Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2011

¨	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 001-32352

NEWS CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware		26-0075658
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1211 Avenue of the Americas, New York, New York		10036
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (212) 852-7000

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of April 27, 2011, 1,828,108,615 shares of Class A Common Stock, par value $0.01 per share, and 798,520,953 shares of Class B Common Stock, par value $0.01 per share, were outstanding.

NEWS CORPORATION

FORM 10-Q

TABLE OF CONTENTS


		Page
Part I. Financial Information
Item 1.	Financial Statements
	Unaudited Consolidated Statements of Operations for the three and nine months ended March 31, 2011 and 2010		3
	Consolidated Balance Sheets at March 31, 2011 (unaudited) and June 30, 2010 (audited)		4
	Unaudited Consolidated Statements of Cash Flows for the nine months ended March 31, 2011 and 2010		5
	Notes to the Unaudited Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		59
Item 4.	Controls and Procedures		61
Part II. Other Information
Item 1.	Legal Proceedings		61
Item 1A.	Risk Factors		61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		64
Item 3.	Defaults Upon Senior Securities		64
Item 4.	(Removed and Reserved)		64
Item 5.	Other Information		65
Item 6.	Exhibits		65
Signature			66

NEWS CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)


	For the three months ended March 31,						For the nine months ended March 31,
	2011			2010			2011			2010
Revenues	$	8,256		$	8,785		$	24,443		$	24,668

Operating expenses		(5,322	)		(5,777	)		(15,470	)		(15,812	)
Selling, general and administrative		(1,588	)		(1,461	)		(4,638	)		(4,939	)
Depreciation and amortization		(283	)		(294	)		(837	)		(890	)
Impairment and restructuring charges		(3	)		(6	)		(285	)		(36	)
Equity earnings of affiliates		111			181			272			271
Interest expense, net		(244	)		(247	)		(706	)		(761	)
Interest income		31			20			85			61
Other, net		(19	)		(45	)		(41	)		(143	)

Income before income tax expense		939			1,156			2,823			2,419
Income tax expense		(257	)		(295	)		(657	)		(677	)

Net income		682			861			2,166			1,742
Less: Net income attributable to noncontrolling interests		(43	)		(22	)		(110	)		(78	)

Net income attributable to News Corporation stockholders	$	639		$	839		$	2,056		$	1,664

Weighted average shares:
Basic		2,626			2,620			2,624			2,619
Diluted		2,631			2,627			2,628			2,625

Net income attributable to News Corporation stockholders per share
Basic	$	0.24		$	0.32		$	0.78		$	0.64
Diluted	$	0.24		$	0.32		$	0.78		$	0.63

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

NEWS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts)


	At March 31, 2011		At June 30, 2010
	(unaudited)		(audited)
Assets:
Current assets:
Cash and cash equivalents	$	11,784	$	8,709
Receivables, net		6,687		6,431
Inventories, net		2,358		2,392
Other		436		492

Total current assets		21,265		18,024

Non-current assets:
Receivables		370		346
Investments		4,571		3,515
Inventories, net		4,179		3,254
Property, plant and equipment, net		6,425		5,980
Intangible assets, net		8,335		8,306
Goodwill		14,311		13,749
Other non-current assets		975		1,210

Total assets	$	60,431	$	54,384

Liabilities and Equity:
Current liabilities:
Borrowings	$	37	$	129
Accounts payable, accrued expenses and other current liabilities		5,493		5,204
Participations, residuals and royalties payable		1,614		1,682
Program rights payable		1,226		1,135
Deferred revenue		858		712

Total current liabilities		9,228		8,862

Non-current liabilities:
Borrowings		15,455		13,191
Other liabilities		3,045		2,979
Deferred income taxes		3,468		3,486
Redeemable noncontrolling interests		328		325
Commitments and contingencies

Equity:
Class A common stock ⁽¹⁾		18		18
Class B common stock ⁽²⁾		8		8
Additional paid-in capital		17,435		17,408
Retained earnings and accumulated other comprehensive income		10,952		7,679

Total News Corporation stockholders’ equity		28,413		25,113
Noncontrolling interests		494		428

Total equity		28,907		25,541

Total liabilities and equity	$	60,431	$	54,384

⁽¹⁾	Class A common stock , $0.01 par value per share, 6,000,000,000 shares authorized, 1,827,891,804 shares and 1,822,301,780 shares issued and outstanding, net of 1,776,568,370 and 1,776,740,787 treasury shares at par at March 31, 2011 and June 30, 2010, respectively.

⁽²⁾	Class B common stock , $0.01 par value per share, 3,000,000,000 shares authorized, 798,520,953 shares issued and outstanding, net of 313,721,702 treasury shares at par at March 31, 2011 and June 30, 2010.

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

NEWS CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	For the nine months ended March 31,
	2011			2010
Operating activities:
Net income	$	2,166		$	1,742
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		837			890
Amortization of cable distribution investments		69			64
Equity earnings of affiliates		(272	)		(271	)
Cash distribution received from affiliates		178			190
Impairment charges		168			—
Other, net		41			143
Change in operating assets and liabilities, net of acquisitions:
Receivables and other assets		(130	)		(480	)
Inventories, net		(747	)		(465	)
Accounts payable and other liabilities		168			1,166

Net cash provided by operating activities		2,478			2,979

Investing activities:
Property, plant and equipment, net of acquisitions		(817	)		(661	)
Acquisitions, net of cash acquired		(408	)		(132	)
Investments in equity affiliates		(273	)		(307	)
Other investments		(265	)		(106	)
Proceeds from dispositions		363			889

Net cash used in investing activities		(1,400	)		(317	)

Financing activities:
Borrowings		2,471			1,024
Repayment of borrowings		(417	)		(1,869	)
Issuance of shares		12			22
Dividends paid		(257	)		(203	)
Purchase of subsidiary shares from noncontrolling interests		(116	)		—
Sale of subsidiary shares to noncontrolling interests		50			—
Other, net		—			2

Net cash provided by (used in) financing activities		1,743			(1,024	)

Net increase in cash and cash equivalents		2,821			1,638
Cash and cash equivalents, beginning of period		8,709			6,540
Exchange movement of opening cash balance		254			5

Cash and cash equivalents, end of period	$	11,784		$	8,183

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

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

News Corporation, a Delaware corporation, with its subsidiaries (together “News Corporation” or the “Company”), is a diversified global media company, which manages and reports its businesses in six segments: Cable Network Programming, Filmed Entertainment, Television, Direct Broadcast Satellite Television (“DBS”), Publishing and Other.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these unaudited consolidated financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2011.

These interim unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the fiscal year ended June 30, 2010 and notes thereto included in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on November 3, 2010, which should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC on August 6, 2010.

The consolidated financial statements include the accounts of News Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments in which the Company exercises significant influence but does not exercise control and is not the primary beneficiary are accounted for using the equity method. Investments in which the Company is not able to exercise significant influence over the investee are designated as available-for-sale if readily determinable fair values are available. If an investment’s fair value is not readily determinable, the Company accounts for its investment under the cost method.

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

Certain fiscal 2010 amounts have been reclassified to conform to the fiscal 2011 presentation.

The Company’s fiscal year ends on the Sunday closest to June 30. Fiscal year 2011 will include 53 weeks, with the 53 ^rd week falling in the fourth fiscal quarter, while fiscal year 2010 included 52 weeks. All references to March 31, 2011 and March 31, 2010 relate to the three and nine month periods ended March 27, 2011 and March 28, 2010, respectively. For convenience purposes, the Company continues to date its financial statements as of March 31.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standards Codification (“ASC”) 220 “Comprehensive Income,” total comprehensive income (loss) for the Company consisted of the following:


	For the three months ended March 31,						For the nine months ended March 31,
	2011			2010			2011			2010
	(in millions)
Net income, as reported	$	682		$	861		$	2,166		$	1,742
Other comprehensive income:
Foreign currency translation adjustments		467			(342	)		1,518			117
Unrealized holding gains on securities, net of tax		38			5			92			62
Benefit plan adjustments		(1	)		16			13			28

Total comprehensive income		1,186			540			3,789			1,949

Less: net income attributable to noncontrolling interests ⁽¹⁾		(43	)		(22	)		(110	)		(78	)
Less: foreign currency translation adjustments attributable to noncontrolling interests ⁽¹⁾		(2	)		(2	)		(10	)		(2	)

Comprehensive income attributable to News Corporation stockholders	$	1,141		$	516		$	3,669		$	1,869

⁽¹⁾	Includes amounts relating to noncontrolling interests classified as equity and redeemable noncontrolling interests.

Recent Accounting Pronouncements

On July 1, 2010, the Company adopted the new provisions of ASC 810-10-65-2, “Transition Related to FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R).” ASC 810-10-65-2 changes the approach to determining the primary beneficiary of a variable interest entity (“VIE”) and requires the Company to regularly assess whether it is the primary beneficiary of a VIE. The Company’s adoption of ASC 810-10-65-2 did not have a material effect on the Company’s consolidated financial statements.

The Company has an unconsolidated investment in a VIE and the Company’s aggregate risk of loss related to this unconsolidated VIE as of March 31, 2011 was approximately $563 million which consisted of debt and equity securities and was included in Investments in the consolidated balance sheets. In addition, the Company has agreed to provide loans to this VIE of approximately $150 million. As of March 31, 2011, funding of these loans has not yet been requested by this VIE.

The Company also has a consolidated investment in a VIE; however, the assets, liabilities, net income and cash flows attributable to this entity were not material to the Company in any of the periods presented.

