SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F/A

 

(Mark One)
¨		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
		OR
x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2002
		OR
¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to

 

Commission file number 1-9141

 

THE NEWS CORPORATION LIMITED

(Exact name of Registrant as specified in its charter)

 

Australia

(Jurisdiction of incorporation or organization)

 

2 Holt Street, Surry Hills, New South Wales, Australia 2010

(Address of principal executive offices)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class		Name of each exchange on which registered
Ordinary Shares		New York Stock Exchange (1)
Preferred Limited Voting Ordinary Shares		New York Stock Exchange (1)
American Depositary Shares, each of which represents four Ordinary Shares of The News Corporation Limited		New York Stock Exchange
American Depositary Shares, each of which represents four Preferred Limited Voting Ordinary Shares of The News Corporation Limited		New York Stock Exchange
Guarantee of the 8 5/8% Cumulative Guaranteed Preference Shares, Series A, of Newscorp Overseas Limited		New York Stock Exchange (2)
Guarantee of the Adjustable Rate Cumulative Preference Shares, Series B, of Newscorp Overseas Limited		New York Stock Exchange (2)

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(1)

The listing of Registrant’s Ordinary Shares and Preferred Limited Voting Ordinary Shares on the New York Stock Exchange is for technical purposes only and without trading privileges.

(2)

This Guarantee does not trade separately from the Preference Shares of Newscorp Overseas Limited.

 

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

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Guarantees by The News Corporation Limited of the following securities issued by News America Incorporated: (i) 8 ⁵/8% Senior Notes due 2003; (ii) 8 ¹/2% Senior Notes due 2005; (iii) 7 ³/8% Senior Debentures due 2008; (iv) 6.625% Senior Debentures due 2008; (v) 10 ¹/8% Senior Debentures due 2012; (vi) 9 ¹/4% Senior Debentures due 2013; (vii) 8 ⁵/8% Senior Debentures due 2014; (viii) 7.6% Senior Debentures due 2015; (ix) 8% Senior Debentures due 2016; (x) 8 ¹/4% Senior Debentures due 2018; (xi) 7 ¹/4% Senior Debentures due 2018; (xii) Liquid Yield Option Notes due 2021; (xiii) 8 ⁷/8% Senior Debentures due 2023; (xiv) 7 ³/4% Senior Debentures due 2024; (xv) 7 ³/4% Senior Debentures due 2024; (xvi) 9 ¹/2% Senior Debentures due 2024; (xvii) 8 ¹/2% Senior Debentures due 2025; (xviii) 7.7% Senior Debentures due 2025; (xix) 7.43% Senior Debentures due 2026; (xx) 7 ¹/8% Senior Debentures due 2028; (xxi) 7.3% Senior Debentures due 2028; (xxii) 7.28% Senior Debentures due 2028; (xxiii) 7.625% Senior Debentures due 2028; (xxiv) 6.703% Mandatory Par Put Remarketed Securities due 2034; (xxv) 8.45% Senior Debentures due 2034; (xxvi) 8.15% Senior Debentures due 2036; (xxvii) 6 ³/4% Senior Debentures due 2038; (xxviii) 7.75% Senior Debentures due 2045; (xxix) 7.9% Senior Debentures due 2095; and (xxx) 8 ¹/4% Senior Debentures due 2096.

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 

Ordinary Shares		2,094,411,035
Preferred Limited Voting Ordinary Shares		3,208,695,775

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

Indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  x

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EXPLANATORY NOTE

 

 

This Form 20-F/A hereby amends Items 3, 5, 8, 11, 18 and 19 of the Registrant’s Annual Report on Form 20-F for the fiscal year ended June 30, 2002, which was filed on December 30, 2002. This amendment includes editorial changes and expanded discussions of information included in the original report in response to disclosure recommendations of the Staff of the U.S. Securities and Exchange Commission made as part of a regular periodic review. This amendment also includes the amended and restated results for 2001 and 2002 of Gemstar-TV Guide International, Inc., which were not available at the time the original report was filed.

 

This Form 20-F/A does not reflect events occurring after the filing of the original Form 20-F (except for the auditor’s report and the subsequent events described in Item 5 and in Note 24 of the Notes to the Consolidated Financial Statements of The News Corporation Limited and Subsidiaries) and does not modify or update the disclosure therein in any way other than as required to reflect the amendments discussed above and reflected below.

 

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ITEM 3.    KEY INFORMATION

 

Selected Financial Data

 

The selected financial data appearing on the next page are set forth in Australian dollars (except as otherwise indicated), and are derived from the Consolidated Financial Statements of The News Corporation Limited and Subsidiaries appearing elsewhere herein and from certain financial data in previously filed annual reports on Form 20-F, as applicable. Certain reclassifications, however, have been made to financial data for fiscal years prior to fiscal 2002 in order to conform with the fiscal 2002 presentation.

 

The Consolidated Financial Statements of The News Corporation Limited and Subsidiaries have been prepared in accordance with accounting principles generally accepted in Australia (“A-GAAP”). A-GAAP differs significantly in certain respects from accounting principles generally accepted in the United States (“US-GAAP”). A discussion of these significant differences for each of the fiscal years 2000 through 2002 is contained in Note 20 to the Consolidated Financial Statements of The News Corporation Limited and Subsidiaries set forth elsewhere herein and Item 5: Operating and Financial Review and Prospects—US-GAAP Reconciliation.

 

The selected financial data should be read in conjunction with, and are qualified in their entirety by reference to, the Consolidated Financial Statements of The News Corporation Limited and Subsidiaries (including the notes thereto) set forth elsewhere herein.

 

 

2

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		Fiscal Year Ended June 30, 1
		1998				1999				2000				2001				2002
Amounts in Accordance with US-GAAP
Income statement data:
Revenues		A$	18,897			A$	21,704			A$	22,337			A$	25,387			A$	28,776
Depreciation and amortization			905				1,033				1,108				1,321				1,373
Operating income			1,921				2,012				1,509				1,823				256
Equity in losses of associated companies			(116	)			(509	)			(936	)			(1,711	)			(14,840	)
Interest, net			778				783				829				935				(1,000	)
Other income (expense)			(111	)			1,317				1,924				635				1,965
Income (loss) before cumulative effect of accounting change and extraordinary item			555				963				(329	)			740				(14,552	)
Net income (loss)			555				963				(329	)			(218	)			(14,670	)
Basic and diluted income (loss) before cumulative effect of accounting change per share:
Ordinary shares			0.13				0.22				(0.09	)			0.15				(2.64	)
Preferred limited voting ordinary shares			0.15				0.27				(0.10	)			0.18				(3.16	)
Basic and Diluted Net income (loss) per share:
Ordinary shares			0.13				0.22				(0.09	)			(0.06	)			(2.66	)
Preferred limited voting ordinary shares			0.15				0.27				(0.10	)			(0.07	)			(3.19	)
Dividends per ordinary share			0.030				0.030				0.030				0.030				0.030
Dividends per preferred ordinary share			0.075				0.075				0.075				0.075				0.075
Dividends per ordinary share in US dollars		US$	0.020			US$	0.019			US$	0.018			US$	0.016			US$	0.016
Dividends per preferred ordinary share in U.S. dollars		US$	0.051			US$	0.047			US$	0.047			US$	0.041			US$	0.039
Balance sheet data at period end:
Cash		A$	4,314			A$	7,483			A$	4,638			A$	5,615			A$	6,337
Total assets			48,094				47,094				57,986				81,466				65,837
Total debt			14,422				13,167				15,431				18,805				15,441
Total stockholder’s equity			15,713				14,044				18,443				36,285				24,953
Amounts in Accordance with A-GAAP
Income statement data:
Sales Revenue		A$	18,949			A$	21,774			A$	22,433			A$	25,578			A$	29,014
Depreciation and amortization			415				510				562				706				749
Operating income			2,646				2,752				2,742				3,093				3,542
Net income (loss) from associated entities			190				(545	)			(298	)			(249	)			(1,434	)
Net borrowing costs			763				773				814				935				1,000
Dividends on exchangeable preferred securities			74				80				79				90				93
Net profit (loss) attributable to members of the parent entity			1,682				1,088				1,921				(746	)			(11,962	)
Basic/Diluted Net income (loss) per share:
Ordinary shares			0.40				0.25				0.42				(0.17	)			(2.17	)
Preferred limited voting ordinary shares			0.48				0.30				0.51				(0.21	)			(2.60	)
Dividends per ordinary share			0.030				0.030				0.030				0.030				0.030
Dividends per preferred ordinary share			0.075				0.075				0.075				0.075				0.075
Dividends per ordinary share in U.S. dollars		US$	0.020			US$	0.019			US$	0.018			US$	0.016			US$	0.016
Dividends per preferred ordinary share in U.S. dollars		US$	0.051			US$	0.047			US$	0.047			US$	0.041			US$	0.039
Balance sheet data at period end:
Cash and cash equivalents		A$	4,314			A$	7,483			A$	4,638			A$	5,615			A$	6,337
Total assets			54,484				53,972				65,585				84,961				71,441
Total debt			14,422				13,167				15,431				18,805				15,441
Total stockholder’s equity			27,211				27,109				32,660				47,595				39,468

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1

See Note 2 and Note 16 to the Consolidated Financial Statements of News Corporation for information with respect to significant acquisitions and dispositions during fiscal 2000, 2001 and 2002. In fiscal 1999, News Corporation acquired substantially all of Liberty Media Corporation’s interest in Fox Sports Networks LLC for aggregate consideration of approximately US$1.3 billion. Also, in fiscal 1999 News Corporation sold News America Publications and certain related assets to TV Guide, Inc. in exchange for common stock representing a 43.6% equity interest in TV Guide, Inc. and net cash of US$671 million. In fiscal 1998, News Corporation acquired Heritage Media Group for aggregate consideration of approximately US$1.4 billion.

 

 

3

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Exchange Rates

 

The following table sets forth, for the periods indicated, information concerning the Noon Buying Rates in New York City for Australian dollars, expressed as US$ per A$1.00.

 

Month		High		Low
June 2002		0.5748		0.5583
July 2002		0.5688		0.5370
August 2002		0.5534		0.5280
September 2002		0.5518		0.5419
October 2002		0.5550		0.5422
November 2002		0.5660		0.5528

 

Fiscal Year Ended June 30,		Average*
1998		0.6773
1999		0.6246
2000		0.6256
2001		0.5320
2002		0.5240
2003 (through November 30, 2002)		0.5504

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*

The average rate is calculated by using the average of the Noon Buying Rates on the last day of each month during the relevant period.

 

On November 29, 2002, the Noon Buying Rate was $0.5601 per A$1.00.

 

 

Special Note Regarding Forward Looking Statements

 

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 News Corporation Limited (“News Corporation”), its directors or its officers with respect to, among other things, trends affecting News Corporation’s financial condition or results of operations. These forward-looking statements are subject to risks, uncertainties and assumptions about News Corporation News Corporation and its businesses and are not guarantees of performance. These risks and uncertainties are described below and elsewhere in this document. News Corporation 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. Readers should carefully review the other documents filed by News Corporation and its subsidiaries with the Securities and Exchange Commission.

 

Risk Factors

 

News Corporation’s business, financial condition or results of operations could be materially adversely affected by any or all of the following risk factors.

 

A decline in advertising expenditures could cause News Corporation’s revenues and operating results to decline significantly in any given period or in specific markets.

 

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News Corporation derives substantial revenues from the sale of advertising on its television stations, broadcast and cable networks and direct-to-home (“DTH”) television services and in its newspapers and inserts. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions as well as budgeting and buying patterns. A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. This could cause News Corporation’s revenues and operating results to decline significantly in any given period or in specific markets.

 

Acceptance of our film and television programming by the public is difficult to predict, which could lead to fluctuations in revenues.

 

Feature film and television production and distribution are speculative businesses since the revenues derived from the production and distribution of a feature film or television series depend primarily upon its acceptance by the public, which is difficult to predict. The commercial success of a feature film or television series also depends upon the quality and acceptance of other competing films and television series released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, all of which can change and cannot be predicted with certainty. Further, the theatrical success of a feature film and the audience ratings for a television series are generally key factors in generating revenues from other distribution channels, such as home video and premium pay television with respect to feature films and syndication with respect to television series.

 

Changes in U.S. or foreign communications laws and other regulations may have an adverse effect on News Corporation’s business.

 

In general, the television broadcasting and cable industries in the U.S. are highly regulated by federal laws and regulations issued and administered by various federal agencies, including the Federal Communications Commission (the “FCC”). The FCC generally regulates, among other things, the ownership of media, including ownership by non-U.S. citizens, broadcast programming and technical operations. Further, the U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters, including technological changes, which could, directly or indirectly, affect the operations and ownership of News Corporation’s U.S. broadcast properties. Similarly, changes in regulations imposed by governments in other jurisdictions in which News Corporation, or entities in which News Corporation has an interest, operate could adversely affect News Corporation’s business and results of operations.

 

News Corporation is controlled by one principal shareholder.

 

Approximately 30% of the Ordinary Shares of News Corporation are owned by (i) K. Rupert Murdoch, (ii) Cruden Investments Pty. Limited, a private Australian investment company owned by Mr. Murdoch, members of his family and various corporations and trusts, the beneficiaries of which include Mr. Murdoch, members of his family and certain charities, and (iii) corporations, which are controlled by trustees of settlements and trusts set up for the benefit of the Murdoch family, certain charities and other persons. By virtue of the shares of News Corporation owned by such persons and entities, and Mr. Murdoch’s positions as Chairman and Chief Executive of News Corporation, Mr. Murdoch may be deemed to control the operations of News Corporation.

 

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ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

This section should be read in conjunction with the Consolidated Financial Statements of The News Corporation Limited and Subsidiaries (“News Corporation”, “TNCL” or the “Group”) and related notes set forth elsewhere herein.

 

The Consolidated Financial Statements of News Corporation have been prepared in accordance with accounting principles generally accepted in Australia (“A-GAAP”) and are presented in Australian dollars. A-GAAP differs significantly in certain respects from accounting principles generally accepted in the United States (“US-GAAP”) as described in Note 20 to the Consolidated Financial Statements of News Corporation. See “US-GAAP Reconciliation” in this section for a comparison of revenue, operating income and net income (loss) under A-GAAP and US-GAAP.

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and financial performance are based upon our consolidated financial statements, which have been prepared in accordance with A-GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of commitments and contingencies. On an ongoing basis, the Group evaluates its estimates, which are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates. The following accounting policies require significant management judgments and estimates.

 

Inventories

 

Accounting for the production and distribution of filmed entertainment and television programming requires management’s judgment as it relates to total revenues to be received and costs to be incurred throughout the life of each program or its license period. These judgments are used to determine the amortization of capitalized filmed entertainment and television programming costs associated with revenues earned and any fair value adjustments.

 

The Filmed Entertainment segment amortizes capitalized film costs on an individual film basis in the ratio that the current year’s gross revenues bears to management’s estimate of total ultimate gross revenues from all sources. Revenue forecasts for motion pictures reflect management’s estimate of total revenues to be received throughout the life of each motion picture. Estimates of revenues are reviewed and reassessed periodically on a title-by-title basis and revised when warranted by changing conditions.

 

The Television segment amortizes the costs of multi-year sports contracts based on the ratio of each period’s operating profit earned on the contract to the estimated total operating profit expected to be earned over the life of the contract from all segments. Estimates of total operating profit to be earned over the life of the contract are reviewed periodically and amortization is adjusted as necessary. Management’s estimates of total operating profit over the life of the contract are primarily dependent upon its projections of the revenue to be derived from selling advertising spots during the games and other directly attributed revenue sources as well as direct selling costs and the direct costs associated with broadcasting the games or events. At the inception of these contracts and periodically thereafter, management evaluates the recoverability of the costs associated therewith against the revenues directly associated with the program material and related expenses. When an evaluation indicates that a multi-year contract will result in an ultimate loss, additional amortization is provided to recognize such loss in the current year.

 

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Intangible Assets

 

The Group has significant intangible assets, FCC television station licenses, newspaper mastheads, distribution networks, sports franchises, publishing rights and goodwill. The Group accounts for its business acquisitions under the purchase method of accounting. The total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair market values. Goodwill is recorded as the difference between the cost of acquiring an entity and the estimated fair market values assigned to its tangible and identifiable intangible net assets at the date of acquisition. Determining the fair market value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including, among others, assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, among other items. The judgments made in determining the estimated fair market value assigned to each class of intangible assets acquired as well as their useful lives can significantly impact net profit (loss) attributable to members of the parent entity. Except for goodwill, no amortization is provided against the Group’s intangible assets since, in the opinion of the Directors, the lives of the publishing rights, titles and television licenses are indefinite.

 

Recoverable Amount

 

The Group assesses potential impairment of non-current assets under the guidance of Australian Accounting Standards Board No. 1010, “Recoverable Amounts of Non-Current Assets.” The recoverable amount of publishing rights, titles and television licenses and goodwill has been determined by discounting the expected net cash inflows arising from their continued use or sale. Discounting has not been used to determine the recoverable amount of all other non-current assets.

 

Employee Costs

 

Superannuation and other postretirement benefit costs and obligations are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, health care cost trend rates, benefits earned, interest cost, expected return on plan assets, mortality rates and other factors. The Group’s retirement benefit expense for superannuation plans is based on contributions payable to the retirement plans for the fiscal year, at rates determined by the actuary of the superannuation plans. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Group’s superannuation and other postretirement obligations.

 

Associated Entities

 

The Group accounts for investments in associated entities using the equity method of accounting, whereby investments in associated entities are initially recorded at cost and subsequently adjusted for increases or decreases in the Group’s share of post-acquisition results and equity reserves of the associated entities. Investments in associated entities cannot exceed their recoverable amount. Management regularly reviews the carrying value of its investments in associated entities to determine if a diminution in value has occurred. In determining the recoverable amount, management considers the net undiscounted cash flows arising from the investment in associated entities and the subsequent value upon disposition.

 

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Results of Operations—Fiscal 2002 vs. Fiscal 2001

 

The following table sets forth the Group’s operating results by segment, for fiscal 2002 as compared to fiscal 2001.

