NOTE 5. INVESTMENTS

The Company’s investments were comprised of the following:


	Ownership Percentage as of June 30, 2015			As of June 30,
	Ownership Percentage as of June 30, 2015			2015		2014
				(in millions)
Equity method investments:
Foxtel^(a)		50	%	$	1,476	$	1,869
Other equity method investments^(b)		various			168		24
Loan receivable from Foxtel^(c)		N/A			345		425
Available-for-sale securities^(d)		various			185		151
Cost method investments^(e)		various			205		140

Total Investments				$	2,379	$	2,609

^(a)	The change in the Foxtel investment for the fiscal year ended June 30, 2015 was primarily due to the impact of foreign currency fluctuations. For the fiscal years ended June 30, 2015 and 2014, the Company received dividends from Foxtel of $107 million and $151 million, respectively.

The Company’s investment in Foxtel exceeds its equity in the underlying net assets by approximately $1.6 billion as of June 30, 2015. This amount represented the excess cost over the Company’s proportionate share of its investment’s underlying net assets. This has been allocated between finite-lived intangible assets, indefinite-lived intangible assets and goodwill. The finite-lived intangible assets of approximately $0.5 billion primarily represent subscriber relationships with a weighted remaining average useful life of 8 years.

^(b)

In July 2014, REA Group purchased a 17.22% interest in iProperty Group Limited (ASX: IPP) (“iProperty”) for total cash consideration of approximately $100 million. iProperty has online property advertising operations primarily in Malaysia, Indonesia, Hong Kong, Macau, Thailand and Singapore. In December 2014, REA Group sold Squarefoot, its Hong Kong based business, to iProperty in exchange for an additional 2.2% interest in iProperty. As of June 30, 2015, including an acquisition of additional shares of iProperty in October 2014, REA Group owns an approximate 19.9% interest in iProperty. The Company retroactively applied the equity method of accounting in the second quarter of fiscal 2015 in accordance with ASC 323, “Investments—Equity Method and Joint Ventures.” The carrying value of the investment in iProperty was $90 million as of June 30, 2015. The change in the iProperty investment was primarily due to the impact of foreign currency fluctuations.

^(c)

In May 2012, Foxtel purchased Austar United Communications Ltd. The transaction was funded by Foxtel bank debt and Foxtel’s shareholders made pro rata capital contributions in the form of subordinated shareholder notes based on their respective ownership interests. The Company’s share of the subordinated shareholder notes was approximately A$451 million ($345 million and $425 million as of June 30, 2015 and June 30, 2014, respectively). The subordinated shareholder note can be repaid beginning in July 2022 provided that Foxtel’s senior debt has been repaid. The subordinated shareholder note has a maturity date of July 15, 2027, with interest of 12% payable on June 30 each year and at maturity. Upon maturity, the principal advanced will be repayable.

^(d)	During fiscal 2015, the Company purchased a 14.99% interest in APN News and Media Limited (“APN”) for approximately $112 million. APN operates a portfolio of Australian and New Zealand radio and outdoor media assets and small regional print interests.

In August 2014, REA Group completed the sale of a minority interest held in marketable securities for total cash consideration of $104 million. As a result of the sale, REA Group recognized a pre-tax gain of $29 million, which was reclassified out of accumulated other comprehensive (loss) income and included in Other, net in the Statement of Operations.

^(e)

Cost method investments primarily include the Company’s investment in SEEKAsia Limited (“SEEK Asia”) and certain investments in China. In November 2014, SEEK Asia, in which the Company owned a 12.1% interest, acquired the online employment businesses of JobStreet Corporation Berhad (“JobStreet”), which were combined with JobsDB, Inc., SEEK Asia’s existing online employment business. The transaction was funded primarily through additional contributions by SEEK Asia shareholders which did not have an impact on the Company’s ownership. The Company’s share of the funding contribution was approximately $60 million. In June 2015, the Company purchased an additional 0.8% interest in SEEK Asia for approximately $7 million, which increased the Company’s investment to approximately 12.9%.