Note 2—Acquisitions, Disposals and Other Transactions

Fiscal 2011 Transactions

During the first quarter of fiscal 2011, the Company acquired an additional interest in Asianet Communications Limited (“Asianet”), an Asian general entertainment television joint venture, for approximately $92 million in cash. As a result of this transaction, the Company increased its interest in Asianet to 75% from the 51% it owned at June 30, 2010.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In November 2010, the Company formed a joint venture with China Media Capital (“CMC”), a media fund in China, to explore new growth opportunities. The Company transferred the equity and related assets of its STAR China business along with the Fortune Star Chinese movie library with a combined market value of approximately $140 million and CMC paid cash of approximately $74 million to the Company. Following this transaction, CMC holds a 53% controlling stake in the joint venture and the Company holds a 47% stake. The Company’s interest in the joint venture was recorded at fair value of $66 million, which was determined using a discounted cash flow valuation method and is now accounted for under the equity method of accounting. The Company recorded a gain on this transaction of $57 million, which was included in Other, net in the unaudited consolidated statements of operations for the nine months ended March 31, 2011.

In December 2010, the Company disposed of the Fox Mobile Group (“Fox Mobile”) and recorded a loss of approximately $28 million on the disposition which was included in Other, net in the unaudited consolidated statements of operations for the nine months ended March 31, 2011. The net income, assets, liabilities and cash flow attributable to the Fox Mobile operations were not material to the Company in any of the periods presented and, accordingly, have not been presented separately.

During the third quarter of fiscal 2011, the Company acquired Wireless Generation, an education technology company, for cash. Total consideration was approximately $390 million, which included the equity purchase and the repayment of Wireless Generation’s outstanding debt.

In April 2011, the Company acquired Shine Group, an international television production group, for cash. The total consideration for this acquisition included (i) approximately $480 million for the acquisition of the equity, of which approximately $60 million has been set aside in escrow to satisfy any indemnification obligations, (ii) the repayment of Shine Group’s outstanding debt of approximately $135 million and (iii) net liabilities assumed. Elisabeth Murdoch, Chairman and Chief Executive Officer of Shine Group, and daughter of Mr. K. R. Murdoch and sister of Messrs. Lachlan and James Murdoch, received approximately $214 million in cash at closing in consideration for her majority ownership interest in Shine Group, and is entitled to her proportionate share of amounts that are released from escrow.

Fiscal 2010 Transactions

During fiscal year 2010, the Company completed two transactions related to its financial indexes businesses:

The Company sold its 33% interest in STOXX AG (“STOXX”), a European market index provider, to its partners, Deutsche Börse AG and SIX Group AG, for approximately $300 million in cash. The Company is entitled to receive additional consideration up to approximately $40 million if STOXX achieved certain revenue targets in calendar year 2010. The Company expects that this post-closing adjustment will be resolved in the fourth quarter of fiscal 2011.

The Company and CME Group Inc. (“CME”) formed a joint venture to operate a global financial index service business (the “Venture”), to which the Company contributed its Dow Jones Indexes business valued at $675 million (which included the Company’s agreement to provide to the Venture an annual media credit for advertising on the Company’s Dow Jones media properties averaging approximately $3.5 million a year for a ten year term) and CME contributed a business which provides certain market data services valued at $608 million. The Company and CME own 10% and 90% of the Venture, respectively. The Venture issued approximately $613 million in third-party debt due in March 2018 that has been guaranteed by CME (the “Venture Financing”). The Venture used the proceeds from the debt issuance to make a special distribution at the time of the closing of approximately $600 million solely to the Company. The Company agreed to indemnify

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

CME with respect to any payments of principal, premium and interest that CME makes under its guarantee of the Venture Financing and certain refinancing of such debt. In the event the Company is required to perform under this indemnity, the Company will be subrogated to and acquire all rights of CME. The maximum potential amount of undiscounted future payments related to this indemnity was approximately $800 million at March 31, 2011. The Company has made a determination that there is no recognition of this potential future payment in the accompanying financial statements.

The Company has the right to cause the Venture to purchase its 10% interest at fair market value in 2016 and the Venture has the right to call the Company’s 10% interest at fair market value in 2017.

The Company’s interest in the Venture was recorded at fair value of $67.5 million, which was determined using an earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiple and market-based valuation approach methodologies, and is now accounted for under the cost method of accounting. The net income, assets, liabilities, and cash flow attributable to the Dow Jones Indexes business were not material to the Company in any of the periods presented and, accordingly, have not been presented separately.

The Company recorded a combined loss of approximately $23 million on both of these transactions, which was included in Other, net in the consolidated statements of operations for the fiscal year ended June 30, 2010, of which $22 million was recorded during the three and nine months ended March 31, 2010.

In December 2009, the Company entered into an agreement to transfer the equity and related assets of Photobucket to a mobile photo uploading platform in exchange for an equity interest in the acquirer and cash. A loss of approximately $32 million was recorded on this transaction, of which $29 million was included in Other, net in the unaudited consolidated statements of operations for the nine months ended March 31, 2010. As a result of this transaction, the Company’s interest in the acquirer, which is not material, was recorded at fair value and is now accounted for under the equity method of accounting.

During fiscal 2010, the Company sold the majority of its terrestrial television operations in Eastern Europe led by the sale of its Bulgarian terrestrial TV business, bTV. The aggregate cash received in connection with these sales was approximately $372 million, net of expense, and a net gain of approximately $195 million on these sales was included in Other, net in the consolidated statements of operations for the fiscal year ended June 30, 2010. The Company recorded a gain related to these sales of approximately $235 million during the fourth quarter of fiscal 2010 which was partially offset by net losses of $40 million recorded during the nine months ended March 31, 2010. The Company continues to operate a terrestrial TV business, FOX TV, a Turkish national general interest free-to-air broadcast television station. The net income, assets, liabilities and cash flow attributable to the terrestrial television operations sold were not material to the Company in any of the periods presented and, accordingly, have not been presented separately.

Other Transactions

During fiscal 2010, the Company announced that it had proposed to the board of directors of British Sky Broadcasting Group plc (“BSkyB”), in which the Company currently has an approximate 39% interest, to make a cash offer of 700 pence per share for the BSkyB shares that the Company does not already own. The Company and the independent members of BSkyB’s board of directors were unable to reach a mutually agreeable price at the time of the public announcement; however, the parties entered into a cooperation agreement pursuant to which the parties agreed to work together to proceed with the regulatory process in order to facilitate a proposed transaction. There can be no assurance that the Company will make a binding offer. The Company will pay BSkyB a breakup fee of approximately $60 million as of March 31, 2011 if the regulatory approvals are obtained

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

and the Company does not make a binding offer within five months thereafter of at least 700 pence per share. The Company believes that a potential transaction will result in increased geographic diversification of the Company’s earnings base and reduce its exposure to cyclical advertising revenues through an increase in direct consumer subscription revenues. If the Company makes a binding offer and proceeds with the proposed transaction, the Company plans to finance the transaction by using a significant portion of the available cash on its balance sheet plus borrowed funds.

During fiscal 2009, the Company, two incorporated subsidiaries of funds advised by Permira Advisers LLP and the Company’s then majority-owned, publicly-held subsidiary, NDS Group plc (“NDS”), completed a transaction pursuant to which all issued and outstanding NDS Series A ordinary shares, including those represented by American Depositary Shares traded on The NASDAQ Stock Market, were acquired for per-share consideration of $63 in cash. As part of the transaction, approximately 67% of the NDS Series B ordinary shares held by the Company were exchanged for $63 per share in a mix of approximately $1.5 billion in cash, which included $780 million of cash retained upon the deconsolidation of NDS, and a $242 million vendor note. In March 2011, the Company received $316 million from NDS in full payment of the $242 million vendor note and $74 million in accrued interest.

Note 3—Receivables, net

Receivables, net consisted of:


	At March 31, 2011			At June 30, 2010
	(in millions)
Total receivables	$	8,246		$	7,947
Allowances for returns and doubtful accounts		(1,189	)		(1,170	)

Total receivables, net		7,057			6,777
Less: current receivables, net		6,687			6,431

Non-current receivables, net	$	370		$	346

Note 4—Restructuring Programs

Fiscal 2011

During the second quarter of fiscal 2011, the Company recorded restructuring charges of approximately $107 million. These charges were a result of an organizational restructuring of the Company’s digital media properties to align resources more closely with business priorities and consisted of an increase to the original provision for facility related costs of $51 million, facility related costs of $37 million related to additional sites, severance costs of $17 million and other associated costs of $2 million.

Fiscal 2010

In fiscal 2010, the Company recorded restructuring charges of approximately $53 million, of which $6 million and $36 million were recorded during the three and nine months ended March 31, 2010, respectively. The restructuring charges in fiscal 2010 reflect an $18 million charge related to the sales and distribution operations of the STAR channels, a $19 million charge for termination benefits related to the newspaper businesses, a $7 million charge related to the restructuring program at Fox Mobile and a $9 million charge for accretion on facility termination obligations.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company expects to record an additional $68 million of restructuring charges, principally related to accretion on facility termination obligations through 2021. At March 31, 2011, restructuring liabilities of approximately $52 million and $186 million were included in the consolidated balance sheets in other current liabilities and other liabilities, respectively. Amounts included in other liabilities primarily relate to facility termination obligations, which are expected to be paid through fiscal 2021.