 

		For the year ended June 30,
		2002				2001				Change				% Change
		(in millions)
Revenues:
Filmed Entertainment		A$	7,714			A$	6,795			A$	919			14	%
Television			8,160				6,838				1,322			19	%
Cable Network Programming			3,569				2,696				873			32	%
Magazines & Inserts			1,650				1,675				(25	)		(1	)%
Newspapers			4,604				4,600				4			0	%
Book Publishing			2,059				1,907				152			8	%
Other			1,258				1,067				191			18	%
Total revenues		A$	29,014			A$	25,578			A$	3,436			13	%
Operating income:
Filmed Entertainment		A$	904			A$	487			A$	417			86	%
Television			873				1,007				(134	)		(13	)%
Cable Network Programming			380				197				183			93	%
Magazines & Inserts			448				437				11			3	%
Newspapers			822				904				(82	)		(9	)%
Book Publishing			224				205				19			9	%
Other			(109	)			(144	)			35			24	%
Total operating income		A$	3,542			A$	3,093			A$	449			15	%
Net loss from associated entities		A$	(1,434	)		A$	(249	)		A$	(1,185	)		(476	)%
Net borrowing costs			(1,000	)			(935	)			(65	)		(7	)%
Dividends on exchangeable preferred securities			(93	)			(90	)			(3	)		(3	)%
Other revenues before tax			5,627				3,335				2,292			69	%
Other expenses before tax			(17,601	)			(4,609	)			(12,992	)		282	%
Change in accounting policy before income tax			—				(1,107	)			1,107			100	%
Profit (loss) from ordinary activities before income tax		A$	(10,959	)		A$	(562	)		A$	(10,397	)		(1,850	)%
Income tax benefit (expense) on:
Ordinary activities before change in accounting policy and other items		A$	(640	)		A$	(428	)		A$	(212	)		(50	)%
Other items			(15	)			19				(34	)		(179	)%
Change in accounting policy			—				421				(421	)		(100	)%
Net income tax benefit (expense)		A$	(655	)		A$	12			A$	(667	)		(5,558	)%
Net profit (loss) from ordinary activities after tax		A$	(11,614	)		A$	(550	)		A$	(11,064	)		(2,012	)%
Net profit attributable to outside equity interests			(348	)			(196	)			(152	)		(78	)%
Net profit (loss) attributable to members of parent entity		A$	(11,962	)		A$	(746	)		A$	(11,216	)		(1,503	)%

 

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Consolidated

 

News Corporation’s consolidated revenues increased approximately 13% to A$29,014 million in fiscal 2002 from A$25,578 million in fiscal 2001. This increase was led by increased revenues at the Filmed Entertainment, Television and Cable Network Programming segments.

 

Consolidated operating income of A$3,542 million in fiscal 2002 increased approximately 15% as compared to A$3,093 million in fiscal 2001. The Filmed Entertainment and Cable Network Programming segments experienced strong performances, which were partially offset by a decrease from the Television segment.

 

Net loss from associated entities of A$1,434 million increased A$1,185 million from A$249 million in the prior year. The higher net loss was primarily due to the Group’s share of British Sky Broadcasting Group plc’s (“BSkyB”) write-off of its investment in KirchPayTV. Additionally, increased losses were due to unfavorable foreign exchange movements in our Latin American pay television platforms, the first-time inclusion of losses recognized from our Italian pay television platform Stream S.p.A. (“Stream”) and reduced profitability of Fox Sports Domestic Cable Networks primarily due to lower revenues and higher costs at Madison Square Garden, an entertainment company owned by Regional Programming Partners.

 

Net profit (loss) attributable to members of parent entity was a loss of A$11,962 million in fiscal 2002 as compared to a loss of A$746 million in fiscal 2001. The current year loss primarily relates to the write-downs in the Group’s carrying value of its investments in Gemstar-TV Guide International, Inc. (“Gemstar-TV Guide”), Stream and KirchMedia. Also contributing to this loss was the Group’s write-down of its U.S. national sports rights contracts for Major League Baseball (“MLB”), the National Association of Stock Car Auto Racing (“NASCAR”), the National Football League (“NFL”) and non-U.S. cricket programming rights. These write-downs were partially offset by the gain on the sale of the Group’s interest in Fox Family Worldwide, Inc (“FFW”). Fiscal 2001 losses primarily related to the loss incurred for the restructuring of the Healtheon/WebMD transaction, the write-off of the One.Tel investment and increased new media related investment write-downs.

 

Filmed Entertainment

 

Revenues increased A$919 million, or approximately 14%, from A$6,795 million in fiscal 2001 to A$7,714 million in fiscal 2002. This increase is due to the worldwide theatrical and home entertainment and domestic pay-television performance of Planet of The Apes, domestic theatrical and home entertainment performance of Kiss of the Dragon, the worldwide theatrical performance of Ice Age, the worldwide home entertainment performances of Moulin Rouge and Dr. Dolittle 2 and library titles released on DVD. Fiscal 2001 results included the worldwide theatrical and worldwide home entertainment and domestic pay-television performance of X-Men, the international television sales of Titanic and the worldwide home entertainment performance of library titles. Additionally, at Twentieth Century Fox Television (“TCFTV”), increased syndication revenues for NYPD Blue and King of the Hill, higher license fees for Buffy the Vampire Slayer, Dharma and Greg and The Practice and increased worldwide home entertainment and international free-television revenues for The Simpsons contributed to the increase in revenues. Operating income increased to A$904 million in fiscal 2002 from A$487 million in fiscal 2001, an increase of approximately 86%. This increase is due to the revenue increases noted above, compared to the prior’s year results, which were partially offset by the disappointing results of Monkeybone, Say It Isn’t So and TheLegend of Bagger Vance.

 

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Television

 

Revenues increased A$1,322 million, or approximately 19% from A$6,838 million in fiscal 2001 to A$8,160 million in fiscal 2002. This increase in revenues is due primarily to the inclusion of the Chris-Craft Industries, Inc. (“Chris-Craft”) television stations that were acquired in July 2001, and the increase in advertising revenues from the telecast of the Super Bowl at Fox Broadcasting Company (“FOX”), which was not telecast on FOX in the prior year. Also impacting revenues were an estimated 1.4 percentage point gain in market share over the prior year at the Fox Television Stations (“FTS”), A$162 million of revenue recognized from the sale of the MLB divisional series rights to ABC Family, and increased advertising revenue for MLB due to additional postseason games compared to the prior year. Partially offsetting these increases was the soft advertising environment prevalent for much of the year in the U.S., which was further weakened by the terrorist attacks on September 11^th. Operating income decreased to A$873 million in fiscal 2002 from A$1,007 million in fiscal 2001, a decrease of approximately 13%. The decrease in operating income was primarily related to increased programming costs at FTS and at FOX resulting from more MLB games shown than in the prior year and higher primetime license fees, the telecast of the Super Bowl during fiscal 2002 and license fees for Star Wars Episode I: The Phantom Menace.

 

At STAR, continued increases in both subscriber and advertising revenues contributed to overall revenue growth for fiscal 2002 as compared to fiscal 2001. Increased subscription revenues were generated from pricing increases and subscriber growth. Advertising revenue increases are attributable to Kahaani Ghar Ghar Ki and Kyunki Saas Bhi Kabhi Bahu Thi, the top Indian cable shows on STAR Plus (cable and satellite channel in India). These revenue gains were partially offset by increased programming costs at STAR News and increased production costs.

 

Cable Network Programming

 

Revenues of A$3,569 million increased 32% as compared to fiscal 2001 revenues of A$2,696 million due to a combination of subscriber growth and improved ratings primarily at the Fox News Channel (“Fox News”) and FX Channel (“FX”), as well as the acquisition of Speed Channel in July 2001. At Fox News, a 72% increase in advertising revenue was driven by improved ratings, partially offset by lower national sell-out and pre-emptions. Affiliate revenues increased 31% at Fox News which was attributable to an 18% increase in subscribers. As of June 30, 2002, Fox News reached 80 million U.S. cable and DBS households, an increase of 12 million households over the prior year. FX affiliate revenues increased 22%, reflecting a 20% increase in average households over the prior year. As of June 30, 2002, FX reached over 78 million U.S. DBS and cable households, an increase of 13 million households over the prior year. Despite the difficult advertising sales market, FX advertising revenues increased 26% over the prior year, as the result of an increase in average audience and higher ratings, primarily due to the success of The Shield, which was partially offset by declines in pricing. Affiliate revenues increased 13% at the Fox Sports Regional Sports Networks (“RSNs”) primarily from increased average cable rates per subscriber, as well as increases in total reached U.S. cable and DBS households. Operating income increased 93% to A$380 million as compared to A$197 million in fiscal 2001. This significant increase relates primarily to the increased revenues across all channels. Fox News improved results were driven by significant gains in subscriber base and advertising revenues from higher pricing and improved ratings, which was only partially offset by higher costs associated with breaking news events and programming expenses. At the RSNs, increased affiliate revenues were partially offset by increased operating expenses related to an increased number of professional sports events and higher average rights fees associated with new professional sports rights agreements at the RSNs. FX revenue increases of 17% were only partially offset by increased programming and marketing expenses due to the fall line-up and The Shield.

 

Magazines and Inserts

 

Revenues of A$1,650 million in fiscal 2002 decreased A$25 million as compared to A$1,675 million reported in fiscal 2001. Operating income increased from A$437 million to A$448 million in fiscal 2002. This decrease in revenues is due to lower advertising volume and rates from free-standing inserts and lower revenue from instant coupon machines. The operating income increase is due to cost

 

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reductions in printing, paper, media and field expenses which more than offset by the revenue shortfalls noted above.

 

Newspapers

 

Revenues were flat at A$4,604 million in fiscal 2002 compared to A$4,600 million in fiscal 2001. Operating income decreased by 9% to A$822 million in fiscal 2002 from A$904 million in fiscal 2001. In the U.K., lower advertising volume and advertising rates were partially offset by circulation revenue gains across all major titles due to cover price increases and a decrease in production costs. In Australia, lower advertising revenues and higher newsprint costs were partially offset by increased circulation revenue due to cover price increases. In the U.S., increased circulation and advertising revenue were more than offset by increased costs related to the new printing plant at the New York Post.

 

Book Publishing

 

Revenues increased approximately 8% from A$1,907 million in fiscal 2001 to A$2,059 million in fiscal 2002. Operating income was A$224 million, a 9% increase over the prior year’s operating income of A$205 million. These increases were driven by the strong performance in the U.K. of Pamela Stephenson’s biography of comedian Billy Connolly and J.R.R. Tolkien’s Lord of the Rings Trilogy, coupled with a successful children’s program and local publishing programs in Canada and Australia/New Zealand. HarperCollins had 106 titles on the New York Times’ bestsellers list during the year, including nine titles that reached the number 1 spot.

 

Net loss from associated entities

 

Net loss from associated entities of A$1,434 million increased A$1,185 million from A$249 million in fiscal 2001.

 

		For the year ended June 30,
		2002				2001				Change				% Change
		(in millions)
The Group’s share of the profit (loss) after income tax of its associated entities consist principally of:
BSkyB		A$	(51	)		A$	(76	)		A$	25			33	%
Stream			(66	)			—				(66	)		—
Sky Latin America:
Net Sat Servicos Ltda (Brazil)			(120	)			(101	)			(19	)		(19	)%
Innova, S. de R.L. de C.V. (Mexico)			(92	)			(52	)			(40	)		(77	)%
Other			(78	)			(63	)			(15	)		(24	)%
Fox Sports Domestic Cable (USA)			33				89				(56	)		(63	)%
FOXTEL			(15	)			(11	)			(4	)		(36	)%
ESPN Star Sports			(11	)			(23	)			12			52	%
Other associated entities			86				75				11			15	%
Operating (loss) after income tax before other items		A$	(314	)		A$	(162	)		A$	(152	)		(94	)%
Other items after income tax			(1,120	)			(87	)			(1,033	)		(1,187	)%
Operating (loss) after income tax and other items		A$	(1,434	)		A$	(249	)		A$	(1,185	)		(476	)%

 

The higher net loss was primarily due to the Group’s share of BSkyB’s write-off of its investment in KirchPayTV. Additionally, increased losses were due to the unfavorable foreign exchange movements in our Latin American pay television platforms, losses recognized from our Italian pay television platform Stream and reduced profitability of Fox Sports Domestic Cable Networks primarily due to lower revenues and higher costs at Madison Square Garden.

 

11

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Net borrowing costs

 

Net borrowing costs increased to A$1,000 million in fiscal 2002 from A$935 million in fiscal 2001. This increase is due to lower rates of return on cash balances, which was partially offset by a decrease in interest expense due to the redemption of certain debt.

 

Other items before tax

 

Other items before tax of A$11,974 million in fiscal 2002 was A$10,700 higher than the loss of A$1,274 million in fiscal 2001. The fiscal year loss primarily relates to the write-downs in the Group’s carrying value of its investments in Gemstar-TV Guide, Stream and KirchMedia. Also contributing to this loss was the Group’s write-down of its U.S. national sporting contracts for MLB, NASCAR, the NFL and non-U.S. cricket programming rights. These write downs were partially offset by the gain on the sale of the Group’s interest in FFW. Fiscal 2001 losses primarily related to the loss incurred for the restructuring of the Healtheon/WebMD transaction, the write-off of the One.Tel investment and increased new media related investment write-downs.

 

Net income tax benefit (expense)

 

Net income tax expense of A$655 million during fiscal 2002 decreased from a benefit of A$12 million during fiscal 2001. Net income tax expense of A$655 million was recognized in fiscal 2002 as opposed to an income tax benefit of A$2,858 million that would have been recognized if the statutory rate had been applied without adjustments. The difference is primarily due to the exclusion of the Gemstar-TV Guide write-down, as it is not expected to be realized in the future.

 

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Results of Operations—Fiscal 2001 vs. Fiscal 2000

 

The following table sets forth the Group’s operating results; by segment, for fiscal 2001 as compared to fiscal 2000.

 

		For the year ended June 30,
		2001				2000				Change				% Change
		(in millions)
Revenues:
Filmed Entertainment		A$	6,795			A$	6,269			A$	526			8	%
Television			6,838				5,689				1,149			20	%
Cable Network Programming			2,696				2,005				691			34	%
Magazines & Inserts			1,675				1,585				90			6	%
Newspapers			4,600				4,448				152			3	%
Book Publishing			1,907				1,634				273			17	%
Other			1,067				813				254			31	%
Total revenues		A$	25,578			A$	22,443			A$	3,135			14	%
Operating income:
Filmed Entertainment		A$	487			A$	155			A$	332			214	%
Television			1,007				1,153				(146	)		(13	)%
Cable Network Programming			197				120				77			64	%
Magazines & Inserts			437				411				26			6	%
Newspapers			904				870				34			4	%
Book Publishing			205				141				64			45	%
Other			(144	)			(108	)			(36	)		(33	)%
Total operating income		A$	3,093			A$	2,742			A$	351			13	%
Net loss from associated entities		A$	(249	)		A$	(298	)		A$	49			16	%
Net borrowing costs			(935	)			(814	)			(121	)		(15	)%
Dividends on exchangeable preferred securities			(90	)			(79	)			(11	)		(14	)%
Other revenues before tax			3,335				4,147				(812	)		(20	)%
Other expenses before tax			(4,609	)			(2,961	)			(1,648	)		(56	)%
Change in accounting policy before income tax			(1,107	)			—				(1,107	)		—	%
Profit (loss) from ordinary activities before income tax		A$	(562	)		A$	2,737			A$	(3,299	)		(121	)%
Income tax benefit (expense) on:
Ordinary activities before change in accounting policy and other items		A$	(428	)		A$	(225	)		A$	(203	)		(90	)%
Other items			19				(454	)			473			104	%
Change in accounting policy			421				—				421			—	%
Net income tax benefit (expense)		A$	12			A$	(679	)		A$	691			102	%
Net profit (loss) from ordinary activities after tax		A$	(550	)		A$	2,058			A$	(2,608	)		(127	)%
Net profit attributable to outside equity interests			(196	)			(137	)			(59	)		(43	)%
Net profit (loss) attributable to members of parent entity		A$	(746	)		A$	1,921			A$	(2,667	)		(139	)%

 

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Consolidated

 

News Corporation’s consolidated revenues increased approximately 14% to A$25,578 million in fiscal 2001 from A$22,443 million in fiscal 2000. This increase was primarily due to increased revenues at the Cable Network Programming, Book Publishing and Television segments.

 

Consolidated operating income of A$3,093 million in fiscal 2001 increased approximately 13% as compared to operating income of A$2,742 million in fiscal 2000. The Filmed Entertainment, Book Publishing and Cable Network Programming segments experienced strong performances, which were partially offset by a decrease from the Television segment.

 

Net loss from associated entities of A$249 million decreased A$49 million from A$298 million in the prior year. The lower net loss was primarily due to the increased results of BSkyB, the domestic associates of Fox Sports Networks, LLC (“Fox Sports Networks”) and FOXTEL, partially offset by decreased results of certain Sky Latin America satellite platforms and STAR’s associates. BSkyB reported higher results for fiscal year 2001 principally driven by subscriber growth, which was partially offset by higher losses at its equity affiliates, British Interactive Broadcasting and KirchPayTV. FOXTEL’s increases were driven by a 17% growth in the number of subscribers. Some of Fox Sports’ domestic associates experienced increased subscribers and higher advertising revenues, which more than offset the increased expenses and reduced advertising revenues of other associates.

 

Net profit (loss) attributable to members of the parent entity was a loss of A$746 million in fiscal 2001 as compared to income of A$1,921 million in fiscal 2000. The decrease primarily relates to losses incurred for the restructuring of the Healtheon/WebMD transaction, the write-off of the One.Tel investment and increased new media related investment write-downs during fiscal 2001. In addition, prior year’s net other items after tax included a non-recurring gain recognized on the initial public offering of NDS Group plc (“NDS”).

 

 

Change in Accounting Policy

 

At the beginning of fiscal 2001, the Group, under both A-GAAP and US-GAAP, adopted Statement of Position (“SOP”) 00-2, “Accounting by Producers or Distributors of Films,” (“SOP 00-2”), which established new accounting standards for producers and distributors of films and supersedes Statement of Financial Accounting Standards No. 53. SOP 00-2 establishes new accounting standards for, among other things, marketing and development costs. Effective July 1, 2000, the Group recorded a one-time, non-cash charge of A$1,107 million as a change in accounting policy before tax. Under US-GAAP the charge of A$686 million, net of A$421 million tax, is included in the consolidated statement of operations as a cumulative effect of accounting change. This charge primarily reflects the write-off of marketing and certain development costs in accordance with SOP 00-2. Subsequent to the adoption of SOP 00-2, the Group’s accounting policy, under both A-GAAP and US-GAAP, is to expense marketing and certain development costs as incurred.

 

 

Filmed Entertainment

 

Revenues increased A$526 million or approximately 9% from A$6,269 million in fiscal 2000 to A$6,795 million in fiscal 2001. Operating income increased to A$487 million in fiscal 2001 as compared to A$155 million in fiscal 2000, an increase of approximately 214%. The fiscal 2001 results included the strong worldwide theatrical and video performance of X-Men, strong growth in video catalog sales primarily due to growth in the DVD market, the broadcast network release of Titanic and the solid performance of releases in international free television markets. These results were partially offset by losses from Monkeybone, The Legend of Bagger Vance and Say It Isn’t So. At the beginning of fiscal 2001, the Group adopted SOP 00-2 changing its film accounting policies; accordingly operating income was further offset by the releasing costs for Moulin Rouge, Dr. Dolittle 2, Planet of the Apes and Kiss of the Dragon, which are now, under SOP 00-2, expensed as incurred.

 

 

14

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These results are compared to fiscal 2000 results, which included the poor performances of Brokedown Palace, Anna and the King, Light It Up, Bartok and Titan AE.

