1 NEWS CORP FINAL COVER 9/14/05 3:22 PM Page 2 Annual Report 2005 1 Worldwide listing 2005 9/14/05 3:17 PM Page 1 The eyes of the world are on us EXECUTIVE OFFICER'S REVIEW CHIEF CHIEF 1 Worldwide listing 2005 9/14/05 3:17 PM Page 2 News Corporation As of June 30, 2005 Filmed Entertainment United States WTTG Washington DC Latin America Fox Filmed Entertainment WDCA Washington DC Cine Canal 23% Twentieth Century Fox Film WAGA Atlanta, GA Telecine 13% Corporation WJBK Detroit, MI Australia and New Zealand Fox 2000 Pictures KRIV Houston, TX Premium Movie Partnership 20% Fox Searchlight Pictures KTXH Houston, TX Fox Music KMSP Minneapolis, MN Twentieth Century Fox Home WFTC Minneapolis, MN Entertainment WTVT Tampa Bay, FL Cable Network Twentieth Century Fox Licensing KSAZ Phoenix, AZ Programming and Merchandising KUTP Phoenix, AZ Blue Sky Studios WJW Cleveland, OH United States Twentieth Century Fox Television KDVR Denver, CO FOX News Channel Fox Television Studios WRBW Orlando, FL Fox Cable Networks Twentieth Television WOFL Orlando, FL FX Regency Television 50% KTVI St. Louis, MO Fox Movie Channel WDAF Kansas City, MO Fox Regional Sports Networks Asia WITI Milwaukee, WI (14 owned and operated) (a) Balaji Telefilms 26% KSTU Salt Lake City, UT Fox Soccer Channel SPEED Channel Latin America WBRC Birmingham, AL FUEL Fox Studios Baja WHBQ Memphis, TN Fox Reality Canal Fox WGHP Greensboro, NC KTBC Austin, TX National Sports Partners WUTB Baltimore, MD National Advertising Partners WOGX Gainesville, FL Fox Sports Net Bay Area 40% Television Fox Pan American Sports 38% United States Asia National Geographic Channel – FOX Broadcasting Company STAR International 50% Fox Television Stations STAR Plus National Geographic Channel – WNYW New York, NY STAR Movies Domestic 67% WWOR New York, NY STAR News Australia KTTV Los Angeles, CA STAR Mandarin Movies Premier Media Group 50% KCOP Los Angeles, CA STAR World WFLD Chicago, IL STAR Gold WPWR Chicago, IL STAR Chinese Channel WTXF Philadelphia, PA ESPN STAR Sports 50% KDFW Dallas, TX Channel [V] (Taiwan) KDFI Dallas, TX Channel [V] (Thailand) 50% WFXT Boston, MA Xing Kong Wei Shi Vijay Television 1 Worldwide listing 2005 9/14/05 3:18 PM Page 3 Direct Broadcast Newspapers Magazines and Inserts Satellite Television United States United States and Canada New York Post News America Marketing Europe In-Store SKY Italia United Kingdom FSI (SmartSource Magazine) Sky Sport The Times SmartSource iGroup Calcio Sky The Sunday Times News Marketing Canada Sky Cinema The Sun The Weekly Standard Sky TG 24 News of the World Gemstar-TV Guide International 41% British Sky Broadcasting 37% TSL Education Sky News Australia Australia Sky Sports INSIDEout More than 110 national, metropolitan, Sky Travel donna hay suburban, regional and Sunday titles, Sky One including the following: Sky Movies The Australian United States The Weekend Australian Book Publishing The DIRECTV Group 34% The Daily Telegraph United States, Canada, Europe The Sunday Telegraph and Australia Latin America Herald Sun HarperCollins Publishers Sky Latin America DBS Platforms Sunday Herald Sun Mexico – Innova 30% The Courier-Mail Brazil – Sky Brasil 50% (b) Sunday Mail (Brisbane) Other Asia The Advertiser Space TV (India DBS) 20% Sunday Mail (Adelaide) Europe Phoenix Satellite Television 38% The Mercury NDS 76% Hathway Cable and Datacom 26% Sunday Tasmanian Broadsystem Ventures China Network Systems The Sunday Times Convoys Group (17 affiliated cable systems) various Northern Territory News Sky Radio 93% Sunday Territorian News Outdoor Group 75% Balkan News Corporation Fiji The Fiji Times Australia and New Zealand Sunday Times FOXTEL 25% Nai Lalakai Sky Network Television Limited 44% Shanti Dut National Rugby League 50% News Interactive Papua New Guinea Festival Mushroom Records Post-Courier 63% (a) Fox Regional Sports Networks are all 100% owned except for Fox Sports Net South which is 88% owned. (b) Represents the Company’s economic interest. The Company continues to hold a 36% equity interest. 