majority of claims settled and Ordinary equity 12,578.0 13,263.0 13,540.7 13,760.8 14,034.9 Environment Social Governance litigation costs decreasing. Minority interests 118.0 156.0 222.6 304.1 420.8 Stock Local Sector Preferred capital 0.0 0.0 0.0 0.0 0.0 Country Global Sector Total shareholder funds 12,696.0 13,419.0 13,763.3 14,064.9 14,455.7 Net debt -2,381.0 -3,145.0 -3,099.1 -3,708.0 -4,424.7 Source: MSCI ESG Research

Cashflow 06/13A 06/14A 06/15E 06/16E 06/17E Share Price Performance EBIT 323.0 264.0 379.7 498.9 695.3 25.00 Net interest 77.0 68.0 78.6 77.5 92.7 Depr & Amort 548.0 578.0 593.8 587.7 584.4 20.00 Tax paid 374.0 691.0 -138.0 -151.0 -229.5 Working capital 29.0 44.0 -231.0 -12.4 -20.4 Other -850.0 -791.0 115.0 25.1 38.8 15.00 Operating cashflow 501.0 854.0 798.0 1,025.7 1,161.4 Capex -332.0 -379.0 -400.0 -330.0 -300.0 10.00 Capex - expansionary Capex - maintenance Acquisitions & Invest -2,156.0 -45.0 -415.0 0.0 0.0 5.00 Asset sale proceeds 826.0 202.0 0.0 0.0 0.0 Other -12.0 -84.0 0.0 0.0 0.0 0.00 Investing cashflow -1,674.0 -306.0 -815.0 -330.0 -300.0 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Dividends paid -20.0 -24.0 -28.9 -86.8 -144.6 Equity raised 0.0 0.0 0.0 0.0 0.0 NWS.AX XJO Net borrowings -235.0 0.0 0.0 0.0 0.0 Other 2,741.0 213.0 0.0 0.0 0.0 1 Month 3 Month 12 Month Financing cashflow 2,486.0 189.0 -28.9 -86.8 -144.6 Absolute 3.9% 2.2% 4.6% Total cashflow 1,313.0 737.0 -45.9 608.9 716.8 Relative 0.7% -0.6% -3.7% Adjustments 0.0 0.0 0.0 0.0 0.0 Net change in cash 1,313.0 737.0 -45.9 608.9 716.8 Source: Reuters 52 week trading range: 17.01-20.20 Source: Company data, Credit Suisse estimates

News Corporation (NWS.AX / NWS AU) 2 09 September 2014

Foxtel price changes a major strategic shift The changes to Foxtel's pricing structure represent a major strategic shift aimed at: (1) shoring up the existing subscriber base (ahead of new SVOD competition) and (2) increasing the addressable market to attract new customers. Key changes include: ■ An A$24 reduction in the price of the basic package to A$25 (from A$49) ■ A new A$10 'BoxSets' channel and on demand service, including HBO content such as series 1-4 (free for customers taking the drama package) ■ Movies and drama split into two separate packs (previously A$25 combined) Figure 2: New Foxtel packages and pricing (from 3 November 2014)

Source: Foxtel press release

News Corporation (NWS.AX / NWS AU) 3 09 September 2014

Price reduction will impact ARPU The price changes will clearly have a negative impact on ARPU, which we expect to step down over FY15 and FY16 as ARPU from existing customers is rebased to a lower level. The extent of the reduction will depend on the proportion of customers that chose to 'bank' the savings versus those that choose to pay the same and take additional channels/products. The impact will be partially offset by the removal of existing promotions and offers. Our base case is for ARPU to fall 12.5% to A$84 by FY16 (versus A$96 reported in FY14). Our key assumptions are:

■ 50% of current subscribers will 'bank' the A$24 saving. We expect the biggest shift down to be amongst 'Platinum' subscribers that currently pay A$134 per month for a bundle of all channels. Under the new pricing, this package will look particularly unattractive (even with an additional two pay per view movies per month included) and customers can achieve reasonable savings and still keep most of their current channels by buying on an 'a la carte' basis (e.g., under the new pricing a platinum customer can get everything excluding movies and one additional entertainment pack for A$100 versus A$134 for Platinum HD)

■ 50% of customers continue to pay the same amount as currently and take additional channels or services (e.g. HD or multi-room) The chart below shows average channel mix to get to our A$84 ARPU forecast.