 

TCFTV completed another highly successful year by maintaining its position as the leading supplier of prime time shows to the networks, with 24 series being picked up for the Fall 2001 season including eight new shows. TCFTV also has four series entering syndication at the end of the first quarter of fiscal 2002, including The Practice, King of the Hill, Buffy the Vampire Slayer and Ally McBeal. During fiscal 2001, TCFTV increased operating results primarily due to greater gross profit from The Practice due to the renegotiated license fees and from Buffy the Vampire Slayer due to increased international and home video.

 

 

Television

 

Revenues increased A$1,149 million, or approximately 20%, from A$5,689 million in fiscal 2000 to A$6,838 million in fiscal 2001. Operating income decreased to A$1,007 million, or approximately 13%, in fiscal 2001 from A$1,153 million in fiscal 2000. Operating results were greatly affected by the negative impact of the weak advertising market in the United States and increased programming, broadcasting and news costs at FTS, as well as the approximate A$132 million loss at FOX resulting from the short duration and lower ratings of the MLB post-season divisional play-offs and World Series in October 2000.

 

At STAR continued increases in both advertising and subscriber revenues contributed to overall revenue growth for fiscal 2001 as compared to fiscal 2000. A strong advertising market primarily in India at STAR Plus drove this growth. These revenue gains were partially offset by higher spending on local language programming and popular movies, which were acquired to further drive the platform’s distribution and ratings.

 

 

Cable Network Programming

 

Revenues of A$2,696 in fiscal 2001 increased significantly over fiscal 2000 revenues of A$2,005 million due to a combination of subscriber growth and advertising revenue increases primarily at FX and Fox News. Operating income was reported at A$197 million as compared to A$120 million in fiscal 2000. These significant increases relate primarily to the improved operating performance at Fox News, as well as higher earnings from FX, partially offset by lower contributions from the RSNs. Fox News generated positive operating income for the year as compared to losses in the prior year. Improved results were driven by significant gains in subscriber base and advertising revenues from higher pricing and improved ratings. The Fox News currently has approximately 68 million cable and DBS households, up from 51 million in the prior year. At Fox Sports Networks, increased pricing related to advertising revenues and higher average rates per subscriber related to affiliate and DTH revenues, combined with a growing subscriber base, drove up revenues at FX. These increased revenues were partially offset by increased operating expenses related to an increased number of professional sports events and higher average rights fees associated with new professional sports rights agreements at the RSNs. These revenues were further offset by first-year broadcast costs associated with the recently completed MLB cable deal and NASCAR events at the RSNs and at FX, respectively.

 

 

Magazines and Inserts

 

Revenues of A$1,675 million in fiscal 2001 were approximately 6% higher than the A$1,585 million reported in fiscal 2000. Operating income increased from A$411 million to A$437 million in fiscal 2001. These increases are a result of beneficial foreign exchange fluctuations. In local currency, these results reflect lower packaged goods advertising pages and lower advertising rates for the free-standing inserts business. In-store’s results reflect decreased instant coupon machine revenues.

 

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Newspapers

 

Revenues increased approximately 3%, from A$4,448 million in fiscal 2000 to A$4,600 million in fiscal 2001. Operating income increased by 4% to A$904 million in fiscal 2001. The U.K. newspapers primarily drove improved fiscal 2001 results. At the U.K. newspapers, higher advertising revenues due to strong yield and increased classified advertising, particularly at The Sunday Times and The Sun, were partially offset by increased editorial and production costs. Also offsetting these gains, were increased editorial and promotional expenses at the Australian newspapers, which was used to bolster circulation and advertising sales in the lead-in to the Olympics.

 

 

Book Publishing

 

Revenues increased approximately 17% from A$1,634 million in fiscal 2000 to A$1,907 million in fiscal 2001. Operating income was A$205 million, a 45% increase over the prior year’s income of A$141 million. The segment’s growth is related to higher margin title sales following the acquisition of William Morrow & Company and Avon Books businesses, which were acquired in fiscal 2000. The Group enjoyed particularly strong performances from Children’s Books, HarperCollins UK and Zondervan.

 

 

Net loss from associated entities

 

Net loss from associated entities of A$249 million decreased A$49 million from A$298 million in fiscal 2000.

 

		For the year ended June 30,
		2001				2000				Change				% Change
		(in millions)
The Group’s share of the profit (loss) after income tax of its associated entities consist principally of:
BSkyB		A$	(76	)		A$	(150	)		A$	74			49	%
Stream			—				—				—			—
Sky Latin America:
Net Sat Servicos Ltda (Brazil)			(101	)			(71	)			(30	)		(42	)%
Innova, S. de R.L. de C.V. (Mexico)			(52	)			(57	)			5			9	%
Other			(63	)			(40	)			(23	)		(58	)%
Fox Sports Domestic Cable (USA)			89				56				33			59	%
FOXTEL			(11	)			(12	)			1			8	%
ESPN Star Sports			(23	)			(25	)			2			8	%
Other associated entities			75				71				4			6	%
Operating (loss) after income tax before other items		A$	(162	)		A$	(228	)		A$	66			29	%
Other items after income tax			(87	)			(70	)			(17	)		(24	)%
Operating (loss) after income tax and other items		A$	(249	)		A$	(298	)		A$	49			16	%

 

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The lower net loss was primarily due to the increased results of BSkyB, the domestic associates of Fox Sports Networks, and FOXTEL, partially offset by decreased results of certain Sky Latin America satellite platforms and STAR’s associates. BSkyB reported higher results for fiscal year 2001 principally driven by subscriber growth, which was partially offset by higher losses at its equity affiliates, British Interactive Broadcasting and KirchPayTV. FOXTEL’s increases were driven by a 17% growth in subscribers. Some of Fox Sports’ domestic associates experienced increased subscribers and higher advertising revenues, which more than offset the increased expenses and reduced advertising revenues of other associates.

 

 

Net borrowing costs

 

Net borrowing costs increased to A$935 million in fiscal 2001 from A$814 million in fiscal 2000. As most outstanding obligations are denominated in US dollars, the weakened US dollar against the Australian dollar resulted in an increase in net borrowing costs.

 

 

Other items before tax

 

Other items before tax was a loss of A$1,274 million in fiscal 2001 as compared to income of A$1,186 million in fiscal 2000. The decrease primarily relates to losses incurred for the restructuring of the Healtheon/WebMD transaction, the write-off of the One-Tel investment and increased new media related investment write-downs during fiscal 2001. In addition, prior year’s net abnormal items after tax included a non-recurring gain recognized on the initial public offering of NDS.

 

 

Net income tax benefit (expense)

 

Net income tax expense of A$679 million during fiscal 2000 decreased to a benefit of A$12 million during fiscal 2001. Net income tax benefit of A$12 million during fiscal 2001 differs from a benefit of A$106 million that would have been recognized if the statutory rate had been used without adjustments. This difference was primarily due to foreign income being taxed at a higher rate than the statutory rate.

 

 

Liquidity and Capital Resources

 

The Group’s principal sources of cash flow are internally generated funds. As additional sources of funding, the Group has access to the worldwide capital markets, an unused A$3.0 billion Revolving Credit Facility (the “Revolving Credit Agreement”) and various film financing alternatives and as of June 30, 2002, the Group had consolidated cash and cash equivalents of A$6.3 billion. Management of the Group believes that funds available from cash flows from operations and alternative sources will be adequate for the Group to conduct its operations. The Group’s internally generated funds are highly dependent upon the state of the advertising market and public acceptance of film products. Any significant decline in the advertising market or the performance of its films could adversely impact its cash flows from operations.

 

The principal uses of cash flow that affect the Group’s liquidity position include the following: investments in the production and distribution of new feature films and television programs, the acquisition of and payments under programming rights for entertainment programming and sporting events, operational expenditures, capital expenditures, investments in associated entities, interest expense and income tax payments.

 

Cash flows provided by operating activities during the fiscal years ended June 30, 2000, 2001 and 2002 were A$533 million, A$920 million and A$3,078 respectively. During the year ended June 30, 2002, higher operating profit of A$449 million, decreased inventories due to higher amortization as compared to investments in the production of new feature films and television programs and

 

17

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increased collections on receivables at Fox Broadcasting Company contributed to the increase in cash provided by operating activities. The increase in cash from operating activities in 2001 as compared to fiscal 2000 was primarily due to a lower overall investment in certain working capital items.

 

Cash used in investing activities were A$1,487 million, A$1,779 million, while cash provided by investing activities was A$400 million for the years ended June 30, 2000, 2001 and 2002, respectively. The year ended June 30, 2002 included proceeds from the sales of FFW and Outdoor Life, partially offset by investments in Stream, National Geographic Channels and the Latin American pay television platforms. Investing activities in fiscal 2001 were A$292 million greater than fiscal 2000 primarily due to A$442 million increase in capital expenditures related to the construction of the new printing plant facility for the New York Post.

 

Cash flows used in financing activities were A$2,333 million during fiscal year 2002. Fiscal 2001 had cash flows provided by financing activities of A$1,188 million. Fiscal 2000 had cash flows used in financing activities of A$2,631 million. During fiscal year 2002, the Group redeemed A$1,639 million of debt and A$443 million related to the settlement of the MCI and other obligations. Financing activities in fiscal 2001 included A$1,496 million in proceeds from the issuance of A$2,994 million maturity value of Liquid Yield Option Notes (“LYONs”) due in 2021 and a lower buyback of preferred shares as compared to the prior year.

 

In May 1993, News Corporation entered into a US$2.0 billion Revolving Credit Agreement, as amended. The Revolving Credit Agreement and the indentures governing certain debt instruments (the “Indentures”) each contain various covenants affecting News Corporation. Covenants and provisions contained in the Revolving Credit Agreements among other things: (i) prohibit the News Corporation Group, as defined in the Revolving Credit Agreement, from incurring indebtedness if at the time of such incurrence a default under the Revolving Credit Agreement has occurred and is still continuing; (ii) require the News Corporation Group to maintain certain financial ratios; and (iii) limit certain corporate acts of the News Corporation Group, such as the creation of liens and the entrance into transactions with affiliates. Among other things, the Indentures limit News Corporation’s ability to (i) incur, issue, assume, guarantee or otherwise become liable with respect to indebtedness; (ii) purchase, redeem or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, and subordinated indebtedness; (iii) enter into transactions with affiliates; (iv) make investments (but such limitation applies only to investments in affiliates); (v) create, assume, incur or suffer to exist liens on property; (vi) use the proceeds from asset sales; and (vii) pay dividends or make distributions.

 

The Revolving Credit Agreement permits borrowings of U.S. dollars, the British pounds sterling and Australian dollars; the three principal currencies of the Group’s operations. These currencies operate as the functional currency for the Group’s U.S., U.K. and Australian operations, respectively. Cash is managed centrally within each of the three countries with net earnings reinvested locally and working capital requirements met from existing liquid funds. To the extent such funds are not sufficient to meet working capital requirements, drawdowns in the appropriate local currency are available under the Revolving Credit Agreement. For additional information regarding our foreign currency position and the management of our foreign currency exchange risk, see ITEM 11 “Quantitative and Qualitative Disclosure about Market Risk”.

 

News Corporation was in compliance with all covenants and had satisfied all financial ratios and tests contained in its long-term debt obligations as of June 30, 2002 and expects to remain in compliance and satisfy all such financial ratios and tests. News Corporation expects that compliance with the covenants contained in its long-term debt obligations will not have a material adverse effect on its business and operations.

 

As of June 30, 2002, News Corporation’s debt ratings, by Moody’s (Ba1 for subordinated

 

18

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notes and Baa3 for senior unsecured notes) and Standard & Poors (BBB-) were within the investment grade scale.

 

As of June 30, 2002, News Corporation had A$6,337 million of funds on deposit and A$3,546 million available unrestricted credit facilities, primarily under the Revolving Credit Agreement.

 

 

Redemptions of Debt

 

During fiscal year 2002, the Group redeemed A$1,639 million of debt. The Group recognized an aggregate loss of approximately A$111 million on the following early extinguishments of debt.

 

·

In December 2001, the Group completed its offer to purchase for cash all of its outstanding US$300 million aggregate principal amount of 10 1/8% Senior Debentures due 2012 (the “Debentures”). Approximately 90% of these Debentures were tendered and accepted for payment.

 

·

In February 2002, the Group redeemed all of its outstanding US$170 million aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2006.

 

·

In March 2002, the Group offered to purchase for cash any and all of its outstanding US$500 million aggregate principal amount of 8 5/8% Senior Notes due 2003. Approximately 92% of these Notes were tendered and accepted for payment.

 

·

In March 2002, the Group redeemed its entire outstanding A$15 million aggregate principal amount of Zero Coupon Exchangeable Notes due in March 2002.

 

Additionally, in June 2002, the Group and Fox Sports Networks, irrevocably called for redemption of all of the outstanding 8.875% Senior Notes and the 9.75% Senior Discount Notes. The Group recognized a loss of A$80 million on this irrevocable early extinguishment of debt.

 

19

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The Group has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. The following table summarizes the Group’s material firm commitments at June 30, 2002 and the timing of such obligations in future periods.

 

		Payments Due by Period
		1 year			2-3 years			4-5 years			After 5 years			Total
		(In millions)
Contracts for Capital Expenditure
Buildings		A$	16		A$	—		A$	—		A$	—		A$	16
Plant and machinery			127			18			3			1			149
		A$	143		A$	18		A$	3		A$	1		A$	165
Operating Leases (a)
Land and buildings		A$	284		A$	505		A$	440		A$	2,445		A$	3,674
Plant and machinery			48			49			22			8			127
		A$	332		A$	554		A$	462		A$	2,453		A$	3,801
Other Commitments
Unsecured loans payable (b)		A$	1,799		A$	887		A$	—		A$	12,605		A$	15,291
Term loans (b)			57			93						—			150
Exchangeable preferred securities (b)			—			—			—			1,690			1,690
New Millennium II Preferred Interest			1,021			424			62			—			1,507
News America Marketing (c)			59			80			6			—			145
Major League Baseball (d)			592			1,356			1,589			—			3,537
National Football League (e)			1,020			2,642			1,445			—			5,107
National Association Stock Car Auto Racing (f)			356			879			950			688			2,873
Cricket (g)			174			149			406			—			729
Commitment for purchase of TV Station (h)			754			—			—			—			754
Other programming commitments (i)			1,573			1,554			1,196			2,753			7,076
Other obligations			452			653			175			333			1,613
		A$	7,857		A$	8,717		A$	5,829		A$	18,069		A$	40,472
Total commitments, borrowings and contractual obligation		A$	8,332		A$	9,289		A$	6,294		A$	20,523		A$	44,438

 

20

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The Group also has certain contractual arrangements in relation to certain associates that would require the Group to make payments or provide funding if certain circumstances occur (“contingent guarantees”). The Group does not expect that these contingent guarantees will result in any amounts being paid by the Group in the foreseeable future. The timing of the amounts presented in the table below reflect when the maximum contingent guarantees will expire and does not indicate that the Group expects to incur an obligation to make payments during that time frame.

 

		Amount of Commitment Expiration Per Period
		1 year			2-3 years			4-5 years			After 5 years			Total
		(In millions)
FOXTEL (j)		A$	12		A$	24		A$	24		A$	148		A$	208
STAR (k)			77			76			—			—			153
Transponder leases guarantees (l)			55			110			104			406			675
Chicago RSN (m)			76			165			186			1,434			1,861
Star Channel Japan (n)			48			—			42			—			90
		A$	268		A$	375		A$	356		A$	1,988		A$	2,987

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(a)

The Group leases transponders, office facilities, warehouse facilities, equipment and microwave transmitters used to carry its broadcast signals. These leases, which are classified as operating leases, expire at various dates through 2016. In addition, the Group leases various printing plants which expire at various dates through 2094.

 

(b)

TNCL has guaranteed borrowings of controlled entities of A$15,441 million (2001—A$18,805 million). Additionally, TNCL has film distribution agreement guarantees in respect of controlled entities of A$1,507 million (2001—A$1,663 million). Under the terms of deeds of indemnity, any deficiency of funds, if any Australian wholly-owned controlled entity is wound up, will be met by the parent entity.

 

(c)

News America Marketing (“NAM”), a leading provider of in-store marketing products and services primarily to consumer packaged goods manufacturers, enters into minimum guarantee agreements with retailers.

 

(d)

The Group’s six-year contract with MLB grants the Group rights to telecast certain regular season and all post-season MLB games. The contract began with the 2001 MLB season and ends with the 2006 MLB season. The remaining future scheduled payments for telecast rights to such MLB games aggregated approximately A$3,537 million as of June 30, 2002 before sublicense fees are considered. For the duration of its contract with MLB, the Group has sublicensed telecast rights to certain MLB post-season games to the The Walt Disney Company (“Disney”), and is entitled to be paid the remaining sublicense fee aggregating A$1,046 million over the remaining term. The amounts reflected on this schedule have not been reduced by the sublicense.

 

(e)

Under the Group’s eight-year contract with the NFL through 2006, which contains certain termination clauses, remaining future minimum payments for program rights to broadcast certain football games aggregated approximately A$5,107 million as of June 30, 2002, and are payable over the remaining five-year term of the contract assuming no early terminations.

 

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(f)

The Group’s contracts with NASCAR, which contains certain termination clauses, gives the Group rights to broadcast certain NASCAR races through fiscal 2009 and exclusive NASCAR content rights as well as the NASCAR brand to be exploited with a new NASCAR cable channel or the existing Speed Channel through fiscal 2013. The remaining future minimum payments aggregated approximately A$2,873 million as of June 30, 2002 and are payable over the terms assuming no early terminations.

 

(g)

The Group has acquired the exclusive rights to transmit and exploit the signals for the 2003 and 2007 Cricket World Cups and other related International Cricket Council (“ICC”) cricket events for a minimum guarantee of A$887 million through fiscal 2008. The Group has guaranteed this contract and has been granted the right of first refusal and the last right to match for the broadcast rights in their respective territories. As of June 30, 2002, the remaining minimum guarantee is A$729 million over the remaining term.

 

(h)

In June 2002, the Group entered into an agreement to acquire WPWR-TV in Chicago from Newsweb Corporation for A$754 million. This acquisition closed in August 2002.

 

(i)

The Group’s minimum commitments and guarantees under certain other programming, players, licensing and other agreements aggregated approximately A$7,076 million at June 30, 2002, which are payable principally over a five-year period.

 

(j)

The Group, Telstra Corporation Limited (“Telstra”) and Publishing and Broadcasting Limited (“PBL”) are participants in a partnership known as FOXTEL, which has established a Pay TV operation in Australia. FOXTEL has entered into long-term channel supply agreements with various parties for exclusive rights to their programming. News Corporation and Telstra have severally guaranteed minimum subscriber payments under certain agreements entered into by FOXTEL, and PBL has provided the Group with an indemnity for 50% of the liability of the Group. These agreements prescribe payments of approximately A$832 million, for future programming based on subscriber numbers subject to minimal annual payment. The Group has included 25% of these prescribed payments as a commitment.

 

(k)

The Group has guaranteed certain sports rights contracts for certain associated entities of STAR. The aggregate of the guarantees is approximately A$153 million (2001—A$213 million) and extend to May 2004.

 

(l)

News Corporation has guaranteed various transponder and other leases for certain associated entities operating in Latin America. The aggregate of these guarantees is approximately A$675 million (2001—A$759 million) and extends to 2019.

