2. Investments

Available-for-sale investments are carried at fair value, inclusive of unrealized gains and losses, and net of discount accretion and premium amortization computed using the level yield method. Net unrealized gains and losses are included in other comprehensive income (loss) net of applicable income taxes. Gains or losses on sales of available-for-sale investments are recognized using the first-in, first-out method and are included in other income or interest income depending upon the type of security.

Available-for-sale securities as of September 23, 2012 are summarized as follows (in thousands):

	Amortized Costs		Gross Unrealized Gain		Gross Unrealized Loss			Net Unrealized Gain		Market Value
Short-Term Investments:
Corporate debt	$	6,022	$	28	$	—		$	28	$	6,050
U.S. government and agency obligations		69,716		11		—			11		69,727
Total short-term investments	$	75,738	$	39	$	—		$	39	$	75,777
Long-Term Investments:
U.S. government and agency obligations	$	10,034	$	14	$	—		$	14	$	10,048
Total long-term investments	$	10,034	$	14	$	—		$	14	$	10,048

Equity securities	$	11,631	$	1,433	$	(808	)	$	625	$	12,256

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Investments (Continued)

Available-for-sale securities as of June 24, 2012 are summarized as follows (in thousands):

	Amortized Costs		Gross Unrealized Gain		Gross Unrealized Loss			Net Unrealized Gain		Market Value
Short-Term Investments:
Corporate debt	$	6,045	$	26	$	—		$	26	$	6,071
U.S. government and agency obligations		57,796		10		(5	)		5		57,801
Total short-term investments	$	63,841	$	36	$	(5	)	$	31	$	63,872
Long-Term Investments:
U.S. government and agency obligations	$	15,053	$	7	$	(6	)	$	1	$	15,054
Total long-term investments	$	15,053	$	7	$	(6	)	$	1	$	15,054

Equity securities	$	11,631	$	3,848	$	—		$	3,848	$	15,479

The Company manages its total portfolio to encompass a diversified pool of investment‑grade securities. The investment policy is to manage its total cash and investments balances to preserve principal and maintain liquidity while maximizing the returns on the investment portfolio.

In addition, the Company has a note receivable from a privately held company which it carries at cost of $0.4 million. This investment is carried at cost as the Company has determined that it is not practicable to estimate the fair value of the investment given that the issuer is a start-up company whose securities are not publicly traded. As of September 23, 2012, there have been no developments which would indicate the note receivable from that privately held company has been impaired.

The Company also holds as strategic investments the common stock of three publicly traded foreign companies. The common stock of the three companies are shown as "Equity securities" in the tables above and are included in other assets on the consolidated balance sheets. The common shares of the publicly traded companies are traded on either the Tokyo Stock Exchange or the Taiwan Stock Exchange. The Company holds an option on one of the strategic investments to put the associated number of common shares back to the issuer at a fixed price in local currency (which is described as the "Put Option" in Note 1). The Put Option became effective September 1, 2009 and is reported at fair value. As of September 23, 2012, the fair value of the Put Option was $2.9 million, with changes in fair value recorded in other (income)/expense, net (See Note 3, "Derivative Financial Instruments"). Dividend income from these investments was $0.1 million for the three months ended September 23, 2012. The Company received no dividend income from these equity investments during the three months ended September 25, 2011.

The Company evaluates securities for other-than-temporary impairment on a quarterly basis. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include the length of time and extent to which the market value has been less than cost; the financial condition and near-term prospects of the issuer of the securities; and the intent and ability of the Company to retain the security in order to allow for an anticipated recovery in fair value. If, based upon the analysis, it is determined that the impairment is other-than-temporary, the security is written down to fair value, and a loss is recognized through earnings.

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Investments (Continued)

The following table provides the Company's other-than-temporary impairments for equity, asset-backed, and mortgage-backed securities for the three months ended September 23, 2012 and September 25, 2011 (in thousands):

	Three Months Ended
	September 23, 2012		September 25, 2011
Publicly traded foreign company(s)-common stock	$	―	$	535
Total other-than-temporary impairments	$	―	$	535

The following table summarizes the fair value and gross unrealized losses related to available-for-sale investments, aggregated by type of investment and length of time that individual securities have been held. The unrealized loss position is measured and determined at each fiscal quarter end (in thousands):

	Securities held in a loss position for less than 12 months at September 23, 2012					Securities held in a loss position for 12 months or more at September 23, 2012				Total in a loss position at September 23, 2012
	Market Value		Gross Unrealized Losses			Market Value		Gross Unrealized Losses		Market Value		Gross Unrealized Losses
Equity securities	$	3,579	$	(808	)	$	—	$	—	$	3,579	$	(808	)
Total	$	3,579	$	(808	)	$	—	$	—	$	3,579	$	(808	)

	Securities held in a loss position for less than 12 months at June 24, 2012					Securities held in a loss position for 12 months or more at June 24, 2012				Total in a loss position at June 24, 2012
	Market Value		Gross Unrealized Losses			Market Value		Gross Unrealized Losses		Market Value		Gross Unrealized Losses
U.S government and agency obligations	$	46,420	$	(11	)	$	—	$	—	$	46,420	$	(11	)
Total	$	46,420	$	(11	)	$	—	$	—	$	46,420	$	(11	)

As of September 23, 2012, the Company evaluated whether an equity security with gross unrealized losses of $0.8 million was other-than-temporarily impaired. The Company determined there was no indication of other-than-temporary impairment with regards to gross unrealized losses. The determination was based on the fact the Company has evaluated the near-term prospects of the equity investment in relation to the severity and duration of the impairment, and based on that evaluation, has the ability and intent to hold these investments until a recovery of fair value.

The amortized cost and estimated fair value of investments at September 23, 2012, by contractual maturity, are as follows (in thousands):

Contractual Maturity	Amortized Cost		Estimated Market Value
Due in 1 year or less	$	75,738	$	75,777
Due in 1-2 years		10,034		10,048
Total investments	$	85,772	$	85,825

INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Investments (Continued)

The Company may decide to dispose of securities prior to the contractual maturity date indicated in the table above.

During the three months ended September 23, 2012, there were no sales of available-for-sale securities. During the three months ended September 25, 2011, available-for-sale securities were sold for total proceeds of $5.3 million. Gross realized gains and (losses) were $0.1 million and $0 million, respectively, for the three months ended September 25, 2011.

During the three months ended September 23, 2012, the Company did not reclassify realized gains (losses) from accumulated other comprehensive income to earnings, as there were no sales for available-for-sale securities. For the three months ended September 25, 2011, as a result of sales of available-for-sale securities and recognition of other-than-temporary impairments on available-for-sale securities, the Company reclassified $0.1 million from accumulated other comprehensive income to earnings as a component of interest income.

Fair Value of Investments

The following tables present the balances of investments measured at fair value on a recurring basis (in thousands):

	As of September 23, 2012
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Corporate debt	$	6,050	$	—	$	6,050	$	—
U.S. government and agency obligations		79,775		50,034		29,741		—
Equity securities-strategic investments		12,256		12,256		—		—
Total securities at fair value	$	98,081	$	62,290	$	35,791	$	—

	As of June 24, 2012
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Corporate debt	$	6,071	$	—	$	6,071	$	—
U.S. government and agency obligations		72,855		43,059		29,796		—
Equity securities-strategic investments		15,479		15,479		—		—
Total securities at fair value	$	94,405	$	58,538	$	35,867	$	—