Changes in the program liabilities were as follows:


	For the three months ended March 31, 2011												For the three months ended March 31, 2010
	One time termination benefits			Facility related costs			Other costs			Total			One time termination benefits			Facility related costs			Other costs			Total
	(in millions)												(in millions)
Beginning of period	$	29		$	229		$	7		$	265		$	28		$	162		$	8		$	198
Additions		—			3			—			3			4			2			—			6
Payments		(14	)		(9	)		(6	)		(29	)		(5	)		(6	)		(1	)		(12	)
Other		(1	)		(1	)		1			(1	)		(1	)		—			—			(1	)

End of period	$	14		$	222		$	2		$	238		$	26		$	158		$	7		$	191


	For the nine months ended March 31, 2011												For the nine months ended March 31, 2010
	One time termination benefits			Facility related costs			Other costs			Total			One time termination benefits			Facility related costs			Other costs			Total
	(in millions)												(in millions)
Beginning of period	$	32		$	154		$	6		$	192		$	65		$	164		$	8		$	237
Additions		22			93			2			117			22			12			2			36
Payments		(39	)		(24	)		(6	)		(69	)		(60	)		(18	)		(3	)		(81	)
Other		(1	)		(1	)		—			(2	)		(1	)		—			—			(1	)

End of period	$	14		$	222		$	2		$	238		$	26		$	158		$	7		$	191

Dow Jones

As a result of the Dow Jones acquisition, in fiscal 2008, the Company established and approved plans to integrate the acquired operations into the Company’s Publishing segment. The cost to implement these plans consists of separation payments for certain Dow Jones executives under the change in control plan Dow Jones had established prior to the acquisition, non-cancelable lease commitments and lease termination charges for leased facilities that have or will be exited and other contract termination costs associated with the restructuring activities. As of March 31, 2011, all of the material aspects of the plans have been completed and the substantial remaining obligation pertains to the lease termination charges for leased facilities of approximately $60 million.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 5—Inventories, net

The Company’s inventories were comprised of the following:


	At March 31, 2011			At June 30, 2010
	(in millions)
Programming rights	$	3,523		$	3,058
Books, DVDs, paper and other merchandise		381			367
Filmed entertainment costs:
Films:
Released (including acquired film libraries)		573			614
Completed, not released		179			155
In production		860			508
In development or preproduction		104			98

		1,716			1,375

Television productions:
Released (including acquired libraries)		663			561
In production		250			283
In development or preproduction		4			2

		917			846

Total filmed entertainment costs, less accumulated amortization ^(a)		2,633			2,221

Total inventories, net		6,537			5,646
Less: current portion of inventory, net ^(b)		(2,358	)		(2,392	)

Total noncurrent inventories, net	$	4,179		$	3,254

^(a)	Does not include $436 million and $460 million of net intangible film library costs as of March 31, 2011 and June 30, 2010, respectively, which are included in intangible assets subject to amortization in the consolidated balance sheets.

^(b)	Current inventory as of March 31, 2011 and June 30, 2010 was comprised of programming rights ($2,011 million and $2,057 million, respectively), books, DVDs, paper and other merchandise.

Note 6—Investments

The Company’s investments were comprised of the following:


		Ownership Percentage			At March 31, 2011		At June 30, 2010
					(in millions)
Equity method investments:
British Sky Broadcasting Group plc ⁽¹⁾	U.K. DBS operator		39	%	$	1,520	$	1,159
NDS	Digital technology company		49	%		393		286
Sky Network Television Ltd. ⁽¹⁾	New Zealand media company		44	%		386		343
Sky Deutschland AG ⁽¹⁾	German pay-TV operator		49.9	% ⁽²⁾		331		326
Other equity method investments			various			1,030		893
Fair value of available-for-sale investments			various			597		225
Other investments			various			314		283

					$	4,571	$	3,515

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

⁽¹⁾	The market value of the Company’s investment in BSkyB, Sky Deutschland AG (“Sky Deutschland”) and Sky Network Television Ltd., was $9,183 million, $1,359 million and $708 million at March 31, 2011, respectively.

⁽²⁾	In fiscal 2011, the Company increased its ownership in Sky Deutschland from approximately 45% to 49.9%. (See Fiscal 2011 Transactions below for further discussion)

The cost basis, unrealized gains, unrealized losses and fair market value of available-for-sale investments are set forth below:


	At March 31, 2011		At June 30, 2010
	(in millions)
Cost basis of available-for-sale investments	$	269	$	37
Accumulated gross unrealized gain		328		189
Accumulated gross unrealized loss		—		(1	)

Fair value of available-for-sale investments	$	597	$	225

Deferred tax liability	$	114	$	66

Fiscal 2011 Transactions

In fiscal 2011, the Company agreed to backstop €400 million (approximately $525 million), of financing measures that were being initiated by Sky Deutschland of which approximately €342 million (approximately $450 million) has been completed. As part of these financing measures, the Company acquired 108 million additional shares of Sky Deutschland, increasing its ownership from approximately 45% to 49.9%. The aggregate cost of the shares acquired by the Company was approximately €115 million (approximately $150 million) and the shares were newly registered shares issued pursuant to the total capital increase.

In addition, in accordance with the backstop, the Company agreed with Sky Deutschland to subscribe to a bond issuance that is convertible for up to 53.9 million underlying Sky Deutschland shares. The convertible bond was issued to the Company in January 2011 for approximately €165 million (approximately $225 million). The Company currently has the right to convert the bond into equity, subject to certain black-out periods. If not converted, the Company will have the option to redeem the bond for cash upon its maturity in four years. The convertible bond was separated into its host and derivative financial instrument components, both of which are recorded at their estimated fair value in Investments in the unaudited consolidated balance sheets. The change in estimated fair value of the host is recorded in Other Comprehensive Income in the unaudited consolidated balance sheets while the changes in estimated fair value of the derivative financial instrument is recorded in Other, net in the unaudited consolidated statement of operations. The remaining amount under the backstop of approximately €58 million (approximately $75 million), must be funded prior to December 2011 and will be provided as a shareholder loan to the extent Sky Deutschland does not generate other proceeds through capital increases or convertible bond issuances.

The Company has also agreed to loan Sky Deutschland approximately $70 million to support the launch of a sports news channel. The Company expects to fund this in fiscal 2012.

In August 2010, the Company increased its investment in Tata Sky Ltd. (“Tata Sky”) for approximately $88 million in cash. As a result of this transaction, the Company increased its interest in Tata Sky to approximately 30% from the 20% it owned at June 30, 2010.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fiscal 2010 Transactions

During fiscal 2010, the Company acquired shares of Sky Deutschland, increasing its ownership from approximately 38% at June 30, 2009 to approximately 45% at June 30, 2010. The aggregate cost of the shares acquired was approximately $200 million and the majority of the shares were newly registered shares issued pursuant to a capital increase.

During fiscal 2010, the Company acquired an approximate 9% interest in Rotana Holding FZ-LLC (“Rotana”), which operates a diversified film, television, audio, advertising and entertainment business across the Middle East and North Africa, for $70 million. A significant stockholder of the Company, who owned approximately 7% of the Company’s Class B Common stock at the time of transaction, owns a controlling interest in Rotana. The Company has an option to purchase an approximate 9% additional interest for $70 million through November 2011. The Company also has an option to sell its interest in Rotana in fiscal year 2015 at the higher of the price per share based on a bona fide sale offer or the original subscription price.

Other Transactions

During fiscal 2010, the Company announced that it had proposed to the board of directors of BSkyB, in which the Company currently has an approximate 39% interest, to make a cash offer of 700 pence per share for the BSkyB shares that the Company does not already own. (See Note 2—Acquisitions, Disposals and Other Transactions for further discussion)

Note 7—Fair Value

In accordance with ASC 820, fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories: (i) inputs that are quoted prices in active markets (“Level 1”); (ii) inputs other than quoted prices included within Level 1 that are observable, including quoted prices for similar assets or liabilities (“Level 2”); and (iii) inputs that require the entity to use its own assumptions about market participant assumptions (“Level 3”). Additionally, in accordance with ASC 815 “Derivatives and Hedging” (“ASC 815”), the Company has included additional disclosures about the Company’s derivatives and hedging activities (Level 2).

The table below presents information about financial assets and liabilities carried at fair value on a recurring basis as of March 31, 2011:


Description	Total			Fair Value Measurements at Reporting Date Using
Description	Total			Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Assets
Available-for-sale securities ⁽¹⁾	$	597		$	365	$	232		$	—
Liabilities
Derivatives ⁽²⁾		(6	)		—		(6	)		—
Redeemable noncontrolling interests ⁽³⁾		(328	)		—		—			(328	)

Total	$	263		$	365	$	226		$	(328	)

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

⁽¹⁾	See Note 6—Investments.

⁽²⁾	Represents derivatives associated with the Company’s foreign exchange forward contracts designated as hedges.

⁽³⁾

The Company accounts for the redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A “Distinguishing Liabilities from Equity” (“ASC 480-10-S99-3A”) because their exercise is outside the control of the Company and, accordingly, as of March 31, 2011, has included the fair value of the redeemable noncontrolling interests in the consolidated balance sheets. The majority of redeemable noncontrolling interests recorded at fair value are put arrangements held by the noncontrolling interests in one of the Company’s majority-owned Regional Sports Network (“RSN”), in a majority-owned outdoor marketing subsidiary and in one of the Company’s Asian general entertainment television joint ventures.

The fair value of the redeemable noncontrolling interest in the Company’s RSN was determined by using a discounted earnings before interest, taxes, depreciation and amortization valuation model, assuming a 9% discount rate.

As the Company is currently exploring the possible disposal of its majority–owned outdoor marketing subsidiary, the Company applied the market approach in valuing its redeemable noncontrolling interest.

