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, 1994
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
North Tarrytown, New York 10591
-------------------------------------
(Address of the plan)
INTERNATIONAL BUSINESS MACHINES CORPORATION
-------------------------------------------
(Name of issuer of the securities held pursuant to the plan)
Old Orchard Road
Armonk, New York 10504
----------------------
(Address of issuer's principal executive office)
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REQUIRED INFORMATION
Page
----
Consent of Independent Accountants 3
Report of Independent Accountants 4
Financial Statements:
_____________________
Statements of Net Assets Available for Plan Benefits
as of December 31, 1994 and December 31, 1993 5
Statement of Changes in Net Assets Available for Plan
Benefits for the year ended December 31, 1994 7
Notes to Financial Statements 8
Supplementary Schedules:
________________________
Schedule I - Assets Held for Investment at December 31, 1994 22
Schedule II - Transactions Involving an Amount in Excess
of 5 Percent of the Current Value of Plan Assets 26
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 28, 1995 By: J. B. York
---------------------------------
(Senior Vice President, Chief Financial
Officer, and Acting Controller)
2
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in
the Registration Statement on Form S-8 (33-33458) of IBM
Corporation Tax Deferred Savings Plan of our report dated
June 15, 1995 appearing on page 4 of this Annual Report on
Form 11-K for the year ended December 31, 1994.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
June 15, 1995
3
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of the
IBM Retirement Plans Committee and the
Participants of the International Business Machines Corporation
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, 1994 and 1993, and the changes in net assets available
for plan benefits for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
These financial statements are the responsibility of the
plan's management; our responsibility is to express an opin-
ion 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 fi-
nancial 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 audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The addi-
tional information included in supplementary 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. Such information
has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion,
is 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 15, 1995
4
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<TABLE><CAPTION>
INTERNATIONAL BUSINESS MACHINES CORPORATION
TAX DEFERRED SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1994
(Dollars in thousands)
U.S.
Money Large Co. Small Co. IBM Fixed Govt. Int'l. Balanced
Market Index Stock Stock Income Sec. Stock Asset Loan
Fund Fund Fund Fund Fund Fund Fund Fund Fund Total
------- --------- --------- ------- --------- -------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at fair value:
Interest in equity-oriented
General Employee Benefit
Trust pooled funds
(cost: $2,906,006) 1,793,598 812,908 337,231 2,943,737
Interest in short-term investment-
oriented General Employee Benefit
Trust pooled funds
(cost: $313,738) 288,807 793 4,286 1,610 12,250 119 2,023 3,850 313,738
Investment contracts
(cost: $3,376,832) 3,376,832 3,376,832
Interest in U.S. Gov't Securities-
oriented General Employee Benefit
Trust pooled funds
(cost: $62,554) 63,074 63,074
Common Stock (cost: $327,867) 356,735 356,735
------- --------- -------- ------- --------- ------- ------- ------- ------- ---------
Total investments 288,807 1,794,391 817,194 358,345 3,389,082 63,193 339,254 3,850 7,054,116
Income and sales proceeds receivable 1,352 49 9 18,563 4 18 19,995
Contributions receivable (payable) (107) 21 (29) (527) 960 (27) 30 (237) 84
Loans receivable 251,178 251,178
Transfers receivable (payable) (382) 229 640 627 (3,153) 8 704 303 1,024
Balanced Asset Fund Allocation (75,838) (18,954) (57,012) (19,012) (18,805) 189,621
------- --------- ------- ------- --------- ------- ------- ------- ------- ---------
Total assets 289,670 1,718,803 798,900 358,454 3,348,440 44,162 321,187 193,555 252,202 7,325,373
Liabilities:
Expenses payable (167) (58) 32 (310) 756 (46) (37) 25 195
Investments purchased (1) (5) 3,440 1,407 (9) 1 4,833
------- --------- ------- ------- --------- ------- ------- ------- ------- ---------
Total liabilities (168) (63) 3,472 1,097 747 (46) (36) 25 5,028
------- --------- ------- ------- --------- ------- ------- ------- ------- ---------
Net assets available for plan
benefits 289,838 1,718,866 795,428 357,357 3,347,693 44,208 321,223 193,530 252,202 7,320,345
======= ========= ======= ======= ========= ======= ======= ======= ======= =========
The accompanying notes are an integral part of this financial statement.
</TABLE>
5
<PAGE>
<TABLE><CAPTION>
INTERNATIONAL BUSINESS MACHINES CORPORATION
TAX DEFERRED SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1993
(Dollars in thousands)
U.S.
