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, 1998
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)
Director of Compensation & Benefits
Capital Accumulation Programs
IBM
North Castle Drive
Armonk, New York 10504
-------------------------------------
(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
Page
----
Consent of Independent Accountants 3
Report of Independent Accountants 4
Financial Statements:
Statements of Net Assets Available for Plan Benefits, with Fund
Information, as of December 31, 1998 and December 31, 1997 5
Statement of Changes in Net Assets Available for Plan
Benefits, with Fund Information, for the year ended
December 31, 1998 9
Notes to Financial Statements 11
Supplementary Schedules:
Schedule I - Item 27a - Assets Held for Investment Purposes
at December 31, 1998 31
Schedule II - Item 27d - Schedule of Reportable Transactions 34
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, 1999 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, 1999 appearing on page 4 of this Annual Report on Form
11-K for the year ended December 31, 1998.
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, NY 10019
June 18, 1999
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, 1998 and 1997, and the changes in net assets available for plan
benefits for the year ended December 31, 1998, 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 conducted 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 the purpose 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 statements 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.
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, NY 10019
June 18, 1999
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, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Large Small Total Income Conserv.
Money Company Company IBM Stable Int'l. Bond Plus Life Life
Market Index Stock Stock Value 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
pooled funds
(cost: $5,265,798) 6,094,776 2,199,180 541,312 16,603 85,787
Interest in short-term investment-
oriented pooled funds
(cost: $721,074) 476,372 41,007 203,695
Investment contracts, at contract
value (cost: $4,004,246) 3,562,674 61,909 106,714
Interest in bond market-oriented
pooled funds (cost: $436,740) 222,431 4,129 21,354
IBM Common Stock (cost: $960,659) 2,026,038
------- --------- --------- --------- --------- -------- ------- --------- --------
Total investments 476,372 6,094,776 2,199,180 2,067,045 3,766,369 541,312 222,431 82,641 213,855
Income and sales proceeds receivable 2,899 11 (23) 161 3
Loans receivable
------- --------- --------- --------- --------- -------- ------- --------- --------
Total assets 479,271 6,094,787 2,199,157 2,067,045 3,766,530 541,315 222,431 82,641 213,855
Liabilities:
Expenses payable 6 13 5 31 162 3 1 4 1
Investments purchased 9,552
------- --------- --------- --------- --------- -------- ------- --------- --------
Total liabilities 6 13 5 9,583 162 3 1 4 1
------- --------- --------- --------- --------- -------- ------- --------- --------
Net assets available for plan
benefits 479,265 6,094,774 2,199,152 2,057,462 3,766,368 541,312 222,430 82,637 213,854
======= ========= ========= ========= ========= ======== ======= ========= ========
</TABLE>
* Formerly Fixed Income Fund, renamed Stable Value Fund effective February 1,
1999.
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, 1998
(Dollars in thousands)
Moderate Aggressive
Life Life
Strategy Strategy Loan
Fund Fund Fund Total
--------- ---------- ------- ----------
Assets:
Investments at fair value:
Interest in equity-oriented
pooled funds
(cost: $5,265,798) 658,433 297,559 9,893,650
Interest in short-term investment-
oriented pooled funds
(cost: $721,074) 721,074
Investment contracts, at contract
value (cost: $4,004,246) 272,949 4,004,246
Interest in bond market-oriented
pooled funds (cost: $436,740) 163,851 74,041 485,806
IBM Common Stock (cost: $960,659) 2,026,038
--------- ---------- ------- ----------
Total investments 1,095,233 371,600 17,130,814
Income and sales proceeds receivable 4 1 3,056
Loans receivable 301,706 301,706
--------- ---------- ------- ----------
Total assets 1,095,237 371,601 301,706 17,435,576
Liabilities:
Expenses payable 226
Investments purchased 9,552
--------- ---------- ------- ----------
Total liabilities 9,778
--------- ---------- ------- ----------
Net assets available for plan
benefits 1,095,237 371,601 301,706 17,425,798
========= ========== ======= ==========
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, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Large Small Total Income Conserv.