Figure 3: FY16 Foxtel ARPU composition example Item Cost Proportion Blended Comment Basic Bundle (Entertainment Pack) $25 100% $25 Previously $49 p/mth. Excludes $150 of one-off fees. BoxSets $10 50% $5 Free for Drama subscribers Sport $25 75% $19 Currently estimated above 80%, assume lower for new subs Drama $20 50% $10 Showcase, BBC First, F/X, SoHo + BoxSets Movies $20 20% $4 Assume lower penetration as standalone from Drama Kids $10 30% $3 Nickelodeon, Cartoon Net and Disney no longer in basic bundle Documentaries $10 20% $2 NatGeo, History, Animal Planet (Discovery in basic bundle) Entertainment Plus $10 20% $2 Comedy, Syfy and general entertainment channels HD $10 50% $5 42% at end of FY12 Multiroom $15 40% $6 43% at end of FY12 Other $10 30% $3 Includes PPV, specialty channels etc Total $84 Source: Company data, Credit Suisse estimates After the initial step down, we assume that core ARPU returns to low growth (+1-2%) over the longer term. We assume some dilution as new customers come in at lower levels, offset by natural growth from price rises or customers taking additional products. We forecast overall blended ARPU (including IPTV) to be approximately flat.

Figure 4: Foxtel forecast ARPU (by product) Figure 5: Foxtel ARPU versus previous estimates $96 $100 $90 $90 $110 $84 $84 $77 $80 $100

$60 $90

$40 $80

$20 $70

$0 $60 FY14A FY15F FY16F FY14 FY15 FY16 FY17 FY18 FY19 Full IPTV Presto Blended Old (Total) Old (Full) New (Total) New (Full) Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

News Corporation (NWS.AX / NWS AU) 4 09 September 2014

Content costs to rise and margins to fall We understand that Foxtel has renegotiated better rates from its content partners in order to help fund the lower prices. However, we still expect overall content costs to increase as Foxtel provides more channels to existing customers (with no additional revenue). We model EBITDA margins to decline from 31% in FY14 to 23% in FY16 and then to improve due to scale effects from FY17 onwards.

Figure 6: Foxtel – cost and cost growth forecast Figure 7: Foxtel – EBITDA margin forecasts $3,600m 9% 40% $3,200m 8% 35% $2,800m 7% 30% $2,400m 6% 25% $2,000m 5% 20% $1,600m 4% 15% $1,200m 3% $800m 2% 10% $400m 1% 5% $0m 0% 0% FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 Costs ($m) Growth Old forecasts New forecasts Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates iQ3 to result in higher capex We expect the launch of the new iQ3 box later this year to result in a step up in capex over FY15 and FY16 as the new boxes are rolled out. We assume an average box cost of cA$250 and a net cost to Foxtel of A$175 per customer on the assumption that Foxtel charges the customer a A$75 one-off fee to upgrade (same as currently). This equates net additional capex of A$420mn across the core 2.4mn customer base for the iQ3 roll- out. On this basis, we forecast total Foxtel capex of A$600mn in FY15 and FY16 (versus estimate of A$400mn in FY14). Subscriber growth to pick up We expect that the new pricing structure will be successful at minimising churn and shoring up the existing customer base in the face of new competition. However, the major unknown is the extent to which it will expand Foxtel's addressable market and enable it to attract new subscribers. Foxtel had 2.6mn subscribers at the end of FY14, which was an increase of 5% on the pcp. However, we estimate that all the growth in FY14 was from the lower ARPU IPTV products (T-box, Play and Presto) and that subscribers to the core product were flat or slightly down in the year (Foxtel does not disclose subs by product). Our base case modelling is for the price reductions to drive a return to growth for the core product. We assume average core growth of 5% per annum FY15-19F (excluding IPTV). This would take its core base to 3.0mn by FY19F (vs c2.4mn in FY14), equivalent to 31% household penetration by FY19F (versus 27% currently on our estimates). Including IPTV products (Play, T-box, Presto) we forecast the total subscriber base to grow 9% per annum from 2.6mn in FY14 to 3.9mn by FY19F (equivalent to 40% total household penetration by FY19F).

News Corporation (NWS.AX / NWS AU) 5 09 September 2014

Figure 8: Foxtel – subscriber growth versus previous Figure 9: Foxtel – penetration versus previous estimates estimates 12% 45%

