NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Overview, Basis of Presentation and Significant Accounting Policies

Overview

Avago Technologies Limited, or the “Company”, was organized under the laws of the Republic of Singapore in August 2005.

We are a designer, developer and global supplier of analog semiconductor devices with a focus on III-V based products. We offer products in three primary target markets: wireless communications, wired infrastructure and industrial & other. Applications for our products in these target markets include cellular phones, consumer appliances, data networking and telecommunications equipment, enterprise storage and servers, factory automation and displays.

References herein to “we”, “our”, “us” and “Avago” are to Avago Technologies Limited and its consolidated subsidiaries, unless otherwise specified or the context otherwise requires.

Basis of Presentation

Fiscal Periods. We operate on a 52- or 53-week fiscal year ending on the Sunday closest to October 31. Our fiscal year ending November 3, 2013, or fiscal year 2013, is a 53-week fiscal year, with our first fiscal quarter containing 14 weeks. The first quarter of our fiscal year 2013 ended on February 3, 2013, the second quarter ended on May 5, 2013, the third quarter ended on August 4, 2013 and the fourth quarter will end on November 3, 2013.

Information. The unaudited condensed consolidated financial statements include the accounts of Avago Technologies Limited and all of its wholly-owned subsidiaries, and are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. Intercompany transactions and balances have been eliminated in consolidation.

On June 28, 2013, we completed our acquisition of CyOptics, Inc., or "CyOptics". The unaudited condensed consolidated financial statements include the results of operations of CyOptics commencing on the date of closing of the acquisition. See Note 3. Acquisitions and Investment for further discussion.

Interim information presented in the unaudited condensed consolidated financial statements has been prepared by management and, in the opinion of management, includes all adjustments of a normal recurring nature that are necessary for the fair statement of the financial position, results of operations, comprehensive income and cash flows for the periods shown, and is in accordance with GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended October 28, 2012 , or fiscal year 2012 , included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on December 17, 2012.

The operating results for the fiscal quarter and three fiscal quarters ended August 4, 2013 are not necessarily indicative of the results that may be expected for fiscal year 2013 , or for any other future period. The balance sheet data as of October 28, 2012 presented are derived from the audited consolidated financial statements as of that date.

Significant Accounting Policies

Use of estimates. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could affect the results of operations reported in future periods.

Concentrations of credit risk and significant customers. Our cash, cash equivalents and accounts receivable are subject to concentration of credit risk. Cash and cash equivalents may be redeemable upon demand and are maintained with several financial institutions that management believes are of high credit quality and therefore bear minimal credit risk. We seek to mitigate our credit risks by spreading such risks across multiple counterparties and monitoring the risk profile of these counterparties. Our accounts receivable are derived from revenue earned from customers located in the U.S. and internationally. We mitigate collection risks from our customers by performing regular credit evaluations of our customers’ financial conditions, and require collateral, such as letters of credit and bank guarantees, in certain circumstances.

We sell our products through our direct sales force, distributors and manufacturers' representatives. One direct customer accounted for 18% and 32% of our net accounts receivable balance at August 4, 2013 and October 28, 2012 , respectively. For the fiscal quarter and three fiscal quarters ended August 4, 2013 , one direct customer represented 16% and 17% of our net revenue, respectively. For the fiscal quarter and three fiscal quarters ended July 29, 2012 , one direct customer represented 13% and 15% of our net revenue, respectively.

Warranty.   We accrue for the estimated costs of product warranties at the time revenue is recognized. Product warranty costs are estimated based upon our historical experience and specific identification of product requirements, which may fluctuate based on product mix. Additionally, we accrue for warranty costs associated with occasional or unanticipated product quality issues if a loss is probable and can be reasonably estimated.

The following table summarizes the changes in accrued warranty (in millions):

Net income per share . Basic net income per share is computed using the weighted-average number of ordinary shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of ordinary shares and potentially dilutive share equivalents outstanding during the period. Diluted shares outstanding includes the dilutive effect of in-the-money options, restricted share units, or RSUs, and employee share purchase rights under the Avago Technologies Limited Employee Share Purchase Plan, or ESPP. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period, using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising share options and to purchase shares under the ESPP, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when equity awards become deductible for income tax purposes are collectively assumed to be used to repurchase ordinary shares.

Diluted net income per share for the fiscal quarter and three fiscal quarters ended August 4, 2013 and the fiscal quarter and three fiscal quarters ended July 29, 2012 excluded the potentially dilutive effect of weighted-average outstanding equity awards (options, RSUs, and ESPP rights) to acquire 2 million ordinary shares each, as their effect was antidilutive.