 

(m)

The Group has guaranteed various sports rights agreements for certain associated entities. The aggregate of these guarantees is approximately A$1,861 million and extends through 2019.

 

(n)

The Group has guaranteed a bank loan facility of A$89 million for Star Channel Japan. The facility covers a term loan of A$42 million which matures in September 2005 and an agreement for overdraft of A$48 million.

 

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New Millennium II

 

On March 30, 2001, the Group’s film distribution arrangement with New Millennium Investors, LLC (“New Millennium”) expired. The Group acquired the outstanding equity of New Millennium and repaid all of New Millennium’s existing debt, resulting in the acquisition of film inventories of A$1,314 million and elimination of current and non-current payables of A$237 million.

 

Concurrently, the Group entered into a new series of film rights agreements whereby a controlled consolidated subsidiary of the Group, Cornwall Venture LLC (“NM2”), that holds certain library film rights, funds the production or acquisition costs of all eligible films, as defined, to be produced by Twentieth Century Fox Film Corporation (“TCF”), a subsidiary of the Group, between 2001 and 2004 (these film rights agreements are collectively referred to as the “New Millennium II Agreement”). NM2 is a separate legal entity from the Group and TCF and has separate assets and liabilities. NM2 issued a preferred limited liability membership interest (“Preferred Interest”) to a third party to fund the film financing, which is presented on the Consolidated Statement of Financial Position as outside equity interests in controlled entities. The Preferred Interest has no fixed redemption rights but is entitled to an allocation of the gross receipts to be derived by NM2 from the distribution of each eligible film. Such allocation to the extent available based on gross receipts from the distribution of the eligible films consists of (a) a return on the Preferred Interest (the “Preferred Payments”), based on certain reference rates (generally based on US commercial paper rates or LIBOR) prevailing on the respective dates of determination, and (b) a redemption of the Preferred Interest, based on a contractually determined amortization schedule. The Preferred Interest has a preference in the event of a liquidation of NM2 equal to the unredeemed portion of the investment plus any accrued and unpaid Preferred Payments. The Group owns the controlling equity interest in NM2. Accordingly, NM2 is consolidated as the Group has control over the strategic and operational decisions of NM2 and control of all film rights held by NM2.

 

The net change in Preferred Interests outstanding was A$14 million and A$1,662 million for the years ended June 30, 2002 and 2001, respectively. These amounts were comprised of issuances by the Group of additional Preferred Interests under the New Millennium II Agreement in the amount of A$1,165 million and A$259 million and redemptions by the Group of Preferred Interests of A$1,151 million and A$83 million during fiscal years 2002 and 2001, respectively. The original issuance of Preferred Interests was A$1,486 million in fiscal 2001.

 

At June 30, 2002, there was A$1,507 million (2001—A$1,663 million) of Preferred Interests outstanding, which is included in the Statement of Financial Position as outside equity interest in controlled entities, with the Preferred Payments recorded in the Statements of Financial Performance as outside equity interest.

 

A Ratings Trigger Event for the above agreement would occur if the Group’s debt rating:

 

(i)

(a) falls below BB+ and below Ba1, or (b) falls below BB, or (c) falls below Ba2, or (d) it is not rated by both rating agencies, and, in each case the Group has not, within ten business days after the occurrence of such event, provided credit enhancement so that the resulting agreement is rated at least BB+ and Ba1, or

 

(ii)

(a) falls below BBB- and Baa3, or (b) it is not rated by both rating agencies, and, in each case, more than A$44 million in capital payments redeemable at that time from film gross receipts remain unredeemed for at least one quarter.

 

If a Ratings Trigger Event were to occur then (a) no new film will be transferred, (b) rights against certain film assets may be enforced, and (c) the Preferred Interest may become redeemable.

 

During fiscal 2002, no Ratings Trigger Event occurred. If a Ratings Trigger Event were to occur, then A$754 million (or approximately 50% of the outstanding balance as of June 30, 2002) may be payable immediately. The balance of the redemption would be payable to the extent of future gross receipts from films that had been transferred to NM2.

 

23

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Acquisitions and Dispositions

 

WebMD

 

As a result of the restructuring of the Group’s investment in the Healtheon WebMD Corporation (“WebMD”), the Group swapped out of its preferred stock investment and recognized an impairment loss on its remaining common stock interest in WebMD. In exchange for the preferred shares the Group received the ownership interest in the Health Network (“THN”), warrants to purchase additional common stock in WebMD, a reduction in its obligation to provide future media services to and license content from WebMD and the elimination of future funding commitments to an international joint venture. The Group recorded a non-cash charge of approximately A$426 million related to this restructuring. In June 2001, the Group sold its investment in THN to a third party for consideration valued at A$433 million.

 

RSN North

 

In February 2001, Fox Sports Networks acquired certain assets and liabilities constituting the business of Midwest Sports Channel, a regional sports network serving the Minneapolis, Minnesota and Milwaukee, Wisconsin metropolitan areas, pursuant to an Assignment and Assumption Agreement among Fox Sports Networks, Viacom, and Comcast Corporation (“Comcast”) and a Purchase Agreement between Viacom and Comcast for approximately A$79 million.

 

Home Team Sports

 

In February 2001, Fox Sports Networks sold its approximate 34% limited partnership interest in Home Team Sports, in a non-cash exchange for new or amended cable carriage arrangements (the “Carriage Arrangements”) related to the distribution of certain of the Group’s programming services on cable systems. The value ascribed to the Carriage Arrangements was A$89 million and was based upon the value of similar cash transactions that the Group had completed. The Group has recognized a gain of approximately A$80 million related to this transaction for the year ended June 30, 2001.

 

Taiwan Cable Group (“China Network System”)

 

In April 2001, STAR purchased a 20% interest in each of the Koos’ Group’s (“Koos”) 15 cable systems in Taiwan. The aggregate purchase price for this transaction was A$474 million. As of July 2002, STAR had aggregate interests of up to 23% in 17 cable systems throughout Taiwan, including systems affiliated with Koos. The Group accounts for this investment under the equity method of accounting from the date of acquisition. Koos is a leading business group based in Taiwan encompassing finance, telecommunications, entertainment and other businesses.

 

The Golf Channel

 

In June 2001, the Group sold its 31% interest in The Golf Channel to Comcast for a total consideration of approximately A$695 million, of which A$676 million was received in cash during fiscal 2001. The Group recorded a gain on the sale of A$476 million in relation to this transaction.

 

Chris-Craft

 

In July 2001, News Corporation, through a wholly-owned subsidiary, acquired all of the outstanding common stock of Chris-Craft Industries, Inc. and its subsidiaries, BHC Communications, Inc. and United Television, Inc., (collectively, “Chris-Craft”). The consideration for the acquisition was approximately A$3.5 billion in cash and the issuance of 68,854,209 News Corporation American Depositary Receipts representing 275,416,836 preferred limited voting ordinary shares (“ADRs”)

 

24

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valued at approximately A$3.5 billion. Simultaneously with the closing of the acquisition, News Corporation transferred A$4,438 million of certain net assets, constituting Chris-Craft’s ten television stations (the “Acquired Stations”) to its majority owned subsidiary, FEG, in exchange for 122,244,272 shares of FEG’s Class A Common Stock (the “Exchange”), thereby increasing the Group’s ownership in FEG from 82.76% to 85.25%. FEG assigned the licenses issued by the FCC for the Acquired Stations to its indirect subsidiary, Fox Television Stations, Inc., which became the licensee and controls the operations of the Acquired Stations. The Group acquired Chris-Craft and transferred to FEG the Acquired Stations in order to strengthen FEG’s existing television station business.

 

FEG consolidated the operations of the Acquired Stations, as of the date of Exchange, July 31, 2001, with the exception of KTVX-TV in Salt Lake City, whose operations were not consolidated prior to the Exchange due to regulatory requirements which precluded FEG from controlling the station and required its disposal (see description of Clear Channel swap below).

 

In October 2001, the Group exchanged KTVX-TV in Salt Lake City and KMOL-TV in San Antonio with Clear Channel Communications, Inc. for WFTC-TV in Minneapolis (the “Clear Channel swap”). In addition, on November 1, 2001, the Group exchanged KBHK-TV in San Francisco with Viacom Inc. for WDCA-TV in Washington, DC and KTXH-TV in Houston (the “Viacom swap”). In June 2002, the Group exchanged KPTV-TV in Portland, an Acquired Station, for Meredith Corporation’s WOFL-TV in Orlando and WOGX-TV in Ocala (the “Meredith swap”, and together with the Viacom and Clear Channel swaps, the “Station Swaps”). All of the stations exchanged in the Station Swaps were Acquired Stations. The stations received in the Station Swaps have been independently appraised at the same fair values as those Acquired Stations that were exchanged. Accordingly, no gain or loss was recognized by the Group as a result of the Station Swaps.

 

Speed Channel

 

In July 2001, as a result of the exercise of rights by existing shareholders, the Group acquired an additional 53.44% of Speedvision Network, LLC, now Speed Channel, Inc. (“Speed Channel”) for approximately A$789 million. This acquisition resulted in the Group owning approximately 85.46% of Speed Channel. As a result, the Group has consolidated the results of Speed Channel beginning in July 2001. In October 2001, the Group acquired the remaining 14.54% minority interest in Speed Channel for approximately A$221 million bringing the Group’s ownership percentage to 100%.

 

Outdoor Life

 

In July 2001, as a result of the exercise of rights by existing shareholders of Outdoor Life Network LLC (“Outdoor Life”), the Group acquired 50.23% of Outdoor Life for approximately A$608 million. This acquisition resulted in the Group owning approximately 83.18% of Outdoor Life. In October 2001, a shareholder of Outdoor Life acquired the Group’s ownership interest in Outdoor Life for approximately A$977 million in cash. Upon the closing of the sale of the Group’s ownership interest in Outdoor Life, the Group recognized a gain of A$271 million.

 

Fox Family Worldwide

 

In October 2001, FOX, Haim Saban and the other stockholders of FFW, sold FFW to Disney for total consideration of approximately A$10.3 billion (including the assumption of certain debt) of which approximately A$3.2 billion was in consideration of the Group’s interest in FFW. As a result of this transaction, the Group recognized a gain of approximately A$2.3 billion before tax and minority interest. In addition, the Group sublicensed certain post-season MLB games through the 2006 MLB season to Disney for aggregate consideration of approximately A$1.2 billion, payable over the entire period of the sublicense.

 

25

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Fox Sports International

 

The Group and Liberty Media Corporation (“Liberty”) at June 30, 2001 each owned 50% of Fox Sports International. In July 2001, under a pre-existing option, Liberty exercised its right to sell its 50% interest in Fox Sports International to the Group in exchange for an aggregate 3,673,183 News Corporation ADRs representing 14,692,732 preferred limited voting ordinary shares valued at approximately A$180 million. The transaction closed in December 2001. Under the terms of this transaction, the Group transferred the acquired interest in Fox Sports International to FEG in exchange for the issuance of 3,632,269 shares of FEG Class A Common Stock. This issuance increased the Group’s equity interest in FEG from 85.25% to 85.32%, while its voting interest remained at 97.8%.

 

Sunshine

 

In January 2002, the Group acquired an additional 23.3% voting interest in Sunshine Networks (“Sunshine”) for approximately A$41.3 million. This resulted in the acquisition of a controlling financial interest in Sunshine and increased the Group’s ownership percentage in Sunshine to approximately 93%. In February 2002, the Group acquired an additional approximate 0.4% interest in Sunshine. Since the Group obtained a controlling financial interest upon acquisition in January 2002, Sunshine has been consolidated into the Cable Network Programming segment of the Group as it is now under the control of the Group.

 

Contingencies

 

Regional Programming Partners

 

In December 1997, Rainbow Media Sports Holdings, Inc. (“Rainbow”) (a subsidiary of Cablevision Systems Corporation (“Cablevision”), and Fox Sports Net, Inc. (“Fox Sports Net”) (a subsidiary of the Group) formed Regional Programming Partners (“RPP”) to hold various programming interests in connection with the operation of certain RSNs (“Rainbow Transaction”). Rainbow contributed various interests in RSNs, the Madison Square Garden Entertainment Complex, Radio City Music Hall, the New York Rangers NHL franchise, and the New York Knickerbockers NBA franchise, to RPP in exchange for a 60% partnership interest in RPP, and Fox Sports Net contributed A$1,295 million in cash for a 40% partnership interest in RPP.

 

Pursuant to the RPP partnership agreement upon certain actions being taken by Fox Sports Net, Rainbow has the right to purchase all of Fox Sports Net’s interests in RPP. The buyout price will be the greater of (i) (a) A$3.768 billion, increased by capital contributions and decreased by capital distributions, times Fox Sports Net’s interest in RPP plus (b) an 8% rate of return on the amount in (a) and (ii) the fair market value of Fox Sports Net’s interest in RPP. Consideration will be, at Rainbow’s option, in the form of cash or a three-year note with an interest rate of prime plus ½%. In addition, for 30 days following December 18, 2002 and during certain periods thereafter, so long as RPP has not commenced an initial public offering of its securities, Fox Sports Net has the right to cause Rainbow to, at Rainbow’s option, either (i) purchase all of Fox Sports Net’s interests in RPP or (ii) consummate an initial public offering of RPP’s securities. The purchase price will be the fair market value of Fox Sports Net’s interest in RPP and the consideration will be, at Rainbow’s option, in the form of marketable securities of certain affiliated companies of Rainbow or a three-year note with an interest rate of prime plus ½%.

 

In connection with the Rainbow Transaction, Rainbow and Fox Sports Net formed National Sports Partners (“NSP”) in which each of Rainbow and Fox Sports Net were issued a 50% partnership interest to operate Fox Sports Net (“FSN”), a national sports programming service that provides its affiliated RSNs with 24 hour per day national sports programming. In addition, Rainbow and Fox Sports Net formed National Advertising Partners (“NAP”), in which each of Fox Sports Net and Rainbow were issued a 50% partnership interest, to act as the national advertising sales representative for the Fox Sports Net-owned RSNs and the RPP-owned and managed RSNs. Independent of the arrangements discussed above relating to RPP, for 30 days following December 18, 2002 and during

 

26

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certain periods thereafter, so long as NSP and NAP have not commenced an initial public offering of its securities, Rainbow has the right to cause Fox Sports Net to, at Fox Sports Net’s option, either (i) purchase all of Rainbow’s interests in NSP and NAP, or (ii) consummate an initial public offering of NSP’s and NAP’s securities. The purchase price will be the fair market value of Rainbow’s interest in NSP and NAP and the consideration will be, at Fox Sports Net’s option, in the form of marketable securities of certain affiliated entities of Fox Sports Net or a three-year note with an interest rate of prime plus ½%.

 

AWAS

 

During 2000, the Group sold all of its interest in AWAS. Following the sale, the Group received an indemnity from the acquirer of its interest in AWAS against the contingent liability under the guarantees of certain leveraged lease transactions. These guarantees total A$nil at June 30, (2001—A$322 million) 2002 as the liabilities were fully satisfied during the year at no cost to the Group.

 

Other

 

Various claims arise in the ordinary course of business against controlled entities. The amount of the liability (if any) at June 30, 2002 cannot be ascertained, but the Group believes that any resulting liability would not materially affect the financial position of the Group.

 

Subsequent Events

 

NDS

 

In March 2002, Groupe Canal+ Technologies S.A. and Canal+ Technologies Inc., subsidiaries of Vivendi (collectively “Canal+”), filed a lawsuit against NDS Group plc and NDS Americas Inc. (together, “NDS”) in the United States District Court for the Northern District of California, alleging acts of improper conduct, including unfair competition and copyright infringement, in connection with the conditional access systems operated by Canal+. In October 2002, Canal+ and NDS agreed to a stay of all proceedings pending regulatory approval of News Corporation’s acquisition of Telepiu. The action was dismissed with prejudice on May 14, 2003, after consummation of the acquisition. In September 2002, Echostar Communications Corporation and several affiliates (collectively, Echostar) asked the court’s permission to intervene in the action, asserting that they have claims similar to those asserted by Canal+. Additionally, in October 2002, MEASAT Broadcast Network Systems Sendirian Berhad, a Malayasian satellite broadcaster, requested permission to intervene in the action, and in December 2003, Sogecable S.A., owners of Canal Satellite Digital, a Spanish satellite broadcaster and a customer of Canal+, similarly requested permission to intervene. Upon dismissal of the action, the motions to intervene became moot.

 

 

On June 6, 2003, Echostar filed a separate action against NDS in the United States District Court for the Central District of California. The complaint purports to allege claims for violations of the Digital Millennium Copyright Act, the Communications Act of 1934, the Electronic Communications Privacy Act, The Computer Fraud and Abuse Act, California’s Unfair Competition statute and the federal RICO statute. The complaint also purports to allege claims for civil conspiracy, misappropriation of trade secrets and interference with prospective business advantage. The complaint seeks injunctive relief, compensatory and exemplary damages and restitution. The response of NDS to the complaint is not yet due, but NDS believes the claims to be baseless and intends to vigorously defend the action.

 

In September 2002, NDS Group plc and two of its subsidiaries were named as defendants in a lawsuit filed by DIRECTV, Inc. (“DIRECTV”) and certain of its affiliates in the United States District Court for the Central District of California. At DIRECTV’s request, the action was filed under seal. The suit, most of which has now been dismissed (see below), purports to allege misappropriation of trade secrets, breach of contract, fraud and statutory violations relating to NDS’ provision of conditional access services to DIRECTV. The suit sought unspecified damages and injunctive relief. The allegations are substantially similar and related to a complaint in a prior action commenced by DIRECTV that was dismissed with prejudice in February 2002. NDS believes that these allegations as well as the additional ones in the complaint were and are without merit and a pretext designed to enable DIRECTV to circumvent restrictions on DIRECTV’s future use of NDS’ technology and filed a motion to dismiss the claims. In January 2003, Judge Audrey B. Collins of the United States District Court for the Central District of California dismissed most of the claims made by DIRECTV. The Court dismissed in their entirety claims brought by DIRECTV alleging fraud, breach of warranty and violation of the Federal Communications Act. The Court also dismissed the bulk of five other DIRECTV claims, including those for breach of contract, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, and statutory violations. DIRECTV’s remaining claims, which NDS maintains are without merit, relate to one alleged incident of misappropriation of trade secrets. NDS intends to continue to vigorously defend the actions.

 

Additionally, in October 2002, NDS filed counterclaims against DIRECTV and a chip manufacturer, alleging that DIRECTV and the chip manufacturer misappropriated NDS’ trade secrets and proprietary information, conspired to infringe NDS’ patents, colluded to unfairly compete and breached agreements and licenses restricting the use of NDS’ intellectual property. In March 2003, the Court denied in its entirety DIRECTV’s motion to dismiss NDS’ counterclaims, thereby confirming that all NDS’ counterclaims against DIRECTV survive. In April 2003, the parties agreed to stay all proceedings pending efforts to resolve the disputes through mediation, which is ongoing.