Money Large Co. Small Co. IBM Fixed Govt. Int'l. Balanced
Market Index Stock Stock Income Sec. Stock Asset Loan
Fund Fund Fund Fund Fund Fund Fund Fund Fund Total
-------- --------- -------- ------- --------- ------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at fair value:
Interest in equity-oriented
General Employee Benefit
Trust pooled fund
(cost: $1,199,710) 1,874,979 1,874,979
Interest in short-term investment-
oriented General Employee Benefit
Trust pooled funds
(cost: $409,307) 283,754 4,361 26,479 7,058 24,595 2,251 57,502 3,307 409,307
Investment contracts
(cost: $3,092,850) 3,092,850 3,092,850
U.S. Government Treasury Securities
(cost: $77,208) 358 65,996 10,226 76,580
Common Stock (cost: $1,101,237) 880,486 153,753 171,879 1,206,118
------- --------- ------- ------- --------- ------- ------- ------- ------- ---------
Total investments 283,754 1,879,340 907,323 160,811 3,117,445 68,247 239,607 3,307 6,659,834
Income and sales proceeds receivable 796 3 2,598 10 18,445 999 725 9 13 23,598
Contributions receivable (payable) 14 (65) (9) 37 78 (9) 48 10 104
Loans receivable 250,457 250,457
Transfers receivable (payable) (499) (997) 1,563 69 (2,579) 76 566 333 1,468
Balanced Asset Fund Allocation (64,449) (16,141) (48,521) (16,171) (16,218) 161,500
------- --------- ------- ------- --------- ------- ------- -------- ------- ---------
Total assets 284,065 1,813,832 895,334 160,927 3,084,868 53,142 224,728 165,159 251,938 6,933,993
Liabilities:
Expenses payable 13 1 19 1,007 (8) (71) (9) 952
Investments purchased 42 5,727 11,245 17,014
------- --------- ------- ------- --------- ------- ------- ------- ------- ---------
Total liabilities 13 1 61 5,727 1,007 (8) 11,174 (9) 17,966
------- --------- ------- ------- --------- ------- ------- ------- ------- ---------
Net assets available for plan
benefits 284,052 1,813,831 895,273 155,200 3,083,861 53,150 213,554 165,168 251,938 6,916,027
======= ========= ======= ======= ========= ======= ======= ======= ======= =========
The accompanying notes are an integral part of this financial statement.
</TABLE>
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<TABLE><CAPTION>
INTERNATIONAL BUSINESS MACHINES CORPORATION
TAX DEFERRED SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS
FOR THE THE YEAR ENDED DECEMBER 31, 1994
(Dollars in thousands)
U.S.
Money Large Co. Small Co. IBM Fixed Govt Int'l Balanced
Market Index Stock Stock Income Sec. Stock Asset Loan
Fund Fund Fund Fund Fund Fund Fund Fund Fund Total
------- --------- -------- ------- --------- ------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Participant contributions 26,324 110,389 103,337 15,345 139,058 5,615 30,645 17,591 448,304
Employer contributions 6,200 22,573 20,425 3,027 29,124 1,118 5,877 3,535 91,879
Transfer of Balanced Asset
Fund Contributions 8,208 2,052 6,156 2,052 2,052 (20,520)
Participant loan repayments 7,297 36,380 27,200 5,771 57,002 1,663 7,712 1,840 (144,865)
Participant directed transfer
of investments, net (11,212) (139,441) (139,821) 129,571 92,489 (11,018) 80,732 (1,300)
------- --------- -------- ------- --------- ------- ------- -------- -------- ---------
Total contributions
and transfers 28,609 38,109 13,193 153,714 323,829 (570) 127,018 1,146 (144,865) 540,183
------- --------- -------- ------- --------- ------- ------- -------- -------- ---------
Income from investments:
Interest 12,153 94 309 141 215,601 676 4,111 168 16,946 250,199
Dividends 16,348 3,496 533 20,377
------- --------- -------- ------- --------- ------- ------- -------- -------- ---------
Total income 12,153 94 16,657 3,637 215,601 676 4,644 168 16,946 270,576
------- --------- -------- ------- --------- ------- ------- -------- -------- ---------
Unrealized and realized gain
(loss) on investments, net 24,843 (48,770) 59,822 (190) 1,841 37,546
------- --------- -------- ------- --------- ------- ------- -------- -------- ---------
Total additions 40,762 63,046 (18,920) 217,173 539,430 (84) 133,503 1,314 (127,919) 848,305
------- --------- -------- ------- --------- ------- ------- -------- -------- ---------
Reductions:
Distributions to participants 13,993 61,758 30,596 3,792 121,767 2,421 10,885 533 26,688 272,433
Transfer to/(from) other
benefits plans, net 10,269 43,873 25,914 4,092 70,197 2,045 6,223 139 (78) 162,674
Balanced Asset Fund Alloc. 11,389 2,813 8,491 2,841 2,587 (28,121)
Loans to participants 9,966 38,782 20,483 6,882 71,578 1,462 5,553 87 (154,793)
Administrative expenses 748 2,209 1,119 250 3,565 89 586 314 8,880
------- --------- -------- ------- --------- ------- ------- ------- -------- ---------
Total reductions 34,976 158,011 80,925 15,016 275,598 8,858 25,834 (27,048) (128,183) 443,987
------- --------- -------- ------- --------- ------- ------- ------- -------- ---------
Increase (decrease) in net
assets during the year 5,786 (94,965) (99,845) 202,157 263,832 (8,942) 107,669 28,362 264 404,318
Net assets available for plan
benefits: 284,052 1,813,831 895,273 155,200 3,083,861 53,150 213,554 165,168 251,938 6,916,027
Beginning of year
------- --------- -------- ------- --------- ------- ------- ------- -------- ---------
End of year 289,838 1,718,866 795,428 357,357 3,347,693 44,208 321,223 193,530 252,202 7,320,345
======= ========= ======== ======= ========= ======= ======= ======= ======== =========
The accompanying notes are an integral part of this financial statement.
