-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VJQhK5q7eEyQa2nbqH4qDZReaMiLczIWDidfK7MrVv2h7TGoYkn3hqPWTyf3mk8g J7RfgOeFhcOH7RTCCzXuzA== 0001047469-98-025838.txt : 19980630 0001047469-98-025838.hdr.sgml : 19980630 ACCESSION NUMBER: 0001047469-98-025838 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980629 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL BUSINESS MACHINES CORP CENTRAL INDEX KEY: 0000051143 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 130871985 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-02360 FILM NUMBER: 98657065 BUSINESS ADDRESS: STREET 1: 1 NEW ORCHARD ROAD CITY: ARMONK STATE: NY ZIP: 10504- BUSINESS PHONE: (914)-499-1900 MAIL ADDRESS: STREET 1: ONE NEW ORCHARD RD CITY: ARMONK STATE: NY ZIP: 10504 11-K 1 FORM 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 11-K (X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1997 or ( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ___________________ Commission file number 1-2360 IBM TAX DEFERRED SAVINGS PLAN ----------------------------- (Full title of the plan) Manager of Benefits - U.S. Operations IBM Route 9 Town of Mount Pleasant Sleepy Hollow, New York 10591 ------------------------------------- (Address of the plan) INTERNATIONAL BUSINESS MACHINES CORPORATION ------------------------------------------- (Name of issuer of the securities held pursuant to the plan) New Orchard Road Armonk, New York 10504 ---------------------- (Address of issuer's principal executive office) REQUIRED INFORMATION
Page ---- Consent of Independent Accountants 3 Report of Independent Accountants 4 Financial Statements: Statements of Net Assets Available for Plan Benefits, with Fund Information, as of December 31, 1997 and December 31, 1996 5 Statement of Changes in Net Assets Available for Plan Benefits, with Fund Information, for the year ended December 31, 1997 9 Notes to Financial Statements 11 Supplementary Schedules: Schedule I - Item 27a - Assets Held for Investment Purposes at December 31, 1997 31 Schedule II - Item 27d - Schedule of Reportable Transactions 35
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the plan) have duly caused this annual report to be signed by the undersigned thereunto duly authorized. IBM TAX DEFERRED SAVINGS PLAN Dated June 29, 1998 By: M. Loughridge ------------------------------- (Vice President and Controller) 2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (333-09055) of the IBM Tax Deferred Savings Plan of our report dated June 18, 1998 appearing on page 4 of this Annual Report on Form 11-K for the year end December 31, 1997. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, NY 10036 June 18, 1998 3 REPORT OF INDEPENDENT ACCOUNTANTS To the Members of the International Business Machines Corporation (IBM) Retirement Plans Committee and the Participants of the IBM Tax Deferred Savings Plan In our opinion, the financial statements as referenced in the Required Information Section on page 2, present fairly, in all material respects, the net assets available for plan benefits of the IBM Tax Deferred Savings Plan at December 31, 1997 and 1996, and the changes in net assets available for plan benefits for the year ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information included in schedules I and II is presented for purposes of additional analysis and is not a required part of the basic financial statements but is additional information required by ERISA. The fund information in the statement of net assets available for plan benefits, with fund information and the statement of changes in net assets available for plan benefits, with fund information is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for benefits of each fund. Schedules I and II and the fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, NY 10036 June 18, 1998 4 INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION AS OF DECEMBER 31, 1997 (Dollars in thousands)
Large Small Total Income Conserv. Money Company Company IBM Fixed Int'l. Bond Plus Life Life Market Index Stock Stock Income Stock Market Strategy Strategy Fund Fund Fund Fund Fund Fund Fund Fund Fund ------- --------- --------- ------- --------- -------- ------- --------- -------- Assets: Investments at fair value: Interest in equity-oriented General Employee Benefit Trust pooled funds (cost: $4,903,380) 4,720,581 2,213,371 477,478 8,622 53,312 Interest in short-term investment- oriented General Employee Benefit Trust pooled funds (cost: $473,795) 388,264 16,701 68,830 Investment contracts, at contract value (cost: $3,613,269) 3,294,271 32,309 66,601 Interest in bond market-oriented General Employee Benefit Trust pooled funds (cost: $263,616) 94,926 2,159 13,354 IBM Common Stock (cost: $722,242) 1,210,202 ------- --------- --------- --------- --------- -------- ------- --------- -------- Total investments 388,264 4,720,581 2,213,371 1,226,903 3,363,101 477,478 94,926 43,090 133,267 Income and sales proceeds receivable 1,670 5 139 1 Contributions receivable 32 5 5 111 4 Loans receivable Transfers receivable (payable) (2) (5) (2) (12) (141) (1) ------- --------- --------- --------- --------- -------- ------- --------- -------- Total assets 389,964 4,720,586 2,213,374 1,226,891 3,363,210 477,482 94,926 43,090 133,267 Liabilities: Investments purchased 1,512 ------- --------- --------- --------- --------- -------- ------- --------- -------- Total liabilities 1,512 ------- --------- --------- --------- --------- -------- ------- --------- -------- Net assets available for plan benefits 389,964 4,720,586 2,213,374 1,225,379 3,363,210 477,482 94,926 43,090 133,267 ------- --------- --------- --------- --------- -------- ------- --------- -------- ------- --------- --------- --------- --------- -------- ------- --------- --------
The accompanying notes are an integral part of this financial statement. 5 INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION (CONTINUED) AS OF DECEMBER 31, 1997 (Dollars in thousands)
Moderate Aggressive Life Life Strategy Strategy Loan Fund Fund Fund Total --------- ----------- ------- ---------- Assets: Investments at fair value: Interest in equity-oriented General Employee Benefit Trust pooled funds (cost: $4,903,380) 528,551 185,163 8,187,078 Interest in short-term investment- oriented General Employee Benefit Trust pooled funds (cost: $473,795) 473,795 Investment contracts, at contract value (cost: $3,613,269) 220,088 3,613,269 Interest in bond market-oriented General Employee Benefit Trust pooled funds (cost: $263,616) 132,387 46,376 289,202 IBM Common Stock (cost: $722,242) 1,210,202 --------- ----------- ------- ---------- Total investments 881,026 231,539 13,773,546 Income and sales proceeds receivable 1 1 1,817 Contributions receivable 3 160 Loans receivable 291,561 291,561 Transfers receivable (payable) (1) (1) 165 --------- ----------- ------- ---------- Total assets 881,029 231,539 291,726 14,067,084 Liabilities: Investments purchased 1,512 --------- ----------- ------- ---------- Total liabilities 1,512 --------- ----------- ------- ---------- Net assets available for plan benefits 881,029 231,539 291,726 14,065,572 --------- ----------- ------- ---------- --------- ----------- ------- ----------
The accompanying notes are an integral part of this financial statement. 6 INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION AS OF DECEMBER 31, 1996 (Dollars in thousands)
