NOTE 6. INVESTMENTS

The Company’s investments were comprised of the following:


	Ownership Percentage as of June 30, 2018		As of June 30,
	Ownership Percentage as of June 30, 2018		2018		2017
			(in millions)
Equity method investments:
Foxtel^(a)		65%	$	—	$	1,208
Other equity method investments^(b)		various		173		133
Loan receivable from Foxtel^(a)		N/A		—		370
Available-for-sale securities^(c)		various		93		97
Cost method investments^(d)		various		127		219

Total Investments			$	393	$	2,027

^(a)

Following completion of the Transaction in April 2018, News Corp owns a 65% interest in new Foxtel, and Telstra owns the remaining 35%. Consequently, the Company ceased accounting for Foxtel as an equity method investment and began consolidating its results in the fourth quarter of fiscal 2018. See Note 3—Acquisitions, Disposals and Other Transactions.

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 and new Foxtel’s investment in Nickelodeon Australia Joint Venture.

^(c)	Available-for-sale securities are primarily comprised of the Company’s investment in HT&E 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 June 30, 2018. During the third quarter of fiscal 2018, the Company sold its investment in SEEKAsia Limited for $122 million in cash and recognized a $32 million gain in Other, net. See Note 21—Additional Financial Information.

The Company measures the fair market values of available-for-sale securities 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 securities are set forth below:


	As of June 30,
	2018		2017
	(in millions)
Cost basis of available-for-sale securities	$	77	$	99
Accumulated gross unrealized gain		16		—
Accumulated gross unrealized loss		—		(2	)

Fair value of available-for-sale securities	$	93	$	97

Net deferred tax asset	$	—	$	(1	)

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,
	2018			2017			2016
	(in millions)
Foxtel^(a)	$	(974	)	$	(265	)	$	38
Other equity affiliates, net^(b)		(32	)		(30	)		(8	)

Total Equity (losses) earnings of affiliates	$	(1,006	)	$	(295	)	$	30

^(a)

During the third quarter of fiscal 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) earnings of affiliates in the Statements of Operations for the fiscal year ended June 30, 2018. 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%.

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. 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 included the gain recognized in connection with the acquisition of Consolidated Media Holdings Ltd. (“CMH”). The write-down is reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal year ended June 30, 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 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.

Additionally, in accordance with ASC 350, the Company amortized $49 million, $68 million, and $52 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, 2018, 2017 and 2016, respectively. Such amortization is reflected in Equity (losses) earnings of affiliates in the Statements of Operations. The Company began consolidating the results of Foxtel in the fourth quarter of fiscal 2018 as a result of the Transaction.

^(b)

Other equity affiliates, net for the fiscal years ended June 30, 2018 and 2017, include losses primarily from the Company’s interest in Elara. Additionally, during the fiscal years ended June 30, 2018 and 2017, the Company recognized non-cash write-downs of $13 million and $9 million, respectively, on certain other equity method investments. The write-downs are reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal years ended June 30, 2018 and 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 in the fiscal years ended June 30, 2018, 2017 and 2016 of $33 million, $21 million and $17 million, respectively, which were reclassified out of Accumulated other comprehensive income and included in Other, net. The Company recorded write-offs and impairments of certain cost method investments of $4 million in fiscal 2016 in Other, net. These write-offs and impairments 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.

Summarized Financial Information

Summarized financial information for Foxtel for periods through April 2, 2018, presented in accordance with U.S. GAAP, was as follows:


	For the fiscal years ended June 30,
	2018		2017		2016
	(in millions)
Revenues	$	1,818	$	2,411	$	2,379
Operating income^(a)		155		353		373
Net income		64		59		180

^(a)

Includes Depreciation and amortization of $187 million for the period ended April 2, 2018 and $215 million and $231 million for the fiscal years ended June 30, 2017 and 2016, respectively. Operating income before depreciation and amortization was $342 million for the period ended April 2, 2018 and $568 million, and $604 million for the fiscal years ended June 30, 2017 and 2016, respectively.


	As of June 30,
	2018		2017
	(in millions)
Current assets	$	—	$	642
Non-current assets		—		2,517
Current liabilities		—		758
Non-current liabilities		—		2,557