10% 40% 8% 35% 6% 30% 4% 25% 2%

0% 20%

-2% 15% FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 Old (Total) Old (Full) New (Total) New (Full) Old (Total) Old (Full) New (Total) New (Full) Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates Foxtel forecasts reduced We now forecast Foxtel revenue to grow by 0.8% in FY15 (versus 4.2% previously) as the impact of lower ARPU offsets additional revenue from new customers. We forecast revenue to grow by 0.2% in FY16. We reduce our FY15F EBITDA by 17% to A$911mn (versus A$1.09bn previously) due to the impact of higher content costs and an increase in subscriber acquisition costs (due to higher forecast customer additions). The changes to our FY15 EBITDA forecasts also reflect a lower than expected FY14 base of A$976mn as disclosed by Telstra at its FY14 results (including a restatement of FY13 EBITDA to A$927mn versus A$944mn originally and adjustments for US GAAP). News Corp said in its FY14 results that Foxtel EBITDA grew 8% in FY14 (Telstra reported +5%) implying EBITDA of A$1,020mn in FY14 (before re-stating the FY13 base). We forecast EBITDA to decline further to A$729mn in FY16 as the full-year impact of the price changes flows through (vs A$1.16bn previously). The table below outlines key changes to our Foxtel forecasts:

Figure 10: Changes to our Foxtel forecasts Historical FY15F FY16F FY17F June Y/E IFRS A$ FY13 FY14 Previous Revised Change Previous Revised Change Previous Revised Change Subscriber data Full Foxtel subscribers 2,481 2,431 2,432 2,492 2.5% 2,419 2,617 8.2% 2,419 2,748 13.6% IPTV (T-Box, Presto, Play) subscribers 0 189 363 363 0.0% 544 544 0.0% 680 680 0.0% Total subscriber base 2,481 2,620 2,794 2,855 2.2% 2,963 3,161 6.7% 3,099 3,427 10.6% Full Foxtel ARPU $95.00 $96.00 $97.92 $90.00 -8.1% $99.88 $84.00 -15.9% $101.88 $85.68 -15.9% Blended ARPU $92.75 $90.27 $87.98 $84.46 -4.0% $86.44 $76.64 -11.3% $85.41 $76.43 -10.5% Growth Rates Full Foxtel subs -2.0% 0.0% 2.5% -0.5% 5.0% 0.0% 5.0% Total subs 5.6% 6.6% 9.0% 6.1% 10.7% 4.6% 8.4% Full Foxtel ARPU 1.1% 2.0% -6.3% 2.0% -6.7% 2.0% 2.0% Blended ARPU -2.7% -2.5% -6.4% -1.8% -9.3% -1.2% -0.3% Financial data Subscriber revenue 2,716 2,763 2,871 2,774 -3.4% 2,986 2,766 -7.4% 3,107 3,021 -2.8% Total revenue 3,071 3,138 3,271 3,164 -3.3% 3,387 3,171 -6.4% 3,533 3,442 -2.6% Costs 2,142 2,162 2,177 2,253 3.5% 2,230 2,443 9.5% 2,323 2,614 12.5% EBITDA 929 976 1,094 911 -16.7% 1,157 729 -37.0% 1,210 828 -31.6% EBIT 497 576 717 515 -28.2% 778 288 -62.9% 829 354 -57.3% NPAT 228 304 365 250 -31.5% 400 54 -86.4% 428 84 -80.3% EBITDA margin 30.3% 31.1% 33.4% 28.8% 34.2% 23.0% 34.2% 24.0% Growth Rates Subscriber revenue 1.7% 3.9% 0.4% 4.0% -0.3% 4.0% 9.2% Total revenue 2.2% 4.2% 0.8% 3.5% 0.2% 4.3% 8.5% Costs 0.9% 2.8% 4.2% 2.4% 8.4% 4.2% 7.0% EBITDA 5.1% 7.0% -6.6% 5.8% -20.0% 4.6% 13.6% EBIT 15.9% 10.7% -10.6% 8.5% -44.0% 6.6% 22.8% NPAT 33.3% 12.8% -17.7% 9.6% -78.2% 7.0% 55.0% Source: Company data, Credit Suisse estimate. FY13 EBITDA re-stated to A$924mn versus A$944mn originally

News Corporation (NWS.AX / NWS AU) 6 09 September 2014

Figure 11: Foxtel revenue growth vs previous estimates Figure 12: Foxtel EBITDA vs previous estimates 9% $1,400m 8% $1,200m 7% $1,000m 6% 5% $800m 4% $600m 3% $400m 2% 1% $200m 0% $0m FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 Old forecasts New forecasts Old forecasts New forecasts Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Foxtel valuation reduced to A$5.1bn Our base case Foxtel DCF equity valuation falls 17% to A$5.1bn (vs A$6.2bn previously) due to lower forecast earnings and higher capex. Our calculations are based on a WACC of 9% and terminal value of 2.5%. We assume net debt at end FY14 was roughly equivalent to the US$1.9bn (A$2.1bn) disclosed at the FY13 result. The DCF valuation is highly sensitive to the core assumptions around ARPU and subscriber growth (key sensitivities outlined in the table below). At our base case ARPU of A$84, we calculate that Foxtel needs to grow its core subscriber base at an average of 7.2% over FY15-19F (ex IPTV) in order for the new pricing structure to be value neutral (this would take core household penetration to 34.1% by FY19 and total penetration including IPTV products to 42.9%).