Large Small Total Income Conserv. Money Company Company IBM Fixed Int'l. Bond Plus Life Life Market Index Stock Stock Income Stock Market Strategy Strategy Fund Fund Fund Fund Fund Fund Fund Fund Fund ------- --------- --------- ------- --------- -------- ------- --------- -------- Assets: Investments at fair value: Interest in equity-oriented General Employee Benefit Trust pooled funds (cost: $4,245,253) 3,390,453 1,639,225 487,544 4,374 29,492 Interest in short-term investment- oriented General Employee Benefit Trust pooled funds (cost: $426,042) 366,350 12,848 44,065 212 476 Investment contracts, at contract value (cost: $3,601,544) 3,387,891 16,286 36,626 Interest in bond market-oriented General Employee Benefit Trust pooled funds (cost: $159,970) 42,165 1,096 7,397 IBM Common Stock (cost: $461,256) 738,140 ------- --------- --------- ------- --------- -------- ------- --------- -------- Total investments 366,350 3,390,453 1,639,225 750,988 3,431,956 487,544 42,165 21,968 73,991 Income and sales proceeds receivable 1,707 4 184 1 Contributions receivable 180 10 3 191 82 4 Loans receivable Transfers receivable (payable) (1) (1) 6 (56) (211) Reinstatements receivable 15 53 448 2 ------- --------- --------- ------- --------- -------- ------- --------- -------- Total assets 368,251 3,390,519 1,639,234 751,123 3,432,459 487,551 42,165 21,968 73,991 Liabilities: Expenses payable 155 537 300 152 443 211 21 1 6 Investments purchased 4,648 ------- --------- --------- ------- --------- -------- ------- --------- -------- Total liabilities 155 537 300 4,800 443 211 21 1 6 ------- --------- --------- ------- --------- -------- ------- --------- -------- Net assets available for plan benefits 368,096 3,389,982 1,638,934 746,323 3,432,016 487,340 42,144 21,967 73,985 ------- --------- --------- ------- --------- -------- ------- --------- -------- ------- --------- --------- ------- --------- -------- ------- --------- --------
The accompanying notes are an integral part of this financial statement. 7 INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION (CONTINUED) AS OF DECEMBER 31, 1996 (Dollars in thousands)
Moderate Aggressive Life Life Strategy Strategy Loan Fund Fund Fund Total --------- ----------- ------- ---------- Assets: Investments at fair value: Interest in equity-oriented General Employee Benefit Trust pooled funds (cost: $4,245,253) 388,389 73,931 6,013,408 Interest in short-term investment- oriented General Employee Benefit Trust pooled funds (cost: $426,042) 2,091 426,042 Investment contracts, at contract value (cost: $3,601,544) 160,741 3,601,544 Interest in bond market-oriented General Employee Benefit Trust pooled funds (cost: $159,970) 97,386 18,535 166,579 IBM Common Stock (cost: $461,256) 738,140 --------- ----------- ------- ---------- Total investments 648,607 92,466 10,945,713 Income and sales proceeds receivable 1 1,897 Contributions receivable 3 473 Loans receivable 270,329 270,329 Transfers receivable (payable) 1 262 Reinstatements receivable 354 872 --------- ----------- ------- ---------- Total assets 648,611 92,467 270,945 11,219,284 Liabilities: Expenses payable 87 12 1,925 Investments purchased 4,648 --------- ----------- ------- ---------- Total liabilities 87 12 6,573 --------- ----------- ------- ---------- Net assets available for plan benefits 648,524 92,455 270,945 11,212,711 --------- ----------- ------- ---------- --------- ----------- ------- ----------
The accompanying notes are an integral part of this financial statement. 8 INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1997 (Dollars in thousands)
Total Income Conserv. Money Large Co. Small Co. IBM Fixed Int'l Bond Plus Life Life Market Index Stock Stock Income Stock Market Strategy Strategy Fund Fund Fund Fund Fund Fund Fund Fund Fund ------- --------- --------- --------- --------- ------- -------- --------- -------- Additions: Participant contributions 43,186 212,545 150,676 66,746 123,713 51,795 7,381 937 3,336 Employer contributions 16,095 66,959 47,425 20,357 40,939 15,987 2,498 197 731 Participant loan repayments 7,630 49,419 30,396 18,522 45,913 8,293 1,075 255 675 Participant directed transfer of investments, net (44,791) 16,106 (5,725) 99,375 (267,653) (62,440) 38,965 18,413 46,639 ------- --------- --------- --------- --------- ------- -------- --------- -------- Total contributions and transfers 22,120 345,029 222,772 205,000 (57,088) 13,635 49,919 19,802 51,381 ------- --------- --------- --------- --------- ------- -------- --------- -------- Interest and dividend income from investments 21,376 9,416 215,122 1,801 3,900 Unrealized and realized gain (loss) on investments, net 1,160,399 431,368 312,836 (1,168) 5,716 1,197 8,716 ------- --------- --------- --------- --------- ------- -------- --------- -------- Total additions 43,496 1,505,428 654,140 527,252 158,034 12,467 55,635 22,800 63,997 ------- --------- --------- --------- --------- ------- -------- --------- -------- Reductions: Distributions to participants 22,923 127,729 55,381 26,597 171,594 16,200 2,063 1,308 3,896 Transfers (from) other benefits plans, net (13,541) (2,862) (1,816) (1,631) (1,483) (623) (145) (24) (11) Loans to participants 11,740 47,068 24,672 22,629 54,323 5,972 862 370 749 Administrative expenses 506 2,889 1,463 601 2,406 776 73 23 81 ------- --------- --------- --------- --------- ------- -------- --------- -------- Total reductions 21,628 174,824 79,700 48,196 226,840 22,325 2,853 1,677 4,715 ------- --------- --------- --------- --------- ------- -------- --------- -------- Increase (decrease) in net assets during the year 21,868 1,330,604 574,440 479,056 (68,806) (9,858) 52,782 21,123 59,282 Net assets available for plan benefits: Beginning of year 368,096 3,389,982 1,638,934 746,323 3,432,016 487,340 42,144 21,967 73,985 ------- --------- --------- --------- --------- ------- -------- --------- -------- End of year 389,964 4,720,586 2,213,374 1,225,379 3,363,210 477,482 94,926 43,090 133,267 ------- --------- --------- --------- --------- ------- -------- --------- -------- ------- --------- --------- --------- --------- ------- -------- --------- --------
The accompanying notes are an integral part of this financial statement. 9 INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1997 (Dollars in thousands)
Moderate Aggressive Life Life Strategy Strategy Loan Fund Fund Fund Total --------- ----------- ------- ---------- Additions: Participant contributions 56,999 16,139 (3,194) 730,259 Employer contributions 17,793 4,030 233,011 Participant loan repayments 11,156 3,048 (176,382) Participant directed transfer of investments, net 65,393 95,718 --------- ----------- ------- ---------- Total contributions and transfers 151,341 118,935 (179,576) 963,270 --------- ----------- ------- ---------- Interest and dividend income from investments 22,023 25,919 25,279 324,836 Unrealized and realized gain (loss) on investments, net 95,342 2,014,406 --------- ----------- ------- ---------- Total additions 268,706 144,854 (154,297) 3,302,512 --------- ----------- ------- ---------- Reductions: Distributions to participants 26,575 2,732 6,285 463,283 Transfers (from) other benefits plans, net (728) (173) (1,618) (24,655) Loans to participants 9,676 3,073 (181,134) Administrative expenses 678 138 1,389 11,023 --------- ----------- ------- ---------- Total reductions 36,201 5,770 (175,078) 449,651 --------- ----------- ------- ---------- Increase (decrease) in net assets during the year 232,505 139,084 20,781 2,852,861 Net assets available for plan benefits: Beginning of year 648,524 92,455 270,945 11,212,711 --------- ----------- ------- ---------- End of year 881,029 231,539 291,726 14,065,572 --------- ----------- ------- ---------- --------- ----------- ------- ----------