7
</TABLE>
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
TAX DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN:
General:
The International Business Machines Corporation ("IBM") Tax De-
ferred Savings Plan (the "Plan") offers all qualifying active reg-
ular or part-time employees of IBM and certain of its domestic
subsidiaries an opportunity to defer up to nine percent of their
compensation (up to twelve percent beginning January 1, 1995),
subject to the legal limit allowed by IRS regulations, which IBM
will contribute on their behalf to any of eight 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 ben-
efit of its participants.
During 1993, the Plan was modified to include the addition of the
International Stock Fund and the Balanced Asset Fund, while the
Equity I and Equity II Funds were closed. Plan participants who
had not instructed the Plan's Trustee to transfer the remaining
Equity I and Equity II balances to another plan fund by July 1,
1993, had these balances automatically transferred on their behalf
into the Large Company Index Fund.
Beginning in 1994, the Plan includes the employees of Technology
Service Solutions (TSS), a less than wholly owned subsidiary 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.
The Plan is intended to qualify as a profit-sharing plan under the
Internal Revenue Code of 1954, as amended, and is subject to the
provisions of the Employee Retirement Income Security Act of 1974
("ERISA"), as amended.
8
<PAGE>
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. In addition, through
1993 IBM acted as the investment manager for the Small Company
Stock Fund, International Stock Fund, and U.S. Government Securi-
ties Fund, and negotiated contracts with the respective financial
institutions for Fixed Income Fund investments. Effective March
1, 1994, management of the U.S. Government Securities Fund was
transferred to Bankers Trust Company; effective May 13, 1994, man-
agement of the Small Company Stock Fund was transferred to State
Street Global Advisors, the institutional investment management
affiliate of State Street Bank and Trust Company, and management
of the International Stock Fund was transferred to Bankers Trust
Company.
Contributions and participants' equity:
Contributions are made to the Plan by IBM on behalf of each par-
ticipant based upon the participant's elected compensation defer-
ral. Participants may elect to defer up to nine percent of their
eligible compensation (up to twelve percent beginning January 1,
1995), subject to the legal limit allowed by IRS regulations.
IBM's matching deferral is thirty percent (fifty percent beginning
January 1, 1995) of each participant's deferral up to a maximum of
five percent (six percent beginning January 1, 1995) of a partic-
ipant'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 5 percent multiples: Money
Market Fund, Large Company Index Fund, Small Company Stock Fund,
IBM Stock Fund, Fixed Income Fund, U.S. Government Securities
Fund, International Stock Fund, and Balanced Asset Fund. These
funds and their investment objectives are more fully described in
Note 3. Contributions are temporarily invested in short-term in-
vestments and are then allocated to the funds selected by the par-
ticipant. Participants may elect to change their investment
selection for future contributions during any payroll period.
Also, the participant may transfer part or all of existing account
balances among funds in the Plan during any weekly valuation pe-
riod, (daily beginning May 18, 1995), except that money in the
Fixed Income Fund may not be transferred directly into the Money
Market Fund or U.S. Government Securities Fund, and if transferred
to an equity fund may not subsequently be transferred to the Money
Market Fund or U.S. Government Securities Fund for three months.
The Trustee maintains an account in the name of each participant
to which the Trustee 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.
9
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The interest of each participant in each of the funds is repres-
ented by units/shares credited to the participant's account.
The initial unit value of each fund (excluding the IBM Stock
Fund), on the first valuation date, was equivalent to $1.00. On
each succeeding valuation date, the unit value of each fund is de-
termined 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 valu-
ation date are excluded from the calculation. The number of addi-
tional units to be credited to a participant's account for each
fund, due to new contributions, is equal to the amount of the par-
ticipant's new contributions to the fund divided by the unit value
for the applicable fund as determined on the valuation date.
For the IBM Stock Fund, the initial valuation price per share was
$106.125 (March 30, 1990 closing price). On each succeeding valu-
ation date, the valuation price per share for the IBM Stock Fund
is the closing price of IBM stock as reported on the New York
Stock Exchange Composite tape for that date. This valuation
price, applied to the participant's whole and fractional shares,
and cash awaiting investment in IBM stock comprise the partic-
ipant's equity in the Fund. Effective May 18, 1995, the IBM Stock
Fund changed from share accounting to unit value accounting to
provide for daily settlement of fund transactions. (Refer to Note
7 - Subsequent Events).
At December 31, 1994 and 1993 the number of participants in the
Plan approximated 182,000 and 191,000, respectively. The number
of individuals participating in each of the Plan's funds at Decem-
ber 31, 1994, were approximately:
Money Market 50,000
Large Company Index 115,000
Small Company Stock 87,000
IBM Stock 32,000
Fixed Income 139,000
U.S. Government Securities 13,000
International Stock 41,000
Balanced Asset 17,000
Contributions made to the Plan and 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 con-
tributions 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%.
10
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Consistent with provisions established by the IRS, a 1994 annual
limit of $9,240 was set on employee deferrals under salary defer-
ral plans, such as the IBM Tax Deferred Savings Plan.
Vesting:
Participants in the Plan are at all times fully vested in their
account balance, including deferred compensation, matching con-
tributions and earnings thereon.
Distribution:
A participant who has attained age 59 1/2 may request a cash dis-
tribution of all or part of the value of the participant's ac-
count. 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 be-
comes 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 in-
stallments over a period not to exceed ten years or to defer pay-
ment, whether lump-sum or installment, 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 benefi-
ciary will be the participant's spouse. If the participant is
single, the beneficiary will be as designated under the IBM Group
Life Insurance Plan (unless the participant has assigned ownership
of such insurance). 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 par-
ticipant'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.
