INVESTMENTS IN OTHER EQUITY SECURITIES

From time to time, the Company may acquire certain equity investments for the promotion of business objectives and these investments are classified as long-term investments and included in "Other assets" in the Consolidated Balance Sheet.

On September 2, 2014, the Company acquired a 3.3% interest in Vislink plc ("Vislink"), a U.K. public company listed on the AIM exchange, for $3.3 million, and also made a $3.3 million prepayment to Vislink for future software license purchases. The investment in Vislink is being accounted for as a cost method investment as the Company does not have significant influence over the operational and financial policies of Vislink. Since the Vislink investment is also an available-for-sale security, its value is marked to market for the difference in fair value at period end. As of December 31, 2014, the carrying value of Vislink was $2.6 million and the unrealized loss of $0.7 million, net of taxes, on the Vislink investment is included in the Consolidated Balance Sheet as a component of "Accumulated other income (loss)". As of December 31, 2014, the balance of the prepayment to Vislink for future software license purchase was $1.2 million and it is included in the "Prepaid expenses and other current assets" in the Consolidated Balance Sheet. The Company determined that there was no impairment indicators existing at December 31, 2014 that would indicate that the Vislink investment was impaired and we believe the decline in the fair value of Vislink investment is temporary. As of December 31, 2014, the Company's maximum exposure to loss from the Vislink investment was limited to its initial investment cost of $3.3 million.

Unconsolidated Variable Interest Entities ("VIE")

On September 26, 2014, the Company acquired a 19.8% interest in VJU ITV Development GmbH ("VJU"), a software company based in Austria, for $2.5 million. Since VJU's equity is deemed not sufficient to permit it to finance its activities without additional support from its shareholders, VJU is considered a VIE. The Company determined that it is not the primary beneficiary of VJU because its financial interest in VJU's equity and its research and development agreement with VJU do not empower the Company to direct VJU's activities that will most significantly impact VJU's economic performance. VJU is accounted for as a cost method investment as the Company does not have significant influence over the operational and financial policies of VJU. As of December 31, 2014, the carrying value of VJU was $2.5 million.

On October 22, 2014, the Company acquired an 18.4% interest in Encoding.com, Inc. ("EDC"), a video transcoding service company headquartered in San Francisco, California, for $3.5 million by subscribing to EDC's Series B preferred stock. Since EDC's equity is deemed not sufficient to permit it to finance its activities without additional support from its shareholders, EDC is considered a VIE. The Company determined that it is not the primary beneficiary of EDC because its financial interest in EDC's equity does not empower the Company to direct EDC's activities that will most significantly impact EDC's economic performance. In addition, the Company determined that its investment in EDC's Series B preferred stock does not have the risk and reward characteristics that are substantially similar to EDC’s common stock. Therefore, Harmonic does not hold an investment in EDC’s common stock or in-substance common stock. According to the applicable accounting guidance, EDC investment is accounted for as a cost-method investment and as of December 31, 2014, the carrying value of EDC was $3.5 million.

The following table presents the carrying values and maximum exposure of the unconsolidated VIEs as of December 31, 2014 (in thousands):



	Carrying Value		Maximum exposure to loss⁽¹⁾
VJU ⁽²⁾	$	2,505	$	2,605
EDC	3,507		3,507
Total	$	6,012	$	6,112

(1) The Company did not provide financial support to any of its unconsolidated VIEs during the year ended December 31, 2014. As of December 31, 2014, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to any of its unconsolidated VIEs.

(2) VJU's maximum exposure to loss as of December 31, 2014 was limited to the investment cost and research and development fees paid to VJU of $2.5 million and $0.1 million, respectively.

Each reporting period, the Company reviews all of its unconsolidated VIE investments to determine whether there are any reconsideration events that may result in the Company being a primary beneficiary of the unconsolidated VIE which would then require the Company to consolidate the VIE. The Company also reviews all its cost-method investments at each reporting period to determine whether a significant event of change in circumstances has occurred that may have an adverse effect on the fair value of each investment.