Money Company Company IBM Stable Int'l. Bond Plus Life Life
Market Index Stock Stock Value 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
pooled funds
(cost: $4,903,380) 4,720,581 2,213,371 477,478 8,622 53,312
Interest in short-term investment-
oriented 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
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>
* Formerly Fixed Income Fund, renamed Stable Value Fund effective February 1,
1999.
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, 1997
(Dollars in thousands)
Moderate Aggressive
Life Life
Strategy Strategy Loan
Fund Fund Fund Total
--------- ---------- ------- ----------
Assets:
Investments at fair value:
Interest in equity-oriented
pooled funds
(cost: $4,903,380) 528,551 185,163 8,187,078
Interest in short-term investment-
oriented 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
pooled funds (cost: $263,616) 132,387 46,376 289,202
IBM Common Stock (cost: $722,242) 1,210,202
--------- ---------- ------- ----------
Total investments 881,026 231,539 13,773,546
Income and sales proceeds receivable 1 1 1,817
Contributions receivable 3 160
Loans receivable 291,561 291,561
Transfers receivable (payable) (1) (1) 165
--------- ---------- ------- ----------
Total assets 881,029 231,539 291,726 14,067,084
Liabilities:
Investments purchased 1,512
--------- ---------- ------- ----------
Total liabilities 1,512
--------- ---------- ------- ----------
Net assets available for plan
benefits 881,029 231,539 291,726 14,065,572
========= ========== ======= ==========
The accompanying notes are an integral part of this financial statement.
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, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Total Income Conserv.
Money Large Co. Small Co. IBM Stable Int'l Bond Plus Life Life
Market Index Stock Stock Value 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 45,769 253,706 159,704 85,717 112,785 46,836 15,199 1,782 5,047
Employer contributions 16,247 77,734 49,039 25,879 35,757 14,269 4,411 413 1,317
Participant loan repayments 8,768 58,941 32,704 24,104 44,133 7,312 2,345 492 1,055
Participant directed transfer
of investments, net 28,151 (95,163) (308,889) (84,646) 236,427 (49,388) 102,289 34,522 62,805
------- --------- --------- --------- --------- ------- -------- --------- --------
Total contributions
and transfers 98,935 295,218 (67,442) 51,054 429,102 19,029 124,244 37,209 70,224
------- --------- --------- --------- --------- ------- -------- --------- --------
Transfers from other
benefits plans, net 15,961 3,484 1,014 3,777 (143) 519 274 15 171
Interest and dividend
income from investments 24,267 531 265 10,186 220,874 109 16 4,816 9,323
Unrealized and realized gain
(loss) on investments, net 1,340,790 157,367 846,159 69,573 11,891 1,531 12,484
------- --------- --------- --------- --------- ------- -------- --------- --------
Total additions 139,163 1,640,023 91,204 911,176 649,833 89,230 136,425 43,571 92,202
------- --------- --------- --------- --------- ------- -------- --------- --------
Reductions:
Distributions to participants 37,118 206,592 77,052 51,942 189,145 18,889 6,899 3,210 10,114
Loans to participants 12,131 55,182 26,486 26,239 52,606 5,705 1,857 723 1,280
Administrative expenses 613 4,061 1,888 912 4,924 806 165 91 221
------- --------- --------- --------- --------- ------- -------- --------- --------
Total reductions 49,862 265,835 105,426 79,093 246,675 25,400 8,921 4,024 11,615
------- --------- --------- --------- --------- ------- -------- --------- --------
Increase (decrease) in net
assets during the year 89,301 1,374,188 (14,222) 832,083 403,158 63,830 127,504 39,547 80,587
Net assets available for plan
benefits:
Beginning of year 389,964 4,720,586 2,213,374 1,225,379 3,363,210 477,482 94,926 43,090 133,267
------- --------- --------- --------- --------- ------- -------- --------- --------
End of year 479,265 6,094,774 2,199,152 2,057,462 3,766,368 541,312 222,430 82,637 213,854
======= ========= ========= ========= ========= ======= ======== ========= ========
</TABLE>
* Formerly Fixed Income Fund, renamed Stable Value Fund effective February 1,
1999.