The accompanying notes are an integral part of this financial statement. 10 INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF THE PLAN: The following description of the International Business Machines Corporation (IBM) Tax Deferred Savings Plan (the Plan) provides only general information. Participants should refer to the Plan prospectus for a more complete description of the Plan's provisions. General: The International Business Machines Corporation (IBM) Tax Deferred Savings Plan (the Plan) offers all qualifying active regular and part-time employees of IBM and certain of its eligible domestic related companies and partnerships an opportunity to defer up to twelve percent (fifteen percent effective January 1, 1998 refer to Note 8 - Subsequent Events) of their compensation, subject to the legal limit allowed by Internal Revenue Service (IRS) regulations, which IBM will contribute on their behalf to any of eleven investment funds. The investment objectives of these funds are described in Note 3. The Plan was established by resolution of IBM's Retirement Plans Committee effective July 1, 1983 and is held in trust for the benefit of its participants. The Plan includes the employees of the Technology Service Solutions (TSS) (wholly-owned) and Micrus (less than wholly-owned) subsidiaries of IBM. The provisions of the Plan for TSS employees are identical to those of the other Plan participants except for the matching deferral, which is one hundred percent of each participant's deferral up to a maximum of seven percent of eligible compensation. The Plan provisions for Micrus employees are identical to those of other Plan participants except for an additional profit sharing component which is set annually by Micrus management as a percentage of eligible employees' annual compensation. Micrus employees, not covered by the IBM Retirement Plan, are eligible to receive this additional profit sharing component on January 1 following the date on which they attain one year of service with Micrus. Eligible employees must be employed by Micrus on the annual contribution date of December 31st to receive the additional profit sharing component. The Plan is intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended, and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. 11 Administration: The Plan is administered by IBM's Retirement Plans Committee which has appointed officials of IBM as plan administrators to assist in administering the Plan. The IBM Retirement Plans Committee has also appointed Bankers Trust Company as Trustee to safeguard the assets of the various funds, and outside investment managers to direct investments in the various funds. On October 21, 1997, Bankers Trust Company announced that Metropolitan Life Insurance Company had acquired Bankers Trust's 401(k) recordkeeping, participant services and communications services segments, including its TDSP Service Center Operation in Nashville, Tennessee. Bankers Trust continues to be Trustee and provide investment management services for the Plan. Contributions and participants' equity: Contributions are made to the Plan by IBM on behalf of each participant based upon the participant's elected compensation deferral. Participants may elect to defer up to twelve percent of their eligible compensation, subject to the legal limit allowed by IRS regulations. Effective January 1, 1998, the maximum allowable deferral percentage was increased to fifteen percent of eligible compensation (refer to Note 8 - Subsequent Events). IBM's matching deferral is fifty percent of each participant's deferral up to a maximum of six percent of a participant's eligible compensation. Participants may choose to have their contributions invested entirely in any one of, or in any combination of, the following funds in five percent multiples: Money Market Fund, Large Company Index Fund, Small Company Stock Fund, IBM Stock Fund, Fixed Income Fund, International Stock Fund, Total Bond Market Fund, Income Plus Life Strategy Fund, Conservative Life Strategy Fund, Moderate Life Strategy Fund, and Aggressive Life Strategy Fund. These funds and their investment objectives are more fully described in Note 3. Contributions are temporarily invested in short-term investments and are then allocated to the funds selected by the participant. Participants may elect to change their investment selection for future contributions once during any payroll period up to twenty-four times each calendar year. Employees may change their percentage of deferred compensation up to six times in a calendar year. Also, the participant may transfer part or all of existing account balances among funds in the Plan once daily, but a service fee will be incurred for each transfer in excess of eight in any calendar year. However, participant balances in the Fixed Income Fund may not be transferred directly into the Money Market Fund or Total Bond Market Fund, and if transferred into another fund may not subsequently be transferred to the Money Market Fund or Total Bond Market Fund for three months. 12 The Plan recordkeeper maintains an account in the name of each participant to which the Plan recordkeeper records each participant's contributions and share of the net earnings, losses and expenses, if any, of the various investment funds. The earnings on the assets held in each of the funds and all proceeds from the sale of such assets are held and reinvested in the respective funds. Effective January 22, 1996, the Plan was amended to allow participant rollover contributions of pretax dollars from other qualified savings plans or conduit Individual Retirement Accounts (IRAs that exclusively hold a previously taxable distribution from a qualified plan) into their Plan accounts. Rollovers must be made in cash within the time limits specified by the IRS; stock or in-kind rollovers cannot be accepted. These rollovers are limited to active employees on the payroll of IBM (or affiliated companies) who have existing accounts in the Plan. Retirees or employees on leave or bridge leave of absence are not eligible for such rollovers. The interest of each participant in each of the funds is represented by units/shares credited to the participant's account. The initial unit value of each fund on the first valuation date was equivalent to $1.00. On each succeeding valuation date, the unit value of each fund is determined by dividing the value of the fund on that date by the number of outstanding units in the fund. In determining the unit value, new contributions that are to be allocated as of the valuation date are excluded from the calculation. The number of additional units to be credited to a participant's account for each fund, due to new contributions, is equal to the amount of the participant's new contributions to the fund divided by the unit value for the applicable fund as determined on the valuation date. At December 31, 1997 and 1996 the number of participants in the Plan approximated 203,000 and 196,000, respectively. The number of individuals participating in each of the Plan's funds at December 31, 1997, were approximately:
Money Market 53,000 Large Company Index 146,000 Small Company Stock 118,000 IBM Stock 65,000 Fixed Income 122,000 International Stock 59,000 Total Bond Market 12,000 Income Plus Life Strategy 2,000 Conservative Life Strategy 4,000 Moderate Life Strategy 41,000 Aggressive Life Strategy 12,000