Figure 13: Foxtel – valuation sensitivity analysis (100% Figure 14: Core subscriber growth required to maintain equity valuation) previous valuation (ex IPTV)

Subscriber CAGR FY15-19 24% A$m 0.0% 2.5% 5.0% 7.5% 10.0% $72 -1,031 -366 356 1,139 1,986 20% $76 312 1,105 1,966 2,900 3,910 16% $80 1,642 2,563 3,563 4,647 5,820 $84 2,960 4,009 5,147 6,382 7,718 12%

ARPU 7.2% $88 4,268 5,445 6,722 8,107 9,607 8% $92 5,567 6,871 8,288 9,824 11,486 4% $96 6,858 8,291 9,846 11,532 13,358 0% $72 $74 $76 $78 $80 $82 $84 $86 $88 $90 $92 $94 $96

Source: Company data, Credit Suisse estimates. Note: Equity Source: Company data, Credit Suisse estimates. valuation after adjusting for A$2.1bn net debt. Core subscriber growth (ex IPTV)

Fox Sports to benefit from higher penetration A positive for News Corp is that the impact of any degradation in earnings and valuation at Foxtel will be at least partly offset by higher earnings and valuation for Fox Sports (as higher Foxtel penetration should drive additional Fox Sports subscribers). We estimate that 80% of Foxtel subscribers currently take Fox Sports. We model a lower take up rate of 50% for new subscribers (including IPTV).

News Corporation (NWS.AX / NWS AU) 7 09 September 2014

We understand that the wholesale rate that Fox Sports charges Foxtel is unchanged so we do not forecast any decline in Fox Sports ARPU. The fixed nature of the Fox Sports cost base should result in a high drop through of incremental revenue to EBITDA. We raise Fox Sports' FY15F EBITDA by 5% to US$141mn (versus A$134mn previously) and by 12% to A$155mn in FY16F. Our Fox Sports valuation increases to US$1.46bn (versus US$1.17bn previously), equivalent to 10.4x FY15F EBITDA and 9.4x FY16F.

Figure 15: Fox Sports – subscriber growth Figure 16: Fox Sports – EBITDA growth 7% 12%

6% 10% 5% 8% 4% 6% 3% 4% 2%

1% 2%

0% 0% FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 Old forecasts New forecasts Old forecasts New forecasts Source: Company data, Credit Suisse estimates. Source: Company data, Credit Suisse estimates. NWS pay TV valuation sensitivity We believe that the overall Foxtel pricing strategy has to be looked at on the basis of Foxtel and Fox Sports combined as Fox Sports provides NWS with a 'natural hedge'. Equally, Telstra will benefit from Foxtel's lower prices through higher penetration of its Entertainer bundles and flow through to its broadband products.

Figure 17: Sub growth required to maintain previous Figure 18: Sub growth required to maintain previous valuation of pay TV assets assuming 50% FSA take up valuation of pay TV assets assuming A$84 Foxtel ARPU

24% 7% 5.7% 20% 6% 5% 16% 4.1% 4% 12% 7.2% 3% 8% 2% 4% 5.7% 1% 0%

Required Foxtel subscriber CAGR subscriber Foxtel Required 0% $72 $74 $76 $78 $80 $82 $84 $86 $88 $90 $92 $94 $96 40% 50% 60% 70% 80% Foxtel only Total pay TV Proportion of incremental Foxtel subs taking Fox Sports

Source: Company data, Credit Suisse estimates. Source: Company data, Credit Suisse estimates. On this basis, we calculate that the pricing changes are Neutral for the total value of News Corp's pay TV assets on the basis of Foxtel being able to achieve average subscriber growth of 5.7% FY15-19F (ex IPTV). If Foxtel ARPU holds up better than our A$84 base case, or Fox Sports can achieve a penetration rate of above 50% for new subscribers, then the subscriber growth rate required for neutral valuation impact is less.

News Corporation (NWS.AX / NWS AU) 8 09 September 2014

News Corp valuation unchanged due to higher REA price Our overall News Corp sum of the parts valuation is broadly unchanged at A$23.62 (including a 10% conglomerate/holding company discount). The lower Foxtel valuation is offset by higher Fox Sports and higher REA (due to share price increase). Our price target of A$21.27 is unchanged and is at a further 10% discount to valuation for lack of disclosure/structural headwinds.