The following is a reconciliation of the basic and diluted net income per share computations for the periods presented (in millions, except per share data):

	Fiscal Quarter Ended								Three Fiscal Quarters Ended
	August 4, 2013				July 29, 2012				August 4, 2013				July 29, 2012
Net income (Numerator):
Net income	$	142			$	145			$	380			$	404
Shares (Denominator):
Basic weighted-average ordinary shares outstanding	248				245				246				245
Add incremental shares for:
Dilutive effect of share options, RSUs and ESPP rights	4				5				5				6
Shares used in diluted computation	252				250				251				251
Net income per share:
Basic	$	0.57			$	0.59			$	1.54			$	1.65
Diluted	$	0.56			$	0.58			$	1.51			$	1.61

Supplemental cash flow disclosures. At August 4, 2013 and October 28, 2012 , we had $28 million and $48 million , respectively, of unpaid purchases of property, plant, and equipment included in accounts payable and other current liabilities. Amounts reported as unpaid purchases will be recorded as cash outflows from investing activities for purchases of property, plant, and equipment in the unaudited condensed consolidated statement of cash flows in the period in which they are paid.

Recently Adopted Accounting Guidance

In the first quarter of fiscal year 2013, we adopted the updated guidance issued by the Financial Accounting Standards Board, or FASB, related to goodwill impairment testing, which reduces the cost and complexity of the goodwill impairment test by providing entities an option to perform a qualitative assessment to determine whether further impairment testing is necessary. An entity is no longer required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The adoption of this guidance did not have a significant impact on our results of operations and financial position.

In the first quarter of fiscal year 2013, we adopted guidance on the presentation of comprehensive income issued by the FASB, which requires that all non-owner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements and eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The requirement to present reclassification adjustments out of accumulated other comprehensive income on the face of the consolidated statement of income has been deferred by an update issued by the FASB in December 2011. Upon adoption of this guidance, we have separately reported unaudited Condensed Consolidated Statements of Comprehensive Income and the adoption did not have a significant impact on our results of operations and financial position.

In the first quarter of fiscal year 2013, we adopted updated guidance on indefinite-lived intangible assets impairment test issued by the FASB. This guidance is intended to reduce the cost and complexity of testing indefinite-lived intangible assets for impairment, other than goodwill. It allows companies to perform a qualitative assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test. The adoption of this guidance did not have a significant impact on our results of operations and financial position.

Recent Accounting Guidance Not Yet Adopted

In February 2013, the FASB issued updated guidance on reporting on reclassifications out of accumulated other comprehensive income (loss). This guidance seeks to improve the reporting of such reclassifications by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income (loss) on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under GAAP that provide additional detail about those amounts. The amendments in this guidance supersede the presentation requirements for reclassifications out of accumulated other comprehensive income (loss) in previously issued guidance. This guidance will be effective for our first quarter of fiscal year 2014. The adoption of this guidance will affect the presentation of comprehensive income, but will not impact our financial condition or results of operations.

2. Inventory

Inventory consists of the following (in millions):

Inventory as of August 4, 2013 includes $32 million of inventory acquired from the CyOptics acquisition. See Note 3. “Acquisitions and Investment.”

3. Acquisitions and Investment

CyOptics

On June 28, 2013, we completed our acquisition of CyOptics, Inc., a U.S.-based company that manufactures and sells Indium Phosphide, or InP, optical chip and component technologies for the data communications and telecommunications markets. CyOptics has front-end manufacturing operations in the U.S. and back-end manufacturing operations in Mexico. As a result of the CyOptics acquisition, we acquired approximately 1,100 additional employees, with 745 of these employees located in Mexico.

The aggregate consideration for the acquisition was approximately $376 million , of which $372 million was paid in cash, net of $3 million in cash acquired, to acquire all of the outstanding shares of capital stock of CyOptics. We also agreed to pay additional deferred consideration to the previous shareholders of CyOptics in the amount of $4 million one year subsequent to the acquisition date, which was recorded as a liability.

In addition, approximately $27 million is payable to key employees, and was paid into escrow and will be paid in the form of retention bonuses over a three-year period subsequent to the acquisition date and which will be recognized as compensation expense over the same period.