13 Contributions made to the Plan as well as interest, dividends or other earnings of the Plan are not includable in gross income of the participant until withdrawal, at which time all earnings and contributions withdrawn are generally taxed as ordinary income to the participant. Additionally, withdrawals by the participant before attaining age 59 1/2 are generally subject to a penalty tax of 10%. Consistent with provisions established by the IRS, a 1997 annual limit of $9,500 was set on employee deferrals under salary deferral plans such as the Plan. The 1997 maximum annual deferral amount for employees residing in Puerto Rico was limited by local government regulations to the lesser of $7,500 or ten percent of eligible compensation. Vesting: Participants in the Plan are at all times fully vested in their account balance, including deferred compensation, matching contributions and earnings thereon. Distribution: A participant who has attained age 59 1/2 may request a cash distribution of all or part of the value of the participant's account. The minimum amount of any such distribution shall be the lesser of the participant's account balance or $500. In the event that the participant retires under the IBM Retirement Plan or becomes eligible for benefits under the IBM Long-Term Disability Plan, the participant may elect to receive the balance of the participant's account in a specified number of annual cash installments over a period not to exceed ten years or to defer distribution until age 70 1/2. Upon the death of a participant, the value of the participant's account will be distributed to the participant's beneficiary in a lump-sum cash payment. If the participant is married, the beneficiary must be the participant's spouse, unless the participant's spouse has previously given written, notarized consent to designate another person as beneficiary. If the participant becomes married or remarried, any prior designation is cancelled and the current spouse automatically becomes the beneficiary. If the participant is single, the beneficiary may be anyone previously designated by the participant under the Plan. In the absence of an effective designation under the Plan at the time of death, the proceeds will normally be paid in the following order: the participant's spouse, the participant's children in equal shares, or to surviving parents equally. If no spouse, child, or parent is living, payments will be made to the executors or administrators of the participant's estate. 14 Participants may borrow, subject to additional limitations relative to prior loans, up to one-half of the value of the participant's account balance, but not to exceed $50,000. Effective January 1, 1998, the minimum loan amount allowable for new loans was increased to $500 from $50 (refer to Note 8 - Subsequent Events). Participants are limited to two outstanding Plan loans at any one time. The loan shall bear a fixed rate of interest, set quarterly, for the term of the loan, determined by the plan administrator to be 1.25 percent above the prime rate. Repayment of a loan shall be made through monthly payroll deductions (semi-monthly effective January 1, 1998; refer to Note 8 - Subsquent Events) over a term of one to four years. Participants may prepay the entire remaining loan principal after payments have been made for three full months. Employees on an approved leave of absence may elect to make scheduled loan payments directly to the Plan. Participants may continue to contribute to the Plan while having an outstanding loan, provided that the loan is not in default. Participants who retire or separate from IBM and have outstanding Plan loans may choose automated loan repayments or coupon payment options to continue monthly loan repayments according to their original amortization schedule. The number of loans outstanding at December 31, 1997 and 1996 was 48,330 and 48,033, respectively. Interest rates on outstanding loans at December 31, 1997 ranged from 7.25% to 10.25%. Termination of service: The value of the participant's account will be distributed to the participant in a lump-sum cash payment as soon as practical following the termination of the participant's employment with IBM for any reason other than retirement, medical disability or death. If the account balance is greater than $3,500 at the time of separation, the participant may elect to defer distribution of the account until age 70 1/2. Termination of the Plan: IBM reserves the right to terminate this Plan at any time by action of its Retirement Plans Committee. In such event, each participant or beneficiary receiving or entitled to receive payments under the Plan will receive the balance of his or her account at such time and in such manner as the Retirement Plans Committee shall determine at its discretion. In the event of a full or partial termination of the Plan, or upon complete discontinuance of contributions under the Plan, the rights of all affected participants in the value of their accounts will be nonforfeitable. 15 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Valuation of investments: The fair value of the net assets of the Plan is based on the estimated fair values of the underlying assets and liabilities. Investments in registered investment companies and pooled funds are valued at the net asset values per share as quoted by such companies or funds as of the valuation date. Interest accrued on investments is recorded separately as interest receivable until paid and reinvested. Investments in fully benefit responsive bank and insurance company investment contracts are stated at contract value which is equal to cost plus reinvested interest. Contracts include synthetic investment contracts, whereby individual assets are placed in a trust with ownership by the Plan and a third party issues a wrapper contract that provides that holders can, and must, execute transactions at contract value. Individual assets of the synthetic contracts are valued at representative quoted market prices. The wrapper is valued as the difference between fair value of the assets and contract value of the investment contract. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures at the date of the financial statements. Actual results could differ from the estimates that were used. Security transactions and related investment income: Security transactions are recorded on a trade-date basis. Realized gains and losses on sales of securities are based on average cost at the time of sale. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. 16 Administrative expenses and investment management fees: All administrative costs of the Plan are paid by the Plan. This includes: (a) brokerage fees and commissions which are included in the cost of investments when purchased and in determining net proceeds on sales of investments (b) investment management fees which are paid from the respective fund's assets (excluding the IBM Stock Fund); such fees consist of fixed annual charges and charges which are based on a percentage of net asset value (c) operational expenses required for administration of the Plan consisting of trustee, recordkeeping, participant reports and communications, and service center expenses, which are expenses charged against the fund's assets on a pro rata basis throughout the year. 17 NOTE 3 - DESCRIPTION OF INVESTMENT FUNDS: The investment funds to which employees may contribute monies are described below: Money Market Fund: - Preservation of principal, liquidity and a variable rate of income based on current market interest rates. Investments in the Money Market Fund are managed by Bankers Trust Company. Investments are made in a diversified portfolio of high-quality money market instruments with average maturity dates not exceeding 