Participants may borrow, subject to additional limitations rela-
tive to prior loans, up to one-half of the value of the partic-
ipant's account balance, but not to exceed $50,000. 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 per-
cent above the prime rate. Repayment of a loan shall be made
through monthly payroll deductions over a term of one to four
years. (Effective July 1, 1994, participants may prepay the entire
remaining loan principal after three regular monthly payments have
been made). Employees on an approved leave of absence may elect
to make monthly loan payments directly to the Trustee. Partic-
ipants may continue to contribute to the Plan while having an out-
standing loan, provided that the loan is not in default.
11
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Prior to July 1, 1994, all outstanding loans were due and payable
as of the last date of employment in the case of retirement, sepa-
ration, or death. In the event payment was not made within forty-
five days of notification by the Trustee, the participant was
deemed to have received a distribution from the Plan in an amount
equal to the remaining outstanding principal and accrued interest
on the loan. Participants who retire or separate from IBM on or
after July 1, 1994, and have outstanding Plan loans, are no longer
required to pay off their loans within forty-five days of notifi-
cation by the trustee. By choosing automated loan repayments or
coupon payment options, retirees and other employees separating
from IBM can continue monthly loan repayments according to their
original amortization schedule.
The number of outstanding loans at December 31, 1994 and 1993 was
51,027 and 50,688, respectively. Interest rates on outstanding
loans at December 31, 1994 ranged from 7.25% to 11.25%.
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 fol-
lowing 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 sepa-
ration, the participant may elect to defer distribution of the ac-
count 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 pay-
ments under the Plan will receive the balance of his or her ac-
count 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Valuation of investments:
The fair value of the net assets of the Plan is based on the esti-
mated fair values of the underlying assets and liabilities.
12
<PAGE>
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. Investments in in-
surance and group annuity contracts and fixed rate time deposits
are valued at the cost of amounts contributed plus interest paid
and reinvested. United States Government Treasury Securities and
common stocks, including IBM stock, are valued at quoted market
prices. Interest accrued on investments is recorded separately as
interest receivable until paid and reinvested.
Security transactions and related investment income:
Security transactions are recorded on a trade-date basis. Real-
ized 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 ba-
sis.
Administrative expenses and investment management fees:
All administrative costs of the Plan are paid by the Plan. These
costs include (a) brokerage fees and commissions which are in-
cluded in the cost of investments when purchased and in determin-
ing net proceeds on sales of investments (b) investment management
fees which are paid from the respective fund's assets (such fees
consist of fixed annual charges, with the exception of the Large
Company Stock and Money Market Funds, which are based on a per-
centage of net asset value) (c) operational expenses required for
administration of the Plan consisting of trustee, recordkeeping,
participant reports and communications, and service center ex-
penses, which are expenses charged against the fund's assets on a
pro rata basis throughout the year.
NOTE 3 - DESCRIPTION OF INVESTMENT FUNDS:
The eight investment funds to which employees have contributed
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 the 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 ex-
ceed 182 days. At all times not less than 20 percent of the re-
maining assets of the fund must be composed of cash, demand
obligations and assets that mature on the next business day.
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The fund in which monies are invested is the Bankers Trust Compa-
ny's Discretionary Short-term Investment Fund.
Large Company Index Fund - Long term growth of capital with a
market rate of return from a diversified group of large- and
medium-sized company stocks.
This fund invests in a broad range of common stocks through Bank-
ers 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 solely
on a statistical basis, by which it seeks to represent a
cross-section of industry sectors and companies within each sector.
Investments in the Large Company Index Fund are managed by the
Bankers Trust Company.
Small Company Stock Fund - Long term growth of capital from a di-
versified group of medium- and small-sized company common stocks.
This fund invests in a broad range of common stocks to produce in-
vestment results approximating the price and yield performance of
medium- and small-sized company common stocks generally not re-
presented in the Standard & Poor's 500 Index. Investors can use
this fund as a complement to the Large Company Index Fund to at-
tain extensive coverage of the total U.S. equity market. Divi-
dends paid on common stocks in the portfolio are reinvested in the
fund.
The Small Company Stock Fund may not have as close a correlation
to its market segment rate of return as the Large Company Index
Fund. This results from higher transaction costs associated with
trading in medium- and small-sized company stocks and from the
fund not investing in every company.
Effective May 13, 1994, management of the Small Company Stock Fund
was assumed from IBM by State Street Global Advisors, the institu-
tional investment management affiliate of State Street Bank and
Trust Company.
IBM Stock Fund - Direct investment in IBM common stock, with divi-
dends being reinvested in additional shares of IBM common stock.
The IBM Stock Fund permits the participant to have contributions
invested in IBM $1.25 par value 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 invest-
ment will be determined by the market price of IBM common stock
and by the amount of any dividends paid thereon.
14
<PAGE>
Assets invested in the IBM Stock Fund will be expressed in whole
and fractional shares. In addition, interest will be earned on
money that is in the participant's account awaiting investment in
IBM common stock.
An investment in a single stock is generally more risky than in-
vesting in a broadly diversified group of stocks.
IBM corporate officers are not eligible to invest in the IBM Stock
Fund.
