<PAGE>
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)
<PAGE>
REQUIRED INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
<TABLE>
<CAPTION>
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
------- --------- --------- ------- --------- -------- ------- --------- --------
<S> <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: $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
------- --------- --------- --------- --------- -------- ------- --------- --------
------- --------- --------- --------- --------- -------- ------- --------- --------
</TABLE>
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
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)
<TABLE>
<CAPTION>
Moderate Aggressive
Life Life
Strategy Strategy Loan
Fund Fund Fund Total
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
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
--------- ----------- ------- ----------
--------- ----------- ------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
6
<PAGE>
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)
<TABLE>
<CAPTION>
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
------- --------- --------- ------- --------- -------- ------- --------- --------
<S> <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: $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
------- --------- --------- ------- --------- -------- ------- --------- --------
------- --------- --------- ------- --------- -------- ------- --------- --------
</TABLE>
The accompanying notes are an integral part of this financial statement.
7
<PAGE>
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)
<TABLE>
<CAPTION>
Moderate Aggressive
Life Life
Strategy Strategy Loan
Fund Fund Fund Total
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
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
--------- ----------- ------- ----------
--------- ----------- ------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
8
<PAGE>
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)
<TABLE>
<CAPTION>
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
------- --------- --------- --------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
------- --------- --------- --------- --------- ------- -------- --------- --------
------- --------- --------- --------- --------- ------- -------- --------- --------
</TABLE>
The accompanying notes are an integral part of this financial statement.
9
<PAGE>
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)
<TABLE>
<CAPTION>
Moderate Aggressive
Life Life
Strategy Strategy Loan
Fund Fund Fund Total
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
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
--------- ----------- ------- ----------
--------- ----------- ------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
10
<PAGE>
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
<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. 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
<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
13
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
Fair value determined by
-----------------------------------
December 31, 1997: Quoted
market Estimates
prices of Trustee Total
----------- ---------- -----------
<S> <C> <C> <C>
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
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
26
<PAGE>
NOTE 6 - TDSP INVESTMENT VALUATIONS (continued):
Net Unrealized and Realized Gain (Loss) on investments (dollars in
thousands):
<TABLE>
<CAPTION>
For the year ended
December 31, 1997
------------------
<S> <C>
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
----------
----------
</TABLE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
Month in 1997: January February March April May June July August September October November December
------- -------- ------- ------- ------- ------- ------- ------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
29
<PAGE>
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:
<TABLE>
<CAPTION>
Month in 1996: January February March April May June July August September October November December
------- -------- ------- ------- ------- ------- ------- ------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
30
<PAGE>
SCHEDULE I
INTERNATIONAL BUSINESS MACHINES CORPORATION
IBM TAX DEFERRED SAVINGS PLAN
ITEM 27a - ASSETS HELD FOR INVESTMENT PURPOSES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
Total Current
Shares/Units or Cost Value
Maturity Value (In Thousands) (In Thousands)
--------------- -------------- --------------
<S> <C> <C> <C>
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
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Total Contract
Shares/Units or Value
Maturity Value (In Thousands)
--------------- -------------
<S> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total Contract
Shares/Units or Value
Investment Contracts (Continued): Maturity Value (In Thousands)
--------------- --------------
<S> <C> <C>
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
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Total Contract
Shares/Units or Value
Investment Contracts (Continued): Maturity Value (In Thousands)
--------------- --------------
<S> <C> <C>
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
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Total Contract
Shares/Units or Value
Investment Contracts (Continued): Maturity Value (In Thousands)
--------------- --------------
<S> <C> <C>
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
-----------
-----------
</TABLE>
34
<PAGE>
SCHEDULE II
INTERNATIONAL BUSINESS MACHINES CORPORATION
IBM TAX DEFERRED SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS*
DECEMBER 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Cost of Proceeds Cost of Assets Realized
Volume Purchases from Sale Disposed Gain
------ ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C>
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 -
</TABLE>
* 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