91 days from the date of purchase. Twenty percent of the value of the fund may be invested in instruments with maturities not to exceed 182 days. At all times, not less than twenty percent of the remaining assets of the fund must be composed of cash, demand obligations and assets that mature on the next business day. Large Company Index Fund: - Long term growth of capital with a market rate of return from a diversified group of large-capitalization company common stocks. This fund invests in a broad range of common stocks through Bankers Trust Company's Large Capitalization Equity Index Fund which is designed to produce investment results approximating the price and yield performance of the Standard & Poor's Composite Index of 500 Stocks (S & P 500). The S & P 500 Index is composed of 500 selected common stocks, most of which are listed on the New York Stock Exchange. Standard and Poor's, a financial services corporation, chooses the stocks to be included in the index on a statistical basis, by which it seeks to represent a cross-section of industry sectors and companies within each sector. Dividends paid on common stocks in the portfolio are reinvested in the fund. The value of a participant's assets in this fund will vary as a result of fluctuations in the applicable common stock prices and dividends paid on those stocks. The broad diversification attained by investing in a large number of stocks generally results in less risk than an investment in a single stock. Investments in the Large Company Index Fund are managed by Bankers Trust Company. 18 Small Company Stock Fund: - Long term growth of capital from a diversified group of medium- and small-capitalization company common stocks. This fund invests in a broad range of common stocks to produce investment results approximating the price and yield performance of medium- and small-capitalization company common stocks generally not represented in the Standard & Poor's 500 Index. Investors can use this fund as a complement to the Large Company Index Fund to attain extensive coverage of the total U.S. equity market. Dividends paid on common stocks in the portfolio are reinvested in the fund. The value of a participant's assets invested in this fund will vary as a result of fluctuations in applicable common stock prices and dividends paid on those stocks. The broad diversification attained by investing in a large number of stocks generally results in less risk than an investment in a single stock. Investments in the Small Company Stock Fund are managed by State Street Global Advisors, the institutional investment management affiliate of State Street Bank and Trust Company. IBM Stock Fund: - Direct investment in IBM common stock, with dividends being reinvested in additional shares of IBM common stock. The IBM Stock Fund permits the participant to have contributions invested in IBM common stock, or to have existing account balances transferred into this fund so as to be invested in such IBM common stock. The return on the participant's investment will be determined by the market price of IBM common stock, the amount of any dividends paid thereon, and the cash balance necessary to maintain liquidity. In addition, interest will be earned on money that in the participant's account awaiting investment in IBM common stock. An investment in a single stock is generally more risky than investing in a broadly diversified group of stocks. Investments in the IBM Stock Fund are managed by Bankers Trust Company. 19 Fixed Income Fund: - Preservation of principal with a relatively stable and predictable rate of interest. Investments consist of interest-bearing instruments, including corporate and U.S. government securities, mortgages, bank time deposits, and contracts with insurance companies, banks, and other financial institutions. The investments in this fund may have fixed rates of interest for fixed periods of time, or may have rates of interest that vary during the contract period based upon the contract issuer's investment experience for the assets or pooled assets supporting the contract or upon another formula applicable under the contract. Investment contracts with insurance companies and other financial institutions require the repayment of principal plus interest as determined under the contract. Certain of the investment contracts are held in trusts owned by the Plan, and managed by insurance companies or financial institutions. Such investment contracts provide for return of principal and interest earned, with interest rates being fixed quarterly. The contract value of the investments held in trusts at December 31, 1997 and 1996 was $2,260,835,000 and $1,929,759,841 respectively, fair value being $2,290,993,000 and $1,927,922,000 respectively. IBM selects the various contracts and oversees eight external bond managers who are responsible for the individual portfolios within the Fixed Income Fund. IBM will take steps to place investments with highly rated institutions and money managers, but cannot guarantee the return of either principal or interest. Total Bond Market Fund: - Effective May 1, 1996, the Total Bond Market Fund became available as an investment option. The Total Bond Market Fund seeks investment results that modestly exceed the total return of the Lehman Brothers Aggregate Bond Index, a broad market-weighted index comprised of U.S. Treasury and agency securities, corporate investment-grade bonds and mortgage-backed securities, each with maturities exceeding one year. Investments in the Total Bond Market Fund are managed by State Street Global Advisors, the institutional investment management affiliate of State Street Bank and Trust Company. U. S. Government Securities Fund: - Effective June 28, 1996, the U.S. Government Securities Fund (USGSF) was closed. Contributions to the USGSF were suspended on May 1, 1996. Participants who had not instructed the Plan's trustee to transfer their USGSF balances into alternative investment funds by June 28, 1996, had any balances remaining in the USGSF automatically transferred on their behalf to the Fixed Income Fund on that day. With the closing of USGSF, the ten percent 20 Balanced Asset Fund allocation previously targeted for the USGSF was directed to the Total Bond Market Fund. International Stock Fund: - Long-term capital growth with a market rate of return from a diversified group of equity holdings in stock markets of Europe, Asia/Pacific, Latin America and Africa. These Equity market investments are based on the Morgan Stanley Capital International Europe, Australia, and Far East (EAFE) Index and the Morgan Stanley Capital International Emerging Markets Free ex Malaysia Index (EMF ex Malaysia). The combination of developed and developing markets may serve to reduce the overall volatility within the fund's portfolio and help reduce risk. The fund is passively managed, that is, the managers do not actively select investments, but instead follow EAFE and EMF ex Malaysia Index characteristics. Prior to August 1, 1996, the International Stock Fund had a modified country weighting that limited investments in the stocks of any one country to twenty-five percent of the fund. Effective August 1, 1996, this twenty-five percent limitation on stocks from any one country was removed to better diversify the fund for participants. Dividend income is reinvested in the fund. The International Stock Fund is designed to broaden and supplement Plan investment options by offering a way to participate in foreign equity markets, while maintaining diversification within and across different assets