 

In October 2002, NDS Americas, Inc. was served with subpoenas by the U.S. Attorney’s office in San Diego, California, seeking documents apparently in connection with an investigation related to Canal+ and EchoStar’s claims. NDS is co-operating with the investigation. NDS was advised by the US Attorney’s Office in San Diego that it is not currently considered either a target or a subject of the investigation. Lead responsibility for the investigation has recently been transferred to the US Attorney’s Office for the Central District of California.

 

27

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WPWR-TV

 

In June 2002, the Group entered into an agreement to acquire WPWR-TV in Chicago from Newsweb Corporation for A$754 million in cash. The acquisition closed in August 2002.

 

Debt Redemption

 

In June 2002, the Group called for redemption of all of the outstanding 9 ³/4% Senior Discount Notes due 2007 and all of the outstanding 8 ⁷/8% Senior Notes due 2007. The redemption was completed in August 2002.

 

FEG

 

In November 2002, FEG sold 50 million shares of its Class A Common Stock pursuant to an underwritten public offering. The net proceeds received by FEG were approximately A$2.1 billion and were used to repay intercompany indebtedness. This offering reduced the Group’s equity ownership and voting percentage in FEG to 80.58% and 97%, respectively, and increased the outside equity interests in controlled entities.

 

Rainbow RSNs

 

In January 2003, Fox Sports Net exercised its right to put its 50% direct ownership interests in SportsChannel Chicago Associates and SportsChannel Pacific Associates (collectively, the “SportsChannels”) to RPP in connection with the Rainbow Transaction (See Note 12). In March 2003, RPP and Fox Sports Net agreed on a A$252 million purchase price for the interest in the SportsChannels, payable in the form of a three-year promissory note of RPP, bearing interest at prime plus 1% and secured by the interests being purchased. The transaction is expected to close in the fourth quarter of fiscal 2003 following receipt of customary regulatory approval. Following the closing of this sale, the SportsChannels will be held 100% by RPP and indirectly 40% by Fox Sports Net and 60% by Rainbow, and each will remain a Fox Sports Net affiliate. This disposition is not expected to have a material effect on the Group’s financial statements taken as a whole.

 

National Football League

 

Under the Group’s eight-year contract with the NFL that expires in 2006, the contract provides the NFL with the option to renegotiate the programming rights to broadcast certain football games at the end of the 2002 football season. This option was not exercised and expired in February 2003.

 

Gemstar-TV Guide

 

For the six months ended December 31, 2002, Gemstar’s market value continued to decline and the Group considered the five factors discussed in Note 20(c) to determine if an additional charge was required. As a result of this review, as at December 31, 2002, the Group recorded a A$551 million charge to reduce the carrying value of the investment in Gemstar-TV Guide to A$6.66 (US$3.75) per share to reflect a decline in value.

 

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In March 2003, Gemstar filed its December 31, 2002 annual report on Form 10-K and also filed amended and restated results for 2001 and 2000 as described in Note 20 (c). Accordingly, the Group has reviewed these restatements to determine the effects on the Group’s consolidated statement of financial position and consolidated statement of financial performance. Because the Group wrote-down its investment in Gemstar to its recoverable amount at December 31, 2002 and June 30, 2002, there is no further impact from Gemstar’s restatements.

 

In addition, because the Group recorded an other-than-temporary decline in value in its investment in Gemstar at both December 31, 2002 and June 30, 2002 under US-GAAP, the Group’s investment in Gemstar was recorded at its approximate fair value. Therefore, the Gemstar restatements did not have an effect on the Group’s consolidated condensed balance sheets and consolidated condensed statements of operations and cash flows as the Gemstar investment is recorded at its fair value at both December 31, 2002 and June 30, 2002.

 

Debt Refinancing

 

In March 2003, the Group purchased approximately 74% of its outstanding US$500 million aggregate principal 8 ½% Notes due February 2005 (“8 ½% Notes”) at a premium, plus accrued interest. Concurrent with this transaction, the Group issued US$150 million of 4.750% Notes due March 2010 and US$350 million of 6.550% Notes due March 2033 (collectively, “New Notes”) at a discount. Proceeds from the issuance of the New Notes were used to purchase these 8 ½% Notes and for general corporate purposes.

 

BUCS

 

In March and April 2003, News Corporation Finance Trust II issued an aggregate of A$2.79 billion 0.75% Senior Exchangeable BUCS (“BUCS”) representing interests in debentures issued by News America Incorporated and guaranteed on a senior basis by the Group and certain of its subsidiaries. The BUCS will be exchangeable commencing April 2, 2004 into ordinary shares or ADSs of BSkyB based on an exchange ratio of 77.09 BSkyB ordinary shares per US$1,000 original liquidation amount of BUCS. The net proceeds from the BUCS issuances were used to purchase approximately 85% of the Company’s outstanding 5% Exchangeable Trust Originated Preferred Securities (“TOPrS”) from their holders in privately negotiated transactions for approximately A$1,479 million and the balance will be used for general corporate purposes.

 

Liberty Media put/call

 

In March 2003, the Group and Liberty Media Corporation (“Liberty”) entered into an agreement under which Liberty has the right, prior to September 28, 2003, to purchase A$835 million of the Group’s preferred limited voting ordinary ADRs, at A$35.93 (US$21.50) per ADR. If Liberty does not exercise its right, the Group can require Liberty to purchase A$835 million of its preferred limited voting ordinary ADRs, at A$35.93 (US$21.50) per ADR, should the Group acquire an ownership interest in Hughes Electronics Corporation prior to April 2005.

 

Telepiu

 

In April 2003, News Corporation and Telecom Italia acquired Telepiu, S.p.A. (“Telepiu”), Vivendi Universal’s satellite pay-television platform in Italy, for approximately A$1,551 million, consisting of the assumption of A$737 million in outstanding indebtedness and a cash payment of A$814 million.

 

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In the acquisition, Telepiu was merged with Stream S.p.A., and the combined platform was renamed Sky Italia, which is owned 80.1% by News Corporation and 19.9% by Telecom Italia.

 

Hughes Electronics

 

In April 2003, News Corporation, General Motors Corporation (“GM”) and Hughes Electronics Corporation (“Hughes”) reached an agreement in which News Corporation would acquire 34% of Hughes. News Corporation will acquire GM’s approximate 19.9% interest in Hughes for A$6.3 billion, of which A$1,279 million of the consideration may be paid in News Corporation preferred ADRs. News Corporation will acquire through a merger an additional 14.1% of Hughes for approximately A$4.7 billion that is payable, at News Corporation’s option, in cash or News Corporation preferred ADRs. Simultaneously with the closing of this transaction, News Corporation will transfer its 34% ownership interest in Hughes to FEG in exchange for promissory notes representing A$7.5 billion and approximately 74.2 million shares of FEG’s Class A Common Stock, thereby increasing News Corporation’s ownership interest in FEG from 80.6% to approximately 82%. News Corporation’s voting percentage of FEG will remain at 97%. The closing of this transaction is subject to a number of conditions, including approval by GM’s shareholders, a tax ruling and regulatory approvals.

 

Revolving Credit Facility

 

In December 2002, News Corporation reduced the commitments available under the Revolving Credit Agreement from A$3.0 billion to A$2.6 billion.

 

On June 27, 2003, News America Incorporated terminated its existing Revolving Credit Agreement (the “Prior Credit Agreement”) and entered into a new A$2.6 billion Five Year Credit Agreement (the “New Credit Agreement”) with Citibank N.A., as administrative agent, JP Morgan Chase Bank, as syndication agent, and the lenders named therein. News Corporation, FEG Holdings, Inc., Fox Entertainment Group, Inc., News America Marketing FSI, Inc., and News Publishing Australia Limited are guarantors (the “Guarantors”) under the New Credit Agreement. The New Credit Agreement provides a A$2.6 billion revolving credit facility with a sub-limit of A$904 million available for the issuance of letters of credit, and expires on June 30, 2008. On June 27, 2003, letters of credit representing A$179 million were issued under the New Credit Agreement.

 

PanAmSat International Systems

 

In late June 2003, an arbitration award was issued in favor of PanAmSat International Systems against the Group in an amount of approximately A$63 million (which includes pre-judgment interest). The arbitration involved a dispute regarding the termination provisions of an agreement to provide satellite transponder capacity over India. The Group disagrees with the findings of fact and the conclusions of law reached by the arbitrator and, pursuant to the terms of the arbitration agreement between the parties, intends to appeal the award. The Company is in the process of evaluating the impact of the award, and to the extent it deems necessary, will record an amount, net of tax, in the quarter ended June 30, 2003.

 

US-GAAP Reconciliation

 

A-GAAP differs from US-GAAP with respect to News Corporation’s results of operations in a number of significant respects. A comparison of the results for fiscal 2000, 2001 and 2002 under both A-GAAP and US-GAAP is as follows (in millions):

 

		Fiscal Year Ended June 30,
		2000				2001				2002
Revenue
A-GAAP		A$	22,443			A$	25,578			A$	29,014
US-GAAP (a)		A$	22,337			A$	25,387			A$	28,776
Operating income
A-GAAP		A$	2,742			A$	3,093			A$	3,542
US-GAAP		A$	1,509			A$	1,823			A$	256
Net income (loss)
A-GAAP		A$	1,921			A$	(746	)		A$	(11,962	)
US-GAAP		A$	(329	)		A$	(218	)		A$	(14,670	)

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(a)

Under US-GAAP, in November 2001, the Financial Accounting Standards Board (“FASB”) issued Emerging Issues Task Force (“EITF”) No. 01-09, “Accounting for the Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s Products.” This EITF states that the financial statement classification of customer incentives, including the amortization of cable distribution investments over the original term of the cable distribution agreement, should be presented as a reduction in revenue. Under A-GAAP, costs associated with cable distribution investments are reflected as intangible assets. As required, under US-GAAP, effective January 1, 2002, the Group reclassified the amortization of cable distribution investments against revenues. The amortization of cable distribution investments had previously been included in Depreciation and amortization. US-GAAP Operating income, Net income (loss) and Earnings (loss) per share are not affected by this reclassification. The effect of the reclassification on the Group is as follows:

 

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		Years Ended June 30,
		2000				2001				2002
		(in millions)
Gross Revenues		A$	22,451			A$	25,554			A$	28,997
Amortization of cable distribution investments			(114	)			(167	)			(221	)
Revenues			22,337				25,387				28,776

 

As more completely described and quantified in Note 20 to the Consolidated Financial Statements of The News Corporation Limited and Subsidiaries included elsewhere herein, the major differences in each of the periods are: (a) the amortization of intangible assets, (b) the accounting for deferred taxes under the SFAS No. 109, (c) the charge for the market value of the warrants issued in connection with the Exchangeable Preferred Securities, (d) the differences in the recorded net investment of sold properties (basis difference principally arising from the amortization of the associate intangible assets for US-GAAP), (e) costs incurred in the development of major new businesses and (f) the differences in the date of measurement of the fair value of purchase business combinations and investments in associates.

 

News Corporation’s gains or losses on the sale of business entities included in other items under A-GAAP are included in other income (expense) under US-GAAP.

 

US-GAAP New Accounting Pronouncements

 

In June 2001, the FASB issued Statement of Financial Accountability Standards (“SFAS”) No. 141, “Business Combinations” (“SFAS No. 141”) and SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). SFAS No. 141 requires all business combinations to be accounted for by the purchase method and that acquired intangible assets be recognized apart from goodwill if they meet specific criteria. SFAS No. 141 supersedes Accounting Principles Board (“APB”) Opinion No. 16 and is effective for all business combinations initiated after June 30, 2001. SFAS No. 142 eliminates the requirement to amortize goodwill, identifiable intangible assets that have indefinite useful lives and the excess cost of equity investments attributable to such intangibles. However, it requires that goodwill and identifiable intangibles with indefinite lives be tested for impairment at least annually using the guidance specifically provided in the statement. SFAS No. 142 supersedes APB Opinion No. 17 and adopted by the Group on July 1, 2002. While the Group is still in the process of evaluating the overall impact of adopting the provisions of SFAS No. 142, the Group expects that all of its goodwill, a substantial amount of its publishing rights, titles and television licenses and the excess cost of equity investments attributable to indefinite-lived intangibles will no longer be amortized beginning in fiscal 2003 under US-GAAP. In addition, the Group does not currently expect that adoption of SFAS No. 142 will result in a transitional impairment loss that will be material to its consolidated statement of operations under US-GAAP, however, this is subject to a final evaluation of the impact of the adoption.

 

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 establishes an accounting model for impairment or disposal of long-lived assets to be (i) held and used and (ii) disposed of by sale. The Group plans to adopt SFAS No. 144 on July 1, 2002 and does not expect it to have a material impact on its consolidated statements of operations.

 

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 4,

 

31

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“Reporting Gains and Losses from Extinguishment of Debt,” required that gains and losses from extinguishment of debt be classified as an extraordinary item, net of the related income tax effect. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB Opinion No. 30 for classification as an extraordinary item shall be reclassified. SFAS No. 13, “Accounting for Leases,” has been amended to require sale-leaseback accounting for certain lease modifications that are similar to sale-leaseback transactions. The rescission of SFAS No. 4 and the amendment to SFAS No. 13 shall be effective for fiscal years and transactions, respectively, occurring after May 15, 2002. The Group has adopted the provisions of SFAS No. 145. In accordance with SFAS No. 145, all losses relating to the extinguishment of debt are included in Other expense.

 

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses the accounting and reporting for costs associated with exit or disposal activities and nullifies EITFNo. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized at fair market value when the liability is incurred, rather than upon an entity’s commitment to an exit plan, as prescribed by EITF No. 94-3. SFAS No. 146 is effective for exit and disposal activities initiated after December 31, 2002. The Group will adopt SFAS No. 146 on January 1, 2003.

 

Trend Information

 

News Corporation experienced lower growth in advertising revenues for fiscal 2002 as a result of a decline in the general newspaper and television advertising markets which began at the end of fiscal 2001.

 

Inflation has not had a material impact on the Group.

 

The Results of Operations as discussed in this Item 5, reflect any other significant trends which have had a material effect on the financial condition of the Group. Any additional information of note has been included in the Notes to the Consolidated Financial Statements of The News Corporation Limited and Subsidiaries and elsewhere in this report.

 

32

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ITEM 8.    FINANCIAL INFORMATION

 

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

 

The financial statements filed as part of this document are included on pages F-1 to F-97.

 

Legal Proceedings

 

News Corporation has extensive international operations and is a party to a number of pending legal proceedings. News Corporation does not expect that the outcome of such proceedings, either individually or in the aggregate, will have a material effect on its financial statements taken as a whole, nor on its financial condition, liquidity or results of operations.

 

Dividends

 

News Corporation declares dividends on its Ordinary Shares and Preferred Shares from time to time at the discretion of its Board of Directors.

 

Significant Changes

 

Other than those events described in other items in this document, including Item 18: Financial Statements, and fluctuations in borrowings, there have not been any significant changes to our financial condition or results of operations since June 30, 2002.

 

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ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

News Corporation has exposure to several types of market risk: changes in foreign currency exchange rates, interest rates and stock prices. The Group neither holds nor issues financial instruments for trading purposes. The following sections provide quantitative information on the Group’s exposure to foreign currency exchange rate risk, interest rate risk and stock price risk. It makes use of sensitivity analysis and other measures that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.

 

Foreign Currency Exchange Rates

 

News Corporation conducts operations in three principal currencies: the U.S. dollar, the British pound sterling and the Australian dollar. These currencies operate as the functional currency for the Group’s U.S., U.K. and Australian operations, respectively. Cash is managed centrally within each of the three countries with net earnings reinvested locally and working capital requirements met from existing liquid funds. To the extent such funds are not sufficient to meet working capital requirements, drawdowns in the appropriate local currency are available under the Revolving Credit Agreement. Currently, the Group’s foreign (i.e., U.S. and U.K.) operations account for approximately 92% of consolidated revenues, 93% of consolidated operating income and 79% of consolidated assets. However, since earnings of the Group’s U.S. and U.K. operations are expected to be reinvested in those businesses indefinitely, the Group does not hedge its investment in the net assets of those foreign operations.

 

At June 30, 2002 and 2001, the Group’s outstanding financial instruments with foreign currency exchange rate risk exposure had an aggregate fair value of A$15.6 billion and A$18.8 billion, respectively (including the Group’s U.S. dollar-denominated fixed rate debt). The potential decrease in the fair values of these instruments resulting from a 10% adverse change in quoted foreign currency exchange rates would be approximately A$1.8 billion and A$2.2 billion for the fiscal years ended June 30, 2002 and 2001, respectively.

 

Interest Rates

 

The Group’s current financing arrangements and facilities include A$15.3 billion of outstanding debt with fixed interest and an unused Revolving Credit Agreement, which carries variable interest. Fixed and variable rate debts are impacted differently by changes in interest rates. A change in the interest rate or yield of fixed rate debt will only impact the fair value of such debt, while a change in the interest rate of variable debt will impact interest expense as well as the amount of cash required to service such debt. As of June 30, 2002 and 2001, substantially all of the Group’s financial instruments with exposure to interest rate risk was denominated in U.S. dollars and had an aggregate fair value of A$15.5 billion and A$18.6 billion, respectively. The potential change in fair value for these financial instruments from an adverse 10% change in quoted interest rates would be approximately A$889 million and A$1.05 billion for fiscal 2002 and 2001, respectively.

 

Stock Prices

 

The Group has common stock investments in several publicly traded companies that are subject to market price volatility. These investments have an aggregate carrying value of approximately A$14,918 million as of June 30, 2002. A hypothetical decrease in the market price of these investments of 10% would result in a fair value of approximately A$13,426 million. Under US-GAAP, such a hypothetical decrease would result in a decrease in comprehensive income of approximately A$54.9 million.

