Western Digital 2012 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2012 Western Digital annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
performance, and appropriate realignment of asset allocation. Assumptions regarding the expected long-term rate of
return on plan assets are periodically reviewed and are based on the historical trend of returns, the risk and correlation
of each asset, and the latest economic environment.
The expected long-term rate of return is estimated based on many factors, including expected forecast for
inflation, risk premiums for each asset class, expected asset allocation, current and future financial market conditions,
and diversification and rebalancing strategies. Historical return patterns and correlations, consensus return forecasts,
and other relevant financial factors are analyzed periodically by the investment advisor so as to ensure that the
expected long-term rate of return is reasonable and appropriate.
Fair Value Measurements
The following table presents the Japanese defined benefit pension plans’ major asset categories and their asso-
ciated fair values as of June 29, 2012 (in millions):
Level 1 Level 2 Level 3 Total
Equity:
Equity securities(1) ................................... $ 4 $ — $— $ 4
Equity commingled/mutual funds(2)(3) .................... — 45 — 45
Fixed income:
Government and related(4) .............................. 1 12 — 13
Fixed income commingled/mutual funds(2)(5) ............... — 77 — 77
Other securities(6) .................................... — 9 — 9
Cash and short-term investments(2) ......................... 8 4 — 12
Alternative investments:
Other(7) ............................................ — — 7 7
Fair value of plan assets .................................. $13 $147 $ 7 $167
(1) Includes direct investments in equity of domestic and foreign companies, including those in developing countries.
(2) Commingled funds represent pooled institutional investments.
(3) Equity mutual funds invest primarily in equity securities.
(4) Includes debt issued by national, state or local governments and related agencies.
(5) Fixed income mutual funds invest primarily in fixed income securities.
(6) Other securities include corporate bonds, insurance contracts and mortgage-backed securities
(7) Includes investments in hedge funds, venture capital funds, limited partnerships, private real estate, bank capital
and collateral debt obligations such as private placement real estate funds.
Assets held in defined benefit plans in the Philippines, Taiwan and Thailand were less than $1 million and are
not presented in the above table. There were no significant movements of assets between any level categories from the
Closing Date through June 29, 2012.
Fair Value Valuation Techniques
Equity securities are valued at the closing price reported on the stock exchange on which the individual securities
are traded. Equity commingled/mutual funds are typically valued using the net asset value (“NAV”) provided by the
investment manager or administrator of the fund. The NAV is based on the value of the underlying assets owned by
the fund, minus liabilities and divided by the number of shares or units outstanding. These assets are classified as
either Level 1 or Level 2, depending on availability of quoted market prices for identical or similar assets.
84