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, 1998
(Dollars in thousands)
Moderate Aggressive
Life Life
Strategy Strategy Loan
Fund Fund Fund Total
--------- ---------- ------- ----------
Additions:
Participant contributions 68,741 29,605 2 824,893
Employer contributions 20,825 8,019 253,910
Participant loan repayments 12,911 6,165 (198,930)
Participant directed transfer
of investments, net 13,577 60,315
--------- ---------- ------- ----------
Total contributions
and transfers 116,054 104,104 (198,928) 1,078,803
--------- ---------- ------- ----------
Transfers from other
benefits plans, net 708 706 793 27,279
Interest and dividend
income from investments 35,528 23 28,070 334,008
Unrealized and realized gain
(loss) on investments, net 110,374 50,497 2,600,666
--------- ---------- ------- ----------
Total additions 262,664 155,330 (170,065) 4,040,756
--------- ---------- ------- ----------
Reductions:
Distributions to participants 36,771 9,453 17,146 664,331
Loans to participants 10,547 5,506 (198,262)
Administrative expenses 1,138 309 1,071 16,199
--------- ---------- ------- ----------
Total reductions 48,456 15,268 (180,045) 680,530
--------- ---------- ------- ----------
Increase (decrease) in net
assets during the year 214,208 140,062 9,980 3,360,226
Net assets available for plan
benefits:
Beginning of year 881,029 231,539 291,726 14,065,572
--------- ---------- ------- ----------
End of year 1,095,237 371,601 301,706 17,425,798
========= ========== ======= ==========
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 complete description of
the Plan's provisions.
General:
The Plan offers all qualifying active regular and part-time employees of IBM and
certain of its domestic related companies and partnerships an opportunity to
defer up to fifteen percent of their eligible compensation for contribution to
any of eleven investment funds, subject to the legal limit allowed by Internal
Revenue Service (IRS) regulations. The investment objectives of these funds are
described in Note 3. The Plan was established by resolution of IBM's Retirement
Plans Committee (the Committee) effective July 1, 1983 and is held in trust for
the benefit of its participants.
On December 31, 1998, the Plan included the employees of Micrus, a less than
wholly-owned subsidiary of IBM. 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, who are 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 31 to receive the additional profit sharing
component.
The Plan qualifies 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 the Committee which has appointed officials of IBM
as plan administrators to assist in administering the Plan. The Committee also
has appointed Bankers Trust Company as Trustee to safeguard the assets of the
various funds (effective June 4, 1999, Deutsche Bank AG acquired Bankers Trust
Company, see Note 8 - Subsequent Events on page 28), and has appointed Bankers
Trust and outside investment managers to direct investments in the various funds
(for addition information on investment managers by fund see Note 3 -
Description of Investment Funds on pages 19 through 23). 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 to provide
investment management services for the Plan.
Contributions and participants' equity:
IBM contributes to the Plan an additional fifty percent of each participant's
elected deferral up to a maximum of six percent of a participant's annual
eligible compensation. Eligible compensation includes regular salary,
commissions, overtime, shift premium and similar additional compensation
payments, recurring payments under any form of variable compensation plan,
regular Sickness and Accident Income Plan payments, holiday, and vacation pay.
Participants may choose to have their contributions invested entirely in 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,
Stable Value 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.
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 will incur
a service fee for each transfer in excess of eight in a calendar year. However,
participant balances in the Stable Value 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 each participant's contributions and share of the net earnings, losses and
expenses, if any, of the various investment funds are recorded. 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.