Our primary reason for acquiring CyOptics was to strengthen our fiber optics product portfolio for emerging 40G and 100G enterprise and data center applications, through CyOptics' single-mode InP laser, receiver and photonics integration capability. Our optical transceiver products primarily leverage VCSEL-based technology today. In addition, we also acquired CyOptics for

their optical components business, which serves segments of the access, metro and long-haul markets. The purchase price for CyOptics was based on cash flow projections assuming the integration of any acquired technology and products with our own, which are of considerably greater value than utilizing CyOptics’ technology or product on a standalone basis, as well as the assembled workforce of CyOptics. These factors, among others, contributed to a purchase price in excess of the estimated fair value of the net identifiable assets acquired, and, as a result, we have recorded goodwill in connection with this transaction. This acquired goodwill is not deductible for tax purposes.

We have preliminarily estimated the fair value of the acquired assets and liabilities for CyOptics. We allocated the purchase price to tangible assets, liabilities and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The fair value assigned to identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of acquisition. As additional information becomes available, such as finalization of negotiations of working capital adjustments and tax related matters, we may revise our preliminary purchase price allocation.

Our preliminary allocation of the total purchase price for CyOptics and the purchased intangible assets as of August 4, 2013 is as follows (in millions):

	Estimated Fair Value
Trade accounts receivable	$	51
Inventory	35
Other current assets	2
Property, plant and equipment	34
Goodwill	192
Intangible assets	141
Total assets acquired	455
Accounts payable	(25		)
Employee compensation and benefits	(5		)
Other current liabilities	(2		)
Long-term deferred tax liabilities (included in Other long-term liabilities)	(47		)
Total liabilities assumed	(79		)
Purchase price allocation	$	376

Purchased Intangible Assets. Developed technology represents base product technology and packaging technology. We valued the base product technology that generates cash flows from sales of the existing products using the income approach, specifically the multi-period excess earnings method which calculates the value based on the risk-adjusted present value of the cash flows specific to the products, allowing for a reasonable return. The useful life of 15 years was determined based on the technology cycle related to the base product technology as well as the life of current legacy products.

Packaging technology is valued utilizing the relief-from-royalty method, a form of the income approach. The relief-from-royalty method estimates the cost savings that accrue to the owner of an intangible asset that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. The royalty rate is based on an analysis of empirical, market-derived royalty rate for guideline intangible assets.

Customer relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of CyOptics. Customer relationships were valued using the with-and-without-method, a form of the income approach. In this method, fair value is measured by the lost profits associated with the period of time necessary to reacquire the customers. The method involves a comparison of the cash flows assuming as if the customer relationships were in place versus as if the customer relationships were to be created "from scratch". There are additional considerations related to the build-in time for certain product lines and the qualification periods included in the valuation model. This method also assumes that all other assets, know-how and technology were easily available in both scenarios.

The fair value of in-process research and development, or IPR&D, from the CyOptics acquisition was determined using the multi-period excess earnings method, a form of the income approach. Under the income approach, the expected future cash flows from each project under development are estimated and discounted to their net present values at an appropriate risk-adjusted rate of return.

We believe the amount recorded as developed technology, IPR&D and customer relationships, represent the fair value of and approximate the amount a market participant would pay for these projects as of the acquisition date.

The purchased intangible assets are being amortized over their estimated useful lives of 1 year to 15 years. (See Note 4. Goodwill and Intangible Assets).

The unaudited condensed consolidated statements of operations include the results of operations of CyOptics commencing as of the acquisition date. Included in the unaudited condensed consolidated statements of operations for the third quarter of fiscal year 2013 was net revenue of $21 million and a net loss of $1 million for CyOptics. In connection with the acquisition, our results of operations for the third fiscal quarter and first three quarters of fiscal year 2013 also include: (i) amortization of purchased intangible assets, (ii) the amortization of fair value step-up in acquired inventory sold post acquisition; and (iii) charges associated with conforming accounting convention for fixed assets. Lastly, we incurred $2 million  and $4 million , respectively, in transaction costs related to legal, accounting and other related fees which was recorded in selling, general and administrative expense for the third fiscal quarter and first three quarters of fiscal year 2013.

Unaudited Pro Forma Information. The following table presents certain unaudited pro forma financial information for each of the fiscal quarter and three fiscal quarters ended August 4, 2013 and July 29, 2012, as if CyOptics had been acquired as of the beginning of our fiscal year 2012. The unaudited estimated pro forma information combines the historical results of CyOptics with our consolidated historical results and includes certain fair value adjustments reflecting the estimated impact of amortization of purchased intangible assets and depreciation of acquired property, plant & equipment for the respective periods. The pro forma data are for informational purposes only and are not necessarily indicative of the results of operations of the combined business had the acquisition actually occurred at the beginning of our fiscal year 2012 or of the results of future operations of the combined business. Consequently, actual results will differ from the unaudited pro forma information presented.