The Company measures the fair market values of available-for-sale investments as Level 1 financial instruments under ASC 820 as such investments have quoted prices in active markets. The cost basis, unrealized gains, unrealized losses and fair market value of available-for-sale investments are set forth below:


	As of June 30,
	2015			2014
	(in millions)
Cost basis of available-for-sale investments	$	164		$	113
Accumulated gross unrealized gain		46			38
Accumulated gross unrealized loss		(25	)		—

Fair value of available-for-sale investments	$	185		$	151

Net deferred tax liability	$	11		$	14

Equity Earnings of Affiliates

The Company’s share of the earnings of its equity affiliates was as follows:


	For the fiscal years ended June 30,
	2015			2014		2013
	(in millions)
Foxtel^(a)	$	59		$	90	$	66
Pay television and cable network programming equity affiliates^(b)		—			—		51
Other equity affiliates, net		(1	)		—		(17	)

Total Equity earnings of affiliates	$	58		$	90	$	100

^(a)

The Company owned 25% of Foxtel through November 2012. In November 2012, the Company increased its ownership in Foxtel to 50% as a result of the CMH acquisition. In accordance with ASC 350, the Company amortized $57 million, $62 million and $43 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the fiscal years ended June 30, 2015, 2014 and 2013, respectively. Such amortization is reflected in Equity earnings of affiliates in the Statements of Operations.

^(b)

Includes equity earnings of FOX SPORTS Australia and SKY Network Television Ltd. The Company acquired the remaining interest in FOX SPORTS Australia in November 2012 as a result of the CMH acquisition. The results of FOX SPORTS Australia have been included within the Cable Network Programming segment in the Company’s consolidated results of operations since November 2012. In March 2013, the Company sold its 44% equity interest in SKY Network Television Ltd. for approximately $675 million and recorded a gain of approximately $321 million which was included in Other, net in the Statement of Operations for the fiscal year ended June 30, 2013. For the fiscal year ended June 30, 2013, the Company received dividends from SKY Network Television Ltd. of $60 million.

Impairments of investments

The Company regularly reviews its investments for impairments based on criteria that include the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline, the Company’s ability to hold its investment until recovery and the investment’s financial strength and specific prospects. The Company recorded impairment charges of $15 million related to the Company’s investment in an Australian newspaper business included in Other equity method investments during the fiscal year ended June 30, 2013, which were reflected in Equity earnings of affiliates in the Statements of Operations. The Company recorded write-offs of certain investments in the fiscal year ended June 30, 2015 and 2014 of $5 million and $10 million, respectively. These write-offs were reflected in Other, net in the Statements of Operations. These impairments and write-offs were taken as a result of either the deteriorating financial position of the investee or due to other-than-temporary impairment resulting from sustained losses and limited prospects for recovery.

Summarized Financial Information

Summarized financial information for the significant equity affiliates, including Foxtel, FOX SPORTS Australia for periods through November 2012 and SKY Network Television Ltd. for periods through March 2013, accounted for under the equity method was as follows:


	For the fiscal years ended June 30,
	2015		2014		2013
	(in millions)
Revenues	$	2,658	$	2,897	$	3,872
Operating income		441		554		675
Net income		232		304		357


	As of June 30,
	2015		2014
	(in millions)
Current assets	$	480	$	490
Non-current assets		2,490		2,805
Current liabilities		732		817
Non-current liabilities		2,550		2,887

Summarized financial information for Foxtel, presented in accordance with U.S. GAAP, was as follows:


	For the fiscal years ended June 30,
	2015		2014		2013
	(in millions)
Revenues	$	2,658	$	2,897	$	3,184
Operating income^(a)		441		554		491
Net income		232		304		240

^(a)

Includes Depreciation and amortization of $319 million, $349 million and $441 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively. Operating income before depreciation and amortization was $760 million, $903 million and $932 million for the fiscal years ended June 30, 2015, 2014 and 2013, respectively.