Participants may transfer 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, 1998 and 1997 the number of participants in the Plan were
207,973 and 203,378, respectively. The number of individuals participating in
each of the Plan's funds at December 31, 1998, were:
Money Market 54,355
Large Company Index 149,714
Small Company Stock 114,677
IBM Stock 74,730
Stable Value 117,166
International Stock 56,399
Total Bond Market 20,987
Income Plus Life Strategy 3,144
Conservative Life Strategy 5,946
Moderate Life Strategy 44,291
Aggressive Life Strategy 17,690
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 generally are subject to a penalty tax
of 10%.
Consistent with provisions established by the IRS, the Plan's 1998 limit on
employee salary deferrals was $10,000. The 1998 maximum annual deferral amount
for employees residing in Puerto Rico was limited by local government
regulations to the lesser of $8,000 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 his or her account in a number
of annual cash installments he or she has specified, over a period not to exceed
ten years, or to defer distribution until age 70 1/2.
Withdrawals for financial hardship are permitted provided they are for a severe
and immediate financial need and the distribution is necessary to satisfy that
need. Employees are required to fully use the Plan loan program, described on
page 15, before requesting a hardship withdrawal. Only an employee's deferred
compensation is eligible for hardship withdrawal; earnings and IBM matching
contribution are not eligible for withdrawal. Employees must submit evidence of
hardship to Metropolitan Life, who will determine whether the situation
qualifies for a hardship withdrawal. A hardship withdrawal is taxed as regular
income to the employee and may be subject to the 10% additional tax on early
distributions.
14
<PAGE>
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 marries or
remarries, any prior beneficiary designation is cancelled and the 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.
Participants may borrow, subject to additional limitations relative to prior
loans, up to one-half of the value of the participant's account balance, not to
exceed $50,000. Effective January 1, 1998, the minimum amount for new loans was
increased to $500 from $50. Participants are limited to two simultaneous
outstanding Plan loans. 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
semi-monthly payroll deductions 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, 1998 and 1997 was 47,484
and 48,330, respectively. Interest rates on outstanding loans at December 31,
1998 ranged from 9.00% to 9.75%.
15
<PAGE>
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 $5,000 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 the
Committee. In that event, each participant or beneficiary receiving or entitled
to receive payments under the Plan would receive the balance of his or her
account at such time and in such manner as the 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 would be nonforfeitable.
16
<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 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 those estimates.
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.
17
<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 and
in determining net proceeds on sales of investments, (b) investment management
fees which are paid from the assets of the respective funds (excluding the IBM
Stock Fund); those fees comprise fixed annual charges and charges based on a
percentage of net asset value, and (c) operational expenses required for
administration of the Plan consisting of trustee, recordkeeping, participant
reports and communications, and service center expenses, which are charged
against the fund's assets on a pro rata basis throughout the year.
18
<PAGE>
NOTE 3 - DESCRIPTION OF INVESTMENT FUNDS:
The objectives of 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 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 assets of the fund must comprise cash, demand obligations and
assets that mature on the next business day.
Investments in the Money Market Fund are managed by Bankers Trust Company.
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 Index). The S & P 500 Index
comprises 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.
Investments in the Large Company Index Fund are managed by Bankers Trust
Company.
19
<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 S &
P 500 Index. 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.
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 to
be invested in 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.
Investments in the IBM Stock Fund are managed by Bankers Trust Company.
20
<PAGE>
STABLE VALUE FUND (formerly named Fixed Income Fund- see note 8, Subsequent
Events on page 28) - 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 on the contract issuer's investment experience for the assets or pooled
assets supporting the contract or on 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, 1998 and 1997 was $2,478 million and $2,261 million,
respectively, fair value being $2,547 million and $2,291 million, respectively.
The plan administrators select the various contracts and oversee nine external
bond managers who are responsible for the individual portfolios within the
Stable Value Fund. Investments are with highly rated institutions and money
managers, but there is no guarantee of the return of either principal or
interest.