Javelin

During the second quarter of fiscal year 2013, we acquired Javelin Semiconductor, Inc., a U.S.-based company engaged in developing mixed-signal complementary metal oxide semiconductor integrated circuits, or CMOS ICs, for wireless communications for aggregate consideration of approximately $37 million in cash. A portion of the cash consideration was used to immediately pay off outstanding debt of the acquired company totaling $5 million in the aggregate. This payment is presented as a cash outflow and included in "Acquisitions and investment, net of cash acquired" within the cash flows used in investing activities in the unaudited condensed consolidated statement of cash flows. The purchase price was allocated to the acquired net assets, based on estimates of fair values, as follows: net assets of $37 million including intangible assets of $10 million , net current deferred tax assets of $7 million and goodwill of $21 million . The intangible assets are being amortized over their estimated useful lives of 10 years. (See Note 4. Goodwill and Intangible Assets).

We acquired Javelin for their radio frequency CMOS engineering talent, technical personnel and technology to form the foundation of the Company's radio frequency CMOS design and development for products for its wireless target market. These factors, among others, contributed to a purchase price in excess of the estimated fair value of the net identifiable assets acquired, and, as a result, we have recorded goodwill in connection with this transaction. This acquired goodwill is not deductible for tax purposes.

The unaudited condensed consolidated financial statements include Javelin's results of operations commencing as of the acquisition date. Pro forma results of operations for the Javelin acquisition have not been presented because the effects of the acquisition were not material to our prior fiscal quarter unaudited condensed consolidated financial statements.

Investment

During the fiscal quarter ended August 4, 2013, we made an additional equity investment of $1 million in a foreign listed company, as part of a rights offering by this company to its existing shareholders, which we had originally accounted for as available-for-sale investment. In connection with this investment, we purchased approximately 8 million ordinary shares and received approximately 16 million warrants to acquire a corresponding number of ordinary shares of the investee per the terms of the rights offerings. We continued to account for the investment in ordinary shares as available-for-sale securities investment and the $5 million unrealized gain on these ordinary shares was recorded in other comprehensive income in our unaudited condensed consolidated balance sheets. Warrants were accounted for as trading securities and the $2 million unrealized gain on these warrants was recorded as other income, net in our unaudited condensed consolidated statements of operations.

Subsequently in the fourth quarter of fiscal year 2013, we exited our investments in the ordinary shares and warrants in this foreign-listed company completely and realized a total gain of $9 million of which $2 million was already recorded in other income, net for the third quarter of fiscal year 2013 and the remaining $7 million will be recorded in other income, net for the fourth quarter of fiscal year 2013.

The following table presents the amortization expense of purchased intangible assets (in millions):

During the second and third quarters of fiscal year 2013, we recorded $10 million and $141 million of intangible assets with weighted-average amortization periods of 10  years and 13  years, respectively, in conjunction with acquisitions. (See Note 3. Acquisitions and Investment).

Based on the amount of intangible assets subject to amortization at August 4, 2013 , the expected amortization expense for each of the next five fiscal years and thereafter is as follows (in millions):

Fiscal Year	Amount
2013 (remainder)	$	24
2014	93
2015	89
2016	71
2017	62
2018	27
Thereafter	144
	$	510

The weighted-average amortization periods remaining by intangible asset category at August 4, 2013 were as follows (in years):

5. Borrowings

Revolving Credit Facility

As of August 4, 2013 and October 28, 2012 , we had no borrowings outstanding under our unsecured revolving credit facility and we were in compliance with the financial covenants under our credit agreement.

6. Fair Value

Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy is applied to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under the guidance for fair value measurements are described below:

Level 1—Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Our Level 1 assets include bank acceptances, trading securities investments, including warrants, investment funds (deferred compensation plan assets) and available-for-sale securities investments. We measure trading securities investments, investment funds and available-for-sale securities investments at quoted market prices as they are traded in an active market with sufficient volume and frequency of transactions.

Level 2—Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3—Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. Level 3 assets and liabilities include cost method investments, goodwill, amortizable intangible assets, and property, plant and equipment, which are measured at fair value using a discounted cash flow approach when they are impaired. Quantitative information for Level 3 assets and liabilities reviewed at each reporting period includes indicators of significant deterioration in the earnings performance, credit rating, asset quality, business prospects of the investee, and financial indicators of the investee's ability to continue as a going concern.

