EMC 2011 Annual Report Download - page 39

Table of Contents
guarantees provided by these financial institutions. EMC and certain of its subsidiaries have also entered into arrangements with financial institutions in order
to facilitate the management of currency risk. EMC has agreed to guarantee the obligations of its subsidiaries under these arrangements.
We enter into agreements in the ordinary course of business with, among others, customers, resellers, joint ventures, OEMs, systems integrators and
distributors. Most of these agreements require us to indemnify the other party against third-party claims alleging that an EMC product infringes a patent and/
or copyright. Certain agreements in which we grant limited licenses to specific EMC-trademarks require us to indemnify the other party against third-party
claims alleging that the use of the licensed trademark infringes a third-party trademark. Certain of these agreements require us to indemnify the other party
against certain claims relating to the loss or processing of data, to real or tangible personal property damage, personal injury or the acts or omissions of EMC,
its employees, agents or representatives. In addition, from time to time, we have made certain guarantees regarding the performance of our systems to our
customers. We have also made certain guarantees for obligations of affiliated third parties.
We have agreements with certain vendors, financial institutions, lessors and service providers pursuant to which we have agreed to indemnify the other
party for specified matters, such as acts and omissions of EMC, its employees, agents or representatives.
We have procurement or license agreements with respect to technology that is used in our products and agreements in which we obtain rights to a
product from an OEM. Under some of these agreements, we have agreed to indemnify the supplier for certain claims that may be brought against such party
with respect to our acts or omissions relating to the supplied products or technologies.
We have agreed to indemnify the directors, executive officers and certain other officers of EMC and our subsidiaries, to the extent legally permissible,
against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having
been a director or officer.
In connection with certain acquisitions, we have agreed to indemnify the current and former directors, officers and employees of the acquired company
in accordance with the acquired company's by-laws and charter in effect immediately prior to the acquisition or in accordance with indemnification or similar
agreements entered into by the acquired company and such persons. In a substantial majority of instances, we have maintained the acquired company's
directors' and officers' insurance, which should enable us to recover a portion of any future amounts paid. These indemnities vary in length of time.
Based upon our historical experience and information known as of December 31, 2011, we believe our liability on the above guarantees and
indemnities at December 31, 2011 is not material.
Pension
We have a noncontributory defined benefit pension plan ("the Pension Plan") that was assumed as part of the Data General acquisition, which covers
substantially all former Data General employees located in the United States. Certain of the former Data General foreign subsidiaries also have foreign
retirement plans covering substantially all of their employees. All of these plans have been frozen resulting in employees no longer accruing pension benefits
for future services. The assets for these defined benefit plans are invested in common stocks and bonds. The market related value of the plan's assets is based
upon the assets' fair value. The expected long-term rate of return on assets for the year ended December 31, 2011 was 6.75%. This rate represents the average
of the expected long-term rates of return weighted by the plan's assets as of December 31, 2011. We continue to shift the asset allocation to lower the
percentage of investments in equities and increase the percentage of investments in long-duration fixed-income securities. The continued changes could result
in a reduction in the long-term rate of return on plan assets and increase future pension expense consistent with the sensitivity described below. As of
December 31, 2011, the ten-year historical rate of return on plan assets was 5.5% and the inception to date return on plan assets was 9.8%. In 2011 and 2010,
we experienced an 8.9% and 12.6% gain on plan assets, respectively. Based upon current market conditions and the target allocation of the plan's assets, the
expected long-term rate of return for 2012 is 6.75%. A 25 basis point change in the expected long-term rate of return on the plan's assets would have
approximately a $1.0 impact on the 2012 pension expense.
As of December 31, 2011, the Pension Plan had a $218.0 unrecognized actuarial loss that will be expensed over the average future working lifetime of
active participants of 13.10 years. For the year ended December 31, 2011, the discount rate to determine the benefit obligation was 4.6%. This rate represents
the average of the discount rate weighted by the plan's liabilities as of December 31, 2011. The discount rate selected was based on highly rated long-term
bond indices and yield curves that match the duration of the plan's benefit obligations. The bond indices and yield curve analyses include only bonds rated AA
or higher from a reputable rating agency. The discount rate reflects the rate at which the pension benefits could be effectively settled. A 25 basis point change
in the discount rate would have approximately a $0.6 impact on the 2012 pension expense for all plans. Additionally, certain foreign subsidiaries have defined
benefit pension plans. These foreign pension plans are excluded from this discussion because they do not have a material impact on our consolidated financial
position or results of operations.
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