NOTE 4. INVESTMENTS

The Company’s investments were comprised of the following:


	Ownership
	Percentage		As of		As of
	as of March 31,		March 31,		June 30,
	2018		2018		2017
			(in millions)
Equity method investments:
Foxtel^(a)		50%	$	631	$	1,208
Other equity method investments^(b)		various		122		133
Loan receivable from Foxtel^(a)		N/A		—		370
Available-for-sale securities^(c)		various		78		97
Cost method investments^(d)		various		126		219

Total Investments			$	957	$	2,027

^(a)

During the three months ended March 31, 2018, the Company recognized a $957 million non-cash write-down of the carrying value of its investment in Foxtel. In the third quarter of fiscal 2018, as part of the long range planning process and in preparation for the Transaction, the Company assessed the long-term prospects for Foxtel, on both a stand-alone and combined basis. As a result of lower-than-expected revenues from certain new products and broadcast subscribers at Foxtel, the Company revised its outlook for Foxtel, which resulted in a reduction in expected future cash flows. Based on the revised projections, the Company concluded that the fair value of its investment in Foxtel declined below its carrying value. The assumptions utilized in the income approach valuation method were a discount rate of 10.25% and a long-term growth rate of 2.0%.

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) as of June 30, 2017. During the three months ended September 30, 2017, Foxtel’s shareholders made pro-rata capital contributions to Foxtel by way of promissory notes. The Company’s share of the capital contributions was A$494 million ($388 million) at September 28, 2017, and the Company’s investment in Foxtel increased by this amount. Foxtel utilized the shareholders’ capital contributions to repay its subordinated shareholder notes and interest accrued in the three months ended September 30, 2017. As a result, such notes were considered to be repaid as of September 30, 2017.

^(b)	Other equity method investments are primarily comprised of Elara Technologies Pte. Ltd., which operates PropTiger.com, Makaan.com and Housing.com.

^(c)	Available-for-sale securities are primarily comprised of the Company’s investment in HT&E Limited (formerly APN News and Media Limited), which operates a portfolio of Australian radio and outdoor media assets.

^(d)

Cost method investments are primarily comprised of certain investments in China as of March 31, 2018. During the three months ended March 31, 2018, the Company sold its investment in SEEKAsia for $122 million in cash and recognized a $32 million gain in Other, net. See Note 12— Additional Financial Information.

The Company measures the fair market values of available-for-sale securities as Level 1 financial instruments under Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement” (“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 securities are set forth below:


	As of		As of
	March 31, 2018		June 30, 2017
	(in millions)
Cost basis of available-for-sale securities	$	77	$	99
Accumulated gross unrealized gain		1		—
Accumulated gross unrealized loss		—		(2	)

Fair value of available-for-sale securities	$	78	$	97

Net deferred tax asset	$	—	$	1

Equity Losses of Affiliates

The Company’s equity losses of affiliates were as follows:


	For the three months ended March 31,						For the nine months ended March 31,
	2018			2017			2018			2017
	(in millions)						(in millions)
Foxtel^(a)	$	(970	)	$	(16	)	$	(974	)	$	(260	)
Other equity affiliates, net^(b)		(4	)		(7	)		(28	)		(16	)

Total Equity losses of affiliates	$	(974	)	$	(23	)	$	(1,002	)	$	(276	)

^(a)

During the three and nine months ended March 31, 2018, the Company recognized a $957 million non-cash write-down of the carrying value of its investment in Foxtel. The write-down is reflected in Equity losses of affiliates in the Statements of Operations for the three and nine months ended March 31, 2018. Refer to the discussion above for further details.

During the nine months ended March 31, 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel. 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 in the second quarter of fiscal 2017, 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 carrying value, which includes the gain recognized in connection with the acquisition of Consolidated Media Holdings Ltd. (“CMH”). The write-down is reflected in Equity losses of affiliates in the Statements of Operations for the nine months ended March 31, 2017. The assumptions utilized in the income approach valuation method were a discount rate of 9.0% and a long-term growth rate of 2.5%. The assumptions utilized in the market approach valuation methods were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10%.

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 “Business Combinations” 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.

In accordance with ASC 350, “Intangibles—Goodwill and Other”, the Company amortized $17 million and $49 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 three and nine months ended March 31, 2018, respectively, and $16 million and $53 million in the corresponding periods of fiscal 2017. Such amortization is reflected in Equity losses of affiliates in the Statements of Operations.

^(b)	During the nine months ended March 31, 2018, the Company recognized $13 million in non-cash write-downs of certain equity method investments’ carrying values. The write-downs are reflected in Equity losses of affiliates in the Statements of Operations for the nine months ended March 31, 2018.

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


	For the nine months ended March 31,
	2018		2017
	(in millions)
Revenues	$	1,818	$	1,811
Operating income^(a)		155		263
Net income		64		40

^(a)	Includes Depreciation and amortization of $187 million and $155 million for the nine months ended March 31, 2018 and 2017, respectively. Operating income before depreciation and amortization was $342 million and $418 million for the nine months ended March 31, 2018 and 2017, respectively.