We record at cost non-marketable investments where we do not have the ability to exercise significant influence or control and periodically review them for impairment. During fiscal year 2011, we made an investment of $1 million in the common shares of a privately-held non-U.S. company. This equity investment was accounted for under the cost method and was included on the unaudited condensed consolidated balance sheet in other long-term assets. In fiscal year 2011, we also entered

into a collateralized loan and warrant purchase agreement with this company, pursuant to which we provided it with a collateralized loan of $1 million , at an annual interest rate of 8% , for a term of one year . Based on the quantitative assessment of the financial condition and business prospects of the investee, this equity investment and loan were both determined to be impaired during the fiscal quarter ended January 29, 2012.

During the fiscal quarter ended August 4, 2013 , pursuant to public ordinary share rights with detachable warrants offering, we made an additional investment of $1 million in the publicly traded ordinary shares of a foreign company. The ordinary shares are included as available-for-sale securities. The warrants are included as trading securities. (See Note 3. Acquisitions and Investment).

We did not have any Level 3 asset or liability activities during the three fiscal quarters ended August 4, 2013 .

Assets Measured at Fair Value on a Recurring Basis

The table below sets forth by level our financial assets that were accounted for at fair value as of August 4, 2013 . The table does not include cash on hand and also does not include assets that are measured at historical cost or any basis other than fair value (in millions).

During the three fiscal quarters ended August 4, 2013 , there were no material transfers between Level 1, Level 2 or Level 3 fair value instruments.

Assets Measured at Fair Value on a Nonrecurring Basis

There were no non-financial assets or liabilities measured at fair value as of August 4, 2013 .

Fair Value of Other Financial Instruments

The fair values of cash equivalents, trade accounts receivable, accounts payable and accrued liabilities, to the extent the underlying liability will be settled in cash, approximate carrying values because of the short-term nature of these instruments.

7. Shareholders’ Equity

Share Repurchase Program

On April 4, 2012, our Board of Directors authorized the Company to repurchase up to 15 million of its ordinary shares, referred to as the 2012 share repurchase program. Under the 2012 share repurchase program, the Company repurchased and cancelled 0.3 million and 0.7 million shares for an aggregate purchase price of $11 million and $24 million in cash during the fiscal quarter and two fiscal quarters ended May 5, 2013 , respectively. The weighted average purchase prices per share repurchased were $34.07 and $33.42 for the fiscal quarter and two fiscal quarters ended May 5, 2013 , respectively. All repurchased shares were immediately retired. The 2012 share repurchase program expired the day prior to the Company's 2013 annual general meeting on April 10, 2013 .

On April 10, 2013 , the Board authorized the Company to repurchase up to  20 million of its outstanding ordinary shares, or the 2013 share repurchase program. This program replaces the expired 2012 share repurchase program. The 2013 share repurchase program will expire the day prior to the Company's 2014 annual general meeting, unless earlier terminated. Share repurchases will be made in the open market at such times and in such amounts as the Company deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, market conditions and applicable legal requirements. The 2013 share repurchase program does not obligate the Company to repurchase any specific number of shares and may be suspended from time to time or terminated at any time without prior notice. All repurchased shares are immediately retired. Under the 2013 share repurchase program, the Company repurchased 1.0 million shares for an aggregate purchase price of $38 million in cash at a weighted average purchase price per share of $37.66 during the fiscal quarter ended August 4, 2013 .

Dividends

We paid a quarterly cash dividend of $0.21 and $0.15 per share, or $52 million and $37 million in total, during the fiscal quarters ended August 4, 2013 and July 29, 2012 , respectively. We paid aggregate cash dividends of $141 million and $98 million during the three fiscal quarters ended August 4, 2013 and July 29, 2012 , respectively.

Share-Based Compensation Expense

The following table summarizes share-based compensation expense related to share-based awards granted to employees, directors, and non-employees for the fiscal quarter and three fiscal quarters ended August 4, 2013 and July 29, 2012 (in millions):

     

The fair values of our time-based options and ESPP rights were estimated using the Black-Scholes option pricing model. Certain stock options granted in the fiscal quarter ended August 4, 2013 included both service and market conditions. The fair value of those market-based stock options was estimated using Monte Carlo simulation techniques.