classes. Like U.S. equities, foreign equities are subject to price fluctuations. In addition, they are impacted by other factors such as foreign currency exchange fluctuations that affect the dollar value of the fund. Investments in the International Stock Fund are managed by Bankers Trust Company. Life Strategy Funds: On August 1, 1996, the Plan was amended to include the addition of four Life Strategy Funds, one of which (the Moderate Life Strategy Fund) was created from the existing Balanced Asset Fund. The Life Strategy Funds diversify their assets among the following five existing Plan funds: Large Company Index Fund, Small Company Stock Fund, International Stock Fund, Fixed Income Fund, and Total Bond Market Fund. The Life Strategy Funds enable participants to choose from four different portfolios of stock, bond and fixed income investments, ranging from very conservative to aggressive, to pursue their personal financial goals. The Funds are rebalanced monthly by Bankers Trust Company to the target allocations as the value of the underlying investment funds fluctuate. For example, if stocks declined in value, more would be purchased to maintain the desired stock allocation within the Funds. The Life Strategy Funds are passively managed, meaning the fund managers do not actively select investments, but instead follow invest- 21 ment allocations set by the staff of the IBM Retirement Fund. The underlying funds are managed by Bankers Trust Company and State Street Global Advisors. The four Life Strategy Funds and their target allocations are as follows: Income Plus Life Strategy Fund: - Seeks investment returns which modestly and fairly consistently outpace inflation, with a target allocation of twenty percent stocks and eighty percent fixed income/bonds. The Income Plus Life Strategy Fund is intended for the more risk-averse investor with a generally short time horizon desiring more security in their investment. Investments in this fund are automatically allocated among the following five Plan investment options, while maintaining the target allocations as shown: Large Company Index Fund - 11%, Small Company Stock Fund - 4%, International Stock Fund - 5%, Fixed Income Fund - 75%, and Total Bond Market Fund- 5%. The Income Plus Life Strategy Fund is managed by Bankers Trust Company. Conservative Life Strategy Fund: - Seeks to moderately outpace inflation over the long term with a fair measure of consistency, and a target allocation of forty percent stocks and sixty percent fixed income/bonds. The Conservative Life Strategy Fund is designed for risk-averse investors with a short to medium time horizon. Investments in this fund are automatically allocated among the following five Plan investment options, while maintaining the target allocations as shown: Large Company Index Fund - 23%, Small Company Stock Fund - 7%, International Stock Fund - 10%, Fixed Income Fund - 50%, and Total Bond Market Fund - 10%. The Conservative Life Strategy Fund is managed by Bankers Trust Company. Moderate Life Strategy Fund (formerly Balanced Asset Fund): - Effective August 1, 1996, the existing Balanced Asset Fund was renamed the Moderate Life Strategy Fund, and its target allocations remixed according to its revised fund objective to provide relatively high returns at a moderate risk level with a target allocation of sixty percent stocks and forty percent fixed income/bonds. The Moderate Life Strategy Fund is intended for moderate-risk tolerant investors with a medium to long time horizon. Investments in this fund are automatically allocated among the following five Plan investment options, while maintaining the target allocations as shown: Large Company Index Fund - 34%, Small Company Stock Fund - 11%, International Stock Fund - 15%, Fixed Income Fund - 25%, and Total Bond Market Fund- 15%. 22 The Moderate Life Strategy Fund is managed by Bankers Trust Company. Aggressive Life Strategy Fund: - Seeks to provide high returns over longer time periods with a target allocation of eighty percent stocks and twenty percent fixed income/bonds. The Aggressive Life Strategy Fund is intended for higher-risk tolerant investors with a long time horizon. Investors in this fund should anticipate occasional annual losses in pursuit of long-term higher returns. Investments in this fund are automatically allocated among the following five Plan investment options, while maintaining the target allocations as shown: Large Company Index Fund - 45%, Small Company Stock Fund - 15%, International Stock Fund - 20%, Fixed Income Fund - 0%, and Total Bond Market Fund - 20%. The Aggressive Life Strategy Fund is managed by Bankers Trust Company. 23 NOTE 4 - PLAN TRANSFERS: The transfers below represent the participants' account balances attributable to employees transferred to IBM: On July 1, 1996, approximately 23 employees of Ameritech Corporation were transferred to what is now IBM Global Services (IGS), formerly IBM's wholly-owned subsidiary Integrated Services Solutions Corporation (ISSC), as a result of an outsourcing agreement between ISSC and Ameritech Corporation. Accordingly, there were net transfers of cash and securities of $1,613,820 during 1997 between the Plan and a similar savings plan established by Ameritech Corporation. On October 4, 1996, IBM acquired all of the outstanding shares of Professional Data Management. As a result of this transaction, there were net transfers of cash and securities of $1,661,934 during 1997 between the Plan and a similar savings plan established by Professional Data Management. On January 1, 1997, approximately 128 employees of Nationwide Insurance Enterpise were transferred to IGS as a result of an outsourcing agreement between IGS and Nationwide Insurance. Accordingly, there were net transfers of cash and securities of $4,271,285 during 1997 between the Plan and a similar savings plan established by Nationwide Insurance. On January 7, 1997, approximately 679 employees of Prudential Insurance Company were transferred to IGS as a result of an outsourcing agreement between IGS and Prudential Insurance. Accordingly, there were net transfers of cash and securities of $13,446,366 during 1997 between the Plan and a similar savings plan established by Prudential Insurance. On June 2, 1997, approximately 41 employees of Ryder System, Inc. were transferred to IGS as a result of an outsourcing agreement between IGS and Ryder System. Accordingly, there were net transfers of cash and securities of $1,426,552 during 1997 between the Plan and a similar savings plan established by Ryder System. On August 16, 1997, approximately 30 employees of American Express Company were transferred to IGS as a result of an outsourcing agreement between IGS and American Express. Accordingly, there were net transfers of cash and securities of $396,177 during 1997 between the Plan and a similar savings plan established by American Express. 24 NOTE 5 - INCOME TAXES: The Trust established under the Plan is qualified under the appropriate section of the Internal Revenue Code and intends to continue as a qualified trust. The Plan received a favorable determination letter from the IRS on June 14, 1993. The Plan has been amended since receiving the determination letter. However, the Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. Accordingly, a provision for federal income taxes has not been made. 25 NOTE 6 - TDSP INVESTMENT VALUATIONS: The following schedules summarize the fair value of investments, and the related net unrealized and realized gain/loss on investments by type of investment (dollars in thousands):