 

34

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ITEM 18.    FINANCIAL STATEMENTS

 

 

				Page
1.		The News Corporation Limited and Subsidiaries*
		Report of Independent Auditors		F-2
		Consolidated Statements of Financial Performance for the fiscal years ended June 30, 2000, 2001 and 2002		F-3
		Consolidated Statements of Financial Position at June 30, 2000, 2001 and 2002		F-4
		Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2000, 2001 and 2002		F-6
		Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2000, 2001 and 2002		F-9
		Notes to Consolidated Financial Statements		F-10
2.		Fox Entertainment Group, Inc.**
		Report of Independent Public Accountants
		Copy of 2001 Report of Independent Public Accountants
		Consolidated Balance Sheets at June 30, 2002 and 2001
		Consolidated Statements of Operations for the years ended June 30, 2002, 2001 and 2000
		Consolidated Statements of Cash Flows for the years ended June 30, 2002, 2001 and 2000
		Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2002, 2001 and 2000
		Notes to Consolidated Financial Statements
3.		British Sky Broadcasting Group plc***
		Report of the Independent Public Accountants
		Consolidated Profit and Loss Accounts for the years ended
		June 30, 2000, 2001 and 2002
		Consolidated Balance Sheets at June 30, 2001 and 2002
		Consolidated Cash Flow Statements for the years ended June 30, 2000, 2001 and 2002
		Notes to Financial Information

 

35

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4.		Stream S.p.A.***
		Report of Independent Auditors
		Balance Sheets as of December 31, 2000 and 2001
		Statements of Operations for the years ended December 31, 1999, 2000 and 2001
		Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001
		Statements of Shareholders’ Equity for the years ended December 31, 1999, 2000 and 2001
		Notes to Financial Statements
5.		Gemstar—TV Guide International, Inc.*
		Report of Independent Auditors		G-1
		Consolidated Balance Sheets (Restated) as of December 31, 2002		G-2
		Consolidated Statements of Operations (Restated) for the year ended December 31, 2001		G-3
		Consolidated Statements of Stockholders’ (Restated) Equity for the year ended December 21, 2001		G-4
		Consolidated Statements of Cash Flows (Restated) for the year ended December 31, 2001		G-5

 

*

Filed herewith

**

Previously filed on Form 20-F on December 31, 2002

***

Previously filed on Form 6-K on May 20, 2003

 

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ITEM 19.    EXHIBITS

 

 

Number		Description
1.1		Memorandum and Constitution of The News Corporation Limited, as amended on October 18, 1994.1
1.2		Amendments to the Constitution of The News Corporation Limited, dated January 31, 1995 and October 10, 1995.2
1.3		Extract from the Notice of Annual General Meeting of The News Corporation Limited setting forth amendments to its Constitution, adopted at its Annual General Meeting held on October 7, 1997.3
2.1		Amended and Restated Deposit Agreement, dated as of December 3, 1996, among The News Corporation Limited, Citibank, N.A. and the holders from time to time of American Depositary Receipts issued thereunder, representing American Depositary Shares of The News Corporation Limited each representing four Preferred Shares.4
2.2		Amended and Restated Deposit Agreement, dated as of October 29, 1996, among The News Corporation Limited, Citibank, N.A. and the holders from time to time of American Depositary Receipts issued thereunder, representing American Depositary Shares of The News Corporation Limited each representing four Ordinary Shares.5
2.3		Composite Revolving Credit Agreement, dated as of May 19, 1993 (including amendments dated August 9, 1993, September 14, 1993, May 12, 1994, March 30, 1995, February 29, 1996 and December 20, 1996) among News America Incorporated et al, several agents, managers and banks.6
2.4		Amendment No. 7, dated as of June 8, 1998, to the Revolving Credit Agreement dated as of May 19, 1993 (as amended on August 9, 1993, September 14, 1993, May 12, 1994, March 30, 1995, February 29, 1996 and December 20, 1996) among News America Incorporated et al, several agents, managers and banks.7
2.5		Amendment No. 8, dated as of November 22, 2000, to the Revolving Credit Agreement dated as of May 19, 1993 (as amended on August 9, 1993, September 14, 1993, May 12, 1994, March 30, 1995, February 29, 1996, December 20, 1996 and June 8, 1998) among News America Incorporated et al, several agents, managers and banks.8
2.6		Form of Preferred Ordinary Shares of The News Corporation Limited.9
2.7		Form of Preferred American Depositary Shares of The News Corporation Limited.10
2.8		Form of Ordinary Shares of The News Corporation Limited.11
2.9		Form of Ordinary American Depositary Shares of The News Corporation Limited.12
2.10		Indenture, dated as of February 28, 2001, by and among News America Incorporated, The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to the Liquid Yield Option™ Notes due February 28, 2021.13
2.11		Indenture, dated as of October 15, 1992, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company, as Trustee, with respect to the 10 1/8% Senior Debentures due October 15, 2012.14
2.12		First Supplemental Indenture, dated as of May 20, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the 10 1/8% Senior Debentures due October 15, 2012.15

 

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2.13		Second Supplemental Indenture, dated as of July 21, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the 10 1/8% Senior Debentures due October 15, 2012.16
2.14		Third Supplemental Indenture, dated as of May 12, 1994, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the 10 1/8% Senior Debentures due October 15, 2012.17
2.15		Form of Fourth Supplemental Indenture, dated as of August 1, 1995, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the 10 1/8% Senior Debentures due October 15, 2012.18
2.16		Fifth Supplemental Indenture, dated March 2, 2000, by and among News America Incorporated, The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the 10 1/8% Senior Debentures due October 15, 2012.19
2.17		Sixth Supplemental Indenture, dated as of February 14, 2001, by and among News America Incorporated, The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the 10 1/8% Senior Debentures due October 15, 2012.20
2.18		Indenture, dated as of January 28, 1993, by and among News America Holdings Incorporated, The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities.21
2.19		First Supplemental Indenture, dated as of March 24, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 22
2.20		Second Supplemental Indenture, dated as of April 8, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 23
2.21		Third Supplemental Indenture, dated as of May 20, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 24
2.22		Fourth Supplemental Indenture, dated as of May 28, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 25

 

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2.23		Fifth Supplemental Indenture, dated July 21, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 26
2.24		Form of Sixth Supplemental Indenture, dated as of January 25, 1994, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 27
2.25		Form of Seventh Supplemental Indenture, dated as of February 4, 1994, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 28
2.26		Form of Eighth Supplemental Indenture, dated as of May 12, 1994, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 29
2.27		Form of Ninth Supplemental Indenture, dated as of August 1, 1995, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 30
2.28		Form of Tenth Supplemental Indenture, dated as of March 2, 2000, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 31
2.29		Form of Eleventh Supplemental Indenture, dated as of February 14, 2001, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and State Street Bank and Trust Company (as successor to The First National Bank of Boston), as Trustee, with respect to the senior debt securities. 32
2.30		Amended and Restated Indenture, dated as of March 24, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to senior debt securities. 33
2.31		First Supplemental Indenture, dated as of May 20, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to senior debt securities. 34
2.32		Second Supplemental Indenture, dated as of May 28, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to senior debt securities. 35
2.33		Third Supplemental Indenture, dated as of July 21, 1993, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to senior debt securities. 36

 

39

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2.34		Fourth Supplemental Indenture, dated as of October 20, 1995, by and among News America Holdings Incorporated (currently News America Incorporated), The News Corporation Limited, the other Guarantors named therein and The Bank of NewYork, as Trustee, with respect to senior debt securities. 37
2.35		Fifth Supplemental Indenture, dated as of January 8, 1998, by and among News America Incorporated, The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to senior debt securities. 38
2.36		Sixth Supplemental Indenture, dated as of March 1, 1999, by and among News America Incorporated, The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to senior debt securities. 39
2.37		Seventh Supplemental Indenture, dated as of February 14, 2001, by and among News America Incorporated, The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to senior debt securities. 40
2.38		Indenture, dated as of November 12, 1996, by and among News America Holdings Incorporated, The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to the 5% Subordinated Discount Debentures due 2016. 41
2.39		First Supplemental Indenture, dated as of March 2, 2000, by and among News America Incorporated, The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to the 5% Subordinated Discount Debentures due 2016. 42
2.40		Second Supplemental Indenture, dated as of February 14, 2001, by and among News America Incorporated, The News Corporation Limited, the other Guarantors named therein and The Bank of New York, as Trustee, with respect to the 5% Subordinated Discount Debentures due 2016. 43
2.41		Other long-term borrowing instruments are omitted pursuant to Instruction 2(b) of the Instructions as to Exhibits to Form 20-F. The News Corporation Limited undertakes to furnish copies of such instruments to the Securities and Exchange Commission upon request.
4.1		Agreement and Plan of Merger, dated as of May 2, 2001, by and among Liberty Media Corporation, Liberty UVSG, Inc., The News Corporation Limited and News Publishing Australia Limited.44
4.2		Agreement and Plan of Merger, dated as of November 27, 2001, by and among Liberty Media Corporation, Liberty TVGIA, Inc., The News Corporation Limited and News Publishing Australia Limited.45
8		List of Subsidiaries.46
10.1		Consent of Ernst & Young regarding The News Corporation Limited.*
10.2		Consent of Ernst & Young LLP regarding Gemstar-TV Guide International, Inc.*
10.3		Excerpt entitled Government Regulation of Item 4-Description of Business from the Annual Report on Form 20-F of British Sky Broadcasting Group plc for its fiscal year ended June 30, 2002. 47
99.1		Certifications pursuant to USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

 

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* Filed herewith.

 

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1		Incorporated by reference to Exhibit 1.3 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1994.
2		Incorporated by reference to Exhibit 1.1 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1995.
3		Incorporated by reference to Exhibit 1.3 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1997.
4		Incorporated by reference to Exhibit 4.2 to the Registration Statement of The News Corporation Limited on Form F-4 (Registration No. 333-6190) filed with the Securities and Exchange Commission on December 20, 1996.
5		Incorporated by reference to Exhibit 4.1 to the Registration Statement of The News Corporation Limited on Form S-8 (Registration No. 333-10338) filed with the Securities and Exchange Commission on May 10, 1999.
6		Incorporated by reference to Exhibit 10.21 to Amendment No. 4 to the Registration Statement of Fox Entertainment Group, Inc. on Form S-1 (Registration No. 333-61515) filed with the Securities and Exchange Commission on November 4, 1998.
7		Incorporated by reference to Exhibit 10.32 to Amendment No. 4 to the Registration Statement of Fox Entertainment Group, Inc. on Form S-1 (Registration No. 333-61515) filed with the Securities and Exchange Commission on November 4, 1998.
8		Incorporated by reference to Exhibit 1.1 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2000.
9		Incorporated by reference to Exhibit (a) to the Registration Statement of The News Corporation Limited on Form 8-A (File No. 1-9141) filed with the Securities and Exchange Commission on November 2, 1994.
10		Incorporated by reference to Exhibit A of Exhibit 4.2 to Amendment No. 1 to the Registration Statement of The News Corporation Limited on Form F-3 (Registration No. 333-13556) filed with the Securities and Exchange Commission on June 29, 2001.
11		Incorporated by reference to Exhibit (a) to the Registration Statement of The News Corporation Limited on Form 8-A (File No. 1-9141) filed with the Securities and Exchange Commission on November 2, 1994.
12		Incorporated by reference to Exhibit A of Exhibit (c) to the Registration Statement of The News Corporation Limited on Form F-8-A (File No. 1-9141) filed with the Securities and Exchange Commission on November 2, 1994.
13		Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement of The News Corporation Limited on Form F-3 (Registration No. 333-13556) filed with the Securities and Exchange Commission on June 29, 2001.
14		Incorporated by reference to Exhibit 10.13 to Amendment No. 1 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-57286) filed with the Securities and Exchange Commission on January 27, 1993.

 

41

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15		Incorporated by reference to Exhibit 10.16 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-63604) and Post-Effective Amendment No. 1 to the Registration Statement on Form F-3 of the News America Holdings Incorporated (Registration No. 33-59688) filed with the Securities and Exchange Commission on May 28, 1993.
16		Incorporated by reference to Exhibit 10.10 to Amendment No. 1 to the Registration Statement of The News Corporation Limited on Form F-3 (Registration No. 33-66930) filed with the Securities and Exchange Commission on August 11, 1993.
17		Incorporated by reference to Exhibit No. 2.3 to the Annual Report of The News Corporation Limited on Form 20-F (as amended) (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1994.
18		Incorporated by reference to Exhibit No. 2.3 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1995.
19		Incorporated by reference to Exhibit 2.16 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2000.
20		Incorporated by reference to Exhibit 2.17 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2001.
21		Incorporated by reference to Exhibit 2 to the Report of The News Corporation Limited on Form 6-K filed with the Securities and Exchange Commission dated January 28, 1993.
22		Incorporated by reference to Exhibit 2 to the Report of The News Corporation Limited on Form 6-K filed with the Securities and Exchange Commission dated April 26, 1993.
23		Incorporated by reference to Exhibit 3 to the Report of The News Corporation Limited on Form 6-K filed with the Securities and Exchange Commission dated April 26, 1993.
24		Incorporated by reference to Exhibit 4.7 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-63604) and Post-Effective Amendment No. 1 to the Registration Statement on Form F-3 of News America Holdings Incorporated (Registration No. 33-59688) filed with the Securities and Exchange Commission on May 28, 1993.
25		Incorporated by reference to Exhibit 4.8 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-63604) and Post-Effective Amendment No. 1 to the Registration Statement on Form F-3 of News America Holdings Incorporated (Registration No. 33-59688) filed with the Securities and Exchange Commission on May 28, 1993
26		Incorporated by reference to Exhibit 4.6 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-74574) filed with the Securities and Exchange Commission on January 28, 1994.
27		Incorporated by reference to Exhibit 4.7 to Amendment No. 1 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-74574) filed with the Securities and Exchange Commission on February 4, 1994.
28		Incorporated by reference to Exhibit 4.8 to Amendment No. 1 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-79334) filed with the Securities and Exchange Commission on June 14, 1994.

 

42

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29		Incorporated by reference to Exhibit 4.9 to Amendment No. 1 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-79334) filed with the Securities and Exchange Commission on June 14, 1994.
30		Incorporated by reference to Exhibit 4.10 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-94868) filed with the Securities and Exchange Commission on July 24, 1995.
31		Incorporated by reference to Exhibit 10.12 to the Annual Report of Fox Entertainment Group, Inc. on Form 10-K (File No. 1-14595) filed with the Securities and Exchange Commission on September 28, 2001.
32		Incorporated by reference to Exhibit 10.13 to the Annual Report of Fox Entertainment Group, Inc. on Form 10-K (File No. 1-14595) filed with the Securities and Exchange Commission on September 28, 2001.
33		Incorporated by reference to Exhibit 4.1 to the Registration Statement of The News Corporation Limited on Form F-3 (Registration No. 33-67008) filed with the Securities and Exchange Commission on May 4, 1993.
34		Incorporated by reference to Exhibit 4.1 to the Registration Statement of The News Corporation Limited on Form F-3 (Registration No. 33-67008) filed with the Securities and Exchange Commission on May 4, 1993.
35		Incorporated by reference to Exhibit 4.3 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-63604) and Post-Effective Amendment No. 1 to the Registration Statement News America Holdings Incorporated on Form F-3 (Registration No. 33-59688) filed with the Securities and Exchange Commission on May 28, 1993.
36		Incorporated by reference to Exhibit 4.14 to Amendment No. 1 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-98238) filed with the Securities and Exchange Commission on October 23, 1995.
37		Incorporated by reference to Exhibit 4.15 to Amendment No. 1 to the Registration Statement of News America Holdings Incorporated on Form F-3 (Registration No. 33-98238) filed with the Securities and Exchange Commission on October 23, 1995.
38		Incorporated by reference to Exhibit 10.20 to the Annual Report of Fox Entertainment Group, Inc. on Form 10-K (File No. 1-14595) filed with the Securities and Exchange Commission on September 28, 2001.
39		Incorporated by reference to Exhibit 10.21 to the Annual Report of Fox Entertainment Group, Inc. on Form 10-K (File No. 1-14595) filed with the Securities and Exchange Commission on September 28, 2001.
40		Incorporated by reference to Exhibit No. 1.5 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1996.
41		Incorporated by reference to Exhibit 10.3 to the Registration Statement of The News Corporation Limited on Form F-3 (Registration No. 33-46196) filed with the Securities and Exchange Commission on March 24, 1992.

 

43

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42		Incorporated by reference to Exhibit 2.39 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2001.
43		Incorporated by reference to Exhibit 2.40 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2001.
44		Incorporated by reference to Exhibit 7(g) to Amendment No. 2 of Schedule 13D/A of The News Corporation Limited and certain other persons filed with the Securities and Exchange Commission on May 17, 2001.
45		Incorporated by reference to Exhibit 7(j) to Amendment No. 3 of Schedule 13D/A of The News Corporation Limited and certain other persons filed with the Securities and Exchange Commission on December 7, 2001.
46		Incorporated by reference to Exhibit 8 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2002.
47		Incorporated by reference to Exhibit 10.8 to the Annual Report of The News Corporation Limited on Form 20-F (File No. 1-9141) filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2002.

 

44

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

INDEX TO FINANCIAL STATEMENTS

 

 

 

I.    The News Corporation Limited and Subsidiaries *
Annual Financial Statements
Report of Independent Auditors		F-2
Consolidated Statements of Financial Performance for the fiscal years ended June 30, 2000, 2001 and 2002		F-3
Consolidated Statements of Financial Position at June 30, 2001 and 2002		F-4
Consolidated Statements of Stockholders’ Equity for the fiscal years ended June 30, 2000, 2001 and 2002		F-6
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2000, 2001 and 2002		F-9
Notes to Consolidated Financial Statements		F-10
II.    Fox Entertainment Group, Inc. **
Annual Financial Statements
Report of Independent Public Accountants		F-91
Copy of 2001 Report of Independent Public Accountants		F-92
Consolidated Balance Sheets as of June 30, 2002 and 2001		F-93
Consolidated Statements of Operations for the years ended June 30, 2002, 2001 and 2000		F-94
Consolidated Statements of Cash Flows for the years ended June 30, 2002, 2001 and 2000		F-95
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2002, 2001 and 2000		F-96
Notes to Consolidated Financial Statements		F-97
III.    British Sky Broadcasting Group plc ***
Annual Financial Statements
Report of Independent Accountants		B-1
Consolidated Profit and Loss Accounts for the years ended June 30, 2000, 2001 and 2002		B-2
Consolidated Balance Sheets at June 30, 2001 and 2002		B-3
Consolidated Cash Flows Statements for the fiscal years ended June 30, 2000, 2001 and 2002		B-4
Notes to Consolidated Financial Statements		B-7
IV.    Stream S.p.A. ***
Annual Financial Statements
Report of Independent Auditors		S-1
Balance Sheets as of December 31, 2000 and 2001		S-2
Statements of Operations for the years ended December 31, 1999, 2000 and 2001		S-4
Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001		S-5
Statements of Shareholders’ Equity for the years ended December 31, 1999, 2000 and 2001		S-6
Notes to Financial Statements		S-7
V.    Gemstar – TV Guide International, Inc. *
Annual Financial Statements
Report of Independent Auditors		G-2
Consolidated Balance Sheets as of December 31, 2002 and 2001		G-3
Consolidated Statements of Operations for the years ended December 31, 2002 and 2001 and the nine months ended December 31, 2000		G-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2002 and 2001 and the nine months ended December 31, 2000		G-5
Consolidated Statements of Cash Flows for the years ended December 31, 2002 and 2001 and the nine months ended December 31, 2000		G-6
Notes to Consolidated Financial Statements		G-7

 

*

Filed herewith

 

**

Previously filed on Form 20-F on December 31, 2002.

 

***

Previously filed on Form 6-K on May 20, 2003.

 

F-1

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REPORT OF INDEPENDENT AUDITORS

 

 

To the Board of Directors

The News Corporation Limited

 

 

We have audited the accompanying consolidated statements of financial position of The News Corporation Limited and subsidiaries as of June 30, 2001 and 2002, and the related consolidated statements of financial performance, cash flows, and stockholders’ equity for each of the three years in the period ended June 30, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in Australia and in the United States of America. 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 consolidated financial position of The News Corporation Limited and subsidiaries at June 30, 2001 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2002, in conformity with accounting principles generally accepted in Australia, which differ in certain respects from accounting principles generally accepted in the United States of America (see note 20 to the consolidated financial statements).