TOTAL BOND MARKET FUND - 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.
21
<PAGE>
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 (EMF) Index. The fund is
passively managed, that is, the managers do not actively select investments, but
instead follow EAFE and EMF Index characteristics. 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 asset classes.
Foreign equities are subject to price fluctuations including 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: The Life Strategy Funds diversify their assets among the
following five Plan funds: Large Company Index Fund, Small Company Stock Fund,
International Stock Fund, Stable Value Fund, and Total Bond Market Fund. The
Life Strategy Funds enable participants to choose from four portfolios of stock,
bond and stable value 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. The Life Strategy Funds are passively managed, that
is, the fund managers do not actively select investments, but instead follow
investment 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 that modestly and
fairly consistently outpace inflation, with a target allocation of twenty
percent stocks and eighty percent stable value/bonds.
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%, Stable Value Fund - 75%, and Total Bond Market Fund- 5%.
The Income Plus Life Strategy Fund is managed by Bankers Trust Company.
22
<PAGE>
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 stable value/bonds.
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%, Stable Value Fund - 50%, and Total Bond Market Fund - 10%.
The Conservative Life Strategy Fund is managed by Bankers Trust Company.
MODERATE LIFE STRATEGY FUND - Seeks to provide relatively high returns at a
moderate risk level, with a target allocation of sixty percent stocks and forty
percent stable value/bonds.
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%, Stable Value Fund - 25%, and Total Bond Market Fund - 15%.
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
stable value/bonds.
Investments in this fund are automatically allocated among the following four
Plan investment options, while maintaining the target allocations as shown:
Large Company Index Fund - 45%, Small Company Stock Fund - 15%, International
Stock Fund - 20%, 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 participant account balances attributable
to employees transferred to IBM as a result of IBM acquisitions or outsourcing
agreements:
On December 22, 1998, 156 employees of Bank One Corporation were transferred to
IBM Global Services (IGS) as a result of an outsourcing agreement between IGS
and Bank One Corporation. Accordingly, there were net transfers of cash and
securities of $5,965,670 during 1998 between the Plan and a similar savings plan
established by Bank One Corporation.
During 1998, twenty-five employees of Commonwealth Energy System were
transferred to IGS as a result of an outsourcing agreement between IGS and
Commonwealth Energy System. Accordingly, there were net transfers of cash and
securities of $2,231,030 during 1998 between the Plan and a similar savings plan
established by Commonwealth Energy System.
On April 1, 1998, IBM acquired Chem Systems Group, Inc. As a result of this
transaction, there were net transfers of cash and securities of $6,860,204
during 1998, representing eighty-five participant account balances, between the
Plan and a similar savings plan established by Chem Systems Group, Inc.
On January 27, 1998, IBM acquired Software Artistry, Inc. As a result of this
transaction, there were net transfers of cash and securities of $3,416,033
during 1998, representing 245 participant account balances, between the Plan and
a similar savings plan established by Software Artistry, Inc.
On December 9, 1997, IBM acquired Unison Software, Inc. As a result of this
transaction, there were net transfers of cash and securities of $1,561,035
during 1998, representing eighty-one particpant account balances, between the
Plan and a similar savings plan established by Unison Software, Inc.
On April 15, 1996, IBM acquired all outstanding shares of Taligent, Inc. As a
result of this transaction, there were net transfers of cash and securities of
$7,767,565 during 1998, representing 112 participant account balances, between
the Plan and a similar savings plan established by Taligent, Inc.
Additionally, during 1998 there were net transfers into the Plan of cash and
securities of $952,934, representing thirty-one participant account balances,
resulting from various other IBM acquisitions and outsourcing agreements.