The weighted-average assumptions utilized for our time-based options, ESPP rights and market-based stock options granted during the fiscal quarter and three fiscal quarters ended August 4, 2013 and July 29, 2012 are as follows:

	Time-based Options
	Fiscal Quarter Ended						Three Fiscal Quarters Ended
	August 4, 2013			July 29, 2012			August 4, 2013			July 29, 2012
Risk-free interest rate	1.4	%		0.7	%		1.0	%		0.8	%
Dividend yield	2.2	%		1.7	%		2.0	%		1.4	%
Volatility	47.0	%		53.0	%		48.0	%		53.0	%
Expected term (in years)	5			5			5			5

The dividend yields for the fiscal quarters ended August 4, 2013 and July 29, 2012 are based on the dividend yield as of the respective award grant dates. For the three fiscal quarters ended August 4, 2013, expected volatility is based on the combination of historical volatility of guideline publicly-traded companies and our own historical share price volatility over the period commensurate with the expected life of the awards and the implied volatility from traded options in guideline publicly-traded companies and our own shares with a term of 720 days measured over the last three months. Effective for the first quarter of fiscal year 2013 we updated our guideline publicly-traded companies based on direct competitors in our target markets. Prior to fiscal year 2013, expected volatility was based on the combination of historical volatility of our previous group of guideline publicly-traded companies over the period commensurate with the expected life of the options and the implied volatility of guideline publicly-traded companies from traded options with a term of 180 days or greater measured over the last three months. The risk-free interest rate is derived from the average U.S. Treasury Strips rate during the period, which approximates the rate in effect at the time of grant. Our computations of expected term for time-based options were based on data, such as the data of peer companies and company-specific attributes, that we believe could affect employees’ exercise behavior. The expected life of market-based stock options valued using Monte Carlo simulation techniques is based upon the vesting dates forecasted by the simulation and then assuming that options which vest, and for which the market condition has been satisfied, are exercised at the midpoint between the forecasted vesting date and their expiration.

Based on the above assumptions, the weighted-average fair values of the options granted under the Company's equity incentive award plan for the fiscal quarters ended August 4, 2013 and July 29, 2012 were $13.02 and $13.13 , respectively, and $12.83 and $14.30 for the three fiscal quarters ended August 4, 2013 and July 29, 2012 , respectively. The weighted-average fair values of the rights to purchase shares in the ESPP for the fiscal quarters ended August 4, 2013 and July 29, 2012 were $11.90 and $13.08 , respectively, and $11.72 and $12.92 for the three fiscal quarters ended August 4, 2013 and July 29, 2012 , respectively. The weighted-average fair values of RSUs granted in the fiscal quarter ended August 4, 2013 and July 29, 2012 were $36.35 and $33.03 , respectively, and $35.47 and $34.61 for the three fiscal quarters ended August 4, 2013 and July 29, 2012 , respectively.

Total compensation cost of options granted but not yet vested as of August 4, 2013 was $155 million , which is expected to be recognized over the remaining weighted-average service period of 3  years. The total grant-date fair values of options vested during the fiscal quarters ended August 4, 2013 and July 29, 2012 were $13 million and $9 million , respectively. The total grant-date fair values of options vested during the three fiscal quarters ended August 4, 2013 and July 29, 2012 were $39 million and $26 million , respectively. Total unrecognized compensation cost related to the ESPP rights as of August 4, 2013 was immaterial and is expected to be recognized over the remaining portion of the current offering period under the ESPP, which ends on September 14, 2013. Total compensation cost related to unvested RSUs as of August 4, 2013 was $38 million , which is expected to be recognized over the remaining weighted-average service period of 3  years. The total grant-date fair values of RSUs that vested during the fiscal quarter and three fiscal quarters ended August 4, 2013 were $1 million and $2 million , respectively. The total grant-date fair value of RSUs that vested during the fiscal quarter and three fiscal quarters ended July 29, 2012 were immaterial.

The total intrinsic values of options exercised during the fiscal quarters ended August 4, 2013 and July 29, 2012 were $35 million and $11 million , respectively. The total intrinsic values of options exercised during the three fiscal quarters ended August 4, 2013 and July 29, 2012 were $78 million and $43 million , respectively.

A summary of RSU activity related to our equity incentive plans is as follows (in millions, except years and per share amounts):

As of October 28, 2012 there were 12 million shares available for grant under the 2009 Equity Incentive Plan. Per the terms of the 2009 Equity Incentive Plan, an annual increase of 6 million shares was approved for issuance on the first day of fiscal year 2013. As of the three quarters ended August 4, 2013 there were 12 million shares that remained available for grant.

The following table summarizes the ranges of outstanding and exercisable option awards as of August 4, 2013 (in millions, except years and per share amounts):