Microsoft 2003 Annual Report Form 10-K Note 8 -- Equity and Other Investments

Accounting Policies
Stock Split
Accounting Changes
Unearned Revenue
Cash and Short-Term Investments
Inventories
Property and Equipment
Equity and Other Investments
Goodwill
Intangible Assets
Derivatives
Investment Income/(Loss)
Income Taxes
Stockholders' Equity
Other Comprehensive Income
Employee Stock and Savings Plans
Earnings Per Share
Acquisitions
Commitments and Guarantees
Contingencies
Segment Information

Note 8-Equity and Other Investments

(In millions)	Cost Basis	Unrealized Gains	Unrealized Losses	Recorded Basis
June 30, 2002

Debt securities recorded at market, maturing:
Within one year	$ 485	$ 26	$ -	$ 511
Between 2 and 10 years	893	46	(4)	935
Between 10 and 15 years	541	19	(2)	558
Beyond 15 years	3,036	-	-	3,036
Debt securities recorded at market	4,955	91	(6)	5,040

Common stock and warrants	6,580	1,287	(617)	7,250
Preferred stock	1,382	-	-	1,382
Other investments	519	-	-	519
Equity and other investments	$ 13,436	$ 1,378	$ (623)	$ 14,191

(In millions)	Cost Basis	Unrealized Gains	Unrealized Losses	Recorded Basis
June 30, 2003

Debt securities recorded at market, maturing:
Within one year	$ 293	$ 9	$ -	$ 302
Between 2 and 10 years	1,436	194	(73)	1,557
Debt securities recorded at market	1,729	203	(73)	1,859

Common stock and warrants	8,395	1,686	(3)	10,078
Preferred stock	1,262	-	-	1,262
Other investments	493	-	-	493
Equity and other investments	$ 11,879	$ 1,889	$ (76)	$ 13,692

Debt securities include corporate and government notes and bonds and derivative securities. In connection with the definitive agreement to combine AT&T Broadband with Comcast into a new company called Comcast Corporation, Microsoft exchanged its AT&T 5% convertible preferred debt for 115 million shares of Comcast Corporation on November 18, 2002, resulting in a $20 million net recognized loss.

Common and preferred stock and other investments that are restricted for more than one year or are not publicly traded are recorded at cost. At June 30, 2002 the recorded basis of these investments was $2.31 billion, and their estimated fair value was $2.28 billion. At June 30, 2003, the recorded basis of these investments was $2.15 billion, and their estimated fair value was $2.56 billion. The estimate of fair value is based on publicly available market information or other estimates determined by management. Realized gains and (losses) from equity and other investments (excluding impairments) were $3.03 billion and $(23) million in 2001, $2.24 billion and $(121) million in 2002, and $540 million and $(88) million in 2003.