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, bank time deposits, and
contracts with insurance companies, banks, and other financial in-
stitutions.
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 in-
vestment 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. IBM will take steps to place in-
vestments with highly rated institutions, but cannot guarantee the
return of either principal or interest.
U. S. Government Securities Fund - A market rate of return with
effectively no credit risk by investing primarily in short-term
U.S. Treasury notes and bonds.
The U.S. Government Securities Fund, invests primarily in a diver-
sified portfolio of U.S. Treasury notes and bonds that have an av-
erage maturity between one and three years. It is designed to
approximate the composite investment results of U.S. Treasury se-
curities having similar remaining maturities. The fund may also
invest in U.S. government agency securities which are guaranteed
as to principal and interest by the U.S. Government.
U.S. government securities, while secure as to payment of princi-
pal at maturity, can fluctuate in market value in the interim be-
cause of changes in prevailing interest rates. Therefore, any
withdrawals, distributions or transfers from the U.S. Government
Securities Fund will be subject to some market value variability.
Effective March 1, 1994, Bankers Trust Company assumed management
of the U.S. Government Securities Fund.
15
<PAGE>
International Stock Fund - Long-term capital growth with a market
rate of return from a diversified group of equity holdings in the
major stock markets of Europe and Asia/Pacific.
These Equity market investments are based on the Morgan Stanley
Capital International Europe, Australia, and Far East (EAFE) In-
dex, with a modified country weighting that limits investments in
securities of any one country to approximately 25% of the fund.
In order to reduce long-term volatility and operating costs, the
fund may also invest in stock index futures and other contracts
structured to obtain similar results. Dividend income is rein-
vested in the fund.
The International Stock Fund, which was added to the Plan on April
2, 1993, is designed to broaden and supplement plan investment
options by offering a way to participate in foreign equity mar-
kets, while maintaining diversification within and across differ-
ent assets classes.
Like U.S. equities, foreign equities are subject to price fluctu-
ations. In addition, they are impacted by other factors such as
foreign currency exchange fluctuations that affect the dollar
value of the fund.
The International Stock Fund may not have as close a correlation
to the modified EAFE Index as the Large Company Index Fund does to
the S&P 500 Index. This results from the higher transaction costs
of trading in foreign markets, and not investing in every company
in the EAFE Index.
Effective May 13, 1994, Bankers Trust Company assumed management
of the International Stock Fund from IBM.
Balanced Asset Fund - Long-term returns consistent with preserva-
tion of capital through a combination of equity and fixed income
investment options available in the Plan.
A single investment (payroll contribution or fund transfer) in
this fund will automatically be allocated among the following five
Plan investment options, while maintaining the target allocations
as shown: Large Company Index Fund - 40%, Small Company Stock Fund
- 10%, International Stock Fund - 10%, Fixed Income Fund - 30%,
and U.S. Government Securities Fund - 10%. This fund will be re-
balanced each month to maintain the target allocations, as the
value of the underlying investment funds fluctuates. The Balanced
Asset Fund, which was added to the Plan on April 2, 1993, is de-
signed to blend the long-term performance of equity and fixed in-
come investments. Although the fund's value may fluctuate, its
diversification among equity and fixed income investments can po-
tentially improve stability of returns over the long-term.
16
<PAGE>
Equity I and Equity II Funds - Growth and Income:
Effective July 1, 1993, the Equity I and Equity II Funds were
closed; new contributions to these funds had been suspended since
January 1, 1986. Plan participants who had not instructed the
Plan's Trustee to transfer their balances out of the Equity I and
Equity II Funds by July 1, 1993, had any remaining balance in
these funds automatically transferred on their behalf to the Large
Company Stock Fund.
NOTE 4 - PLAN TRANSFERS:
Effective September 29, 1989 an agreement was finalized establish-
ing ROLM Systems as part of Siemens and ROLM Company from what was
a joint venture between IBM and Siemens. Under this agreement,
IBM heritage employees working at ROLM/Siemens could return to
and/or retire from IBM. If said employees chose to return to IBM,
they could exercise the option to transfer their "pre-tax"
ROLM/Siemens 401(K) assets into the IBM Plan. As a result, there
were net transfers of cash and securities of $265,283 and
$1,003,987 during 1994 and 1993, respectively, between the Plan
and similar savings plans established for these companies.
On March 27, 1991, IBM completed a transaction with Clayton &
Dubilier, Inc., to create a new information products company,
Lexmark International, Inc. (Lexmark). As a result of this trans-
action, there were net transfers of cash and securities of
$(291,541) in 1993 between the Plan and a similar savings plan es-
tablished by Lexmark.
Effective January 1, 1992, approximately 200 employees of Conti-
nental Bank were transferred to IBM's wholly owned subsidiary, In-
tegrated Services Solutions Corporation (ISSC) as a result of an
outsourcing agreement between ISSC and Continental Bank. During
1994, there were net transfers between the Plan and a similar
savings plan established by Continental Bank of $3,160,523.
On March 1, 1994, IBM completed the sale of its Federal Systems
Company to Loral Corporation, effective January 1, 1994. As a re-
sult of this transaction, there were net transfers of cash and se-
curities of $(158,716,147) during 1994 between the Plan and a
similar savings plan established by Loral Corporation.
These transfers represent the participants' account balances at-
tributable to employees transferred to(from) IBM.