Figure 19: News Corp – Sum of the parts valuation (based on divisional DCF) EBITDA EV/EBITDA Value June Y/E FY15F FY16F FY15F FY16F US$mn US$ Method Comment News & Info Services 636 608 5.4x 5.7x 3,451 $5.96 SOTP See News & Info breakdown Book Publishing 233 242 8.0x 7.7x 1,862 $3.22 DCF Inc US$415m for Harlequin Fox Sports Australia 141 155 10.4x 9.4x 1,463 $2.53 DCF US cable nets trading on 10-12x REA Group (62%) 261 314 20.9x 17.3x 3,520 $6.08 Mkt value Foxtel (50%) 419 335 8.0x 10.0x 2,363 $4.08 DCF After Foxtel debt (US$2bn gross FY14) Amplify (192) (62) 0.8x 2.6x (158) ($0.27) DCF PV of 2 year losses (post tax) Corporate overheads (165) (170) 6.0x 5.8x (990) ($1.71) Multiple Enterprise value 11,511 $19.90 Add net cash (less REA and Harlequin) 2,485 $4.30 $3.15bn less A$253m REA & $415m Harlequin Equity value 13,996 $24.19 579mn shares 10% conglomerate / ESG discount ($2.30) US$ valuation per share $21.89 AUD/USD exchange rate $0.93 A$ valuation per share $23.62 Source: Company data, Credit Suisse estimates We outline our detailed sum of the parts valuation for the News & Information division in the table below (based on CS divisional estimates).

Figure 20: News & Information valuation breakdown (based on CS divisional estimates) EBITDA EV/EBITDA Value June Y/E FY15F FY16F FY15F FY16F US$mn US$ Method Comment Journal 179 177 8.5x 8.6x 1,517 $2.62 Multiple NYT recently on 8.5x EBITDA 226 222 6.5x 6.6x 1,471 $2.54 Multiple Valassis sold for 7x 2013F EBITDA Dow Jones Institutional 29 30 2.0x 1.9x 58 $0.10 Multiple Significant restructuring required Other 202 179 2.0x 2.3x 404 $0.70 Multiple Aus, UK and New York Post Total News & Info 636 608 5.4x 5.7x 3,451 $5.96 Source: Company data, Credit Suisse estimates (NWS does not disclose earnings breakdown by asset in the News & Information division)

News Corp investment view and gap analysis Our core News Corp investment thesis and OUTPERFORM rating is based around the following: (1) News Corp has some valuable 'hidden' assets to which minimal value is attached at the current share price (e.g., WSJ, News America Marketing). This is over and above the more visible valuations for News Corp's better quality assets such as Books and pay TV (which we believe are also in the share price at very low multiples). (2) News Corp's share price has significantly underperformed its media peers since the corporate split in July 2013. We therefore believe there is scope for a re-rating to catch up with peers (see report of 1 May 2014 NWS – Ripe for re-rating) . The gap analysis outlined below shows that after excluding REA and the cash balance, the value attached to News Corp's core assets has fallen from US$4.4bn at the time of the corporate split in July 2013 to US$3.8bn currently. The EBITDA multiple attached to the core business (ex. Amplify) has fallen from 4.3x at split in July 2013 to 3.8x currently (including share of Foxtel EBITDA and net debt).

News Corporation (NWS.AX / NWS AU) 9 09 September 2014

Figure 21: News Corp – Gap analysis Figure 22: News Corp – FY15F EV/EBITDA multiple

$12bn 8.0x

$10bn 7.0x

$8bn 6.0x

$6bn 5.0x

$4bn 4.0x

$2bn 3.0x

$0bn 2.0x

NWS Core Cash REA NWSA Ex-REA Ex-Amplify

Source: Bloomberg, Company data, Credit Suisse estimates. Source: Bloomberg, Company data. Market cap adjusted to exclude US$ value of REA and cash. EBITDA based on current CS FY15F. This decline in value of the core business has happened at a time when share prices of key media peers across publishing, pay TV and marketing services have been re-rated. Operating performance has generally been improving although the weak ad market in Australia has been a major headwind. Any further signs of quarterly improvements over the course of FY15 would be a key share price catalyst.