24
<PAGE>
NOTE 5 - TAX STATUS:
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. The Plan
administrator continues to believe 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):
Fair value determined by
------------------------------------
Quoted
market Estimates
prices of Trustee Total
----------- ---------- -----------
December 31, 1998:
Interest in equity-oriented
pooled funds $ 9,893,650 $ 9,893,650
Interest in short-term investment-
oriented pooled funds 721,074 721,074
Investment contracts $4,004,246 4,004,246
Interest in bond market-oriented
pooled funds 485,806 485,806
IBM common stock 2,026,038 2,026,038
----------- ---------- -----------
Total $13,126,568 $4,004,246 $17,130,814
=========== ========== ===========
December 31, 1997:
Interest in equity-oriented
pooled funds $ 8,187,078 $ 8,187,078
Interest in short-term investment-
oriented pooled funds 473,795 473,795
Investment contracts $3,613,269 3,613,269
Interest in bond market-oriented
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
=========== ========== ===========
26
<PAGE>
NOTE 6 - TDSP INVESTMENT VALUATIONS (continued):
Net Unrealized and Realized Gain (Loss) on investments (dollars in
thousands):
For the year ended
December 31, 1998
------------------
Investments at fair value
determined by quoted market
price:
Interest in pooled funds $1,754,507
IBM common stock 846,159
----------
Total $2,600,666
==========
NOTE 7 - RELATED PARTY TRANSACTIONS:
At December 31, 1998 and 1997, a majority of the Plan's assets were invested in
Bankers Trust Company Funds. Bankers Trust Company also acts as the trustee for
the Plan and therefore, these transactions qualify as party-in-interest.
Additionally, The Plan held $186,534,495 and $116,520,897 in investment
contracts with Metropolitan Life Insurance Company, the Plan recordkeeper, at
December 31, 1998 and December 31, 1997, respectively.
On April 27, 1999, IBM stockholders approved amendments to the Certificate
of Incorporation reducing the par value of common shares from $.50 per share
to $.20 per share, and granting common stockholders of record at the close
of business on May 10, 1997 one additional share for each share held.
At December 31, 1998, the Plan held 21,977,364 shares of IBM common
stock valued at $2,026,038,244. At December 31, 1997, the Plan held
23,134,078 shares of IBM common stock valued at $1,210,201,455. The number
of shares have been adjust to reflect the two-for-one stock split.
27
<PAGE>
NOTE 8 - SUBSEQUENT EVENTS:
Effective June 4, 1999, Deutsche Bank AG acquired all outstanding shares of
Bankers Trust Company, including Bankers Trust Global Asset Management Services
(the Plan Trustee) and Bankers Trust Global Investment Management Services which
manages the Plan's Money Market, Large Company Index, IBM Stock, International
Stock, and Life Strategy Funds.
Effective February 1, 1999, the Plan changed the name of the Fixed Income Fund
to the Stable Value Fund. The holdings and investment objectives of the fund
remain unchanged. The name change was made because within the investment
industry, the term "fixed income" typically refers to bonds, government or
mortgage-backed securities which rise and fall in value as interest rates
change. By contrast, the Stable Value Fund is more likely to grow by a positive
rate of return each day, regardless of the direction of interest rates.