17
<PAGE>
NOTE 5 - INCOME TAXES:
The Trust established under the Plan is qualified under the appro-
priate section of the Internal Revenue Code and intends to con-
tinue as a qualified trust. The Plan received a favorable
determination letter from the IRS on June 14, 1993. In manage-
ment's opinion, the Plan, since June 14, 1993, continues to qual-
ify under the Internal Revenue Code. Accordingly, a provision for
federal income taxes has not been made.
18
<PAGE>
NOTE 6 - PLAN 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, 1994: Quoted
market Estimates
prices of trustee Total
---------- ---------- ----------
Interest in equity-oriented General
Employee Benefit Trust pooled funds $2,943,737 $2,943,737
Interest in short-term investment-
oriented General Employee Benefit
Trust discretionary pooled funds 313,738 313,738
Investment contracts $3,376,832 3,376,832
Interest in U.S. Government Securities-
oriented General Employee Benefit Trust
pooled funds 63,074 63,074
Common stock 356,735 356,735
---------- ---------- ----------
Total $3,677,284 $3,376,832 $7,054,116
========== ========== ==========
December 31, 1993:
Interest in equity-oriented General
Employee Benefit Trust pooled fund $1,874,979 $1,874,979
Interest in short-term investment-
oriented General Employee Benefit
Trust discretionary pooled fund 409,307 409,307
Investment contracts $3,092,850 3,092,850
U.S. Government Treasury Securities 76,580 76,580
Common stock 1,206,118 1,206,118
---------- ---------- ----------
Total $3,566,984 $3,092,850 $6,659,834
========== ========== ==========
19
<PAGE>
NOTE 6 - PLAN INVESTMENT VALUATIONS (continued):
Net Unrealized and Realized Gain (Loss) on investments (dollars in
thousands):
For the year ended
December 31, 1994
__________________
Investments at fair value
determined by quoted market
price:
Interest in equity-oriented General
Employee Benefit Trust pooled funds $(22,086)
U.S. Government Treasury Securities (190)
Common Stock 59,822
--------
Total $ 37,546
========
NOTE 7 - SUBSEQUENT EVENTS
Effective January 1, 1995, participants may elect to defer up to
twelve percent (previously nine percent) of their eligible compen-
sation to the Plan up to the legal limit allowed by the IRS.
IBM's matching deferral was increased from thirty percent to fifty
percent of each participants deferral up to a maximum of six per-
cent (previously five percent) of a participants eligible compen-
sation.
Effective May 18, 1995, the Plan changed from weekly to daily val-
uation, permitting contributions, fund transfers and loan requests
to be processed on a daily basis. In addition, the IBM Stock Fund
changed from share accounting to unit value accounting to pro-
vide for daily settlement of fund transactions. This change does
not affect the account's value.
20
<PAGE>
<TABLE><CAPTION>
NOTE 8 - SCHEDULE OF UNIT/SHARE VALUES AND PARTICIPANT UNITS/SHARES (FUND UNITS/SHARES 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 weekly valuation date:
Money Market Large Company Equity Equity Small Company Fixed Income U.S. Gov't. IBM Stock
Fund Index Fund I Fund II Fund Stock Fund Fund Sec. Fund Fund
------------- ------------- ------------- ------------- ------------- --------------- ------------ ---------------
Price
Unit Unit Unit Unit Unit Unit Unit Per
value Units value Units value Units value Units Value Units Value Units Value Units Shares Shares
----- ------- ----- ------- ----- ------ ----- ------- ----- ------- ----- --------- ----- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Month in 1994:
January $2.38 118,451 $6.33 294,333 $1.70 542,097 $2.12 1,452,081 $1.12 46,887 $56.50 2,989
February 2.39 116,452 6.11 293,586 1.66 538,764 2.13 1,440,405 1.12 44,839 52.88 3,141
March 2.39 116,892 5.90 292,847 1.59 541,191 2.14 1,446,286 1.12 44,967 54.63 3,104
April 2.40 120,402 5.98 291,287 1.62 537,704 2.16 1,468,241 1.11 45,407 57.50 3,173
May 2.41 120,778 6.20 289,718 1.61 538,092 2.17 1,478,052 1.12 43,666 63.00 3,220
June 2.42 120,437 5.92 290,068 1.54 541,432 2.18 1,478,491 1.12 43,279 58.75 3,404
July 2.43 120,230 6.12 289,199 1.58 536,470 2.19 1,485,226 1.13 42,902 61.88 3,473
August 2.43 120,173 6.33 287,952 1.64 518,684 2.20 1,503,238 1.13 41,854 68.50 3,472
September 2.44 120,008 6.08 287,947 1.59 519,149 2.22 1,501,302 1.13 41,560 69.63 3,718