Figure 23: News Corp – peer multiples Share Mkt Cap P/E EV/EBITDA Dividend Yield Calendarised to June Y/E Price (LC) US$mn FY15F FY16F FY15F FY16F FY15F FY16F Publishing News Corporation 17.62 10,131 33.3x 33.3x 6.2x 6.2x 0.6% 1.1% Fairfax Media 0.84 1,833 12.9x 12.1x 6.5x 6.4x 6.0% 6.5% Gannett 33.42 7,604 13.5x 10.7x 8.0x 7.0x 2.8% 1.6% New York Times 12.36 1,848 28.8x 24.6x 6.3x 5.7x 1.3% 1.3% Time US 23.54 2,564 15.2x 12.8x 7.2x 6.6x 3.6% 3.6% E. W. Scripps 20.19 1,138 35.4x 13.6x 6.4x 6.0x 0.0% 0.0% & General Trust 8.59 5,307 15.5x 13.6x 11.1x 9.9x 2.5% 2.7% Trinity Mirror 1.99 825 6.6x 6.1x 4.6x 4.7x 1.5% 2.3% Online property classified REA Group 47.13 5,760 32.0x 25.7x 21.0x 17.5x 1.5% 1.9% Rightmove PLC 24.02 3,821 24.1x 20.0x 18.3x 15.9x 1.4% 1.6% Zoopla Property Group Plc 2.35 1,581 26.6x 20.9x 21.2x 16.6x 1.6% 2.0% Zillow, Inc 131.69 5,312 141.0x 80.0x 56.7x 37.4x 0.0% 0.0% Other Aus/NZ online classified Seek 17.53 5,537 29.6x 25.2x 16.0x 13.4x 1.9% 2.2% carsales.com.au 10.66 2,357 23.1x 20.5x 16.3x 14.7x 3.5% 3.9% Trade Me Group Ltd 3.69 1,211 17.2x 15.8x 11.9x 11.0x 4.6% 5.1% Pay TV SKY Network 6.16 1,982 12.7x 12.4x 7.2x 7.1x 5.4% 6.1% Comcast 55.88 145,070 17.0x 14.7x 8.1x 7.5x 1.8% 2.0% The Directv Group Inc 86.82 43,604 13.6x 12.0x 7.0x 6.7x 0.0% 0.0% Time Warner Cable 150.75 42,133 18.1x 16.2x 7.5x 7.1x 2.1% 2.2% British Sky Broadcasting 8.83 24,430 14.5x 14.5x 10.0x 9.7x 3.4% 3.4% Source: Company data, Credit Suisse estimates. NWS EV/EBITDA calculated on a proportional EBITDA basis.

News Corporation (NWS.AX / NWS AU) 10 09 September 2014

News Corp financial forecasts We outline changes to our News Corp financial forecast in Figure 24. FY15F EBITDA is broadly unchanged as higher Fox Sports EBITDA is offset by a slightly more conservative view on earnings from some of the other divisions. The reduction in FY15F and FY16F NPAT primarily reflects the lower Foxtel associate contribution due to changes outlined above (NB News Corp FY15F and FY16F associate earnings are after US$60mn purchase price amortisation for CMH acquisition)..

Figure 24: Changes to NWS' financial forecasts FY15F FY16F Growth June Y/E FY14 Previous Revised Change Previous Revised Change FY15F FY16F P&L Revenue 8,574 8,882 8,858 -0.3% 9,080 9,064 -0.2% 3.3% 2.3% Costs (7,732) (7,900) (7,884) -0.2% (7,989) (7,978) -0.1% 2.0% 1.2% EBITDA 842 982 973 -0.9% 1,091 1,087 -0.4% 15.6% 11.6% D&A (578) (594) (594) 0.0% (588) (588) 0.0% 2.7% -1.0% EBIT 264 388 380 -2.2% 504 499 -1.0% 43.8% 31.4% Interest 68 79 79 0.0% 78 77 -1.0% 15.6% -1.5% Tax (99) (151) (138) -8.4% (194) (151) -22.0% 39.4% 9.4% Associates 90 91 53 -42.0% 109 (37) -133.7% -41.2% -169.7% Minorities 55 (67) (67) 0.0% (82) (82) 0.0% -221.0% 22.5% NPAT (normalised) 268 341 307 -10.0% 416 307 -26.3% 14.4% 0.1% NPAT (reported) 237 341 307 -10.0% 416 307 -26.3% 29.4% 0.1% Adj EPS (c) 41 59 53 -10.0% 72 53 -26.3% 29.1% 0.1% DPS (c) 0 10 10 0.0% 20 20 0.0% n.m. 100.0% Segmental estimates Revenue News & Information Services 6,153 6,076 6,067 -0.2% 6,083 6,073 -0.2% -1.4% 0.1% Book Publishing 1,434 1,709 1,688 -1.2% 1,733 1,711 -1.3% 17.7% 1.3% REA Group 408 478 478 0.0% 553 553 0.0% 17.1% 15.7% Fox Sports 491 513 520 1.3% 535 551 3.1% 5.9% 6.0% Amplify 88 105 105 0.0% 177 177 0.0% 19.4% 68.3% Total revenue 8,574 8,882 8,858 -0.3% 9,080 9,064 -0.2% 3.3% 2.3% EBITDA News & Information Services 665 645 636 -1.5% 618 608 -1.6% -4.4% -4.4% Book Publishing 197 238 233 -2.3% 248 242 -2.6% 18.2% 3.8% REA Group 214 261 261 0.0% 314 314 0.0% 21.8% 20.4% Fox Sports 128 134 141 4.9% 139 155 11.8% 9.9% 10.1% Amplify (193) (132) (132) 0.0% (62) (62) 0.0% -31.8% -53.1% Corporate Costs (169) (165) (165) 0.0% (165) (170) 3.0% -2.4% 3.0% Total EBITDA 842 982 973 -0.9% 1,091 1,087 -0.4% 15.6% 11.6% IFRS Foxtel estimates (A$) Revenue 3,138 3,271 3,164 -3.3% 3,387 3,171 -6.4% 0.8% 0.2% EBITDA 976 1,094 911 -16.7% 1,157 729 -37.0% -6.6% -20.0% EBIT 576 717 515 -28.2% 778 288 -62.9% -10.6% -44.0% NPAT 304 365 250 -31.5% 400 54 -86.4% -17.7% -78.2% NWS share of dividend 165 183 125 -31.5% 200 27 -86.4% -24.3% -78.2% Source: Company data, Credit Suisse estimates