The fair value of the redeemable noncontrolling interest in the Asian general entertainment television joint venture was determined using a discounted cash flow analysis assuming a multiple of ten times terminal year EBITDA.

The changes in fair value of liabilities classified as Level 3 measurements during the nine months ended March 31, 2011 were as follows (in millions):


Beginning of period	$	(325	)
Total gains (losses) included in net income		(12	)
Total gains (losses) included in other comprehensive income		—
Other		9

End of period	$	(328	)

Financial Instruments

The carrying value of the Company’s financial instruments, including cash and cash equivalents, receivables, payables and cost investments, approximates fair value.

The aggregate fair value of the Company’s borrowings at March 31, 2011 was approximately $17,072 million compared with a carrying value of $15,492 million and, at June 30, 2010, was approximately $14,975 million compared with a carrying value of $13,320 million. Fair value is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market.

Foreign Currency Forward Contracts

The Company uses financial instruments designated as cash flow hedges primarily to hedge certain exposures to foreign currency exchange risks associated with the cost for producing or acquiring films and television programming abroad. The notional amount of foreign exchange forward contracts with foreign currency risk outstanding at March 31, 2011 and June 30, 2010 was $554 million and $381 million, respectively. As of March 31, 2011 and June 30, 2010, the fair values of the foreign exchange forward contracts of

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

approximately $(6) million and $33 million, respectively, were recorded in the underlying hedged balances. The Company’s foreign currency forward contracts are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.

The effective changes in fair value of derivatives designated as cash flow hedges for the three and nine months ended March 31, 2011 of $(31) million and $(34) million, respectively, were recorded in accumulated other comprehensive income with foreign currency translation adjustments. The ineffective changes in fair value of derivatives designated as cash flow hedges were immaterial. Amounts are reclassified from accumulated other comprehensive income when the underlying hedged item is recognized in earnings. During the three and nine months ended March 31, 2011, the Company reclassified gains of approximately $3 million and $12 million, respectively, from other comprehensive income to net income. The Company expects to reclassify the cumulative change in fair value included in other comprehensive income within the next 24 months. Cash flows from the settlement of foreign exchange forward contracts offset cash flows from the underlying hedged item and are included in operating activities in the consolidated statements of cash flows.

Concentrations of Credit Risk

Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk.

The Company’s receivables did not represent significant concentrations of credit risk at March 31, 2011 or June 30, 2010 due to the wide variety of customers, markets and geographic areas to which the Company’s products and services are sold.

The Company monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial instruments. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. At March 31, 2011, the Company did not anticipate nonperformance by any of the counterparties.

Note 8—Goodwill and Other Intangible Assets

The increase in the carrying value of goodwill during the nine months ended March 31, 2011 was primarily due to foreign currency adjustments and the acquisition of Wireless Generation, partially offset by the Digital Media Group goodwill impairment and fiscal 2011 dispositions.

During the second quarter of fiscal 2011, the Company performed an interim impairment review of its Digital Media Group reporting unit’s goodwill as a result of lower than expected earnings and cash flows relative to the assumptions utilized in its fiscal 2010 annual impairment review, as well as the organizational restructuring at this reporting unit. As a result of the review performed, the Company recorded a non-cash goodwill impairment charge of $168 million during the nine months ended March 31, 2011.

The Company’s goodwill impairment review was determined using a two-step process. The first step of the process was to compare the fair value of the reporting unit with its carrying amount, including goodwill. In performing the first step, the Company determined the fair value of the reporting unit by using a discounted cash flow analysis and market-based valuation approach methodologies. Determining fair value required the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates, relevant

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

comparable company earnings multiples and the amount and timing of expected future cash flows. The cash flows employed in the analyses were based on the Company’s estimated outlook and various growth rates have been assumed for years beyond the long-term business plan period. Discount rate assumptions were based on an assessment of the risk inherent in the future cash flows of the respective reporting unit. In assessing the reasonableness of its determined fair values, the Company evaluated its results against other value indicators, such as comparable public company trading values. As the carrying amount of the reporting unit exceeded its fair value, the second step of the goodwill impairment review was required to be performed to estimate the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill was determined in the same manner as the amount of goodwill recognized in a business combination. That is, the estimated fair value of the reporting unit was allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the purchase price paid. The implied fair value of the reporting unit’s goodwill was compared with the carrying amount of that goodwill. As the carrying amount of the reporting unit’s goodwill exceeded the implied fair value of that goodwill, an impairment loss was recognized in an amount equal to that excess.

Note 9—Borrowings

Notes due 2021 and 2041

In February 2011, News America Incorporated (“NAI”), a wholly-owned subsidiary of the Company, issued $1.0 billion of 4.50% Senior Notes due 2021 and $1.5 billion of 6.15% Senior Notes due 2041. The net proceeds of $2.5 billion will be used for general corporate purposes, including the recent refinancing of near term maturities.

LYONs

In February 2001, NAI issued Liquid Yield Option ^TM Notes (“LYONs”) which pay no interest and had an aggregate principal amount at maturity of $1,515 million, representing a yield of 3.5% per annum on the issue price. The notes were recorded at a discount and are being accreted using the effective interest rate method. On February 28, 2006, 92% of the LYONs were redeemed for cash at the specified redemption amount of $594.25 per LYON. Accordingly, NAI paid an aggregate of approximately $831 million to the holders of the LYONs that had exercised this redemption option.

The remaining notes were redeemable at the option of the holders on February 28, 2011 at a price of $706.82 per LYON. During the third quarter of fiscal 2011, the majority of the outstanding LYONs were redeemed for cash at the specified redemption amount. Accordingly, NAI paid an aggregate of approximately $78 million to the holders of the LYONs that had exercised this redemption option. The remaining $5 million of LYONs were redeemed by NAI in April 2011.

Other

In February 2011, NAI completed a tender offer on a portion of the $500 million of 9.25% Senior Debentures due February 1, 2013 and retired, at a premium, an aggregate principal amount of approximately $227 million. The loss on early extinguishment of debt was approximately $36 million which was included in Other, net in the unaudited consolidated statements of operations for the three and nine months ended March 31, 2011.

Included in Borrowings within current liabilities as of March 31, 2011, was bank debt of approximately $32 million that is due in the next 12 months and the remaining LYONs of $5 million that were redeemed in April 2011.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 10—Film Production Financing

The Company enters into co-financing arrangements with third parties for certain of its motion pictures. Under these arrangements, the third-party investors own an interest in the film and, therefore, receive a participation based on their contractual interest in any net profits earned on the film. Consistent with the requirements of ASC 926-605, “Entertainment—Films Revenue Recognition,” the estimate of the third-party investor’s interest in the net profits earned on the film is determined by reference to the ratio of actual revenue earned to date in relation to total estimated ultimate revenues. During the nine months ended March 31, 2011, the Company bought out the ownership interests of a group of third party investors in an existing slate of films and extended its co-financing arrangement with such investors for an additional two years through August 1, 2012. The Company negotiated a buy out of the investors’ remaining interests in their underlying slate of films, at a price that was based on the then remaining projected future cash flows that the investors would have received from the slate.

Note 11—Equity

The following table summarizes changes in equity:


	For the three months ended March 31,
	2011									2010
	News Corporation Stockholders			Noncontrolling Interests			Total Equity			News Corporation Stockholders			Noncontrolling Interests			Total Equity
	(in millions)
Balance, beginning of period	$	27,414		$	451		$	27,865		$	24,401		$	429		$	24,830
Net income		639			38	^(a)		677			839			22	^(a)		861
Other comprehensive income (loss)		502			2	^(b)		504			(323	)		—	^(b)		(323	)
Issuance of shares		22			—			22			8			—			8
Dividends declared		(199	)		—			(199	)		(196	)		—			(196	)
Other		35			3	^(c)		38			44			(15	) ^(c)		29

Balance, end of period	$	28,413		$	494		$	28,907		$	24,773		$	436		$	25,209


	For the nine months ended March 31,
	2011									2010
	News Corporation Stockholders			Noncontrolling Interests			Total Equity			News Corporation Stockholders			Noncontrolling Interests			Total Equity
	(in millions)
Balance, beginning of period	$	25,113		$	428		$	25,541		$	23,224		$	408		$	23,632
Net income		2,056			98	^(a)		2,154			1,664			71	^(a)		1,735
Other comprehensive income		1,613			10	^(b)		1,623			205			3	^(b)		208
Issuance of shares		75			—			75			78			—			78
Dividends declared		(396	)		—			(396	)		(353	)		—			(353	)
Other		(48	)		(42	) ^(c)		(90	)		(45	)		(46	) ^(c)		(91	)

Balance, end of period	$	28,413		$	494		$	28,907		$	24,773		$	436		$	25,209

^(a)

Net income attributable to noncontrolling interests excludes $5 million and nil for the three months ended March 31, 2011 and 2010, respectively, and $12 million and $7 million for the nine months ended March 31, 2011 and 2010, respectively, relating to redeemable noncontrolling interests which are reflected in temporary equity.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

^(b)

Other comprehensive income (loss) attributable to noncontrolling interests excludes nil and $2 million for the three months ended March 31, 2011 and 2010, respectively, and nil and $(1) million for the nine months ended March 31, 2011 and 2010, respectively, relating to redeemable noncontrolling interests.

^(c)

Other activity attributable to noncontrolling interests excludes $3 million and $(5) million for the three months ended March 31, 2011 and 2010, respectively, and $(9) million and $13 million for the nine months ended March 31, 2011 and 2010, respectively, relating to redeemable noncontrolling interests.

