NOTE 6. INVESTMENTS

The Company’s investments were comprised of the following:


	Ownership Percentage as of June 30, 2017		As of June 30,
	Ownership Percentage as of June 30, 2017		2017		2016
			(in millions)
Equity method investments:
Foxtel^(a)		50%	$	1,208	$	1,437
Other equity method investments^(b)		various		133		101
Loan receivable from Foxtel^(c)		N/A		370		338
Available-for-sale securities^(d)		various		97		189
Cost method investments^(e)		various		219		205

Total Investments			$	2,027	$	2,270

^(a)

During the second quarter of fiscal 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel to fair value. As a result of Foxtel’s performance in the first half of fiscal 2017 and the competitive operating environment in the Australian pay-TV market, the Company revised its future outlook for the business, which resulted in a reduction in expected future cash flows. Based on the revised projections, the Company determined that the fair value of its investment in Foxtel declined below its $1.4 billion carrying value, which includes the gain recognized in connection with the acquisition of Consolidated Media Holdings Ltd. (“CMH”). Significant unobservable inputs utilized in the income approach valuation method were a discount rate of 9.0% and a long-term growth rate of 2.5%. Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10%. Any significant shortfall of the expected future cash flows of, or changes in market conditions for, Foxtel could result in additional write downs for which non-cash charges would be required.

In November 2012, the Company acquired CMH, a media investment company that operates in Australia. CMH owned a 25% interest in Foxtel through its 50% interest in FOX SPORTS Australia. The CMH acquisition was accounted for in accordance with ASC 805 which requires an acquirer to remeasure its previously held equity interest in an acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. The carrying amount of the Company’s previously held equity interest in FOX SPORTS Australia, through which the Company held its indirect 25% interest in Foxtel, was revalued to fair value as of the acquisition date, resulting in a step-up and non-cash gain of approximately $1.3 billion for the fiscal year ended June 30, 2013, of which $0.9 billion related to Foxtel.

^(b)

In January 2017, REA Group acquired an approximate 15% interest in Elara Technologies Pte. Ltd., a leading online real estate services provider in India (“Elara”), for $50 million. Elara operates PropTiger.com, Makaan.com and Housing.com, and the investment further strengthens REA Group’s presence in Asia. Following the completion of the investment and certain related transactions, including Elara’s acquisition of Housing.com, News Corporation’s pre-existing interest in Elara decreased to approximately 23%.

^(c)

In May 2012, Foxtel purchased Austar United Communications Ltd. The transaction was funded by Foxtel bank debt and pro rata capital contributions made by Foxtel shareholders 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$481 million ($370 million) and A$451 million ($338 million) as of June 30, 2017 and June 30, 2016, respectively. During the three months ended June 30, 2017, the Company capitalized a portion of the interest due from Foxtel which is included in the carrying value of the note receivable as of June 30, 2017. 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 payable on June 30 each year and at maturity. On June 22, 2016, Foxtel and Foxtel’s shareholders agreed to modify the terms of the loan receivable to reduce the interest rate from 12% to 10.5%, to more closely align with current market rates. Foxtel paid interest at a rate of 10.5% for fiscal 2016. Upon maturity, the principal advanced will be repayable.

^(d)

Available-for-sale securities primarily include the Company’s investment in HT&E. During fiscal 2016, the Company participated in an entitlement offer to maintain its 14.99% interest in HT&E for $20 million. During the second quarter of fiscal 2017, the Company participated in an entitlement offer for $21 million and its interest was diluted from 14.99% to 13.23%. During the fourth quarter of fiscal 2017, the Company’s interest increased from 13.23% to 13.40% as a result of dividend reinvestment. HT&E operates a portfolio of Australian radio and outdoor media assets.

^(e)	Cost method investments primarily include the Company’s investment in SEEKAsia Limited and certain investments in China.

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,
	2017			2016
	(in millions)
Cost basis of available-for-sale investments	$	99		$	155
Accumulated gross unrealized gain		—			34
Accumulated gross unrealized (loss)		(2	)		—

Fair value of available-for-sale investments	$	97		$	189

Net deferred tax (asset) liability	$	(1	)	$	13

Equity (Losses) Earnings of Affiliates

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


	For the fiscal years ended June 30,
	2017			2016			2015
	(in millions)
Foxtel^(a)	$	(265	)	$	38		$	59
Other equity affiliates, net^(b)		(30	)		(8	)		(1	)

Total Equity (losses) earnings of affiliates	$	(295	)	$	30		$	58

^(a)

During the second quarter of fiscal 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel to fair value. The write-down is reflected in Equity (losses) earnings of affiliates in the Statement of Operations for the fiscal year ended June 30, 2017. Refer to the discussion above for further details.

Additionally, in accordance with ASC 350, the Company amortized $68 million, $52 million and $57 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, 2017, 2016 and 2015, respectively. Such amortization is reflected in Equity (losses) earnings of affiliates in the Statements of Operations.

^(b)

Other equity affiliates, net for the fiscal year ended June 30, 2017 includes losses primarily from the Company’s interest in Elara. Additionally, during the fourth quarter of fiscal 2017, the Company recognized impairments of $9 million on certain other equity method investments. The impairments are reflected in Equity (losses) earnings of affiliates in the Statement of Operations for the fiscal year ended June 30, 2017.

Impairments of Other 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 write-offs and impairments of certain available-for-sale securities and cost method investments in the fiscal years ended June 30, 2017, 2016 and 2015 of $21 million, $21 million and $5 million, respectively. These write-offs and impairments were reflected in Other, net in the Statements of Operations and were taken either as a result of the deteriorating financial position of the investee or due to an other-than-temporary impairment resulting from sustained losses and limited prospects for recovery. In the fiscal years ended June 30, 2017, 2016 and 2015, write-offs and impairments of $21 million, $17 million and nil, respectively, were reclassified out of accumulated other comprehensive loss and included in Other, net in the Statement of Operations.

Summarized Financial Information

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


	For the fiscal years ended June 30,
	2017		2016		2015
	(in millions)
Revenues	$	2,411	$	2,379	$	2,658
Operating income^(a)		353		373		441
Net income		59		180		232

^(a)

Includes Depreciation and amortization of $215 million, $231 million and $319 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively. Operating income before depreciation and amortization was $568 million, $604 million, and $760 million for the fiscal years ended June 30, 2017, 2016 and 2015, respectively.


	As of June 30,
	2017		2016
	(in millions)
Current assets	$	642	$	605
Non-current assets		2,517		2,470
Current liabilities		758		764
Non-current liabilities		2,557		2,534