News Corporation (NWS.AX / NWS AU) 11 09 September 2014

Appendix A – Foxtel scenario analysis

Figure 25: Foxtel scenario analysis A$ unless otherwise stated Previous Forecasts Base Case Bear Case Bull Case Full Foxtel ARPU FY14 ARPU $96.00 $96.00 $96.00 $96.00 FY16F ARPU $98.90 $84.00 $84.00 $84.00 FY19F ARPU $105.99 $89.14 $89.14 $89.14 FY14-19 CAGR 2.0% -1.5% -1.5% -1.5% Blended ARPU (incl IPTV) FY14 ARPU $90.27 $90.27 $90.27 $90.27 FY16F ARPU $86.27 $76.64 $76.33 $76.94 FY19F ARPU $85.54 $77.88 $76.06 $79.45 FY14-19 CAGR -1.1% -2.9% -3.4% -2.5% Full Foxtel Subscriber Base FY14 subscribers 2,431 2,431 2,431 2,431 FY16F subscribers 2,419 2,617 2,431 2,808 FY19F subscribers 2,419 3,029 2,431 3,738 FY14-19 CAGR -0.1% 4.5% 0.0% 9.0% Total Subscriber Base (incl IPTV) FY14 subscribers 2,620 2,620 2,620 2,620 FY16F subscribers 2,963 3,161 2,975 3,352 FY19F subscribers 3,279 3,889 3,291 4,598 FY14-19 CAGR 4.6% 8.2% 4.7% 11.9%

Penetration FY14 penetration (Full Foxtel) 26.9% 26.9% 26.9% 26.9% FY14 penetration (Total) 29.0% 29.0% 29.0% 29.0% FY19F penetration (Full Foxtel) 24.7% 31.0% 24.9% 38.3% FY19F penetration (Total) 33.7% 39.8% 33.7% 47.1%

FY16F Financials FY16F Revenue Subscription Revenue 2,982 2,766 2,642 2,893 Growth 3.4% -0.3% -3.6% 3.1% Other Revenue 405 405 405 405 Total Revenue 3,387 3,171 3,047 3,298 Growth 3.6% 0.2% -2.7% 3.2%

FY16F EBITDA 1,157 729 678 780 Growth 5.7% -20.0% -24.3% -15.8% Margin 34.2% 23.0% 22.3% 23.7%

FY16F NPAT 400 54 18 92 Variance N/A -86.4% -95.5% -77.0%

FY19F Financials FY19F Revenue Subscription Revenue 3,326 3,531 2,968 4,184 FY14-19 CAGR 3.8% 5.0% 1.4% 8.7% Other Revenue 461 455 455 455 Total Revenue 3,787 3,986 3,423 4,639 FY14-19 CAGR 3.8% 4.9% 1.8% 8.1%

FY19F EBITDA 1,332 1,043 815 1,307 FY14-19 CAGR 6.4% 1.3% -3.5% 6.0% Margin 33.6% 26.2% 23.8% 28.2%

FY19F NPAT 489 283 124 468 Variance N/A -42.0% -74.5% -4.3%

Valuation Foxtel DCF valuation (100%) 8,353 7,278 5,091 9,849 Value of News Corp equity stake (US$) 2,863 2,363 1,359 3,543 Variance N/A -17.5% -52.5% 23.8%