The Company declared a dividend of $0.075 per share on both the Class A Common Stock and the Class B Common Stock in the three months ended March 31, 2011, which was paid in April 2011 to stockholders of record on March 16, 2011. The total aggregate dividend paid to stockholders in April 2011 was approximately $199 million.

The Company declared a dividend of $0.075 per share on both the Class A Common Stock and the Class B Common Stock in the three months ended September 30, 2010, which was paid in October 2010 to stockholders of record on September 8, 2010. The total aggregate dividend paid to stockholders in October 2010 was approximately $197 million.

The Company declared a dividend of $0.075 per share on both the Class A Common Stock and the Class B Common Stock in the three months ended March 31, 2010, which was paid in April 2010 to stockholders of record on March 10, 2010. The total aggregate dividend paid to stockholders in April 2010 was approximately $196 million.

The Company declared a dividend of $0.06 per share on both the Class A Common Stock and the Class B Common Stock in the three months ended September 30, 2009, which was paid in October 2009 to stockholders of record on September 9, 2009. The related total aggregate dividend paid to stockholders in October 2009 was approximately $157 million.

Note 12—Equity-Based Compensation

The following table summarizes the Company’s equity-based compensation transactions:


	For the three months ended March 31,				For the nine months ended March 31,
	2011		2010		2011		2010
	(in millions)
Equity-based compensation	$	50	$	40	$	125	$	120

Cash received from exercise of equity-based compensation	$	12	$	1	$	12	$	22

At March 31, 2011, the Company’s total compensation cost related to non-vested stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) not yet recognized for all equity-based compensation plans was approximately $203 million, the majority of which is expected to be recognized over the next three fiscal years. Compensation expense on all equity-based awards is generally recognized on a straight-line basis over the vesting period of the entire award. However, certain performance based awards are recognized on an accelerated basis.

Stock option activity during the nine months ended March 31, 2011 and 2010 was not material.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

During the nine months ended March 31, 2011, the Company issued approximately 13.2 million RSUs. These RSUs will be settled in shares of Class A Common Stock upon vesting, except for approximately 2.5 million RSUs that will be settled in cash. RSUs granted to executive directors and certain awards granted to employees in certain foreign locations are settled in cash.

In August 2010, the Compensation Committee approved the annual grant of PSUs that will have a three year performance measurement period beginning for the fiscal year ending June 30, 2011. For executive directors of the Company, each PSU represents the right to receive the U.S. dollar value of one share of News Corporation’s Class A Common Stock in cash after the completion of the three year performance period, subject to the satisfaction of one or more pre-established objective performance measures that shall be determined by the Compensation Committee. The PSUs were awarded under the Company’s 2005 Long-Term Incentive Plan. In fiscal 2011, a total of 1.8 million target PSUs were issued under this program. At the end of the three year performance period, the final number of PSUs will be determined and such PSUs will be awarded and vested at that time.

At March 31, 2011 and June 30, 2010, the liability for cash-settled awards was approximately $45 million and $25 million, respectively.

During the nine months ended March 31, 2011 and 2010, approximately 9.4 million and 9.8 million RSUs vested, respectively, of which approximately 7.8 million and 7.5 million, respectively, were settled in Class A Common Stock, before statutory tax withholdings. The fair value of RSUs settled in Class A Common Stock was approximately $105 million and $83 million for the nine months ended March 31, 2011 and 2010, respectively. The remaining 1.6 million and 2.3 million RSUs settled during the nine months ended March 31, 2011 and 2010, respectively, were settled in cash, before statutory tax withholdings, of approximately $23 million and $24 million, respectively.

The Company recognized a tax expense on vested RSUs and stock options exercised of approximately $3 million and $9 million for the nine months ended March 31, 2011 and 2010, respectively.

Note 13—Commitments and Guarantees

Commitments

The Company 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. Other than as previously disclosed in these notes to the Company’s unaudited consolidated financial statements, the Company’s commitments have not changed significantly from the disclosures included in the Company’s Form 10-Q filed with the SEC on November 4, 2010.

Guarantees

The Company’s guarantees have not changed significantly from disclosures included in the Company’s Current Report on Form 8-K filed with the SEC on November 3, 2010.

Note 14—Contingencies

Intermix

On August 26, 2005 and August 30, 2005, two purported class action lawsuits captioned, respectively, Ron Sheppard v. Richard Rosenblatt et. al., and John Friedmann v. Intermix Media, Inc. et al., were filed in the

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

California Superior Court, County of Los Angeles. Both lawsuits named as defendants all of the then incumbent members of the board of directors of Intermix Media, Inc. (“Intermix”), including Mr. Rosenblatt, Intermix’s former Chief Executive Officer, and certain entities affiliated with VantagePoint Venture Partners (“VantagePoint”), a former major Intermix stockholder. The complaints alleged that, in pursuing the transaction whereby Intermix was to be acquired by Fox Interactive Media, a subsidiary of the Company (the “FIM Transaction”), and approving the related merger agreement, the director defendants breached their fiduciary duties to Intermix stockholders by, among other things, engaging in self-dealing and failing to obtain the highest price reasonably available for Intermix and its stockholders. The complaints further alleged that the merger agreement resulted from a flawed process and that the defendants tailored the terms of the merger to advance their own interests. The FIM Transaction was consummated on September 30, 2005. The Friedmann and Sheppard lawsuits were subsequently consolidated and, on January 17, 2006, a consolidated amended complaint was filed (the “Intermix Media Shareholder Litigation”). The plaintiffs in the consolidated action sought various forms of declaratory relief, damages, disgorgement and fees and costs. On March 20, 2006, the court ordered that substantially identical claims asserted in a separate state action filed by Brad Greenspan, captioned Greenspan v. Intermix Media, Inc., et al., be severed and related to the Intermix Media Shareholder Litigation. The defendants filed demurrers seeking dismissal of all claims in the Intermix Media Shareholder Litigation and the severed Greenspan claims. On October 6, 2006, the court sustained the demurrers without leave to amend. On December 13, 2006, the court dismissed the complaints and entered judgment for the defendants. Greenspan and plaintiffs in the Intermix Media Shareholder Litigation filed notices of appeal. The Court of Appeal heard arguments on the fully briefed appeal on October 23, 2008. On November 11, 2008, the Court of Appeal issued an unpublished opinion affirming the lower court’s dismissal on all counts. On December 19, 2008, stockholder appellants filed a Petition for Review with the California Supreme Court. The California Supreme Court denied review on February 18, 2009 and the judgment is now final.

