Filed by The News Corporation Limited
Pursuant to Rule 425 under the Securities Act of 1933
Subject Companies: Hughes Electronics Corporation
General Motors Corporation
Commission File No. 333-105851
Commission File No. 333-105853
Chairman's Address - K. Rupert Murdoch
News Corporation Annual General Meeting
Adelaide
15 October 2003
Let me welcome the many hundreds of you to this 2003 Annual General Meeting of
The News Corporation Limited and say what a pleasure it is to be with you all
again and to celebrate the year 2003 fiscal year, which delivered the
magnificent operating profit of A$4.4 billion.
While many of our competitors continued to grapple with the hangovers of the
90s excesses, we steamed ahead to end the year with the strongest balance
sheet and competitive position we have ever enjoyed.
Let me briefly summarise our results. Full-year revenues were up 15 per cent
to US$17.5 billion, while operating income increased 36 per cent to a record
US$2.5 billion. Those record profits came not from one or two operations but
from record results at a wide swathe of our businesses, including film, cable,
publishing, Australian newspapers, STAR in Asia, and the FOX Television
stations in the US. Along with record profits, we increased our cash flow,
paid down debt and significantly improved the health of our company. By 30
June 2003, we had effectively put another US$1.4 billion in the bank,
increasing our cash to US$4.9 billion, while reducing debt by US$460 million
to US$8.2 billion.
To run through the performance at each of our operating segments, let me start
with Filmed Entertainment where earnings increased to US$641 million, a 36 per
cent jump over the 2002 results, while our home entertainment business
continued to break records and our film studio continued its extraordinary run
of profitable box office releases. Movies such as "X2: X-Men United", "Dare
Devil", "Phone Booth", and a string of others gave us great returns at the box
office, while previous movie hits quickly became best-selling DVD and video
titles, including "Ice Age", "Shallow Hal", "Behind Enemy Lines" and others.
It is no secret that those DVD and video releases have added tremendous
stability to our filmed entertainment earnings and they provided the bulk of
the earnings increase in the segment. Of course, the contribution of our
television studios should not be forgotten. Twentieth Century Fox Television
is scheduled to supply 24 series for the major American networks - not just
the FOX network but ABC, CBS, NBC and the WB - in the 2003-2004 television
season. The syndication profits from existing or former hits such as "King of
the Hill", "The Simpsons" and "X-Files" as well as profits from the TV DVD
market that we pioneered last year continued to grow and buoy the segment's
bottom line.
Results at the television segment included record contributions from the Fox
Television Stations group, the first full year of profitability at STAR, and a
dramatic decrease in the losses at the FOX network. The US broadcast
television operations were dominated by the best-ever ratings at the FOX
network. Fox came within a hair's breadth of toppling NBC for the crown among
US networks, and in fact won the ratings race in both the February and May
2003 sweeps period on the back of hits such as "Joe Millionaire", "American
Idol", "24", "The Simpsons", "That 70s Show", and "Bernie Mac". The 16 per
cent prime time ratings improvement for the year at Fox helped lift operating
income, but it also gave a terrific boost to our station group, which is our
most profitable business, and which in turn increased earnings by 24 per cent,
thanks to increased market share, higher ratings,and the efficiencies we have
gained from the integrating of our duopoly stations. The station group now
comprises 35 television stations covering nearly 40 per cent of the US market
and it increased its margins to 46 per cent during fiscal 2003.
Meanwhile, we started to reap the rewards of our long-held faith and our years
of hard work at STAR in Asia. STAR's strength, particularly in India, fuelled
its first ever full year of profitability, even as the platform absorbed
start-up losses in mainland China and elsewhere in Asia. All told, operating
income at our television businesses was up a dramatic 46 per cent to US$851
million.
As good as the growth in the television segment was, the cable network
programming segment remained the fastest growing area of the entire company.
Earnings more than doubled to US$430 million in fiscal 2003, and I am
convinced there is considerable growth remaining in this exciting business.
Fox News Channel confirmed itself as the darling of the news-watching public
by increasing its lead over its competitors, despite predictions that its
popularity would wane as soon as the war in Iraq started. Instead, its
popularity soared.
Elsewhere, the Fox Sports News and FX lifted profits through a combination of
increased subscriber numbers, higher affiliate fees and better ratings. FX
added a second hit series, "Nip/Tuck", which premiered earlier in fiscal 2004,
to its previous record-breaking and 4 award-winning Series, "The Shield". FX's
original movie "44 Minutes: The North Hollywood Shootout" drew more than six
million viewers to become the channel's best-rating program ever. These
successful series, coupled with the tremendous ratings for its original
movies, have helped cement FX as a powerhouse in original programming and a
valuable asset among our growing stable of pay-TV channels.
Meanwhile, newer channels such as National Geographic and SPEED continued to
grow rapidly. The National Geographic Channel in the US, which is two-thirds
owned by News Corporation, increased subscribers more than 50 per cent to
reach 43 million homes by the end of fiscal 2003.