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 1998: 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 $2.94 $2.95 $2.96 $2.98 $2.99 $3.00 $3.02 $3.03 $3.05 $3.06 $3.07 $3.09
Units 134,223 133,969 138,599 143,213 141,748 139,242 141,341 148,313 153,182 160,047 153,435 155,193
Large Company:
Unit Value $14.17 $15.19 $15.96 $16.12 $15.84 $16.48 $16.31 $13.96 $14.86 $16.07 $17.04 $18.02
Units 336,919 338,953 342,938 344,786 346,383 346,405 350,062 344,797 343,557 339,047 340,667 338,176
Small Company:
Unit Value $3.09 $3.33 $3.48 $3.52 $3.34 $3.39 $3.19 $2.59 $2.80 $2.97 $3.13 $3.42
Units 700,536 697,728 703,603 706,912 706,143 702,373 687,686 665,609 659,581 651,504 651,726 642,885
IBM Stock:
Unit Value $2.14 $2.26 $2.25 $2.51 $2.55 $2.49 $2.87 $2.45 $2.79 $3.21 $3.57 $3.98
Units 547,566 523,242 501,010 449,066 456,770 495,184 467,830 487,736 489,228 475,730 502,995 516,658
Stable Value*:
Unit Value $2.74 $2.75 $2.76 $2.78 $2.79 $2.81 $2.82 $2.84 $2.85 $2.87 $2.88 $2.89
Units 1,235,417 1,234,923 1,241,749 1,252,998 1,234,049 1,216,017 1,233,634 1,270,427 1,287,301 1,336,230 1,296,839 1,301,798
International Stock:
Unit Value $1.52 $1.62 $1.67 $1.69 $1.66 $1.66 $1.68 $1.44 $1.41 $1.56 $1.65 $1.70
Units 320,482 318,625 324,286 326,770 329,772 330,210 329,975 324,324 321,809 318,248 320,379 318,522
Total Bond Market:
Unit Value $1.17 $1.17 $1.18 $1.19 $1.20 $1.21 $1.21 $1.23 $1.26 $1.25 $1.25 $1.26
Units 94,038 103,826 110,805 115,757 116,254 119,689 125,006 142,774 160,929 180,054 172,208 177,083
Income Plus Life Strategy:
Unit Value $1.16 $1.18 $1.20 $1.20 $1.20 $1.21 $1.22 $1.19 $1.20 $1.23 $1.24 $1.26
Units 41,423 49,048 54,017 58,798 59,288 58,994 62,276 66,501 66,385 66,713 65,284 65,411
Conservative Life Strategy:
Unit Value $1.23 $1.26 $1.29 $1.30 $1.29 $1.31 $1.31 $1.23 $1.26 $1.30 $1.34 $1.37
Units 116,344 127,568 136,616 143,185 148,540 149,547 153,914 154,380 153,080 153,334 155,529 155,752
Moderate Life Strategy:
Unit Value $1.80 $1.88 $1.93 $1.95 $1.93 $1.96 $1.95 $1.78 $1.84 $1.93 $2.00 $2.07
Units 500,718 512,375 524,629 533,555 540,647 541,575 545,254 536,240 530,473 524,341 529,181 528,935
Aggressive Life Strategy:
Unit Value $1.36 $1.44 $1.49 $1.50 $1.48 $1.51 $1.49 $1.32 $1.37 $1.46 $1.53 $1.60
Units 180,095 190,434 202,054 214,357 227,249 227,401 235,746 231,804 230,139 227,934 230,830 232,015
</TABLE>
* Formerly Fixed Income Fund, renamed Stable Value Fund effective February 1,
1999.
29
<PAGE>
NOTE 9 (CONTINUED) - 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
Stable Value *:
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>
* Formerly Fixed Income Fund, renamed Stable Value Fund effective February 1,
1999.