In November 2005, plaintiff in a derivative action captioned LeBoyer v. Greenspan et al. pending against various former Intermix directors and officers in the United States District Court for the Central District of California filed a First Amended Class and Derivative Complaint (the “Amended Complaint”). The original derivative action was filed in May 2003 and arose out of Intermix’s restatement of quarterly financial results for its fiscal year ended March 31, 2003. A substantially similar derivative action filed in Los Angeles Superior Court was dismissed based on the inability of the plaintiffs to plead adequately demand futility. The Amended Complaint added various allegations and purported class claims arising out of the FIM Transaction that are substantially similar to those asserted in the Intermix Media Shareholder Litigation. The Amended Complaint also added as defendants the individuals and entities named in the Intermix Media Shareholder Litigation that were not already defendants in the matter. On October 16, 2006, the court dismissed the fourth through seventh claims for relief, which related to the 2003 restatement, finding that the plaintiff is precluded from relitigating demand futility. At the same time, the court asked for further briefing regarding plaintiffs’ standing to assert derivative claims based on the FIM Transaction, including for alleged violation of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the effect of the state judge’s dismissal of the claims in the Greenspan case and the Intermix Media Shareholder Litigation on the remaining direct class action claims alleging breaches of fiduciary duty and other common law claims leading up to the FIM Transaction. The parties filed the requested additional briefing in which the defendants requested that the court stay the direct LeBoyer claims pending the resolution of any appeal in the Greenspan case and the Intermix Media Shareholder Litigation. By order dated May 22, 2007, the court granted defendants’ motion to dismiss the derivative claims arising out of the FIM Transaction, and denied the defendants’ request to stay the two remaining direct claims. As explained in more detail in the next paragraph, the court subsequently consolidated this case with the Brown v. Brewer action also pending before the court. On July 11, 2007, plaintiffs filed the consolidated first amended complaint under the Brown case title. See the discussion of the Brown case below for the subsequent developments in the consolidated case.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On June 14, 2006, a purported class action lawsuit, captioned Jim Brown v. Brett C. Brewer, et al., was filed against certain former Intermix directors and officers in the United States District Court for the Central District of California. The plaintiff asserted claims for alleged violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9, as well as control person liability under Section 20(a) of the Exchange Act. The plaintiff alleged that certain defendants disseminated false and misleading definitive proxy statements on two occasions: one on December 30, 2003 in connection with the stockholder vote on January 29, 2004 on the election of directors and ratification of financing transactions with certain entities of VantagePoint; and another on August 25, 2005 in connection with the stockholder vote on the FIM Transaction. The complaint named as defendants certain VantagePoint related entities, the former general counsel and the members of the Intermix Board who were incumbent on the dates of the respective proxy statements. Intermix was not named as a defendant, but has certain indemnity obligations to the former officer and director defendants in connection with these claims and allegations. On August 25, 2006, plaintiff amended his complaint to add certain investment banks (the “Investment Banks”) as defendants. Intermix has certain indemnity obligations to the Investment Banks as well. Plaintiff amended his complaint again on September 27, 2006, which defendants moved to dismiss. On February 9, 2007, the case was transferred to Judge George H. King, the judge assigned to the LeBoyer action, on the grounds that it raises substantially related questions of law and fact as LeBoyer, and would entail substantial duplication of labor if heard by different judges. On June 11, 2007, Judge King ordered the Brown case be consolidated with the LeBoyer action, ordered plaintiffs’ counsel to file a consolidated first amended complaint, and further ordered the parties to file a joint brief on defendants’ contemplated motion to dismiss the consolidated first amended complaint. On July 11, 2007, plaintiffs filed the consolidated first amended complaint, which defendants moved to dismiss. By order dated January 17, 2008, Judge King granted defendants’ motion to dismiss the 2003 proxy claims (concerning VantagePoint transactions) and the 2005 proxy claims (concerning the FIM Transaction), as well as a claim against the VantagePoint entities alleging unjust enrichment. The court found it unnecessary to rule on dismissal of the remaining claims, which are related to the 2005 FIM Transaction, because the dismissal disposed of those claims. On February 8, 2008, plaintiffs filed a consolidated second amended complaint, which defendants moved to dismiss on February 28, 2008. By order dated July 15, 2008, the court granted in part and denied in part defendants’ motion to dismiss. The 2003 claims and the claims against the Investment Banks were dismissed with prejudice. The Section 14(a), Section 20(a) and the breach of fiduciary duty claims related to the FIM Transaction remain against the officer and director defendants and the VantagePoint defendants. On November 14, 2008, plaintiff filed a motion for class certification to which defendants filed their opposition on January 14, 2009. On June 22, 2009, the court granted plaintiff’s motion for class certification, certifying a class of all holders of Intermix common stock from July 18, 2005 through consummation of the FIM Transaction, who were allegedly harmed by defendants’ improper conduct as set forth in the complaint. The parties have completed fact and expert discovery. On June 17, 2010, the court granted in part and denied in part defendants’ summary judgment motion filed on October 19, 2009. Specifically, the court denied plaintiff’s motion for summary adjudication of a factual issue and denied defendants’ motion to exclude plaintiff’s damages expert, which was filed on November 30, 2009. In the court’s June 17 order, the court found that plaintiff could not proceed on any fiduciary duty claim based upon alleged violations of the duty of care, but found material issues of fact prohibiting summary judgment on alleged violations of fiduciary duty of loyalty. On plaintiff’s Section 14(a) claim, the court found material issues of fact that prohibited summary judgment on the entire claim, but granted defendants’ motion as to certain purported omissions, finding the allegedly omitted information immaterial. Further, the court granted defendants’ motion as to two damage theories for the Section 14(a) claim, finding benefit of the bargain damages not viable and lost opportunity damages too speculative, and permitting plaintiff to proceed only based upon a theory of out-of-pocket damages. No trial date was set. On October 21, 2010, the parties agreed to a settlement of the action, which is subject to approval by the court. A formal stipulation of settlement was submitted to the court for its approval on December 28, 2010. Accordingly, the Company has recognized the terms of this settlement, which was not material to the Company, in its results of operations. On February 18, 2011, the court granted preliminary approval of the settlement. The final approval hearing is scheduled for May 16, 2011.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

News America Marketing

On September 23, 2004, Insignia Systems, Inc. (“Insignia”) filed an action against News America Marketing In-Store Inc. (“News America”) in the United States District Court for the District of Minnesota. The operative complaint alleges, among other things, disparagement of Insignia by News America in violation of the Lanham Act and Minnesota state law and various federal and state antitrust violations arising out of Insignia’s and News America’s competition in the domestic in-store advertising market. Insignia seeks damages, injunctive relief and attorneys’ fees and costs. On September 30, 2009, the court granted in part, and denied in part, News America’s motion for summary judgment.

Discovery in the case has been completed. On January 14, 2011, the court granted in part, and denied in part, News America’s motions to exclude testimony by Insignia’s expert witnesses. The trial began on February 8, 2011. On February 9, 2011, the parties settled the lawsuit. Under the terms of the settlement, which included no admission of liability, News America paid Insignia $125 million, which is recorded in Selling, general and administrative expenses during the three and nine months ended March 31, 2011. In addition, Insignia paid News America $4 million in relation to a 10-year exclusive business arrangement between the companies.

Other

Other than as previously disclosed in the notes to the Company’s unaudited consolidated financial statements, the Company is party to several purchase and sale arrangements which become exercisable over the next ten years by the Company or the counter-party to the agreement. In the next twelve months, none of these arrangements that become exercisable are material to the Company.

The Company experiences routine litigation in the normal course of its business. The Company believes that none of its pending litigation will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity.

The Company’s operations are subject to tax in various domestic and international jurisdictions and as a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. The Company believes it has appropriately accrued for the expected outcome of all other pending tax matters that it can estimate at this time and does not currently anticipate that the ultimate resolution of other pending tax matters will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity.

Note 15—Pension and Other Postretirement Benefits

The Company sponsors non-contributory pension plans and retiree health and life insurance benefit plans covering specific groups of employees which are closed to new participants (with the exception of groups covered by collective bargaining agreements). The benefits payable for the Company’s non-contributory pension plans are based primarily on a formula factoring both an employee’s years of service and pay near retirement. Participant employees are vested in the pension plans after five years of service. The Company’s policy for all pension plans is to fund amounts, at a minimum, in accordance with statutory requirements. Plan assets consist principally of common stocks, marketable bonds and government securities. The retiree health and life insurance benefit plans offer medical and/or life insurance to certain full-time employees and eligible dependents that retire after fulfilling age and service requirements.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The components of net periodic benefit costs were as follows:


	Pension Benefits						Postretirement Benefits
	For the three months ended March 31,
	2011			2010			2011			2010
	(in millions)
Service cost benefits earned during the period	$	25		$	17		$	2		$	2
Interest costs on projected benefit obligation		44			42			4			4
Expected return on plan assets		(44	)		(34	)		—			—
Amortization of deferred losses		15			11			—			—
Other		1			1			(5	)		(4	)

Net periodic costs	$	41		$	37		$	1		$	2

Cash contributions	$	15		$	23		$	5		$	5


	For the nine months ended March 31,
	2011			2010			2011			2010
	(in millions)
Service cost benefits earned during the period	$	73		$	53		$	4		$	4
Interest costs on projected benefit obligation		129			128			12			14
Expected return on plan assets		(128	)		(104	)		—			—
Amortization of deferred losses		44			31			—			—
Other		3			4			(13	)		(12	)

Net periodic costs	$	121		$	112		$	3		$	6

Cash contributions	$	39		$	46		$	14		$	13

Note 16—Segment Information

The Company regularly reviews its segment reporting and classification. In the first quarter of fiscal 2011, the Company aggregated the previously reported Book Publishing segment, Integrated Marketing Services segment and the Newspapers and Information Services segment to report a new Publishing segment because of changes in how the Company manages and evaluates these businesses as a result of evolving industry trends. The Company has revised its segment information for prior fiscal years to conform to the fiscal 2011 presentation.

The Company is a diversified global media company, which manages and reports its businesses in the following six segments:

•

Cable Network Programming , which principally consists of the production and licensing of programming distributed through cable television systems and direct broadcast satellite operators primarily in the United States, Latin America, Europe and Asia.

•

Filmed Entertainment , which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide.

•

Television , which principally consists of the broadcasting of network programming in the United States and the operation of 27 full power broadcast television stations, including nine duopolies, in the United States (of these stations, 17 are affiliated with the FOX network and ten are affiliated with the MyNetworkTV programming distribution service).

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

•

Direct Broadcast Satellite Television , which consists of the distribution of basic and premium programming services via satellite and broadband directly to subscribers in Italy.

•

Publishing , which principally consists of the Company’s newspapers and information services, book publishing and integrated marketing services businesses. The newspapers and information services business principally consists of the publication of four national newspapers in the United Kingdom, the publication of approximately 146 newspapers in Australia, the publication of a metropolitan newspaper and a national newspaper (with international editions) in the United States and the provision of information services. The book publishing business consists of the publication of English language books throughout the world and the integrated marketing services business consists of the publication of free-standing inserts and the provision of in-store marketing products and services in the United States and Canada.

•

Other , which principally consists of the Company’s digital media properties, Wireless Generation, the Company’s education technology business, and News Outdoor, an advertising business which offers display advertising in outdoor locations primarily throughout Russia and Eastern Europe.

The Company’s operating segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measures are segment operating income (loss) and segment operating income (loss) before depreciation and amortization.

Segment operating income (loss) does not include: Impairment and restructuring charges, equity earnings of affiliates, interest expense, net, interest income, other, net, income tax expense and net income attributable to noncontrolling interests. The Company believes that information about segment operating income (loss) assists all users of the Company’s consolidated financial statements by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from non-operational factors that affect net income, thus providing insight into both operations and the other factors that affect reported results.

Segment operating income (loss) before depreciation and amortization is defined as segment operating income (loss) plus depreciation and amortization and the amortization of cable distribution investments and eliminates the variable effect across all business segments of depreciation and amortization. Depreciation and amortization expense includes the depreciation of property and equipment, as well as amortization of finite-lived intangible assets. Amortization of cable distribution investments represents a reduction against revenues over the term of a carriage arrangement and, as such, it is excluded from segment operating income (loss) before depreciation and amortization.