October 2.45 120,177 6.29 286,307 1.63 513,742 2.23 1,502,618 1.13 41,422 74.50 4,341
November 2.46 120,068 6.06 284,398 1.56 511,830 2.24 1,508,476 1.12 40,098 70.75 4,675
December 2.48 116,524 6.23 275,778 1.59 495,358 2.25 1,484,226 1.13 39,014 73.50 4,854
Month in 1993:
January $2.31 135,456 $5.61 277,336 $5.00 26,012 $4.60 24,993 $1.51 393,777 $1.97 1,491,449 $1.08 49,402 $50.25 1,839
February 2.32 133,377 5.67 278,350 5.10 25,851 4.63 24,887 1.49 421,694 1.99 1,491,091 1.08 48,358 53.75 1,912
March 2.32 133,313 5.79 281,377 5.24 25,277 4.77 24,218 1.51 437,389 2.00 1,498,941 1.09 49,998 50.50 1,925
April 2.33 129,347 5.65 281,688 5.21 21,654 4.70 20,432 1.48 452,188 2.01 1,482,876 1.09 49,334 48.88 2,008
May 2.33 128,209 5.84 281,977 5.32 20,159 4.91 19,001 1.54 459,823 2.02 1,485,816 1.09 50,199 53.25 2,068
June 2.34 127,738 5.78 312,364 5.28 96 4.84 367 1.51 473,150 2.03 1,488,961 1.10 51,163 48.75 2,107
July 2.35 125,962 5.84 309,107 1.55 482,401 2.05 1,489,304 1.10 51,151 43.88 2,179
August 2.35 123,654 6.00 303,805 1.60 495,471 2.06 1,486,404 1.11 50,142 44.00 2,233
September 2.36 123,067 5.96 301,184 1.64 504,237 2.07 1,486,198 1.11 50,250 42.00 2,297
October 2.36 121,062 6.11 297,579 1.64 524,841 2.08 1,469,395 1.12 48,827 45.75 2,335
November 2.37 119,654 6.06 296,086 1.59 536,582 2.09 1,463,222 1.12 47,845 55.13 2,513
December 2.38 118,900 6.16 294,933 1.65 540,407 2.11 1,456,350 1.12 46,991 57.00 2,840
</TABLE>
Balanced Int'l Stock
Asset Fund Fund
-------------- ---------------
Price
Unit Per
Value Units Shares Shares
----- ------- ------ -------
Month in 1994:
January $1.10 156,318 $1.22 198,093
February 1.08 183,466 1.17 230,962
March 1.06 188,673 1.14 238,241
April 1.07 189,299 1.17 236,782
May 1.08 187,531 1.17 246,427
June 1.06 189,986 1.17 249,458
July 1.09 189,552 1.23 253,343
August 1.11 186,479 1.24 273,429
September 1.09 186,543 1.19 280,577
October 1.11 184,525 1.23 278,814
November 1.08 181,649 1.18 276,362
December 1.10 175,239 1.17 268,675
Month in 1993:
January
February
March
April $1.01 57,624 1.01 31,057
May 1.01 78,480 1.03 47,580
June 1.02 94,484 1.00 60,577
July 1.02 111,710 1.03 71,723
August 1.04 130,957 1.09 97,604
September 1.05 138,078 1.08 112,332
October 1.06 145,370 1.11 156,931
November 1.06 150,380 1.08 177,015
December 1.07 154,182 1.15 188,919
21
<PAGE>
<TABLE><CAPTION>
SCHEDULE I
INTERNATIONAL BUSINESS MACHINES CORPORATION
TAX DEFERRED SAVINGS PLAN
ASSETS HELD FOR INVESTMENT AT DECEMBER 31, 1994
Total Fair
Shares/Units or Cost Value
Maturity Value (In Thousands) (In Thousands)
Interest in Pooled Funds: _______________ ____________________________
<S> <C> <C> <C>
Discretionary Accounts 313,737,715 $ 313,738 $ 313,738
========== ==========
Equity Index Funds 85,461,729 $2,906,006 $2,943,737
========== ==========
U.S. Government Securities Index Fund 52,252,166 $ 62,554 $ 63,074
========== ==========
Common Stock:
IBM Stock Fund 4,853,543 $ 327,867 $ 356,735
========== ==========
Investment Contracts:
Bankers Trust Company
#90-023 9.05% 7/1/1997 79,360,496 $ 79,360 $ 79,360
Bankers Trust Company
#90-060 8.50% 10/1/1997 57,024,649 57,025 57,025
Bankers Trust Company
#91-028 8.20% 4/1/1996 42,401,286 42,401 42,401
Black Rock
7.78% 9/30/1999 101,218,430 101,218 101,218
Brundage Story & Rose
5.78% 1/1/1999 77,398,539 77,399 77,399
CDC BRIC
BR 130-01 6.48% 10/1/1996 76,987,786 76,988 76,988
CDC BRIC
BR 130-02 7.42% 10/1/1999 78,566,660 78,567 78,567
CIGNA
FM 22011 8.66% 3/31/1995 61,171,233 61,171 61,171
CIGNA
7.73% 9/30/1999 24,619,617 24,620 24,620
</TABLE>
22
<PAGE>
<TABLE><CAPTION>
Total Fair
Shares/Units or Cost Value
Investment Contracts (Continued): Maturity Value (In Thousands) (In Thousands)
_______________ ______________ ______________
<S> <C> <C> <C>
Citibank
MMIG-392506 #4B 8.99% 4/1/1995 32,785,288 $ 32,785 $ 32,785
Citibank
#0306G 8.33% 1/1/1995 11,360,186 11,360 11,360
Citibank
#0307G 8.27% 4/1/1996 48,543,082 48,543 48,543
Citibank
#178360 6.75% 1/1/1999 175,100,369 175,100 175,100
Citibank
#178361 4.93% 10/1/1996 76,528,279 76,528 76,528
Citibank
#178362 5.17% 1/1/1999 55,449,978 55,450 55,450
Citibank
#178364 6.51% 7/1/1999 77,831,871 77,832 77,832
Citibank
#178365 7.21% 4/1/1998 23,106,711 23,107 23,107
CNA Insurance
GP 12546 9.12% 3/31/1995 9,623,069 9,623 9,623
CNA Insurance
GP 13078 8.05% 4/1/1999 40,000,000 40,000 40,000
Confederation Life Insurance Co.