 

 

/S/    ERNST & YOUNG

 

 

Sydney, Australia

August 14, 2002,

except for Note 24, as to

which the date is June 27, 2003

 

 

F-2

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF FINANCIAL PERFORMANCE

(in millions, except for per share amounts)

 

 

		Years Ended June 30,
		2000				2001				2002
Sales revenue		A$	22,443			A$	25,578			A$	29,014
Operating expenses			19,701				22,485				25,472
Operating income			2,742				3,093				3,542
Net loss from associated entities			(298	)			(249	)			(1,434	)
Borrowing costs			(1,169	)			(1,268	)			(1,291	)
Investment income			355				333				291
Net borrowing costs		A$	(814	)		A$	(935	)		A$	(1,000	)
Dividends on exchangeable preferred securities			(79	)			(90	)			(93	)
Other revenues before tax			4,147				3,335				5,627
Other expenses before tax			(2,961	)			(4,609	)			(17,601	)
Change in accounting policy before income tax			—				(1,107	)			—
Profit (loss) from ordinary activities before income tax		A$	2,737			A$	(562	)		A$	(10,959	)
Income tax benefit (expense) on:
Ordinary activities before change in accounting policy and other items			(225	)			(428	)			(640	)
Other items			(454	)			19				(15	)
Change in accounting policy			—				421				—
Net income tax (expense) benefit		A$	(679	)		A$	12			A$	(655	)
Net profit (loss) from ordinary activities after tax		A$	2,058			A$	(550	)		A$	(11,614	)
Net profit attributable to outside equity interests			(137	)			(196	)			(348	)
Net profit (loss) attributable to members of parent entity		A$	1,921			A$	(746	)		A$	(11,962	)
Net exchange gain (loss) arising on translation of net assets of controlled entities			2,223				3,372				(3,019	)
Additional investment by an associated entity			—				1,060				(267	)
Total change in equity other than those resulting from transactions with owners as owners		A$	4,144			A$	3,686			A$	(15,248	)
Earnings per share on net profit (loss) attributable to members of the parent entity:
Basic/Diluted
Ordinary shares		A$	0.424			A$	(0.174	)		A$	(2.170	)
Preferred limited voting ordinary shares		A$	0.509			A$	(0.209	)		A$	(2.604	)
Ordinary and preferred limited voting ordinary shares		A$	0.469			A$	(0.192	)		A$	(2.431	)

 

 

 

 

 

See notes to consolidated financial statements

 

F-3

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions)

 

 

ASSETS

 

 

 

		At June 30,
		2001			2002
Current assets
Cash and cash equivalents		A$	5,615		A$	6,337
Receivables
Trade—net of allowance			6,308			5,496
Other			375			313
Inventories			3,259			1,935
Prepaid expenses and other			616			566
Total current assets		A$	16,173		A$	14,647
Non-current assets
Investments
Equity in associated entities			20,022			6,875
Other investments			3,129			1,712
Total investments		A$	23,151		A$	8,587
Property, plant and equipment—net of accumulated depreciation and amortization			7,110			6,671
Other non-current assets
Publishing rights, titles and television licenses			31,051			35,348
Goodwill—net of accumulated amortization			519			455
Long-term receivables			762			796
Inventories			906			998
Filmed entertainment costs, net			4,313			3,234
Other			976			705
Total other non-current assets		A$	38,527		A$	41,536
Total Assets		A$	84,961		A$	71,441

 

 

 

See notes to consolidated financial statements

 

F-4

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions, except share and per share data)

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

		At June 30,
		2001			2002
Current liabilities
Interest bearing liabilities		A$	63		A$	1,856
Payables			8,777			8,073
Tax liabilities			550			848
Provisions			386			228
Total current liabilities		A$	9,776		A$	11,005
Non-current liabilities
Interest bearing liabilities			18,742			13,585
Payables			4,465			4,054
Tax liabilities			426			434
Provisions			290			1,205
Total non-current liabilities		A$	23,923		A$	19,278
Exchangeable preferred securities		A$	3,667		A$	1,690
Total liabilities including exchangeable preferred securities		A$	37,366		A$	31,973
Commitments and contingencies (Note 12)
Stockholders’ equity
Ordinary shares no par value; issued and outstanding 2,091,801,440—2001 and 2,094,411,035—2002			5,432			5,448
Preferred limited voting shares ordinary shares no par value; issued and outstanding 2,660,797,506—2001 and 3,208,695,775—2002			14,813			22,301
Adjustable rate cumulative perpetual preference shares US$25 par value; 3,800,000 shares authorized; issued and outstanding			132			132
Guaranteed 8 5/8% perpetual preference shares US$25 par value; 10,000,000 shares authorized; issued and outstanding			358			358
Reserves and retained earnings			21,805			6,352
Outside equity interests in controlled entities			5,055			4,877
Total stockholders’ equity		A$	47,595		A$	39,468
Total liabilities and stockholders’ equity		A$	84,961		A$	71,441

 

 

 

See notes to consolidated financial statements

 

 

F-5

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

 

 

 

		Share Capital															Capital Reserves				Revenue Reserves
		Ordinary Shares				Perpetual Preference Shares			Preferred Limited Voting Shares				Subsidiary Preference Shares				Assets Revaluation				Foreign Exchange Fluctuation			Retained Earnings				Associated Companies				Minority Interest in Subsidiaries
Balance at June 30, 1999		A$	4,554			A$	490		A$	3,415			A$	1,483			A$	3,145			A$	1,642		A$	9,737			A$	302			A$	2,341
Net income																									1,921								137
Transfers between reserves																		(2	)			64			317				(465	)
Dividends paid and proposed																									(284	)							(17	)
Dividend reinvestment and bonus share plan			37							58
Issue of shares			212							3,402
Exchange loss on translation																						2,159							(26	)			257
Redemption of shares																																	28
Disposal of minority interest																																	20
Minority interest purchased																																	15
Devaluation of assets
Shares expired and cancelled under share buyback										(763	)			(1,483	)
Elimination of associate’s reciprocal shareholding			(4	)						(32	)
Balance at June 30, 2000		A$	4,799			A$	490		A$	6,080			A$	0			A$	3,143			A$	3,865		A$	11,691			A$	(189	)		A$	2,781

 

 

 

See notes to consolidated financial statements

 

F-6

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

 

 

 

		Share Capital														Capital Reserves			Revenue Reserves
		Ordinary Shares				Perpetual Preference Shares			Preferred Limited Voting Shares				Subsidiary Preference Shares			Assets Revaluation			Foreign Exchange Fluctuation			Retained Earnings				Associated Companies				Minority Interest in Subsidiaries
Balance at June 30, 2000		A$	4,799			A$	490		A$	6,080			A$	0		A$	3,143		A$	3,865		A$	11,691			A$	(189	)		A$	2,781
Net loss																							(746	)							196
Outside equity interest in controlled entities																											1,060
Transfers between reserves																							266				(329	)
Dividends paid and proposed																							(305	)							(21	)
Dividend reinvestment and bonus share plan			32							62
Issue of shares			605							8,763
Adjustment of conversion rates
Exchange gain on translation of net assets of subsidiaries																				3,372							(23	)			518
Devaluation of assets
Minority interest disposed																															(32	)
Minority interest purchased																															1,613
Shares acquired and cancelled under share buyback										(91	)
Elimination of associate’s reciprocal shareholding			(4	)						(1	)
Balance at June 30, 2001		A$	5,432			A$	490		A$	14,813			A$	0		A$	3,143		A$	7,237		A$	10,906			A$	519			A$	5,055

 

 

 

See notes to consolidated financial statements

 

F-7

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

(in millions)

 

		Share Capital												Capital Reserves			Revenue Reserves
		Ordinary Shares				Perpetual Preference Shares			Preferred Limited Voting Shares			Subsidiary Preference Shares		Assets Revaluation			Foreign Exchange Fluctuation				Retained Earnings				Associated Companies				Minority Interest in Subsidiaries
Balance at June 30, 2001		A$	5,432			A$	490		A$	14,813		—		A$	3,143		A$	7,237			A$	10,906			A$	519			A$	5,055
Net loss																						(11,962	)							348
Transfers between reserves																						1,260				(1,262	)
Additional investment by an associated entity																										(267	)
Dividends paid and proposed																						(203	)							(73	)
Dividend reinvestment			30							56
Issue of shares			4							7,432
Exchange loss on translation																		(3,019	)											(542	)
Redemption of shares
Disposal of minority interest																														(1,147	)
Acquisition of minority interest																														1,236
Devaluation of assets
Elimination of associate’s reciprocal shareholding			(18	)
Balance at June 30, 2002		A$	5,448			A$	490		A$	22,301		—		A$	3,143		A$	4,218			A$	1			A$	(1,010	)		A$	4,877

 

 

 

 

 

See notes to consolidated financial statements

 

 

F-8

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

 

		Years Ended June 30,
		2000				2001				2002
Operating activities:
Net profit (loss) attributable to members of the parent entity		A$	1,921			A$	(746	)		A$	(11,962	)
Adjustments for non-cash and non-operating activities:
Associated entity earnings, net of dividends			295				242				388
Depreciation and amortization			562				706				749
Provisions			142				188				378
Other items, net			(662	)			1,342				13,179
Change in accounting policy after tax			—				686				—
Change in related balance sheet accounts—net of disposition and acquisition effects:
Receivables			(598	)			(410	)			(51	)
Inventories			(1,088	)			(889	)			515
Payables			(39	)			(199	)			(118	)
Cash provided by operating activities		A$	533			A$	920			A$	3,078
Investing and other activities:
Property, plant and equipment			(671	)			(1,113	)			(505	)
Investments			(4,157	)			(3,053	)			(3,379	)
Proceeds from sale of non-current assets			3,341				2,387				4,284
Cash (used in) provided by investing activities		A$	(1,487	)		A$	(1,779	)		A$	400
Financing activities:
Issuance of debt			—				1,496				—
Repayment of debt			(1,621	)			(63	)			(2,181	)
Issuance of shares in a subsidiary			317				—				—
Issuance of shares			127				56				133
Buyback of preferred shares			(1,166	)			(91	)			—
Dividends paid			(236	)			(205	)			(278	)
Leasing and other finance costs			(52	)			(5	)			(7	)
Cash (used in) provided by financing activities		A$	(2,631	)		A$	1,188			A$	(2,333	)
Net (decrease) increase in cash			(3,585	)			329				1,145
Opening cash balance			7,483				4,638				5,615
Exchange movement on opening cash balance			740				648				(423	)
Closing cash balance		A$	4,638			A$	5,615			A$	6,337
Gross cash flows from operating activities
Cash from trading operations
Receipts		A$	21,846			A$	25,176			A$	28,970
Payments			(20,300	)			(23,120	)			(24,423	)
		A$	1,546			A$	2,056			A$	4,547
Dividend and distribution receipts			74				86				38
Interest receipts			283				302				247
Interest payments			(1,127	)			(1,225	)			(1,324	)
Income tax payments			(164	)			(209	)			(337	)
Dividends paid on exchangeable preferred securities			(79	)			(90	)			(93	)
Cash provided by operating activities		A$	533			A$	920			A$	3,078

 

 

 

 

See notes to consolidated financial statements

 

F-9

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Note 1—Basis of Presentation and Significant Accounting Policies

 

The consolidated financial statements and notes thereto of The News Corporation Limited and subsidiaries (“TNCL”, “News Corporation” or the “Group”) have been prepared in accordance with the accounting principles generally accepted in Australia (“A-GAAP”) and are presented in Australian dollars (“A$”).

 

A-GAAP differs in certain respects from accounting principles generally accepted in the United States (“US-GAAP”). The significant differences and the approximate related effect on the consolidated financial statements are set forth in Note 20.

 

Except for a change in policy for accounting for films and a change in the basis of measuring certain classes of non-current assets, the consolidated financial statements have been prepared on a basis consistent with previous years. Certain reclassifications have been made to fiscal 2000 and 2001 consolidated financial statements to conform with the fiscal 2002 presentation.

 

(a)  Principles of Consolidation

 

The consolidated financial statements include the accounts of the parent entity, TNCL and its controlled entities, referred to collectively as the Group. For financial reporting purposes, control generally means ownership of a majority interest in an entity but may, in certain instances, result from other considerations, including a company’s capacity to dominate decision-making in relation to the financial and operating policies of the consolidated entity.

 

Although TNCL has less than a majority voting interest in Fox Television Holdings, Inc. (“FTH”), such entity is included in the consolidated financial statements because (i) the Group has the ability to redeem the majority voting interest, at any time, (ii) the dividends on and the amounts paid on redemption of, the majority voting interest are fixed and not related to the performance of FTH, and (iii) senior management of FTH, including its Board of Directors, consist solely of persons employed by the Group.

 

These consolidated financial statements also include the Group’s portion of the results of associated entities over which it has significant influence.

 

Financial statements of controlled entities and associated entities are, for consolidation purposes, adjusted to comply with Group policy and A-GAAP. All intercompany balances and transactions, including unrealized profits arising from intra-group transactions, have been eliminated in full. Acquisitions of controlled entities are accounted for using the purchase method of accounting.

 

(b)  Revenue Recognition

 

Revenues from the theatrical distribution or the licensing of motion pictures are recognized when the following conditions are met:

 

a.

Persuasive evidence of a sale or licensing arrangement with a customer exists.

b.

The film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery.

c.

The license period of the arrangement has begun and the customer can begin its exploitation, exhibition or sale.

d.

The arrangement fee is fixed or determinable.

e.

Collection of the arrangement fee is reasonably assured.

 

Revenues from home video and DVD sales are recognized on the date that video and DVD units are made widely available for sale by retailers and all Group—imposed restrictions have expired.

 

License agreements for the telecast of theatrical and television product in the broadcast network, syndicated television and cable television markets are routinely entered into in advance of their available date for telecast. Cash received in connection with such contractual rights for which revenue is not yet recognizable is classified as deferred revenue within payables. Because deferred revenue generally relates to contracts for the licensing of theatrical and television product which has already been produced, the recognition of revenue for such completed product is principally only dependent upon the commencement of the availability period for telecast under the terms of the related licensing agreement.

 

Television advertising revenue is recognized as the commercials are aired. Subscriber fees received from cable system operators and direct broadcast satellite services are recognized as revenue when services are provided.

 

 

F-10

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1—Basis of Presentation and Significant Accounting Policies (continued)

 

Advertising revenue from newspapers, magazines and inserts is recognized when the advertisements are published. Revenue from books and newspaper circulation revenues is recognized upon shipment.

 

(c)  Inventories

 

Inventories are valued at the lower of cost or net realizable value. Cost is determined by the first in first out or average cost method for the greater part of inventories depending on the nature of the item and by specific identification for the balance.

 

Program rights, and the related liability for entertainment programs and sporting events aired principally by the Group’s television broadcast and cable networks are recorded at cost when the programs are available for telecast. Program rights are amortized on a straight-line basis, generally based on the usage of the program or term of the license. Original cable programming is amortized on an accelerated basis. The current portion of program rights represents the estimated amount to be amortized in the next financial year.

 

The Group has a number of multi-year contracts for the television rights of certain sporting events. At the inception of these contracts and at each subsequent reporting date, the Group will evaluate the recoverability of the costs associated therewith, using aggregate estimated advertising revenues directly associated with the program material and related expenses. When an evaluation indicates that a multi-year programming contract will result in an ultimate loss, additional amortization is provided to recognize such loss in the current year.

 

The costs of sports contracts entered into by Fox Broadcasting Company are recorded as an operating expense based on the ratio of each period’s operating profits to estimated total operating profits. Estimates of total operating profits can change and, accordingly, are reviewed periodically and amortization is adjusted as necessary. Such changes in the future could be material.

 

Projects in progress are recorded at cost that consists of the cost of material, labor and appropriate overhead expenses.

 

Film costs include direct production, production overhead and capitalized interest costs, net of any allocated amounts received from outside investors. These costs, as well as participations and talent residuals, are amortized on an individual film basis in the ratio that the current year’s gross revenues bears to management’s estimate of total ultimate gross revenues from all sources. Marketing costs and development costs under term deals are expensed as incurred. Development costs for projects not produced after three years are written off.

 

At the beginning of fiscal 2001, the Group changed its accounting policy with regards to, amongst other things, the treatment of marketing and development costs incurred in the production and distribution of films whereby marketing and certain development costs, previously capitalized and expensed over time, are now expensed as incurred. This change in accounting policy provides better comparability of the Group’s results against its competitors and has also ensured continued consistency with US-GAAP for the producers and distributors of films. For fiscal 2001, the net impact of this change in accounting policy, net of outside equity interest, was a one time pre-tax charge to profit of A$1,107 million with an associated tax benefit of A$421 million. The effect of this change in fiscal 2001 was a reduction in net profit attributable to members of the parent entity of A$686 million and a corresponding reduction in the carrying value of inventory of A$1,338 million, a reduction in tax liabilities of A$509 million and in outside equity interests of A$143 million.

 

Film costs are stated at the lower of unamortized cost or estimated fair value on an individual film or television series basis. Revenue forecasts for both motion pictures and television products are continually reviewed by management and revised when warranted by changing conditions. When estimates of total revenues or other events or changes in circumstances indicate that a motion picture or television production has a fair value that is less than its unamortized cost, a loss is recognized in the current year for the amount by which the unamortized cost exceeds the film or television production’s fair value. The unamortized cost of completed motion picture and television productions which are recoverable from primary markets are classified as current assets.

 

(d)  Recoverable Amount

 

Non-current assets are written down to the recoverable amount where the carrying value of a non-current asset exceeds its recoverable amount.

 

The recoverable amount of publishing rights, titles, and television licenses and goodwill has been determined by discounting the expected net cash inflows arising from their continued use or sale. Discounting has not been used to determine the recoverable amount of all other non-current assets.

 

 

F-11

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 1—Basis of Presentation and Significant Accounting Policies (continued)

 

(e)  Investments in Associated Entities

 

The Group uses the equity method of accounting for its investments in associated entities. Under this method, investments in associated entities are initially recognized at cost of acquisition and the carrying value is subsequently adjusted for increases or decreases in the Group’s share of post-acquisition results and reserves of each associated entity.

 

Investments in associated entities are decreased by the amount of dividends received or receivable. Associated entities include interests in non-controlled partnerships and joint venture entities.

 

(f)  Property, Plant and Equipment

 

In accordance with the requirements of Australian Accounting Standards Board (“AASB”) 1041, “Revaluation of Non-Current Assets”, land and buildings previously carried at valuation were reverted to a cost basis of measurement. For the purpose of transitioning to a cost basis, the existing revalued carrying amounts at July 1, 2000, were deemed to be their cost. This change in accounting policy had no impact on the financial position or financial performance of the Group as presented in these consolidated financial statements.

 

Depreciation is provided for by charges to the Statement of Financial Performance over the expected useful life of each class of asset. Leasehold land and buildings are amortized over the shorter of the period of the lease or the useful life of the asset.