In the print arena, News Corporation remains a world leader. Our newspapers
serve their communities with pride here in Australia, as well as in the United
Kingdom and the United States. The foundation of this company is its
newspapers, and they remain the soul of who we are: they epitomise the
"can-do" spirit that has naturally filtered down to all parts of our group.
The competitive drive at each and every one of our newspapers - whether it's a
national broadsheet, a capital city daily or a suburban weekly - is present in
the very DNA that makes News Corporation.
Nowhere was the health of our papers more evident than here in Australia,
where operating income grew to record levels. In the United States The New
York Post attracted new advertisers and grew circulation at a pace unmatched
by any other major newspaper in the country, or perhaps the world. We remain
confident that this great newspaper can tip the balance of the New York
tabloid market in its favour and reach profitability in the next few years.
Meanwhile, in Britain a price war, started by a competitor of The Sun, lowered
earnings but led to circulation gains that we intend to hold on to now that
the price war has ended. It is already showing results in advertising, where
we have a 5 per cent gain in market share as against a loss of 1 per cent to
our competitor that started that price argument.
Elsewhere among our print assets, HarperCollins books performed admirably
worldwide, achieving book sales that placed 111 books on the New York Times
best seller lists, including 13 number ones. Meanwhile, our News American
Marketing arm made steady gains in market share and solidified its place as a
clear industry leader with innovative new products. Among magazines, The
Weekly Standard continued to build on its position at the centre of
conservative political thought in Washington, while the beautifully produced
"donna hay" and "InsideOut" achieved substantial circulation growth here in
Australia.
On the subject of magazines, one of the few dark clouds that hung over us last
year was the situation at Gemstar-TV Guide, a problem area we worked hard,
long and successfully to resolve. With the removal of the former management
and the installation of new key executives, as well as a relaunch of TV Guide
magazine, we are already on our way to restoring the lustre to this powerful
and respected brand. Only last week Gemstar signed an important 12-year
contract with Time Warner Cable that ensures a TV Guide-branded interactive
programming guide will be deployed throughout Time Warner's digital's cable
subscribers. The deal means that Gemstar-TV Guide now has contracts in place
covering 12 million active digital cable subscribers, and we expect many more
in the future.
Finally, we introduced a new segment in the final quarter of fiscal 2003,
Direct Broadcast Satellite Television. The segment essentially represents the
performance of our 80 per cent-held Sky Italia, which was formed out of the
merger of STREAM and Telepiu in Italy. Together with our partner, Telecom
Italia, we acquired Telepiu in April this year, and I believe the combined
platform will one day be one of News Corp's shining jewels. The combined
platform was relaunched at the end of July, and has met or exceeded all of our
expectations since. In the first eight weeks after its relaunch 1.4 million
subscribers swapped to the new service, while we added a better-than-expected
280,000 new subscribers. Many of these new subscribers, as well as those who
swapped to the new service, chose premium packages. We anticipate that Sky
Italia will reach profitability within the next 18 months and that it will
have a very steep growth after that. To say the least, we are all very excited
about Sky Italia's prospects.
I view Sky Italia's potential as being on a par with the world-class
performance of our 35 per cent-owned BSkyB. In fiscal 2003, for the first time
since our 1998 decision to convert Sky to an entirely digital service, BSkyB
generated positive earnings contributions to News Corporation. It was worth
the wait. In that time subscribers have doubled, and we have developed a truly
world-leading direct-to-home television service that is the envy of
competitors in Britain and pay-TV companies around the world. Many of the
successes we have achieved at BSkyB will be replicated at Sky Italia, and
indeed, at each of our pay-TV platforms around the world.
That brings me to perhaps the most exciting event of the past year, which is
of course our anticipated acquisition of a 34 per cent stake in Hughes
Electronics, the owner of America's leading direct-to-home satellite service,
DIRECTV. It remains our hope and our expectation that this deal will receive
the proper regulatory approvals in the coming weeks and that we will be able
to close the transaction by the end of calendar 2003. It is our intention to
immediately set about improving the DIRECTV experience for consumers, with
enhanced interactive services, broader local-into-local coverage, new
technological offerings, such as personal video recorders, and greatly
improved customer service. All these things will, I believe, enable us to
compete head-to head with the presently dominant cable companies by giving
consumers greater choice and better services. That will lead to greater
returns for shareholders of Hughes, Fox Entertainment Group and News
Corporation. I expect that I will have a great deal to tell you about Hughes
and DIRECTV when we meet here again next year.
The anticipated completion of the DIRECTV transaction will mark the
culmination of a long-time pursuit by our company of providing the missing
link in a global satellite television platform that will span four continents
and encompass 23 million subscribers at its beginning, all of which will give
us, I believe, the perfect balance of assets for a media company, the right
mix of subscription and advertising revenues, the right mix of content and
distribution businesses, and a geographic breadth that is unmatched by any
media company in the world today.