Fox Sports DCF valuation (US$) 1,169 1,463 1,065 1,989 Variance N/A 25.2% -8.9% 70.1% Total value of NWS pay TV assets (US$) 4,032 3,826 2,424 5,532 Variance N/A -5.1% -39.9% 37.2% Source: Company data, Credit Suisse estimates

News Corporation (NWS.AX / NWS AU) 12 09 September 2014

Reference Appendix Our new “Total return forecast in perspective” chart helps visualize Credit Suisse and consensus views of a company’s 12-month return within the context of forecasting risks and its historical trading pattern: 12mth Volatility is calculated as the annualised standard deviation of weekly total return series over the past 12 months. It illustrates variability of stock returns; in other words, risk. The way to think about it is that one would rather take 10% forecast return from a stock that has 20% volatility, than from the stock that has 40% volatility. The shaded area shows the one standard deviation range based on past 12 months volatility. In statistical terms, once you make a number of brave assumptions, there is a 68% probability that the share price will end up inside that range in 12 months time. 52wk Hi-Lo is maximum and minimum daily closing price over the past 52 weeks. It is often handy to know the price momentum especially when the stock is trading close to its highs and lows: Is the stock trading close to its peak? Is the momentum against the stock? *Consensus is IBES consensus supplied by Thomson Reuters. IBES is a survey of sell side research analysts, collecting a few dozen data points such as EPS, DPS, Sales, Target Price, ROE and so on. *Mean is the average of target returns, while the shaded area around the mean represents the range of estimates from the lowest to the highest estimate. This aids visualisation of a number of important factors such as: the range of analyst estimates; where Credit Suisse’s estimates on this stock sit relative to consensus; and where the share price is relative to consensus mean and consensus range target. Target return is calculated as capital gain plus forecast dividend yield (net) over the next 12 months. For “CS tgt” we have used Credit Suisse’s target price and Credit Suisse forecast for 12-month forward dividend, grossed up for franking. For the consensus mean and range, we have used consensus target price and consensus dividend forecasts for 12 month forward.

News Corporation (NWS.AX / NWS AU) 13 09 September 2014

Companies Mentioned (Price as of 09-Sep-2014) APN News & Media (APN.AX, A$0.82) British Sky Broadcasting (BSY.L, 882.5p) Comcast (CMCSA.OQ, $55.88) Daily Mail & General Trust (DMGOa.L, 859.0p) Fairfax Media (FXJ.AX, A$0.835) Gannett (GCI.N, $33.42) New York Times (NYT.N, $12.36) News Corporation (NWS.AX, A$18.6, OUTPERFORM, TP A$21.27) REA Group (REA.AX, A$46.8) Rightmove PLC (RMV.L, 2402.0p) SKY Network (SKT.NZ, NZ$6.16) Seek (SEK.AX, A$17.5) The Directv Group Inc (DTV.OQ, $86.82) Time Warner Cable (TWC.N, $150.75) Torstar Corporation (NVS) (TSb.TO, C$7.63) Trade Me Group Ltd (TME.NZ, NZ$3.68) Trinity Mirror (TNI.L, 198.75p) carsales.com.au (CRZ.AX, A$10.67)

Disclosure Appendix Important Global Disclosures Fraser McLeish and Lucas Goode, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for News Corporation (NWS.AX)

NWS.AX Closing Price Target Price Date (A$) (A$) Rating 16-Jul-13 16.09 25.30 O * 24-Sep-13 17.85 23.30 12-Nov-13 18.40 19.80 N * 07-Feb-14 18.61 20.25 01-May-14 17.85 20.70 O 09-May-14 18.29 21.27 * Asterisk signifies initiation or assumption of coverage.

OUTPERFORM NEUTRAL

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive , and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10- 15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

News Corporation (NWS.AX / NWS AU) 14 09 September 2014

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 44% (54% banking clients) Neutral/Hold* 39% (51% banking clients) Underperform/Sell* 13% (44% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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Price Target: (12 months) for News Corporation (NWS.AX) Method: Our target price of A$21.27 per share for News Corporation is based on our A$23.64 SOTP (sum-of-the-parts) valuation, adjusted for a 10% discount due to corporate governance / ESG concerns. Risk: The main risks to our A$21.27 per share target price for NWS are changes to advertising spend, changes to management, legal costs, higher than anticipated restructuring costs and corporate governance.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names The subject company (NWS.AX) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (NWS.AX) within the next 3 months. Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (NWS.AX) within the past 12 months Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

News Corporation (NWS.AX / NWS AU) 15 09 September 2014

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse Equities (Australia) Limited ...... Fraser McLeish ; Lucas Goode

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News Corporation (NWS.AX / NWS AU) 16 09 September 2014

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