Fair value determined by ----------------------------------- December 31, 1997: Quoted market Estimates prices of Trustee Total ----------- ---------- ----------- Interest in equity-oriented General $ 8,187,078 $ 8,187,078 Employee Benefit Trust pooled funds Interest in short-term investment- oriented General Employee Benefit Trust pooled funds 473,795 473,795 Investment contracts $3,613,269 3,613,269 Interest in bond market-oriented General Employee Benefit Trust pooled funds 289,202 289,202 IBM common stock 1,210,202 1,210,202 ----------- ---------- ----------- Total $10,160,277 $3,613,269 $13,773,546 ----------- ---------- ----------- ----------- ---------- ----------- December 31, 1996: Interest in equity-oriented General $6,013,408 $6,013,408 Employee Benefit Trust pooled funds Interest in short-term investment- oriented General Employee Benefit Trust pooled funds 426,042 426,042 Investment contracts $3,601,544 3,601,544 Interest in bond market-oriented General Employee Benefit Trust pooled funds 166,579 166,579 IBM common stock 738,140 738,140 ----------- ---------- ----------- Total $ 7,344,169 $3,601,544 $10,945,713 ----------- ---------- ----------- ----------- ---------- -----------
26 NOTE 6 - TDSP INVESTMENT VALUATIONS (continued): Net Unrealized and Realized Gain (Loss) on investments (dollars in thousands):
For the year ended December 31, 1997 ------------------ Investments at fair value determined by quoted market price: Interest in General Employee Benefit Trust pooled funds $1,701,570 IBM common stock 312,836 ---------- Total $2,014,406 ---------- ----------
NOTE 7 - RELATED PARTY TRANSACTIONS: At December 31, 1997 and 1996, a majority of the Plan's assets were invested in Bankers Trust Company Funds. Bankers Trust also acts as the trustee and recordkeeper for the Plan. On October 21, 1997, Bankers Trust announced that Metropolitan Life Insurance Company had acquired Bankers Trust's 401(k) recordkeeping, partipant services and communications business segments. The Plan held $116,520,897 and $240,825,549 in investment contracts with Metropolitan Life Insurance Company at December 31, 1997 and December 31, 1996, respectively. At December 31, 1997, the Plan held 11,567,039 shares of IBM common stock valued at $1,210,201,455. At December 31, 1996, the Plan held 4,872,209 shares of IBM common stock valued at $738,139,664. On April 29, 1997, IBM stockholders approved amendments to the Certificate of Incorporation reducing the par value of common shares from $1.25 per share to $.50 per share, and granting common stockholders of record at the close of business on May 9, 1997 one additional share for each share held. As a result of this amendment, the restated number of shares of IBM common stock held by the Plan at December 31, 1996 was 9,744,418. 27 NOTE 8 - SUBSEQUENT EVENTS: Effective January 1, 1998, the maximum deferral percentage allowable under the Plan was increased to fifteen percent of eligible compensation from the previous twelve percent deferral limitation. Also effective January 1, 1998, the following changes were implemented to the Plan's loan provisions: 1) establishment of a semi-monthly repayment schedule for loans initiated on or after January 1, 1998. All existing loans with an effective date prior to January 1, 1998 will continue to have a monthly repayment schedule for the life of the loan. 2) The minimum loan amount available for new loans has been increased to $500 from the previous $50 minimum. 3) New loan delinquency and default procedures have been established as follows: any missed Plan loan repayment or payment received less than the amount due, will cause an outstanding loan to be delinquent. A first, second and final reminder letter and repayment coupon will be mailed to participants with delinquent loans. Any payment missed in any calendar quarter must be repaid and made current by the end of the next calendar quarter in order to avoid default. Once a Plan loan is defaulted, a participant will be suspended from Plan contributions for one year, and suspended from initiating a new Plan loan until the defaulted loan is repaid in full (this is an unchanged, current Plan provision). 28 NOTE 9 - SCHEDULE OF UNIT/SHARE VALUES AND PARTICIPANT UNITS/SHARES (FUND UNITS IN THOUSANDS): The following is a schedule of the TDSP individual fund unit/share values and participant units/shares as calculated by the Trustee based on each daily valuation date:
Month in 1997: January February March April May June July August September October November December ------- -------- ------- ------- ------- ------- ------- ------- --------- ------- -------- -------- Money Market: Unit Value $2.78 $2.79 $2.80 $2.82 $2.83 $2.84 $2.86 $2.87 $2.88 $2.90 $2.91 $2.92 Units 128,241 129,642 133,027 137,469 136,412 136,630 132,222 133,803 133,541 134,716 135,093 133,373 Large Company: Unit Value $11.17 $11.25 $10.79 $11.44 $12.14 $12.68 $13.69 $12.92 $13.63 $13.17 $13.77 $14.01 Units 324,791 327,486 329,300 330,097 333,420 335,433 338,948 338,184 337,318 335,064 336,386 336,856 Small Company: Unit Value $2.58 $2.53 $2.39 $2.42 $2.65 $2.76 $2.96 $2.98 $3.17 $3.05 $3.07 $3.16 Units 660,030 662,203 666,087 654,299 655,310 659,666 664,369 668,817 690,825 699,419 703,267 700,767 IBM Stock: Unit Value $1.69 $1.55 $1.49 $1.73 $1.87 $1.95 $2.28 $2.19 $2.29 $2.13 $2.37 $2.26 Units 511,038 508,618 517,280 517,942 516,136 505,095 513,135 517,023 509,428 534,582 511,119 541,035 Fixed Income: Unit Value $2.57 $2.58 $2.60 $2.61 $2.62 $2.64 $2.65 $2.66 $2.68 $2.69 $2.71 $2.72 Units 1,305,765 1,298,940 1,319,031 1,334,783 1,325,729 1,321,434 1,279,602 1,273,996 1,264,269 1,247,258 1,256,282 1,235,924 International Stock: Unit Value $1.42 $1.44 $1.45 $1.46 $1.55 $1.64 $1.67 $1.54 $1.62 $1.48 $1.46 $1.47 Units 324,070 321,711 328,285 330,365 335,042 339,482 349,161 349,656 349,000 334,709 330,348 323,776 Total Bond Market: Unit Value $1.06 $1.07 $1.05 $1.07 $1.08 $1.09 $1.12 $1.11 $1.13 $1.14 $1.15 $1.16 Units 40,392 42,441 45,040 46,524 47,050 48,842 52,570 55,714 57,908 69,029 77,020 81,812 Income Plus Life Strategy: Unit Value $1.06 $1.06 $1.06 $1.07 $1.09 $1.11 $1.13 $1.12 $1.14 $1.13 $1.14 $1.15 Units 22,536 24,789 26,001 26,698 27,078 28,149 29,316 33,069 33,426 35,299 35,949 37,370 Conservative Life Strategy: Unit Value $1.09 $1.09 $1.08 $1.10 $1.14 $1.16 $1.20 $1.17 $1.21 $1.19 $1.20 $1.22 Units 75,908 80,456 83,699 84,197 85,676 87,508 92,509 97,689 98,950 103,124 106,702 109,622 Moderate Life Strategy: Unit Value $1.56 $1.56 $1.53 $1.57 $1.64 $1.69 $1.77 $1.71 $1.78 $1.73 $1.76 $1.78 Units 429,982 438,188 442,681 444,508 450,302 456,467 472,144 480,185 482,438 485,359 491,189 493,730 Aggressive Life Strategy: Unit Value $1.15 $1.15 $1.12 $1.16 $1.22 $1.27 $1.34 $1.29 $1.35 $1.30 $1.32 $1.35 Units 94,236 100,967 103,824 105,541 111,528 117,355 132,825 139,024 144,594 157,910 164,216 172,048
29 NOTE 9 - SCHEDULE OF UNIT/SHARE VALUES AND PARTICIPANT UNITS/SHARES (FUND UNITS IN THOUSANDS): The following is a schedule of the TDSP individual fund unit/share values and participant units/shares as calculated by the Trustee based on each daily valuation date:
Month in 1996: January February March April May June July August September October November December ------- -------- ------- ------- ------- ------- ------- ------- --------- ------- -------- -------- Money Market: Unit Value $2.64 $2.65 $2.66 $2.67 $2.68 $2.69 $2.71 $2.72 $2.73 $2.74 $2.75 $2.77 Units 120,124 120,751 122,133 120,999 119,745 119,783 124,007 123,588 124,888 130,306 129,666 133,005 Large Company: Unit Value $8.84 $8.92 $9.01 $9.14 $9.38 $9.41 $9.00 $9.19 $9.70 $9.97 $10.73 $10.51 Units 309,650 314,150 317,118 318,117 320,200 322,687 321,301 320,973 321,724 323,166 324,584 322,490 Small Company: Unit Value $2.13 $2.20 $2.23 $2.31 $2.37 $2.31 $2.15 $2.27 $2.38 $2.36 $2.48 $2.50 Units 598,638 608,361 620,607 633,474 653,998 664,618 658,066 656,698 660,639 659,099 654,576 654,679 IBM Stock: Unit Value $1.17 $1.32 $1.19 $1.16 $1.15 $1.07 $1.16 $1.24 $1.34 $1.39 $1.72 $1.63 Units 513,539 470,126 488,838 534,811 523,446 516,551 530,792 505,503 486,583 454,992 463,575 457,102 Fixed Income: Unit Value $2.41 $2.43 $2.44 $2.45 $2.46 $2.48 $2.49 $2.50 $2.52 $2.53 $2.54 $2.56 Units 1,401,954 1,384,909 1,386,221 1,357,435 1,342,046 1,351,613 1,357,960 1,342,752 1,345,238 1,346,021 1,329,688 1,342,498 U.S. Gov't Securities: Unit Value $1.26 $1.25 $1.25 $1.25 $1.26 Units 48,561 51,616 51,957 49,138 39,722 International Stock: Unit Value $1.38 $1.39 $1.42 $1.45 $1.44 $1.45 $1.41 $1.41 $1.45 $1.44 $1.49 $1.47 Units 290,669 310,633 319,418 328,688 335,969 341,392 344,349 344,971 345,601 338,509 332,798 330,724 Total Bond Market: Unit Value $1.00 $1.01 $1.01 $1.01 $1.03 $1.05 $1.07 $1.06 Units 14,489 22,065 26,832 27,951 28,279 31,880 35,899 39,788 Income Plus Life Strategy: Unit Value $1.00 $1.01 $1.02 $1.03 $1.05 $1.05 Units 964 8,752 11,071 15,961 18,370 20,942 Conservative Life Strategy: Unit Value $1.00 $1.01 $1.03 $1.04 $1.08 $1.07 Units 3,947 31,534 38,527 52,169 62,531 69,049 Moderate Life Strategy: Unit Value $1.37 $1.38 $1.39 $1.41 $1.43 $1.43 $1.39 $1.41 $1.46 $1.48 $1.54 $1.53 Units 285,015 307,322 315,723 322,975 330,625 338,452 344,288 376,007 386,389 409,115 423,328 425,043 Aggressive Life Strategy: Unit Value $1.00 $1.02 $1.06 $1.07 $1.13 $1.12 Units 2,426 30,389 41,124 63,108 77,649 82,729
30 SCHEDULE I INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN ITEM 27a - ASSETS HELD FOR INVESTMENT PURPOSES AT DECEMBER 31, 1997
Total Current Shares/Units or Cost Value Maturity Value (In Thousands) (In Thousands) --------------- -------------- -------------- Interest in Bankers Trust Company and State Street Global Advisors Pooled Funds: Discretionary Cash Fund 473,795,403 $ 473,795 $ 473,795 ----------- ----------- ----------- ----------- Equity Index Funds 612,418,674 $ 4,903,380 $ 8,187,078 ----------- ----------- ----------- ----------- Bond Index Fund 24,867,945 $ 263,616 $ 289,202 ----------- ----------- ----------- ----------- Common Stock: IBM Stock Fund 11,567,039 $ 722,242 $1,210,202 ----------- ----------- ----------- -----------
Total Contract Shares/Units or Value Maturity Value (In Thousands) --------------- ------------- Investment Contracts: Black Rock #95235 7.45% 9/30/1999 101,827,655 $ 101,828 Brundage Story & Rose #93-597 5.95% 1/4/2001 80,194,730 80,195 CDC Bric BR 130-02 7.42% 10/1/1999 76,259,375 76,259 Chase CFC NISA #400462-1 6.46% 10/1/2004 30,673,677 30,674 CIGNA #25181 7.73% 9/30/1999 27,007,543 27,008 CIGNA #25183 8.29% 6/1/1999 40,008,729 40,009 31
Total Contract Shares/Units or Value Investment Contracts (Continued): Maturity Value (In Thousands) --------------- -------------- CIGNA #25189 6.31% 10/1/1998 51,574,981 $ 51,575 CIGNA #25193 6.58% 9/30/1999 60,974,407 60,974 Citibank #178360 6.75% 1/2/1999 107,336,786 107,337 Citibank #178362 5.17% 12/31/1998 55,703,264 55,703 Citibank #178364 6.51% 7/1/1999 78,649,842 78,650 Citibank #178367 7.21% 4/1/1998 10,787,649 10,788 CNA Insurance GP 13078-006 8.05% 4/1/1999 21,605,417 21,605 CNA Insurance GP 13078-016 5.79% 7/1/1999 75,011,566 75,012 CNA Insurance GP 13078-026 6.64% 10/1/2000 26,403,700 26,404 Hartford Life #GA10254 8.08% 3/31/1999 27,131,708 27,132 Jackson National Insurance Co. G-1128-1 6.75% 10/1/2000 113,662,051 113,662 John Hancock Life Insurance Co. GAC #8663 6.85% 11/1/2002 132,189,241 132,189 Loomis Sayles #93-599 6.80% Non-Maturing 57,198,132 57,198 Loomis Sayles # 96014 7.46% Non-Maturing 112,442,079 112,442 Metropolitan Life Insurance Co. #18580B 6.90% 12/31/1998 4,101,805 4,102 Metropolitan Life Insurance Co. GAC #24650 6.75% 10/01/2001 50,839,115 50,839
32
Total Contract Shares/Units or Value Investment Contracts (Continued): Maturity Value (In Thousands) --------------- -------------- Metropolitan Life Insurance Co. GAC #13630 5.20% 3/31/1998 32,996,756 $ 32,997 Metropolitan Life Insurance Co. GAC #13831 6.90% 1/2/1998 14,580,255 14,580 Metropolitan Life Insurance Co. GAC #13993 8.04% 4/1/1999 14,002,966 14,003 New York Life Insurance Company GA-06554-002 5.35% 12/31/1998 82,497,673 82,498 New York Life Insurance Company GA-06554-003 7.13% 7/1/1999 63,223,151 63,223 New York Life Insurance Company GA-30721 6.88% 1/1/2003 56,907,551 56,908 NISA Investment Advisors #92-425 6.20% 1/15/2001 280,970,404 280,970 NISA Investment Advisors #400462 6.48% Non-Maturing 230,775,163 230,775 NISA Investment Advisors #92-425-B 6.20% 1/15/2001 33,756,545 33,757 Pacific Investment Management Co. #242 6.69% Non-Maturing 159,268,755 159,269 Pacific Investment Management Co. #93-637 6.27% Non-Maturing 68,329,953 68,330 Pacific Investment Management Co. #93-638 6.34% Non-Maturing 45,224,620 45,225 Principal Mutual #4-23271-1 6.53% 6/30/2000 62,939,682 62,940 Principal Mutual #4-23271-2 7.26% 7/1/2001 61,081,070 61,081 Principal Mutual #4-23271-3 6.61% 10/1/2001 111,464,181 111,464
33
Total Contract Shares/Units or Value Investment Contracts (Continued): Maturity Value (In Thousands) --------------- -------------- Prudential Asset Management Co. GA-7406-211 7.03% 3/31/1998 37,979,333 $ 37,979 Prudential Asset Management Co. GA-7406-212 6.49% 6/30/1999 80,701,071 80,701 Prudential Asset Management Co. GA-7406-213 7.17% 12/31/1998 103,552,408 103,552 Prudential Asset Management Co. GA-7913 7.12% 3/31/2000 101,748,735 101,749 Sanford C. Bernstein #93-598 4.03% 6/30/1998 51,043,252 51,043 State Street Global Advisors #103177 6.75% Non-Maturing 239,318,505 239,318 Union Bank of Switzerland #2010 7.15% 4/1/1998 45,443,166 45,443 Union Bank of Switzerland #2071 5.17% 10/15/1998 50,651,562 50,651 Union Bank of Switzerland #2097 8.07% 6/15/1998 12,394,203 12,394 Union Bank of Switzerland #2187 7.04% 10/25/2018 49,104,212 49,104 Union Bank of Switzerland #2188 7.02% 12/25/2021 49,711,588 49,711 Union Bank of Switzerland #3009 6.40% Non-Maturing 132,018,629 132,019 ----------- $3,613,269 ----------- -----------
34 SCHEDULE II INTERNATIONAL BUSINESS MACHINES CORPORATION IBM TAX DEFERRED SAVINGS PLAN ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS* DECEMBER 31, 1997 (Dollars in Thousands)
Cost of Proceeds Cost of Assets Realized Volume Purchases from Sale Disposed Gain ------ ---------- ---------- -------------- ---------- Bankers Trust Discretionary Cash Fund - Acquisition Transactions 344 $1,166,839 - - - - Disposal Transactions 347 - $1,149,824 $1,149,824 - Bankers Trust Directed Account Cash Fund - Acquisition Transactions 353 $1,323,214 - - - - Disposal Transactions 396 - $1,361,855 $1,361,855 - International Business Machines Corporation Common Stock - Acquisition Transactions 66 $ 416,595 - - - - Disposal Transactions 66 - $ 252,847 $ 152,775 $ 100,072 Bankers Trust Large Capitalization Equity Index Fund - Acquisition Transactions 329 $ 364,457 - - - - Disposal Transactions 176 - $ 206,696 $ 116,746 $ 89,950 State Street Russell Short Term Investment Fund - Acquisition Transactions 86 $ 795,728 - - - - Disposal Transactions 65 - $ 726,888 $ 726,888 -
* NOTE: Cumulative transactions involving an amount in excess of 5 percent of the value of plan assets at the beginning of the plan year. 35 -----END PRIVACY-ENHANCED MESSAGE-----