30
<PAGE>
SCHEDULE I
INTERNATIONAL BUSINESS MACHINES CORPORATION
IBM TAX DEFERRED SAVINGS PLAN
ITEM 27a - ASSETS HELD FOR INVESTMENT PURPOSES AT DECEMBER 31, 1998
<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 Funds 721,074,324 $ 721,074 $ 721,074
=========== ===========
Equity Index Funds 610,319,803 $ 5,265,798 $ 9,893,650
=========== ===========
Bond Index Fund 38,550,085 $ 436,740 $ 485,806
=========== ===========
Common Stock:
IBM Common Stock 21,977,364* $ 960,659 $2,026,038
========== ==========
Loans to Participants:
$ - $ 301,706
========== ==========
</TABLE>
Investment Contracts:
Total Contract
Maturity Shares/Units or Value
Rate Date Maturity Value (In Thousands)
----- -------- -------------- --------------
CDC Bric
BR 130-02 7.42% 10/1/1999 76,259,375 $ 76,259
CIGNA
#25181 7.73% 9/30/1999 27,007,543 27,008
CIGNA
#25193 6.60% 9/30/1999 60,974,407 60,974
31
<PAGE>
Investment Contracts (Continued):
Total Contract
Maturity Shares/Units or Value
Rate Date Maturity Value (In Thousands)
----- -------- -------------- --------------
Citibank
#178360 6.75% 1/2/1999 19,287,247 $ 19,287
Citibank
#178364 6.51% 7/1/1999 78,649,842 78,650
CNA Insurance
GP 13078-006 8.05% 4/1/1999 10,802,708 10,803
CNA Insurance
GP 13078-016 5.79% 7/1/1999 37,505,783 37,506
CNA Insurance
GP 13078-026 6.64% 10/1/2000 26,240,719 26,241
Connecticut General Life
# 0025183 8.29% 12/29/1999 40,008,729 40,009
Hartford Life
# GA-10254 8.08% 3/31/1999 12,500,000 12,500
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% 1/2/2002 132,189,241 132,189
John Hancock Life Insurance Co.
GAC #14406 6.38% 6/30/2009 126,063,530 126,063
Metropolitan Life Insurance Co.
GAC #24650 6.75% 10/1/2001 50,839,115 50,839
Metropolitan Life Insurance Co.
GAC #24976 5.20% 1/2/2001 20,389,489 20,389
Metropolitan Life Insurance Co.
GAC #24977 5.27% 1/2/2002 101,302,925 101,303
Metropolitan Life Insurance Co.
GAC #13993 8.04% 4/1/1999 14,002,966 14,003
New York Life Insurance Company
GA-30898 5.26% 1/2/2002 202,600,999 202,601
New York Life Insurance Company
GA-06554-003 7.13% 7/1/1999 63,223,151 63,223
32
<PAGE>
Investment Contracts (Continued):
Total Contract
Maturity Shares/Units or Value
Rate Date Maturity Value (In Thousands)
----- -------- -------------- --------------
New York Life Insurance Company
GA-30721 6.88% 1/1/2003 56,907,551 $ 56,908
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 137,195,660 137,196
Prudential Asset Management Co.
GA-7406-212 6.49% 6/30/1999 55,045,428 55,045
State Street Global Advisors
Wrapper 5.42% Non-Maturing 2,322,863,573 2,322,864
Sun America
#4785 6.35% 4/1/2003 94,703,284 94,703
----------
$4,004,246
==========
* Adjusted to reflect a two-for-one stock split effective May 10, 1999.
33
<PAGE>
SCHEDULE II
INTERNATIONAL BUSINESS MACHINES CORPORATION
IBM TAX DEFERRED SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS*
DECEMBER 31, 1998
(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 246 $ 814,212 - - -
- Disposal Transactions 270 - $ 729,980 $ 729,980 -
Bankers Trust Directed Account
Cash Fund
- Acquisition Transactions 463 $1,458,151 - - -
- Disposal Transactions 502 - $1,428,548 $1,428,548 -
International Business Machines
Corporation Common Stock
- Acquisition Transactions 111 $ 625,036 - - -
- Disposal Transactions 106 - $ 648,650 $ 382,923 $ 265,727
Bankers Trust Large
Capitalization Equity Index Fund
- Acquisition Transactions 121 $ 566,562 - - -
- Disposal Transactions 132 - $ 509,770 $ 260,558 $ 249,212
State Street Russell Short Term
Investment Fund
- Acquisition Transactions 226 $1,713,989 - - -
- Disposal Transactions 103 - $1,579,081 $1,579,081 -
State Street Global Wrapper
Book Valve Facility
- Acquisition Transactions 22 $2,333,581 - - -
- Disposal Transactions 30 - $ 10,718 $ 10,718 -
</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.
34