#43002 9.32% 6/30/1995 15,161,997 15,162 15,162
Confederation Life Insurance Co.
#43005 8.75% 1/2/1996 21,042,007 21,042 21,042
John Hancock Life Insurance Co.
GAC #5627 9.03% 7/1/1997 39,082,661 39,083 39,083
J. P. Morgan, Delaware
#081220 8.03% 7/1/1995 35,118,826 35,119 35,119
J. P. Morgan, Delaware
#881220 8.19% 12/31/1995 34,107,072 34,107 34,107
</TABLE>
23
<PAGE>
<TABLE><CAPTION>
Total Fair
Shares/Units or Cost Value
Investment Contracts (Continued): Maturity Value (In Thousands) (In Thousands)
_______________ ______________ ______________
<S> <C> <C> <C>
J. P. Morgan, Delaware
#681220 8.36% 7/1/1996 34,129,526 $ 34,130 $ 34,130
Loomis Sayles
5.79% 9/1/1998 52,246,691 52,247 52,247
Metropolitan Life Insurance Co.
GAC #70834 8.08% 12/31/1998 10,028,668 10,029 10,029
Metropolitan Life Insurance Co.
GAC #11862-6 9.03% 1/1/1996 71,576,726 71,577 71,577
Metropolitan Life Insurance Co.
GAC #11863-7 9.03% 1/1/1996 10,215,677 10,216 10,216
Metropolitan Life Insurance Co.
GAC #13630 5.20% 4/1/1998 78,221,193 78,221 78,221
Metropolitan Life Insurance Co.
GAC #13831 6.90% 1/2/1998 60,675,863 60,676 60,676
New York Life Insurance Company
GA-06554-001 7.56% 7/1/1997 304,553,926 304,554 304,554
New York Life Insurance Company
GA-06554-002 5.35% 1/1/1999 82,127,805 82,128 82,128
New York Life Insurance Company
GA-06554-003 7.13% 7/1/1999 62,695,726 62,696 62,696
Pimco
#915 4.95% 10/1/1996 60,521,749 60,522 60,522
Pimco
#916 5.95% 1/1/1999 40,301,417 40,301 40,301
PNC Bank, Kentucky
9.10% 10/1/1995 50,785,343 50,785 50,785
PNC Bank, NA
8.80% 4/1/1995 27,019,178 27,019 27,019
Provident National Assurance Co.
#020-03459-05A 9.13% 3/31/1996 17,613,253 17,613 17,613
Prudential Asset Management Co.
GA-7406 7.03% 3/31/1998 143,811,761 143,812 143,812
</TABLE>
24
<PAGE>
<TABLE><CAPTION>
Total Fair
Shares/Units or Cost Value
Investment Contracts (Continued): Maturity Value (In Thousands) (In Thousands)
_______________ ______________ ______________
<S> <C> <C> <C>
Prudential Asset Management Co.
GA-7406-212 6.49% 6/30/1999 80,257,402 80,257 80,257
Prudential Asset Management Co.
GA-7406-213 7.17% 12/31/1998 102,925,657 102,926 $ 102,926
Prudential Asset Management Co.
GA-7913 7.45% 3/31/2000 101,148,356 101,148 101,148
Putnam Management Group
6.20% 4/1/1998 267,666,293 267,666 267,666
Sanford C. Bernstein
5.92% 7/1/1998 51,054,979 51,055 51,055
Union Bank of Switzerland
#2001 7.81% 1/1/1997 32,910,292 32,910 32,910
Union Bank of Switzerland
#2005 6.67% 10/1/1995 80,776,860 80,777 80,777
Union Bank of Switzerland
#2010 7.15% 4/1/1998 209,559,452 209,559 209,559
Union Bank of Switzerland
#2071 5.17% 10/1/1998 50,417,849 50,418 50,418
__________ __________
$3,376,832 $3,376,832
========== ==========
</TABLE>
25
<PAGE>
<TABLE><CAPTION>
SCHEDULE II
INTERNATIONAL BUSINESS MACHINES CORPORATION
TAX DEFERRED SAVINGS PLAN
TRANSACTIONS INVOLVING AN AMOUNT IN EXCESS
OF 5 PERCENT OF THE CURRENT VALUE OF PLAN ASSETS
DECEMBER 31, 1994
(Dollars in Thousands)
Acquisitions Disposals
--------------------- ----------------------------------
Realized
Volume Cost Volume Proceeds (Loss)
------ ---------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
Bankers Trust Directed Account
Cash Fund
- Acquisition Transactions 551 $ 966,414
- Disposal Transactions 585 $1,012,846 -
Bankers Trust Equity
Index Fund
- Acquisition Transactions 1 $ 4,000
- Disposal Transactions 2 $1,875,328 $(328,382)
Bankers Trust Large
Capitalization Equity Index Fund
- Acquisition Transactions 36 $2,002,444
- Disposal Transactions 100 $ 237,340 $ (1,227)
</TABLE>
26
