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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
diversified portfolio with target asset allocation and expected rate of return is established by considering factors such
as composition of participants, level of funded status, capacity to absorb risks, and the current economic environment.
The target asset allocation is 35% in equity securities, 62% in debt securities and the remaining 3% in other assets.
Risk management is accomplished through diversification, periodic review of plan asset 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 28, 2013 (in millions):
Level 1
Level 2
Level 3
Total
Equity:
Equity commingled/mutual funds(2)(3) . . . . . . . . . . . . . . . . . . . . .
$--
$ 60
$--
$ 60
Fixed income:
Fixed income commingled/mutual funds(2)(5) . . . . . . . . . . . . . . . .
--
101
--
101
Cash and short-term investments(2) . . . . . . . . . . . . . . . . . . . . . . . . . .
4
2
--
6
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4
$163
$--
$167
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.
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