NOTE 5. INVESTMENTS

The Company’s investments were comprised of the following:


	Ownership
	Percentage		As of		As of
	as of September 30,		September 30,		June 30,
	2015		2015		2015
			(in millions)
Equity method investments:
Foxtel^(a)		50%	$	1,371	$	1,476
Other equity method investments^(b)		various		166		168
Loan receivable from Foxtel^(c)		N/A		317		345
Available-for-sale securities		various		142		185
Cost method investments		various		200		205

Total Investments			$	2,196	$	2,379

^(a)	The change in the Foxtel investment for the three months ended September 30, 2015 was primarily due to the impact of foreign currency fluctuations.

^(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, 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 September 30, 2015, REA Group owned an approximate 22.7% interest in iProperty.

^(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 ($317 million and $345 million as of September 30, 2015 and June 30, 2015, respectively). The subordinated shareholder notes can be repaid beginning in July 2022 provided that Foxtel’s senior debt has been repaid. The subordinated shareholder notes have 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.

The Company measures the fair market values of available-for-sale investments as Level 1 financial instruments under ASC 820, “Fair Value Measurement,” 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 September 30, 2015			As of June 30, 2015
	(in millions)
Cost basis of available-for-sale investments	$	164		$	164
Accumulated gross unrealized gain		36			46
Accumulated gross unrealized loss		(58	)		(25	)

Fair value of available-for-sale investments	$	142		$	185

Net deferred tax asset (liability)	$	3		$	(11	)

Equity Earnings of Affiliates

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


	For the three months ended September 30,
	2015			2014
	(in millions)
Foxtel^(a)	$	9		$	25
Other equity affiliates		(1	)		—

Total Equity earnings of affiliates	$	8		$	25

^(a)

In accordance with ASC 350, the Company amortized $12 million and $16 million, respectively, 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 three months ended September 30, 2015 and 2014. Such amortization is reflected in Equity earnings of affiliates in the Statements of Operations.

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


	For the three months ended September 30,
	2015		2014
	(in millions)
Revenues	$	587	$	728
Operating income^(a)		85		137
Net income		42		81

^(a)	Includes Depreciation and amortization of $55 million and $88 million for the three months ended September 30, 2015 and 2014, respectively. Operating income before depreciation and amortization was $140 million and $225 million for the three months ended September 30, 2015 and 2014, respectively.

For the three months ended September 30, 2015, Foxtel’s revenues decreased $141 million, or 19%, as a result of the negative impact of foreign currency fluctuations, which more than offset higher revenues in local currency. Operating income decreased primarily due to increased programming costs, increased costs associated with higher sales volumes, the public launch of Triple Play as well as the negative impact of foreign currency fluctuations, which was partially offset by lower depreciation expense resulting from Foxtel’s reassessment of the useful lives of cable and satellite installations due to lower subscriber churn. Net income decreased as a result of the lower operating income noted above, partially offset by lower income tax expense.