 

The following are the main depreciation rates used:

 

 

Freehold buildings		2%-10%
Leasehold premises		2%-33%
Plant and equipment		3%-50%
Plant and equipment under lease		10%-40%

 

(g)  Publishing Rights, Titles and Television Licenses

 

In accordance with the requirements of AASB 1041, publishing rights, titles and television licenses, previously carried at valuation were reverted to a cost basis of measurement. For the purpose of transitioning to a cost basis, the existing revalued carrying amounts at July 1, 2000, were deemed to be their cost. This change in accounting policy had no impact on the financial position or financial performance of the Group as presented in these consolidated financial statements.

 

As a creator and distributor of branded content, the Group has significant intangible assets including, television licenses, newspaper mastheads, distribution networks, sports franchises, publishing rights and other copyrighted products and trademarks. These assets are stated at the lower of cost or recoverable amounts. While television licenses in the United States are renewable every five years, the Directors have no reason to believe that they will not be renewed. No amortization is provided against these assets since, in the opinion of the Directors, the lives of the publishing rights, titles and television licenses are indefinite.

 

The Group annually assesses the carrying amount of intangible assets to ensure that they are not carried at a value greater than their recoverable amount. This assessment is primarily based on the Group’s estimate of maintainable earnings before interest, tax, depreciation and amortization for each of its key business segments and an appropriate market-based multiple.

 

(h)  Goodwill

 

Where the purchase consideration and incidental expenses exceed the fair value of the identifiable net assets acquired, the difference is assigned to goodwill and written off against operating income on a straight-line basis over the period the benefits are expected to arise, but not exceeding twenty years. Accumulated amortization related to goodwill was A$702 million and A$688 million at June 30, 2001 and 2002, respectively.

 

(i)  Developing Businesses

 

Costs incurred in the development of major new activities are capitalized until the operations are commenced on a commercial basis. At that point, any readily identifiable intangibles, such as publishing rights, titles and television licenses but not goodwill, are recorded at cost and accounted for in accordance with the relevant accounting policy. Any other costs are amortized over the period in which benefits are expected to be received.

 

 

F-12

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1—Basis of Presentation and Significant Accounting Policies (continued)

 

(j)  Capitalization of Interest

 

Interest cost on funds invested in major projects with substantial development and construction phases are capitalized until production or operations commence. Thereafter, the capitalized interest is amortized over the period in which benefits are expected to be received.

 

Capitalized interest for the year ended June 30, 2002, amounted to A$42 million (2001—A$115 million) of which A$nil (2001—A$66 million) is included in property, plant and equipment.

 

(k)  Provision for Employee Entitlements

 

Provision has been made for benefits accruing to employees in relation to such matters as annual leave, long service leave and non-superannuation post retirement benefits. All on-costs are included in the determination of the provision. Provisions for annual leave and the current portion of long service leave are measured at their nominal amounts, whilst the non-current portion of long service leave is measured at the present value of estimated future cash flows.

 

(l)  Income Taxes

 

The Group follows tax effect accounting procedures. Income tax expense is calculated on the accounting profit after adjusting for permanent differences. Future income tax benefits relating to tax losses are not recognized as an asset unless the benefit is virtually certain of being realized. Income taxes on cumulative timing differences are reflected in the Statement of Financial Position as future income tax benefit or deferred income tax liability at income tax rates that are expected to apply when the underlying timing differences reverse.

 

There is no present intention to remit to Australia the retained profits or reserves of foreign controlled entities or to realize revaluation surpluses through the sale of revalued assets. Accordingly, no provision has been made for withholding or other taxes that may become payable overseas or in Australia as a result of such remittance or realization.

 

(m)  Other Revenues and Expenses

 

The Group discloses as Other Revenues and Other Expenses those transactions, the financial impact of transactions which are included within profit (loss) from ordinary activities, that are considered significant by reason of their size, nature or effect on the Group’s financial performance for the year.

 

(n) Foreign Currencies

 

Financial statements of self-sustaining foreign controlled entities are translated using the current rate method whereby trading results are converted at the average rates of exchange for the year and assets and liabilities are converted at the closing rates on the period end date. Any exchange differences arising on the translation are taken directly to the foreign exchange fluctuation reserve.

 

All realized and unrealized gains or losses of a trading nature are brought to account within profit (loss) from ordinary activities.

 

The Group enters into forward foreign exchange contracts with the objective of protecting the Group against future adverse foreign exchange fluctuations. Exchange gains or losses on these contracts are brought to account within the profit (loss) from ordinary activities, except where they relate to specific commitments, whereby they are deferred until the commitment to sell or purchase is satisfied. Material foreign exchange contracts are disclosed in the financial statements.

 

(o)  Dividends

 

Dividends payable are recognized when their payment is determined by, and announced following, a meeting of the Board of Directors. This represents a change in accounting policy over fiscal 2001 and 2000 whereby dividends were accrued at year-end, even though determined by the Board of Directors at a later date. This change in accounting policy is not material to the financial statements.

 

(p)  Classification of Expenses

 

Expenses are classified according to their function, as this is considered to be the most relevant information about the Group’s financial performance. The various functions of the Group are considered to align with the segments in which the Group operates.

 

F-13

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1—Basis of Presentation and Significant Accounting Policies (continued)

 

(q)  Earnings and Dividends Per Share

 

Basic earnings per share (“EPS”) is calculated as net profit or loss attributable to members of the parent entity, adjusted for dividends on perpetual preference shares, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

 

Diluted EPS is calculated as net profit or loss attributable to members of the parent entity, adjusted (i) for dividends on perpetual preference shares, (ii) for the after tax effects of dividends and interest associated with dilutive potential ordinary shares that have been recognized as expenses, and (iii) for other non-discretionary changes in revenues or expenses during the period that would result from dilution of potential ordinary shares, divided by the weighted average number of ordinary and dilutive potential ordinary shares, adjusted for any bonus element.

 

As the Group has two classes of ordinary shares (ordinary shares and preferred limited voting ordinary shares), two classes of EPS numbers are presented in accordance with the requirements of AASB 1027, “Earnings Per Share”.

 

Dividends per share were A$0.030 for ordinary shares for each of the fiscal years ended June 30, 2000 and 2001 and A$0.015 for the fiscal year ended June 30, 2002 and A$0.075 for preferred limited voting ordinary shares for each of the fiscal years ended June 30, 2000 and 2001 and A$0.0375 for the fiscal year ended June 30, 2002. Due to a change in accounting policy, the final dividend of A$0.015 for ordinary shares and A$0.0375 for preferred limited voting ordinary shares were not provided for in the financial statements for the year ended June 30, 2002, as the dividends were not declared and announced by the Directors prior to June 30, 2002.

 

(r)  Financial Instruments

 

Terms and conditions of material financial instruments are disclosed in the notes. Unless otherwise stated, financial instruments including trade receivables and trade payables are carried at cost. The fair value of interest bearing liabilities is disclosed in Note 8. The fair value of all other financial instruments is not materially different from their carrying value.

 

The fair value of financial instruments, including investments and borrowings, is generally determined by reference to market values resulting from trading on national securities exchanges. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques.

 

(s)  Use of Estimates

 

The preparation of financial statements in conformity with A-GAAP 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 reported amounts of revenues and expenses during the reporting period. The Group uses significant estimates in determining the amortization of filmed entertainment costs and programming contracts. Because of the use of estimates inherent in the financial reporting process, especially for companies with significant segments in the entertainment business, actual results could differ from those estimates. These differences could be material.

 

(t) Reserves

 

(i)

Capital:

Asset revaluation reserves are the excess of the valuation of investments, property, plant and equipment and publishing rights, titles and television licenses over their net book values at the date of revaluation.

 

(ii)

Net profit (loss) attributable to members of the parent entity Foreign exchange fluctuation (refer to (n) above).

 

(iii)

Associated Companies

Associated companies reserves represent the Group’s share in post acquisition retained earnings and reserves of companies accounted for under the equity method and are not available for distribution until they are received as dividends.

 

 

F-14

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1—Basis of Presentation and Significant Accounting Policies (continued)

 

(u)  Rounding of Accounts

 

The accounts have been rounded to the nearest million Australian dollars.

 

Amounts relating to related party transactions, Directors’, Executives’ and Auditors’ remuneration are rounded to the nearest thousand Australian dollars.

 

(v)  Fiscal Year End

 

The Group maintains a 52-53 week fiscal year ending on the Sunday nearest to June 30 in each year. Fiscal years 2001 and 2002 consisted of 52-week periods, while fiscal year 2000 consisted of a 53-week period.

 

F-15

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Note 2—Acquisitions

 

Fox Sports International

 

The Group and Liberty Media Corporation (“Liberty”) at June 30, 2001 each owned 50% of Fox Sports International. In July 2001, under a pre-existing option, Liberty exercised its right to sell its 50% interest in Fox Sports International to the Group in exchange for an aggregate 3,673,183 News Corporation American Depository Receipts representing 14,692,732 preferred limited voting ordinary shares (“ADRs”) valued at A$180 million. The transaction closed in December 2001. Under the terms of this transaction, the Group transferred the acquired interest in Fox Sports International to Fox Entertainment Group, Inc. (together with its subsidiaries, “FEG”) in exchange for the issuance of 3,632,269 FEG Class A Common Stock. This issuance increased the Group’s interest in FEG from 85.25% to 85.32%, while its voting interest remained at 97.8%.

 

Chris Craft

 

In July 2001, News Corporation, through a wholly-owned subsidiary, acquired all of the outstanding common stock of Chris-Craft Industries, Inc. and its subsidiaries, BHC Communications, Inc. and United Television, Inc., (collectively, “Chris-Craft”). The consideration for the acquisition was approximately A$3.5 billion in cash and the issuance of 68,854,209 ADRs representing 275,416,836 preferred limited voting ordinary shares valued at approximately A$3.5 billion. Simultaneously with the closing of the acquisition, News Corporation transferred A$4,438 million of certain net assets, constituting Chris-Craft’s ten television stations (the “Acquired Stations”) to its majority owned subsidiary, FEG, in exchange for 122,244,272 shares of FEG’s Class A Common Stock (the “Exchange”), thereby increasing the Group’s ownership in FEG from 82.76% to 85.25%. FEG assigned the licenses issued by the Federal Communications Commission (“FCC”) for the Acquired Stations to its indirect subsidiary, Fox Television Stations, Inc., which became the licensee and controls the operations of the Acquired Stations. The Group acquired Chris-Craft and transferred to FEG the Acquired Stations in order to strengthen FEG’s existing television station business.

 

FEG consolidated the operations of the Acquired Stations, as of the date of Exchange, July 31, 2001, with the exception of KTVX-TV in Salt Lake City, whose operations were not consolidated prior to the Exchange due to regulatory requirements which precluded FEG from controlling the station and required its disposal (see description for Clear Channel swap below).

 

In October 2001, the Group exchanged KTVX-TV in Salt Lake City and KMOL-TV in San Antonio with Clear Channel Communications, Inc. for WFTC-TV in Minneapolis (the “Clear Channel swap”). In addition, on November 1, 2001, the Group exchanged KBHK-TV in San Francisco with Viacom Inc. for WDCA-TV in Washington, DC and KTXH-TV in Houston (the “Viacom swap”). In June 2002, the Group exchanged KPTV-TV in Portland, an Acquired Station, for Meredith Corporation’s WOFL-TV in Orlando and WOGX-TV in Ocala (the “Meredith Swap”, and together with the Viacom and Clear Channel swaps, the “Station Swaps”). All of the stations exchanged in the Station Swaps were Acquired Stations. The stations received in the Station Swaps have been independently appraised at the same fair values as those Acquired Stations that were exchanged. Accordingly, no gain or loss was recognized by the Group as a result of the Station Swaps.

 

 

F-16

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2—Acquisitions (continued)

 

The following table summarizes the approximate fair values of the assets transferred and liabilities assumed at the date of the Exchange. The allocation of purchase price is substantially complete, but awaiting final valuations.

 

 

		As of July 31, 2001
		(in millions)
Cash		A$	2,700
Accounts receivable, net			157
Filmed entertainment and television programming costs, net			271
Property and equipment, net			176
Publishing rights, titles and television licenses			5,215
Other assets and investments			303
Total assets transferred		A$	8,822
Payables			1,323
Deferred compensation			(20	)
Total liabilities assumed		A$	1,303
Net assets acquired		A$	7,519

 

The table below reflects the unaudited pro forma combined results of the Group as if the Exchange and the Station Swaps had taken place as of July 1, 2000.

 

		For the years ended June 30,
		2001			2002
		(in millions, except for share amounts)
Revenues		A$	26,510		A$	29,078
Operating income			3,268			3,574
Net profit (loss) attributable to members of the parent entity			280			(11,944	)
Basic and diluted earnings (loss) per share:
Ordinary shares		A$	0.06		A$	(2.16	)
Preferred limited voting ordinary shares		A$	0.07		A$	(2.59	)

 

The unaudited pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the operating results that actually would have occurred had the Exchange and the Station Swaps been consummated on July 1, 2000. In addition, these results are not intended to be a projection of future results and do not reflect any synergies that might be achieved from the combined operations.

 

Speed Channel

 

In July 2001, as a result of the exercise of rights by existing shareholders, the Group acquired an additional 53.44% of Speedvision Network, LLC, now Speed Channel, Inc. (“Speed Channel”) for approximately A$789 million. This acquisition resulted in the Group owning approximately 85.46% of Speed Channel. As a result, the Group has consolidated the results of Speed Channel beginning in July 2001. In October 2001, the Group acquired the remaining 14.54% minority interest in Speed Channel for approximately A$221 million bringing the Group’s ownership percentage to 100%.

 

RSN North

 

In February 2001, Fox Sports Networks LLC (“Fox Sports Networks”), acquired certain assets and liabilities constituting the business of Midwest Sports Channel, a regional sports network serving the Minneapolis, Minnesota and Milwaukee, Wisconsin metropolitan areas, pursuant to an Assignment and Assumption Agreement among Fox Sports Networks, Viacom and Comcast Corporation (“Comcast”) and a Purchase Agreement between Viacom and Comcast for approximately A$79 million.

 

Sunshine

 

In January 2002, the Group acquired an additional 23.3% voting interest in Sunshine Networks (“Sunshine”) for approximately A$41.3 million. This resulted in the acquisition of a controlling financial interest in Sunshine and increased the Group’s ownership percentage in Sunshine to approximately 93%. In February 2002, the Group acquired an additional approximate 0.4% interest in Sunshine. Since the Group obtained a controlling financial interest upon acquisition in January 2002, Sunshine has been consolidated into the Cable Network Programming segment of the Group as it is now under the control of the Group.

 

 

F-17

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 3—Receivables

 

 

		At June 30,
		(in millions)
		2001				2002
Current receivables:
Trade receivables		A$	6,553			A$	6,140
Trade receivables owing by associated entities			296				188
Less allowance for doubtful accounts and rebates			(541	)			(832	)
		A$	6,308			A$	5,496
Non-trade amounts owing by unrelated entities		A$	346			A$	280
Non-trade amounts owing by associated entities			29				33
		A$	6,683			A$	5,809
Non-current receivables:
Trade receivables		A$	331			A$	375
Other receivables			431				421
		A$	762			A$	796

 

These receivables are primarily denominated in US dollars (“US$”) and located in the United States of America. There is no material reliance on any single customer.

 

The net charge to the provision for doubtful accounts was A$166 million, A$151 million and A$286 million for the fiscal years ended 2000, 2001 and 2002 respectively.

 

 

F-18

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 4—Inventories

 

 

		At June 30,
		(in millions)
		2001			2002
Current:
Raw materials		A$	177		A$	124
Finished goods			283			237
Work and projects in progress			86			123
Television and sports programming rights			2,774			1,526
Total at cost		A$	3,320		A$	2,010
Provision for diminished value:
Finished goods			61			75
Total provision for diminution in value			61			75
		A$	3,259		A$	1,935
Non-current:
Finished goods			194			186
Television and sports programming rights			712			812
Total at cost		A$	906		A$	998
Filmed entertainment costs, net:
Film costs in progress		A$	1,844		A$	914
Completed film product			2,469			2,320
Total filmed entertainment costs, net		A$	4,313		A$	3,234
		A$	5,219		A$	4,232

 

Interest of A$42 million was capitalized during the year related to film inventories (2001—A$49 million). Capitalized interest in film inventory at June 30, 2002 amounts to A$73 million (2001-A$87 million). Interest has been capitalized at 8.00% (2001—8.00%).

 

Total inventories at June 30, 2002 amount to A$6,167 million (2001—A$8,478 million) and consist of the following:

 

 

		At June 30,
		(in millions)
		2001			2002
Filmed entertainment costs:
Films
Released		A$	1,456		A$	1,291
Completed, not released			57			142
In production			1,189			648
In development or preproduction			339			87
			3,041			2,168
Television productions
Released			956			887
In production			296			167
In development or preproduction			20			12
			1,272			1,066
Total filmed entertainment			4,313			3,234
Television programming			3,486			2,338
Other inventories			679			595
Total inventories		A$	8,478		A$	6,167
Less current inventories			3,259			1,935
Non-current inventories		A$	5,219		A$	4,232

 

As of June 30, 2002, the Group estimated that approximately 63% of unamortized filmed entertainment costs from completed films are expected to be amortized during fiscal year 2003 and approximately 91% of released unamortized filmed entertainment costs will be amortized within the next three years. As of June 30, 2002, the Group estimated that approximately 35% of A$1,449 million in accrued participation liabilities will be payable during fiscal year 2003.

 

 

F-19

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THE NEWS CORPORATION LIMITED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 5—Investments

 

The Group’s investments consist principally of:

 

							At June 30,
							(in millions)
Company		Principal Activities		Percentage Ownership			2001			2002
Gemstar—TV Guide International		U.S. print and electronic guidance company		42.9% (2001 38.5%	)		A$	11,271		A$	1,673
Regional Programming Partners(a)		U.S. partnership holding interests in sporting networks, teams and arenas		40.0%				1,835			1,673
Stream, S.p.A.		Italian pay TV provider		50.0%				952			648
China Network Systems		Taiwan cable TV operator		20.0%				477			434
National Geographic Channel(a)		U.S. domestic cable channel		66.7%				67			314
Independent Newspapers Limited		New Zealand newspaper publisher		45.3% (2001 44.3%	)			256			237
Ventures Arena(a)		U.S. company holding interests in sporting arenas		40.0%				260			218
FOXTEL		Australian pay TV operator		25.0%				199			207
National Rugby League		Australian rugby league football competition		50.0%				160			160
Queensland Press Pty. Limited		Australian newspaper publisher		41.7%				156			131
National Geographic International(a)		International cable channel		50.0%				90			104
BSkyB Group plc(b)		U.K. satellite TV broadcaster		36.2% (2001 36.3%	)			1,392			—
Fox Family Worldwide(a)		Family television programming venture		0% (2001 49.5%	)			857			—
Fox Sports International(a)		U.S. cable TV operator		Consolidated (2001 50.0%	)			151			—
Other equity investments		Various		Various				1,899			1,076
		Total equity investments						20,022			6,875
Echostar Communications		Satellite broadcaster		0% (2001 5.2%	)			873			—
Kirch Media		Holding company for commercial TV, film and sporting rights, new media, production and film technology		2.5%				427			—
The Wireless Group plc		Commercial radio operator		40.32% (voting 19.90%	)			146