Total segment operating income and segment operating income (loss) before depreciation and amortization are non-GAAP measures and should be considered in addition to, not as a substitute for, net income (loss), cash flow and other measures of financial performance reported in accordance with GAAP. In addition, these measures do not reflect cash available to fund requirements. These measures exclude items, such as impairment and restructuring charges, which are significant components in assessing the Company’s financial performance. Segment operating income (loss) before depreciation and amortization also excludes depreciation and amortization which are also significant components in assessing the Company’s financial performance.

Management believes that total segment operating income and segment operating income (loss) before depreciation and amortization are appropriate measures for evaluating the operating performance of the Company’s business. Total segment operating income and segment operating income (loss) before depreciation and amortization provide management, investors and equity analysts measures to analyze operating performance of the Company’s business and its enterprise value against historical data and competitors’ data, although

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

historical results, including total segment operating income and segment operating income (loss) before depreciation and amortization, may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).


	For the three months ended March 31,						For the nine months ended March 31,
	2011			2010			2011			2010
	(in millions)
Revenues:
Cable Network Programming	$	2,040		$	1,798		$	5,886		$	5,160
Filmed Entertainment		1,554			2,422			4,866			5,841
Television		1,438			1,168			3,658			3,181
Direct Broadcast Satellite Television		923			954			2,723			2,889
Publishing		2,084			2,116			6,476			6,423
Other		217			327			834			1,174

Total revenues	$	8,256		$	8,785		$	24,443		$	24,668

Segment operating income:
Cable Network Programming	$	735		$	588		$	2,129		$	1,705
Filmed Entertainment		248			497			717			1,212
Television		192			40			448			107
Direct Broadcast Satellite Television		17			35			87			133
Publishing		36			243			594			271
Other		(165	)		(150	)		(477	)		(401	)

Total segment operating income		1,063			1,253			3,498			3,027

Impairment and restructuring charges		(3	)		(6	)		(285	)		(36	)
Equity earnings of affiliates		111			181			272			271
Interest expense, net		(244	)		(247	)		(706	)		(761	)
Interest income		31			20			85			61
Other, net		(19	)		(45	)		(41	)		(143	)

Income before income tax expense		939			1,156			2,823			2,419
Income tax expense		(257	)		(295	)		(657	)		(677	)

Net income		682			861			2,166			1,742
Less: Net income attributable to noncontrolling interests		(43	)		(22	)		(110	)		(78	)

Net income attributable to News Corporation stockholders	$	639		$	839		$	2,056		$	1,664

Intersegment revenues, generated primarily by the Filmed Entertainment segment, of approximately $236 million and $255 million for the three months ended March 31, 2011 and 2010, respectively, and of approximately $683 million and $644 million for the nine months ended March 31, 2011 and 2010, respectively, have been eliminated within the Filmed Entertainment segment. Intersegment operating (loss) profit generated primarily by the Filmed Entertainment segment of approximately $(8) million and $(7) million for the three months ended March 31, 2011 and 2010, respectively, and of approximately $21 million and $5 million for the nine months ended March 31, 2011 and 2010, respectively, have been eliminated within the Filmed Entertainment segment.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	For the three months ended March 31, 2011
	Segment operating income (loss)			Depreciation and amortization		Amortization of cable distribution investments		Segment operating income (loss) before depreciation and amortization
	(in millions)
Cable Network Programming	$	735		$	36	$	21	$	792
Filmed Entertainment		248			23		—		271
Television		192			22		—		214
Direct Broadcast Satellite Television		17			75		—		92
Publishing		36			96		—		132
Other		(165	)		31		—		(134	)

Total	$	1,063		$	283	$	21	$	1,367


	For the three months ended March 31, 2010
	Segment operating income (loss)			Depreciation and amortization		Amortization of cable distribution investments		Segment operating income (loss) before depreciation and amortization
	(in millions)
Cable Network Programming	$	588		$	37	$	19	$	644
Filmed Entertainment		497			23		—		520
Television		40			21		—		61
Direct Broadcast Satellite Television		35			70		—		105
Publishing		243			97		—		340
Other		(150	)		46		—		(104	)

Total	$	1,253		$	294	$	19	$	1,566


	For the nine months ended March 31, 2011
	Segment operating income (loss)			Depreciation and amortization		Amortization of cable distribution investments		Segment operating income (loss) before depreciation and amortization
	(in millions)
Cable Network Programming	$	2,129		$	111	$	69	$	2,309
Filmed Entertainment		717			68		—		785
Television		448			64		—		512
Direct Broadcast Satellite Television		87			207		—		294
Publishing		594			285		—		879
Other		(477	)		102		—		(375	)

Total	$	3,498		$	837	$	69	$	4,404

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	For the nine months ended March 31, 2010
	Segment operating income (loss)			Depreciation and amortization		Amortization of cable distribution investments		Segment operating income (loss) before depreciation and amortization
	(in millions)
Cable Network Programming	$	1,705		$	115	$	64	$	1,884
Filmed Entertainment		1,212			69		—		1,281
Television		107			62		—		169
Direct Broadcast Satellite Television		133			208		—		341
Publishing		271			287		—		558
Other		(401	)		149		—		(252	)

Total	$	3,027		$	890	$	64	$	3,981


	At March 31, 2011		At June 30, 2010
	(in millions)
Total assets:
Cable Network Programming	$	12,856	$	12,032
Filmed Entertainment		7,546		7,122
Television		6,489		6,479
Direct Broadcast Satellite Television		2,934		2,703
Publishing		14,607		13,071
Other		11,428		9,462
Investments		4,571		3,515

Total assets	$	60,431	$	54,384

Goodwill and Intangible assets, net:
Cable Network Programming	$	6,817	$	6,860
Filmed Entertainment		1,862		1,886
Television		4,316		4,310
Direct Broadcast Satellite Television		617		540
Publishing		7,256		6,864
Other		1,778		1,595

Total goodwill and intangible assets, net	$	22,646	$	22,055

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 17—Additional Financial Information

Supplemental Cash Flows Information


	For the nine months ended March 31,
	2011			2010
	(in millions)
Supplemental cash flows information:
Cash paid for income taxes	$	(843	)	$	(632	)
Cash paid for interest		(678	)		(699	)
Sale of other investments		56			15
Purchase of other investments		(321	)		(121	)

Supplemental information on businesses acquired:
Fair value of assets acquired		518			139
Cash acquired		12			5
Liabilities assumed		(91	)		(6	)
Noncontrolling interest increase		(19	)		(1	)
Cash paid		(420	)		(137	)

Fair value of stock consideration	$	—		$	—

Other, net consisted of the following:


	For the three months ended March 31,						For the nine months ended March 31,
	2011			2010			2011			2010
	(in millions)
Gain on STAR China transaction ^(a)	$	—		$	—		$	57		$	—
Loss on disposal of Fox Mobile ^(a)		—			—			(28	)		—
Loss on early extinguishment of debt ^(b)		(36	)		—			(36	)		—
Loss on the financial indexes business transactions ^(a)		—			(22	)		—			(22	)
Loss on the sale of eastern European television stations ^(a)		—			(21	)		—			(40	)
Loss on the Photobucket transaction ^(a)		—			—			—			(29	)
Change in fair value of exchangeable securities ^(c)		—			7			—			3
Other		17			(9	)		(34	)		(55	)

Total Other, net	$	(19	)	$	(45	)	$	(41	)	$	(143	)

^(a)	See Note 2—Acquisitions, Disposals and Other Transactions.

^(b)	See Note 9—Borrowings.

^(c)

The Company had certain exchangeable debt securities which contained embedded derivatives. Pursuant to ASC 815, these embedded derivatives were not designated as hedges and, as such, changes in their fair value were recognized in Other, net in the consolidated statements of operations. The Company redeemed the exchangeable debt securities in fiscal year 2010.

Note 18—Supplemental Guarantor Information

In May 2007, NAI, a 100% owned subsidiary of the Company as defined in Rule 3-10(h) of Regulation S-X, entered into a credit agreement (the “Credit Agreement”), among NAI as Borrower, the Company as Parent Guarantor, the lenders named therein (the “Lenders”), Citibank, N.A. as Administrative Agent and JPMorgan

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Chase Bank, N.A. as Syndication Agent. The Credit Agreement provides a $2.25 billion unsecured revolving credit facility with a sub-limit of $600 million available for the issuance of letters of credit. Borrowings are in U.S. dollars only, while letters of credit are issuable in U.S. dollars or Euros. The significant terms of the agreement include the requirement that the Company maintain specific leverage ratios and limitations on secured indebtedness. NAI pays a facility fee of 0.08% regardless of facility usage. NAI pays interest for borrowings at LIBOR plus 0.27% and pays commission fees on letters of credit at 0.27%. NAI pays an additional fee of 0.05% if borrowings under the facility exceed 50% of the committed facility. The interest and fees are based on the Company’s current debt rating. The maturity date is in May 2012; however, NAI may request a $250 million increase in the amount of the credit facility and may also request that the Lenders’ commitments be extended until May 2013.

The Parent Guarantor presently guarantees the senior public indebtedness of NAI and the guarantee is full and unconditional. The supplemental condensed consolidating financial information of the Parent Guarantor should be read in conjunction with these consolidated financial statements.

In accordance with rules and regulations of the SEC, the Company uses the equity method to account for the results of all of the non-guarantor subsidiaries, representing substantially all of the Company’s consolidated results of operations, excluding certain intercompany eliminations.