Let me speak a little about corporate governance, a topic that has taken on
far greater significance in the past few years with several high-profile
corporate collapses here and in the United States. We have always been careful
to meet the spirit and the letter of the law on corporate governance, and the
past year has been no exception, as we have undertaken many changes to comply
with the Sarbanes-Oxley Act, new SEC rules, and newly proposed New York Stock
Exchange Listing Rules in the United States, as well as revised guidelines at
the Australian Stock Exchange.
News Corporation has reconstituted its three board committees. The Audit
Committee, Nominating and Corporate Governance Committee, 10 and the
Compensation Committee will - and does - consist solely of nonexecutive
directors who will satisfy the "independence" requirements of the proposed
NYSE rules when those rules become effective. The NYSE rules are generally
more restrictive than the ASX guidelines.
During the fiscal year, Stan Shuman resigned from the Audit Committee, and
Graham Kraehe, who is present with us today, was appointed chairman of that
committee. Mr Kraehe has a great deal of expertise in financial matters and,
as you all know, is one of Australia's most respected and influential business
leaders.
Also during the year the former Nominating Committee was restructured to form
the nominating and corporate governance committee and the three new
independent members were appointed: Geoff Bible, Ken Cowley and Rod Eddington.
This committee is charged with recommending nominees for the company's board
of directors and with advising and making recommendations to the board on
corporate governance matters.
Finally, the Compensation Committee was restructured and took over the role of
the former Share Option Committee. Andrew Knight, as chairman, and Tom Perkins
- again independent, non-executive directors - were appointed to this
committee. Dr Erkko was also a member. As a 11 consequence of Dr Erkko's
retirement from the board, at the next board meeting, Rod Eddington will be
nominated to become a member of this committee. This committee has been
meeting without the presence of any executive directors to discuss the
compensation of all the executive directors and other senior management in the
company. The compensation of your chairman and chief executive for the past
fiscal year was decided by the non-executive directors sitting without the
presence of the executive directors, upon recommendation of the Compensation
Committee.
News Corporation is proud of its record of scrupulous corporate governance,
and it will continue to comply with the changing rules and regulations in each
of the markets in which we operate. Our high standards of corporate governance
have shielded us from any of the difficulties and scandals that have faced too
many other companies in the past few years. I have full confidence that we
have a management team as honest as it is capable.
Much credit for our good reputation, as well as our outstanding results in
fiscal 2003, must also go to our 37,000 hard-working and talented employees
around the world. The combined efforts of our managers and employees produced
record profits last year, and we are on target to repeat the performance this
year. As we said when we released our year-end results in August, we
anticipate operating income growth at News Corporation in the high-single to
low double digit range this year. Based on the performance of our businesses
so far in fiscal 2004, I am very confident that we will meet these targets.
Based on present trends, as well as our expectations for many of our
developing businesses, I believe we can achieve average annual earnings growth
of 20 per cent in the coming years.
I want to end on a personal note. Last month marked an anniversary of sorts:
50 years since I assumed control of News Limited, then a small South
Australian publishing company just across the road from here, where we started
our growth out of Adelaide News. You will not have noticed the milestone,
because we did not make any fuss about it. In fact, I did not even know about
it until somebody pointed it out to me recently. At News Corporation we are
guided by the success of those past 50 years, as well as by some of the
mistakes we have made along the way, but what truly drives us are the
opportunities for the next 50 years. I want to say to you that I am
tremendously proud to have had the privilege of leading this company and its
wonderful employees, and proud to have served its shareholders and investors
for the past 50 years.
* * *
This communication shall not constitute an offer to sell or the solicitation
of an offer to buy, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of
1933, as amended.
This communication contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Investors are cautioned that any such forward-looking statements are
not guarantees of future performance or results and involve risks and
uncertainties, and that actual results or developments may differ materially
from those in the forward-looking statements as a result of various factors,
including financial community and rating agency perceptions of the company and
its business, operations, financial condition and the industry in which it
operates and the factors described in the company's filings with the
Securities and Exchange Commission, including the sections entitled "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained therein. The company disclaims any obligation
to update the forward-looking statements contained herein.
In connection with the proposed transactions, on August 21, 2003, General
Motors Corporation ("GM"), Hughes Electronics Corporation ("Hughes") and The
News Corporation Limited ("News Corporation") filed definitive materials with
the Securities and Exchange Commission ("SEC"), including a Definitive Proxy
Statement of GM on Schedule 14A, a Registration Statement of Hughes on Form
S-4 and a Registration Statement of News Corporation on Form F-4 that contain
a consent solicitation statement of GM, a prospectus of Hughes and a
prospectus of News Corporation. Investors and security holders are urged to
read these materials, as well as any other relevant documents filed or that
will be filed with the SEC, as they become available, because these documents
contain or will contain important information. These materials and other
relevant materials (when they become available) and any other documents filed
by GM, Hughes or News Corporation with the SEC, may be obtained for free at
the SEC's website, www.sec.gov. The documents may also be obtained free of
charge by directing such request to: News America Incorporated, 1211 Avenue of
the Americas, 7th Floor, New York, New York 10036, Attention: Investor
Relations.