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 News Corporation, its Directors or its Officers with respect to, among other things, trends affecting the group’s financial condition or results of operations. Readers of this document are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The Company does not ordinarily make projections of its future operating results and undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 1 News Corp AR 05 layout #79979 9/14/05 2:29 PM Page 4 NEWS CORPORATION Chief Executive Officer’s Review Rupert Murdoch, Chairman and Chief Executive Officer I am very pleased to report to you that fiscal 2005 was, by virtually any measure, the best year in News Corporation’s 52-year history. The Company reported record revenues and profits, generated a record amount of cash flow from operations, achieved a swift turnaround at its Italian satellite platform and completed a host of strategic initiatives that we believe position us for sustained growth for years to come. Indeed, fiscal 2005 was our third consecutive year of double-digit revenue and operating income growth. Our Filmed Entertainment, Cable Network Programming, Newspapers, Book Publishing, Magazines and Inserts segments all posted record profits. At the same time, with our $2.4 billion increase in cash, we significantly strengthened our balance sheet, giving us enhanced financial flexibility to meet the challenges ahead. We’ve achieved all this in an environment that is changing faster than ever. For the consumer, technological change represents progress: more and better choices, greater functionality, easier use. For corporations, however, change can sometimes have the opposite effect: disrupted business plans, outdated products, missed budgets. But these moving parts also lead to great, if uncertain, opportunities. Fortunately, change plays to News Corp.’s strengths. When I’m asked how we’ve been able to grow so strongly during a time when our peers have not, I often note how change complements our corporate culture. We’ve always been a company that’s resisted the status quo, that’s charted its own course in the face of conventional wisdom. Whether in creating a fourth network or a third cable news channel, a regional sports network or a compact version of a venerable broadsheet, we’ve always followed our instincts, often to the dismay of our competitors but ultimately to the benefit of consumers and shareholders. Our management is trained to focus not only on strengthening existing operations but, as importantly, on pursuing new growth opportunities for the future. These initiatives at times involve investing new capital and a short-term reduction to our earnings growth. > 4 < 1 News Corp AR 05 layout #79979 9/14/05 2:29 PM Page 5 As a result of our longer-term focus and capital allocation, News Corporation today boasts among the best mix of assets in the business, and a corporate structure that enables us to get the most out of those assets. We produce award-winning. critically acclaimed and popular content. We have also invested in the world’s largest distribution platform and the only one that is truly global in scope. Most importantly, we’ve learned how to integrate our content and distribution assets into a seamless whole that allows us to get the most out of each individual asset – an attribute that further distinguishes us from our peers. Our diverse businesses encompass all forms of modern media: from print to broadcast to cable to satellite to film to home entertainment to the Internet. We generate revenue around the world, with more than 40 percent coming from outside the U.S. And those revenues are diversified by a broad base of sources. This past fiscal year, News Corporation’s net income exceeded $2.1 billion, a 39 percent increase over the prior year with combined earnings per share of $0.69, up 28 percent. The Company’s balance sheet is also stronger than ever before, with $6.5 billion in cash and a strong debt-to-equity position. As a result of our strong financial position, we increased our dividends for the fiscal year for both Class A and Class B Common Stock, to $0.12 and $0.10, respectively. In addition, we announced a $3 billion stock buyback in June 2005, and by the end of August had already purchased 34 million shares for approximately $585 million. Sustained financial growth was not the only measure of our success in fiscal 2005, however. Strategically, we also excelled. We completed our reincorporation in the U.S., moving our primary listing to the New York Stock Exchange. This has already resulted in the Company’s inclusion in several major U.S. equity indices, including the S&P 500, and a significant reduction in the discount of the non-voting to voting shares. We continue to believe that this change in domicile will help the Company attain greater value for our shareholders longer term. With News Corporation’s domicile change, there was no further need to maintain the Fox Entertainment Group as a separate corporate entity. Consequently, earlier this year we completed a successful exchange offer for all outstanding shares of Fox stock. In so doing, we simplified our corporate reporting, eliminated a duplicative U.S. listing and achieved some minimal cost savings from redundant operations. This year also saw us acquire the 58 percent controlling interest in Queensland Press Pty Ltd that the Company did not already own.