The following condensed consolidating financial statements present the results of operations, financial position and cash flows of NAI, the Company and the subsidiaries of the Company and the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations

For the three months ended March 31, 2011

(in millions)


	News America Incorporated			News Corporation			Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
Revenues	$	—		$	—		$	8,256		$	—		$	8,256
Expenses		(103	)		—			(7,093	)		—			(7,196	)
Equity earnings (losses) of affiliates		(1	)		—			112			—			111
Interest expense, net		(349	)		(280	)		(3	)		388			(244	)
Interest income		1			2			416			(388	)		31
Earnings (losses) from subsidiary entities		53			903			—			(956	)		—
Other, net		(34	)		14			34			(33	)		(19	)

Income (loss) before income tax expense		(433	)		639			1,722			(989	)		939
Income tax (expense) benefit		112			—			(469	)		100			(257	)

Net income (loss)		(321	)		639			1,253			(889	)		682
Less: Net income attributable to noncontrolling interests		—			—			(43	)		—			(43	)

Net income (loss) attributable to News Corporation stockholders	$	(321	)	$	639		$	1,210		$	(889	)	$	639

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations

For the three months ended March 31, 2010

(in millions)


	News America Incorporated			News Corporation			Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
Revenues	$	1		$	—		$	8,784		$	—		$	8,785
Expenses		(68	)		—			(7,470	)		—			(7,538	)
Equity earnings of affiliates		—			—			181			—			181
Interest expense, net		(777	)		(303	)		—			833			(247	)
Interest income		2			—			851			(833	)		20
Earnings (losses) from subsidiary entities		397			1,142			—			(1,539	)		—
Other, net		5			—			(50	)		—			(45	)

Income (loss) before income tax expense		(440	)		839			2,296			(1,539	)		1,156
Income tax (expense) benefit		476			—			(924	)		153			(295	)

Net income (loss)		36			839			1,372			(1,386	)		861
Less: Net income attributable to noncontrolling interests		—			—			(22	)		—			(22	)

Net income (loss) attributable to News Corporation stockholders	$	36		$	839		$	1,350		$	(1,386	)	$	839

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations

For the nine months ended March 31, 2011

(in millions)


	News America Incorporated			News Corporation			Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
Revenues	$	—		$	—		$	24,443		$	—		$	24,443
Expenses		(268	)		—			(20,962	)		—			(21,230	)
Equity earnings (losses) of affiliates		(4	)		—			276			—			272
Interest expense, net		(1,034	)		(816	)		(10	)		1,154			(706	)
Interest income		2			5			1,232			(1,154	)		85
Earnings (losses) from subsidiary entities		367			2,868			—			(3,235	)		—
Other, net		(42	)		(1	)		55			(53	)		(41	)

Income (loss) before income tax expense		(979	)		2,056			5,034			(3,288	)		2,823
Income tax (expense) benefit		228			—			(1,172	)		287			(657	)

Net income (loss)		(751	)		2,056			3,862			(3,001	)		2,166
Less: Net income attributable to noncontrolling interests		—			—			(110	)		—			(110	)

Net income (loss) attributable to News Corporation stockholders	$	(751	)	$	2,056		$	3,752		$	(3,001	)	$	2,056

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations

For the nine months ended March 31, 2010

(in millions)


	News America Incorporated			News Corporation			Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
Revenues	$	1		$	—		$	24,667		$	—		$	24,668
Expenses		(193	)		—			(21,484	)		—			(21,677	)
Equity earnings of affiliates		2			—			269			—			271
Interest expense, net		(2,293	)		(890	)		(8	)		2,430			(761	)
Interest income		4			—			2,487			(2,430	)		61
Earnings (losses) from subsidiary entities		1,281			2,554			—			(3,835	)		—
Other, net		389			—			(127	)		(405	)		(143	)

Income (loss) before income tax expense		(809	)		1,664			5,804			(4,240	)		2,419
Income tax (expense) benefit		588			—			(1,986	)		721			(677	)

Net income (loss)		(221	)		1,664			3,818			(3,519	)		1,742
Less: Net income attributable to noncontrolling interests		—			—			(78	)		—			(78	)

Net income (loss) attributable to News Corporation stockholders	$	(221	)	$	1,664		$	3,740		$	(3,519	)	$	1,664

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Balance Sheet

At March 31, 2011

(in millions)


	News America Incorporated		News Corporation		Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
ASSETS:
Current assets:
Cash and cash equivalents	$	460	$	7,022	$	4,302		$	—		$	11,784
Receivables, net		15		24		6,648			—			6,687
Inventories, net		—		—		2,358			—			2,358
Other		20		—		416			—			436

Total current assets		495		7,046		13,724			—			21,265

Non-current assets:
Receivables		—		—		370			—			370
Inventories, net		—		—		4,179			—			4,179
Property, plant and equipment, net		99		—		6,326			—			6,425
Intangible assets, net		—		—		8,335			—			8,335
Goodwill		—		—		14,311			—			14,311
Other		324		—		651			—			975
Investments
Investments in associated companies and other investments		128		39		4,404			—			4,571
Intragroup investments		49,435		45,662		—			(95,097	)		—

Total investments		49,563		45,701		4,404			(95,097	)		4,571

TOTAL ASSETS		50,481		52,747		52,300			(95,097	)		60,431

LIABILITIES AND EQUITY
Current liabilities:
Borrowings	$	4	$	—	$	33		$	—		$	37
Other current liabilities		69		207		8,915			—			9,191

Total current liabilities		73		207		8,948			—			9,228
Non-current liabilities:
Borrowings		15,455		—		—			—			15,455
Other non-current liabilities		224		—		6,289			—			6,513
Intercompany		25,465		24,127		(49,592	)		—			—
Redeemable noncontrolling interests		—		—		328			—			328
Equity		9,264		28,413		86,327			(95,097	)		28,907

TOTAL LIABILITIES AND EQUITY		50,481		52,747		52,300			(95,097	)		60,431

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Balance Sheet

At June 30, 2010

(in millions)


	News America Incorporated		News Corporation		Non-Guarantor			Reclassifications and Eliminations			News Corporation and Subsidiaries
ASSETS
Current Assets:
Cash and cash equivalents	$	5,331	$	—	$	3,378		$	—		$	8,709
Receivables, net		17		—		6,414			—			6,431
Inventories, net		—		—		2,392			—			2,392
Other		44		—		448			—			492

Total current assets		5,392		—		12,632			—			18,024

Non-current assets:
Receivables		—		—		346			—			346
Inventories, net		—		—		3,254			—			3,254
Property, plant and equipment, net		96		—		5,884			—			5,980
Intangible assets, net		—		—		8,306			—			8,306
Goodwill		—		—		13,749			—			13,749
Other		269		—		941			—			1,210
Investments
Investments in associated companies and other investments		121		39		3,355			—			3,515
Intragroup investments		48,663		40,483		—			(89,146	)		—

Total investments		48,784		40,522		3,355			(89,146	)		3,515

TOTAL ASSETS	$	54,541	$	40,522	$	48,467		$	(89,146	)	$	54,384

LIABILITIES AND EQUITY
Current liabilities:
Borrowings	$	80	$	—	$	49		$	—		$	129
Other current liabilities		20		—		8,713			—			8,733

Total current liabilities		100		—		8,762			—			8,862
Non-current liabilities:
Borrowings		13,159		—		32			—			13,191
Other non-current liabilities		200		—		6,265			—			6,465
Intercompany		30,561		15,409		(45,970	)		—			—
Redeemable noncontrolling interests		—		—		325			—			325
Total equity		10,521		25,113		79,053			(89,146	)		25,541

TOTAL LIABILITIES AND EQUITY	$	54,541	$	40,522	$	48,467		$	(89,146	)	$	54,384

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

For the nine months ended March 31, 2011

(in millions)


	News America Incorporated			News Corporation			Non-Guarantor			Reclassifications and Eliminations		News Corporation and Subsidiaries
Operating activities:
Net cash provided by (used in) operating activities	$	(6,943	)	$	7,209		$	2,212		$	—	$	2,478

Investing and other activities:
Property, plant and equipment		(13	)		—			(804	)		—		(817	)
Investments		(28	)		—			(918	)		—		(946	)
Proceeds from dispositions		—			—			363			—		363

Net cash used in investing activities		(41	)		—			(1,359	)		—		(1,400	)

Financing activities:
Borrowings		2,453			—			18			—		2,471
Repayment of borrowings		(340	)		—			(77	)		—		(417	)
Issuance of shares		—			12			—			—		12
Dividends paid		—			(199	)		(58	)		—		(257	)
Purchase of subsidiary shares from noncontrolling interests		—			—			(116	)		—		(116	)
Sale of subsidiary shares to noncontrolling interests		—			—			50			—		50

Net cash provided by (used in) financing activities		2,113			(187	)		(183	)		—		1,743

Net increase (decrease) in cash and cash equivalents		(4,871	)		7,022			670			—		2,821
Cash and cash equivalents, beginning of period		5,331			—			3,378			—		8,709
Exchange movement on opening cash balance		—			—			254			—		254

Cash and cash equivalents, end of period	$	460		$	7,022		$	4,302		$	—	$	11,784

See notes to supplemental guarantor information

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

For the nine months ended March 31, 2010

(in millions)


	News America Incorporated			News Corporation		Non-Guarantor			Reclassifications and Eliminations		News Corporation and Subsidiaries
Operating activities:
Net cash provided by operating activities	$	1,584		$	136	$	1,259		$	—	$	2,979

Investing activities:
Property, plant and equipment		(40	)		—		(621	)		—		(661	)
Investments		(42	)		—		(503	)		—		(545	)
Proceeds from dispositions		—			—		889			—		889

Net cash used in investing activities		(82	)		—		(235	)		—		(317	)

Financing activities:

Quarterly Report

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